<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB

           /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                  For the quarterly period ended March 30, 2002
                                 --------------

                                       OR

          /_/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

 For the transition period from _______________________ to ____________________

                           Commission File No. 000-25507
                                               ---------

                                  iPARTY CORP.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                       76-0547750
-------------------------------                ---------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation of organization)

  1457 VFW Parkway, West Roxbury, MA                        02132
----------------------------------------       ---------------------------------
(Address of principal executive offices)                  (Zip Code)

       Registrant's telephone number, including area code: (617) 323-0822

 ------------------------------------------------------------------------------
         (Former name or former address, if changed since last report.)

         Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.

                                  Yes [X]    No [_]

                  Transitional small business disclosure format

                                  Yes [_]    No [X]


          On May 7, 2002, there were 15,852,120 shares of the Registrant's
common stock, $.001 par value, issued and outstanding.


--------------------------------------------------------------------------------
                                                                          Page 1


<PAGE>

                                  iPARTY CORP.

                         Quarterly Report on Form 10-QSB

                                Table of Contents

                                                                            PAGE

PART I   FINANCIAL INFORMATION

Item 1.           Financial Statements                                      3

                  Notes to Consolidated Financial Statements                6

Item 2.           Management's Discussion and Analysis                      9


PART II  OTHER INFORMATION


SIGNATURES



























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                                                                          Page 2
<PAGE>

                                  iPARTY CORP.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                            MARCH 30, 2002      DECEMBER 29, 2001
                                                                                            --------------      -----------------
                                                                                              (UNAUDITED)
<S>                                                                                         <C>                 <C>
                                         ASSETS

Current assets:
     Cash and cash equivalents                                                                $  1,493,922        $  2,399,084
     Cash, restricted                                                                              652,841             667,957
     Accounts receivable                                                                           389,953             541,703
     Inventory,net                                                                               9,109,136           9,282,852
     Prepaid expenses and other current assets                                                     450,432             337,997
                                                                                              ------------        ------------
          Total current assets                                                                  12,096,284          13,229,593

     Property and equipment, net                                                                 1,051,331             979,042
     Other assets                                                                                  339,536             324,583
                                                                                              ------------        ------------

Total assets                                                                                  $ 13,487,151        $ 14,533,218
                                                                                              ============        ============

                             LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                                         $  3,425,328        $  2,636,160
     Accrued expenses                                                                            1,358,914           2,122,748
     Current portion of capital lease obligations                                                  259,838             274,012
     Line of credit                                                                              3,242,835           3,354,977
                                                                                              ------------        ------------
          Total current liabilities                                                              8,286,915           8,387,897

Long-term liabilities:
     Capital lease obligations, net of current portion                                             218,221             260,338
     Other long term liabilities                                                                   611,694             576,414
                                                                                              ------------        ------------
         Total long term liabilities                                                               829,915             836,752

Total liabilities                                                                                9,116,830           9,224,649

Commitments and contingencies (Note 6)

Stockholders' equity:
     Preferred stock - $.001 par value; 10,000,000 shares authorized;
       Series A preferred stock - 1,000,000 shares authorized,
         issued and outstanding                                                                      1,000               1,000
       Series B preferred stock - 1,413,352 shares authorized;
         1,052,094 and 1,118,559 shares issued and outstanding                                       1,053               1,119
       Series C preferred stock - 145,198 shares authorized,
         issued and outstanding                                                                        145                 145
       Series D preferred stock - 362,996 shares authorized,
         issued and outstanding                                                                        363                 363
       Series E preferred stock - 533,333 shares authorized,
         issued and outstanding                                                                        533                 533
       Series F preferred stock - 114,286 shares authorized,
         issued and outstanding                                                                        114                 114
     Common stock - $.001 par value; 150,000,000 shares authorized;
         15,796,700 and 15,122,675 shares issued and outstanding                                    15,797              15,123
     Additional paid in capital                                                                 64,488,789          64,484,707
     Accumulated deficit                                                                       (60,137,473)        (59,194,535)
                                                                                              ------------        ------------

          Total stockholders' equity                                                             4,370,321           5,308,569
                                                                                              ------------        ------------

Total liabilities and stockholders' equity                                                    $ 13,487,151        $ 14,533,218
                                                                                              ============        ============
</TABLE>



                 The accompanying Notes are an integral part of
                    these Consolidated Financial Statements.



