According to sources close to the project, previously featured in the AJ (AJ 16.02.06), the local council has decided to withdraw its funding for the new £7 million scheme on the site of the existing theatre - Scotland's oldest working playhouse.
The news comes just weeks after the practice won planning permission for the contentious development which would have housed a 300-seat theatre, a youth media centre and a restaurant.
The building was to be clad in coloured steel, etched with poems and texts and backlit at night.
Last week's decision by Dumfries and Galloway Council is the latest in a long line of twists and turns surrounding the development of the theatre, which has links with literary greats Robert Burns and JM Barrie.
Threatened with demolition on a number of occasions, other suggestions for the site included a multimillion-pound proposal to rebuild the auditorium behind the existing 1792 facade - a plan pooh-poohed by local councillors.