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, 1999

                                       OR

          ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
              15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

                For the transition period from _______ to _______

                         Commission File Number 0-24860

                       PIERCING PAGODA, INC.

             (Exact Name of Registrant as Specified in its Charter)

                               Delaware 23-1894725
                (State or Other Jurisdiction of (I.R.S. Employer
                                 Identification
                     Incorporation or Organization) Number)


                  3910 Adler Place
                   Bethlehem, PA                18017
                (Address of Principal
                  Executive Offices)          (Zip Code)

        Registrant's Telephone Number, Including Area Code: (610)691-0437

                                       N/A
             (Former Name, Former Address and Former Fiscal Year, if
                           Changed Since Last Report.)


     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 [ ]

     The  number of  shares  outstanding  of the  registrant's  common  stock is
9,149,325 (as of August 11, 1999)


<PAGE>


                       PIERCING PAGODA, INC.


                               INDEX
                                                             PAGE
                    PART I - FINANCIAL INFORMATION          NUMBER

  Item 1.   Financial Statements

            Consolidated balance sheets as of
            June 30, 1999 (unaudited) and March 31, 1999       3

            Consolidated statements of operations for the
            three months                                       4
            ended June 30, 1999 and 1998(unaudited)

            Consolidated statements of cash flows for
            the  three months ended June 30, 1999 and          5
            1998(unaudited)

            Notes to consolidated financial statements         7

  Item 2.   Management's Discussion and Analysis of
            Financial Condition and Results of Operations     10

  Item 3.   Quantitative and Qualitative Disclosures
            About Market Risk                                 14

                     PART II - OTHER INFORMATION

  Item 1.   Legal Proceedings                                 15


  Item 2.   Changes in Securities and Use of Proceeds         15


  Item 3.   Defaults Upon Senior Securities                   15


  Item 4.   Submission of Matters to a Vote of Security
            Holders                                           15

  Item 5.   Other Information                                 15

  Item 6.   Exhibits and Reports on Form 8-K                  15

            Signatures                                        16



<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                PIERCING PAGODA, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS
                  (In thousands, except share data)
                                                June 30,    March 31,
                                                  1999         1999
                                                ----------  -----------
  Assets                                        (Unaudited)
<S>                                               <C>         <C>
Current assets
  Cash                                            $ 3,638     $ 4,068
  Accounts receivable                               4,508       4,674
  Inventory                                        53,843      53,685
  Deposits for inventory purchases                  2,162         707
  Prepaid expenses and other current assets           802       1,337
  Prepaid income taxes                                342         131
  Deferred tax assets                               2,335       2,213

                                                ----------  -----------
Total current assets                               67,630      66,815

Property, fixtures and equipment, net              35,057      34,293
Goodwill, net                                      20,121      20,199
Other assets                                        1,953       1,993

                                                ==========  ===========
                                                $ 124,761   $ 123,300
                                                ==========  ===========
  Liabilities and Stockholders' Equity

Current liabilities
  Accounts payable                                $ 4,615     $ 3,934
  Current installments of long-term debt and          428         432
  revolving line of credit
  Income taxes payable                                  -         125
  Accrued expenses and other current               13,122      14,753
  liabilities

                                                ----------  -----------
Total current liabilities                          18,165      19,244

Long-term debt, less current installments          27,827      25,169
Deferred tax liabilities                            3,670       3,476
Other liabilities                                     849         920

                                                ----------  -----------
Total liabilities                                  50,511      48,809

Commitments and contingencies
Stockholders' equity
  Preferred stock, par value $.01 per share,
   authorized 3,000,000 shares. None issued.            -           -
  Common stock, par value $.01 per share,
   authorize 15,000,000 shares. Issued 9,143,100
   shares and 9,133,901 at June 30, 1999 and
   March 31, 1999, respectively.                       92          92
  Additional paid-in capital                       40,976      40,906
  Retained earnings                                33,182      33,493

                                                ----------  -----------
Total stockholders' equity                         74,250      74,491
                                                ----------  -----------
                                                $ 124,761   $ 123,300
                                                ==========  ===========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>



<TABLE>
<CAPTION>

               PIERCING PAGODA, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS
                (In thousands, except per share data)
                             (Unaudited)

