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

                                   FORM 10 - Q

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

For the Quarterly Period Ended June 30, 2005

[ ]  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 incorporation    (I.R.S. Employer Identification
               or organization)                              Number)
</TABLE>

<TABLE>
<S>                                                        <C>
             80 Grasslands Road
             Elmsford, New York                               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 an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

     Yes     No  X
         ---    ---

As of August 15, 2005, 1,000.00 shares of Registrant's common stock, par value
$0.10, were outstanding.


<PAGE>
                              AMSCAN HOLDINGS, INC.
                                    FORM 10-Q

                                  JUNE 30, 2005

                                TABLE OF CONTENTS

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

ITEM 1      FINANCIAL STATEMENTS (UNAUDITED)

            Consolidated Balance Sheets at June 30, 2005 and
               December 31, 2004.........................................     3

            Consolidated Statements of Operations for the Three Months
               Ended June 30, 2005, Two Months Ended June 30, 2004,
               One Month Ended April 30, 2004 (Predecessor),
               Six Months Ended June 30, 2005, Two Months Ended
               June 30, 2004 and Four Months Ended April 30, 2004
               (Predecessor).............................................     4

            Consolidated Statement of Stockholders' Equity for
               the Six Months Ended June 30, 2005........................     6

            Consolidated Statements of Cash Flows for the Six Months
               Ended June 30, 2005, Two Months Ended June 30, 2004, and
               Four Months Ended April 30, 2004 (Predecessor)............     7

            Notes to Consolidated Financial Statements...................     8

ITEM 2      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS.................................    27

ITEM 3      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...    34

ITEM 4      CONTROLS AND PROCEDURES......................................    34


                                     PART II

ITEM 6      EXHIBITS.....................................................    35

SIGNATURE................................................................    36
</TABLE>


                                        2
<PAGE>
                              AMSCAN HOLDINGS, INC.
                           CONSOLIDATED BALANCE SHEETS
                  (DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                          JUNE 30,    DECEMBER 31,
                                                                                            2005          2004
                                                                                        -----------   ------------
                                                                                        (Unaudited)      (Note)
<S>                                                                                     <C>           <C>
                                        ASSETS
Current assets:
   Cash and cash equivalents ........................................................     $  2,052      $  4,252
   Accounts receivable, net of allowances ...........................................       84,199        83,968
   Inventories, net of allowances ...................................................       96,205        88,159
   Prepaid expenses and other current assets ........................................       15,764        15,241
                                                                                          --------      --------
      Total current assets ..........................................................      198,220       191,620
Property, plant and equipment, net ..................................................       97,736        96,134
Goodwill ............................................................................      282,998       282,921
Tradenames ..........................................................................       33,500        33,500
Other intangible assets, net ........................................................       21,118        23,289
Other assets, net ...................................................................       19,298        19,802
                                                                                          --------      --------
      Total assets ..................................................................     $652,870      $647,266
                                                                                          ========      ========

          LIABILITIES, REDEEMABLE COMMON SECURITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Loans and notes payable ..........................................................     $  1,700      $  2,025
   Accounts payable .................................................................       38,339        36,842
   Accrued expenses .................................................................       21,128        20,980
   Income taxes payable .............................................................        1,934         2,594
   Current portion of long-term obligations .........................................        2,825         2,807
                                                                                          --------      --------
      Total current liabilities .....................................................       65,926        65,248
Long-term obligations, excluding current portion ....................................      383,714       384,993
Deferred income tax liabilities .....................................................       42,409        43,175
Other ...............................................................................        3,416         3,417
                                                                                          --------      --------
      Total liabilities .............................................................      495,465       496,833

Redeemable common securities ........................................................        3,601         3,705

Commitments and contingencies .......................................................

Stockholders' equity:
   Preferred Stock ($0.01 par value; 10,000.00 shares authorized; none issued and
      outstanding) ..................................................................           --            --
   Common Stock ($0.01 par value; 40,000.00 shares authorized; 13,951.98 and
      13,962.38 shares issued and outstanding at June 30, 2005 and December 31,
      2004, respectively) ...........................................................           --            --
   Additional paid-in capital .......................................................      136,931       136,819
   Retained earnings ................................................................       16,191         8,564
   Accumulated other comprehensive income ...........................................          682         1,345
                                                                                          --------      --------
      Total stockholders' equity ....................................................      153,804       146,728
                                                                                          --------      --------
      Total liabilities, redeemable common securities and stockholders' equity ......     $652,870      $647,266
                                                                                          ========      ========
</TABLE>

Note: The balance sheet at December 31, 2004 has been derived from the audited
consolidated financial statements at that date (see Note 3).

          See accompanying notes to consolidated financial statements.


                                        3
<PAGE>
                              AMSCAN HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                    THREE MONTHS     TWO MONTHS       ONE MONTH
                                                       ENDED           ENDED            ENDED
                                                   JUNE 30, 2005   JUNE 30, 2004   APRIL 30, 2004
                                                   -------------   -------------   --------------
                                                                                    (PREDECESSOR)
<S>                                                <C>             <C>             <C>
Net sales ......................................     $101,285         $63,181         $33,135
Cost of sales ..................................       68,762          43,424          22,166
                                                     --------         -------         -------
      Gross profit .............................       32,523          19,757          10,969

Operating expenses:
   Selling expenses ............................        9,211           5,948           3,128
   General and administrative expenses .........        8,928           5,452           2,557
   Art and development costs ...................        2,352           1,769             899
   Provision for doubtful accounts .............          430             326             188
   Non-recurring expenses related to the
      Transactions (see Note 2) ................                                       11,757
                                                     --------         -------         -------
      Total operating expenses .................       20,921          13,495          18,529
                                                     --------         -------         -------
      Income (loss) from operations ............       11,602           6,262          (7,560)

Interest expense, net ..........................        7,704           4,760           2,023
Undistributed loss in unconsolidated joint
   venture .....................................          369             312              56
Other income, net ..............................           (6)            (11)            (10)
                                                     --------         -------         -------
      Income (loss) before income taxes and
         minority interest .....................        3,535           1,201          (9,629)

Income tax (benefit) expense ...................         (132)            474          (3,803)
Minority interest ..............................           46              25               3
                                                     --------         -------         -------
      Net income (loss) ........................        3,621             702          (5,829)
         Dividend on redeemable convertible
            preferred stock ....................                                           34
                                                     --------         -------         -------
      Net income (loss) applicable to
         common stock ..........................     $  3,621         $   702         $(5,863)
                                                     ========         =======         =======
</TABLE>

          See accompanying notes to consolidated financial statements.


                                        4
<PAGE>
                              AMSCAN HOLDINGS, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                        SIX MONTHS ENDED   TWO MONTHS ENDED   FOUR MONTHS ENDED
                                                          JUNE 30, 2005      JUNE 30, 2004      APRIL 30, 2004
                                                        ----------------   ----------------   -----------------
                                                                                                (PREDECESSOR)
<S>                                                     <C>                <C>                <C>
Net sales............................................       $201,661            $63,181            $133,660
Cost of sales........................................        135,563             43,424              88,247
                                                            --------            -------            --------
      Gross profit...................................         66,098             19,757              45,413

Operating expenses:
   Selling expenses..................................         18,195              5,948              12,430
   General and administrative expenses...............         17,048              5,452              10,145
   Art and development costs.........................          4,614              1,769               3,332
   Provision for doubtful accounts...................            688                326                 729
   Non-recurring expenses related to the
      Transactions (see Note 2)......................                                                11,757
                                                            --------            -------            --------
      Total operating expenses.......................         40,545             13,495              38,393
                                                            --------            -------            --------
      Income from operations.........................         25,553              6,262               7,020
Interest expense, net................................         15,231              4,760               8,384
Undistributed loss in unconsolidated joint venture...            432                312                  89
Other income, net....................................            (10)               (11)                (58)
                                                            --------            -------            --------
      Income (loss) before income taxes and minority
         interest....................................          9,900              1,201              (1,395)

Income tax expense (benefit).........................          2,223                474                (551)
Minority interest....................................             50                 25                  46
                                                            --------            -------            --------
      Net income (loss)..............................          7,627                702                (890)
         Dividend on redeemable convertible
            preferred stock..........................                                                   136
                                                            --------            -------            --------
      Net income (loss) applicable to common stock...       $  7,627            $   702            $ (1,026)
                                                            ========            =======            ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                        5
<PAGE>
                              AMSCAN HOLDINGS, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                         SIX MONTHS ENDED JUNE 30, 2005
                             (DOLLARS IN THOUSANDS)
                                   (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, 2004............   13,962.38     $--     $136,819     $ 8,564      $ 1,345      $146,728
   Net income...........................                                        7,627                      7,627
   Net change in cumulative
      translation adjustment............                                                    (1,087)       (1,087)
   Change in fair value of interest
      rate swap and foreign exchange
      contracts, net of income taxes....                                                       424           424
                                                                                                        --------
   Comprehensive income.................                                                                   6,964
   Purchase and retirement of
      redeemable Common Stock held by
      a former employee.................      (10.40)
   Stock option compensation............                              112                                    112
                                           ---------     ---     --------     -------      -------      --------
Balance at June 30, 2005................   13,951.98     $--     $136,931     $16,191      $   682      $153,804
                                           =========     ===     ========     =======      =======      ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                        6
<PAGE>
                              AMSCAN HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED   TWO MONTHS ENDED   FOUR MONTHS ENDED
                                                                       JUNE 30, 2005      JUNE 30, 2004      APRIL 30, 2004
                                                                     ----------------   ----------------   -----------------
                                                                                                             (PREDECESSOR)
<S>                                                                  <C>                <C>                <C>
Cash flows provided by operating activities:
   Net income (loss) .............................................       $ 7,627           $     702           $   (890)
   Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
         Depreciation and amortization expense ...................         7,348               2,767              5,296
         Amortization of deferred financing costs ................           738                 262                709
         Amortization of restricted Common Stock awards ..........                                                   52
         Provision for doubtful accounts .........................           688                 326                729
         Deferred income tax expense (benefit) ...................           813                (484)               (58)
         Gain on sale of available-for-sale securities ...........                                                  (47)
         Gain on disposal of equipment ...........................                                                  (35)
         Write-off of deferred financing costs in connection
            with the Transactions ................................                                                5,548
         Debt retirement costs incurred in connection with the
            Transactions .........................................                                                6,209
         Undistributed loss in unconsolidated joint venture ......           432                 312                 89
         Changes in operating assets and liabilities:
            (Increase) decrease in accounts receivable ...........          (921)              8,746            (15,247)
            (Increase) decrease in inventories ...................        (8,046)               (768)             6,229
            Increase in prepaid expenses and other current
               assets ............................................        (2,787)               (437)            (3,593)
            Increase (decrease) in accounts payable, accrued
               expenses and income taxes payable .................         1,521              (6,397)             3,991
         Other, net ..............................................          (905)                (13)               430
                                                                         -------           ---------           --------
            Net cash provided by operating activities ............         6,508               5,016              9,412

