Titled Blackstar, the game was to be a space-action MMO, allowing players to fly spaceships to "exotic locations" and then dock their avatars on planets or stations for traditional RPG play.
As a result of the cancellation, Spacetime announced that it has been forced to shed 12 employees from its staff in an effort to stay afloat.
"We want to stress that there are no bad feelings with NCSoft," reads a post by the company on its website. "There is a tremendous amount of mutual respect between our companies. They have conducted themselves with honor and integrity, and we would work with them again in an instant."
NCSoft's most recent sci-fi MMO, Richard Garriott's Tabula Rasa, reportedly garnered only mild sales upon its November release.
"Though not an easy decision, NCsoft believes the move is in the company's best interest as we continue to assess the multiplayer game market and weigh the risks and rewards in that market with our current product portfolio," said an NCSoft rep to GameDaily.
While Blackstar has been axed, the assets remain, and Spacetime is seeking new funding to continue work.
"The cancelled game was our primary project and we have a complete MMO engine w/ networking infrastructure, tools suite, and next-gen rendering engine," continued the company line. "We are still here, stable and strong, and running a little bit lighter while we figure out our next move."