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                                                                          Page 3
<PAGE>
                                  iPARTY CORP.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                                                             FOR THE THREE MONTHS ENDED
                                                                                         MARCH 30, 2002        MARCH 31, 2001
                                                                                         --------------        --------------
<S>                                                                                      <C>                    <C>
Revenues                                                                                  $ 10,586,041          $  8,948,302

Operating costs:
     Cost of products sold                                                                   6,646,619             5,737,861
     Marketing and sales                                                                     3,401,008             3,254,425
     Product and technology development                                                        453,281               527,440
     General and administrative                                                                896,561               945,857
     Non-cash compensation expense                                                                --                  85,490
                                                                                          ------------          ------------

Operating loss                                                                                (811,428)           (1,602,771)

    Interest income                                                                              4,705                53,069

    Interest expense                                                                          (136,215)             (133,547)
                                                                                          ------------          ------------

Net loss                                                                                  $   (942,938)         $ (1,683,249)
                                                                                          ============          ============

Loss per share:
     Basic and diluted (Note 5)                                                           $      (0.06)         $      (0.13)
                                                                                          ============          ============

Weighted average shares outstanding:
     Basic and diluted                                                                      15,584,885            12,708,428
                                                                                          ============          ============
</TABLE>












                 The accompanying Notes are an integral part of
                    these Consolidated Financial Statements.



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                                                                          Page 4
<PAGE>

                                  iPARTY CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                            FOR THE THREE MONTHS ENDED
                                                                                         MARCH 30, 2002       MARCH 31, 2001
                                                                                         --------------       --------------
CASH FLOWS FROM OPERATING ACTIVITIES:

<S>                                                                                       <C>                  <C>
    Net loss                                                                              $  (942,938)         $(1,683,249)

    Adjustments to reconcile net loss
      to net cash used in operating activities:
       Depreciation and amortization                                                          134,866              132,825
       Non-cash compensation expense                                                             --                 85,490
       Decrease (increase) in:
          Accounts receivable                                                                 263,092              151,750
          Inventory
                                                                                              173,716           (1,413,646)
          Prepaid expenses and other current assets                                          (470,182)            (112,435)
          Other assets                                                                        397,620              (14,953)
       Increase (decrease) in:
          Accounts payable                                                                  1,294,472              789,167
          Accrued severance and restructuring expenses                                           --               (404,816)
          Accrued expenses                                                                   (475,297)            (763,819)
          Other long term liabilities                                                          35,280               26,406
                                                                                          -----------          -----------
        Net cash used in operating activities                                                (551,407)          (2,245,244)
                                                                                          -----------          -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

    Purchase of property and equipment                                                       (197,172)             (10,285)
    Decrease in restricted cash                                                                15,116              470,991
                                                                                          -----------          -----------

       Net cash (used  in) provided by investing activities                                  (182,056)             460,166
                                                                                          -----------          -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

    Net (repayments) borrowings under line of credit agreement                               (112,142)             325,919
    Principal payments on capital lease obligations                                           (64,233)             (77,396)
    Proceeds from exercise of stock options                                                     4,676                 --
                                                                                          -----------          -----------
       Net cash (used in) provided by financing activities                                   (171,699)             248,523
                                                                                          -----------          -----------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                                    (905,162)          (1,536,555)


CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                              2,399,084            5,002,254
                                                                                          -----------          -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD                                                  $ 1,493,922          $ 3,465,699
                                                                                          ===========          ===========

Cash paid for:
    Interest expense                                                                      $   101,607          $   133,547
                                                                                          ===========          ===========
Supplemental disclosure of non-cash financing activities:

    Conversion of Series B preferred stock to common stock                                $       693          $       791
                                                                                          ===========          ===========

    Acquisition of assets under capital lease                                             $     7,942          $      --
                                                                                          ===========          ===========
</TABLE>







                 The accompanying Notes are an integral part of
                    these Consolidated Financial Statements.



--------------------------------------------------------------------------------
                                                                          Page 5
<PAGE>

                                  iPARTY CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 30, 2002
                                   (Unaudited)

1.   THE COMPANY:

     The Company's efforts are devoted to the sale of party goods and services
through retail stores and the Internet. The Company's retail stores are located
throughout New England with three additional stores located in Florida. The
Company was originally launched as an Internet-based merchant of party goods and
services. On August 3, 2000, iParty Retail Stores Corp. ("iParty Retail") was
incorporated as a wholly owned subsidiary of iParty Corp. to operate a chain of
retail stores selling party goods. On August 15, 2000, iParty Retail acquired
certain assets from The Big Party Corporation ("The Big Party"). iParty Retail
acquired inventory, fixed assets and the leases of 33 retail stores from The Big
Party in consideration of cash and assumption of certain liabilities. The Big
Party filed for bankruptcy protection during the second quarter of 2000 and the
acquisition was approved by the United States Bankruptcy Court, District of
Delaware.

