concerned and curious

[observer]

I think I have heard this before, but, I do not remember the final results on how to handle this situation.

NFHS game I was observing/evaluating

A1 scores on a driving layup with 5 seconds remaining in a close contest, he falls to the floor under the basket as B1 retrieves the ball from the basket net and tries to get out of bounds for the throw-in. Without ever establishing out-of-bounds status he (B1) throws the ball to B2 and B2 dribbles down the floor. With 2.1 seconds remaining on the clock the official realizes that B1 was never out-of-bounds, and blows his whistle. The official gives the ball to team A stating that B1 had a lane violation.
The official questioned me on the status and what should have been done.

1. Maybe continue to count a 5 second until the violation.
2. Blow and stop immediately until A1 gets up from the floor.
3. Exactly as he handled it.

Your thoughts