In 2002, Pseudo Interactive created an early prototype for a sequel to Cel Damage, entitled "Cel Damaged 2". Pseudo was aiming to fix what was considered wrong with the first game as well as introduce new elements to the game. A character line-up with some of the characters that appeared in the first game was made as well. The game would've featured new characters(their names were not mentioned in the documents). The new characters in order were a caveman, a robot, an Egyptian queen, and a king sheep.

The game was pitched to EA Games, Sega, Ubisoft, and lastly Midway Games. All of which were rejected due to the game's poor performance in sales.

In the US version, the game's default difficulty is Toon Pro (medium). Toon Training (easy) does not let you unlock anything. However, the European version default difficulty is Toon Training and you can unlock stuff with that difficulty.