                                                       Three months
                                                          ended
                                                         June 30,
                                                     -----------------
                                                      1999     1998
                                                     -------  --------

<S>                                                 <C>       <C>
Net sales                                           $58,154   $48,018
Cost of goods sold and
 occupancy expenses, (excluding
  depreciation on kiosks and
  store fixtures)                                    32,665    26,633
                                                     -------  --------
Gross profit                                         25,489    21,385

Selling, general and
 administrative expenses,
 (including depreciation on kiosks
  and store fixtures)                                25,348    20,755
                                                     -------  --------
Income from operations                                  141       630

Interest and other income                                41        96
Interest expense                                        702       563
                                                     -------  --------
Earnings (loss) before income                          (520)      163
taxes

Income tax expense (benefit)                           (209)       61
                                                     =======  ========
Net income (loss)                                     ($311)    $ 102
                                                     =======  ========

Basic earnings (loss) per share                      ($0.03)   $ 0.01
                                                     =======  ========
Diluted earnings (loss) per share                    ($0.03)   $ 0.01
                                                     =======  ========
</TABLE>

See accompanying notes to consolidated financial statements.


<PAGE>


<TABLE>
<CAPTION>

               PIERCING PAGODA, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (In thousands)
                             (Unaudited)
                                                  Three months ended
                                                       June 30,
                                                 ---------------------
                                                   1999         1998
                                                 ---------  ----------
<S>                                               <C>        <C>
Cash flows from operating activities:
  Net income (loss)                               ($ 311)     $ 102
  Adjustments to reconcile net income (loss)
   to net cash used in operating activities:
    Depreciation and amortization                  1,983      1,483
    Other changes in other assets                     20         15
    Deferred income taxes                             72         45
    Change in operating assets and liabilities
       net of effects of acquisitions:
      Accounts receivable                            166        210
      Inventory                                     (158)    (4,936)
      Deposits for inventory purchases            (1,455)      (416)
      Prepaid expenses and other current assets      535        (81)
      Prepaid income taxes                          (211)      (244)
      Accounts payable                               681      1,962
      Accrued expenses and other current
       liabilities                                (1,631)      (992)
      Income taxes payable                          (125)      (296)
      Other liabilities                              (71)       (46)

                                                 ---------  ----------
Net cash used in operating activities               (505)    (3,194)

Cash flows from investing activities:
  Additions to property, fixtures and equipment   (2,296)    (3,693)
  Payments for purchase of businesses               (298)      (135)
  Noncurrent deposits, net                           (42)       (88)

                                                 ---------  ----------
Net cash used in investing activities             (2,636)    (3,916)

Cash flows from financing activities:
  Repayments of long-term debt                      (146)        (9)
  Revolving line of credit, net                    2,800      3,700
  Loan fees paid                                     (13)       (98)
  Proceeds from issuance of long-term debt             -      2,565
  Net proceeds from issuance of common stock
   under employee share plans                         70        129

                                                 ---------  ----------
Net cash provided by financing activities          2,711      6,287

                                                 ---------  ----------
Net decrease in cash                                (430)      (823)

Cash at beginning of period                        4,068      2,699

                                                 =========  ==========
Cash at end of period                             $3,638     $1,876
                                                 =========  ==========

</TABLE>


<PAGE>


<TABLE>
<CAPTION>


               PIERCING PAGODA, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                           (In thousands)
                             (Unaudited)
                                                  Three months ended
                                                       June 30,
                                                 ---------------------
                                                   1999       1998
                                                 ---------  ----------
Supplemental disclosures of cash flow information:
  Cash paid during the period for:
<S>                                                <C>        <C>
   Interest                                        $ 703      $ 505
                                                 =========  ==========
   Income taxes, net                                $ 55      $ 617
                                                 =========  ==========
</TABLE>

See accompanying notes to consolidated financial statements.