2.   UNAUDITED INTERIM FINANCIAL INFORMATION:

     The interim consolidated financial statements as of March 30, 2002 have
been prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC") for interim financial reporting.
These consolidated statements are unaudited and, in the opinion of management,
include all adjustments (consisting of normal recurring adjustments and
accruals) necessary to present fairly the consolidated balance sheets,
consolidated operating results, and consolidated cash flows for the periods
presented in accordance with generally accepted accounting principles. The
consolidated balance sheet at December 29, 2001 has been derived from the
audited consolidated financial statements at that date. Operating results for
the three months ended March 30, 2002 may not be indicative of the results for
the year ending December 28, 2002. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted in accordance with the rules
and regulations of the SEC. These consolidated financial statements should be
read in conjunction with the audited consolidated financial statements, and
accompanying notes, included in the Company's Annual Report on Form 10-KSB for
the year ended December 29, 2001.

3.   LINE OF CREDIT:

     The Company has a line of credit with a bank, which permits maximum
borrowings equal to the lesser of $7,500,000 or the borrowing base, as defined.
The line of credit is secured by the Company's inventory, and expires on July
31, 2003. As of March 30, 2002, and December 29, 2001 the Company had $3,242,835
and $3,354,977, respectively, outstanding under the line of credit. The
outstanding balances under the line of credit are classified as a current
liability in the accompanying consolidated balance sheets due to provisions in
the agreement which require the Company to maintain an account with the lender
whereby lock box receipts are applied to reduce the amount outstanding under the
agreement on a daily basis. At March 30, 2002 available borrowings under the
line of credit were approximately $2,600,000.

     Interest on the line of credit for the first $5,000,000 borrowed is payable
at the greater of the bank's base rate plus 1%, or 8%. Interest on the sub-line
borrowing, money borrowed between $5,000,000 and $7,500,000, is payable at the
bank base rate plus 2%. The agreement also provides for a commitment fee of 1%
or $75,000 and an annual facility fee of 0.5% per annum of the maximum amount of
the special sub-line.

     The agreement provides for certain financial covenants, including inventory
levels, advance rate, tangible net worth and operating performance of the
Internet segment. At March 30, 2002 the Company was in compliance with all
financial covenants.




--------------------------------------------------------------------------------
                                                                          Page 6
<PAGE>
4.   SEGMENT REPORTING:

     SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information" establishes standards for the way business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders.

     Operating segments represent components of the Company's business that are
evaluated regularly by management in assessing the performance and resource
allocation. The Company has determined that its reportable segments consist of
retail operations and Internet operations.

     The Retail Operations include the sales and related expenses from 34 retail
stores primarily located throughout New England with the highest concentration
of 19 stores in Massachusetts. Of the others, five are located in Connecticut,
three in Rhode Island, three in New Hampshire, one in Maine and three in
Florida.

     The Internet operations include the sales and related expenses from the
Internet.

     The reporting segments follow the same accounting policies used for the
Company's consolidated financial statements and are described in the Company's
Form 10-KSB. Management evaluates a segment's performance based upon net
revenue, operating income (loss) and net income (loss). Inter-segment
transactions are uncommon and not material. Therefore, they have not been
separately reflected in the financial table below. The totals of the reportable
segments' revenues, net profits and assets agree with the Company's comparable
amounts contained in the financial statements. Revenues from customers outside
of the United States are not material. No one customer accounts for more than
10% of the Company's consolidated revenues.

