FORM 10-Q

ý QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 28, 2003

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-25507

iPARTY CORP.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE	76-0547750
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	(I.R.S. EMPLOYER IDENTIFICATION NO.)

1457 VFW PARKWAY WEST ROXBURY, MASSACHUSETTS	02132
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)	(ZIP CODE)

(617) 323-0822
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:

COMMON STOCK, $.001 PAR VALUE		AMERICAN STOCK EXCHANGE
(TITLE OF EACH CLASS)		(NAME OF EACH EXCHANGE ON WHICH REGISTERED)

SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT: NONE

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

The number of shares of the Registrant’s common stock outstanding as of August 1, 2003: 17,562,972.

iParty Corp.
Quarterly Report on Form 10-Q

Table of Contents

PART 1	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets – June 28, 2003 and December 28, 2002
	Consolidated Statements of Operations – Three months and six months ended June 28, 2003 and June 29, 2002
	Consolidated Statements of Cash Flows – Six months ended June 28, 2003 and June 29, 2002
	Notes to Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

PART II	OTHER INFORMATION

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

Item 6.	Exhibits and Reports on Form 8-K

SIGNATURES


Exhibit Index

Ex. 10.1	Website License Agreement between iParty Corp. and Taymark, Inc., dated as of July 8, 2003

Ex. 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act

Ex. 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

Ex. 32	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

iPARTY CORP.

CONSOLIDATED BALANCE SHEETS

	Jun 28, 2003			Dec 28, 2002
	(Unaudited)			Restated
				(Note 1)
ASSETS
Current assets:
Cash and cash equivalents	$	2,350,707		$	2,326,343
Restricted cash	383,618			371,952
Accounts receivable	349,882			445,988
Inventory, net	9,106,940			8,916,664
Prepaid expenses and other assets	658,850			294,370
Total current assets	12,849,997			12,355,317
Property and equipment, net	1,059,139			1,128,897
Other assets	287,962			331,669
Total assets	$	14,197,098		$	13,815,883

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	3,421,133		$	2,752,311
Accrued expenses	2,023,457			1,867,496
Current portion of capital lease obligations	126,996			237,080
Borrowings under line of credit	4,221,995			3,476,738
Total current liabilities	9,793,581			8,333,625

Long-term liabilities:
Capital lease obligations, net of current portion	1,765			3,173
Other liabilities	412,328			678,932
Total long-term liabilities	414,093			682,105

Commitments and contingencies

Convertible preferred stock - $.001 par value; 10,000,000 shares authorized,
Series A convertible preferred stock - 1,000,000 shares authorized, issued and outstanding (aggregate liquidation value of $1,000,000 at June 28, 2003)	1,000,000			1,000,000
Series B convertible preferred stock – 1,150,000 shares authorized; 648,963 and 684,799 shares issued and outstanding in 2003 and 2002, respectively (aggregate liquidation value of $12,979,260 at June 28, 2003)	9,656,569			10,189,809
Series C convertible preferred stock – 100,000 shares authorized, issued and outstanding (aggregate liquidation value of $2,000,000 at June 28, 2003)	1,492,000			1,492,000
Series D convertible preferred stock – 250,000 shares authorized, issued and outstanding (aggregate liquidation value of $5,000,000 at June 28, 2003)	3,652,500			3,652,500
Series E convertible preferred stock - 533,333 shares authorized; 466,667 issued and outstanding (aggregate liquidation value of $1,750,000 at June 28, 2003)	1,750,000			1,750,000
Series F convertible preferred stock - 114,286 shares authorized, issued and outstanding (aggregate liquidation value of $500,000 at June 28, 2003)	500,000			500,000
Total convertible preferred stock	18,051,069			18,584,309

Stockholders’ deficit:
Common stock - $.001 par value; 150,000,000 shares authorized; 17,468,724 and 16,996,570 shares issued and outstanding in 2003 and 2002, respectively	17,469			16,997
Additional paid-in capital	46,702,629			46,168,101
Accumulated deficit	(60,781,743		)	(59,969,254		)
Total stockholders’ deficit	(14,061,645		)	(13,784,156		)

Total liabilities, convertible preferred stock and stockholders’ deficit	$	14,197,098		$	13,815,883

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

iPARTY CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the three months ended				For the six months ended
	Jun 28, 2003		Jun 29, 2002		Jun 28, 2003		Jun 29, 2002
Revenues	$	13,805,555	$	13,084,475	$	24,093,132	$	23,670,516
Operating costs:
Cost of products sold	7,849,863		7,674,326		14,091,559		14,320,945
Marketing and sales	4,252,482		3,759,517		8,025,341		7,160,525
General and administrative	1,295,272		1,327,005		2,681,141		2,711,439