First appearance: Phantasm II
What you saw happen at the end of Phantasm is not what actually happened.
What really happened is the Tall Man and his minions attacked Reggie and Mike at Reggie's house. In order to save themselves Reggie was forced to blow up his house, now infested with midgets.
The pair meet up with a psychic girl who has a crush on Mike because she's been dreaming about him for years. The trio travel across a slowly emptying America in order to confront the tall man and put an end to all his grave-robbing-midget-building shenanigans before he can kill the world.
The studio demanded the recasting of the role of Mike. One of the people who auditioned for the role was Brad Pitt, he didn't get it.