Some time has passed and Terry Bogard is working a job on the docks. He meets a boy who is a King of Fighters fan and wants Terry to teach him martial arts. Terry declines but the boy follows him around anyway and witnesses Terry get beaten badly when he is challenged by a particularly strong fighter. Terry is hurt badly and his confidence is shattered. His body heals but he gives up fighting. Others hear of Terry's defeat and challenge the count who defeated him but with no success. News of one of his friends hospitalized re awakens Terry's fighting spirit and he begins training with his eyes on a rematch.