Cash flows used in investing activities:
   Cash paid to consummate the Transactions ......................                          (529,982)
   Capital expenditures ..........................................        (6,216)             (1,056)            (3,726)
   Proceeds from sale of available-for-sale securities ...........                                                   65
   Proceeds from disposal of property and equipment ..............                                 1                 53
                                                                         -------           ---------           --------
            Net cash used in investing activities ................        (6,216)           (531,037)            (3,608)

Cash flows (used in) provided by financing activities:
   Proceeds from loans, notes payable and long-term
      obligations, net of debt issuance costs of $12,668 .........                           378,922
   Repayment of loans, notes payable and long-term obligations ...        (1,720)               (224)           (21,251)
   Capital contributions in connection with the Transactions .....                           138,979
   Debt retirement costs paid in connection with the
      Transactions ...............................................                                               (6,209)
   Purchase and retirement of redeemable Common Stock
      held by a former employee ..................................          (104)
   Repayment of note receivable from stockholder and officer .....                                                   25
                                                                         -------           ---------           --------
            Net cash (used in) provided by financing
               activities ........................................        (1,824)            517,677            (27,435)
Effect of exchange rate changes on cash and cash equivalents .....          (668)                413               (594)
                                                                         -------           ---------           --------
            Net decrease in cash and cash equivalents ............        (2,200)             (7,931)           (22,225)
Cash and cash equivalents at beginning of period .................         4,252               9,237             31,462
                                                                         -------           ---------           --------
Cash and cash equivalents at end of period .......................       $ 2,052           $   1,306           $  9,237
                                                                         =======           =========           ========

Supplemental Disclosures:
         Interest paid ...........................................       $13,962           $   4,695           $  6,531
         Income taxes paid .......................................       $ 2,361           $     635           $  1,002
</TABLE>

          See accompanying notes to consolidated financial statements.


                                        7
<PAGE>
                              AMSCAN HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - DESCRIPTION OF BUSINESS

     Amscan Holdings, Inc. ("Amscan Holdings" and, together with its
subsidiaries, "Amscan," "AHI" or the "Company") designs, manufactures, contracts
for manufacture and distributes party goods, including metallic balloons, gifts
and stationery, principally in North America, South America, Europe, Asia and
Australia.

NOTE 2 - THE TRANSACTIONS

     On April 30, 2004, Amscan and AAH Acquisition Corporation ("AAH
Acquisition"), a wholly-owned subsidiary of AAH Holdings Corporation ("AAH
Holdings"), a privately held corporation jointly controlled by funds affiliated
with Berkshire Partners LLC and Weston Presidio (together the "Principal
Investors"), entered into a merger agreement, with Amscan continuing as the
surviving entity and as a wholly-owned subsidiary of AAH Holdings. Under the
terms of the agreement, the equity interests in Amscan of GS Capital Partners
II, L.P. and certain other private investment funds managed by Goldman, Sachs &
Co., (collectively "GSCP"), and all other stockholders, other than certain
management investors, were cancelled in exchange for the right to receive cash.
Cash paid to consummate the acquisition totaled $529,982,000 and was financed
with initial borrowings (before deducting deferred financing costs of
$13,084,000) consisting of a $205,000,000 term loan under a new senior secured
credit facility which includes a $50,000,000 revolving loan facility, the
proceeds from the issuance of $175,000,000 of 8.75% senior subordinated notes
due 2014, an equity contribution from the Principal Investors and employee
stockholders of $140,524,000, borrowings under the revolver of $23,551,000 and
approximately $2,900,000 of cash on hand. Certain existing employee shareholders
participated in the Transactions (as defined hereafter) by purchasing
approximately 296.91 shares of common stock. The Chief Executive Officer and the
President of the Company exchanged 5.4945 and 2.7472 of their shares of common
stock of the Predecessor (as defined hereafter) for 100 and 50 shares of common
stock of the Company with an equivalent value of $1,000,000 and $500,000,
respectively. In addition, the Chief Executive Officer and the President of the
Company exchanged vested options to purchase 5.607 and 2.804 shares of
Predecessor common stock, which had intrinsic values of $600,000 and $300,000,
respectively, for vested options to purchase 65.455 and 32.727 shares of Common
Stock, respectively, under the Company's equity incentive plan with intrinsic
values of $492,000 and $245,000 and fair values of $590,000 and $290,000,
respectively. The acquisition has been accounted for under the purchase method
of accounting which required that the Company adjust its assets and liabilities
to their relative fair values. In order to reflect the ultimate beneficial
ownership of the Company, the capital structure disclosed in the financial
statements is the capital structure of AAH Holdings.

     The purchase price has been allocated based upon the fair value of net
assets acquired at the date of acquisition. The allocations were based on
independent valuations which were finalized during the second quarter of 2005.
The purchase price was principally allocated to accounts receivable
($91,200,000), inventories ($81,600,000), property plant and equipment
($94,400,000), goodwill ($282,998,000), other intangible assets ($60,800,000),
prepaid expenses and other current and non-current assets ($21,400,000), and
accounts payable, accrued expenses and other current and non-current
liabilities of ($102,333,000). As a result of the finalization of the
independent valuations, during the six months ended June 30, 2005 the Company
recorded additional non-current liabilities of approximately $583,000, with a
corresponding increase to goodwill, other intangibles and deferred taxes.  In
addition, the Company recorded amortization of leasehold reserves of $479,000
and $348,000 during the three and six months ended June 30, 2005, respectively,
relating to the eleven months ended March 31, 2005 and the eight months ended
December 31, 2004, respectively. Goodwill and tradenames are not amortizable
and the amortization of other intangible assets is not deductible for income
tax purposes.

     Concurrent with the acquisition, on April 30, 2004, the following financing
transactions were also consummated: the repayment of a term loan of $147,724,000
under the Company's then existing senior secured credit facility and the
termination of all commitments thereunder; the redemption of $87,200,000 of the
$110,000,000 aggregate principal amount outstanding of the Company's 9.875%
senior subordinated notes due 2007 for $93,500,000 or 103.542% of the principal
amount of such notes plus accrued and unpaid interest, following the Company's
tender



                                        8
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

offer and consent solicitation; and repayment of an $8,500,000 mortgage
obligation with a financial institution (the acquisition together with the
foregoing financing transactions are referred to herein collectively as the
"Transactions"). As used herein, "Predecessor" refers to the Company prior to
the Transactions.

     On May 31, 2004, the remaining outstanding 9.875% senior subordinated notes
due 2007 were redeemed pursuant to the redemption notice. The Company financed
the redemption with borrowings under its new revolving credit facility.

     The new senior subordinated notes were sold to the initial purchasers on
April 30, 2004, and 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 connection with the Note
Offering, the Company entered into a Registration Rights Agreement, which
granted holders of the new notes certain exchange and registration rights. 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 are substantially identical. The exchange was completed in
October 2004.

     In connection with the Transactions in April 2004, the Company recorded
non-recurring expenses of $11,757,000 comprised of $6,209,000 of debt retirement
costs and the write-off of $5,548,000 of deferred financing costs associated
with the repayment of debt in connection with the Transactions.

     The following unaudited pro forma information assumes the Transactions had
occurred on January 1, 2004. The pro forma information, as presented below, is
not necessarily indicative of the results that would have been obtained had the
Transactions occurred on January 1, 2004, nor is it necessarily indicative of
the Company's future results (dollars in thousands):

<TABLE>
<CAPTION>
                                           Three Months Ended   Six Months Ended
                                              June 30, 2004       June 30, 2004
                                           ------------------   ----------------
<S>                                        <C>                  <C>
Net sales...............................         $96,316            $196,841
Net income..............................         $ 2,775            $  7,552
</TABLE>

     The pro forma net income amounts reflect the following items: (i)
adjustments for interest expense from new borrowings related to the Transactions
and the elimination of historical interest on debt repaid in the Transactions,
(ii) management fees to be paid to our Principal Investors, (iii) the
elimination of non-recurring expenses related to the Transactions, (iv) the
elimination of the increase in cost of sales in 2004 arising from the
revaluation of inventories as a result of purchase price allocation, (v)
adjustments to depreciation and amortization expense arising from the valuation
of property, plant and equipment and amortizable intangible assets, as a result
of the purchase price allocation, and (vi) the related income tax effects of the
above items based upon a pro forma effective income tax rate of 39.5%.

NOTE 3 - BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements include the
accounts of Amscan Holdings and its majority-owned and controlled entities. All
material intercompany balances and transactions have been eliminated in
consolidation. The unaudited 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 six months ended
June 30, 2005 are not necessarily


                                        9
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

indicative of the results to be expected for the year ending December 31, 2005.
The results of operations may be affected by seasonal factors such as the timing
of holidays or 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, 2004, as filed with the Securities and Exchange Commission.

NOTE 4 - INVENTORIES

     Inventories consisted of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                         JUNE 30,   DECEMBER 31,
                                                           2005         2004
                                                         -------    ------------
<S>                                                      <C>        <C>
Finished goods........................................   $80,086      $70,896
Raw materials.........................................    10,885       11,080
Work-in-process.......................................     6,650        7,167
                                                         -------      -------
                                                          97,621       89,143
Less: reserve for slow moving and obsolete inventory..    (1,416)        (984)
                                                         -------      -------
                                                         $96,205      $88,159
                                                         =======      =======
</TABLE>

     Inventories are valued at the lower of cost, determined on a first-in,
first-out basis, or market.

