Sadly this is not that unusual in the software industry. I was hired on a job a couple of years ago and 2 months later the customer cut the project's budget by 85% which resulted in all but one developer and 2 managers being laid off. It was simply a matter of they had no other positions for us and the company couldn't pay us if no one was paying them. They did explain that to us, however.
If they have not explained the situation to you, I don't see how there is any harm in asking. If you are being laid off, the situation isn't going to get worse.
As to how to handle the situation, there's not much to do but start searching for something new. This can be a long, frustrating process, but sooner you start, the better off you will be. One thing to watch out for, some people can fall into a depression when they are in this situation, do whatever you can to keep motivated.