<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1          Summary of significant accounting policies

          The accompanying consolidated financial statements of Piercing Pagoda,
     Inc. and subsidiaries (the "Company") have been prepared in accordance with
     the instructions to Form 10-Q and do not include all of the information and
     footnotes required by generally accepted accounting principles for complete
     financial statements.  These consolidated  financial statements include the
     results of  operations  for  Piercing  Pagoda,  Inc.  and its wholly  owned
     subsidiaries.   All  intercompany  transactions  have  been  eliminated  in
     consolidation.  These consolidated  financial  statements should be read in
     conjunction with the Company's  consolidated financial statements and notes
     thereto  for the year  ended  March 31,  1999.  The  financial  information
     included  herein  is  unaudited;  however,  the  information  reflects  all
     adjustments  (consisting solely of normal recurring  adjustments) that are,
     in the opinion of  management,  necessary  for a fair  presentation  of the
     financial  position,  results of operations  and cash flows for the interim
     periods.

          In  June  1998,  the  Company's   Board  of  Directors   authorized  a
     three-for-two  stock split effected in the form of a stock dividend payable
     to  shareholders  of record on July 31,  1998,  payable on August 13, 1998.
     Stockholders'  equity has been restated to give retroactive  recognition to
     the stock split for all periods presented by reclassifying  from additional
     paid-in  capital  to common  stock the par value of the  additional  shares
     arising from the split.  In addition,  all share and per share amounts have
     been restated to reflect the stock split.

          Operating  results for the three-month  period ended June 30, 1999 are
     not  necessarily  indicative  of the results  that may be expected  for the
     entire fiscal year.

Note 2          Earnings Per Share

          The following  weighted  average number of shares of common stock were
     used in the  calculations  for  earnings  (loss)  per  share.  The  diluted
     weighted  average  number of shares  includes  the net shares that would be
     issued upon the exercise of outstanding  stock options,  using the treasury
     stock method.

                                            1999            1998
        Basic                             9,143,105       9,088,398
        Dilutive effect of
         outstanding stock options,
         using the treasury stock
         method (1)                           -             367,098
                                         ----------       ---------

        Diluted                           9,143,105        9,455496

          (1) For the  period  ended  June 30,  1999,  the  dilutive  effect  of
     outstanding  stock options was not considered in the calculation of diluted
     loss per share because their effects were anti-dilutive.


<PAGE>



          Basic  earnings  (loss)  per  share is  computed  by  dividing  income
     available to common  stockholders by the weighted  average number of common
     shares  outstanding  during  the  period.  Diluted  earnings  per  share is
     computed  by  dividing  income  available  to  common  stockholders  by the
     weighted  average  number of common  shares  outstanding  during the period
     increased to include the number of additional common shares that would have
     been outstanding if the dilutive potential common shares had been issued.

Note 3          Property, Fixtures and Equipment

          A summary of major classes of property, fixtures and equipment follows
     (in thousands):
<TABLE>
<CAPTION>

                                          June 30,    March 31,
                                            1999         1999
                                        ------------  ----------
<S>                                      <C>          <C>
     Land                                  $  688       $   688
     Furniture and fixtures                 5,397         5,043
     Kiosks                                32,192        30,681
     Buildings and improvements             7,294         7,283
     Computer equipment, software
      and other equipment                  12,042        11,622

                                        ------------  -----------
                                           57,613        55,317
     Less accumulated depreciation
      an amortization                      22,556        21,024

                                        ============  ===========
                                         $ 35,057      $ 34,293
                                        ============  ===========

</TABLE>


Note 4          Accrued Expenses and Other Current Liabilities

          Accrued  expenses and other  current  liabilities  are  summarized  as
     follows (in thousands):
<TABLE>
<CAPTION>

                                          June 30,    March 31,
                                            1999         1999
                                        ------------  ---------
<S>                                     <C>           <C>
     Accrued payroll, vacation
      and related taxes                 $ 5,084       $  6,254
     Sales tax payable                      893            719
     Accrued rents payable                  989          1,089
     Liability under jewelry
      club program                        1,040            989
     Liability under lifetime
      guarantee program                   1,321          1,321
     Accrued store closure costs            941          1,250
     Other accrued expenses               2,854          3,131
                                        ==========    =========
                                        $ 13,122      $ 14,753
                                        ==========    =========
</TABLE>


          During the period ended June 30, 1999,  the Company  closed 11 stores,
     including 8 stores for which anticipated  closure costs had been accrued at
     March 31,  1999.  In  addition,  the  Company  made  payments  to settle 17
     outstanding  lease  obligations  which had also been  accrued  at March 31,
     1999.  Accordingly,  the  Company's  accrual  for store  closure  costs was
     reduced to reflect the payments towards these obligations.

