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 June 30, 2001
                                 --------------

                                       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. 0-25507
                                               -------

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

              Delaware                                    13-4012236
              --------                                    ----------
(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 August 8, 2001  there  were  13,574,095  shares of the  Registrant's
common stock, $.001 par value, issued and outstanding.





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                                                                          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                        11


PART II  OTHER INFORMATION

Item 1.           Legal Proceedings                                           15

Item 4.           Submission of Matters to vote of Security Holders           15

Item 6.           Exhibits                                                    15


SIGNATURES









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                                                                          Page 2
<PAGE>




                                               iParty Corp.
                                       Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                                         June 30,        December 30,
                               ASSETS                                                      2001             2000
                                                                                           ----             ----
                                                                                        (Unaudited)
                                                                                        -----------
<S>                                                                                     <C>              <C>

Current assets:
   Cash and cash equivalents                                                          $  3,354,181     $  5,002,254
   Cash, restricted                                                                        155,564          635,000
   Accounts receivable                                                                     522,357          948,292
   Inventory                                                                             9,386,749        8,226,560
   Prepaid expenses and other current assets                                               727,688           69,812
                                                                                      ------------     ------------
         Total current assets                                                           14,146,539       14,881,918

   Property and equipment, net                                                             786,377          903,849
   Other assets                                                                            194,664          557,286
                                                                                      ------------     ------------

Total assets                                                                          $ 15,127,580     $ 16,343,053
                                                                                      ============     ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                                                    $  3,324,016     $  2,415,679
  Accrued severance and restructuring expenses                                              99,828          775,137
  Accrued expenses                                                                       1,858,675        2,434,480
  Line of credit                                                                         3,459,687        2,800,790
                                                                                      ------------     -------------
       Total current liabilities                                                         8,742,206        8,426,086

Other liabilities:                                                                         614,238          492,465
                                                                                      ------------     -------------
Total liabilities                                                                        9,356,444        8,918,551

Commitments and contingencies

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  authorized;
       1,291,748 and 1,413,352 shares issued and outstanding as of                           1,291            1,414
       June 30, 2001 and December 30, 2000, respectively
     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;
       13,390,785 and 12,174,745 shares issued and outstanding as of                        13,391           12,175
       June 30, 2001 and December 30, 2000, respectively
  Additional paid in capital                                                            64,365,522       64,166,987
  Accumulated deficit                                                                  (58,611,223)     (56,758,229)
                                                                                       ------------     ------------

       Total stockholders' equity                                                        5,771,136        7,424,502
                                                                                       ------------     ------------

Total liabilities and stockholders' equity                                            $ 15,127,580     $ 16,343,053
                                                                                      ============     ============






                             The accompanying Notes are an interal part of these Consolidated Financial
                                                             Statements

</TABLE>
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                                                                          Page 3
<PAGE>


                                  iParty Corp.
                      Consolidated Statements of Operations

<TABLE>
<CAPTION>

                                                For the three months           For the six months ended
                                                   ended June 30,                      June 30,
                                                2001            2000           2001                2000
                                                ----            ----           ----                ----
                                               (Unaudited)      (Unaudited)   (Unaudited)       (Unaudited)
                                               -----------      ----------    ----------         ----------
<S>                                            <C>              <C>           <C>               <C>

Revenues                                       $ 12,250,177    $    259,852   $ 21,198,479    $    406,685
                                               ------------    ------------   ------------    -------------

 Operating costs:
           Cost of products sold                  7,192,259         375,363     12,930,120         492,720
           Amortization of partner warrant               --         377,744             --         755,488
           Marketing and sales                    3,652,970       2,563,555      6,907,395       4,979,563
           Product and technology development       565,032       1,664,788      1,092,472       3,562,532
           General and administrative               905,678         549,544      1,851,535       1,078,543
           Restructuring income                    (122,534)             --       (122,534)             --
           Non-cash compensation expense            114,138          88,777        199,628         634,956
                                                ------------   ------------     -----------    -----------

 Operating loss                                     (57,366)     (5,359,919)     (1,660,137)    (11,097,117)

           Interest income                           33,980         226,679        87,049           500,133
           Interest Expense                        (146,357)             --        (279,904)             --
                                                   ---------     -----------     -----------     ----------

 Net loss                                      $   (169,743)   $ (5,133,240)   $ (1,852,992)   $(10,596,984)
                                               =============   =============   ============    =============

 Loss per share:
           Basic and diluted                   $      (0.01)   $      (0.46)   $     (0.14)     $     (0.95)
                                               =============   =============   ============     ============

