As a child, Jonathan (Peter Liapis) was almost killed by his father, Malcolm (Michael Des Barres), during a satanic ritual. After being saved and raised by Wolfgang (Jack Nance), who has kept him unaware of his background, Jonathan inherits Malcolm's house and moves in with girlfriend Rebecca (Lisa Pelikan). During a party, he jokingly performs a ceremony described in one of his father's books on black magic, not realizing he has unleashed small, demonic creatures known as "Ghoulies."