<PAGE>


    Note 5      Litigation

          On October  19,  1998,  a lawsuit  was filed,  purportedly  as a class
     action,  against the Company and certain of its  executive  officers in the
     U.S.  District Court of the Eastern District of  Pennsylvania.  The lawsuit
     alleges,  among other things,  that the Company and certain of its officers
     made materially false and misleading  statements  and/or failed to disclose
     material  information  regarding the  Company's  business  performance  and
     prospects.  On January 4, 1999,  the Company  filed a motion to dismiss the
     suit,  after which the plaintiffs filed an amended  complaint.  The Company
     currently  has  pending  before the court a motion to dismiss  the  amended
     complaint.  The Company  believes that the lawsuit has no merit and intends
     to contest the case  vigorously  if its motion to dismiss is  unsuccessful.
     Although  the  ultimate  outcome  of  the  lawsuit  cannot  be  determined,
     management does not believe the outcome of the lawsuit will have a material
     adverse  effect on the  financial  position,  results of operations or cash
     flows of the Company. However, there can be no assurance as to the ultimate
     resolution of this matter.





<PAGE>


ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

Background

          The Company's  consolidated net sales are comprised primarily of sales
     generated by the Company's  stores and, to a much lesser extent,  wholesale
     sales  primarily to an  independent  store operator in Florida to which the
     Company  licensed  the use of its  store  name and  concept  (the  "Florida
     Licensee"). On August 31, 1998, the Company acquired all of the outstanding
     common  stock of the  Florida  Licensee  and now  operates  all the  stores
     previously  owned by the Florida  Licensee.  Beginning on September 1, 1998
     net sales  consist  entirely of sales  generated  by the  Company's  retail
     stores.  Cost of goods  sold and  occupancy  expenses  include  the cost of
     merchandise,  rent and occupancy, and the cost of preparing merchandise for
     sale.  Selling,  general  and  administrative  expenses  include  store and
     supervisory  payroll,  corporate overhead and non-occupancy  store expenses
     including depreciation of kiosks and amortization of goodwill.

Results of operations

Three months ended June 30, 1999 and 1998

          Consolidated  net sales  increased  $10.2 million,  or 21%, from $48.0
     million for the three months  ended June 30, 1998 to $58.2  million for the
     three months ended June 30, 1999.  This  increase was due  primarily to net
     sales  generated by new stores opened or acquired by the Company and a $2.8
     million,  or 6%, increase in comparable store net sales. There were a total
     of 934 stores open at June 30, 1999  compared to 812 at June 30,  1998,  an
     increase of 15%. The average jewelry units sold per comparable store during
     the quarter  increased 8% to 2,600 for the three months ended June 30, 1999
     compared to 2,400 at June 30, 1998. The average price per jewelry unit sold
     increased  slightly  to $24.97 for the three  months  ended  June 30,  1999
     compared to $24.78 for the three months  ended June 30, 1998.  The increase
     in average  jewelry units sold  primarily  reflects  increased  unit volume
     caused by greater promotional activity during the current period.

          Gross profit  increased  $4.1 million,  or 19%, from $21.4 million for
     the three months ended June 30, 1998 to $25.5  million for the three months
     ended June 30, 1999. The Company's gross profit margin decreased from 44.5%
     for the three  months  ended  June 30,  1998 to 43.8% for the three  months
     ended June 30, 1999.  This decrease is primarily due to a greater amount of
     promotional  activity,  partially offset by lower occupancy costs and other
     expenses  and  the  the  elimination  of  wholesale  sales  to the  Florida
     Licensee.  The Company increased the amount of its promotional  activity in
     the  quarter to  increase  the  sell-through  of  selected  merchandise  in
     anticipation of the  introduction  of new merchandise  styles in the first,
     second and third fiscal quarters.  However,  in August of 1998, the Company
     acquired its sole  licensee and began  operating  the former  licensee's 22
     stores as its own. As a result, the sales of these stores are now reflected
     as the  Company's  own retail  sales  rather  than  wholesale  sales to the
     licensee.  Wholesale  sales to the  licensee  produced a lower gross margin
     than the Company's own retail net sales.

