Florida-based developer n-Space claims its doors have not closed, following rumours last week that it was to shut up shop after 15 years.
The studio laid off an unspecified number of employees on Friday, having already lost 25 per cent of its workforce in August.
CEO Dan O'Leary took to the company blog to promise n-Space had not closed, despite media reports to the contrary.
"After supporting 70-90 employees for several months without funding, Fridays layoffs were unavoidable," he claimed.
"I will be back in the office next week, along with our core team, to firm up a few of the many deals we are negotiating. If all goes as planned we'll be calling people back before the end of the week.
"n-Space is down, but definitely not out."
However, he admitted that the studio's primary development focus, the current Nintendo platforms, had become a challenge.
"The Wii and DS markets have nearly collapsed and 3DS is a brave new world the publishers are excited about but also very cautious to enter."
He also fingered iTunes as making the marketplace for mid-budget titles especially difficult this year, and the recession as deterring consumers from purchases. "The games industry is, frankly, a mess," he claimed.
O'Leary specifically identified the collapse of an apparently done deal and publisher prevarication on others as the cause of Friday's redundancies.
Impending releases from n-Space include DS versions of the 007: Goldeneye remake and Call of Duty: Black Ops, and a Wii adaptation of the upcoming Tron movie sequel.