 Weighted Average Shares
Outstanding:
           Basic and diluted                      13,036,082      11,136,107      12,873,160      11,103,436
                                                ============     ===========    ============     ============









                             The accompanying Notes are an interal part of these Consolidated Financial
                                                             Statements

</TABLE>
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                                                                          Page 4
<PAGE>
<TABLE>
<CAPTION>



                                                            iParty Corp.
                                                Consolidated Statements of Cash Flows

                                                                                                          For the six months ended
                                                                                                                    June 30,
                                                                                                               2001            2000
                                                                                                               ----            ----
                                                                                                        (Unaudited)      (Unaudited)
<S>                                                                                                     <C>              <C>

Cash flows from operating activities:

     Net loss                                                                                          $ (1,852,992)   $(10,596,984)

     Adjustments to reconcile net loss to
        net cash used in operating activities:
        Depreciation and amortization                                                                       283,324        1,498,952
        Non-cash compensation expense                                                                       199,628          634,596
        Decrease (increase) in:
          Accounts receivable                                                                               425,934           99,476
          Inventory                                                                                      (1,160,189)               -
          Prepaid expenses and other current assets                                                       (657,876)           50,128
          Other assets                                                                                     362,622           (6,349)
      Increase (decrease) in:
          Accounts payable                                                                                 908,337           826,663
          Accrued severance and restructuring expenses                                                    (675,309)        (138,974)
          Accrued expenses                                                                                (492,622)         458,526
          Other liabilities                                                                                121,773                 -
                                                                                                        ------------    ------------
      Net cash used in operating activities                                                            (2,537,370)      (7,173,606)



Cash flows from investing activities:

     Purchase of property and equipment                                                                    (126,346)       (337,458)
     Purchase of marketable securities                                                                            -        (670,436)
     Decrease in restricted cash                                                                            479,436          51,012
                                                                                                       ------------    -------------
        Net cash provided by (used in) investing activities                                                 353,090        (956,882)
                                                                                                       ------------    -------------


Cash flows from financing activities:

     Net borrowings from line of credit,                                                                    658,897                -
     Payments on capital lease obligations                                                                 (122,690)               -
        Net cash provided by financing activities                                                       -----------     ------------
                                                                                                            536,207                -

Net decrease in cash and cash equivalents                                                                (1,648,07)      (8,130,488)

Cash and cash equivalents, beginning of period                                                           5,002,254       18,673,304

Cash and cash equivalents, end of period                                                              $  3,354,181     $ 10,542,816
                                                                                                      ============     ============

Cash paid for:
     Interest expense                                                                                  $    279,904    $           -
                                                                                                       ============    =============

     Income taxes                                                                                      $       --      $     28,997
                                                                                                       ============    =============

Supplemental disclosure of non-cash financing activities:
     Conversion of Series B preferred stock to common stock                                            $      1,215    $           -
                                                                                                       ============    =============

     Acquisition of assets under capital lease                                                         $    184,840    $    212,880
                                                                                                       ============    =============





                             The accompanying Notes are an interal part of these Consolidated Financial
                                                             Statements

</TABLE>
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                                                                          Page 5
<PAGE>



                                  iPARTY CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2001
                                   (Unaudited)

1. THE COMPANY:

         iParty LLC was created on December 11, 1997 to launch an Internet-based
merchant of party goods and services and  commenced  operations in January 1998.
On March 12, 1998,  iParty Corp.  was organized as a wholly owned  subsidiary of
iParty LLC and the net assets and  operations of iParty LLC were  transferred to
iParty Corp. On April 9, 1998, StarGreetings,  Inc. ("Star") was incorporated as
a wholly owned  subsidiary of iParty Corp. to develop and operate a personalized
celebrity greeting service.

         Effective July 2, 1998, iParty Corp. ("iParty" or the "Company") merged
into WSI  Acquisition  Corp.  ("WSI"),  an  inactive  company.  The  merger  was
consummated  through an exchange of shares that resulted in iParty LLC receiving
6,000,000 common shares or 54.5% of the outstanding shares of WSI. In connection
with the merger and as a condition thereof, WSI sold, in two private placements,
an aggregate of 4,585,000  shares of its common stock of which 3,624,043  shares
were sold for $.01 per share and  960,957  shares,  together  with  warrants  to
purchase  1,000,000 shares of Series A preferred stock,  were sold for $1.00 per
share or aggregate proceeds of $997,197 before related expenses.  The merger was
treated as a  re-capitalization  for accounting  purposes and iParty's  historic
capital  accounts were  retroactively  adjusted to reflect the 6,000,000  shares
issued by WSI in the transaction.  In addition,  as WSI had no assets before the
merger and the private placements,  the 420,421 outstanding common shares of WSI
were recorded at par value with a  corresponding  charge to  additional  paid-in
capital. In connection with the merger, WSI changed its name to iParty Corp.

