At night, when Yasuo checks on Lain, he sees a dramatic change in her room arrangement and the upgrades on her NAVI computer system, which worries him. As Lain hangs out with Alice, along with Julie and Reika, in the district, she notices that children are looking up into the sky and raising their arms, only to realize that they are looking at an image of herself that appears in the sky. Lain searches for the reason behind the strange happenings and finds Professor Hodgeson, the creator of KIDS, an experiment that started fifteen years ago that tried to gather psi energy from children and store it, though the result of the project destroyed the children. Now it seems that the Knights have gotten hold of the project's schematics. When the Men in Black return, Lain goes outside to see them. The coolant system in her room bursts, leading the Men in Black to confirm that the Knights planted a parasite bomb there.