The reason for the layoffs (which left N-space "down, but definitely not out"): a deal with an (unspecified) licensor fell through, and no other publishers were found to help support the company's ongoing projects, which include "7 titles this year (plus an iOS game we'll be announcing next week), 5 of which were approved in September."
O'Leary lamented the changing state of the games industry in his message. "Huge budget titles have to sell massive numbers to return a profit and the App Store has disrupted our industry in the same way iTunes changed consumer expectations for music. People that use to buy many games every year now buy a few AAA titles, supplementing their need with games that are free or cost less than a pack of gum. Anything in the 'middle' is struggling." That "middle" includes the Wii and DS, where N-Space releases the majority of its products. The 3DS, he said, is "a brave new world the publishers are excited about but also very cautious to enter."