In 1988, a young Katie and Kristi are living with their mother Julie and her boyfriend Dennis. Dennis notices that since Kristi’s imaginary friend Toby appeared, strange things have been happening around the house. Dennis and Julie attempt to make a sex tape, but are interrupted by an earthquake. The camera shows dust fall from the ceiling and land on an invisible figure in the room. While reviewing the footage, Dennis notices the strange incident. His friend Randy suggests that Dennis place cameras throughout the house to capture any other incidents. That night in the girls’ bedroom, Kristi wakes up and talks to someone off-camera. When Dennis questions her the following day, Kristi tells him it was Toby. Later on, Kristi has a tea party with Toby. But, when Katie walks in and calls Kristi a baby for having imaginary friends, and goes in the closet to look for Toby, the door slams shut on its own.