          Selling,  general and administrative  expenses increased $4.5 million,
     or 21.6%,  from $20.8  million for the three  months ended June 30, 1998 to
     $25.3  million for the three months ended June 30, 1999. As a percentage of
     net sales,  selling,  general and  administrative  expenses  increased from
     43.2%  for the  three  months  ended  June 30,  1998 to 43.6% for the three
     months  ended  June  30,  1999.  The  increase  in  selling,   general  and
     administrative  expenses  primarily reflects higher store payroll costs due
     to the increase in the number of stores operated by the Company compared to
     the previous year, higher administrative expenses to support new stores and
     higher  amortization  expense,   primarily  due  to  goodwill  incurred  in
     connection  with the  Company's  acquisitions  of its  Florida  Licensee in
     August of 1998 and 104 locations from Sedgwick Sales, Inc. in July of 1998.
     Depreciation and amortization  expense increased 33% to $2.0 million in the
     three  months  ended June 30,  1999 from $1.5  million in the three  months
     ended June 30, 1998 due  primarily to higher  amortization  of goodwill and
     capital expenditures for new stores and the upgrading of kiosks in existing
     locations.

          Interest expense increased  $139,000,  or 24.7%, from $563,000 for the
     three  months  ended June 30, 1998 to $702,000  for the three  months ended
     June 30, 1999,  and as a percentage  of net sales was unchanged at 1.2% for
     the three months ended June 30, 1999 and 1998,  respectively.  The increase
     in interest  expense  reflects  higher  average  balances on the  Company's
     revolving line of credit  agreement and an increase in the number of ounces
     consigned under the Company's gold consignment arrangements.

          As a result of the foregoing,  the Company's net income decreased from
     $102,000 for the three months ended June 30, 1998 to a net loss of $311,000
     for the three months ended June 30, 1999.

Liquidity and capital resources

          The Company's  primary ongoing  short-term  capital  requirements have
     been to fund an increase in inventory and to fund capital  expenditures and
     working  capital  (mostly  inventory)  for new  and  acquired  stores.  The
     Company's  long-term  liquidity  requirements  relate  principally  to  the
     maturity of its long-term debt in July of 2000, operating lease commitments
     and store expansion.  The Company's  primary sources of liquidity have been
     funds provided from operations,  a gold consignment program and a revolving
     credit facility.  The Company's  working capital increased to $49.5 million
     at June 30, 1999 from $47.6 million at June 30, 1998. At June 30, 1999, the
     Company had  outstanding  borrowings  of $22.6  million under its revolving
     line of credit and $5.7 million of long-term  debt  outstanding,  including
     $428,000  classified as a current liability.  In addition,  the Company had
     consigned 152,834 ounces of gold under its gold consignment  program valued
     at approximately $39.9 million.

          Net cash  used in  operating  activities  was  $505,000  for the three
     months  ended  June  30,  1999  compared  to net  cash  used  in  operating
     activities of $3.2 million for the same period in the prior year.  Net cash
     used in  operating  activities  primarily  reflects  increases in inventory
     deposits made to secure production of holiday merchandise and reductions in
     accrued expenses,  partially offset by depreciation and  amortization.  Net
     cash used in operating  activities  in the three months ended June 30, 1998
     primarily  reflects  increases  in  inventory  to stock newly  acquired and
     opened stores as well as to provide  initial  inventory for the anticipated
     opening of 104 locations acquired from Sedgwick Sales, Inc.

          Net cash used in  investing  activities  was $2.6  million  during the
     three months ended June 30, 1999 compared to $3.9 million  during the three
     months ended June 30, 1998. Net cash used in investing activities primarily
     reflects  the addition of property,  fixtures and  equipment in  connection
     with the opening of new stores, and the renovation of existing stores.

          Net cash  provided by  financing  activities  was $2.7 million for the
     three  months  ended June 30,  1999 versus  $6.3  million  during the three
     months  ended June 30,  1998.  Net cash  provided by  financing  activities
     during the three months ended June 30, 1999  primarily  reflects  increased
     borrowings under the Company's existing line of credit to fund operations.

