There are not many info about what happened, but during the development the studios were closed down and Terra Formation was doomed. Terra Formations is a FPS with real-time strategy elements that was in development by Star Cave Studios and Cellien Studios in 2006, for the PlayStation 3 and Xbox 360. Thanks to Irrational games for this news (more info on the project can be found at Game Informer) If production had gone as planned it’s release would be around the same time as Bioshock. Other concerns were the assumption that the zombie genre wouldn’t be as popular as it was in the target year. They did well, and were ready to sell it to Vivendi but they had just sold the company to Take-Two. Sadly, the company, going through some trouble at the time was unable to pitch the idea to the buyers in time, having only a week to prepare a demo. It began as a joke amongst the developers, having just finished SWAT 4, this game would be like a Swat 5, jokingly referred to as the Zombie Swat. It also featured complex FPS elements such as game changing missions, one instance being a situation where you could turn on a power generator that would give you light for any night time mission.
The premise for this game is similar to the Left 4 Dead franchise, it featured a co-op survival style gameplay, in a mass city with Zombies as the main antagonists. What we have here is an unreleased game by Irrational Games, known as Division 9.
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