NOTE 5 - INCOME TAXES

The consolidated income tax expense for the three and six months ended June 30,
2005, the two months ended June 30, 2004 and the one and four months ended April
30, 2004 (Predecessor) was determined based upon estimates of the Company's
consolidated effective income tax rates for the year ending December 31, 2005,
the eight months ended December 31, 2004 and the four months ended April 30,
2004 (Predecessor), respectively. The differences between the consolidated
effective income tax rates and the U.S. federal statutory rate are primarily
attributable to state income taxes and the effects of foreign operations,
including available foreign tax credits. In addition, during the three months
ended June 30, 2005, the Company recorded a $1,400,000 reduction to its income
tax expense and net deferred income tax liability to reflect a change in its
estimated state income tax rate. The tax rate change results from a change in
New York State tax law governing the apportionment of income.


                                       10
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

NOTE 6 - COMPREHENSIVE INCOME (LOSS)

     Comprehensive income (loss) consisted of the following (dollars in
thousands):

<TABLE>
<CAPTION>
                                                  THREE MONTHS      TWO MONTHS      ONE MONTH       SIX MONTHS      FOUR MONTHS
                                                      ENDED           ENDED           ENDED           ENDED            ENDED
                                                  JUNE 30, 2005   JUNE 30, 2004   APRIL 30 2004   JUNE 30, 2005   APRIL 30, 2004
                                                  -------------   -------------   -------------   -------------   --------------
                                                                                  (PREDECESSOR)                    (PREDECESSOR)
<S>                                               <C>             <C>             <C>             <C>             <C>
Net income (loss)..............................      $3,621           $  702         $(5,829)         $7,627          $(890)
Net change in cumulative translation
   adjustment..................................        (386)             521          (1,029)          (1087)          (673)
Change in fair value of available-for-sale
   securities, net of income taxes of  $1 and
   $(14), respectively.........................                                            1                            (22)
Reclassification adjustment for
   available-for-sale securities sold during
   the period, net of income taxes of $(19)....                                          (28)                           (28)
Change in fair value of the interest rate swap
   contract, net of  income taxes of $(113),
   $(20), $109, $109 and $54, respectively.....        (193)             (30)            167             165             82
Reclassification adjustment for the interest
   rate swap contract terminated in connection
   with the Transactions, net of income taxes
   of $266.....................................                                          408                            408
Change in fair value of the foreign exchange
   contracts, net of income taxes of $(31),
   $14, $151, $194 and $146, respectively......         (53)              22             231             259            224
                                                     ------           ------         -------          ------          -----
                                                     $2,989           $1,215         $(6,079)         $6,964          $(899)
                                                     ======           ======         =======          ======          =====
</TABLE>

NOTE 7 - CAPITAL STOCK

     At June 30, 2005 and December 31, 2004, 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 13,951.98 and 13,962.38 shares were issued and
outstanding, respectively.

     During the first quarter of 2005, the Company purchased and retired 10.4
shares of redeemable Common Stock held by a former employee for $104,000.

     In connection with the Transactions (see Note 2), certain existing employee
stockholders purchased 296.91 shares of AAH Holdings Common Stock based on the
same price and terms per share as paid by the other equity investors. Under the
terms of the AAH Holdings 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' agreement is 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


                                       11
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

be payable to all employee stockholders based on the 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. At June 30,
2005, the aggregate amount that may be payable to employee stockholders and
employee option holders was approximately $3,601,000. As there is no active
market for the Company's Common Stock, the Company estimated the fair value
based on the valuation of Common Stock issued in connection with the
Transactions.

     In connection with the Transactions, the Company's Chief Executive Officer
and its President exchanged 5.4945 and 2.7472 of their shares of Amscan Holdings
Common Stock for 100 and 50 shares of AAH Common Stock with an equivalent value
of $1,000,000 and $500,000, respectively. In addition, the Chief Executive
Officer and the President exchanged 5.607 and 2.804 vested options to purchase
shares of Amscan Holdings Common Stock, which had intrinsic values of $600,000
and $300,000, respectively, for vested options to purchase 65.455 and 32.727
shares of AAH Common Stock under the new equity incentive plan with intrinsic
values of $492,000 and $245,000 and estimated fair values of $590,000 and
$290,000, respectively (see Note 10). The fair value of the AAH options was
included in the equity contribution related to the Transactions; however as the
options are options to purchase redeemable common stock, their estimated
redemption value is classified as redeemable common securities on the
consolidated balance sheet.

     On March 30, 2001, the Predecessor issued 40 shares of Series A Redeemable
Convertible Preferred Stock to GSCP for proceeds of $6,000,000. Dividends were
cumulative and payable annually, at 6% per annum. On March 30, 2004, the annual
dividends were distributed in additional shares of Series A Redeemable
Convertible Preferred Stock. In connection with the Transactions, on April 30,
2004, the Company redeemed all outstanding shares of Series A Redeemable
Convertible Preferred Stock, including accrued dividends of $34,000.

     The Company has not paid any dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain its earnings for working capital, repayment of
indebtedness, capital expenditures and general corporate purposes. In addition,
the Company's current credit facility and the indenture governing its senior
subordinated notes contain restrictive covenants which have the effect of
limiting the Company's ability to pay dividends or distributions to its
stockholders.

NOTE 8 - LEGAL PROCEEDINGS

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

NOTE 9 - RELATED PARTY TRANSACTIONS

     In connection with the Transactions, 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 June 30, 2005,
accrued management fees payable to Berkshire Partners LLC and Weston Presidio
totaled $138,889 and $69,445, 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.

     In April 2004, Goldman Sachs and its affiliates received fees totaling
$8,123,000 for services provided in connection with the Transactions.


                                       12
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

     During the one and four months ended April 30, 2004, the Company sold
$235,000 and $836,000 of metallic balloons and other party goods to American
Greetings Corporation, a minority stockholder from February 2002 through the
date of the Transactions.

NOTE 10 - STOCK OPTION PLAN

     Effective May 1, 2004, the Company elected to apply the fair value
method of Statement of Financial Accounting Standards ("SFAS") No. 123, as
amended by SFAS No.148, Accounting for Stock-Based Compensation -- Transition
and Disclosure. SFAS No. 123 permits entities to recognize as expense, over the
vesting period, the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 allows entities to apply the provisions of
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
to Employees," which requires the recognition of compensation expense at the
date of grant only if the current market price of the underlying stock exceeds
the exercise price, and to provide pro forma net income disclosures for employee
stock option grants as if the fair value based method defined in SFAS No. 123
had been applied. SFAS No. 148 provides alternative methods of transition to
SFAS No.123's fair value method of accounting for stock-based employee
compensation and amends the disclosure provisions of SFAS No.123.

     In April 2005, the SEC deferred the implementation date of SFAS No. 123(R),
Share-Based Payment. As a result, we plan to adopt SFAS No. 123(R) effective
January 1, 2006 rather than the initial implementation date of July 2005. The
Company is evaluating the requirements of SFAS No. 123(R), including the
valuation methods, the support for the assumptions that underlie the valuation
of awards and the transition methods.

     During the three months ended June 30, 2005, the Company granted 727 basic
stock options and 770 performance stock options to purchase shares of the
Company's common stock to certain employees and two directors under the terms of
the AAH Holdings Corporation 2004 Equity Incentive Plan. The basic and
performance stock options were granted at an exercise price equal to the common
stock's estimated fair value of $10,000 per share and generally vest 20% at each
anniversary date of issuance. The performance options are earned based on the
Company achieving certain financial thresholds upon the occurrence of certain
determination dates. The Company used a minimum value method to determine the
fair value of the options granted and recorded approximately $112,000 in
compensation expense, in general and administrative expenses during the three
and six month periods ended June 30, 2005.

     Prior to the Transactions, the Predecessor elected to apply the intrinsic
value method of APB No. 25 for awards granted under its stock-based compensation
plans and to provide the pro forma disclosures required by SFAS No. 123. No
compensation cost was recognized in connection with the issuance of options
under the Amscan Holdings, Inc. 1997 Stock Incentive Plan, (the "Predecessor
Plan") through April 30, 2004 as all options were granted with exercise prices
equal to the estimated fair market value of the Common Stock on the date of
grant.


                                       13
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

Had the Predecessor determined stock-based compensation based on the fair value
of the options granted at the grant date, consistent with the method prescribed
under SFAS No. 123, the Predecessor's net loss would have increased to the
amounts indicated below (dollars in thousands):

<TABLE>
<CAPTION>
                                                               FOUR MONTHS
                                           ONE MONTH ENDED        ENDED
                                            APRIL 30, 2004   APRIL 30, 2004
                                           ---------------   --------------
<S>                                        <C>               <C>
Net loss as reported....................       $(5,829)         $  (890)
Less: Total stock-based  employee
   compensation expense determined
   under the fair value based method
   for all awards, net of income taxes
   of $31 and $125, respectively........            47              192
                                               -------          -------
SFAS No. 123 pro forma net loss.........       $(5,876)         $(1,082)
                                               =======          =======
</TABLE>

     In connection with the Transactions, all options granted under the
Predecessor Plan vested immediately on April 30, 2004 and, except for those held
by the Chief Executive Officer and the President (see Note 7), all options were
exercised. The Chief Executive Officer and the President exchanged 5.607 and
2.804 vested options to purchase shares of Predecessor Common Stock, which had
intrinsic values of $600,000 and $300,000, respectively, for vested options to
purchase 65.455 and 32.727 shares of Company Common Stock under the new equity
incentive plan with intrinsic values of $492,000 and $245,000 and estimated fair
values of $590,000 and $290,000, respectively. Such options were recorded as
part of the purchase price allocations and have been classified as redeemable
common securities on the Company's consolidated balance sheet.

