<PAGE>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------

                                    FORM 10-Q

                                   ----------

(MARK ONE)

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

     FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2007

                                       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 NUMBER 000-21827

                                   ----------

                              AMSCAN HOLDINGS, INC.
             (Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S>                                                          <C>
                DELAWARE                                         13-3911462
     (State or Other Jurisdiction of                           (I.R.S. Employer
     Incorporation or Organization)                          Identification No.)
</TABLE>

<TABLE>
<S>                                                              <C>
     80 GRASSLANDS ROAD ELMSFORD, NY                                10523
(Address of Principal Executive Offices)                         (Zip Code)
</TABLE>

               REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
                                 (914) 345-2020

     Indicate by check mark whether the registrant (1) has 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 [ ]

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer [ ]   Accelerated filer [ ]   Non-accelerated filer [X]

     Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]

     As of May 15, 2007, 1,000.00 shares of Registrant's common stock, par value
$0.10, were outstanding.

================================================================================
<PAGE>


                              AMSCAN HOLDINGS, INC.
                                    FORM 10-Q

                                 MARCH 31, 2007

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
                                     PART I

ITEM 1 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

       Condensed Consolidated Balance Sheets at March 31, 2007 and
          December 31, 2006 .............................................     3

       Condensed Consolidated Statements of Operations for the Three
          Months Ended March 31, 2007 and 2006 ..........................     4

       Condensed Consolidated Statement of Stockholders' Equity for
          the Three Months Ended March 31, 2007 .........................     5

       Condensed Consolidated Statements of Cash Flows for the Three
          Months Ended March 31, 2007 and 2006 ..........................     6

       Notes to Condensed Consolidated Financial Statements .............     7

ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS .....................................    21

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .......    25

ITEM 4 CONTROLS AND PROCEDURES ..........................................    26

                                     PART II

ITEM 5 OTHER INFORMATION ................................................    26

ITEM 6 EXHIBITS .........................................................    27

SIGNATURE ...............................................................    28
</TABLE>

     References throughout this document to "Amscan," "AHI," and the "Company"
include Amscan Holdings, Inc. and its wholly owned subsidiaries. In this
document the words "we," "our," "ours" and "us" refer only to the Company and
its wholly owned subsidiaries and not to any other person.

     You may read and copy any materials we file with the Securities and
Exchange Commission ("SEC") at the SEC's Public Reference Room at 100 F Street,
NE, Washington, DC 20549. You may obtain information on the operations of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a
website that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC, including
us, at http://www.sec.gov.
<PAGE>


                              AMSCAN HOLDINGS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                      MARCH 31,    DECEMBER 31,
                                                                                         2007          2006
                                                                                     -----------   ------------
<S>                                                                                  <C>           <C>
                                                                                     (UNAUDITED)      (NOTE)
ASSETS
Current assets:
   Cash and cash equivalents......................................................    $    3,350    $    4,966
   Accounts receivable, net of allowances.........................................        95,342        95,470
   Inventories, net of allowances.................................................       235,065       227,450
   Prepaid expenses and other current assets......................................        37,890        35,700
                                                                                      ----------    ----------
      Total current assets ......................................................        371,647       363,586
Property, plant and equipment, net................................................       151,577       155,443
Goodwill..........................................................................       475,800       476,704
Trade names.......................................................................       143,000       143,000
Other intangible assets, net......................................................        45,194        47,407
Other assets, net.................................................................        31,074        31,231
                                                                                      ----------    ----------
      Total assets...............................................................     $1,218,292    $1,217,371
                                                                                      ==========    ==========
LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Loans and notes payable........................................................    $   48,765    $    4,930
   Accounts payable...............................................................        81,055       110,429
   Accrued expenses...............................................................        66,816        68,089
   Income taxes payable...........................................................           409         6,274
   Current portion of long-term obligations.......................................         3,389         3,703
                                                                                      ----------    ----------
      Total current liabilities...................................................       200,434       193,425
Long-term obligations, excluding current portion..................................       558,438       558,372
Deferred income tax liabilities...................................................        82,550        83,592
Other.............................................................................        11,829        12,799
                                                                                      ----------    ----------
      Total liabilities...........................................................       853,251       848,188
Redeemable common securities......................................................         9,331         9,343
Commitments and contingencies.....................................................
Stockholders' equity:
   Common Stock ($0.01 par value; 40,000.00 shares authorized; 30,106.98
      shares issued and outstanding at March 31, 2007 and 30,100.75 shares
      issued and outstanding at December 31, 2006)................................            --            --
   Additional paid-in capital.....................................................       331,520       331,113
   Retained earnings..............................................................        22,831        27,264
   Accumulated other comprehensive income.........................................         1,359         1,463
                                                                                      ----------    ----------
      Total stockholders' equity..................................................       355,710       359,840
                                                                                      ----------    ----------
      Total liabilities, redeemable common securities and stockholders' equity ...    $1,218,292    $1,217,371
                                                                                      ==========    ==========
</TABLE>

Note: The balance sheet at December 31, 2006 has been derived from the audited
consolidated financial statements at that date (see Note 3).

     See accompanying notes to condensed consolidated financial statements.

<PAGE>

                              AMSCAN HOLDINGS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED
                                                                MARCH 31,
                                                           -------------------
                                                             2007       2006
                                                           --------   --------
<S>                                                        <C>        <C>
Revenues:
   Net sales............................................   $243,529   $204,183
   Royalties and franchise fees.........................      4,895      4,157
                                                           --------   --------
      Total revenues....................................    248,424    208,340
Expenses:
   Cost of sales........................................    165,823    148,667
   Selling expenses.....................................     10,480      9,175
   Retail operating expenses............................     34,883     24,199
   Franchise expenses...................................      3,350      2,837
   General and administrative expenses..................     24,132     19,778
   Art and development costs............................      2,919      2,482
                                                           --------   --------
      Total expenses....................................    241,587    207,138
                                                           --------   --------
         Income from operations.........................      6,837      1,202
Interest expense, net...................................     14,075     13,223
Other income, net.......................................       (138)      (275)
                                                           --------   --------
      Loss before income taxes and minority interests...     (7,100)   (11,746)
Income tax benefit......................................     (2,706)    (4,659)
Minority interests......................................          8         70
                                                           --------   --------
      Net loss..........................................   $ (4,402)  $ (7,157)
                                                           ========   ========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

<PAGE>


                              AMSCAN HOLDINGS, INC.
            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                        THREE MONTHS ENDED MARCH 31, 2007
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                  ACCUMULATED
                                                                         ADDITIONAL                  OTHER
                                                      COMMON    COMMON     PAID-IN    RETAINED   COMPREHENSIVE
                                                      SHARES     STOCK     CAPITAL    EARNINGS       INCOME        TOTAL
                                                    ---------   ------   ----------   --------   -------------   --------
<S>                                                 <C>         <C>      <C>          <C>        <C>             <C>
Balance at December 31, 2006 ....................   30,100.75     $--     $331,113     $27,264       $1,463      $359,840
   Net loss .....................................                                       (4,402)                    (4,402)
   Cumulative change from adoption of FIN 48 (see
      Note 5) ...................................                                          (31)                       (31)
   Net change in cumulative translation
      adjustment ................................                                                       179           179
   Change in fair value of interest rate swap
      contracts, net of income tax benefit ......                                                      (144)         (144)
   Change in fair value of foreign exchange
      contracts, net of income tax benefit ......                                                      (139)         (139)
                                                                                                     ------      --------
   Comprehensive loss ...........................                                                                  (4,537)
                                                                                                                 --------
   Proceeds from exercise of options ............        7.63                   48                                     48
   Purchase and retirement of redeemable and
      non-redeemable common stock held by former
      employees .................................       (1.40)                  (8)                                    (8)
   Stock option compensation expense ............                              367                                    367
                                                    ---------     ---     --------     -------       ------      --------
Balance at March 31, 2007 .......................   30,106.98     $--     $331,520     $22,831       $1,359      $355,710
                                                    =========     ===     ========     =======       ======      ========
</TABLE>

<PAGE>

                              AMSCAN HOLDINGS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                  THREE MONTHS
                                                                                ENDED MARCH 31,
                                                                              -------------------
                                                                                2007       2006
                                                                              --------   --------
<S>                                                                           <C>        <C>
Cash flows used in operating activities:
   Net loss................................................................   $ (4,402)  $ (7,157)
   Adjustments to reconcile net loss to net cash used in operating
      activities:
      Depreciation and amortization expense................................      9,940      9,560
      Amortization of deferred financing costs.............................        663        644
      Provision for doubtful accounts......................................        448        281
      Deferred income tax benefit..........................................     (1,046)      (868)
      Deferred rent........................................................        593        690
      Undistributed loss (gain) in unconsolidated joint venture............         51       (325)
      Loss on disposal of equipment........................................         45         26
      Equity based compensation............................................        367        111
      Changes in operating assets and liabilities:
         Increase in accounts receivable...................................       (319)   (15,178)
         Increase in inventories...........................................     (7,615)      (237)
         Increase in prepaid expenses and other current assets.............     (2,034)    (1,497)
         Decrease in accounts payable, accrued expenses and income taxes
            payable........................................................    (38,035)   (28,788)
      Other, net...........................................................          5         --
                                                                              --------   --------
         Net cash used in operating activities.............................    (41,339)   (42,738)
Cash flows used in investing activities:
   Cash paid in connection with store acquisitions.........................       (350)      (222)
   Capital expenditures....................................................     (3,799)    (7,211)
   Proceeds from disposal of property and equipment........................         --        492
                                                                              --------   --------
         Net cash used in investing activities.............................     (4,149)    (6,941)
Cash flows provided by financing activities:
   Repayment of loans, notes payable and long-term obligations.............       (125)      (239)
   Proceeds from short-term obligations....................................     43,835     43,325
   Proceeds from capital transactions, net.................................         28         --
                                                                              --------   --------
         Net cash provided by financing activities.........................     43,738     43,086
Effect of exchange rate changes on cash and cash equivalents...............        134       (219)
                                                                              --------   --------
         Net decrease in cash and cash equivalents.........................     (1,616)    (6,812)
Cash and cash equivalents at beginning of period...........................      4,966      8,745
                                                                              --------   --------
Cash and cash equivalents at end of period.................................   $  3,350   $  1,933
                                                                              ========   ========
Supplemental Disclosures:
         Interest paid.....................................................   $  9,331   $  6,087
         Income taxes paid.................................................   $  5,447   $  1,333
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

