Kingdoms of Amalur: Reckoning developer 38 Studios is in dire financial straits and has been unable to make a $1.125 million loan repayment due to a lack of funds. The original $75 million loan was granted in 2010 and is being backed by Rhode Island taxpayers. The situation is looking grim and the governor of Rhode Island has already expressed concern about the loan repayment. If the studio defaults on the loan, state taxpayers would have to shoulder the debt over the next eight years. In return, the rights to Kingdoms of Amalur would be transferred to Rhode Island, but that is probably of little consolation.

38 Studios also missed its payment to its 379 employees this week, choosing to attempt to pay the loan instead. However, after handing over a cheque to the RI Economic Development Corporation, 38 Studios chief financial officer Rick Wester called the agency to inform them that there wasn’t enough money to cover the payment. The studio has since left its employees redundant.

Kingdoms of Amalur was described as a “noble effort” in Click’s review back in February, but the studio needs more than just an effort at this stage. We’ll have to wait and see what Rhode Island plans to do with its new IP.