NOTE 11 - CONDENSED CONSOLIDATING FINANCIAL INFORMATION

     In connection with the consummation of the Transactions, on April 30, 2004,
all borrowings under the then existing credit agreement were repaid and the
facility was terminated. In addition, $87,200,000 in aggregate principal amount
of the 9.875% senior subordinated notes due 2007 were accepted in a tender offer
and a redemption notice was issued for the remaining senior subordinated notes
(see Note 2). The aggregate cost to purchase the 9.875% senior subordinated
notes due 2007 tendered pursuant to the tender offer was approximately
$93,500,000, or 103.542% of the principal amount of such 9.875% senior
subordinated notes plus accrued and unpaid interest. On May 31, 2004, the
remaining $22,800,000 in aggregate principal amount of the outstanding 9.875%
senior subordinated notes were redeemed pursuant to the redemption notice at a
price of 103.292% of the principal amount of such notes plus accrued and unpaid
interest.

     The acquisition was financed with initial borrowings consisting of a
$205,000,000 term loan under a new senior secured credit facility, which
includes a $50,000,000 revolving loan facility, the proceeds from the issuance
of $175,000,000 of 8.75% senior subordinated notes due 2014, the equity
contribution by our Principal Investors and employee stockholders of
$140,524,000, borrowings under the revolver of $23,551,000 and approximately
$2,900,000 of cash on hand. Borrowings under the new senior secured credit
facility, the revolving loan facility and the $175,000,000 of 8.75% senior
subordinated notes due 2014 are guaranteed jointly and severally, fully and
unconditionally, by the following wholly-owned domestic subsidiaries of the
Company (the "Guarantors"):


                                       14
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

     -    Amscan Inc.

     -    Am-Source, LLC

     -    Anagram International, Inc.

     -    Anagram International Holdings, Inc.

     -    Anagram International, LLC

     -    M&D Industries, Inc.

     -    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 consolidating balance sheets as of June
30, 2005 and December 31, 2004, and the related consolidating statements of
operations and consolidating statements of cash flows for the three months ended
June 30, 2005, the two months ended June 30, 2004, the month ended April 30,
2004 (Predecessor), the six months ended June 30, 2005, the two months ended
June 30, 2004 and the four months ended April 30, 2004 (Predecessor) for the
combined Guarantors and the combined Non-guarantors and elimination entries
necessary to consolidate the entities comprising the combined companies.


                                       15
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

                           CONSOLIDATING BALANCE SHEET

                                  JUNE 30, 2005
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                         AMSCAN
                                                      HOLDINGS AND    COMBINED
                                                        COMBINED        NON-
                                                       GUARANTORS    GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                      ------------   ----------   ------------   ------------
<S>                                                   <C>            <C>          <C>            <C>
ASSETS
Current assets:
   Cash and cash equivalents.......................     $    987       $ 1,065                     $  2,052
   Accounts receivable, net of allowances..........       70,642        13,557                       84,199
   Inventories, net of allowances..................       84,387        12,419      $   (601)        96,205
   Prepaid expenses and other current assets.......       13,653         2,111                       15,764
                                                        --------       -------      --------       --------
      Total current assets.........................      169,669        29,152          (601)       198,220
Property, plant and equipment, net.................       95,650         2,086                       97,736
Goodwill ..........................................      279,060         3,938                      282,998
Tradenames.........................................       33,500                                     33,500
Other intangible assets, net.......................       21,118                                     21,118
Other assets, net..................................       45,540         2,662       (28,904)        19,298
                                                        --------       -------      --------       --------
      Total assets.................................     $644,537       $37,838      $(29,505)      $652,870
                                                        ========       =======      ========       ========

LIABILITIES, REDEEMABLE COMMON SECURITIES
   AND STOCKHOLDERS' EQUITY
Current liabilities:
   Loans and notes payable.........................     $  1,700                                   $  1,700
   Accounts payable................................       35,638       $ 2,701                       38,339
   Accrued expenses ...............................       15,637         5,491                       21,128
   Income taxes payable ...........................        1,515           538      $   (119)         1,934
   Current portion of long-term obligations........        2,603           222                        2,825
                                                        --------       -------      --------       --------
      Total current liabilities....................       57,093         8,952          (119)        65,926
Long-term obligations, excluding current portion...      383,531           183                      383,714
Deferred income tax liabilities....................       41,774           635                       42,409
Other..............................................        4,252        24,049       (24,885)         3,416
                                                        --------       -------      --------       --------
      Total liabilities............................      486,650        33,819       (25,004)       495,465

Redeemable common securities.......................        3,601                                      3,601

Commitments and contingencies

Stockholders' equity:
   Preferred Stock.................................                                                      --
   Common Stock....................................                        339          (339)            --
   Additional paid-in capital......................      136,931                                    136,931
   Retained earnings...............................       16,673         3,172        (3,654)        16,191
   Accumulated other comprehensive income..........          682           508          (508)           682
                                                        --------       -------      --------       --------
      Total stockholders' equity...................      154,286         4,019        (4,501)       153,804
                                                        --------       -------      --------       --------
      Total liabilities, redeemable common
         securities and stockholders' equity.......     $644,537       $37,838      $(29,505)      $652,870
                                                        ========       =======      ========       ========
</TABLE>


                                       16
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

                           CONSOLIDATING BALANCE SHEET

                                DECEMBER 31, 2004
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                         AMSCAN
                                                      HOLDINGS AND    COMBINED
                                                        COMBINED        NON-
                                                       GUARANTORS    GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                      ------------   ----------   ------------   ------------
<S>                                                   <C>            <C>          <C>            <C>
ASSETS
Current assets:
   Cash and cash equivalents.......................     $  3,153       $ 1,099                     $  4,252
   Accounts receivable, net of allowances..........       72,353        11,615                       83,968
   Inventories, net of allowances..................       77,386        11,052      $   (279)        88,159
   Prepaid expenses and other current assets.......       13,914         1,327                       15,241
                                                        --------       -------      --------       --------
      Total current assets.........................      166,806        25,093          (279)       191,620
Property, plant and equipment, net.................       94,179         1,955                       96,134
Goodwill ..........................................      277,699         5,222                      282,921
Tradenames.........................................       33,500                                     33,500
Other intangible assets, net.......................       23,289                                     23,289
Other assets, net..................................       41,875         3,331       (25,404)        19,802
                                                        --------       -------      --------       --------
      Total assets.................................     $637,348       $35,601      $(25,683)      $647,266
                                                        ========       =======      ========       ========

LIABILITIES, REDEEMABLE COMMON SECURITIES
   AND STOCKHOLDERS' EQUITY
Current liabilities:
   Loans and notes payable.........................     $  2,025                                   $  2,025
   Accounts payable................................       34,918       $ 1,924                       36,842
   Accrued expenses................................       14,425         6,555                       20,980
   Income taxes payable ...........................        2,319           302      $    (27)         2,594
   Current portion of long-term obligations........        2,627           180                        2,807
                                                        --------       -------      --------       --------
      Total current liabilities....................       56,314         8,961           (27)        65,248
Long-term obligations, excluding current portion...      384,802           191                      384,993
Deferred income tax liabilities....................       43,175                                     43,175
Other..............................................        2,372        23,310       (22,265)         3,417
                                                        --------       -------      --------       --------
      Total liabilities............................      486,663        32,462       (22,292)       496,833

Redeemable common securities.......................        3,705                                      3,705

Commitments and contingencies

Stockholders' equity:
   Preferred Stock.................................                                                      --
   Common Stock....................................                        339          (339)            --
   Additional paid-in capital......................      136,819                                    136,819
   Retained earnings...............................        8,816         1,384        (1,636)         8,564
   Accumulated other comprehensive income..........        1,345         1,416        (1,416)         1,345
                                                        --------       -------      --------       --------
      Total stockholders' equity...................      146,980         3,139        (3,391)       146,728
                                                        --------       -------      --------       --------
      Total liabilities, redeemable common
         securities and stockholders' equity.......     $637,348       $35,601      $(25,683)      $647,266
                                                        ========       =======      ========       ========
</TABLE>


                                       17
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

                      CONSOLIDATING STATEMENT OF OPERATIONS
                    FOR THE THREE MONTHS ENDED JUNE 30, 2005
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           AMSCAN
                                                        HOLDINGS AND    COMBINED
                                                          COMBINED        NON-
                                                         GUARANTORS    GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                        ------------   ----------   ------------   ------------
<S>                                                     <C>            <C>          <C>            <C>
Net sales............................................      $91,198       $15,542       $(5,455)      $101,285
Cost of sales........................................       63,692        10,295        (5,225)        68,762
                                                           -------       -------       -------       --------
      Gross profit...................................       27,506         5,247          (230)        32,523

Operating expenses:
   Selling expenses..................................        7,330         1,881                        9,211
   General and administrative expenses...............        7,399         1,859          (330)         8,928
   Art and development costs.........................        2,352                                      2,352
   Provision for doubtful accounts...................          321           109                          430
                                                           -------       -------       -------       --------
      Total operating expenses.......................       17,402         3,849          (330)        20,921
                                                           -------       -------       -------       --------
      Income from operations.........................       10,104         1,398           100         11,602

Interest expense, net................................        7,676            28                        7,704
Undistributed loss in unconsolidated joint venture...          369                                        369
Other income, net....................................       (1,278)           (2)        1,274             (6)
                                                           -------       -------       -------       --------
      Income before income taxes and
         minority interest...........................        3,337         1,372        (1,174)         3,535

Income tax expense...................................         (431)          382           (83)          (132)
Minority interest....................................                         46                           46
                                                           -------       -------       -------       --------
      Net income.....................................      $ 3,768       $   944       $(1,091)      $  3,621
                                                           =======       =======       =======       ========
</TABLE>


