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 31, 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 May 11, 2001, there were 12,966,075  shares of the  Registrant's  common
stock, $.001 par value, issued and outstanding.
<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



                                       2
<PAGE>
<TABLE>
<CAPTION>

                                                 iPARTY CORP.
                                          CONSOLIDATED BALANCE SHEET



                                                                                March 31,       December 30,
                                                                                  2001              2000
                                                                              ------------      ------------
                                                                               (Unaudited)
<S>                                                                           <C>               <C>
ASSETS

Current assets:
     Cash and cash equivalents                                             $  3,465,699      $  5,002,254
     Cash, restricted                                                           164,009           635,000
     Accounts receivable                                                        685,200           948,292
     Inventory                                                                9,640,206         8,226,560
     Prepaid expenses and other current assets                                  539,994            69,812
                                                                            ------------     ------------
       Total current assets                                                  14,495,108        14,881,918

     Property and equipment, net                                                779,810           903,849
     Other assets                                                               159,666           557,286
                                                                           ------------      ------------

Total assets                                                               $ 15,434,584      $ 16,343,053
                                                                           ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                                                       $ 3,710,151       $ 2,415,679
     Accrued severance                                                          370,321           775,137
     Accrued expenses and restructuring expenses                              1,881,787         2,434,480
     Line of credit                                                           3,126,709         2,800,790
                                                                           ------------      ------------
       Total current liabilities                                              9,088,968         8,426,086

Other Liabilities                                                               518,872           492,465
                                                                           ------------      ------------
    Total Liabilities                                                         9,607,840         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 authorized;
         1,000,000 shares issued and outstanding                                  1,000             1,000
       Series B preferred stock - 1,413,352 authorized;
         1,334,219 and 1,413,352 shares issued and outstanding                    1,335             1,414
       Series C preferred stock - 145,198 authorized;
         145,198 shares issued and outstanding                                      145               145
     Series D preferred stock - 362,996 authorized;
         362,996 shares issued and outstanding                                      363               363
     Series E preferred stock - 533,333 authorized;
         533,333 shares issued and outstanding                                      533               533
     Series F preferred stock - 114,286 authorized;
         114,286 shares issued and outstanding                                      114             114
    Common stock - $.001 par value; 150,000,000 shares authorized;
         12,966,075 and 12,174,745 shares issued and outstanding                 12,966            12,175
 Additional paid in capital                                                  64,251,766        64,166,987
 Accumulated deficit                                                        (58,441,478)      (56,758,229)
                                                                            ------------      ------------

Total stockholders' equity                                                    5,826,744         7,424,502
                                                                            ------------     ------------



Total liabilities and stockholders' equity                                 $ 15,434,584      $ 16,343,053
                                                                           ============      ============



                      The accompanying Notes to Consolidated Financial Statements are an
                               integral part of this Consolidated Balance Sheet
                                                      3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>



                                        iPARTY CORP.
                            CONSOLIDATED STATEMENT OF OPERATIONS
                                         (Unaudited)





                                                            For the three months ended
                                                                       March 31,
                                                           ------------------------------
                                                                 2001                2000
                                                           -----------         -----------
<S>                                                        <C>                 <C>
Revenues                                                   $  8,948,302       $    146,834
                                                           ------------        -----------

Operating costs:
     Cost of products sold                                    5,737,861            117,357
     Amortization of fulfillment partner warrant                      -            377,744
     Marketing and sales                                      3,254,425          2,405,456
     Product and technology development                         527,440          1,864,459
     General and administrative                                 945,857            572,839
     Non-cash compensation expense                               85,490            546,178
                                                           ------------        -----------

Operating loss                                               (1,602,771)        (5,737,199)

     Interest income                                             53,069            273,455
     Interest expense                                          (133,547)                 -
                                                          -------------        -----------
Net loss                                                   $ (1,683,249)       $(5,463,744)
                                                          ==============       ============
Loss per share:
     Basic and diluted                                     $      (0.13)       $     (0.49)
                                                          ==============       ============
Weighted Average Shares Outstanding:
     Basic and diluted                                       12,708,428          11,136,107
                                                          ==============       ============





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

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

                                                iPARTY CORP.
                                    CONSOLIDATED STATEMENT OF CASH FLOWS
                                                (Unaudited)

                                                                               For the three months ended
                                                                                        March 31,
                                                                               --------------------------
                                                                                 2001              2000
                                                                               ---------         --------
<S>                                                                            <C>               <C>
Cash flows from operating activities:

Net loss                                                                   $ (1,683,249)     $ (5,463,744)

Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation and amortization                                               134,866           735,120
    Reserve for bad debt                                                              -            14,607
    Non-cash compensation expense                                                85,490           546,178
    Decrease (increase) in:
       Accounts receivable                                                      263,092            74,296
       Inventory                                                             (1,413,646)                -
       Prepaid expenses and other current assets                               (470,182)          125,113
       Other assets                                                             397,620            (9,865)
    Increase (decrease) in:
       Accounts payable                                                       1,294,472           638,213
       Accrued severance and restructuring expenses                            (404,816)          (64,812)
       Accrued expenses                                                        (475,297)          (45,069)
       Other liabilities                                                         26,406                 -
                                                                           ------------      ------------
       Net cash used in operating activities                                 (2,245,244)       (3,449,963)
                                                                           ------------      ------------

Cash flows from investing activities:

     Purchase of property and equipment                                         (10,825)         (172,973)
     Advances to officer                                                              -           (14,607)
     Purchase of marketable securities                                                -        (2,913,782)
     Decrease in restricted cash                                                470,991            51,012
                                                                           ------------      ------------
       Net cash provided by (used in) investing activities                      460,166        (3,050,340)
                                                                           ------------      ------------

Cash flows from financing activities:

     Proceeds from line of credit, net                                          325,919                 -
     Payments on capital lease obligations                                      (77,396)                -
                                                                           ------------      ------------
       Net cash provided by financing activities                                248,523                 -
                                                                           ------------      ------------

Net decrease in cash and cash equivalents                                    (1,536,555)       (6,500,303)

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

Cash and cash equivalents, end of period                                   $  3,465,699      $ 12,173,001
                                                                           ============      ============

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

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












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

                                                     5
</TABLE>
<PAGE>

                                  iPARTY CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2001
                                   (Unaudited)

1.   THE COMPANY:

     iParty  LLC  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 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 has been
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
have  been  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 March 31, 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 months ended March 31, 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.

                                        6
<PAGE>

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 or
the  borrowing  base,  as defined.  Interest on the line of credit for the first
$5,000,000 borrowed ("Line Interest Rate") will be payable at the greater of the
bank's  base  rate  (9.0% at March  31,  2001)  plus 1% or 8%.  Interest  on the
sub-line  borrowing,  money borrowed between $5,000,000 and $7,500,000,  will be
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
March 31, 2001, the Company had $3,126,709 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 March 31, 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-K.  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  amount contained in the
audited  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.

                                       7
<PAGE>

     The  Company's  financial  data for segment  reporting for the three months
ended March 31 2001 are as follows:
<TABLE>
<CAPTION>
                                             2001                                             2000
                                             ----                                             ----
                           Internet         Retail           Total             Internet      Retail    Total
                           --------         ------           -----             --------      ------    -----
<S>                        <C>              <C>              <C>               <C>           <C>       <C>

Net revenue                $  246,802      $ 8,701,500      $  8,948,302       $   146,780    $    0   $     146,780
                           ==========      ===========      ============       ===========    ======   =============

Operating Loss             $ (415,639)     $(1,187,132)     $ (1,602,771)      $ (5,737,272)  $    0   $  (5,737,272)
                           ==========      ===========      ============       ============   ======  ==============

Net loss                   $ (370,422)     $(1,312,827)     $ (1,683,249)      $ (5,463,818)  $    0   $  (5,463,818)
                           ==========      ===========      ============       ============   ======  ==============


Total assets               $3,621,422      $11,813,162      $ 15,434,584       $ 22,867,516   $    0   $  22,867,516
                           ============    ===========      ============       ============   ======  ==============

Deprec/amort               $  120,598      $    14,268      $    134,866       $    735,120   $    0   $     735,120
                           ===========     ===========      ============       ============   ======   =============

Capital exp.               $    2,025      $     8,800      $     10,825       $    172,963   $    0   $     172,963
                           ===========     ===========      ============       ============   ======   =============
</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.
                                       8
<PAGE>

Unaudited pro forma  results of operations  for the three months ended March 31,
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.

                                                      Three months ended
                                                        March 31, 2000
                                                      ------------------

      Revenue                                              $ 10,036,780
      Operating loss                                         $6,026,272
                                                           ------------

      Net loss                                             $ (6,123,818)
                                                           ============

      Loss per share:
       Basic and diluted                                   $      (0.55)
                                                           ============

      Weighted average shares:
       Basic and diluted                                    11,136,107
                                                           ============

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.

