If the course you're cancelling is part of the required courses for your faculty, then by cancelling you will have not completed the required number of units to advance to second year. You will be able to take second year courses that don't require this course as a pre-req but you will still be classified as a first year. If you take a course within your faculty in the summer to make up for this requirement then you should be fine.
However, if the course you're considering cancelling is an elective, this is not an issue. As long as its not a prerequisite for any second year courses you can take a reduced courseload without penalty - you'll just have to make up the 3 units somewhere else before you graduate so you graduate with the correct number of units. By taking a summer course you can make up for this, assuming you are taking a full course load next year.
Make sure you consider future options whenever you make these decisions - for example if you are planning on applying to med school there are some schools that require a full course load every semester, which can be classified as "x" number of courses per semester (can vary by school).
I failed an elective in my first year and was able to re-take it in second year without a problem, passed it, and took 11 courses one year to make up for the lost 3 units. No problem!