     The Company's financial data for segment reporting for the three months
ended March 30, 2002 and March 31, 2001 are as follows:


<TABLE>
<CAPTION>

                                                  2002                                                   2001
                                                  ----                                                   ----
                                INTERNET         RETAIL             TOTAL           INTERNET            RETAIL            TOTAL
                             ------------      ------------      ------------      ------------      ------------      ------------

<S>                          <C>               <C>               <C>               <C>               <C>               <C>
Net revenue                  $    162,300      $ 10,423,741      $ 10,586,041      $    246,802      $  8,701,500      $  8,948,302
                             ============      ============      ============      ============      ============      ============

Operating loss               $   (172,144)     $   (639,284)     $   (811,428)     $   (415,639)     $ (1,187,132)     $ (1,602,771)
                             ============      ============      ============      ============      ============      ============

Net loss                     $   (171,778)     $   (771,160)     $   (942,938)     $   (370,422)     $ (1,312,827)     $ (1,683,249)
                             ============      ============      ============      ============      ============      ============

Total assets                 $    459,146      $ 13,028,005      $ 13,487,151      $  3,621,422      $ 11,813,162      $ 15,434,584
                             ============      ============      ============      ============      ============      ============

Deprec/amort                 $     54,109      $     78,716      $    132,825      $    120,598      $     14,268      $    134,866
                             ============      ============      ============      ============      ============      ============

Capital exp                  $          0      $    205,114      $    205,114      $      2,025      $      8,800      $     10,825
                             ============      ============      ============      ============      ============      ============
</TABLE>


5.   EARNINGS PER SHARE:

     The Company has computed net income (loss) per share in accordance with
SFAS No. 128, Earnings per Share. Under the provisions of SFAS No. 128, basic
net income (loss) per common share ("Basic EPS") is computed by dividing net
income (loss) by the weighted average number of common shares outstanding.
Diluted net income (loss) per common share ("Diluted EPS") is computed by
dividing net income (loss) by the weighted average number of common shares and
dilutive common share equivalents then outstanding using the treasury-stock
method.


--------------------------------------------------------------------------------
                                                                          Page 7
<PAGE>
     The following table sets forth the computation of pro-forma basic and
diluted earnings per share:

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED          THREE MONTHS ENDED
                                                 MARCH 30, 2002              MARCH 31, 2001
                                                 --------------              --------------

<S>                                            <C>                         <C>
Net income (loss) available to common
shareholders                                      $ (942,398)                 $ (1,683,249)
                                                  ==========                  ============

Income (loss) per share:
 Basic and diluted                                $    (0.06)                 $      (0.13)
                                                  ==========                  ============

Weighted average shares:
 Basic and diluted                                15,584,885                    12,708,428
                                                  ==========                  ============

</TABLE>


     As of March 30, 2002 and March 31, 2001, 47,362,266 and 50,062,776
potential additional common shares were outstanding, respectively, but not
included in the above calculation as their effect would have been anti-dilutive.

6.   COMMITMENTS AND CONTINGENCIES:

     Pursuant to an Asset Purchase Agreement dated August 2, 2000, as amended,
the Company purchased from The Big Party, Debtor and Debtor-in-Possession, 33
retail locations and the assets located therein, including inventory. The
Company and The Big Party were in disagreement concerning the value and amount
due on account of the inventory. In addition, the parties set up a $100,000
escrow of funds paid under the agreement as security for rental payments and
other adjustments due, and the parties were in discussions concerning the
portion thereof, which belongs to the Company. The Big Party filed a complaint
in the U.S. Bankruptcy Court for the District of Delaware in January 2001
seeking payment of $625,568 on account of the inventory. Both parties agreed to
a settlement amount of $357,500 in October 2001. The U.S. Bankruptcy Court for
the District of Delaware approved the settlement in November 2001. The
settlement amount, which was adequately reserved for, was paid in January 2002.


7.   RECENTLY ISSUED ACCOUNTING STANDARDS:

     In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 141, Business Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS 141 requires business combinations initiated after June 30, 2001 to
be accounted for using the purchase method. It also specifies the types of
acquired intangible assets required to be recognized and reported separately
from goodwill. SFAS No. 142 requires that goodwill and certain intangibles no
longer be amortized, but instead be tested for impairment at least annually.
SFAS No. 142 was effective for the Company on January 1, 2002. The adoption of
SFAS Nos. 141 and 142 did not have a material impact on the Company's financial
position or results of operations, because it currently has no goodwill or other
intangible assets recorded.

     In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 modifies the rules for accounting
for the impairment of long-lived assets. The new rules were effective for the
Company January 1, 2002. The adoption of SFAS No. 144 did not have a material
impact on the Company's financial position or results of operations.


--------------------------------------------------------------------------------
                                                                          Page 8
<PAGE>


Item 2.           Management's Discussion and Analysis

Overview:

     The Company intends to become the premier multi-channel party supply
resource with distribution on-line, through catalogues and in retail stores.

