Although they were now being touted as the "next big thing", several complex issues slowed their progress. Gilbertson's drug problems presented the band with no choice but to ask him to leave. Booth and Glennie had joined a sect named Lifewave that imposed many restrictions on their lifestyle and threatened the band's stability. The band's second EP, "James II", was released over a year after the first and accompanied by a feature on the cover of the "NME", Gilbertson having been replaced by the band's guitar tutor Larry Gott. The first two EPs would later be collected as "Village Fire". Reviews were once again positive, and Factory were eager for James to record an album with it, but the band believed Factory were purely image-based and left the label, striking a deal with Sire Records.