Daikatana 2 (stylised as Daikatana II) was a game that was mentioned on an IGN article. After the troubled development of the first Daikatana, Ion Storm decided to hire Human Head Studios. Other than the story, unexplained features that the game was going to have, It's only known that the the game was going to use the Unreal Engine, instead of the Quake 2 engine. However, the project was been scraped and was not mentioned again and much after that.
Goal of the Game
The goal of the sequel is unknown, though it would use the Unreal Engine instead of the Quake 2 engine and have a goal that is unknown.
Why it Was Cancelled
The project of Daikatana 2 was planned at an unknown time and it was cancelled for unknown reasons (likely because the first Daikatana was a failure, or Ion Storm simply did not have enough resources and development funds to use Unreal Engine) after that.