When released from their boxes, the toys become animated and begin to wage war against each other. Joe initially resists, but relents after Alan pleads with him. During his absence, Alan sees a box containing Commando Elite and Gorgonite toys bound for another larger toy store, and convinces the delivery truck driver Joe (Dick Miller) to leave him a complete set of each to sell, so as to make the shop wealthier and more sophisticated. Stuart goes on a business trip, leaving Alan in charge of the store, hoping that Alan will prove worthy of his trust. His father Stuart owns an unpopular traditional toy store that does not sell electronic toys or violent action figures.
Three months later, schoolboy Alan Abernathy (Gregory Smith) and his parents Stuart (Kevin Dunn) and Irene (Ann Magnuson) have moved to Cleveland, Ohio, hoping for a fresh start after Alan's expulsion from two schools for playing practical jokes. Through Larry's inexperience with the GloboTech database, he commits a critical mistake: rather than standard toy-related computer chips, the action figures are fitted with surplus X-1000 "intelligence" chips designed for use by the military. Despite Irwin's objections, Mars chooses the ugly-looking Gorgonites as the Commando Elite's enemies and imposes a three-month deadline, which Irwin protests as 'impossible' due to the rigorous testing and design period required.
Irwin offers the Gorgonites, peaceful creatures whose mission is to gather information about Earth, prompting children to learn with them, whereas Larry presents the Commando Elite, a special task force of action figures. GloboTech CEO Gil Mars (Denis Leary) pays a visit to Heartland to meet with Larry Benson (Jay Mohr) and Irwin Wayfair (David Cross) concerning their newest projects, which involve the creation of intelligent, interactive toys.
Toy company Heartland Playsystems is acquired by the multinational conglomerate GloboTech Industries, which is expanding from manufacturing high-quality military hardware.
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