The film begins with Brick Bardo (Tim Thomerson, from ''Dollman (film))'' hitchhiking to get to the town of Pahoota, where he tries to find a girl named Nurse Ginger (Melissa Behr, who was shrunken to 11 inches in ''Bad Channels (film))'', to prove to her that she is not alone. Meanwhile, the film cuts to Judith Grey (Tracy Scoggins from ''Demonic Toys)'', who has a nightmare about the events that happened in the previous film a year before. Ever since the events that took place a year before, Judith has been watching the Toyland Warehouse, believing that the toys are still alive. Meanwhile, a drunken bum (R.C. Bates) enters the warehouse to shelter from the rain, and starts to mess around with a clown tricycle, until he gets knocked in the head with a box of toys, causing him to hit his head on the ground, killing him. However, his blood continues to flow over to the place where the demon was buried, and brings back: Baby Oopsy Daisy, Jack Attack, and Mr. Static, but Grizzly Teddy is replaced by a new toy named Zombietoid - a blonde GI Joe action figure with a sword as a weapon.