An update posted on Jo Wood's official website states that the game has been cancelled because "the title in its current form... does satisfy neither our quality requirements nor the fans' expectations," and goes on to say, "we now simply have lost confidence in their ability to finish this project in time and sufficient quality," referring to Perception. Jo Wood is also asking that Perception pay back all the investment made for the game's development.
It's not all doom and gloom for SG-1 fans as Jo Wood has not ruled out another developer reviving the abandoned game. This will only happen once Jo Wood has received the game's source code and assets from Perception, and if such a move is deemed to be "economically viable." Jo Wood has also left open the possibility that the title might end up on next-gen platforms.