caterpillars

Ollie:  What are they?

Me:  What do you think they are?

Ollie:  They're worms.

Me:  Almost... they're caterpillars.  When butterflies have babies, they start out as little caterpillars and then they grow into butterflies... they're baby butterflies.
(Ollie contemplates this for a moment)
Me:  Ollie, are you a baby?

Ollie:  Yes

Me:  Are you mama's baby?

Ollie:  Yes

Me:  What about Max?

Ollie: (pauses)... He's a caterpillar.