         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
inventory,  fixed  assets and the leases of 33 retail  stores from The Big Party
Corporation ("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.

         The  Company's  efforts  are  devoted  to the sale of party  goods  and
services through retail stores and the Internet.

2. UNAUDITED INTERIM FINANCIAL INFORMATION:

         The interim consolidated  financial statements as of June 30, 2001 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  30,  2000 has been  derived  from the
audited  consolidated  financial  statements at that date. Operating results for
the  three and six  months  ended  June 30,  2001 may not be  indicative  of the
results for the year ending December 29, 2001. 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 30, 2000.

3. CREDIT ARRANGEMENT:

         On August 1, 2000,  the  Company  established  a line of credit  with a
bank. The agreement permits maximum borrowings equal to the lesser of $7,500,000

--------------------------------------------------------------------------------
                                                                          Page 6
<PAGE>

or the borrowing base, as defined.  Interest on the line of credit for the first
$5,000,000  borrowed  ("Line  Interest  Rate") is payable at the  greater of the
bank's  base rate  (6.75% at June 30,  2001) plus 1% or 7.75%.  Interest  on the
sub-line borrowing, money borrowed between $5,000,000 and $7,500,000, is payable
at the bank 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.  This agreement  expires on July 31, 2003. As of June 30,
2001,  the Company had  $3,459,687  outstanding  and an additional  $2.4 million
available under the line of credit

         In March  2001,  the  Company  and its lender  modified  the  borrowing
facility  by  adjusting  certain  covenants  and other  provisions  based on the
Company's  operating  plan for 2001.  As of June 30,  2001,  the  Company was in
compliance with the adjusted covenants.

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 33
retail  stores  located  throughout  New England  and  Florida  with the highest
concentration  of 18 stores in  Massachusetts;  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 and the Company's off line catalog.

         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 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 and
six months ended June 30, 2001 are as follows

<TABLE>
<CAPTION>

                                                Three months ended June 30,                       Three months ended June 30,
                                                ---------------------------                       ---------------------------
                                                        2001                                              2000
                                                        ----                                              ----
<S>                                       <C>            <C>              <C>              <C>               <C>        <C>

                                          Internet       Retail           Total            Internet          Retail     Total
                                          --------       ------           -----            --------          ------     -----
Net revenue                               $   242,702    $  12,007,475    $  12,250,177    $      259,905    $     0    $   259,905
                                          ===========    =============    =============    ==============    =======    ===========

Operating Loss                            $  (251,353)   $     193,987    $     (57,366)   $   (5,359,845)   $     0    $(5,359,845)
                                          ===========    =============    =============    ==============    =======    ===========

Net loss                                  $  (222,982)   $      53,239    $    (169,743)   $   (5,133,166)   $     0    $(5,133,166)
                                          ===========    =============    =============    ==============    =======    ===========


Total assets                              $ 3,447,335    $  11,313,213    $  14,760,548    $   16,343,053    $     0    $16,343,053
                                          ===========    =============    =============    ==============    =======    ===========

Deprec/amort                              $   120,598    $      27,860    $     148,458    $      763,832    $     0    $   763,832
                                          ===========    =============    =============    ==============    =======    ===========

Capital exp                               $      --      $     115,521    $     115,521    $      164,495    $     0    $   164,495
                                          ===========    =============    =============    ==============    =======    ===========

</TABLE>

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                                                                          Page 7
<PAGE>

<TABLE>
<CAPTION>

                                        Six Months ended June 30                          Six Months ended June 30
                                        ------------------------                          ------------------------
                                                2001                                               2000
                                                ----                                               ----
<S>                               <C>         <C>            <C>                <C>                <C>           <C>

                                  Internet    Retail         Total              Internet           Retail        Total
                                  --------    ------         -----              --------           ------        -----
Net revenue                       $  489,504  $ 20,708,975    $ 21,198,479      $   406,685        $          0  $    406,685
                                  =========== ===========    ==============     ============       ============  ===============

Operating Loss                    $  (666,992)$  (993,145)   $   (1,660,137)    $   (11,097,117)   $          0  $(11,097,117)
                                  =========== ============   ==============     ===============    ============  ===============

Net loss                          $  (593,404)$(1,259,588)   $   (1,852,992)    $   (10,596,984)   $          0  $(10,596,984)
                                  =========== ============    ==============    ===============   ============  ===============


