Kingdoms of Amalur: Reckoning 2 was in "pre-production" at 38 Studios' Big Huge Games in Maryland before all employees were let go last week. Several sources with knowledge of the situation tell Joystiq that the company was in advanced talks with a publisher before the events that led to the dissolution of the team.

Even if the Big Huge Games team could be salvaged under a different banner, it is unlikely that they could work on Reckoning 2. The intellectual property, tech and code (the latter used as a springboard) required to make a sequel is still owned by 38 Studios for the time being, but will likely soon be owned by the state of Rhode Island. Sources close to discussions with Rhode Island tell us that the state's asking price to release assets is too high.

Elements tested for the sequel were higher graphics quality across the board, no loading screens between zones, expanded and improved combat animations, more branching quests and greater effect on the world by players.

"We had a good base to work from, and it was going to be all about improving everything," said a source who asked to remain anonymous, given that there's still the slightest chance the project could be salvaged. "We listened carefully to fans and critics and were going to implement everything we possibly could."

Kingdoms of Amalur: Reckoning, which -- despite what RI Gov. Lincoln Chafee was advised as being a "failure" -- did have a successful launch for a new IP, with 1.2 million units sold over 90 days. We understand that Electronic Arts, the publisher of Reckoning, did pass on the sequel due to executive politics and 38 Studios was shopping around the title.

Speaking to former Big Huge Games employees, we asked what they felt was the most inaccurate portrayal of the 38 Studios implosion by the media. They expressed that Reckoning's development being tied to 38 Studios Rhode Island has been the biggest gaffe.

Former BHG employees repeatedly tell Joystiq that 38 Rhode Island did give info and guidance about the Amalur IP, but it didn't produce any assets for Reckoning. In terms of the day-to-day work, the Rhode Island team "didn't work on it at all."

"Reckoning was developed with EA publishing money, NOT Rhode Island tax dollars," a former BHG employee told us. "It had nothing to do with the $50 million dollars from RI. That money went directly to the MMO project."

The former BHG employees are thankful that 38 Studios purchased the studio in 2009 and saved them. Schilling is commended for his support of the studio. At that time, the MMO 38 Rhode Island had been working on was already in production for three years and it was believed it would launch before Reckoning. That didn't happen and the latest moving target date was June 2013.

At this point, given significant uncertainty about the production tech and Amalur IP, the best a reformed Big Huge Games team could manage is making an RPG with a similar feel but using a different intellectual property (think Demon's Souls to Dark Souls). The team has done it before: when purchased by 38 Studios from THQ, it converted its "Ascendent" RPG to fit the Amalur world.

"Creating Reckoning wasn't a matter of simply replacing some textures and doing a search/replace on names and such," said a former BHG employee, who explained that the conversion required new environments, animations, characters and voice acting. There was a foundation to work with from "Ascendent." It appears the company will have another foundation to work from with Reckoning if the team can reassemble.

This article was originally published on Joystiq.