                                       18
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

                      CONSOLIDATING STATEMENT OF OPERATIONS
                     FOR THE TWO MONTHS ENDED JUNE 30, 2004
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           AMSCAN
                                                        HOLDINGS AND    COMBINED
                                                          COMBINED        NON-
                                                         GUARANTORS    GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                        ------------   ----------   ------------   ------------
<S>                                                     <C>            <C>          <C>            <C>
Net sales............................................      $57,851       $9,123       $(3,793)       $63,181
Cost of sales........................................       40,954        6,237        (3,767)        43,424
                                                           -------       ------       -------        -------
      Gross profit...................................       16,897        2,886           (26)        19,757
Operating expenses:
   Selling expenses..................................        4,829        1,119                        5,948
   General and administrative expenses...............        4,530        1,142          (220)         5,452
   Art and development costs.........................        1,769                                     1,769
   Provision for doubtful accounts...................          241           85                          326
                                                           -------       ------       -------        -------
      Total operating expenses.......................       11,369        2,346          (220)        13,495
                                                           -------       ------       -------        -------
      Income from operations.........................        5,528          540           194          6,262
Interest expense, net ...............................        4,734           26                        4,760
Undistributed loss in unconsolidated joint venture...          312                                       312
Other income, net....................................         (574)                       563            (11)
                                                           -------       ------       -------        -------
      Income before income taxes and
         minority interest...........................        1,056          514          (369)         1,201
Income tax expense...................................          338          146           (10)           474
Minority interest....................................                        25                           25
                                                           -------       ------       -------        -------
      Net income.....................................      $   718       $  343       $  (359)       $   702
                                                           =======       ======       =======        =======
</TABLE>


                                       19
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

                      CONSOLIDATING STATEMENT OF OPERATIONS
                     FOR THE ONE MONTH ENDED APRIL 30, 2004
                                  (PREDECESSOR)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              AMSCAN
                                                           HOLDINGS AND    COMBINED
                                                             COMBINED        NON-
                                                            GUARANTORS    GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                           ------------   ----------   ------------   ------------
<S>                                                        <C>            <C>          <C>            <C>
Net sales...............................................     $30,280        $4,478       $(1,623)       $33,135
Cost of sales...........................................      20,761         2,994        (1,589)        22,166
                                                             -------        ------       -------        -------
      Gross profit......................................       9,519         1,484           (34)        10,969
Operating expenses:
   Selling expenses.....................................       2,567           561                        3,128
   General and administrative expenses..................       2,107           560          (110)         2,557
   Art and development costs............................         899                                        899
   Provision for doubtful accounts......................         152            36                          188
   Non-recurring expenses related to the Transactions...      11,757                                     11,757
                                                             -------        ------       -------        -------
      Total operating expenses..........................      17,482         1,157          (110)        18,529
                                                             -------        ------       -------        -------
      (Loss) income from operations.....................      (7,963)          327            76         (7,560)
Interest expense, net ..................................       2,007            16                        2,023
Undistributed loss in unconsolidated joint venture .....          56                                         56
Other (income) expense, net.............................        (320)            3           307            (10)
                                                             -------        ------       -------        -------
      (Loss) income before income taxes and
         minority interest..............................      (9,706)          308          (231)        (9,629)
Income tax (benefit) expense............................      (3,897)          108           (14)        (3,803)
Minority interest.......................................                         3                            3
                                                             -------        ------       -------        -------
      Net (loss) income.................................      (5,809)          197          (217)        (5,829)
      Dividend on redeemable convertible
         preferred stock................................          34                                         34
                                                             -------        ------       -------        -------
      Net (loss) income applicable to common stock......     $(5,843)       $  197       $  (217)       $(5,863)
                                                             =======        ======       =======        =======
</TABLE>


                                       20
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

                      CONSOLIDATING STATEMENT OF OPERATIONS
                     FOR THE SIX MONTHS ENDED JUNE 30, 2005
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           AMSCAN
                                                        HOLDINGS AND    COMBINED
                                                          COMBINED        NON-
                                                         GUARANTORS    GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                        ------------   ----------   ------------   ------------
<S>                                                     <C>            <C>          <C>            <C>
Net sales............................................     $182,298      $29,354       $(9,991)       $201,661
Cost of sales........................................      125,972       19,260        (9,669)        135,563
                                                          --------      -------       -------        --------
      Gross profit...................................       56,326       10,094          (322)         66,098

Operating expenses:
   Selling expenses..................................       14,329        3,866                        18,195
   General and administrative expenses...............       14,004        3,704          (660)         17,048
   Art and development costs.........................        4,614                                      4,614
   Provision for doubtful accounts...................          524          164                           688
                                                          --------      -------       -------        --------
      Total operating expenses.......................       33,471        7,734          (660)         40,545
                                                          --------      -------       -------        --------
      Income from operations.........................       22,855        2,360           338          25,553

Interest expense, net ...............................       15,174           57                        15,231
Undistributed loss in unconsolidated joint venture...          432                                        432
Other income, net....................................       (2,357)         (16)        2,363             (10)
                                                          --------      -------       -------        --------
      Income before income taxes and
         minority interest...........................        9,606        2,319        (2,025)          9,900

Income tax expense...................................        1,776          566          (119)          2,223
Minority interest....................................                        50                            50
                                                          --------      -------       -------        --------
      Net income.....................................     $  7,830      $ 1,703       $(1,906)       $  7,627
                                                          ========      =======       =======        ========
</TABLE>


                                       21
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

                      CONSOLIDATING STATEMENT OF OPERATIONS
                     FOR THE TWO MONTHS ENDED JUNE 30, 2004
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               AMSCAN
                                                            HOLDINGS AND    COMBINED
                                                              COMBINED        NON-
                                                             GUARANTORS    GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                            ------------   ----------   ------------   ------------
<S>                                                         <C>            <C>          <C>            <C>
Net sales................................................      $57,851       $9,123        $(3,793)       $63,181
Cost of sales............................................       40,954        6,237         (3,767)        43,424
                                                               -------       ------        -------        -------
      Gross profit.......................................       16,897        2,886            (26)        19,757
Operating expenses:
   Selling expenses......................................        4,829        1,119                         5,948
   General and administrative expenses...................        4,530        1,142           (220)         5,452
   Art and development costs.............................        1,769                                      1,769
   Provision for doubtful accounts.......................          241           85                           326
                                                               -------       ------        -------        -------
      Total operating expenses...........................       11,369        2,346           (220)        13,495
                                                               -------       ------        -------        -------
      Income from operations.............................        5,528          540            194          6,262
Interest expense, net....................................        4,734           26                         4,760
Undistributed loss in unconsolidated joint venture.......          312                                        312
Other income, net........................................         (574)                        563            (11)
                                                               -------       ------        -------        -------
      Income before income taxes and minority interest...        1,056          514           (369)         1,201
Income tax expense.......................................          338          146            (10)           474
Minority interest........................................                        25                            25
                                                               -------       ------        -------        -------
      Net income.........................................      $   718       $  343        $  (359)       $   702
                                                               =======       ======        =======        =======
</TABLE>


                                       22
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

                      CONSOLIDATING STATEMENT OF OPERATIONS
                    FOR THE FOUR MONTHS ENDED APRIL 30, 2004
                                  (PREDECESSOR)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               AMSCAN
                                                            HOLDINGS AND    COMBINED
                                                              COMBINED        NON-
                                                             GUARANTORS    GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                            ------------   ----------   ------------   ------------
<S>                                                         <C>            <C>          <C>            <C>
Net sales................................................     $121,426       $17,721       $(5,487)      $133,660
Cost of sales............................................       81,845        11,796        (5,394)        88,247
                                                              --------       -------       -------       --------
      Gross profit.......................................       39,581         5,925           (93)        45,413
Operating expenses:
   Selling expenses......................................       10,095         2,335                       12,430
   General and administrative expenses...................        8,280         2,305          (440)        10,145
   Art and development costs.............................        3,332                                      3,332
   Provision for doubtful accounts.......................          600           129                          729
   Non-recurring expenses related to the Transactions....       11,757                                     11,757
                                                              --------       -------       -------       --------
      Total operating expenses...........................       34,064         4,769          (440)        38,393
                                                              --------       -------       -------       --------
      Income from operations.............................        5,517         1,156           347          7,020
Interest expense, net....................................        8,320            64                        8,384
Undistributed loss in unconsolidated joint venture.......           89                                         89
Other income, net........................................       (1,194)          (39)        1,175            (58)
                                                              --------       -------       -------       --------
      (Loss) income before income taxes and
         minority interest...............................       (1,698)        1,131          (828)        (1,395)
Income tax (benefit) expense.............................         (864)          350           (37)          (551)
Minority interest........................................                         46                           46
                                                              --------       -------       -------       --------
      Net (loss) income..................................         (834)          735          (791)          (890)
      Dividend on redeemable convertible
         preferred stock.................................          136                                        136
                                                              --------       -------       -------       --------
      Net (loss) income applicable to common stock.......     $   (970)      $   735       $  (791)      $ (1,026)
                                                              ========       =======       =======       ========
</TABLE>


                                       23
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                     FOR THE SIX MONTHS ENDED JUNE 30, 2005
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               AMSCAN HOLDINGS    COMBINED
                                                                 AND COMBINED       NON-
                                                                  GUARANTORS     GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                               ---------------   ----------   ------------   ------------
<S>                                                            <C>               <C>          <C>            <C>
Cash flows provided by operating activities:
   Net income...............................................       $ 7,830         $ 1,703       $(1,906)       $ 7,627
   Adjustments to reconcile net income to net
      cash provided by operating activities:
      Depreciation and amortization expense.................         7,017             331                        7,348
      Amortization of deferred financing costs..............           738                                          738
      Provision for doubtful accounts.......................           524             164                          688
      Deferred income tax expense...........................           813                                          813
      Undistributed loss in unconsolidated joint venture....           432                                          432
      Changes in operating assets and liabilities:
         (Increase), decrease in accounts receivable........         1,146          (2,067)                        (921)
         Increase in inventories............................        (7,001)         (1,367)          322         (8,046)
         Increase in prepaid expenses and other
            current assets..................................        (2,003)           (784)                      (2,787)
         Increase in accounts payable,
            accrued expenses and income taxes payable.......         1,402             238          (119)         1,521
      Other, net............................................        (5,557)          2,949         1,703           (905)
                                                                   -------         -------       -------        -------
         Net cash provided by operating activities..........         5,341           1,167                        6,508

