This episode is mainly a flashback, where a slightly younger Gido (known back then as Dr. Rikudou Gid, nicknamed "Gido" after he stumbled on his own name trying to give a speech in English in America) along with his colleagues is working hard to make a fully functioning clone under the Adam Project to make their country strong again after WWIII.
Now that the eyes of the Japanese government are directly on them, Gido and his colleagues are trying hard to meet their expectations, but attempt #77 dies in its tube, thus causing the government to pull the plug on funding. However, Gido's superiors believe they are close, so they secretly commission two more bodies. Gido's friend decides to name them Adam Arclight and Adam Blade (#78 and #79, respectively).
The project team thinks that using similar procedures that they used to create Eve Neuschwanstein will help keep the tube babies stable when injecting it with the secret formula. So after a lot of dialogue they finally give it another shot. Arclight is considered dead from the project, and buried in a landfill even after he seems to achieve sentience. However, Blade survives the new test, and is thus saved for the project where he first meets Eve.