     The Company's web site was launched in February 1999. On October 12, 1999,
the Company launched the new iParty.com site, a destination for party goods and
party planning. From Pokemon costumes to birthday party packs to fog machines,
an online party magazine to party safety tips, iParty.com presents consumers
with what it believes to be a sophisticated, yet fun and easy-to-navigate online
party resource. Offering convenience and an extensive assortment of merchandise,
the Company believes iParty.com is refocusing the party goods industry back to
the needs of the consumer. At the click of a mouse, party givers can enjoy
one-stop shopping and easy-to-find pricing while purchasing all their party
needs for birthday bashes, Super Bowl and Halloween parties and more.

     On August 15, 2000 iParty Retail Stores Corp. purchased assets consisting
of 33 store leases, fixtures and inventory from The Big Party Corporation. This
enabled the Company to set up retail operations and to become a multi-channel
outlet for party supplies.

Results of Operations:

Three months ended March 31, 2001 compared to three months ended March 30, 2002

     Revenue includes the selling price of party goods sold, net of returns and
discounts, as well as outbound shipping and handling charges. Revenue is
recognized at the time of sale for retail sales and at the time products are
shipped to customers for Internet sales. Consolidated revenue for the three
months ended March 30, 2002 and March 31, 2001 was $10,586,041 and $8,948,302
respectively. For the three months ended March 30, 2002 revenue from retail
stores totaled $10,423,741 and revenue from the Internet totaled $162,300. For
the three months ended March 31, 2001 revenue from the retail stores totaled
$8,701,500 and revenue from the Internet totaled $246,802. The increase in
revenues for the retail stores is attributable to comparable store sales growth
and the addition of one new store in March of 2002. The decrease in revenue for
the Internet is attributable to the reduction of promotional programs in 2002.

     Cost of products sold consists of the cost of merchandise sold to
customers, store rent, warehousing costs, and outbound shipping and handling
costs charged to the Company by its Internet fulfillment partner, Taymark.
Consolidated cost of products sold for the three months ended March 30, 2002 and
March 31, 2001 was $6,646,619 or 62.8% of revenue and $5,737,861 or 64.0% of
revenue, respectively. For the three months ended March 30, 2002 cost of
products sold from the retail stores totaled $6,517,318 or 62.5% of revenue and
cost of products sold from the Internet totaled $129,301 or 79.7% of revenue.
For the three months ended March 31, 2001 cost of products sold from the retail
stores totaled $5,528,997 or 64.0% of revenue and cost of products sold from the
Internet totaled $208,864 or 85.0% of revenue. The decrease in cost of products
sold percentage is primarily attributable to increases in revenue which offset
store rent.

     Marketing and sales expenses consist primarily of advertising, public
relations and promotional expenditures, and all related payroll and related
expenses for personnel engaged in marketing and selling activities, including
store payroll. Consolidated marketing and sales expenses for the three months
ended March 30, 2002 and March 31, 2001 were $3,401,008 and $3,254,425,
respectively. For the three months ended March 30, 2002, marketing and sales
expenses for retail stores totaled $3,384,863 and marketing and sales expenses
for the Internet totaled $16,145. For the three months ended March 31, 2001
marketing and sales expenses for retail stores totaled $3,220,440 and marketing
and sales expenses for the Internet totaled $33,985. The increase in marketing
and sales expenses is primarily attributable to normal increases in retail store
payroll.


--------------------------------------------------------------------------------
                                                                          Page 9
<PAGE>
     Product and technology development expenses consist principally of payroll
and related expenses for product development, editorial, systems and operations
personnel and consultants, and systems infrastructure related to the Company's
Internet site. Product and technology development expenses for the three months
ended March 30, 2002 and March 31, 2001 were $453,281 and $527,440,
respectively.

     General and administrative ("G&A") expenses consist of payroll and related
expenses for executive, finance and administrative personnel, professional fees
and other general corporate expenses. Consolidated G&A expenses for the three
months ended March 30, 2002 and March 31, 2001 were $896,561 and $945,857,
respectively.

     The non-cash compensation expense consists of the amortization of stock
options granted to consultants related to the Internet operation. Non-cash
compensation expense for the three months ended March 30, 2002 and March 31,
2001 was $0 and $85,490, respectively. These consulting agreements were
terminated on December 28, 2001.

     Interest income on cash and cash equivalents for the three months ended
March 30, 2002 and March 31, 2001, was $4,705 and $53,069, respectively. The
decrease in income is due to higher cash and investment balance in 2001.

