Midway Games ( MWY), maker of the popular Mortal Kombat series of video games, has filed for Chapter 11 bankruptcy protection, the latest sign of woe in the video game industry.

The Chicago-based game maker said that despite "strong underlying fundamentals," it filed for bankruptcy protection for its U.S. operations Thursday. Midway cited a recent change in control of the company as the key trigger.

In December, Sumner Redstone, the chairman of Viacom ( VIA) and National Amusements, sold an 87% controlling stake in Midway to investor Mark Thomas for $100,000, or less than a penny a share. Thomas also assumed $70 million in senior secured and unsecured debt.

"This was a difficult but necessary decision," said Matt Booty, CEO and chairman of Midway. "We have been focused on realigning our operations and improving our execution, and this filing will relieve the immediate pressure from our creditors and provide us time for an orderly exploration of our strategic alternatives. This Chapter 11 filing is the next logical step in an ongoing process to address our capital structure."

Midway said that the filing does not include the company's non-U.S. operations, which will continue business as normal. Shares were lately down 40% to 15 cents, and the stock has now fallen 96% since July.

In recent months, bankruptcy hasn't been a far-fetched idea for the struggling company. Last month, Midway was granted a one-month extension to pay back $75 million in debt. The new deadline, Feb. 19, has been rapidly approaching with no word of refinancing.

In December, Midway announced job cuts totaling 25% of its workforce, the closing of a game studio in Austin, Texas, and the suspension of development on several noncore games.

Other game makers have been suffering as well. Electronic Arts ( ERTS), responsible for several hit franchises including Madden NFL and other sports titles, as well as The Sims, recently said it will cut 1,100 jobs, or 11% of its work force, and will close studios and scale back its product portfolio to focus on hit games.

Meanwhile, Take-Two Interactive ( TTWO), which publishes the popular Grand Theft Auto and Bioshock titles, posted a fiscal fourth-quarter loss in December that widened from a year ago due to high marketing costs. Take-Two also predicted a sharp decline in game sales for the current quarter.

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