The Hospital Theory[]
The hospital theory is that all the kids of KND are patients in hospital and the nurse told them they were a secret squad of agents to cheer them up.
Numbah 5 was suffering from bad injuries given to her by her mother. Numbah 5's parents had divorced and her dad left them penniless. Her mother blamed all the tragedy on numbah 5 and beat her. This led Numbah 5 to be the mother figure of their group as she wants to be a better mother than her's.
Numbah 4 had come from a rough neighbour hood so always had to be tough and aware of his surroundings. He was sent to hospital with serious injuries after being mugged by a man with a knife. Due to Numbah 4's tough nature he didn't back down and so was stabbed.
Numbah 3 was born to a family of drug addicts. Her parents would often abuse her and she decided to take her mother's anti-depression pills. Once she had taken them, she believed everything was good. One day, her Dad shot her mom. When she walked in on the murder, she couldn't realize anything bad happened since the pills heavily affected her mental state. Her dad noticed her standing there and shot her to leave no witnesses. She survived, but needed a liver transplant because of all the medication she'd taken.
Numbah 2 was born to a loving mother and father who allowed his creativity to flourish. He was praised and cherished, but his uncle was jealous because he had the same abilities as a child yet never received encouragement as a child. Numbah 2's uncle overfed him to express this resentment. Even when Numbah 2 refused, he was forcefully stuffed. The boy eventually had to go to hospital, as he was so obese that he would get seriously ill and had a high chance of heart failure.
Numbah 1 had a dad with Alzheimer Disease, so he always had to look after him though he didn't mind. His dad was a nice guy and before losing his mind, was always kind to Numbah 1. His dad was the only adult Numbah 1 liked since his mother left him and he felt the doctors and nurses didn't care about his father and weren't trying hard enough to save his father. One day when he took his dad to the hospital, Numbah 1 puked randomly. He was admitted and it was discovered he had cancer. This led him to hate adults more as he felt he was being tortured with the needles and various medications. In the children's ward, he acted like a leader to help the other kids feel better just as he had with his father.
The KND was then formed to war against the adults, as they felt imprisoned in the ward. The other members were of past kids who had come and gone while the teenagers were seen as enemies as they had their own ward which went against theirs.
The Kids Next Door is a pretend game[]
This theory is that the Kids Next Door are just a group of friends, and their "missions" are just them playing games and using their imagination. Here's my evidence: The kids' base is a tree house, all of their tools/weapons are based on toys or household objects, and the villains are people that kids typically don't get along with (teenagers and mean adults). It's likely that all of their battles are just the kids playing on the playground or in the treehouse, playing with toys to fight imaginary bad guys inspired by the people in their lives. Even some of their operations that take place away from the treehouse are just mundane tasks spiced up with a child's imagination. The first episode that comes to mind is the one where they rescue the kindergarten class pet from a German kid, and the action is largely inspired by Indiana Jones. It's likely that they just had to catch the bunny after it got out, and one of the Numbah Five watched Temple of Doom recently, so they made an adventure out of it. Assuming this, the same logic can be applied to the rest of their operations. "But the core group is only part of the global KND operation," you say. This can also be explained. The connection to the global KND operatives is simply a combination of pen pals, online chat rooms (this was the early 2000s), and imaginary characters to aid with the narrative of their spy agency, and the idea of wiping the memories of all agents when they become teenagers could simply be a reference to the behaviors of the teenagers themselves ("you guys are so immature, when I was a kid I never played games like that"). I have no idea if this theory has been previously stated, but I'd rather not focus on the one that says Numbah One has cancer. TL;DR The Kids Next Door are just a group of friends playing secret agent in their treehouse, with many of their adventures/enemies being based on movies they've seen and people in their lives.