The film was the most expensive Danish film of 1986 and proved popular with audiences, however the company failed to regain the cost of production and, as a result, the film became a financial flop at the box office.
The movie takes plot elements told from the three comic albums "Cry Wolf", "The Story of Quark" and "The Journey to Útgarða-Loki".
Thor, the god of thunder, and Loki, the god of lies, habitually visiting Midgard (Earth), takes refuge for the night at a lonesome farm house, inhabited by a couple of ordinary Viking peasants and their two children, a boy named Tjalvi and his younger sister Röskva. Thor generously offers one of his (immortal) goats which is dragging his chariot, as a feast dinner for all of them, but strongly warns any of the members of the household from breaking the bones. Loki, always treacherous, persuades the boy Tjalvi into doing exactly that, for the sake of the good marrow inside. Thor goes on to recount the Hymiskviða, specifically the part when he fished for the Midgard Serpent, Jörmungandr, to entertain his hosts.
The next morning, Thor revives his two goats, but is infuriated when he discovers that the animal has become lame, caused by the breaking of the bone the previous night. Thor is craving for revenge, but Loki instead suggests that they take the boy Tjalvi with them to Asgard as a servant, which Thor reluctantly accepts to. Tjalvi on his part is not very courageous on going to Asgard or the prospect of serving 'the mighty gods' either, but his sister Röskva is very adventurous and keen to go, even though she isn't even a prospect (being a girl). Eventually the gods and their new servant is going, leaving the parents and going to Asgard via Bifröst. Well arrived, they soon discover that Röskva has kept hiding in the chariot, and so she is allowed to follow the company and her brother to Thor's home Bilskirnir where his wife Sif and their two infant children are awaiting. Here, the two human children are put to hard physical work immediately, having to clean not only the mansion with its 540 rooms (sic) but also nursing the two infants, Þrúðr & Móði, and serving the gods.
The glamor of the 'immortals' and their world soon vanishes as Thor is frequently away from home on new adventures, leaving the human protagonists with all the hard work. As a regular friend of the house, one day Loki shows up with a small nonverbal Jötunnboy named Quark, which almost immediately causes havoc in the thunder god's home, and which Loki at first claims 'followed him' home, but finally professes he 'won', when he lost a bet with Útgarða-Loki and now has to keep him until he behaves properly. Sif is so dispared, when she finds out Quark has to stay at Bilskirnir, that she leaves the home with the two infants in distress, which in turn, makes Thor go crazy and destroy everything around him, until he finally leaves, leaving Loki, Quark, Röskva and Tjalvi behind.
Soon, the children and Quark find they have something in common and befriend each other, while Loki just makes himself comfortably in 'his' new home. He acts as a lazy and cruel master of the house and the children and Quark finally run away to look up the mighty head of the gods Odin, who lives in nearby Valhalla and who they suppose will help them against the unfair behaviour of Loki. They find out he will not even listen to them as no one is allowed to disturb him, and so they run out into the forest and build their own treehouse, setting up their own life. Almost everything is pure idyll, until Tjavli is visited by the ravens of Odin, Hugin and Munin (who have appeared as the narrators of the story). They lead Tjalvi to a sacred well where they present him with visions of the future: Thor trying to hold up Jörmungandr, the sea drying up and Thor hastily aging and dying. Thor returns and brings them back to Bilskirnir by force. Now he confronts Loki with Quark, demanding he brings him back to Útgarðar. Since Loki can't or won't bring Quark back, Thor forces him, by escorting him along with Röskva and Tjalvi.
The group travel Útgarðar, where Útgarða-Loki offers to take back Quark if they can overcome his challenges. First Loki is set to win a eating competition with a jötunn names Loge. At first Loki seems to be victorious but loses then Loge eats the entire bucket from which he ate. Thor is then challenged to drink from a giant drinking horn. Thor tries to but the horn does not seem to empty. The audience is shown that the horn is magically connected to the ocean: Thor's drinking causes the sea level to shrink. Thor calls the bluff and is then asked to lift Útgarða-Loki's cat instead. Despite the small size of the cat he is unable to do it and instead demands a trail of combat. Útgarða-Loki then calls for his ancient mother, her appearance frightens the other jötunn. Thor tries to wrestle her down but is unable to. Instead he starts to age and the old hag wrestles him down. As Thor appears to die, Hugin and Munin show Tjalvi, Röskva and Quark the visions again in a bucket of water: Loge moving strangely like fire, Thor trying to lift Jörmungandr and Thor aging and dying. Quark throws the water on Loge revealing his true nature as a fire spirit: an firethurs. The water puts him out and kills him. Tjalvi and Röskva calls out the jötunn's tricks: the cat is in fact Jörmungandr and the old woman is Elle, the aging itself. Thor returns to his former self, but he and Loki has to keep Quark. As they leave Útgarða-Loki's castle Quark turns into a chicken. Loki has used his magic to trick everyone that it was Quark who know has to stay with the other jötunn. This saddens both him and Röskva. Thor gives Tjalvi a sword, a token of that he know sees him as a man. Home in Bilskirnir, Röskva walks out to the forest and suddenly Quark appears, having run away. The friends are now reunited.
The project was originally developed by character animator's Jeffrey J. Varab and Jakob Stegelmann.
They had previously established an animation-school in Copenhagen and trained most of the animators who would eventually work on the film. They managed to raise a small budget for the feature film adaptation before the project was eventually passed to production companies.
During production, the project ran into severe financial difficulties and was passed on between studios before being made by Swan Film.
In the final stages of production, the film's director Jeffrey J. Varab walked out of the project, due to disagreements with the new production management. On the final release version, Peter Madsen, who had drawn the comic books and been the film's art director, is credited as director, and Jeffrey J. Varab is credited as co-director.
At the time of its release, in October 1986 it was Denmark's most expensive film ever made, having cost around 40 million kroner. No Danish film has ever gone as much over budget since.
The soundtrack was composed by Ron Goodwin and was performed by the Copenhagen Collegium Musicum orchestra. The soundtrack was released in 1987 and re-released in 1998. The 45 minute soundtrack would be Goodwin's last film composition.
The Danish release version of the film features the voices of Dick Kaysø, Preben Kristensen, Laura Bro and Marie Ingerslev. The film was translated into other languages including English and German. During the production and animation stages, it was initially animated using an English language soundtrack featuring the voices of a primarily non-Danish cast.
The movie was released in October 1986. More than 100 artists had worked hard on the film for 4 years and the total cost of the film was DKK 35 million (5 million euro). The movie was an instant hit and for several years and reached number 3 on the Danish box office list. In spite of selling more tickets than any other Danish film in 1986, its heavy cost inevitably made it a box-office flop. Swan Film made eight spin-off short films for television featuring Quark, the troll character in both the books and the film, before eventually closing down.
The financial collapse of the Valhalla-production also brought down its sister company, LASER, which had been developing an animated feature film adaptation of Gilgamesh and a laserdisc video game, Pyramid, about a female hero battling various enemies inside an ancient temple structure. However, four animators and one producer prior to completing Valhalla regrouped and formed a new company, A. Film A/S, which to date is Denmark's most successful animation studio, producing frequent artistic triumphs and box-office hits.