Cash flows used in investing activities:
   Capital expenditures.....................................        (5,856)           (360)                      (6,216)
                                                                   -------         -------                      -------
         Net cash used in investing activities..............        (5,856)           (360)                      (6,216)

Cash flows used in financing activities:
   Repayment of loans, notes payable and long-term
      obligations...........................................        (1,620)           (100)                      (1,720)
   Purchase and retirement of redeemable Common
      Stock held by a former employee.......................          (104)                                        (104)
                                                                   -------         -------       -------        -------
         Net cash used in financing activities..............        (1,724)           (100)           --         (1,824)
Effect of exchange rate changes on cash
   and cash equivalents.....................................            73            (741)                        (668)
                                                                   -------         -------       -------        -------
         Net decrease in cash and cash
            equivalents.....................................        (2,166)            (34)                      (2,200)
Cash and cash equivalents at beginning of period............         3,153           1,099                        4,252
                                                                   -------         -------       -------        -------
Cash and cash equivalents at end of period..................       $   987         $ 1,065       $    --        $ 2,052
                                                                   =======         =======       =======        =======
</TABLE>


                                       24
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                     FOR THE TWO MONTHS ENDED JUNE 30, 2004

                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               AMSCAN HOLDINGS    COMBINED
                                                                 AND COMBINED       NON-
                                                                  GUARANTORS     GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                               ---------------   ----------   ------------   ------------
<S>                                                            <C>               <C>          <C>            <C>
Cash flows provided by (used in) operating activities:
   Net income...............................................      $     718       $   343        $(359)       $     702
   Adjustments to reconcile net income to net cash (used in)
      provided by operating activities:
      Depreciation and amortization expense.................          2,654           113                         2,767
      Amortization of deferred financing costs..............            262                                         262
      Provision for doubtful accounts.......................            241            85                           326
      Deferred income tax benefit...........................           (484)                                       (484)
      Undistributed loss in unconsolidated joint venture....            312                                         312
      Changes in operating assets and liabilities:
         Decrease (increase) in accounts receivable.........          8,875          (129)                        8,746
         Decrease (increase) in inventories.................            826        (1,620)          26             (768)
         Decrease in prepaid expenses and other current
            assets..........................................           (465)           28                          (437)
         (Decrease) increase in accounts payable, accrued
            expenses and income taxes payable...............         (6,675)          288          (10)          (6,397)
      Other, net............................................           (860)          504          343              (13)
                                                                  ---------       -------        -----        ---------
         Net cash provided by (used in) operating
            activities......................................          5,404          (388)          --            5,016

Cash flows used in investing activities:
   Cash paid to consummate the Transactions.................       (529,982)                                   (529,982)
   Capital expenditures.....................................         (1,006)          (50)                       (1,056)
   Proceeds from disposal of property and equipment.........                            1                             1
                                                                  ---------       -------        -----        ---------
         Net cash used in investing activities..............       (530,988)          (49)          --         (531,037)

Cash flows provided by (used in) financing activities:
   Proceeds from loans, notes payable and long-term
      obligations, net of debt issuance costs of $12,668....        378,922                                     378,922
   Repayment of loans, notes payable and long-term
      obligations...........................................           (195)          (29)                         (224)
   Capital contributions in connection with the
      Transactions..........................................        138,979                                     138,979
                                                                  ---------       -------        -----        ---------
         Net cash provided by (used in) financing
            activities......................................        517,706           (29)          --          517,677
Effect of exchange rate changes on cash and cash
   equivalents..............................................              9           404                           413
                                                                  ---------       -------        -----        ---------
         Net decrease in cash and cash equivalents..........         (7,869)          (62)                       (7,931)
Cash and cash equivalents at beginning of period............          8,646           591                         9,237
                                                                  ---------       -------        -----        ---------
Cash and cash equivalents at end of period..................      $     777       $   529        $  --        $   1,306
                                                                  =========       =======        =====        =========
</TABLE>


                                       25
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                   (UNAUDITED)

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                    FOR THE FOUR MONTHS ENDED APRIL 30, 2004
                                  (PREDECESSOR)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               AMSCAN HOLDINGS    COMBINED
                                                                 AND COMBINED       NON-
                                                                  GUARANTORS     GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                               ---------------   ----------   ------------   ------------
<S>                                                            <C>               <C>          <C>            <C>
Cash flows provided by operating activities:
   Net (loss) income........................................       $   (834)      $   735        $(791)        $   (890)
   Adjustments to reconcile net (loss) income to net cash
      provided by operating activities:
      Depreciation and amortization expense.................          5,076           220                         5,296
      Amortization of deferred financing costs..............            709                                         709
      Amortization of restricted Common Stock award.........             52                                          52
      Provision for doubtful accounts.......................            600           129                           729
      Deferred income tax benefit...........................            (58)                                        (58)
      Gain on sale of available-for-sale securities.........            (47)                                        (47)
      Gain on disposal of equipment.........................                          (35)                          (35)
      Write-off of deferred financing costs in connection
         with the Transactions..............................          5,548                                       5,548
      Debt retirement costs incurred in connection with
         the Transactions...................................          6,209                                       6,209
      Undistributed loss in unconsolidated joint venture....             89                                          89
      Changes in operating assets and liabilities:
            Increase in accounts receivable.................        (13,843)       (1,404)                      (15,247)
            Decrease in inventories.........................          5,833           303           93            6,229
            Increase in prepaid expenses and other current
               assets.......................................         (3,017)         (576)                       (3,593)
            Increase in accounts payable, accrued expenses
               and income taxes payable.....................          3,663           365          (37)           3,991
      Other, net............................................         (1,545)        1,240          735              430
                                                                   --------       -------        -----         --------
            Net cash provided by operating activities.......          8,435           977           --            9,412
Cash flows used in investing activities:
   Capital expenditures.....................................         (3,205)         (521)                       (3,726)
   Proceeds from sale of available-for-sale securities......             65                                          65
   Proceeds from disposal of property and equipment.........                           53                            53
                                                                   --------       -------        -----         --------
            Net cash used in investing activities...........         (3,140)         (468)          --           (3,608)
Cash flows used in financing activities:
   Repayment of loans, notes payable and long-term
      obligations...........................................        (21,184)          (67)                      (21,251)
   Debt retirement costs paid in connection with the
      Transactions..........................................         (6,209)                                     (6,209)
   Repayment of note receivable from stockholder and
      officer...............................................             25                                          25
                                                                   --------       -------        -----         --------
            Net cash used in financing activities...........        (27,368)          (67)          --          (27,435)
Effect of exchange rate changes on cash and cash
   equivalents..............................................            (21)         (573)                         (594)
                                                                   --------       -------        -----         --------
            Net decrease in cash and cash equivalents.......        (22,094)         (131)                      (22,225)
Cash and cash equivalents at beginning of period............         30,740           722                        31,462
                                                                   --------       -------        -----         --------
Cash and cash equivalents at end of period..................       $  8,646       $   591        $  --         $  9,237
                                                                   ========       =======        =====         ========
</TABLE>


                                       26
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS

THE TRANSACTIONS

     On April 30, 2004, Amscan and AAH Acquisition Corporation ("AAH
Acquisition"), a wholly-owned subsidiary of AAH Holdings Corporation ("AAH
Holdings"), a privately held corporation jointly controlled by funds affiliated
with Berkshire Partners LLC and Weston Presidio (together the "Principal
Investors") entered into a merger agreement, with Amscan continuing as the
surviving entity and as a wholly-owned subsidiary of AAH Holdings. Under the
terms of the agreement, the equity interests in Amscan of GS Capital Partners
II, L.P. and certain other private investment funds managed by Goldman, Sachs &
Co., (collectively "GSCP"), and all other stockholders, other than certain
management investors, were cancelled in exchange for the right to receive cash.
Cash paid to consummate the acquisition totaled $530.0 million and was financed
with initial borrowings (before deducting deferred financing costs of $13.1
million) consisting of a $205.0 million term loan under a new senior secured
credit facility which includes a $50.0 million revolving loan facility, the
proceeds from the issuance of $175.0 million of 8.75% senior subordinated notes
due 2014, an equity contribution from the Principal Investors and employee
stockholders of $140.5 million, borrowings under the revolver of $23.6 million
and approximately $2.9 million of cash on hand. Certain existing employee
shareholders participated in the Transactions (as defined hereafter) by
purchasing 296.91 shares of common stock. The Chief Executive Officer and the
President of the Company exchanged 5.4945 and 2.7472 of their shares of common
stock of the Predecessor (as defined hereafter) for 100 and 50 shares of common
stock of the Company with an equivalent value of $1.0 million and $0.5 million,
respectively. In addition, the Chief Executive Officer and the President of the
Company exchanged vested options to purchase 5.607 and 2.804 shares of
Predecessor common stock, which had intrinsic values of $0.6 million and $0.3
million, respectively, for vested options to purchase 65.455 and 32.727 shares
of Common Stock, respectively, under the Company's equity incentive plan with
intrinsic values of $0.5 million and $0.2 million and fair values of $0.6
million and $0.3 million, respectively. The acquisition has been accounted for
under the purchase method of accounting which required that the Company adjust
its assets and liabilities to their relative fair values. In order to reflect
the ultimate beneficial ownership of the Company, the capital structure
disclosed in the Company's financial statements is the capital structure of AAH
Holdings.

     The purchase price has been allocated based upon the fair value of net
assets acquired at the date of acquisition. The final allocation was based on
independent valuations that were completed during the second quarter of 2005.
The purchase price was principally allocated to accounts receivable ($91.2
million), inventories ($81.6 million), property plant and equipment ($94.4
million), goodwill ($283.0 million), other intangible assets ($60.8 million),
prepaid expenses and other current and non-current assets ($21.4 million), and
accounts payable, accrued expenses and other current and non-current liabilities
($102.3 million). Goodwill and tradenames are not amortizable and the
amortization of other intangible assets is not deductible for income tax
purposes.

