Silicon Knights has cut half of its staff due to financial reasons.

Silicon Knights was founded in 1992 but their first big title was the GameCube's Eternal Darkness back in 2002. Since then they have made Metal Gear Solid: The Twin Snakes for the GameCube and X-Men Destiny for the Wii and DS, as well as Too Human for the Xbox 360.

Kotaku has just learnt that nearly 50% of its workforce, equating to 43 staff members, had to be laid off after a publisher pulled out of an unnamed project. The company released a statement addressing the news:

"Last week Silicon Knights experienced layoffs due to extended contract negotiations falling through with a potential partner. We are currently in discussions with other potential partners. The recent Ontario government funding is tied to future performance targets, spread out over the next 5 years, which we will meet."

The Ontario funding that the statement refers to is $8 million worth of government funding designed to help the company expand, which they'd recently used to increase their workforce.

According to Silicon Knights they are now focusing on "one of its most requested titles for the next generation" so let the speculation begin as to what that could be. As always we'll keep you updated with any developments.