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 September 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
        Incorporation or Organization)     Identification Number)


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

    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 9,161,124 (as of November 11, 1999)


<PAGE>


                              PIERCING PAGODA, INC.


                                      INDEX
                                                             PAGE
                    PART I - FINANCIAL INFORMATION          NUMBER

  Item 1.   Financial Statements

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

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

            Consolidated statements of cash flows for the
            six months ended September 30, 1999 and 1998       5
            (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          17
            About Market Risk

                           PART II - OTHER INFORMATION

  Item 1.   Legal Proceedings                                 18


  Item 2.   Changes in Securities and Use of Proceeds         18


  Item 3.   Defaults Upon Senior Securities                   18

  Item 4.   Submission of Matters to a Vote of Security       18
            Holder

  Item 5.   Other Information                                 19

  Item 6.   Exhibits and Reports on Form 8-K                  19

            Signatures                                        20



<PAGE>





PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                PIERCING PAGODA, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (In thousands, except share data)

                                               September 30,  March 31,
                                                   1999        1999
                                                ----------  -----------
  Assets                                        (Unaudited)

Current assets
  Cash                                          $  1,245     $  4,068
  Accounts receivable                              5,110        4,674
  Inventory                                       65,991       53,685
  Deposits for inventory purchases                   467          707
  Prepaid expenses and other current assets          500        1,337
  Prepaid income taxes                             1,804          131
  Deferred tax assets                              1,766        2,213

                                                ----------  -----------
Total current assets                              76,883       66,815

Property, fixtures and equipment, net             35,559       34,293
Goodwill, net                                     19,744       20,199
Other assets                                       2,065        1,993

                                                ==========  ===========
                                                $134,251     $123,300
                                                ==========  ===========
  Liabilities and Stockholders' Equity

Current liabilities
  Accounts payable                               $ 5,525      $ 3,934
  Current installments of long-term debt and
    revolving line of credit                      33,426          432
  Income taxes payable                                 -          125
  Accrued expenses and other current              12,192       14,753
  liabilities

                                                ----------  -----------
Total current liabilities                         51,143       19,244

Long-term debt, less current installments          5,209       25,169
Deferred tax liabilities                           3,922        3,476
Other liabilities                                    721          920

                                                ----------  -----------
Total liabilities                                 60,995       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,
    authorized 15,000,000 shares.
    Issued 9,124,624 shares and 9,133,901
    at September 30, 1999 and
    March 31, 1999, respectively.                     92           92
  Additional paid-in capital                      41,127       40,906
  Treasury stock at cost                           (462)           -
  Retained earnings                               32,499       33,493

                                                ----------  -----------
Total stockholders' equity                        73,256       74,491
                                                ----------  -----------
                                                $134,251    $ 123,300
                                                ==========  ===========
See accompanying notes to consolidated financial statements.

<PAGE>




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

                                Three months ended   Six months ended
                                  September 30,       September 30,
                                -------------------  -----------------
                                  1999      1998      1999     1998
                                ---------  --------  -------  --------

Net sales                       $ 54,827   $49,670  $112,981  $97,688

Cost of goods sold and
  occupancy expenses,
 (excluding depreciation on       29,208    27,620    61,873   54,253
   kiosks and store fixtures)
                                ---------  -------- -------  --------

Gross profit                      25,619    22,050    51,108   43,435

Selling, general and
 administrative expenses,
 (including depreciation on
  kiosks and store fixtures)      25,848    24,172    51,196   44,927

                                ---------  -------- -------  --------

Loss from operations                (229)   (2,122)      (88)  (1,492)

Interest and other income             54        89        95      185
Interest expense                     944       837     1,646    1,400
                                ---------  -------- -------  --------

Loss before income taxes         ( 1,119)   (2,870)   (1,639)  (2,707)

Income tax benefit                  (436)   (1,106)     (645)  (1,045)
                                =========  ========  =======  ========
Net loss                          $ (683)  $(1,764)    $(994) $(1,662)

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

Basic and diluted loss per
 share                           $ (0.07)   $(0.19)   $(0.11)  $(0.18)
                                =========  ========  =======  ========

See accompanying notes to consolidated financial statements.



