Lost Weekend was due to take place from 23rd – 25th June at Powderham Castle, Devon, but its US financial backers AEGLive pulled out at the last minute.
Organisers Lost Vagueness were hoping to re-finance the festival after another potential sponsor stepped forward last week, but an agreement could not be reached.
Lost Weekend organiser Roy Gurvitz said: "We tried our level best to find alternative finance and we came very close but it's important to ensure a fair deal for our ticket holders.
"In the end, with so little time, it became clear that the right thing to do was to cancel."
Some consolation for Lost Weekend's performing artists is that some of them may be able to play at Lost Vagueness upcoming events at the Coronet in London's Elephant & Castle (12th August, 28th October).
"We are talking to our artists such as the Zutons and the New York Dolls about alternative dates in London and we hope to see them at our other forthcoming events," said Roy Gurvitz.
He continued: "I can reassure all ticket holders that they will be refunded via the agencies from which they bought tickets."
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