While it would be disastrous if this rumor were true, I'm going to take a leap of faith and say it's untrue. The Kotaku report states that a working engine wasn't made available until June, which sounds false considering the game's incredible graphics engine (which was playable). Secondly, I highly doubt the folks at Konami would allow for a high-caliber project like this to fall apart, especially with their other high-profile PSP titles coming down the pipeline. Lastly, a developer in supposedly as much trouble as Climax wouldn't also be working on another high-profile game: Oblivion for the PSP. Climax is a relatively prolific developer: a few layoffs most likely won't affect the future of any of the games in development.