Panty and Stocking arrive at school to find that a strict academic regime has been established by the mayor's daughters, the Demon sisters Scanty and Kneesocks, and are banished to the lowest class in school. Together with Brief, Panty and Stocking discover that Scanty and Kneesocks are demons who are running a factory that produces an army of fake Ghosts beneath the school. A destructive battle ensues, with the Anarchy sisters defeating the Daemon sisters by destroying the stone that powers the factory.