You better watch out, you'll probably cry... Santa Claus is coming to kill
Little Billy witness his parents getting killed by Santa after being warned by his senile grandpa that Santa punishes those who are naughty. Now Billy is 18, and out of the orphanage, and he has just become Santa, himself.
The sequel picks up on Christmas Eve some years after the first movie, with Ricky Caldwell, the 18-year-old brother of the first film's killer, now being held in a mental hospital, awaiting trial for a series of murders that he committed. While being interviewed by the psychiatrist Dr. Henry Bloom, Ricky tells the story of the murders his brother Billy committed throughout a series of several Flashback (narrative) using footage from the original film. These flashbacks have new shots to make Ricky appear in more of Billy's original story.
After being shot down by police at the end of the previous film, the infamous Santa Claus Killer Richard "Ricky" Caldwell has been left comatose for six years, with a transparent dome being affixed to his head by the doctors in order to repair his damaged skull. Wanting to contact Ricky, the eccentric Dr. Newbury begins using a blind Clairvoyance girl named Laura Anderson to try reach out to him. One Christmas Eve, after a particularly traumatic session with Newbury, Laura begins to regret her participation in his experiment, but Newbury tries to convince her to keep trying, saying that they can talk more after Laura returns home from visiting her grandmother over the holiday. After Laura is picked up from the hospital by her older brother Chris, a drunk hospital employee dressed as Santa Claus wanders into Ricky's room and begins taunting him, rousing Ricky back to consciousness. Killing the Santa impersonator Ricky escapes from the hospital, taking a Paper knife with him after killing a receptionist as well.
Kim Levitt is an aspiring journalist working for the Los Angeles, California ''Eye'' as a Classified advertising editor. Her boss, Eli, seems to give all of the men in her office the breaks, including her boyfriend Hank. When a woman is discovered dead on the sidewalk, half-burned into ashes in an apparent case of the spontaneous human combustion, Kim decides to pursue the story on her own without Eli's approval. While investigating, she crosses paths with Fima, a used bookstore proprietor whose shop is in the building the woman jumped from. As a gift, Fima offers Kim a book on feminism and the occult.
Late one night in December, a young boy named Derek Quinn (William Thorne) hears the doorbell ringing and goes downstairs and finds a Christmas present that has been addressed to him on the porch. His father Tom (Van Quattro) reprimands him for being up so late and opening the door, sending him off to bed. Instead Derek watches from the stairs as his curious father opens the gift. Finding a musical orb shaped like Santa Claus in the box he activates it, causing it to strangle him with retractable cords; as Tom struggles he slips and falls onto a fireplace poker, his impaled body being found by his wife Sarah (Jane Higginson) a few moments later.