Total assets                      $ 3,447,335 $ 11,313,213   $   15,127,580     $    16,343,053    $          0  $ 16,343,053
                                  =========== ============   ==============     ===============    ============  ===============

Deprec/amort                      $   241,196 $     42,128   $      286,324     $     1,498,952    $          0  $  1,498,952
                                  =========== ============   ==============     ===============    ============  ===============
Capital exp                       $     2,025 $    124,321   $      126,346     $       337,458    $          0  $    337,458
                                  =========== ============   ==============     ===============    ============  ===============

</TABLE>



5. ACQUISITION:

         On August 15, 2000, the Company,  through its wholly-owned  subsidiary,
iParty Retail, pursuant to an Asset Purchase Agreement,  acquired certain assets
from The Big Party. The Company acquired inventory,  fixed assets and the leases
of 33 retail stores from The Big Party in  consideration  of cash and assumption
of certain  liabilities.  This  transaction  was  accounted for as a purchase in
accordance  with  APB  No.  16,   Accounting  for  Business   Combinations  and,
accordingly,  the  results  of The Big Party  since  August  15,  2000 have been
included in the  Company's  statement  of  operations.  The  purchase  price was
allocated to the acquired assets as follows:

       Purchase price:

       Cash paid                                 $ 3,975,000
       Payable to seller                             650,000
       Accrued transaction costs                     235,000
                                                 -----------

       Total purchase price                      $ 4,860,000
                                                 ===========

       Net tangible assets acquired:
         Inventory                               $ 4,860,000
                                                 ===========

         In  addition  to  acquiring   inventory,   iParty  purchased  leasehold
improvements at the acquired  stores.  The fair value of the acquired  inventory
and leaseholds  exceeded the purchase price.  As a result,  due to the fact that
the purchase price approximated the fair value of the inventory,  no value could
be assigned to the long-term assets.

         Unaudited pro forma results of operations  for the three and six months
ended  June 30,  2000 as if iParty  and The Big Party  had been  combined  as of
January 1, 2000 follow.  The pro forma results include estimates and assumptions
which management believes are reasonable. The pro forma financial information is
not necessarily indicative of the operating results that would have occurred had
the acquisition  occurred as of the dates  indicated,  nor are they  necessarily
indicative of future operating results.

<TABLE>
<CAPTION>

                                                        Three months ended                      Six months ended
                                                             June 30,                               June 30,
                                                                        (Proforma)                                      (Proforma)
                                                                        ----------                                      ----------
                                                        2001              2000                 2001                         2000
                                                        ----              ----                 ----                         ----

<S>                                                  <C>                   <C>                 <C>                     <C>

Revenue                                              $ 12,250,177          $ 11,631,918          $ 21,198,479          $ 21,668,698
Operating loss                                       $    (57,366)         $ (6,958,613)         $ (1,660,137)         $(12,984,685)
                                                     ------------          ------------          ------------          ------------

Net loss                                             $   (169,743)         $ (6,360,734)         $ (1,852,992)         $(12,484,552)
                                                     ============          ============          ============          ============

Loss per share:
 Basic and diluted                                   $      (0.01)         $      (0.57)         $      (0.14)         $      (1.12)
                                                     ============          ============          ============          ============

Weighted average shares:
 Basic and diluted                                     13,036,082            11,136,107            12,873,160            11,103,436
                                                     ============          ============          ============          ============

</TABLE>

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                                                                          Page 8
<PAGE>

6.  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.

         As of June  30,  2001  and June 30,  2000,  49,289,411  and  32,579,193
potential  common  shares were  outstanding,  respectively,  but not included in
earnings per share calculation as their effect would have been anti-dilutive.

7. RESTRUCTURING COSTS:

         In  fiscal  2000,  the  Company  decided  to close  its New  York  City
headquarters and transfer this operation to its Boston,  Massachusetts location.
As part of operating expenses,  the Company recorded $1,093,328 of restructuring
expenses  related to this facility  closure in 2000.  These costs were primarily
related to severance  for a group of employees  and other exit costs  related to
closing the New York facility.

