Independent development studio Darkside Games, which was working on the planned reboot of the cult classic Phantom Dust, shut down this afternoon in the wake of news that Microsoft had cancelled their version of the game, Kotaku has learned. Around 50 people lost their jobs, according to sources at the studio.

Microsoft, however, says they're still working on the upcoming Xbox One reboot, though they won't say who's now making the game or whether that new developer will use what Darkside has already created.

"Microsoft partnered with Darkside Game Studios in the development of 'Phantom Dust,' but our working relationship has now ended," a Microsoft spokesperson said. "We have great respect for their studio and their work in the industry. While we do not have anything new to share on 'Phantom Dust' at this time, we can confirm that development of the title continues. We look forward to sharing more details on the game as we get closer to release."

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Darkside, a small independent studio in Florida that has mostly done contract work on games like Borderlands and Sunset Overdrive, had been helming Phantom Dust as its first solo project, we've learned today. But when the studio's heads today heard that Microsoft had axed their game, they were forced to let everyone go, according to two people who worked there. The studio employed around 50 people.

"The executives who saw it were impressed and as late as this morning gave our team every indication that the project was on solid ground," said one of those people, who requested anonymity while speaking with Kotaku because they were not authorized to speak publicly on the situation. "Yet we got the phone call today that someone up on high who in all likelihood wasn't even aware of the game in detail shut it down."

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Phantom Dust originally came out in 2004 for the first Xbox. Microsoft announced plans to remake the game for Xbox One at E3 of 2014.

You can reach the author of this post at jason@kotaku.com or on Twitter at @jasonschreier.