<PAGE>

                              AMSCAN HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

NOTE 1 - DESCRIPTION OF BUSINESS

     Amscan Holdings, Inc. ("Amscan", "AHI" or the "Company") was incorporated
on October 3, 1996 for the purpose of becoming the holding company for Amscan
Inc. and certain affiliated entities. The Company designs, manufactures,
contracts for manufacture and distributes party goods, including metallic
balloons, gifts and stationery, throughout the world, including in North
America, South America, Europe, Asia and Australia. In addition, through the
Party City Acquisition (defined hereafter) in December 2005, and the Party
America Acquisition (defined hereafter) in September 2006, the Company operates
retail party supply superstores within the United States and sells franchises on
an individual store and franchise area basis throughout the United States and
Puerto Rico.

NOTE 2 - THE PARTY AMERICA ACQUISITION

Party America Acquisition

     On September 29, 2006 (the "Party America Acquisition Date"), the Company
acquired PA Acquisition Corp. (the "Party America Acquisition"), doing business
as Party America ("Party America"), from Gordon Brothers Investment, LLC. In
connection with the acquisition, the outstanding common stock, common stock
options and subordinated debt of Party America were converted into AAH (defined
hereafter) common stock and common stock options valued at $29,659. AAH also
paid transaction costs of $1,100 and repaid $12,583 of Party America senior
debt.

     A preliminary estimate of the excess of the Party America purchase price
over the tangible net assets acquired has been allocated to intangible assets
consisting of franchise licenses ($2,300), which are being amortized using the
straight-line method over the assets' estimated useful life (nine years) and
trade names ($15,400) and goodwill ($8,300), which are not being amortized, and
net deferred tax liabilities ($2,800). In addition, assets acquired totaled
$48,400, including an allocation to adjust property, plant and equipment to
market value ($500), and liabilities assumed were $40,800. The allocation of the
purchase price is based, in-part, on our preliminary estimates of the fair value
of the tangible and identifiable intangible assets acquired and liabilities
assumed. Independent valuation specialists are currently conducting a valuation
of the net assets acquired as of the Party America Acquisition Date to assist
management with the final determination of fair value.

<PAGE>



                              AMSCAN HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

NOTE 3 - BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements as
of March 31, 2007 and December 31, 2006 and for the three-month periods ended
March 31, 2007 and 2006 include the accounts of the Company and its
majority-owned and controlled entities. All material intercompany balances and
transactions have been eliminated in consolidation. The unaudited condensed
consolidated financial statements have been prepared in accordance with U.S.
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by U.S. generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring items) considered necessary for a fair presentation have been
included. Operating results for the three months ended March 31, 2007 are not
necessarily indicative of the results to be expected for the year ending
December 31, 2007. Our business is subject to substantial seasonal variations,
as our retail segment has realized a significant portion of its net sales, cash
flow and net income in the fourth quarter of each year, principally due to the
sales in October for the Halloween season and, to a lesser extent, due to
holiday sales at the end of the calendar year. We expect that this general
pattern will continue. Our results of operations may also be affected by
industry factors that may be specific to a particular period, such as movement
in and the general level of raw material costs. For further information, see the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2006, as filed with
the Securities and Exchange Commission.

     Party City and Party America define a fiscal year as the 52-week period or
53-week period ended on the Saturday nearest December 31 of each year, and
define their fiscal quarters as the four interim 13-week periods following the
end of the previous fiscal year, except in the case of a 53-week fiscal year
when the fourth fiscal quarter is extended to 14 weeks.

     The Company has determined the difference between Party City and Party
America's fiscal year's and the calendar years to be insignificant and will be
reconciled in the financial consolidation process.

NOTE 4 - INVENTORIES

     Inventories consisted of the following:



<TABLE>
<CAPTION>
                                                          MARCH 31,   DECEMBER 31,
                                                             2007         2006
                                                          ---------   ------------
<S>                                                       <C>         <C>
Finished goods.........................................   $223,817      $215,069
Raw materials..........................................     12,394        12,105
Work-in-process........................................      5,648         5,579
                                                          --------      --------
                                                           241,859       232,753
Less: reserve for slow moving and obsolete inventory...     (6,794)       (5,303)
                                                          --------      --------
                                                          $235,065      $227,450
                                                          ========      ========
</TABLE>

     Inventories are valued at the lower of cost or market. The Company
determines the cost of inventory at its retail stores using the weighted average
method. All other inventory cost is determined using the first-in, first-out
method.

NOTE 5 - INCOME TAXES

     The consolidated income tax benefit for the three months ended March 31,
2007 and 2006 was determined based upon estimates of the Company's consolidated
effective income tax rate for the years ending December 31, 2007 and 2006,
respectively. The differences between the consolidated effective income tax rate
and the U.S. federal statutory rate are primarily attributable to state income
taxes and available domestic manufacturing deductions.

     The Company and its subsidiaries file U.S. Federal income tax returns, and
various state and foreign tax returns. Effective January 1, 2007, the Company
adopted Financial Accounting Standards Board (FASB) Interpretation No. (FIN) 48:
"Accounting for Uncertainty in Income Taxes." In accordance with FIN 48, the
Company recognized a cumulative-effect adjustment of $635, decreasing its
liability for previously reserved tax items, interest, and penalties by that
amount, decreasing goodwill by $666, and decreasing the January 1, 2007 balance
of retained earnings by $31.

     At January 1, 2007, the Company had $2,229 in unrecognized tax benefits,
the recognition of which would have an impact of $888 on the effective tax rate.
Liabilities for unrecognized tax benefits are reflected in other long term
liabilities in the condensed consolidated balance sheet. Included in the balance
of unrecognized tax benefits at January 1, 2007, is $323 related to tax
positions for

<PAGE>

                              AMSCAN HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

which it is reasonably possible that the total amounts could significantly
change during the next twelve months. This amount represents a potential
decrease in unrecognized tax benefits comprised of items related to expiring
statutes in federal and state jurisdictions.

     The Company recognizes accrued interest and penalties related to
unrecognized tax benefits in income tax expense. At January 1, 2007, the Company
had accrued $162 and $0 for the potential payment of interest and penalties,
respectively.

     As of January 1, 2007, for federal income tax purposes, the years 2004
through 2006 remain open to examination. For non-U.S. income tax purposes, tax
years from 2003 through 2006 remain open. Lastly, the Company is open to state
and local income tax examinations for the tax years 2002 through 2006.

     During the first quarter of 2007, a reduction for $240 of unrecognized tax
benefits, with a corresponding reduction of goodwill, related to expiring
statutes in state jurisdictions was recorded.

NOTE 6 - RESTRUCTURING

     In connection with the Party City Acquisition, the Company's management
approved and initiated plans to restructure Party City's distribution operations
and involuntarily terminate a limited number of Party City personnel.
Restructuring costs associated with the Party City Acquisition of $3,680 were
accrued as part of the net assets acquired (see note 2). We completed
involuntary terminations in 2006 and expect to complete all other activities in
2007.

     In connection with the Party America Acquisition, $1,000 has been accrued
related to plans to restructure Party America's administrative operations and
involuntarily terminate a limited number of Party America personnel. The Company
may also incur employee retention expenses of approximately $4,000 during 2007.

NOTE 7 - COMPREHENSIVE LOSS

     Comprehensive loss consisted of the following:

<TABLE>
<CAPTION>
                                                                              THREE MONTHS
                                                                            ENDED MARCH 31,
                                                                           -----------------
                                                                             2007      2006
                                                                           -------   -------
<S>                                                                        <C>       <C>
Net loss................................................................   $(4,402)  $(7,157)
Net change in cumulative translation adjustment.........................       179      (148)
Change in fair value of interest rate swap contracts, net of  income tax
   (benefit) expense of $(85) and $48...................................      (144)       83
Change in fair value of foreign exchange contracts, net of
   income tax benefit of $(81)..........................................      (139)       --
                                                                           -------   -------
                                                                           $(4,506)  $(7,222)
                                                                           =======   =======
</TABLE>

     Accumulated other comprehensive income consisted of the following:

<TABLE>
<CAPTION>
                                                                       MARCH 31,   DECEMBER 31,
                                                                          2007         2006
                                                                       ---------   ------------
<S>                                                                    <C>         <C>
Cumulative translation adjustment ..................................    $1,628        $1,449
Interest rate swap contracts, net of income tax (benefit) expense of
   $(41) and $44....................................................       (69)           75
Foreign exchange contracts, net of income tax (benefit) of $(117)
   and $(36)........................................................      (200)          (61)
                                                                        ------        ------
Total accumulated other comprehensive income........................    $1,359        $1,463
                                                                        ======        ======
</TABLE>

NOTE 8 - CAPITAL STOCK

     At March 31, 2007 and December 31, 2006, the Company's authorized capital
stock consisted of 10,000.00 shares of preferred stock, $0.01 par value, of
which no shares were issued or outstanding and 40,000.00 shares of common stock,
$0.01 par value, of which 30,106.98 shares were issued and outstanding.