<TABLE>
<CAPTION>

                                                 Severance              Other               Total
<S>                                              <C>                    <C>                 <C>
Balance at December 30, 2000                           $ 406,874        $ 368,263          $ 775,137
Amounts paid in 2001                                   $(406,874)       $(145,901)         $(552,775)
Excess of amounts provided                             $       -        $(122,534)         $(122,534)
                                                       ---------        ----------         ----------

Balance at June 30 2001                                $       -        $   99,828         $   99,828
                                                       =========        ==========         ==========
</TABLE>

         During  the  quarter  ended  June  30,  2001,  due to  the  substantial
completion  of  the  actions  of  the  2000  restructuring   plan,  the  Company
reevaluated its 2000 restructuring  accrual.  As a result of this review certain
costs associated with the close of the New York City headquarters were no longer
required.  This resulted from the elimination of certain planned actions as well
as the Company  successfully  negotiating  certain  closing costs.  As such, the
Company has recognized a  restructuring  credit of $122,534,  which affected the
Internet  segment.  This credit is  reflected in  "Restructuring  income" in the
Consolidated Statements of Operations.

         The remainder of the reserve  represents  exit costs related to closing
and vacating  the  facility.  Such costs are expected to be incurred  during the
second half of 2001.

8. COMMITMENTS AND CONTINGENCIES:

  Legal proceedings:

         The Company is a defendant in one lawsuit that is being  handled in the
ordinary  course of  business.  Pursuant to an Asset  Purchase  Agreement  dated
August  2,  2000,  as  amended,   the  Company  purchased  from  The  Big  Party
Corporation, Debtor and Debtor-in-Possession, 33 retail locations and the assets
located  therein,  including  inventory.  The  Company  and The Big Party are in
disagreement concerning the value and amount due on account of the inventory and
The Big Party is claiming that $625,568 is due. 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  are  in  discussions
concerning the portion thereof which belongs to the Company. The Big Party filed
a  complaint  with the U.S.  Bankruptcy  Court for the  District  of Delaware in
January  2001  seeking  payment of  $625,568  on account of the  inventory.  The
Company is  disputing  the amount  claimed  and  intends to file an answer and a
possible  counterclaim  for  amounts  due on account of the escrow  referred  to
above.  The Company is also in negotiations  with The Big Party seeking to reach
an  agreeable  compromise.  This  matter is in the  preliminary  stages.  In the
opinion of the management of the Company, the Company is adequately reserved and
this  should  not  result in final  judgement  or  settlement  that would have a
material  adverse  effect on the  Company's  financial  condition  or results of
operations.


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                                                                          Page 9
<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) 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.






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                                                                         Page 10
<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 catalogs 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.

         In  April  2000,   the  Company   launched  its  catalogue   operation,
specializing in the seasonal party needs of the consumer.

         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 June 30, 2001 compared to three months ended June 30, 2000

         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 June 30, 2001 and 2000 were $12,250,177 and $259,852  respectively.
For the three  months ended June 30, 2001  revenue  from retail  stores  totaled
$12,007,475 and revenue from the Internet totaled $242,702. For the three months
ended June 30, 2000 revenue from the retail  stores  totaled $0 and revenue from
the  Internet  totaled  $259,852.  The 7% decrease  in Internet  sales is due to
decreased  traffic and revenue from new  customers  compared to the three months
ended June 30,  2000.  During  the  period  ended  June 30,  2000,  the  Company
aggressively  acquired new customers  with several coupon  promotions.  Although
these promotions were successful in acquiring new customers,  they resulted in a
negative gross margin of 44% for the quarter.

         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 fulfillment partner,  Taymark.  Consolidated
cost of  products  sold for the three  months  ended June 30,  2001 and 2000 was
$7,192,259 or 59% of revenue and $375,363 or 144% of revenue  respectively.  For
the three  months  ended  June 30,  2001 cost of  products  sold from the retail
stores  totaled  $7,022,264 or 58% of revenue and cost of products sold from the
Internet totaled $169,995 or 70% of revenue. For the three months ended June 30,
2000  cost of  products  sold  from the  retail  stores  totaled  $0 and cost of
products sold from the Internet totaled $375,363 or 144% of revenue.  During the
period ended June 30, 2000, the Company aggressively acquired new customers with
several  coupon  promotions.   Although  these  promotions  were  successful  in
acquiring new customers, they resulted in a negative gross margin of 44% for the
quarter.

