Of course they were going to get crushed. If they had an iota of common sense they would have realized that the whole project was a waste of time and that they needed to make their own generic anime characters unless they wanted the royal assraping from Squaresoft.
Their whole idea that they'd come up with this project and then hope to get hired to make the full game was just a little kid's fantasy and I'm honestly surprised that they were allowed to continue on as long as they were, being as open as they were about the project.
Not like it much matters anyway, it wasn't even a full game that they were working on, just a tech demo of a few scenerios from the original game in 3d.
maybe having their precious baby stomped on by the big man knocked some fucking sense into them and maybe they're knee deep in a new and original project. Probably not, though... watch them reveal their 3d Dragonball Z RPG next.