     Certain employee stockholders owned 573.82 and 574.67 shares of AAH common
stock at March 31, 2007 and December 31, 2006, respectively. Under the terms of
the AAH stockholders' agreement dated April 30, 2004, the Company has an option
to purchase all of the shares of common stock held by former employees and,
under certain circumstances, former employee stockholders can require the
Company to purchase all of the shares held by the former employee. The purchase
price as prescribed in the stockholders' agreements is

<PAGE>

                              AMSCAN HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

to be determined through a market valuation of the minority-held shares or,
under certain circumstances, based on cost, as defined therein. The aggregate
amount that may be payable by us to all employee stockholders based on fully
paid and vested common securities is classified as redeemable common securities
on the consolidated balance sheet at the estimated fair market value of the
common stock, with a corresponding adjustment to stockholders' equity.

     In addition, in connection with the 2004 Transactions, on April 30, 2004,
all options granted under the Predecessor's 1997 equity Incentive Plan vested
immediately and, except for those held by the Chief Executive Officer and the
President, all were exercised. The Chief Executive Officer and the President
exchanged 5.607 and 2.804 vested options to purchase shares of Amscan common
stock, which had intrinsic values of $600 and $300, respectively, for vested
options to purchase 65.455 and 32.727 shares of AAH common stock for $2,500 per
share under the new equity incentive plan with intrinsic values of $492 and $245
and estimated fair values of $590 and $290, respectively. The fair value of such
options was recorded as part of the purchase price allocations and has been
classified as redeemable common securities on the Company's consolidated balance
sheet.

     At March 31, 2007 and December 31, 2006, the aggregate amount that may be
payable by the Company to employee stockholders and option holders, based on the
estimated market value, was approximately $9,331 and $9,343, respectively. As
there is no active market for the Company's common stock, the Company estimated
the fair value of its common stock based on the valuation of the Company common
stock issued in connection with the Party America Acquisition.

NOTE 9 - SEGMENT INFORMATION

Industry Segments

     The Company has two identifiable business segments. The Wholesale segment
includes the design, manufacture, contract for manufacture and distribution of
party goods, including paper and plastic tableware, metallic balloons,
accessories, novelties, gifts and stationery, at wholesale. The Retail segment
includes the operation of company-owned retail party supply superstores in the
United States and the sale of franchises on an individual store and franchise
area basis throughout the United States and Puerto Rico.

     The Company's industry segment data for the three months ended March 31,
2007 and March 31, 2006 is as follows:

<TABLE>
<CAPTION>
                                        WHOLESALE    RETAIL    ELIMINATIONS   CONSOLIDATED
                                        ---------   --------   ------------   ------------
<S>                                     <C>         <C>        <C>            <C>
THREE MONTHS ENDED MARCH 31, 2007
Revenues:
   Net sales:
      Net sales .....................    $139,993   $135,409    $ (31,873)      $243,529
      Royalties and franchise fees ..          --      4,895           --          4,895
                                         --------   --------    ---------       --------
Total revenues ......................    $139,993   $140,304    $ (31,873)      $248,424
                                         ========   ========    =========       ========
Income  from operations .............    $ 10,389   $ (1,057)   $  (2,495)      $  6,837
                                         ========   ========    =========
Interest expense, net ...............                                             14,075
Other income, net Total expenses: ...                                               (138)
                                                                                --------
Loss before income taxes and minority
   interests ........................                                           $ (7,100)
                                                                                ========
Long-lived assets ...................    $855,492   $393,913    $(402,760)      $846,645
                                         ========   ========    =========       ========
</TABLE>

<TABLE>
<CAPTION>
                                        WHOLESALE    RETAIL    ELIMINATIONS   CONSOLIDATED
                                        ---------   --------   ------------   ------------
<S>                                     <C>         <C>        <C>            <C>
THREE MONTHS ENDED MARCH 31, 2006
Revenues:
   Net sales:
      Net sales .....................    $123,187   $ 96,899    $ (15,903)      $204,183
      Royalties and franchise fees ..          --      4,157           --          4,157
                                         --------   --------    ---------       --------
Total revenues ......................    $123,187   $101,056    $ (15,903)      $208,340
                                         ========   ========    =========
Income  from operations .............    $ 14,303   $ (9,354)   $  (3,747)      $  1,202
                                         ========   ========    =========       ========
Interest expense, net ...............                                             13,223
Other income, net Total expenses: ...                                               (275)
                                                                                --------
Loss before income taxes and minority
   interests ........................                                           $(11,746)
                                                                                ========
Long-lived assets ...................    $812,517   $341,056    $(357,033)      $796,540
                                         ========   ========    =========       ========
</TABLE>

<PAGE>


                              AMSCAN HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

Geographic Segments

     The Company's export sales, other than those intercompany sales reported
below as sales between geographic areas, are not material. Sales between
geographic areas primarily consist of sales of finished goods for distribution
in foreign markets. No single foreign operation is significant to the Company's
consolidated operations. Sales between geographic areas are made at cost plus a
share of operating profit.

     The Company's geographic area data are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                     DOMESTIC   FOREIGN   ELIMINATIONS   CONSOLIDATED
                                                     --------   -------   ------------   ------------
<S>                                                  <C>        <C>       <C>            <C>
THREE MONTHS ENDED MARCH 31, 2007
Revenues:
   Net sales to unaffiliated customers............   $225,802   $17,727     $     --       $243,529
   Net sales between geographic areas.............      4,424        --       (4,424)            --
                                                     --------   -------     --------       --------
      Net sales...................................    230,226    17,727       (4,424)       243,529
   Royalties and franchise fees...................      4,895        --           --          4,895
                                                     --------   -------     --------       --------
Total revenues....................................   $235,121   $17,727     $ (4,424)      $248,424
                                                     ========   =======     ========       ========
Income from operations............................   $  8,466   $   866     $ (2,495)         6,837
                                                     ========   =======     ========
Interest expense, net.............................                                           14,075
Other income, net.................................                                             (138)
                                                                                           --------
Loss before income taxes and minority interests...                                         $ (7,100)
                                                                                           ========
Long-lived assets, net at March 31, 2007..........   $873,580   $17,436     $(44,371)      $846,645
                                                     ========   =======     ========       ========
</TABLE>

<TABLE>
<CAPTION>
                                                     DOMESTIC   FOREIGN   ELIMINATIONS   CONSOLIDATED
                                                     --------   -------   ------------   ------------
<S>                                                  <C>        <C>       <C>            <C>
THREE MONTHS ENDED MARCH 31, 2006
Revenues:
   Net sales to unaffiliated customers............   $189,114   $15,069     $     --       $204,183
   Net sales between geographic areas.............      3,943        --       (3,943)            --
                                                     --------   -------     --------       --------
       Net sales..................................    193,057    15,069       (3,943)       204,183
   Royalties and franchise fees...................      4,157        --           --          4,157
                                                     --------   -------     --------       --------
Total revenues....................................   $197,214   $15,069     $ (3,943)      $208,340
                                                     ========   =======     ========       ========
(Loss) Income from operations.....................   $   (243)  $   908     $    537       $  1,202
                                                     ========   =======     ========
Interest expense, net.............................                                           13,223
Other income, net.................................                                             (275)
                                                                                           --------
Loss before income taxes and minority interests...                                         $(11,746)
                                                                                           ========
Long-lived assets, net at March 31, 2006..........   $816,419   $ 8,839     $(28,718)      $796,540
                                                     ========   =======     ========       ========
</TABLE>

NOTE 10 - LEGAL PROCEEDINGS

     The Company is a party to certain claims and litigation in the ordinary
course of business. The Company does not believe these proceedings will result,
individually or in the aggregate, in a material adverse effect on its financial
condition or future results of operations.

NOTE 11 - RELATED PARTY TRANSACTIONS

     In connection with its acquisition in April 2004, the Company executed a
management agreement with Berkshire Partners LLC and Weston Presidio. Pursuant
to the management agreement, Berkshire Partners LLC and Weston Presidio will be
paid annual management fees of $833,333 and $416,667, respectively. At both
March 31, 2007 and December 31, 2006, accrued management fees payable to
Berkshire Partners LLC and Weston Presidio totaled $139,000 and $69,000,
respectively. Although the indenture governing our senior subordinated notes
will permit the payments under the management agreement, such payments will be
restricted during an event of default under the notes and will be subordinated
in right of payment to all obligations due with respect to the notes in the
event of a bankruptcy or similar proceeding of Amscan.
<PAGE>

                              AMSCAN HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

NOTE 12 - STOCK OPTION PLAN

     On May 1, 2004, the Company adopted the 2004 Equity Incentive Plan under
which the Company may grant incentive awards in the form of options to purchase
shares of the Company's common stock ("Company Stock Options") and shares of
restricted and unrestricted shares of the Company's common stock to certain
directors, officers, employees and consultants of the Company and its
affiliates. A committee of the Company's board of directors (the "Committee"),
or the board itself in the absence of a Committee, is authorized to make grants
and various other decisions under the 2004 Equity Incentive Plan. Unless
otherwise determined by the Committee, any participant granted an award under
the 2004 Equity Incentive Plan must become a party to, and agree to be bound by,
the stockholders' agreement. Company Stock Options under the 2004 Equity
Incentive Plan reserved and available for grant total 2,923.2068 and may include
incentive stock options, nonqualified stock options or both types of Company
Stock Options. Company Stock Options are nontransferable (except under certain
limited circumstances) and, unless otherwise determined by the Committee, vest
over five years and have a term of ten years from the date of grant.