         Amortization of fulfillment  partner  warrant  expense  consists of the
amortization  of the  estimated  fair value of the warrant  issued to Taymark to
provide inventory and fulfillment services to deliver merchandise ordered on the
site, or directly through a toll-free  telephone number,  directly to consumers.
On July 8, 1999, the Company entered into a product  fulfillment  agreement with
Taymark.  The initial term of the agreement runs through  December 31, 2002. The
agreement  contains certain  restrictions on competition by the direct marketer.
As additional  consideration  for such  restrictions  and services,  the Company
issued a warrant to  purchase  3,000,000  shares of common  stock at an exercise
price of $3.75. The warrant expires on October 1, 2002. The estimated fair value

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                                                                         Page 11
<PAGE>

of the warrant on the date of issue was approximately $5.3 million as determined
using the  Black-Scholes  option  pricing  model.  On  December  30, 2000 it was
determined that the Company had not met certain  purchase  requirements  for the
year as outlined in the agreement with Taymark.  As a result of this  shortfall,
the  restrictions  on  competition  by Taymark as outlined in the agreement were
lifted  rendering  the  remaining  unamortized  value of the warrant  worthless.
Therefore,  the remaining balance of $3,021,954 was charged to expense.  For the
three months ended June 30, 2001 and 2000  amortization  of fulfillment  partner
warrant expense was $0 and $377,744, respectively.

         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 June 30, 2001 and 2000 were  $3,652,970 and $2,563,555  respectively.  For
the three months ended June 30, 2001,  marketing  and sales  expenses for retail
stores  totaled  $3,650,397  and marketing  and sales  expenses for the Internet
totaled  $2,573.  For the three months ended June 30, 2000  marketing  and sales
expenses for retail stores  totaled $0 and marketing and sales  expenses for the
Internet  totaled  $2,563,555.  Included in the marketing and sales expenses for
the  Internet  for 2000 was  $135,000  resulting  from the  amortization  of the
Margaritaville  warrant. The decrease in marketing spending for the Internet was
related to lower cost per acquisition in 2001.

         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  June 30,  2001  and 2000  were  $565,032  and  $1,664,788,
respectively. The decrease in product and technology development expenses is due
to the transition from a site  development  phase in 2000 to a site  maintenance
phase in 2001.

         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 June 30, 2001 and 2000 were  $905,678 and
$549,544,  respectively.  The increase in G&A expenses is due to the  additional
staff required to manage the retail stores.

         Restructuring  income  consists  of the excess of amounts  provided  to
close our New York  office  over actual  expenses  incurred.  During the quarter
ended June 30, 2001,  due to the  substantial  completion  of the actions of the
2000 restructuring plan, the Company reevaluated its 2000 restructuring accrual.
As a result of this review  certain costs  associated  with the close of the New
York  City  headquarters  were  no  longer  required.  This  resulted  from  the
elimination  of  certain  planned  actions as well as the  Company  successfully
negotiating  certain  closing  costs.  As such,  the  Company has  recognized  a
restructuring  credit of $122,534,  which  affected the Internet  segment.  This
credit is reflected in "Restructuring income" in the Consolidated  Statements of
Operations.

         The non-cash compensation expenses consist of the amortization of stock
options  granted to  consultants  related to the  Internet  operation.  Non-cash
compensation  expenses  for the three  months  ended June 30,  2001 and 2000 was
$114,138 and $88,777, respectively.

         Interest income on cash and cash equivalents for the three months ended
June 30, 2001 and 2000, was $33,980 and $226,679,  respectively. The decrease in
interest  income is due to higher cash and investment  balance in 2000 resulting
from the Company's  financing  activities,  principally the private placement of
Series B, C, and D Convertible Preferred Stock completed in 1999.

         Interest expense for the three months ended June 30, 2001 and 2000, was
$146,357 and $0,  respectively.  The interest expense in 2001 was related to the
iParty Retail line of credit.

Six months ended June 30, 2001 compared to six months ended June 30, 2000:

         Revenue  includes the selling price of party goods sold, net of returns
and discounts,  as well as outbound  shipping and handling  charges.  Revenue is

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                                                                         Page 12
<PAGE>

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 six months
ended June 30, 2001 and 2000 were  $21,198,479 and $406,685,  respectively,  For
the  six  months  ended  June  30,  2001  revenue  from  retail  stores  totaled
$20,708,975 and revenue from the Internet totaled  $489,504.  For the six months
ended June 30, 2000 revenue from the retail  stores  totaled $0 and revenue from
the Internet  totaled  $406,685.  The 20%  increase in Internet  sales is due to
increased traffic and revenue from repeat customers.

         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 fulfillment partner,  Taymark.  Consolidated
cost of  products  sold for the six  months  ended  June  30,  2001 and 2000 was
$12,930,120 or 61% of revenue and $492,720 or 121% of revenue respectively.  For
the six months  ended June 30,  2001 cost of products  sold from  retail  stores
totaled  $12,551,261  or 61% of  revenue  and  cost of  products  sold  from the
Internet totaled  $378,859 or 77% of revenue.  For the six months ended June 30,
2000  cost of  products  sold  from the  retail  stores  totaled  $0 and cost of
products sold from the Internet totaled $492,720 or 121% of revenue.

