Santa is captured and brought to Mars, along with Betty and Billy, where he immediately inspires the Martian children and begins to manufacture toys in a factory made for him by the Martians. Santa chuckles a lot. Dropo continues to be silly.
Conflict boils over, however, when the evil Voldar, who has been grumpy about the plan to bring Santa to Mars all along (grumpy to the point of having made an attempt on the lives of poor Santa, Betty, and Billy!) sabotages the toy factory and tries to kidnap Santa. See how angry he is below?
I will go ahead and ruin the ending for you. All works out well, the Earthlings get to go home, and Dropo becomes the Martian Santa Claus.