Welcome to Happy! In a future dystopian New York City, Nick Sax is a very unhappy, very depressed, very drunk, very ex-cop, somewhat suicidal hit man currently spending his Christmas eve drinking himself slaphappy in a bar. He’s called away from puking up blood in the toilet to meet his messenger boy who gives him his next hit job. With a bellyful of vodka and God knows what else, Sax hits the streets.
Meanwhile, there's a holiday celebration happening in the heart of the city, and it’s attracted an army of children and their harried parents. Mr. Sunshine is the main attraction, and he’s giving out gifts to underprivileged and disabled kids. Hailey is a little girl who came to see Mr. Sunshine perform. But she and her mom got there so late, they were both pushed to the back of the crowd. She slips away from her mom to get a better look, but ends up in an off-limits area where a pervy Santa Claus is eyeing her while taking a leak. Hailey’s imaginary friend Happy — a furry, blue unicorn/horse — warns her she better get the heck out of there before… and then it happens. Pervy pissing Santa Claus snatches her up, and sticks her in crate in a storage facility.
Sax arrives at his first hit: a man in a lobster suit receiving fellatio from a hooker. Lobster man’s about to smash the hooker’s brains out with a hammer when Sax busts in and blows him yet another orifice. Meanwhile, the local mafia boys of the Scaramucci family are getting together to put a hit on Sax. Disco Mike is the baby of the family. He just got back into town after being in Sicily rubbing elbows with the Don. Apparently the head honcho gave baby Mikey something important before he kicked it — a password. But no time for that now.
The Scaramucci boys bust into the lobster's den, and shoot the place up, thinking they’re turning Sax into Swiss cheese. Of course, the man they shot up was not Sax but the lobster man. Sax brings up the rears and lays three out of the four Scaramucci brothers low. It was a set up. Disco Mike tries to offer Sax, in exchange for his life, the password that the Don uttered to him before he died. It's priceless. Sax isn't having it, and shoots the kid, and the kid falls out a window.
Of course, Mikey doesn't give up that easily. So Sax has to go down to the street to finish the job. Before Mikey kicks the bucket, he confesses something: the world is run by devils that look like people. Some Illuminati sh*t right there. Ah, well, Sax doesn't make it out either. He throws a heart attack, and keels over. He's picked up by the cops, thrown into an ambulance, and resuscitated by some EMTs.
And remember Happy? He flew all the way from where Santa's been keeping Hailey to get Sax's attention. Happy needs Sax to rescue Hailey. Unfortunately, Sax thinks he's hallucinating (who wouldn't) and dismisses Happy’s plea for help, takes another handful of nappy time pills, and is rushed straight to Mass General Hospital.
Detective Meredith McCarthy is one of the officers who picked Sax up after his heart attack. She knew him during his NYPD days. She learns from the prostitute who helped Sax that Sax knows about the password. If Sax knows about the password, that means that all of NYC’s underworld is going to be after him — and she wants in.
She calls up her mafia hookup to tell him what she knows. When he finds out Sax might have the password, he gets a little bent out of shape, and orders a hit on Sax. Meredith shows up at Sax's hospital room. She wants him to hand over the password to protect him from whatever retribution is coming, and also get a jump on the crime civil war brewing in her city. Sax doesn’t budge. So Meredith leaves; and Sax passes out - but not before being visted again by Happy who keeps urging Sax to get a move on to go get Hailey.
Shortly later, a torture artist named Smoothie and his goons arrive to get that password out of Sax. Before they can shave his penis into little sausage slices (Smoothie’s words) Happy gives Sax a pep talk and poops and apple. Yep, an apple. Annoyed by it all or perhaps Happy's pep talk worked--either way, Sax very handily breaks free of his restraints, and goes full-metal jacket on his torturers. It's a vision to behold.
After making a daring escape from the hospital, Sax steals a car and gets the hell out of dodge. Happy trails along too. It's in the car that Happy tells Sax Hailey isn't just any girl trapped in a pervert Santa's crate… she's his daughter trapped in a pervert Santa's crate. Sax is shocked. That's when he's hit by an oncoming truck. It's a lot.