     Interest expense for the three months ended March 30, 2002 and March 31,
2001, was $136,215 and $133,547, respectively.

Liquidity and Capital Resources:

     The Company used cash in operating activities for the three months ended
March 30, 2002 and March 31, 2001 totaling $551,407 and $2,245,244,
respectively. In addition, the Company invested cash in property and equipment,
primarily related to new store development expenditures for the three months
ended March 30, 2002 and March 31, 2001 totaling $197,192 and $10,825
respectively. For the three months ended March 30, 2002 the Company reduced
borrowings under its line of credit by $112,142.

     To date, the Company raised an aggregate of $30.9 million in equity
financing.

     The Company has a line of credit with a bank which permits maximum
borrowings equal to the lesser of $7,500,000 or the borrowing base. The line of
credit is secured by the Company's inventory, and expires on July 31, 2003. As
of March 30, 2002 the Company had $3,242,835 outstanding under the line of
credit. At March 30, 2002 available borrowings under the line of credit were
approximately $2,600,000.

     Interest on the line of credit for the first $5,000,000 borrowed is payable
at the greater of the bank's base rate plus 1%, or 8%. Interest on the sub-line
borrowing, money borrowed between $5,000,000 and $7,500,000, is payable at the
bank base rate plus 2%. The agreement also provides for a commitment fee of 1%
or $75,000 and an annual facility fee of 0.5% per annum of the maximum amount of
the special sub-line.

     The agreement provides for certain financial covenants related to the line
of credit, including inventory levels, advance rate, tangible net worth and
operating performance of the Internet segment. At March 30, 2002 the Company was
in compliance with all financial covenants.

     The Company believes, based on currently proposed plans and assumptions
relating to its operations, that the net proceeds from the financings together
with anticipated revenues from operations and the line of credit, will be
sufficient to fund its operations and working capital requirements for at least
twelve months. In the event that the Company's plans or assumptions change or
prove inaccurate (due to unanticipated expenses, increased competition,
unfavorable economic conditions, or other unforeseen circumstances) the Company
could be required to seek additional financing sooner than currently expected.
There can be no assurance that such additional funding will be available, or if
available, that the terms of such additional financing will be acceptable.

Critical Accounting Policies:

     We considered the disclosure requirements of FR-60 regarding critical
accounting policies and FR-61 regarding liquidity and capital resources, certain
trading and related party/ certain other disclosures, and concluded nothing
materially changed during the quarter that would warrant further disclosure
under these releases.

--------------------------------------------------------------------------------
                                                                         Page 10
<PAGE>

Safe Harbor Statement:

     Certain statements in this Form 10-QSB, including information set forth
under Item 2 "Management's Discussion and Analysis" constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Act"). The words "anticipates," "believes," "estimates,"
"expects," "plans," "intends" and other similar expressions are intended to
identify these forward-looking statements, but are not the exclusive means of
identifying them. We desire to avail ourselves of certain "safe harbor"
provisions of the Act and are therefore including this special note to enable us
to do so. Forward-looking statements included in this Form 10-QSB or hereafter
included in other publicly available documents filed with the Securities and
Exchange Commission, reports to our stockholders and other publicly available
statements issued or released by us involve known and unknown risks,
uncertainties, and other factors which could cause our actual results,
performance (financial or operating) or achievements to differ from the future
results, performance (financial or operating) or achievements expressed or
implied by such forward looking statements. Such future results are based upon
our best estimates based upon current conditions and the most recent results of
operations. Various risks, uncertainties and contingencies could cause our
actual results, performance or achievements to differ materially from those
expressed in, or implied by, these statements, including, but not limited to,
the following: the success or failure of our efforts to implement our business
strategy; our inability to obtain additional financing, if required; third-party
suppliers' failure to fulfill their obligations to us; intense competition; the
failure of our systems or those of our third-party suppliers; and government
regulation of the Internet.

PART II OTHER INFORMATION

Not Applicable







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<PAGE>

SIGNATURES

         In accordance with requirements of the Securities Exchange Act, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                         iPARTY CORP.

Dated:    May 8, 2002                      By:   /s/ Sal Perisano
                                               ------------------------------
                                                  Sal Perisano
                                                  Chief Executive Officer

                                           By:   /s/ Patrick Farrell
                                               ------------------------------
                                                  Patrick Farrell
                                                  President & Chief Financial
                                                  Officer















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