<PAGE>



               PIERCING PAGODA, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
                                                   Six months ended
                                                    September 30,
                                                 ---------------------
                                                 1999         1998
                                                 ---------  ----------

Cash flows from operating activities:
  Net loss                                        $ (994)   $(1,662)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Depreciation and amortization                  4,075      3,205
    Loss on disposal of furniture, fixtures and
     equipment                                        91          -
    Other changes in other assets                     87         54
    Deferred income taxes                            893        269
    Change in operating assets and liabilities
       net of effects of acquisitions:
      Accounts receivable                           (436)        70
      Inventory                                  (12,306)   (17,490)
      Deposits for inventory purchases               240       (113)
      Prepaid expenses and other current assets      837        567
      Prepaid income taxes                        (1,673)    (1,724)
      Accounts payable                             1,591      6,800
      Accrued expenses and other current
       liabilities                                (2,561)        56
      Income taxes payable                          (122)      (798)
      Other liabilities                             (199)      (239)

                                                 ---------  ----------
Net cash used in operating activities            (10,477)   (11,005)

Cash flows from investing activities:
  Additions to property, fixtures and equipment   (4,529)    (6,606)
  Payments for purchase of businesses               (298)   (14,867)
  Noncurrent deposits, net                          (296)      (160)

                                                 ---------  ----------
Net cash used in investing activities             (5,123)   (21,633)

Cash flows from financing activities:
  Repayments of long-term debt                      (166)       (17)
  Revolving line of credit, net                   13,200     31,466
  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                        218        243
  Purchase of treasury stock                        (462)         -

                                                 ---------  ----------
Net cash provided by financing activities         12,777     34,159

                                                 ---------  ----------
Net increase (decrease) in cash                   (2,823)     1,521

Cash at beginning of period                        4,068      2,699

                                                 =========  ==========
Cash at end of period                            $ 1,245     $4,220
                                                 =========  ==========



<PAGE>




               PIERCING PAGODA, INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                 (In thousands)
                                   (Unaudited)
                                                   Six months ended
                                                    September 30,
                                                 ---------------------
                                                   1999       1998
                                                 ---------  ----------
Supplemental disclosures of cash
 flow information:
  Cash paid during the period for:
   Interest                                      $ 1,841    $ 1,280
                                                 =========  ==========
   Income taxes, net                               $ 260    $ 1,299
                                                 =========  ==========

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.

    The  Company  effected a  three-for-two  stock  split in the form of a stock
    dividend paid on August 13, 1998 to shareholders of record on July 31, 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 and six-month periods ended September
    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 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
                           -------------------    ---------------------
                           Quarter      YTD        Quarter      YTD
                          ---------   ----------  ---------- ----------
     Basic                 9,137,047  9,133,452   9,100,489  9,108,007
     Dilutive effect
       of outstanding
       stock options,
       using the
       treasury stock
       method (1)              -           -            -          -
                           =========  ==========  ========== ==========
     Diluted               9,137,047  9,133,452   9,100,489  9,108,007
                           =========  ==========  ========== ==========

    (1) For the periods  presented,  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  loss per  share is  computed  by  dividing  net loss by the  weighted
    average number of common shares outstanding during the period.  Diluted loss
    per share is computed by dividing net loss 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):

                                         September     March
                                          30, 1999    31, 1999
                                        ------------  ---------

     Land                                    688           688
     Furniture and fixtures                5,810         5,043
     Kiosks                               33,397        30,681
     Buildings and improvements            7,301         7,283
     Computer equipment, software
     and other equipment                  12,453        11,622
                                        ------------  ---------
                                          59,649        55,317
     Less  accumulated  depreciation
     and amortization                     24,090        21,024
                                        ============  =========
                                         $35,559      $ 34,293
                                        ============  =========



Note 4          Accrued Expenses and Other Current Liabilities

    Accrued expenses and other current liabilities are summarized as follows (in
    thousands):

                                         September      March
                                         30, 1999     31, 1999
                                        ------------  ---------
     Accrued  payroll,  vacation and
      related taxes                      $ 5,658       $ 6,254
     Sales tax payable                       751           719
     Accrued rents payable                   373         1,089
     Liability under jewelry club
      program                              1,040           989
     Liability under merchandise
      guarantee program                    1,321         1,321
     Accrued store closure costs             784         1,250
     Other accrued expenses                2,265         3,131
                                        ============  =========
                                         $12,192       $14,753
                                        ============  =========


    During the six months  ended  September  30,  1999,  the  Company  closed 20
    stores,  including 10 stores for which  anticipated  closure  costs had been
    accrued at March 31, 1999. In addition,  the Company made payments to settle
    20 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      Stock Repurchase

    On  August  11,  1999  the  Company's  Board  of  Directors  authorized  the
    repurchase  of up to  200,000  shares  of the  Company's  common  stock.  At
    September 30, 1999, the Company had repurchased  35,000 shares of its common
    stock at an average price of $13.21 per share.


    Note 6      Litigation

    On October 19,  1999,  the  previously  announced  securities  class  action
    litigation  that had been  filed  against  the  Company  and  certain of its
    officers by Israel H. Buck et al. was dismissed with prejudice by the United
    States District Court for the Eastern District of Pennsylvania.  The Company
    does not know whether the dismissal will be appealed by the plaintiffs.