          The  Company's   revolving   credit  facility   provides  for  maximum
     borrowings of $105.0 million  through a combination of cash advances (which
     may not exceed $65 million) and letters of credit (which may not exceed $70
     million) to support the Company's gold consignment  financing  program.  At
     June 30, 1999, the Company had $38.9 million available to be borrowed under
     its  revolving  credit  facility  and  was  in  compliance  with  covenants
     contained in the  agreement.  The Company  believes  that the expected cash
     flows from  operations,  its gold  consignment  program and bank borrowings
     will be sufficient to fund the Company's currently  anticipated capital and
     liquidity needs. The Company is currently  renegotiating its revolving line
     of credit agreement in advance of its expiration and anticipates  signing a
     new  agreement  prior to the  expiration of the existing  revolving  credit
     facility.  The company is also  currently  considering  expanding  its gold
     consignment  program by establishing  consignment  arrangements  with a new
     consignment bank.

Year 2000 compliance

          The  information  set forth in this  section is a Year 2000  Readiness
     Disclosure as defined in the Year 2000 Information Readiness and Disclosure
     Act.

          The Company is aware of "Year 2000" issues existing in the programming
     code of some  information  technology  ("IT") and non-IT systems.  The Year
     2000 issue may arise  because many  hardware and software  systems only use
     two digits to represent  the year.  As a result,  these  systems may not be
     able to process dates beyond 1999, which may cause errors or failures in IT
     or non-IT systems.

          The Company relies  significantly on both IT and non-IT systems in its
     retail outlets as well as at its corporate  headquarters  and  distribution
     center.  These systems include  hardware and software that the Company uses
     to conduct its  operations,  analyze  business  performance  and  safeguard
     assets. The Company's strategy for addressing Year 2000 compliance has been
     to replace or renovate all critical  systems  identified as  non-compliant.
     Accordingly, in fiscal 1999, the Company implemented a process to identify,
     remediate and test all critical systems.  The Company has now substantially
     completed the identification and remediation  portions of this process. For
     the  remainder  of calendar  1999,  the  Company  will focus its efforts on
     testing these systems to ensure Year 2000  compliance as well as developing
     contingency  plans to address Year 2000 related issues which may occur as a
     result of circumstances beyond the Company's control.

          The  Company  has met all costs of its Year 2000  remediation  efforts
     with existing  internal staff resources and has spent less than $500,000 on
     hardware and software  purchased to specifically  address Year 2000 issues.
     The cost of these efforts has not been separately tracked or allocated and,
     accordingly,  the Company cannot precisely  determine the expense incurred.
     The Company does not anticipate future Year 2000 costs will be material and
     will continue to use internal staff  supplemented by external  resources if
     necessary.

          The Company  expects its own Year 2000  project to be  completed  on a
     timely basis. However,  there can be no assurance that the systems of other
     companies on which the Company's  systems also rely will be compliant.  The
     Company is seeking  confirmation  from its  primary  vendors  that they are
     developing and implementing  plans to become Year 2000 compliant.  However,
     there can be no assurance that the systems of third parties,  which are not
     within the control of the Company,  will function properly.  The failure of
     certain  primary  vendors  to be Year 2000  compliant  may have an  adverse
     impact on the Company's performance.  The Company is developing contingency
     plans as part of its remediation efforts and the Company expects such plans
     to be completed by September 30, 1999.

          While the  Company  continues  to believe  that the Year 2000  matters
     discussed above will not have a material impact on its business,  financial
     condition or results of operations, it remains uncertain whether or to what
     extent the Company may be affected.

Seasonality

          The Company's  business is highly  seasonal.  Due to the impact of the
     year-end  holiday shopping  season,  the Company  experiences a substantial
     portion  of its  annual  net sales and  profitability  in its third  fiscal
     quarter (ending December 31st). The Company has generally experienced lower
     net sales in each of the first,  second and fourth  quarters  and lower net
     income or net losses in each of those quarters.

          The Company's results of operations may fluctuate  significantly  from
     quarter  to  quarter  as  a  result  of a  variety  of  factors,  including
     fluctuations  in the price of gold,  the amount and timing of  acquisitions
     and new store  openings,  the  integration  of recently  acquired and newly
     opened stores into the operations of the Company, the timing of promotions,
     and changes in national and regional economic conditions.

