WARNING: If you don't want to know what happened in this episode, don't read this photo recap!
Bereft of Hailey, Nick, and any believers, a dejected Happy attends a support group for rejected, abandoned imaginary friends. Some of them invite him back to where they're staying.
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And 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, and tries to jog his memory for the password.
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Nick can't be burdened right now with the incapacitated, uncooperating Mikey. So he drops him off at the local church.
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Meanwhile, Smoothie is busy turning his class of naughty youngsters into an army of well-behaved exemplars of obedience.
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Speaking of school, Nick beelines it for a local one at which some 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: Blue tells Smoothie to release Hailey, or Blue's kid and wife are on the line. Nick also offers up Mikey to sweeten the deal.
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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, and uses a different tone of voice, all of which would lead us to believe that this ain't Mikey.
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Oh, and the place those other imaginary friends took Happy? Well…
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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.
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Isabella and her sisters, and the gypsy, and the camera crew, prepared the marinara sauce just the way Mikey liked it: with gypsy menstrual blood in it. Well, turns out…
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It worked. Mikey showed up at his old place.
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And Hailey, told by Smoothie that her father is dead, rallies the kids to break out of the classroom and run away.
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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.
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Nick is tied up, taken into Blue's garage, and surrounded by Blue's boys, ready to be executed. He starts shooting his mouth off, buying time. Of course, in so doing he unwittingly alerts Happy of his whereabouts — they're in the same house!
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When Happy hears Nick's voice, it gives him new hope, new reason to evade his torturers. He knocks the stuffing - literally - out of the imaginary bullies and flies to Nick's rescue.
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And Merry's mom gives her daughter permission to stop protecting her, and constantly putting her life on the line for her. It's time. That's seconds before she passes out on the kitchen floor — not remembering to heed the warning on her medication that said do NOT take with milk.
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Before the hitmen can kill Sax, Blue's wife and kid rush into the garage and Happy wanders in as well. Nick sees Happy, and goes absolutely berzerk on his captors.
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It's a thing of beauty.
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Once Nick has vanquished his captors, he tends to Happy. 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!