     In April 2005, the Company granted 722 time-based options and 760
performance based options ("PBO's") to key employees and its outside directors.
Under the PBO feature, the vesting of share option awards is contingent on
meeting various company-wide performance goals based primarily on revenue growth
and profitability over a multi-year period. The Company used a minimum value
method under SFAS No. 123, as amended by SFAS No.148, "Accounting for
Stock-Based Compensation - Transition and Disclosure," to determine the fair
value of the Company Stock Options granted in April 2005 and recorded
approximately $101 and $111 in compensation expense, in general and
administrative expenses, during the three months ended March 31, 2007 and 2006
respectively. It has been assumed that the estimated fair value of the options
granted in 2005 under the Equity Incentive Plan is amortized on a straight line
basis to compensation expense, net of taxes, over the vesting period of the
grant of 4.0 years. The estimated fair value of each option on the date of grant
was determined using the minimum value method with the following assumptions:
dividend yield of 0%, risk-free interest rate of 3.1%, forfeitures and expected
cancellation of 6% for PBOs and 3% for time-based options and an expected life
of 4.0 years.

     On January 1, 2006, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 123(R) "Share-Based Payment," which is a revision of SFAS
No. 123 "Accounting for Stock-Based Compensation" as amended. SFAS No. 123(R)
establishes standards for the accounting for transactions where an entity
exchanges its equity for goods or services and transactions that are based on
the fair value of the entity's equity instruments or that may be settled by the
issuance of those equity instruments. SFAS No. 123(R) focuses primarily on
accounting for transactions in which an entity obtains employee services in
share-based payment transactions. Generally, the fair value approach in SFAS No.
123(R) is similar to the fair value approach described in SFAS No. 123.

     The Company adopted SFAS No. 123(R) using the prospective method. Since the
Company's common stock is not publicly traded, the options granted in 2005 under
SFAS No. 123 continue to be expensed under the provisions of SFAS No. 123 using
a minimum value method. Options issued subsequent to January 1, 2006 are
expensed under the provisions of SFAS No. 123(R).

     During 2006, the Company granted an additional 493.5 time based options
(TBO's) and 896.5 PBO's to key employees and outside directors exercisable at a
strike price of $12,000 per share. In addition, in connection with the
acquisition of Party America, certain Party America employees elected to roll
their options to purchase Party America common stock into fully vested Company
Stock Options. As a result, the Company issued 19.023 fully vested TBO's
exercisable at strike prices of $6,267 and $10,321 per share and with a fair
market value of $170. The fair value of these options was recorded as part of
the purchase price allocations.

     The Company recorded compensation expense of $266 during the three months
ended March 31, 2007, related to the options granted in 2006 under SFAS No.
123(R), in general and administrative expenses. The fair value of each grant is
estimated on the grant date using a Black-Scholes option valuation model based
on the assumptions in the following table.

<TABLE>
<S>                       <C>
Expected dividend rate       --
Risk free interest rate    4.85%
Expected Life              7.50 years
Price Volatility          15.00
Forfeiture rate            7.75
</TABLE>

     The weighted average expected lives (estimated period of time outstanding)
was estimated using the simplified method for determining the expected term.
Expected volatility was based on implied historical volatility of an applicable
Dow Jones Industrial Average sector index for a period equal to the stock
option's expected life.

     SFAS No. 123R also requires that excess tax benefits related to stock
option exercises be reflected as financing cash inflows instead of operating
cash inflows. For the three months ended March 31, 2007, no options were
exercised.

<PAGE>

                              AMSCAN HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
           (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)(UNAUDITED)

NOTE 13 - CONDENSED CONSOLIDATING FINANCIAL INFORMATION

     On December 23, 2005, the Company financed the Party City Acquisition with
(i) the Equity Investment of $166,425, (ii) the First Term Loan of $325,000,
which includes the $85,000 First Term Loan Revolver, (iii) borrowings under the
Second Term Loan of $60,000, and (iv) cash on-hand of $20,365.

     Borrowings under the First Term Loan, First Term Loan Revolver, Second Term
Loan and the Company's 8.75% $175,000 senior subordinated notes issued in April
30, 2004 and due in April 30, 2014 are guaranteed jointly and severally, fully
and unconditionally, by the following wholly-owned domestic subsidiaries of the
Company (the "Guarantors"):

     -    Amscan Inc.

     -    Am-Source, LLC

     -    Anagram International, Inc.

     -    Anagram International Holdings, Inc.

     -    Anagram International, LLC

     -    M&D Industries, Inc.

     -    Party City Corporation

     -    PA Acquisition Corporation

     -    SSY Realty Corp.

     -    JCS Packaging Inc. (formerly JCS Realty Corp.)

     -    Anagram Eden Prairie Property Holdings LLC

     -    Trisar, Inc.

     Non-guarantor subsidiaries ("Non-guarantors") include the following:

     -    Amscan Distributors (Canada) Ltd.

     -    Amscan Holdings Limited

     -    Amscan (Asia-Pacific) Pty. Ltd.

     -    Amscan Partyartikel GmbH

     -    Amscan de Mexico, S.A. de C.V.

     -    Anagram International (Japan) Co., Ltd.

     -    Anagram Espana, S.A.

     -    Anagram France S.C.S.

     -    JCS Hong Kong Ltd.

     The following information presents condensed consolidating balance sheets
at March 31, 2007 and December 31, 2006, and the related condensed consolidating
statements of operations and cash flows for the three-month periods ended March
31, 2007 and 2006 for the combined Guarantors and the combined Non-guarantors
and elimination entries necessary to consolidate the entities comprising the
combined companies.

<PAGE>

                              AMSCAN HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

                      CONDENSED CONSOLIDATING BALANCE SHEET
                                 MARCH 31, 2007

<TABLE>
<CAPTION>
                                                                       AHI AND     COMBINED
                                                                      COMBINED       NON-
                                                                     GUARANTORS   GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                                     ----------   ----------   ------------   ------------
<S>                                                                  <C>          <C>          <C>            <C>
ASSETS
Current assets:
   Cash and cash equivalents......................................   $    2,713     $   637                    $    3,350
   Accounts receivable, net.......................................       78,916      16,426                        95,342
   Inventories, net...............................................      223,434      12,046      $   (415)        235,065
   Prepaid expenses and other current assets......................       35,531       2,359                        37,890
                                                                     ----------     -------      --------      ----------
         Total current assets....................................       340,594      31,468          (415)        371,647
   Property, plant and equipment, net............................       149,242       2,335                       151,577
   Goodwill, net.................................................       471,524       4,276                       475,800
   Trade names...................................................       143,000          --                       143,000
   Other intangible assets, net..................................        45,194          --                        45,194
   Other assets..................................................        64,620      10,825       (44,371)         31,074
                                                                     ----------     -------      --------      ----------
         Total assets............................................    $1,214,174     $48,904      $(44,786)     $1,218,292
                                                                     ==========     =======      ========      ==========
LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Loans and notes payable........................................   $   48,765     $    --                    $   48,765
   Accounts payable...............................................       77,596       3,459                        81,055
   Accrued expenses...............................................       59,560       7,256                        66,816
   Income taxes payable...........................................          747        (386)     $     48             409
   Current portion of long-term obligations.......................        3,226         163                         3,389
                                                                     ----------     -------      --------      ----------
         Total current liabilities................................      189,894      10,492            48         200,434
Long-term obligations, excluding current portion..................      558,364          74                       558,438
Deferred income tax liabilities...................................       81,845         705                        82,550
Deferred rent and other long-term liabilities.....................       18,594      37,708       (44,473)         11,829
                                                                     ----------     -------      --------      ----------
         Total liabilities                                              848,697      48,979       (44,425)        853,251
Redeemable common securities......................................        9,331          --            --           9,331

Commitments and contingencies
Stockholders' equity:
      Common stock................................................           --         339          (339)             --
      Additional paid-in capital..................................      331,520          --            --         331,520
      Retained earnings (deficit).................................       23,267        (334)         (102)         22,831
      Accumulated other comprehensive income (loss)...............        1,359         (80)           80           1,359
                                                                     ----------     -------      --------      ----------
         Total stockholders' equity...............................      356,146         (75)         (361)        355,710
                                                                     ----------     -------      --------      ----------
         Total liabilities, redeemable common securities and
            stockholders' equity..................................   $1,214,174     $48,904      $(44,786)     $1,218,292
                                                                     ==========     =======      ========      ==========
</TABLE>