         Amortization of fulfillment  partner  warrant  expense  consists of the
amortization  of the  estimated  fair value of the warrant  issued to Taymark to
provide inventory and fulfillment services to deliver merchandise ordered on the
site, or directly through a toll-free  telephone number,  directly to consumers.
On July 8, 1999, the Company entered into a product  fulfillment  agreement with
Taymark.  The initial term of the agreement runs through  December 31, 2002. The
agreement  contains certain  restrictions on competition by the direct marketer.
As additional  consideration  for such  restrictions  and services,  the Company
issued a warrant to Taymark to purchase  3,000,000  shares of common stock at an
exercise price of $3.75.  The warrant  expires on October 1, 2002. The estimated
fair value of the warrant on the date of issue was approximately $5.3 million as
determined using the Black-Scholes option pricing model. On December 30, 2000 it
was determined that the Company had not met certain  purchase  requirements  for
the  year as  outlined  in the  agreement  with  Taymark.  As a  result  of this
shortfall,  the  restrictions  on  competition  by  Taymark as  outlined  in the
agreement were lifted rendering the remaining  unamortized  value of the warrant
worthless.  Therefore,  the  remaining  balance  of  $3,021,954  was  charged to
expense.  For the six  months  ended  June 30,  2001 and  2000  amortization  of
fulfillment partner warrant expense was $0 and $755,488, respectively.

         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 six months
ended June 30, 2001 and 2000 were $6,907,395 and $4,979,563,  respectively.  For
the six months  ended June 30,  2001,  marketing  and sales  expenses for retail
stores  totaled  $6,870,837  and marketing  and sales  expenses for the Internet
totaled  $36,558.  For the six months  ended June 30, 2000  marketing  and sales
expenses for retail stores  totaled $0 and marketing and sales  expenses for the
Internet  totaled  $4,979,563.  Included in the marketing and sales expenses for
the  Internet  for 2000 was  $270,000  resulting  from the  amortization  of the
Margaritaville  warrant. The decrease in marketing spending for the Internet was
related to lower cost per acquisition in 2001.

         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 six
months  ended  June  30,  2001  and  2000  were   $1,092,472   and   $3,562,532,
respectively. The decrease in product and technology development expenses is due
to the transition from a site  development  phase in 2000 to a site  maintenance
phase in 2001.

         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 six months  ended June 30, 2001 and 2000 were  $1,851,535  and
$1,078,453  respectively.  The increase in G&A expenses is due to the additional
staff required to manage the retail stores.

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                                                                         Page 13
<PAGE>

         Restructuring  income  consists  of the excess of amounts  provided  to
close our New York  office  over actual  expenses  incurred.  During the quarter
ended June 30, 2001,  due to the  substantial  completion  of the actions of the
2000 restructuring plan, the Company reevaluated its 2000 restructuring accrual.
As a result of this review  certain costs  associated  with the close of the New
York  City  headquarters  were  no  longer  required.  This  resulted  from  the
elimination  of  certain  planned  actions as well as the  Company  successfully
negotiating  certain  closing  costs.  As such,  the  Company has  recognized  a
restructuring  credit of $122,534,  which  affected the Internet  segment.  This
credit is reflected in "Restructuring income" in the Consolidated  Statements of
Operations.

         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 six  months  ended  June  30,  2001  and 2000 was
$199,628  and  $634,596,  respectively.  In  February  2000,  certain  employees
exercised  stock options on a cash-less  basis resulting in $460,000 of non-cash
compensation.

         Interest  income on cash and cash  equivalents for the six months ended
June 30, 2001 and 2000, was $87,049 and $500,133,  respectively. The decrease in
interest  income is due to higher cash and investment  balance in 2000 resulting
from the Company's  financing  activities,  principally the private placement of
Series B, C, and D Convertible Preferred Stock completed in 1999.

         Interest  expense for the six months ended June 30, 2001 and 2000,  was
$279,904 and $0,  respectively.  The interest expense in 2001 was related to the
iParty Retail line of credit.

Liquidity and Capital Resources:

         The Company used cash in operating  activities for the six months ended
June 30, 2001 and 2000 totaling  $2,537,370  and  $7,173,606,  respectively.  In
addition,  the Company  invested cash in property and  equipment,  including web
site  development  expenditures  for the six months ended June 30, 2001 and 2000
totaling $126,346 and $337,458,  respectively. The Company also used $658,897 of
its bank line to fund our working  capital and capital  expenditures  in the six
months ended June 30, 2001.

