Tommy (Bill Cone) and the Lady In Lavender (Kathy Lester) have sex in Morningside Cemetery, after which the woman kills Tommy with a knife. Later, Tommy's friends, including 24-year-old musician Jody Pearson and family man Reggie, attend Tommy's funeral at Morningside, believing he committed suicide. Jody explains that he didn't bring his 13-year-old brother, Mike, because their parents died recently and he felt Mike would be traumatised by another funeral. However, Mike has been secretly observing the funeral from the bushes; after the mourners leave, Mike witnesses a tall man in a suit who seems to be the Morningside mortician lift Tommy's 500-pound casket with superhuman strength and load it into his hearse instead of completing the burial. He also seems to telekinetically knock Mike off his motorbike as he flees the cemetery.
The film introduces Liz Reynolds, a young woman whose psychic bond to Mike and the Tall Man manifests in the form of prophetic nightmares. Liz pleads for Mike to find her, as she fears that when her grandfather dies, the Tall Man will take him. The scene then transitions where the Phantasm (film) left off, the Tall Man (Phantasm) and his minions attempt to kidnap Mike, but Reggie (Phantasm) manages to save him by blowing up the house.
Reggie is wandering through the desert seeking out his friend Mike and the evil The Tall Man. Along his journey, he is hunted down by the dangerous spheres and stumbles upon the gorgeous Dawn. Out of the blue, he finds himself in an institution with Mike explaining that he has dementia and then in another dimension. Where is Mike?