<PAGE>

                              AMSCAN HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

                      CONDENSED CONSOLIDATING BALANCE SHEET
                                DECEMBER 31, 2006

<TABLE>
<CAPTION>
                                                                       AHI AND     COMBINED
                                                                      COMBINED       NON-
                                                                     GUARANTORS   GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                                     ----------   ----------   ------------   ------------
                                                                                           (UNAUDITED
                                                                                     (DOLLARS IN THOUSANDS)
<S>                                                                  <C>          <C>          <C>            <C>
ASSETS
Current assets:
   Cash and cash equivalents .....................................   $    4,395    $   571                     $    4,966
   Accounts receivable, net ......................................       82,193     13,277                         95,470
   Inventories, net ..............................................      214,681     13,313       $   (544)        227,450
   Prepaid expenses and other current assets .....................       33,960      1,740                         35,700
                                                                     ----------    -------       --------      ----------
         Total current assets ....................................      335,229     28,901           (544)        363,586
   Property, plant and equipment, net ............................      152,956      2,487                        155,443
   Goodwill, net .................................................      472,448      4,256                        476,704
   Trade names ...................................................      143,000         --                        143,000
   Other intangible assets, net ..................................       47,407         --                         47,407
   Other assets ..................................................       66,092     10,575        (45,436)         31,231
                                                                     ----------    -------       --------      ----------
         Total assets ............................................   $1,217,132    $46,219       $(45,980)     $1,217,371
                                                                     ==========    =======       ========      ==========
LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Loans and notes payable .......................................   $    4,930                                $    4,930
   Accounts payable ..............................................      108,192    $ 2,237                        110,429
   Accrued expenses ..............................................       61,940      6,149                         68,089
   Income taxes payable ..........................................        6,308       (50)       $     16           6,274
   Current portion of long-term obligations ......................        3,523        180                          3,703
                                                                     ----------    -------       --------      ----------
         Total current liabilities ...............................      184,893      8,516             16         193,425
Long-term obligations, excluding current portion .................      558,265        107                        558,372
Deferred income tax liabilities ..................................       82,891        701                         83,592
Deferred rent and other long-term liabilities ....................       21,479     36,963        (45,643)         12,799
                                                                     ----------    -------       --------      ----------
         Total liabilities .......................................      847,528     46,287        (45,627)        848,188
Redeemable common securities .....................................        9,343         --             --           9,343

Commitments and contingencies
Stockholders' equity:
      Common stock ...............................................           --        339           (339)             --
      Additional paid-in capital .................................      331,113         --             --         331,113
      Retained earnings (deficit) ................................       27,685       (327)           (94)         27,264
      Accumulated other comprehensive income (loss) ..............        1,463        (80)            80           1,463
                                                                     ----------    -------       --------      ----------
         Total stockholders' equity ..............................      360,261        (68)          (353)        359,840
                                                                     ----------    -------       --------      ----------
         Total liabilities, redeemable common securities and
            stockholders' equity .................................   $1,217,132    $46,219       $(45,980)     $1,217,371
                                                                     ==========    =======       ========      ==========
</TABLE>
<PAGE>



                              AMSCAN HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

                 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2007

<TABLE>
<CAPTION>
                                                           AHI AND
                                                           COMBINED       COMBINED
                                                          GUARANTORS   NON-GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                          ----------   --------------   ------------   ------------
<S>                                                       <C>          <C>              <C>            <C>
Revenues:
   Net sales ..........................................    $230,226        $17,727        $(4,424)       $243,529
   Royalties and franchise fees .......................       4,895             --                          4,895
                                                           --------        -------        -------        --------
      Total revenues ..................................     235,121         17,727         (4,424)        248,424
Expenses:
   Cost of sales ......................................     158,004         12,372         (4,553)        165,823
   Selling expenses ...................................       8,111          2,369                         10,480
   Retail operating expenses ..........................      34,883             --                         34,883
   Franchise expenses .................................       3,350             --                          3,350
   General and administrative expenses ................      22,342          2,120           (330)         24,132
   Art and development costs ..........................       2,919             --                          2,919
                                                           --------        -------        -------        --------
      Total expenses ..................................     229,609         16,861         (4,883)        241,587
                                                           --------        -------        -------        --------
      Income from operations ..........................       5,512            866            459           6,837
   Interest expense, net ..............................      14,046             29                         14,075
   Other (income) expense, net ........................        (965)            83            744            (138)
                                                           --------        -------        -------        --------
      Income before income taxes and minority
          interests ...................................      (7,569)           754           (285)         (7,100)
   Income tax (benefit) expense .......................      (3,085)           331             48          (2,706)
   Minority interests .................................          --              8                              8
                                                           --------        -------        -------        --------
      Net (loss) income ...............................    $ (4,484)       $   415        $  (333)       $ (4,402)
                                                           ========        =======        =======        ========
</TABLE>

<PAGE>

                              AMSCAN HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

                 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2006

<TABLE>
<CAPTION>
                                                        AHI AND
                                                        COMBINED       COMBINED
                                                       GUARANTORS   NON-GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                       ----------   --------------   ------------   ------------
<S>                                                    <C>          <C>              <C>            <C>
Revenues:
   Net sales .......................................    $193,057        $15,069        $(3,943)       $ 204,183
   Royalties and franchise fees ....................       4,157             --                           4,157
                                                        --------        -------        -------        ---------
      Total revenues ...............................     197,214         15,069         (3,943)         208,340
Expenses:
   Cost of sales ...................................     142,608         10,209         (4,150)         148,667
   Selling expenses ................................       7,223          1,952                           9,175
   Retail operating expenses .......................      24,199             --                          24,199
   Franchise expenses ..............................       2,837             --                           2,837
   General and administrative expenses .............      18,108          2,000           (330)          19,778
   Art and development costs .......................       2,482             --                           2,482
                                                        --------        -------        -------        ---------
      Total expenses ...............................     197,457         14,161         (4,480)         207,138
                                                        --------        -------        -------        ---------
      (Loss) income from operations ................        (243)           908            537            1,202
   Interest expense, net ...........................      13,188             35                          13,223
   Other (income) expense, net .....................      (1,138)            37            826             (275)
                                                        --------        -------        -------        ---------
      (Loss) income before income taxes and minority
         interests .................................     (12,293)           836           (289)         (11,746)
   Income tax (benefit) expense ....................      (5,007)           270             78           (4,659)
   Minority interests ..............................          --             70                              70
                                                        --------        -------        -------        ---------
      Net (loss) income ............................    $ (7,286)       $   496        $  (367)       $  (7,157)
                                                        ========        =======        =======        =========
</TABLE>

<PAGE>

                              AMSCAN HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

                 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2007

<TABLE>
<CAPTION>
                                                                     AHI AND
                                                                     COMBINED       COMBINED
                                                                    GUARANTORS   NON-GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                                    ----------   --------------   ------------   ------------
<S>                                                                 <C>          <C>              <C>            <C>
Cash flows (used in) provided by operating activities:
   Net (loss) income ............................................    $ (4,483)      $   415          $(334)        $ (4,402)
   Adjustments to reconcile net (loss) income to net cash used in
      operating activities:
      Depreciation and amortization expense .....................       9,705           235             --            9,940
      Amortization of deferred financing costs ..................         663            --             --              663
      Provision for doubtful accounts ...........................         411            37             --              448
      Deferred income tax benefit ...............................      (1,046)           --             --           (1,046)
      Deferred rent .............................................         593            --             --              593
      Undistributed loss in unconsolidated joint venture ........          51            --             --               51
      Loss on disposal of equipment .............................          45            --             --               45
      Equity based compensation .................................         367            --             --              367
   Changes in operating assets and liabilities:
      Decrease (increase) in accounts receivable ................       2,867        (3,186)            --             (319)
      (Increase) decrease in inventories ........................      (8,753)        1,267           (129)          (7,615)
      Increase in prepaid expenses and other current assets .....      (1,415)         (619)                         (2,034)
      (Decrease) increase in accounts payable, accrued
         expenses and income taxes payable ......................     (39,894)        1,811             48          (38,035)
      Other, net ................................................        (480)           70            415                5
                                                                     --------       -------          -----         --------
         Net cash (used in) provided by operating activities ....     (41,369)           30             --          (41,339)
Cash flows used in investing activities:
      Cash paid in connection with store acquisitions ...........        (350)                                         (350)
      Capital expenditures ......................................      (3,722)          (77)            --           (3,799)
                                                                     --------       -------          -----         --------
         Net cash used in investing activities ..................      (4,072)          (77)            --           (4,149)
Cash flows provided by (used in) financing activities:
      Repayment of loans, notes payable and long-term
         obligations ............................................         (73)          (52)            --             (125)
      Proceeds from short-term obligations ......................      43,835            --             --           43,835
      Proceeds from capital contribution and exercise of
         options ................................................          28            --             --               28
                                                                     --------       -------          -----         --------
         Net cash provided by (used in) financing activities ....      43,790           (52)            --           43,738
      Effect of exchange rate changes on cash and cash
         equivalents ............................................         (31)          165             --              134
                                                                     --------       -------          -----         --------
         Net (decrease) increase in cash and cash equivalents ...      (1,682)           66             --           (1,616)
Cash and cash equivalents at beginning of period ................       4,395           571                           4,966
                                                                     --------       -------          -----         --------
Cash and cash equivalents at end of period ......................    $  2,713       $   637          $             $  3,350
                                                                     ========       =======          =====         ========
</TABLE>
<PAGE>

                              AMSCAN HOLDINGS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

                 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                    FOR THE THREE MONTHS ENDED MARCH 31, 2006

