All twenty five staff at Dundee's Cohort Studios are to lose their jobs after the company announced that it would be closing down after the release of its next project.
CEO Lol Scragg announced that the studio was struggling to survive making console content in a "declining console environment."
"It really is with great sadness that we have been left with no alternative but to start winding down," said Scragg. "Making all 25 employees redundant is genuinely heartbreaking.
"As we entered 2011, we have looked to change the direction of our business but unfortunately we ran out of time."
Founded in 2006, Cohort spent time working on external work for games such as Buzz, Motorstorm and, most recently, The Shoot for Sony's Move. The team had recently built its own bespoke engine, known as Praetorian, which it planned to use to create and publish new IP.
Two new games were in the works at Cohort, but only one of those, PlayStation Mini title Me Monstar: Hear Me Roar, will now see light of day.