Episode 2 of Sonic 4 in development

Sega confirms they will offer another chapter
Apparently, those that have worried that it was not going to happen can rest easy, as Ken Balough who is the brand manager for Sonic 4 recently said in a post on the Sega forums that “…early development is moving forward.” In addition, Balough admitted that some of the elements of the first episode could have been better; and they will focus on smoothing out some of those rough edges this time around.
While Balough did not confirm how many episodes were planned for Sonic 4, we can likely expect a release on the Xbox 360, Wii, and PlayStation 3 again this time around. No time line was given as to when we can expect it to be released, however.