Perhaps the fact that the last Sonic 4 game was subtitled "Episode 1" was a dead give-away, but there is now confirmation that development on Episode 2 has begun.
Fansite Sonic Stadium found a series of posts over at the official Sega Sonic 4 forum from series brand manager Ken Balough who stated that work on the sequel was underway. He wouldn't put a timetable on the game's release, as it sounds like it's still in the early stages.
Regardless, at least Balough admitted that the game could be improved, which is one thing the team already has in mind. "I certainly cannot deny there were some elements that could have been done better," he said, "and I could say that about most games I’ve worked on. That’s why Episode II gives us that opportunity to address them (or as much as possible)."
Balough also sort of touched on the game's new zones in a roundabout way, saying, "I can tell you that Ep II is not a Sonic CD remake. I can't comment really on anything else – but I can tell you you are going to see new zones that look really cool."
[via Destructoid]