This somewhat lacklustre 4th entry in the "Ghoulies" series is actually a direct sequel to the first, which sees the return of Jonathan Graves (Peter Liapis reprising his earlier role) who finds his past coming back to haunt him in a very literal sense.
Jonathon is currently a detective with the LAPD, but unfortunately a psycho ex girlfriend of his, Alexandra (Stacie Randall), breaks out of the mental health facility she's in and summons up the demon "Faust". Jonathon's dark alter ego who possessed him in the original film.
Seems Faust wants to escape the dark dimension he's in by possessing Jonathan once more, but to do so he needs Jonathan's amulet necklace, so he sends Alexandra to steal it off him. However, whilst Alexandra was busy summoning Faust, a couple of Evil Dwarves (kind of like the ones from the first film) escape from the Faust's dimension and they too want the Amulet necklace so they can get back. And so the film follows Alexandra and the 2 Ghoulies in their separate attempts to snatch the amulet necklace from him.
Though the film was well made and did have some amusing moments, overall it wasn't that good. There was no sign of the familiar "puppet type" Ghoulies that were used in the other films (though they can be glimpsed in a couple of flashback scenes from the first film) and the 2 Dwarf characters (I'm assuming they're Ghoulies) aren't really in it that much. They just pop-up every now and again to provide a bit of comic relief in their botched attempts to get the amulet necklace before Alexandra does, so I'm not even sure you can class this as a proper "Ghoulies" film.
I'd probably rate this as being a couple of notches better than the original in terms of entertainment, but not as good as the other sequels.