     The  following  table sets forth the  computation  of  pro-forma  basic and
diluted earnings per share:

                                    Three months ended      Three months ended
                                      March 31, 2001          March 31, 2000
                                      --------------          --------------

Net loss                              $(1,683,249)            $(6,123,818)
                                      ===========             ===========
Preferred stock
Beneficial conversion feature         $         -             $         -
                                      -----------             -----------

Net loss available to common
  shareholders
                                      $(1,683,249)            $(6,123,818)
                                      ===========             ===========

Loss per share:
 Basic and diluted                    $     (0.13)            $     (0.55)
                                      ===========             ===========

Weighted average shares:
 Basic and diluted                    $12,708,428             $11,136,107
                                      ===========             ===========

As of March 31, 2001 and March 31, 2000,  50,062,776  and  30,916,181  potential
common  shares were  outstanding,  respectively,  but not  included in the above
calculation as their effect would have been anti-dilutive.

                                       9
<PAGE>

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 are primarily  related to
severance  for a group of employees  and other exit costs related to closing the
New York facility.

                                Severance       Other          Total
                                ---------       -----          -----

Balance at December 30, 2000    $397,800      $368,263       $766,063
Amounts paid in 2001            (329,657)      (66,086)      (395,743)
                               ---------      --------      ---------

Balance at March 31, 2001        $68,143      $302,177       $370,320
                                 =======      ========       ========

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  ("The  Big  Party")  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  to 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.

     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.

                                       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 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.

     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 March 31, 2000  compared to three months ended March 31,
2001

     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 31, 2001 and 2000 were $8,948,302 and $146,834  respectively.
For the three months ended March 31, 2001  revenue  from retail  stores  totaled
$8,701,500 and revenue from the Internet totaled $246,802.  For the three months
ended March 31, 2000 revenue from the retail stores  totaled $0 and revenue from
the Internet  totaled  $146,834.  The 68%  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 three  months  ended March 31, 2001 and 2000 was
$5,737,861 64% of revenue and $117,357 or 80% of revenue  respectively.  For the
three months ended March 31, 2001 cost of products  sold from the retail  stores
totaled $5,528,997 or 64% of revenue and cost of products sold from the Internet
totaled  $208,864 or 85% of revenue.  For the three  months ended March 31, 2000
cost of  products  sold from the retail  stores  totaled $0 and cost of products
sold from the Internet totaled $117,357 or 80% 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, we 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, we 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 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 March
31, 2001 and 2000 amortization of fulfillment partner warrant expense was $0 and
$377,744, respectively.

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<PAGE>

     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 31, 2001 and 2000 were $3,254,425 and $2,405,456,  respectively. 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.  For the three months ended March 31, 2000 marketing and sales
expenses for retail stores  totaled $0 and marketing and sales  expenses for the
Internet  totaled  $2,405,456.  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 March 31, 2001 and 2000 were $527,440 and  $1,864,459,  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 March 31, 2001 and 2000 were $945,857 and  $572,839,  respectively.
The increase in G&A expenses is due to the  additional  staff required to manage
the retail stores.

     The non-cash  compensation  expenses  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 31, 2001 and 2000 were
$85,490  and  $546,178,   respectively.  In  February  2000,  certain  employees
exercised  stock options on a cash-less  basis resulting in $460,000 of non-cash
compensation expense.

     Interest  income on cash and cash  equivalents  for the three  months ended
March 31, 2001 and 2000, was $53,096 and $273,455, respectively. The decrease in
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 March 31, 2001 and 2000,  was
$133,547 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 three months ended
September 31, 2001 and 2000 totaling $2,245,243 and $3,449,963, respectively. In
addition,  we  invested  cash in  property  and  equipment,  including  web site
development  expenditures  for the three  months  ended  March 31, 2001 and 2000
totaling $10,825 and $3,050,340 respectively.  The Company also used $325,919 of
our bank line to fund our working capital and capital  expenditures in the first
quarter of 2001.

     To date,  the  Company  raised  an  aggregate  of $30.9  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") will be payable at the greater of the
bank's  base rate  (9.0% at March,  31,  2001)  plus 1% or 8%.  Interest  on the
sub-line  borrowing,  money borrowed between $5,000,000 and $7,500,000,  will be
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
March 31, 2001, the Company had $3,126,709 outstanding under the line of credit.

                                       12
<PAGE>

     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 March 31, 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 our  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 us, or if  available,  that the terms of such  additional
financing will be acceptable.

                                       13
<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 15,2001                   By:     /s/ Sal Perisano
                                                -------------------------------
                                                Sal Perisano
                                                Chief Executive Officer

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



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