<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 September 30, 1999 and 1998

    Consolidated  net sales  increased $5.1 million,  or 10%, from $49.7 million
    for the three months ended September 30, 1998 to $54.8 million for the three
    months ended  September 30, 1999.  This increase was due primarily to a $2.7
    million,  or 6%,  increase  in  comparable  store  net  sales  and net sales
    generated  by new stores  opened or  acquired by the  Company.  There were a
    total of 934 stores open at September  30, 1999 compared to 956 at September
    30, 1998, a decrease of 2%. The average  jewelry  units sold per  comparable
    store  during the quarter  increased  4% to 2,500 for the three months ended
    September  30, 1999  compared to 2,400 at September  30,  1998.  The average
    price per jewelry unit sold per comparable store increased to $24.30 for the
    three  months  ended  September  30,  1999  compared to $23.55 for the three
    months ended September 30, 1998.

    Gross profit  increased  $3.6  million,  or 16%,  from $22.0 million for the
    three months ended  September 30, 1998 to $25.6 million for the three months
    ended September 30, 1999. The Company's  gross profit margin  increased from
    44.4% for the three months ended  September  30, 1998 to 46.7% for the three
    months ended  September  30, 1999.  The increase in gross profit  dollars is
    primarily  attributable  to the increase in net sales.  The  improvement  in
    gross  profit  margin  reflects  improved  merchandise  margins due to lower
    merchandise costs, less promotional  activity during the quarter and changes
    in merchandise mix compared to the previous year.  During the current fiscal
    year,  the  Company  has  implemented  certain  changes  to its  merchandise
    selection  which  have had a  favorable  impact on sales  and  gross  profit
    margin.  These  changes  include  the  introduction  of new 10k and 14k gold
    merchandise  styles and  increasing  the selection of non-gold  merchandise.
    Additionally, better leverage of fixed rent and occupancy

<PAGE>


    costs have  resulted  in lower  store rent  expense as a  percentage  of net
    sales.   Over  the  last   twelve   months,   the   Company  has  closed  93
    underperforming stores and worked to improve the operations at its remaining
    stores.

    Selling,  general and administrative expenses increased $1.6 million, or 7%,
    from $24.2  million for the three months ended  September  30, 1998 to $25.8
    million for the three months ended  September  30, 1999.  As a percentage of
    net sales, selling, general and administrative expenses decreased from 48.7%
    for the three months ended  September 30, 1998 to 47.1% for the three months
    ended   September   30,  1999.   The   decrease  in  selling,   general  and
    administrative  expenses as a  percentage  of net sales  primarily  reflects
    lower store  payroll  costs as a  percentage  of sales  partially  offset by
    higher  administrative  expenses and amortization expense as a percentage of
    net sales. Store payroll costs as a percentage of net sales decreased due to
    the lower amount of new stores  opened in the quarter and the  corresponding
    reduction in labor  expense for training and new store  set-up.  The Company
    opened only nine new stores in the quarter  ended  September 30, 1999 versus
    149 new stores in the same period last year.  Administrative costs increased
    primarily  to support  expansion  of the  merchandise  purchasing  and human
    resource functions.

    Depreciation and amortization  expense  increased 24% to $2.1 million in the
    three months ended  September 30, 1999 from $1.7 million in the three months
    ended  September  30,  1998.  The  increase  was due  primarily  to  capital
    expenditures  made for new stores and the  upgrading  of kiosks in  existing
    locations and higher  amortization  of goodwill  recorded 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.

    Interest  expense  increased  $107,000,  or 13%, from $837,000 for the three
    months  ended  September  30, 1998 to $944,000  for the three  months  ended
    September  30, 1999,  and as a percentage of net sales was unchanged at 1.7%
    for the three months ended  September 30, 1999 and 1998,  respectively.  The
    increase in interest expense primarily reflects an increase in the number of
    ounces consigned under the Company's gold consignment arrangements partially
    offset by lower average balances on the Company's revolving line of credit.

    Income tax benefit decreased $670,000 to $436,000 for the three months ended
    September  30, 1999 from $1.1 million for the three  months ended  September
    30, 1998. As a percentage  of loss before  income taxes,  income tax benefit
    increased to 39.0% for the three months ended  September 30, 1999 from 38.5%
    for the three months ended  September  30, 1998.  The decrease in income tax
    benefit is due to the decrease in the Company's loss before income taxes.

    As a result of the  foregoing,  the Company's net loss decreased from a loss
    of $1.8 million for the three months ended  September 30, 1998 to a net loss
    of $683,000 for the three months ended September 30, 1999.


