WARNING: If you don't want to know what happened in this episode, don't read this photo recap!
It's the season finale, so drum roll please! When we last left our heroes, Merry had found Blue and was torturing him; Sunny Shines was supervising a satanic orgy ritual; and Nick was chasing down a truck filled with all the abducted kids. Well… not all the abducted kids. As unhappy Happy finds out, Hailey was not on that truck.
Nick and Happy make it into one of the rooms in Santa's warehouse and find out what happens to all those kids he abducted: they eventually grow up into young adults. One kid comes over to Nick with a slinky, looking to play. He's had better days. Or maybe not? He could definitely use a toothbrush.
In one of the inner workrooms in Santa's factory (read: dungeon), the man in charge has taken Hailey up on her knee, about to drill into her skull and make her a human nutcracker. Hailey's definitely her father's daughter, and smashes a snowglobe into the perv's face. The sound of Santa's screams alert Nick of his whereabouts.
Merry confronts Shines about Amanda's whereabouts, and surprisingly he just lets her go. Guess he didn't want any trouble with the cops just as he was preparing for his big show. Either way, the two women are reunited, and head out to find Nick and Hailey, whom they believe are together.
Santa chases Hailey all the way to the roof of the building. There are cop cars below, and she's teetoring right at the edge of the parapet. He tries to persuade her to come with him, to stay young forever, and never have to grow up. It was too late for him, but it's not for her. Before Hailey can fall for his trick, Santa hears a noise from the roof entrance, and scurries away.
Of course, the reunion is short-lived, as Santa returns with a vengeance, and tussels with Nick. Nick gets the upper hand, but eventually succumbs to yet another heart attack that gives Santa an opening. He's about to throw Nick off the roof when…
Happy returns! He managed to break out of the glass jar and find his way to the roof as well. It's a roof party! He starts to kick Santa's ass with the help of his imaginary friends. Then… he starts to get his own ass kicked. Well, he's just an imaginary friend, not a judo champion.
Some time passes, Nick has recovered, Hailey is on the mend, and Happy… well, Happy is starting to fade away. Hailey's growing up, and he's growing a part. He's off to find some other kid in need of a friend.
Oh, and Blue? He was thrown in prison. His nephew Mikey visits him there to deliver some hot air? Or rather to transfer his demon energy into Blue's body. Once he does it, the kid drops over dead. A great load was lifted. Until next season!