<TABLE>
<CAPTION>
                                                                       AHI AND
                                                                       COMBINED       COMBINED
                                                                      GUARANTORS   NON-GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                                      ----------   --------------   ------------   ------------
<S>                                                                   <C>          <C>              <C>            <C>
Cash flows (used in) provided by operating activities:
   Net (loss) income ..............................................    $ (7,286)       $   496         $(367)        $ (7,157)
   Adjustments to reconcile net (loss) income to net cash (used in)
      provided by operating activities:
      Depreciation and amortization expense .......................       9,374            186                          9,560
      Amortization of deferred financing costs ....................         644             --                            644
      Provision for doubtful accounts .............................         219             62                            281
      Deferred income tax benefit .................................        (868)            --                           (868)
      Deferred Rent................................................         690             --            --              690
      Undistributed gain in unconsolidated joint venture ..........        (325)            --                           (325)
      Loss on disposal of equipment ...............................          24              2                             26
      Equity based compensation ...................................         111             --                            111
      Changes in operating assets and liabilities, net of
         acquisitions:
         Increase in accounts receivable ..........................     (13,557)        (1,621)                       (15,178)
         (Increase) decrease in inventories .......................        (500)           470          (207)            (237)
         (Increase) decrease in prepaid expenses, other
            current assets and other, net .........................      (3,359)         1,366           496           (1,497)
         Decrease in accounts payable, accrued expenses,
            income taxes payable and other liabilities ............     (27,982)          (884)           78          (28,788)
                                                                       --------        -------         -----         --------
         Net cash (used in) provided by operating activities s ....     (42,815)            77            --          (42,738)
Cash flows used in investing activities:
      Cash paid in connection with Party City Acquisition .........        (222)            --                           (222)
      Capital expenditures ........................................      (7,040)          (171)                        (7,211)
      Proceeds from disposal of property, plant and equipment .....         492             --                            492
                                                                       --------        -------         -----         --------
         Net cash used in investing activities ....................      (6,770)          (171)           --           (6,941)
Cash flows provided by (used in) financing activities:
      Repayment of loans, notes payable and long-term
         obligations ..............................................        (181)           (58)                          (239)
      Proceeds from short term obligations ........................      43,325             --                         43,325
                                                                       --------        -------         -----         --------
         Net cash provided by financing activities ................      43,144            (58)           --           43,086
      Effect of exchange rate changes on cash and cash
         equivalents ..............................................          16           (235)                         (219)
                                                                       --------        -------                       --------
         Net decrease in cash and cash equivalents ................      (6,425)          (387)                        (6,812)
Cash and cash equivalents at beginning of period ..................       7,695          1,050                          8,745
                                                                       --------        -------         -----         --------
Cash and cash equivalents at end of period ........................    $  1,270        $   663         $             $  1,933
                                                                       ========        =======         =====         ========
</TABLE>

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THE PARTY AMERICA ACQUISITION

     On September 29, 2006 (the "Party America Acquisition Date"), the Company
acquired PA Acquisition Corp. (the "Party America Acquisition"), doing business
as Party America ("Party America"), from Gordon Brothers Investment, LLC. In
connection with the acquisition, the outstanding common stock, common stock
options and subordinated debt of Party America were converted into AAH common
stock and common stock options valued at $29.7 million. AAH also paid
transaction costs of $1.1 million and repaid $12.6 million of Party America
senior debt.

     A preliminary estimate of the excess of the Party America purchase price
over the tangible net assets acquired has been allocated to intangible assets
consisting of franchise licenses ($2.3 million), which are being amortized using
the straight-line method over the assets' estimated useful life (nine years) and
trade names ($15.4 million) and goodwill ($8.3 million), which are not being
amortized, and net deferred tax liabilities ($2.8 million). In addition, assets
acquired totaled $48.4 million, including an allocation to adjust property,
plant and equipment to market value ($0.5 million), and liabilities assumed were
$40.8 million. The allocation of the purchase price is based, in-part, on our
preliminary estimates of the fair value of the tangible and identifiable
intangible assets acquired and liabilities assumed. Independent valuation
specialists are currently conducting a valuation of the net assets acquired as
of the Party America Acquisition Date to assist management with the final
determination of fair value. As a result of the Party America Acquisition, the
Company assumed additional non-cancellable lease commitments totaling $77.5
million.

     The results of Party America's operations are included in the Company's
consolidated results of operations from the date of acquisition.

PERCENTAGE OF TOTAL REVENUES

     The following table sets forth the Company's consolidated statements of
operations for the three months ended March 31, 2007 and 2006.

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED
                                                           MARCH 31,
                                                      ------------------
                                                         2007    2006
                                                        -----   -----
<S>                                                   <C>       <C>
Revenues:
   Net sales ......................................      98.0%   98.0%
   Royalties and franchise fees ...................       2.0     2.0
                                                        -----   -----
      Total revenues ..............................     100.0   100.0

Expenses:
   Cost of sales ..................................      66.8    71.4
   Selling expenses ...............................       4.2     4.4
   Retail operating expenses ......................      14.0    11.6
   Franchise expenses .............................       1.3     1.3
   General and administrative expenses ............       9.7     9.5
   Art and development costs ......................       1.2     1.2
                                                        -----   -----
      Total expenses ..............................      97.2    99.4
                                                        -----   -----
         Income from operations ...................       2.8     0.6

Interest expense, net .............................       5.7     6.3
   Other loss, net ................................        --    (0.1)
                                                        -----   -----
   Loss before income taxes and minority
      interests ...................................      (2.9)   (5.6)

   Income tax benefit .............................      (1.1)   (2.2)
   Minority interests .............................        --      --
                                                        -----   -----
      Net loss ....................................      (1.8)%  (3.4)%
                                                        =====   =====
</TABLE>

TOTAL REVENUES

     The following table sets forth the Company's total revenues for the three
months ended March 31, 2007 and 2006.
<PAGE>

<TABLE>
<CAPTION>
                                            Three Months Ended March 31,
                                   ---------------------------------------------
                                            2007                    2006
                                   ---------------------   ---------------------
                                              % OF TOTAL              % OF TOTAL
                                   $(000'S)    REVENUES    $(000'S)    REVENUES
                                   --------   ----------   --------   ----------
<S>                                <C>        <C>          <C>        <C>
Net sales:
   Wholesale sales .............   $139,993      56.3%     $123,187      59.1%
   Eliminations ................    (31,873)    (12.8)      (15,903)     (7.6)
                                   --------     -----      --------     -----
      Wholesale net sales ......    108,120      43.5       107,284      51.5
   Retail sales ................    135,409      54.5        96,899      46.5
                                   --------     -----      --------     -----
      Total net sales ..........    243,529      98.0       204,183      98.0
Royalties and franchise fees ...      4,895       2.0         4,157       2.0
                                   --------     -----      --------     -----
      Total revenues ...........   $248,424     100.0%     $208,340     100.0%
                                   ========     =====      ========     =====
</TABLE>

          For the quarter ended March 31, 2007, revenues totaled $248.4 million,
consisting of net sales, at wholesale, of $108.1 million, retail sales of $135.4
million and franchise related revenues of $4.9 million. For the quarter ended
March 31, 2006, revenues totaled $208.3 million, including net sales at
wholesale of $107.3 million, retail sales of $96.9 million and franchise related
revenues of $4.2 million. Revenue for the quarter ended March 2007 include $35.4
million of retail sales and $0.4 million of royalty and franchise fees from
Party America, which was acquired September 29, 2006.

     WHOLESALE

          Net sales, at wholesale, of $108.1 million were $0.9 million or 0.8%
higher than sales for the first quarter of 2006. Net sales reflect the
elimination of inter-company sales to Party City company owned stores for first
quarters 2007 and 2006, while Party America inter-company sales are eliminated
only in 2007. Had the Party America Acquisition occurred January 1, 2006, the
Company would have eliminated $5.1 million of first quarter 2006 sales to Party
America. Accordingly, net sales for the first quarter of 2007, at wholesale, of
$108.1 million were $6.0 million or 5.9% higher than adjusted sales for the
first quarter of 2006.

          Net sales to party superstores, including sales to our retail
franchisees, totaled $36.7 million and were 9.8% higher than in adjusted 2006
party superstore sales. International sales totaled $17.7 million or 17.6%
higher than in 2006. The Company attributes the increase in domestic party goods
sales and international party goods sales to synergistic growth with the Party
City and Party America retail segment. Net sales of metallic balloons were $21.7
million, and were comparable to 2006.

     RETAIL

          Net retail sales for company-owned stores for the first quarter of
2007 of $135.4 million were $38.5 million or 39.7% higher than net retail sales
for the first quarter of 2006, and include Party America sales of $35.4 million

          Same-store net retail sales for Party City company-owned stores during
the first quarter 2007 totaled $99.9 million or 6.9% higher than the net retail
sales for the first quarter of 2006. Party America same-store sales for the
first quarter 2007 were $35.4 million or 5.3% higher than their net retail sales
for the first quarter of 2006. The improvements at Party City and Party America
reflect increases of non-seasonal merchandise of 4.6% and 3.3%, respectively,
and increases of seasonal merchandise of 17.9% and 20.4%, respectively. The
increases in net sales of non-seasonal merchandise principally reflect an
increase in the average net sale per retail transaction at our company-owned
stores. The increases in same-store net retail sales of seasonal merchandise
principally reflect a sales shift as Easter fell earlier in April 2007 as
compared to 2006.

     ROYALTIES AND FRANCHISE FEES

          Franchise related revenue for the first quarter of 2007 totaled $4.9
million or 17.8% higher than revenue for the first quarter of 2006, including
first quarter 2007 Party America franchise related revenues of $0.4 million.
During the first quarter of 2007, four new franchise stores opened, and one
closed, as compared to two new stores in the first quarter of 2006. In addition,
Party City franchise stores reported same-store net sales of $108.5 million, or
an increase of 6.2%, while Party America franchise stores reported same-store
net sales of $11.7 million, or an increase of 1.6%, when comparing the first
quarters of 2007 and 2006.

GROSS PROFIT

          The following table sets forth the Company's consolidated gross profit
on net sales for the three months ended March 31, 2007 and 2006.

<PAGE>

<TABLE>
<CAPTION>
                                   THREE MONTHS ENDED           THREE MONTHS ENDED
                                     MARCH 31, 2007               MARCH 31, 2006
                               --------------------------   --------------------------
                                          % OF ASSOCIATED              % OF ASSOCIATED
                                  $            SALES           $            SALES
                               --------   ---------------   --------   ---------------
<S>                            <C>        <C>               <C>        <C>

   Net Wholesale............   $32,690         30.2%        $31,711          29.6%
   Net Retail...............   $45,016         33.2%        $23,805          24.6%
                               -------         ----         -------          ----
   Total Gross Profit.......   $77,706         31.9%        $55,516          27.2%
                                ======         ====         =======          ====
</TABLE>


          The gross profit margin on sales at wholesale, after eliminations,
for the quarter ended March 31, 2007 was 30.2% or 60 basis points higher than in
2006. The increase in gross profit margin principally reflects improved product
pricing and changes in product mix.

