A state trouper, Pekarski, is driving on a highway and he spots a young boy walking on the side of the road. Pekarski stops to see what he is up to.  The trouper decides to give the young boy, Teddy, a ride.  During the drive Pekarski glances back and sees that Teddy appears extremely deformed.

Pekarski takes the now deformed boy to the station and takes his picture.  As he is speaking to the other officers, two deformed men burst into the station.  They shoot and kill all three troupers and leave with Teddy.

In the meantime, Walter and Peter are sitting outside a grocery store.  Walter doesn’t want to enter the store because he is scared he will get lost or kidnapped again.  Peter is trying to convince his dad to take chances and gain courage when they get a call from Dunham.

Walter, Peter, Dunham, and Broyles head to NY to investigate the murders of the troupers/officers.  They notice a mug shot of the young deformed boy.  Through the murdered trouper’s notes they are able to determine that all the sightings of deformed people are just outside of one small town, Edina.  They head to Edina to investigate further.

Upon arriving at Edina, Agent Dunham hears a constant buzzing sound.  Walker immediately begins to sing a strange melody.  The town sheriff, Velchik, meets the agents and informs them that a military base containing turbine generators, is 5 miles away and is responsible for the buzzing sound.  The Sheriff is also shown a picture of the deformed boy and denies ever seeing him before (yeah right).

Broyles calls Dunham and informs her that the officers were killed by a shotgun.  As Agent Dunham, Peter, and sleeping Walter are driving to the hotel, Peter expresses his concern for Walter not being able to snap out of it this time.   A truck suddenly runs their car off the road.  Walter sleeps through the entire crash and then a deformed man begins shooting at them.  Peter fires back and kills the man. 

An abandoned truck belonging to the deformed man is found.  Walter discovers a beautiful butterfly in the bushes near the truck.  He decides to collect the specimen for Astrid.  Agent Dunham then sees a blood trail leading to dead man.  Peter feels extremely bad because this is the first time he has ever killed someone. 

Broyles calls Agent Dunham with information about government testing which was performed in the 1970’s at Edina.  These experiments were classified and named “Project Elephant”. Joe Falls is also revealed as the dead man.  Back at the Harvard lab, Walter unveils his gift for Astrid which turns out to be only an ugly moth.  Where did the beautiful blue butterfly go? Astrid then opens up the corpse bag and backs away.   Joe has transformed into an extremely deformed man. Did the man and moth transform in the same way?

Walter has a feeling he is somehow connected to “Project Elephant”.  He remembers the song he sang when first arriving at Edina.  This allows Astrid to unlock a secret mnemonic code, leading them to the Harkness Law school library.  There, they discover hidden US Army files on “Project Elephant”.  He now remembers and understands.

Walter explains that “Project Elephant” had the army experimenting with electromagnetic pulse as a means to make soldiers invisible.  The exposure to this initial pulse created genetic disorders within its test subjects, resulting in extreme physical deformities. 

They head back to Edina, where Walter takes out the ugly moth which magically turns back into the blue butterfly.  Walter explains that a new electromagnetic pulse is able to change our perceptions, making the deformed appear normal.  This is why the Teddy instantly became deformed when leaving Edina.  Outside of town we see their true appearance. 

Walter and Astrid leave in search of what is responsible for sending out this pulse.  They see a large antenna outside of a house and knock on the door.  Teddy answers the door.  Teddy is the grandson of the pioneer and creator of “Project Elephant”, Edward Cobb.  Now they have located the source of the pulse.

Meanwhile, Agent Dunham and Peter begin searching for the link between Joe Falls and the shootings.  They receive a call from the Sheriff informing them that Falls moved to a trailer just outside of town.  After telling the agents to meet with him, the Sheriff addresses the town people, ensuring them that he will make this “problem” go away.

At the meeting point, the Sheriff begins a shootout with Agent Dunham and Peter, which eventually leads to his death.  Rose, Cobb’s granddaughter, tells the agents that the original electromagnetic pulse deformed the entire town.  Cobb couldn’t live with himself and created a machine to send out another pulse to hide their deformities.  Her father wanted the town’s people to have a good life, including his own deformed daughter and grandson.

The last scene has Walter pleading with Broyles to keep the town’s secret, which he allows.  Peter is proud of Water for speaking up for the town’s people.