Student not giving mid-project report and not coming to defense Context:

I am a researcher in a Western European university. 
As part of a masters courses in my uni, students have a rather long project to do (each student has its own project). This project is divided in two parts: an analysis part (short, they need to understand their project and state how they want to achieve it) and an experimentation part (the main part of the project, they need to achieve as much as they can). Each part is evaluated with a report and a small defence.

In this context, I have a student working on a project I submitted. The first part of the project has now ended and I have the following problems:


the student lied to me on the submission date for the report
they did not submit anything
they did not come to their defence


What I did as an advisor:


during the project: took several hours to explain the project and provided help to prepare the experiments (they are not done right now)
offered my help for writing the report (asked for the student to send drafts regularly and to ask about anything unclear, never received any draft)
I was present at the defence to help them if they could not answer questions


What happened then:


they scored the worst marked for the first part of the project
I did not received any explanation nor excuses
I can decide whether I accept that they continue the project or not


So my question is: what do you advise in such context?

Here I listed a few options:


let them do the rest of the project and help them with the experimentations (note that at this point I do not expect any workable result anymore, but maybe they will work better than on the first part)
forbid the student to finish the project (it is likely that they won't be able to validate the project anyway due to their mark at the first evaluation, and I will have more time for my research, perhaps doing their project by myself)
ask the student to submit the report before deciding (we will loose some time on the rest of the project, but it was explicitly asked to submit this report and I could make sure that they understood what they need to do).


Any help / advice will be greatly appreciated!
Not sure what you expect here, given they have submitted nothing then they will have nothing to experiment on.

So, basically they have failed this assignment and will need to replace it if possible. That will depend on the regulations in force at your institution.