Ken Balough, the man behind the episodic Sonic the Hedgehog 4, may have outed some pretty juicy information regarding the future of game. With two episodes so far and no signs of a follow up, it seems SEGA has pretty much given up on it for reasons that cannot be disclosed. It also seems that there was an intention of making a Sonic 4: Episode III at one point.
This news comes from a Facebook conversation between Ken Balough and a fan, which was reported by Sonic fansite TSSZ. You can check out screenshots of this conversation in the original TSSZ story here.