Earlier this week unconfirmed reports suggested Silicon Knight's collaboration with Nintendo had ended, but the studio dispute this.
The rumour suggested that the pair had been forging a sequel to the fan-favourite GameCube classic, Eternal Darkness, but it had to be cancelled due to legal issues and finances within the company.
According to CEO Denis Dyack, speaking to GamesIndustry, there have had to be a handful of staff unfortunately laid off, but there isn't any truth in the Nintendo side of things.
As to the rumor about Nintendo, it is not true and has no basis in fact. We are scaling back to a core group and focusing all our efforts on future opportunities.
So as it stands, who knows just what is coming from the famed studio. Could Eternal Darkness 2 be on the way to 3DS or Wii U near you?