Without a project lead, Sonic Mars began to spiral.
Sonic Mars was far into development with working prototypes, story drafts, and concept art completed by Kosaka. Kosaka was reported to have issues with Dean Lester, producer of Comix Zone, and unfortunately quit the project. The internal conflict did not end with the stage fiasco and continued with the alleged issues with SEGA Technical Institute's team. However, Yuji Naka, Sonic creator and lead programmer of Nights, disagreed with the plans to share Nights' engine, and things got heated over at SEGA. According to Lost Media Archive, the Sonic Mars team wanted to use the then in-development Nights Into Dreams engine to speed up level design progress. While SEGA executives enjoyed the boss stages, they were not so pleased with the main stages.
This meant two teams were working on the game, one for the main engine, one for boss stages. Sonic Mars was initially going to have stages meant for general exploration and stages for boss fights. Although Kosaka and his team had full support on the project, Sonic Mars quickly fell into trouble.