According to the late Rosario Prestopino (gore effects wizzard)

He stated in an interview on the Zombie Flesh Eaters DVD (the interview was done in 2005 according to the end credits of the interview) he said they were in talks about trying to get a Demons 3 off the ground. And he would do it in an instant if it happened. Three years later after that interview he passed away from a heart attack. Sad news that he wont get to see Demons 3 happen now and even sadder is his passing. The world of horror lost a master of the effects dept when Rosario was taken from us. I just found out tonight about his passing after watching that interview for the first time and then googling his name to find out more on him. So in 2005 they were discussing a third Demons movie. It could still happen folks. I'd support it in a heart beat if it happened. I want a third Demons movie. I DO NOT want a remake of Demons. And if and when the third Demons movie happens they could dedicate the movie to Rosario's memory since he worked on the first two along with many other Italian horror classics.

RIP Rosario.

"The boat can leave now. Tell the crew."