Late one night on New York's poor East Side, a man is stabbed to death on a street corner, and his body is searched by his attacker. Nearby, Glimpy (Huntz Hall) shows Muggs McGinnis (Leo Gorcey) a jeweled necklace he just found outside their tenement. While Glimpy and Muggs are investigating the area, the attacker spots them and gives chase, but is interrupted by the arrival of the police. Muggs and Glimpy then return to their tenement and learn from neighbor Mrs. Darcy (Betty Blythe), a war refugee from Toscania, that a thief just stole a valuable necklace from her. After she identifies the found necklace as hers and speculates that the man who attacked the boys was Compeau (Cy Kendall), an accomplice of the Toscanian Gestapo, she asks the boys to keep the heirloom until the next day. Unknown to the boys, Saundra (Gloria Pope), Mrs. Darcy's niece, is the princess of Toscania and is living in obscurity out of fear of the Gestapo.
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