The Scrapyard of Childish Things
Bereft of Hailey, Nick, and any believers, a dejected Happy attends a support group for rejected, abandoned imaginary friends. A three-headed dog invites him back to where it’s staying, so Happy goes along. Speaking of strange meetings, remember missing (and formerly dead) Mikey? Well, he's been wandering NYC naked and dazed, masturbating in the streets, looking for some direction. Nick happens to sit down next to him on the street, and tries to jog his memory for the password. But the kid is so out of it that he can hardly speak, except for “Blue.”
Nick can't be burdened right now with the incapacitated, uncooperative Mikey, so he drops him off at the local church. Meanwhile, Smoothie is busy turning his class of naughty youngsters into an army of well-behaved exemplars of obedience. Speaking of school, Nick beelines it for a local one at which the kids are performing a nativity. One of those kids happens to be Mr. Blue's son, and his daddy is in the audience. Nick gives Blue a choice: he tells Smoothie to release Hailey, or Blue's kid and wife are on the line. Nick also offers up Mikey to sweeten the deal.
And back to Mikey. Mikey comes out of his daze, and crawls his way to the confessional chamber. The priest meets him there, in order to confess him. Mikey starts spouting Latin, all about his sins, some demonic jargon, and uses a different tone of voice, all of which would lead us to believe that this ain't Mikey.
Oh, and the place those other imaginary friends took Happy? Well… It happens to be the room of Mr. Blue's son. And, go figure, the kid is a little monster that likes to torture and disfigure his imaginary friends and make them play Russian roulette--you know, kid stuff. Little serial killer in the making.
And over at Isabella’s place, she and her sisters, and the gypsy, and the camera crew, have prepared the marinara sauce just the way Mikey liked it: with gypsy menstrual blood in it. This is all in an effort to lure his zombie butt back. Well, turns out… it works. Mikey showed up at his old place, and his family goes nuts.
And Hailey, told by Smoothie that her father is dead, rallies the kids to break out of the classroom and run away. But they don’t get very far before Smoothie halts their progress. They run off through the studio set, and Smoothie seems beyond joyed that they’re misbehaving — it means he gets to inflict punishment now.
Meanwhile, it’s time for Let’s Make A Deal, Happy!-style. Nick shows up outside Blue's house. Neither man has what they promised the other. Although Blue did bring some extra muscle to the drop. Nick is outnumbered, and is soon outmaneuvered, Tased, and knocked out. He’s then tied up, taken into Blue's garage, and surrounded by Blue's boys, ready to be executed by their many, many guns.
Nick starts shooting his mouth off, buying time. Of course, in so doing he also unwittingly alerts Happy of his whereabouts — they're in the same house, remember! When Happy hears Nick's voice, it gives him new hope and new reason to evade his torturers. He flies to Nick's rescue.
Before the hitmen can kill Sax, Blue's wife and kid rush into the garage and so does Happy. When Nick sees Happy, he goes absolutely berserk on his captors. It's a thing of beauty.
Once Nick has vanquished his captors, he tends to his little blue pal. He's not doing so well, on account of having to fend off violent imaginary friends. But Nick's hard love speech gives Happy the boost he needs to come back from the edge. They're back together again!