Forward-looking statements

          The Private  Securities  Litigation Reform Act of 1995 provides a safe
     harbor for forward-looking  statements. A number of the matters and subject
     areas  discussed  in  "Management's  Discussion  and  Analysis of Financial
     Condition  and Results of  Operations,"  are not limited to  historical  or
     current   facts  and  deal  with   potential   future   circumstances   and
     developments. Prospective investors are cautioned that such forward-looking
     statements  are only  predictions  and that  actual  events or results  may
     differ  materially.  A variety of factors could cause the Company's  actual
     results to differ  materially  from the expected  results  expressed in the
     Company's forward-looking  statements,  including,  without limitation: the
     Company's  ability to secure  suitable store sites on a timely basis and on
     satisfactory  terms;  the  Company's  ability  to hire,  train  and  retain
     qualified personnel; the availability of adequate capital resources and the
     successful   integration   of  new  stores  into  the  Company's   existing
     operations;  the Company's  ability to  successfully  implement and improve
     management  information systems,  procedures and controls on a timely basis
     and in such a manner as is necessary to accommodate the increased number of
     transactions  and  customers  and  the  increased  size  of  the  Company's
     operations;  fluctuations in quarterly net sales, and, in particular, third
     quarter net sales;  fluctuations  in gold prices;  competitive  conditions;
     economic   conditions   affecting   disposable  consumer  income,  such  as
     employment,  business conditions,  interest rates and taxation,  as well as
     trends  with  respect to mall  shopping  generally  and the ability of mall
     anchor tenants and other  attractions to generate  customer  traffic in the
     vicinity of the Company's  stores;  and the possibility of the enactment of
     legislation,  or the  modification of existing or pending  legislation,  in
     jurisdictions  in which the Company  operates,  that would adversely affect
     the Company's ear piercing or other activities.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There  were no  material  changes  in market  risk  exposures  that  affect  the
quantitative and qualitative disclosures presented as of March 31, 1999.


<PAGE>



PART II - OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS

    On October 19, 1998,  a lawsuit was filed,  purportedly  as a class  action,
    against  the  Company  and  certain of its  executive  officers  in the U.S.
    District Court of the Eastern District of Pennsylvania. The lawsuit alleges,
    among  other  things,  that the Company  and  certain of its  officers  made
    materially  false  and  misleading  statements  and/or  failed  to  disclose
    material  information  regarding  the  Company's  business  performance  and
    prospects.  On January 4, 1999,  the  Company  filed a motion to dismiss the
    suit,  after which the plaintiffs  filed an amended  complaint.  The Company
    currently  has  pending  before  the court a motion to dismiss  the  amended
    complaint. The Company believes that the lawsuit has no merit and intends to
    contest  the case  vigorously  if its  motion to  dismiss  is  unsuccessful.
    Although  the  ultimate   outcome  of  the  lawsuit  cannot  be  determined,
    management  does not believe the outcome of the lawsuit will have a material
    adverse  effect on the  financial  position,  results of  operations or cash
    flows of the Company.  However, there can be no assurance as to the ultimate
    resolution of this matter.


ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

        None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

        None.

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None.

ITEM 5.    OTHER INFORMATION

        None.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

      a)   Exhibits

           27   Financial Data Schedule.

      b)   Reports on Form 8-K

           During the quarter  ended June 30, 1999,  no reports on Form 8-K were
           filed.


<PAGE>



SIGNATURES


          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.





                                    PIERCING PAGODA, INC.
                                          (Registrant)



    Date:  August 11, 1999          /s/ John F. Eureyecko
                                    John F. Eureyecko
                                   President,
                                    Chief Operating Officer
                                    (Principal Financial Officer)



    Date:  August 11, 1999          /s/ Brandon R. Lehman
                                    Brandon R. Lehman
                                    Treasurer
                                    (Principal Accounting Officer)



<PAGE>



                         INDEX TO EXHIBITS
                                                           Sequentially
  Exhibit                                                  Numbered
  Number                                                     Page

    27      Financial Data Schedule                           18