          Retail gross profit margin for the first quarter 2007 was 33.2%, 860
basis points higher than the first quarter 2006, and includes the wholesale
gross profit margin on product purchased from its wholesale affiliates,
favorable product pricing and product mix.

OPERATING EXPENSES.

          Selling expenses of $10.5 million for the quarter-ended March 31, 2007
were $1.3 million higher than for the first quarter of 2006 due to increases in
base compensation and employee benefits. As a percent of total revenues, selling
expenses were 4.3% for the three months ended March 31, 2007, or 10 basis points
lower than selling expenses as a percentage of total revenue for the first
quarter of 2006.

          Retail operating expenses for the first quarter of 2007 were $34.9
million, or $10.7 million over the first quarter 2006, principally due to first
quarter 2007 Party America operating expenses of $9.3 million, and additional
Party City payroll and other costs associated with store layout resets.

          Franchise expenses for the first quarter of 2007 were $3.4 million, or
$0.6 million higher than last year, reflecting the addition of Party America
franchisees during 2007, and increased amortization of franchise license
intangibles resulting from the completion, in the fourth quarter of 2006, of the
purchase accounting and asset valuation for the Company's Party City
Acquisition.

          General and administrative expenses of $24.1 million for the quarter
ended March 31, 2007 were $4.4 million higher than the first quarter of 2006,
and include Party America first quarter 2007 expenses of $4.0 million, and
higher base compensation and employee benefit costs.

          Art and development costs of $2.9 million for the quarter ended March
31, 2007 were $0.4 million higher than costs for the first quarter of 2006. As a
percentage of total revenues, art and development costs were 1.2% of total
revenue for the first quarter of 2007 and 2006.

INTEREST EXPENSE, NET.

          Interest expense of $14.1 million for the three months ended March 31,
2007 was $0.9 million higher than for the three months ended March 31, 2006,
reflecting higher average borrowings following the Party America Acquisition in
September 2006.

OTHER INCOME, NET.

          Other income, net principally consists of derivative gains or losses,
and our share of loss in an unconsolidated joint venture. The undistributed
(income) loss represents our share of the operations of a Mexican balloon
distribution joint venture, including the elimination of inter-company profit in
the joint venture's inventory at March 31, 2007 and 2006.

INCOME TAXES.

          Income taxes for the first quarter of 2007 and 2006 were based upon
the estimated consolidated effective income tax rates of 38.6% and 39.7% for the
years ending December 31, 2007 and 2006, respectively. The decrease in the 2007
effective income tax rate is primarily attributable to a lower average state
income tax rate.

LIQUIDITY AND CAPITAL RESOURCES

CAPITAL STRUCTURE

<PAGE>

          Our First Lien Credit Agreement consists of (i) the $325 million First
Term Loan and (ii) the $85 million First Term Revolver, which is available for
working capital, general corporate purposes and the issuance of letters of
credit. The First Term Loan was issued at a 1% or $3.25 million discount that is
being amortized by the effective interest method over the term of the loan. The
net proceeds of the First and Second Term Loans were used, together with the
Equity Investment and cash on-hand, to (a) pay the cash portion of the purchase
price of the Party City Acquisition, (b) repay the outstanding balances under
the Company's then existing term loan, (c) pay all other amounts payable as of
the Party City Acquisition Date pursuant to the Party City Acquisition Agreement
and (d) pay transaction costs.

          The First Lien Credit Agreement provides for two interest rate
options: (i) loans on which interest is payable quarterly at a Base Rate equal
to the higher of (x) the Federal Funds rate plus 50 basis points or (y) the
prime rate plus an applicable margin initially equal to 2.00% and subject to a
downward adjustment based on improvements in the Company's leverage ratio and
(ii) loans on which interest accrues for one, two, three, six or, if generally
available, nine or twelve month interest periods, at a rate of interest per
annum equal to the reserve adjusted Eurodollar rate, plus an applicable margin
initially equal to 3.00% per annum, subject to downward adjustment based on
improvements in the leverage ratio. In addition to paying interest on
outstanding principal under the First Term Loan and First Term Revolver, the
Company is required to pay a commitment fee to the lenders under the First Term
Loan Revolver based on the unutilized commitments there-under. The initial
commitment fee rate is 0.50% per annum. The Company must also pay customary
letter of credit fees.

          The Company is required to repay the First Term Loan in quarterly
principal installment amounts of 0.25% of the funded total principal amount for
the first six years and nine months, with the remaining principal balance
payable on the seventh anniversary of the closing of the First Lien Credit
Agreement. The First Term Loan Revolver expires on December 23, 2011. The
obligations of the Company under the First Lien Credit Agreement are jointly and
severally guaranteed by AAH and each wholly-owned domestic subsidiary of the
Company. Each guarantor has secured its obligations under the guaranty by a
first priority lien on substantially all of its assets.

          At March 31, 2007, the balance of the First Term Loan was $318.9
million, borrowings under the First Term Loan Revolver were $48.8 million and
outstanding standby letters of credit totaled $14.7 million.

          The Second Lien Credit Agreement consists of the Second Term Loan of
$60 million. The Second Term Loan was issued at a 2.5% or $1.5 million discount
that is being amortized by the effective interest method over the term of the
loan. The Second Lien Credit Agreement provides for two interest rate options:
(i) loans on which interest is payable quarterly at a Base Rate equal to the
higher of (x) the Federal Funds rate plus 50 basis points or (y) the prime rate
plus an applicable margin equal to 4.00% and (ii) loans on which interest
accrues for one, two, three, six or, if generally available, nine or twelve
month interest periods at a rate of interest per annum equal to the reserve
adjusted Eurodollar rate, plus an applicable margin initially equal to 5.00% per
annum.

          The Second Lien Credit Agreement is not subject to any mandatory
sinking fund payments and is payable on the seventh anniversary of the closing
of the Second Lien Credit Facility. The obligations of the Company under the
Second Lien Credit Agreement are jointly and severally guaranteed by AAH and
each wholly-owned domestic subsidiary of the Company. Each guarantor has secured
its obligations under the guaranty by a second priority lien on substantially
all of its assets.

          Our Credit Agreements contain financial covenants and maintenance
tests, including a minimum interest coverage test and a maximum total leverage
test, and restrictive covenants, including restrictions on our ability to make
capital expenditures or pay dividends. Borrowings under our Credit Agreements
are secured by substantially all of our assets and the assets of some of our
subsidiaries, and by a pledge of all of our domestic subsidiaries' capital stock
and a portion of our wholly owned foreign subsidiaries' capital stock.

          At March 31, 2007, we have a $0.4 million Canadian dollar denominated
revolving credit facility that bears interest at the Canadian prime rate plus
0.6% and expires in April 2008, and a 1.0 million British Pound Sterling
denominated revolving credit facility that bears interest at the U.K. base rate
plus 1.75% and expires on May 31, 2007. No borrowings were outstanding under
these revolving credit facilities at March 31, 2007 or December 31, 2006. We
expect to renew these revolving credit facilities upon expiration.

<PAGE>

          Long-term borrowings at March 31, 2007 include a mortgage note with
the New York State Job Development Authority of $7.4 million which requires
monthly payments based on a 180-month amortization period with a balloon payment
upon maturity in January 2010. The mortgage note bears interest at the rate of
6.76%, and is subject to review and adjustment semi-annually based on the New
York State Job Development Authority's confidential internal protocols. The
mortgage note is collateralized by a distribution facility located in Chester,
New York.

          In connection with its acquisition by AAH in April 2004, the Company
issued $175.0 million of 8.75% senior subordinated notes due 2014 to their
initial purchasers, which were subsequently resold to qualified institutional
buyers and non-U.S. persons in reliance upon Rule 144A and Regulation S under
the Securities Act of 1933 (the "Note Offering"). In August 2004, the Company
filed with the Securities and Exchange Commission a Registration Statement on
Form S-4, offering to exchange registered notes for the notes issued in
connection with the Note Offering. The terms of the notes and the exchange notes
were substantially identical. The exchange was completed in October 2004.
Interest is payable semi-annually on May 1 and November 1 of each year.

          We have entered into various capital leases for machinery and
equipment and automobiles with implicit interest rates ranging from 7.70% to
12.29% which extend to 2009. The Company has numerous non-cancelable operating
leases for its retail store sites as well as several leases for offices,
distribution and manufacturing facilities, showrooms and equipment. These leases
expire on various dates through 2018 and generally contain renewal options and
require the Company to pay real estate taxes, utilities and related insurance
costs. In addition, in May 2006, the Company sold a warehouse located in
Chester, New York and entered into a leaseback for the same warehouse under a
one-year lease agreement. Net proceeds to the Company for the sale of the
property were approximately $12.6 million and the total gain on the transaction
was $2.7 million, half of which was recorded at the time of the transaction.
Since May 2006, a gain of $1.1 million, and a corresponding charge to rent
expense, have been recognized, with $0.2 million of gain still deferred, to be
recognized, with a corresponding charge to rent expense, over the remainder of
the one-year leaseback period in 2007.

          Rent expense for the quarters ended March 31, 2007 and 2006 totaled
$25.7 million and $16.1 million, respectively. Minimum lease payments currently
required under non-cancelable operating leases for the year ending December 31,
2007, including Party America corporate facilities and company-owned stores,
approximate $82.4 million.

