No, don't panic. Calm! Calm! That's how Chris W's friend informed him via tweet that there won't be a third episode of the Penny Arcade games. Wot a bast! Anyway, despite Hothead previously saying they'll do it despite sales of Episode 2 being a third of Episode 1. Hothead plan to concentrate on DeathSpank, but finish the actual narrative on their website. More info on Shacknews and Joystiq, who broke the story. All in all, a bit of a shame.
You should know what you're buying into by now
Alright Cortana, I'll have a chat with you just this once
We've been talking, and we think that you should wear clothes
Total coincidence, but we sell some clothes