Backbone Entertainment is laying off staff in an attempt to avoid closure, sources at the studio have claimed.
It isn't known how many staff at the Emeryville, California-based studio will face redundancy.
The studio, which was founded in 1992, has previously specialised in game development on PSP and digital platforms.
It developed PSP Rock Band spin-off Rock Band Unplugged, both Sonic Rivals titles and ported a range of retro titles to current-gen consoles.
Its most recent project was a sequel to downloadable shoot 'em-up Zombie Apocalypse, Zombie Apocalypse: Never Die Alone.