          Restructuring costs associated with the Party City Acquisition of $3.7
million were accrued as part of the net assets acquired.

          Estimated restructuring costs associated with the Party America
Acquisition of $1.0 million were accrued for as part of net assets acquired.

          The Company has a management agreement with its Principal Investors,
Berkshire Partners LLC and Weston Presidio. Pursuant to the management
agreement, Berkshire Partners LLC and Weston Presidio will be paid annual
management fees of $0.8 million and $0.4 million, respectively. Although the
indenture governing the 8.75% senior subordinated notes will permit the payments
under the management agreement, such payments will be restricted during an event
of default under the notes and will be subordinated in right of payment to all
obligations due with respect to the notes in the event of a bankruptcy or
similar proceeding of Amscan.

          We expect that cash generated from operating activities and
availability under our current Credit Agreement and any future credit agreements
will be our principal sources of liquidity. Based on our current level of
operations, we believe these sources will be adequate to meet our liquidity
needs for at least the next twelve months. We cannot assure you, however, that
our business will generate sufficient cash flow from operations or that future
borrowings will be available to us under our senior secured credit facilities in
an amount sufficient to enable us to repay our indebtedness, including the 8.75%
senior subordinated notes, or to fund our other liquidity needs.

CASH FLOW DATA - THREE MONTHS ENDED MARCH 31, 2007 COMPARED TO THREE MONTHS
ENDED MARCH 31, 2006

          Net cash used in operating activities during the three months ended
March 31, 2007 totaled $41.3 million, as compared to $42.7 million for the three
months ended March 31, 2006. Net cash flow provided by operating activities
before changes in operating assets and liabilities for the three months ended
March 31, 2007 and 2006, was $6.7 million and $3.0 million, respectively.
Changes in operating assets and liabilities for the three months ended March 31,
2007 and 2006 resulted in the use of cash of $48.0 million and $45.7 million,
respectively. The use of cash during the first quarter of 2007 principally
reflects the payment of Halloween and other fourth quarter seasonal, retail
trade payables following the year ended December 31, 2006 and increases in
inventory levels to support synergistic growth and the addition of Party
America, using borrowings under the First Term Loan Revolver.

          During the three months ended March 31, 2007 and 2006, net cash used
in investing activities totaled $4.1 million and $6.9 million, respectively. The
Company invested $1.6 million and $4.7 million in its retail operations during
the first quarters of 2007 and 2006, respectively, including leasehold
improvements and furniture and fixtures in company-owned stores. During the
first quarters of 2007 and 2006, the Company invested $2.5 million and $1.2
million, respectively, in its wholesale operations, principally in additional
manufacturing and distribution assets.

<PAGE>

          During the three months ended March 31, 2007, net cash provided by
financing activities of $43.7 million included borrowings under the First Term
Loan Revolver of $43.8 million used principally to pay Halloween and other
fourth quarter seasonal, retail trade payables following the year ended December
31, 2006, partially offset by scheduled payments of $0.1 million on capital
leases and other long-term obligations. During the three months ended March 31,
2006 net cash provided by financing activities of $43.1 million included
proceeds of $43.3 million from short-term borrowings under the revolver,
partially offset by scheduled payments of $0.2 million on the term loan and
other long-term obligations.

LEGAL PROCEEDINGS

          The Company is a party to certain claims and litigation in the
ordinary course of business. The Company does not believe any of these
proceedings will result, individually or in the aggregate, in a material adverse
effect on its financial condition or future results of operations.

SEASONALITY

               WHOLESALE OPERATIONS

          Despite a concentration of holidays in the fourth quarter of the year,
as a result of our expansive product lines and customer base and increased
promotional activities, the impact of seasonality on our quarterly results of
operations has been limited. Promotional activities, including special dating
terms, particularly with respect to Halloween and Christmas products sold in the
third quarter, and the introduction of our new everyday products and designs
during the fourth quarter result in higher accounts receivables and inventory
balances and higher interest costs to support these balances.

               RETAIL OPERATIONS

          Our retail operations are subject to significant seasonal variations.
Historically, this segment has realized a significant portion of its revenues,
cash flow and net income in the fourth quarter of the year, principally due to
the sales in October for the Halloween season and, to a lesser extent, due to
sales for end of year holidays. In addition, the results of retail operations
and cash flows may also fluctuate significantly as a result of a variety of
other factors, including the timing of new store openings and store closings and
the timing of the acquisition and disposition of stores.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

          This quarterly report on Form 10-Q may contain "forward-looking
statements." Forward-looking statements give our current expectations or
forecasts of future events. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "intend," "estimate," "anticipate," "believe," "project" or "continue"
or the negative thereof and similar words. From time to time, we also may
provide oral or written forward-looking statements in other materials we release
to the public. Any or all of our forward-looking statements in this quarterly
report and in any public statements we make may turn out to be wrong. They can
be affected by inaccurate assumptions we might make or by known or unknown risks
or uncertainties. Consequently, no forward-looking statement can be guaranteed.
Actual results may vary materially. Investors are cautioned not to place undue
reliance on any forward-looking statements. Important factors that could cause
actual results to differ materially from the forward-looking statements include,
but are not limited to: our inability to satisfy our debt obligations, the
reduction of volume of purchases by one or more of our large customers, our
inability to collect receivables from our customers, the termination of our
licenses, our inability to identify and capitalize on changing design trends and
customer preferences, changes in the competitive environment, increases in the
costs of raw materials and the possible risks and uncertainties that have been
noted in reports filed by us with the Securities and Exchange Commission,
including our annual report on Form 10-K for the year ended December 31, 2006.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          Our earnings are affected by changes in interest rates as a result of
our variable rate indebtedness. However, we have utilized interest rate swap
agreements to manage the market risk associated with fluctuations in interest
rates. If market interest rates for our variable rate indebtedness averaged 2%
more than the interest rate actually paid for the three months ended March 31,
2007 and 2006, our interest expense, after considering the effects of our
interest rate swap agreements, would have increased, and the loss before income
taxes and minority interest for the quarters ended March 31, 2007 and 2006 would
have increased by $1.9 million and $1.8 million, respectively. These amounts are
determined by considering the impact of the hypothetical interest rates on our
borrowings and interest rate swap agreements. This analysis does not consider
the effects of the reduced level of overall economic activity that could exist
in such an environment. Further, in the event of a change of such magnitude,
management would likely take actions to further mitigate our exposure to the
change. However, due to the uncertainty of the specific actions that we would
take and their possible effects, the sensitivity analysis assumes no changes in
our financial structure.

          Our earnings are also affected by fluctuations in the value of the
U.S. dollar as compared to foreign currencies, predominately in European
countries, as a result of the sales of our products in foreign markets. Although
we periodically enter into foreign currency forward contracts to hedge against
the earnings effects of such fluctuations, we may not be able to hedge such
risks completely or permanently. A uniform 10% strengthening in the value of the
U.S. dollar relative to the currencies in which our foreign sales are
denominated would have resulted in a decrease in gross profit of $1.2 million
and $1.0 million for the three months ended March 31, 2007

<PAGE>

and 2006, respectively. These calculations assume that each exchange rate would
change in the same direction relative to the U.S. dollar. In addition to the
direct effects of changes in exchange rates, which could change the U.S. dollar
value of the resulting sales, changes in exchange rates may also affect the
volume of sales or the foreign currency sales price as competitors' products
become more or less attractive. Our sensitivity analysis of the effects of
changes in foreign currency exchange rates does not factor in a potential change
in sales levels or local currency prices.

ITEM 4. CONTROLS AND PROCEDURES

          Based on an evaluation of the effectiveness of the Company's
disclosure controls and procedures performed by the Company's management, with
the participation of the Company's Chief Executive Officer and its Chief
Financial Officer, as of the end of the period covered by this report, the
Company's Chief Executive Officer and its Chief Financial Officer concluded that
the Company's disclosure controls and procedures are effective.

          As used herein, "disclosure controls and procedures" means controls
and other procedures of the Company that are designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Securities Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Securities Exchange Act is accumulated and communicated to the
Company's management, including its principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow
timely decisions regarding required disclosure.

          There were no changes in the Company's internal control over financial
reporting identified in connection with the evaluation described in the
preceding paragraph that occurred during the Company's fiscal quarter ended
March 31, 2007 that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.

                                     PART II

ITEM 5. OTHER INFORMATION

          During the quarter ended March 31, 2007, the Company issued 7.63
shares of its Common Stock, $0.01 par value, that were not registered under the
Securities Act of 1933. These shares were issued to certain employees in
connection with their exercise of stock options.

          The Company also purchased and retired 0.85 shares of redeemable and
0.55 shares of non-redeemable common stock held by former employee stockholders
at an estimated fair value of $14,250 per share.

          The Company claims an exemption from registration of the offer and
sale of these shares pursuant to Section 4(2) of the Securities Act and Rule 506
there-under.

<PAGE>

ITEM 6. EXHIBITS

31(1) Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and
     Rule 15d-14(a) of the Securities Exchange Act, as amended.

31(2) Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and
     Rule 15d-14(a) of the Securities Exchange Act, as amended.

32   Certification of Chief Executive and Financial Officer pursuant to 18
     U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
     of 2002.

<PAGE>

                                    SIGNATURE

          Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        AMSCAN HOLDINGS, INC.


                                        By: /s/ Michael A. Correale
                                            ------------------------------------
                                            Michael A. Correale
                                            Chief Financial Officer
                                            (on behalf of the registrant and as
                                            principal financial and accounting
                                            officer)

Date: May 15, 2007