Following the all valley karate tournament, it's Christmas time in the Valley. Daniel and Ali become the most adorable thing, Miyago-do is set to expand this coming new year, while John Kreese is left a frustrated shell of his former self.

On Christmas Eve morning Daniel encounters a familiar ally in Freddy Fernandez. Kept in mind that Freddy had abandoned Daniel the moment he was beaten by Johnny Lawerence at the beach party. "Nice to see ya Freddy".-Daniel nonchalantly responds as he immediately ends the confrontation.

After walking out on his former fake friend, Daniel joins Mr. Miyagi in mending Bonzai trees. Miyagi tells Daniel that not only did he win tournament, but he had won the respect of the entire Valley, which will transform into fame. "Daniel-San, must not let recognition go to head".-Wisely stated by Miyagi. Daniel responds by agreeing with his Sensei. The two continue to clear their minds cutting Bonzai trees.

After a Larusso family Christmas celebration, Daniel shares a long distance phone call with his girlfriend Ali who is currently spending the holidays with her family in Sherman Oaks. The couple chat for hours until Mr. Miyagi sends Daniel for something from his house. As Daniel walks through the yard, Freddy tries speaking with Daniel again, but this time Daniel gets honest with Freddy, letting him understand that he considers him a fake friend who left him behind the minute he was down. Freddy is offended by Daniel's behaviour when suddenly, some old acquaintances from the beach party has Daniel surrounded. "You may be the Karate Champ, but we both know your a sitting duck when it comes to an outnumbered beating".- Freddy intimidates. As the boys get closer to a defenceless Daniel, Familiar foes come to the aid of Larusso. It was the golden Cobra Kai squad; Johnny, Bobby, Tommy & Dutch who seem to have a bit of tension with Daniel. "Good to see you Larusso".-says Johnny as the boys leave Daniel Larusso shell-shocked.