         To date, the Company has raised an aggregate of $32.9 million in equity
financing.  On August 1, 2000,  the Company  established a line of credit with a
bank. The agreement permits maximum borrowings equal to the lesser of $7,500,000
or the borrowing base, as defined.  Interest on the line of credit for the first
$5,000,000  borrowed  ("Line  Interest  Rate") is payable at the  greater of the
bank's  base rate  (6.75% at June 30,  2001) plus 1% or 7.75%.  Interest  on the
sub-line borrowing, money borrowed between $5,000,000 and $7,500,000, is payable
at the bank 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.  This agreement  expires on July 31, 2003. As of June 30,
2001, the Company had $3,459,687 outstanding under the line of credit.

         In March  2001,  the  Company  and its lender  modified  the  borrowing
facility  by  adjusting  certain  covenants  and other  provisions  based on the
Company's  operating  plan for 2001.  As of June 30,  2001,  the  Company was in
compliance with the adjusted covenants.

         The Company believes, based on currently proposed plans and assumptions
relating  to its  operations,  that the net  proceeds  from the  financings  and
related interest income,  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  to the  Company,  or if  available,  that the  terms of such
additional financing will be acceptable.


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                                                                         Page 14


<PAGE>


PART II  OTHER INFORMATION

Item 1.  Legal Proceedings

         The Company is a defendant in one lawsuit that is being  handled in the
ordinary  course of  business.  Pursuant to an Asset  Purchase  Agreement  dated
August  2,  2000,  as  amended,   the  Company  purchased  from  The  Big  Party
Corporation, Debtor and Debtor-in-Possession, 33 retail locations and the assets
located  therein,  including  inventory.  The  Company  and The Big Party are in
disagreement concerning the value and amount due on account of the inventory and
The Big Party is claiming that $625,568 is due. 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  are  in  discussions
concerning the portion thereof which belongs to the Company. The Big Party filed
a  complaint  with the U.S.  Bankruptcy  Court for the  District  of Delaware in
January  2001  seeking  payment of  $625,568  on account of the  inventory.  The
Company is  disputing  the amount  claimed  and  intends to file an answer and a
possible  counterclaim  for  amounts  due on account of the escrow  referred  to
above.  The Company is also in negotiations  with The Big Party seeking to reach
an  agreeable  compromise.  This  matter is in the  preliminary  stages.  In the
opinion of the management of the Company, the Company is adequately reserved and
this  should  not  result in final  judgement  or  settlement  that would have a
material  adverse  effect on the  Company's  financial  condition  or results of
operations.

Item 4.  Submission of Matters to a vote of Security Holders

         On June 18, 2001 the Company held its Annual  Meeting of  Stockholders.
The  stockholders  elected  five  (5)  Director's  to  the  Company's  Board  of
Directors.  Set forth below are (i) the names of the persons elected to serve on
the Company's  Board of Directors  until the 2002 Annual Meeting of Stockholders
and until their  successors  are duly elected and qualified and (ii) the results
of the voting for the nominees.


 Name                  For          % For             Against     % Withheld
 ----                  ---          -----             -------     ----------
Sal Perisano          24,363,502     99.8%             48,205       0.02%
Robert H. Lessin      24,360,352     99.8%             51,355       0.02%
Stuart G. Moldaw      24,361,877     99.8%             49,830       0.02%
Lorenzo Roccia        24,365,502     99.8%             48,205       0.02%
Christina Weaver       3,629,960    100.0%                  0       0.00%



         The stockholders  also approved an amendment to the Company's  Restated
Certificate of  Incorporation  to effect an increase in the number of authorized
shares of Common Stock from 50,000,000 to 150,000,000.

            For            % For            Against           % Against
            ---            -----            -------           ---------
         23,587,312        96.6%            791,525             3.2%

         The  stockholders  also approved an amendment to the 1998 Incentive and
Nonqualified  Stock  Option  Plan to effect an  increase in the number of shares
authorized for issuance from 7,000,000 to 11,000,000.

            For            % For            Against           % Against
            ---            -----            -------           ---------
         20,031,792        95.4%            916,657             4.4%

         The  stockholders  also ratified the appointment of Arthur Andersen LLP
as independent public accountants for the fiscal year ended December 29, 2001

            For            % For            Against           % Against
            ---            -----            -------           ---------
         24,371,997        99.1%            22,355              0.1%

Item 6.  Exhibits:

         (a) Exhibit 27.1    Financial Data Schedule

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                                                                         Page 15
<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:    August 10, 2001                       By:    /s/ Sal Perisano
                                                       -----------------------
                                                       Sal Perisano
                                                       Chief Executive Officer

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




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