What's really going on at OnLive, the streaming game company that reportedly laid off its entire staff today? The official word is that the entire firm's assets were acquired by a "newly-formed company" with "substantial funding," and thus it's business as usual for all... except, perhaps, for the number of individuals we saw leaving the Palo Alto headquarters with single white sheets of paper and boxes of personal possessions. What will become of the company and its employees? We still don't know for sure, but Joystiq has obtained an audio recording of the fateful 10AM meeting, as well as a conversation with a particularly talkative source with insight into the company's recent situation. The most surprising part: according to the audio recording, the new owner is allegedly a single mystery individual who was "impressed" with the OnLive idea.

During the course of the day's meetings, every single OnLive staffer was let go, told to pack and leave by 4PM, with only a small termination package to their name: a check for the last week of work and the value of any remaining paid time off, benefits until the end of the month, and the option to begin COBRA coverage at the beginning of September.

However, a certain percentage of those fired were also given offer letters to join the newly-formed company. According to OnLive, the firm hired "a large percent" of staffers, and intends to keep hiring more. According to Joystiq's source, less than half of the current staff remained on board, including management and a skeleton crew needed to keep the existing services running.

Why is this happening at all? Also unknown, but a TechCrunch report that the whole exercise was designed to eliminate the value of employees' stock to attract suitors is looking more likely. Joystiq's source says that OnLive was looking for a $1 billion buyout, and companies up to and including Hewlett-Packard made bids (we've heard that Sony also made an offer, before it purchased Gaikai instead). When the meeting was called, CEO Steve Perlman allegedly told laid-off employees that their stock would be worthless.

If it's accurate that the company is dissolving itself only to form again anew, it could then theoretically sell its patents and even the full OnLive services to a buyer without requiring them to honor commitments to current employees. According to Kotaku and GamePolitics, the company is filing for bankruptcy to protect its assets from certain creditors, and even if true, it's hard to say if OnLive management is using that as a tool to leverage a successful deal or is truly in the red: Joystiq's source alleges that OnLive only had as many as 1,800 concurrent users on average during peak usage periods, a pittance if accurate.