     Concurrent with the acquisition, the following financing transactions were
also consummated: the repayment of a term loan of $147.7 million under our then
existing senior secured credit facility and the termination of all commitments
thereunder; the redemption of $87.2 million of the $110.0 million aggregate
principal amount outstanding of our 9.875% senior subordinated notes due 2007
for $93.5 million or 103.542% of the principal amount of such notes plus accrued
and unpaid interest following our tender offer and consent solicitation; and
repayment of a $8.5 million mortgage obligation with a financial institution
(the acquisition together with the foregoing financing transactions are referred
to herein collectively as the "Transactions"). As used herein, Predecessor
refers to the Company prior to the Transactions.

     On May 31, 2004, the remaining outstanding 9.875% senior subordinated notes
due 2007 were redeemed pursuant to the redemption notice. The Company financed
the redemption with borrowings under its new revolving credit facility.

     The new senior subordinated notes were sold to the initial purchasers on
April 30, 2004, and 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 connection with the Note
Offering, the Company entered into a


                                       27
<PAGE>
Registration Rights Agreement, which granted holders of the new notes certain
exchange and registration rights. 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 are substantially
identical. The exchange was completed in October 2004.

     In connection with the Transactions in April 2004, the Company recorded
non-recurring expenses of $11.8 million comprised of $6.2 million of debt
retirement costs and the write-off of $5.6 million of deferred financing costs
associated with the repayment of debt in connection with the Transactions.

THREE MONTHS ENDED JUNE 30, 2005 COMPARED TO THREE MONTHS ENDED JUNE 30, 2004

     The following table sets forth the statement of operations data for the
three months ended June 30, 2005 and 2004. In order to facilitate the comparison
between the two periods, the results for the three months ended June 30, 2004
were obtained by combining the results for the Predecessor Company for the one
month ended April 30, 2004 with the results for the Successor Company for the
two months ended June 30, 2004. This presentation is not in accordance with
generally accepted accounting principles but is presented to provide the ability
to compare the results of operations in 2004 to the current year.

PERCENTAGE OF NET SALES

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   JUNE 30,
                                                              ------------------
                                                                 2005    2004
                                                                -----   -----
<S>                                                           <C>       <C>
Net sales..................................................     100.0%  100.0%
Cost of sales..............................................      67.9    68.1
                                                                -----   -----
      Gross profit.........................................      32.1    31.9
Operating expenses:
   Selling expenses........................................       9.1     9.4
   General and administrative expenses.....................       8.8     8.3
   Art and development costs...............................       2.3     2.8
   Provision for doubtful accounts.........................       0.4     0.5
   Non-recurring expenses related to the Transactions......              12.2
                                                                -----   -----
      Total operating expenses.............................      20.6    33.2
                                                                -----   -----
      Income (loss) from operations........................      11.5    (1.3)
Interest expense, net......................................       7.6     7.0
Undistributed loss in unconsolidated joint venture.........       0.4     0.4
Other income, net..........................................
                                                                -----   -----
Income (loss) before income taxes and minority  interest...       3.5    (8.8)
Income tax benefit.........................................      (0.1)   (3.5)
Minority interest..........................................
                                                                -----   -----
      Net income (loss)....................................       3.6%   (5.3)%
                                                                =====   =====
</TABLE>

     NET SALES. Net sales of $101.3 million for the quarter ended June 30, 2005
were $5.0 million or 5.2% higher than the net sales for the quarter ended June
30, 2004, principally due to higher sales to party superstores. Sales for the
second quarter of 2004 were adversely affected by a general softness in retail
markets, the rationalization of inventories by certain national superstore
chains and inventory shortages of certain products as a result of a production
disruption at one of our foreign vendors. International sales were $1.9 million
higher than in the second quarter of 2004 (including the effects of foreign
exchange fluctuations) which was partially offset by lower domestic balloon and
contract manufacturing sales.

     GROSS PROFIT. Gross profit margin for the second quarter of 2005 of 32.1%
was comparable to the gross profit margin for the second quarter of 2004 and
reflects the impact of higher raw material and freight costs as well as product
sales mix. Gross profit margin for the three months ended June 30, 2005 also
reflects the amortization of certain leasehold reserves established upon
finalization of purchase accounting, including approximately $0.5 million
related to the eleven months ended March 31, 2005.


                                       28
<PAGE>
     OPERATING EXPENSES. Selling expenses of $9.2 million for the quarter ended
June 30, 2005 were comparable to the selling expenses for the second quarter of
2004. As a percent of net sales, selling expenses were 9.1% for the quarter
ended June 30, 2005, or 30 basis points lower than for the second quarter of
2004, principally due to the higher level of sales to existing superstores
customers and a reduction in sales force during the second half of 2004.

     General and administrative expenses of $8.9 million for the second quarter
ended June 30, 2005 were $0.9 million higher than for the second quarter of
2004. As a percentage of net sales, general and administrative expenses were
8.8% for the second quarter of 2005, or 30 basis points higher than in 2004. The
net increase in general and administrative expenses principally reflects higher
depreciation and amortization expense (arising from changes in asset valuations
and useful lives as a result of the Transactions) and management fees to our
Principal Investors.

     Art and development costs of $2.4 million for the second quarter ended June
30, 2005, were $0.3 million lower than costs for the second quarter of 2004,
reflecting reduced development of custom product lines. As a percentage of net
sales, art and development costs were 2.3% for the second quarter of 2005 or 30
basis points lower than the second quarter of 2004.

     Provision for doubtful accounts for the three months ended June 30, 2005
was $0.4 million or 0.4% of net sales, as compared to $0.5 million or 0.5% of
net sales for the three months ended June 30, 2004.

     In connection with the Transactions in April 2004, the Company recorded
non-recurring expenses of $11.8 million comprised of $6.2 million of debt
retirement costs and the write-off of $5.6 million of deferred financing costs
associated with the repayment of debt in connection with the Transactions.

     INTEREST EXPENSE, NET. Interest expense of $7.7 million for the three
months ended June 30, 2005 was $0.9 million higher than for the three months
ended June 30, 2004, due to the impact of higher average borrowings following
the Transactions and higher variable interest rates.

     UNDISTRIBUTED LOSS IN UNCONSOLIDATED JOINT VENTURE. Undistributed loss in
unconsolidated joint venture represents our share of the loss from our Mexican
balloon distribution joint venture, including the elimination of intercompany
profit in the joint venture's inventory at June 30, 2005.

     INCOME TAXES. Income taxes for the second quarter of 2005 and 2004 was
based upon estimated consolidated effective income tax rates of 37.0% and 39.5%
for the years ending December 31, 2005 and 2004, respectively. The reduction in
the effective tax rate reflects the estimated benefit of the Domestic Production
Activities deduction in 2005 as well as additional tax items required in 2004.
In addition, during the three months ended June 30, 2005, the Company recorded a
$1.4 million reduction of its income tax expense and its net deferred income tax
liability to reflect a change in its estimated state income tax rates. The tax
rate change results from a change in New York State tax law governing the
apportionment of income.


                                       29
<PAGE>
     SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO SIX MONTHS ENDED JUNE 30, 2004

     The following table sets forth the statement of operations data for the six
months ended June 30, 2005 and 2004. In order to facilitate the comparison
between the two periods, the results for the for the six months ended June 30,
2004 were obtained by combining the results for the Predecessor Company for the
four months ended April 30, 2004 with the results for the Successor Company for
the two months ended June 30, 2004. This presentation is not in accordance with
generally accepted accounting principles but is presented to provide the ability
to compare the results of operations in 2004 to the current year.

PERCENTAGE OF NET SALES

<TABLE>
<CAPTION>
                                                                SIX MONTHS ENDED
                                                                    JUNE 30,
                                                                ----------------
                                                                  2005    2004
                                                                 -----   -----
<S>                                                             <C>      <C>
Net sales....................................................    100.0%  100.0%
Cost of sales................................................     67.2    66.9
                                                                 -----   -----
      Gross profit...........................................     32.8    33.1
Operating expenses:
   Selling expenses..........................................      9.0     9.3
   General and administrative expenses.......................      8.5     7.9
   Art and development costs.................................      2.3     2.6
   Provision for doubtful accounts...........................      0.3     0.5
   Non-recurring expenses related to the Transactions........              6.0
                                                                 -----   -----
      Total operating expenses...............................     20.1    26.3
                                                                 -----   -----
      Income from operations.................................     12.7     6.8
Interest expense, net........................................      7.6     6.7
Undistributed loss in unconsolidated joint venture...........      0.2     0.2
Other income, net............................................
                                                                 -----   -----
Income (loss) before income taxes and minority  interest.....      4.9    (0.1)
Income tax expense...........................................      1.1
Minority interest............................................
                                                                 -----   -----
      Net income (loss)......................................      3.8%   (0.1)%
                                                                 =====   =====
</TABLE>

     NET SALES. Net sales of $201.7 million for the six months ended June 30,
2005 were $4.8 million or 2.4% higher than the net sales for the six months
ended June 30, 2004, principally due to higher sales to party superstores. Sales
for the first six months of 2004 were adversely affected by a general softness
in retail markets, the rationalization of inventories by certain national
superstore chains and inventory shortages on certain products as a result of a
production disruption at one of our foreign vendors. International sales were
$2.5 million higher than in the first six months of 2004 (including the effects
of foreign exchange fluctuations) which was partially offset lower domestic
balloon and contract manufacturing sales.

     GROSS PROFIT. Gross profit margin for the first six months of 2005 was
32.8%, or 30 basis points lower than during the first six months of 2004. The
decrease in gross profit margin principally reflects the impact of higher raw
material and freight costs as well as product sales mix. Gross profit margin
for the six months ended June 30, 2005 also reflects the amortization of
certain leasehold reserves established upon finalization of purchase
accounting, including approximately $0.3 million related to the eight months
ended December 31, 2004.

     OPERATING EXPENSES. Selling expenses of $18.2 million for the six months
ended June 30, 2005 were $0.1 million lower than for the first six months of
2004. As a percent of net sales, selling expenses were 9.0% for the six
months ended June 30, 2005, or 30 basis points lower than in 2004 principally
due to the higher level of sales to existing superstore customers and a
reduction in sales force during the second half of 2004.

