A follow-up to widely praised GameCube horror title Eternal Darkness was in development at Too Human studio Silicon Knights alongside the mediocre X-Men: Destiny, a new report suggests.

Up to 40 per cent of Silicon Knights staff worked on an Eternal Darkness 2 demo while under contract to develop the X-Men title for Activision, sources told Kotaku.

The demo was designed to attract publisher attention while the remainder of the studio plugged away at the superhero adventure, according to the report. It's unclear if Activision was aware of all this.

The report draws on comments from eight anonymous ex-Silicon Knights staff, all of whom painted a damning picture of conditions at the developer.

"Silicon Knights didn't take the development of XMD seriously the entire time I was there," one ex-developer alleged. "While I was there, they were even siphoning off staff from my [X-Men] team to work on it.

"I was always complaining to the producers about this, as the numbers never worked out. Denis [Dyack, studio boss] is not an X-Men fan either, so he didn't care much for the license. To him, it seemed more like a job to get us by, until ED2 could be developed and sold to a publisher, which never happened."

"Some of the individuals on the [Eternal Darkness 2] project were major contributors," a second source added. "At the time, they suggested the developers should be brought onto X-Men Destiny to shore up the team and help them get back on track."

"The farthest they got with it when I left SK was, literally, one two-level church interior. It was really bad, as I recall."

"The farthest they got with it when I left SK was, literally, one two-level church interior," another former employee stated. "It was really bad, as I recall. It took the side team a long time to even get that far. Bad tech, combined with a team composed of people who had not shipped a title since Metal Gear [Twin Snakes], really hurt that demo.

"Other than that, I can't explain why things went so poorly for them [except that] a lot of key people responsible for the original Eternal Darkness are long gone."

The studio's dual development reportedly continued until Activision began to question Dyack's repeated promises that X-Men Destiny was still on track, at which point the report suggests the publisher called Silicon Knights' bluff and released a trailer for the superhero game with the studio's logo and a release date.

"By putting the SK logo on the project for the first time publicly, Activision forced SK to start taking it seriously," another source said. "But by then, it was pretty much too late."

The likelihood of Eternal Darkness 2 ever releasing now looks bleak. Since the X-Men: Destiny debacle, only five staff remain at the developer, including Dyack himself.