     General and administrative expenses of $17.0 million for the six months
ended June 30, 2005 were $1.5 million higher than for the first six months of
2004. As a percentage of net sales, general and administrative expenses were
8.5% for the first six months of 2005, or 60 basis points higher than in 2004.
The net increase in general and administrative expenses principally reflects
higher professional fees and management fees to our Principal Investors,


                                       30
<PAGE>

higher depreciation and amortization expense (arising from changes in asset
valuations and useful lives as a result of the Transactions).

     Art and development costs of $4.6 million for the six months ended June 30,
2005 were $0.5 million lower than costs for the first six months of 2004,
reflecting reduced development of custom product lines. As a percentage of net
sales, art and development costs were 2.3% for the first six months of 2005 or
30 basis points lower than the first six months of 2004.

     In connection with the Transactions in April 2004, the Company recorded
non-recurring expenses of $11.8 million comprised of $6.2 million of debt
retirement costs and the write-off of $5.6 million of deferred financing costs
associated with the repayment of debt in connection with the Transactions.

     INTEREST EXPENSE, NET. Interest expense of $15.2 million for the six months
ended June 30, 2005 was $2.1 million higher than for the six months ended June
30, 2004, due to the impact of higher average borrowings following the
Transactions.

     UNDISTRIBUTED LOSS IN UNCONSOLIDATED JOINT VENTURE. Undistributed loss in
unconsolidated joint venture represents our share of the loss from our Mexican
balloon distribution joint venture, including the elimination of intercompany
profit in the joint venture's inventory at June 30, 2005.

     INCOME TAXES. Income taxes for the first six months of 2005 and 2004 were
based upon estimated consolidated effective income tax rates of 37.0% and 39.5%
for the years ending December 31, 2005 and 2004, respectively. The reduction in
the effective tax rate reflects the estimated benefit of the Domestic Production
Activities deduction in 2005 as well as additional tax items required in 2004.
In addition, during the three months ended June 30, 2005, the Company recorded a
$1.4 million reduction of its income tax expense and its net deferred income tax
liability to reflect a change in its estimated state income tax rates. The tax
rate change results from a change in New York State tax law governing the
apportionment of income.

LIQUIDITY AND CAPITAL RESOURCES

CAPITAL STRUCTURE

     Our senior secured credit facility contains 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. The senior secured credit
facility is 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.

     The Company's term loan provides for amortization (in quarterly
installments) of 1.0% per annum through June 30, 2010, and will then amortize in
equal quarterly payments through June 30, 2012. The term loan bears interest, at
the option of the Company, at the index rate plus 1.75% per annum or at LIBOR
plus 2.75% per annum. At June 30, 2005, the term loan balance was $203.0
million, with a floating interest rate of 5.65%. To hedge the risk associated
with fluctuations in interest rates, the Company entered into two interest rate
swap transactions with a financial institution during 2004, for an initial
aggregate notional amount of $17.4 million, increasing over three years to $62.6
million.

     Revolving loans under the senior credit facility expire on April 30, 2010
and bear interest, at the option of the Company, at the index rate plus, based
on performance, a margin ranging from 0.75% to 1.50% per annum, or at LIBOR
plus, based on performance, a margin ranging from 1.75% to 2.50% per annum. At
June 30, 2005, the Company had borrowings under the revolver totaling $1.7
million at a floating interest rate of 7.50%. Standby letters of credit totaling
$8.0 million were outstanding and the Company had borrowing capacity of $40.3
million under the terms of the revolver at June 30, 2005.


                                       31
<PAGE>
     At June 30, 2005, we had a 400,000 Canadian dollar denominated revolving
credit facility which bears interest at the Canadian prime rate plus 0.6% and
expires in September 2005; a 1.0 million British Pound Sterling denominated
revolving credit facility which bears interest at the U.K. base rate plus 1.75%
and expires on May 31, 2006, and a $1.0 million revolving credit facility which
bears interest at LIBOR plus 1.0% and expires on December 31, 2005. No
borrowings were outstanding under these revolving credit facilities at June 30,
2005. We expect to renew these revolving credit facilities upon expiration.

     Long-term borrowings at June 30, 2005 include a mortgage note with the New
York State Job Development Authority of $8.2 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 4.86%,
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.
On April 30, 2004, in connection with the Transactions, a first lien mortgage
note of $8.5 million was paid in full. The mortgage note bore interest at LIBOR
plus 2.75%. However, we utilized an interest rate swap agreement to effectively
fix the loan rate at 8.40% for the term of the loan. The related interest rate
swap agreement was terminated on April 30, 2004 in connection with the
Transactions at a cost of $0.7 million.

     In connection with the Transactions on April 30, 2004, the Company redeemed
all outstanding shares of Series A Redeemable Convertible Preferred Stock at a
redemption price per share equal to $182,000 in cash, together with accrued and
unpaid dividends.

     Our senior subordinated notes, totaling $175 million, were sold to the
initial purchasers by the Company in the Note Offering. In connection with the
Note Offering, the Company entered into a Registration Rights Agreement, which
granted holders of the new notes certain exchange and registration rights. 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 are substantially identical. The exchange was completed in
October 2004. The senior subordinated notes due 2014 bear interest at a rate of
8.75% per annum. 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
with implicit interest rates ranging from 7.70% to 8.80% which extend to 2008.

     The Company has several non-cancelable operating leases principally for
office, distribution and manufacturing facilities, showrooms and warehouse
equipment. These leases expire on various dates through 2017 and generally
contain renewal options and require the Company to pay real estate taxes,
utilities and related insurance costs. Rent expense for the six months ended
June 30, 2005 and 2004, was $6.0 million and $5.9 million, respectively. The
minimum lease payments currently required under non-cancelable operating leases
for the year ending December 31, 2005 approximate $12.3 million.

     In connection with the Transactions, we executed a management agreement
with our 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
senior subordinated notes in the event of a bankruptcy or similar proceeding of
Amscan.

     We expect that cash generated from operating activities and availability
under our senior secured credit facility will be our principal sources of
liquidity. Based on our current level of operations, we believe our cash flow
from operations and available cash and available borrowings under our senior
secured credit facility 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


                                       32
<PAGE>
facility in an amount sufficient to enable us to repay our indebtedness,
including the notes, or to fund our other liquidity needs.

     During the three months ended June 30, 2005, the Company issued 727 basic
stock options and 770 performance stock options to purchase shares of the
Company's common stock to certain employees and its two outside directors, under
the terms of the AAH Holdings Corporation 2004 Equity Incentive Plan. The basic
and performance stock options were granted at a strike price equal to the common
stock's estimated fair value of $10,000 per share and generally vest 20% at each
anniversary date of issuance. The performance options are earned based on the
Company achieving certain financial thresholds upon the occurrence of certain
measurement dates. The Company used a minimum value method to determine the fair
value of the options granted and recorded approximately $0.1 million in
compensation expense during the three and six month periods ended June 30, 2005.

CASH FLOW DATA - SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO SIX MONTHS ENDED
JUNE 30, 2004

     Net cash provided by operating activities during the six months ended June
30, 2005 and 2004, totaled $6.5 million and $14.4 million, respectively. Net
cash flow provided by operating activities before changes in operating assets
and liabilities for the six months ended June 30, 2005 and 2004, was $17.6
million and $21.5 million, respectively. Changes in operating assets and
liabilities for the six months ended June 30, 2005 and 2004, resulted in the use
of cash of $11.1 million and $7.1 million, respectively, with the increased use
of cash during the six months ended June 30, 2005 reflecting higher levels of
custom inventory and the replenishment of general inventory levels following the
disruption in supply from a foreign vendor which began in the second quarter of
2004.

     During the six months ended June 30, 2005, net cash used in investing
activities of $6.2 million, consisted principally of additional investments in
distribution and manufacturing equipment. During the six months ended June 30,
2004, net cash used in investing activities of $534.6 million consisted of cash
paid of $530.0 million to consummate the Transactions on April 30, 2004 and $4.8
million additional investments in distribution and manufacturing equipment,
partially offset by proceeds from the sales of equipment and available-for-sale
securities.

     During the six months ended June 30, 2005, net cash used in financing
activities of $1.8 million included proceeds of $0.3 million from net short-term
borrowings under the revolver, partially offset by scheduled payments of $1.4
million on the term loan and other long-term obligations, as well as the
purchase of redeemable Common Stock held by a former employee totaling $0.1
million. During the six months ended June 30, 2004, net cash provided by
financing activities of $490.2 million included proceeds totaling $378.9 million
from short-term borrowings under the revolver and debt issued in connection with
the Transactions, net of deferred financing costs of $12.7 million. Net cash
provided by financing activities for the six months ended June 30, 2004, also
included capital contributions in connection with the merger and the repayment
of a note receivable by an employee partially offset by scheduled payments on
the then existing term loan and other long-term obligations, a required
prepayment of the then existing term loan of $20.2 million based on our excess
cash flows for the year ended December 31, 2003 and debt retirement costs
totaling $6.2 million paid in connection with the Transactions.

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.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This quarterly report on Form 10-Q contains "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


                                       33
<PAGE>
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, 2004.

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 June 30,
2005 and 2004, our interest expense, after considering the effects of our
interest rate swap agreements, would have increased, and income before income
taxes and minority interest would have decreased, by $1.0 million and $0.9
million, respectively. If market interest rates for our variable rate
indebtedness averaged 2% more than the interest rate actually paid for the six
months ended June 30, 2005 and 2004, our interest expense, after considering the
effects of our interest rate swap agreements, would have increased, and income
before income taxes and minority interest would have decreased, by $2.0 million
and $1.3 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 $0.5 million and $0.4
million for the three months ended June 30, 2005 and 2004, respectively. 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 $1.0 million and $0.9 million for the six months
ended June 30, 2005 and 2004, 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


                                       34
<PAGE>
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 June
30, 2005 that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.

                                     PART II

ITEM 6. EXHIBITS

<TABLE>
<S>     <C>
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 Officers pursuant to 18
        U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002.
</TABLE>


                                       35
<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: August 15, 2005


                                       36