<PAGE>



Six months ended September 30, 1999 and 1998

    Consolidated  net sales increased  $15.3 million,  or 16% from $97.7 million
    for the six months ended  September  30, 1998 to $113.0  million for the six
    months  ended  September  30,  1999.  This was due  primarily  to net  sales
    generated by new stores opened or acquired by the Company.  Comparable store
    sales  increased  $5.4 million or 6% in the six-month  period.  There were a
    total of 934 stores open at September  30, 1999 compared to 956 at September
    30, 1998, a decrease of 2%. The average  jewelry  units sold per  comparable
    store  increased 4% in the period to 5,100 from 4,900 in the six months last
    year.  The average price per jewelry unit sold  increased  approximately  2%
    from $24.22 for the six months  ended  September  30, 1998 to $24.65 for the
    six months ended September 30, 1999.

    Gross profit increased $7.7 million,  or 18%, from $43.4 million for the six
    months ended  September  30, 1998 to $51.1  million for the six months ended
    September 30, 1999.  The Company's  gross profit margin  improved from 44.5%
    for the six  months  ended  September  30,  1998 to 45.2% for the six months
    ended  September 30, 1999. The increase in gross profit dollars is primarily
    attributable  to the  increase  in net sales  caused by the  higher  average
    number of stores  operated by the Company during the period and the increase
    in comparable  store sales.  Gross profit  margin  improved due primarily to
    better leverage of generally fixed,  non-merchandise  costs,  primarily rent
    and occupancy.  These  improvements  were partially offset by an increase in
    merchandise  costs as a  percentage  of net sales  due to  higher  levels of
    promotional activity in the first three months of the period.

    Selling, general and administrative expenses increased $6.3 million, or 14%,
    from $44.9  million  for the six months  ended  September  30, 1998 to $51.2
    million for the six months ended  September 30, 1999. As a percentage of net
    sales, selling, general and administrative expenses decreased from 46.0% for
    the six months  ended  September  30, 1998 to 45.3% for the six months ended
    September  30,  1999.  The decrease in selling,  general and  administrative
    expenses  as a  percentage  of net  sales  reflects  lower  store  expenses,
    primarily  payroll,  as a  percentage  of sales  partially  offset by higher
    administrative  expenses and  amortization  expense as a  percentage  of net
    sales.  Store costs as a percentage of net sales  decreased due to the lower
    amount of new stores opened in the period and the corresponding reduction in
    labor  expense for training and new store  set-up.  The Company  opened only
    twenty-three  new stores in the  six-month  period ended  September 30, 1999
    versus 175 new stores in the same  period  last year.  Administrative  costs
    increased  primarily to support expansion of the merchandise  purchasing and
    human resource functions.

    Depreciation and amortization  expense  increased 28% to $4.1 million in the
    six months  ended  September  30,  1999 from $3.2  million in the six months
    ended  September  30,  1998.  The  increase  was due  primarily  to  capital
    expenditures  made for new stores and the  upgrading  of kiosks in  existing
    locations and higher  amortization  of goodwill  recorded 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.

<PAGE>

    Interest expense increased  $246,000,  or 18%, from $1.4 million for the six
    months  ended  September  30, 1998 to $1.6  million for the six months ended
    September  30, 1999,  and as a percentage of net sales was increased to 1.5%
    for the six months  ended  September  30, 1999  versus 1.4% in the  previous
    year. The increase in interest  expense  primarily  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.


    Income tax benefit  decreased  $400,000 to $645,000 for the six months ended
    September 30, 1999 from $1.0 million for the six months ended  September 30,
    1998.  As a  percentage  of loss  before  income  taxes,  income tax benefit
    increased  to 39.4% for the six months ended  September  30, 1999 from 38.6%
    for the six months  ended  September  30,  1998.The  decrease  in income tax
    benefit is due to the decrease in the Company's loss before income taxes.

    As a result of the  foregoing,  the Company's net loss decreased from a loss
    of $1.7 million for the six months ended September 30, 1998 to a net loss of
    $994,000 for the six months ended September 30, 1999.

<PAGE>


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  decreased  to $25.7  million at
    September 30, 1999 from $59.7 million at September 30, 1998.  This reduction
    primarily  reflects the current  classification  of the Company's  revolving
    line of credit  which is due in July of 2000.  At September  30,  1999,  the
    Company had outstanding borrowings of $33.0 million under its revolving line
    of credit and $5.6 million of long-term debt outstanding, including $426,000
    classified as a current  liability.  In addition,  the Company had consigned
    160,186  ounces  of gold  under  its  gold  consignment  program  valued  at
    approximately $47.9 million.

    Net cash used in operating  activities  was $10.5 million for the six months
    ended  September  30, 1999  compared to $11.0 million for the same period in
    the prior year. Net cash used in operating  activities  primarily reflects a
    seasonal  increase in inventory  in  anticipation  of the  year-end  holiday
    selling season,  partially  offset by depreciation  and amortization and net
    changes  in  other  operating  assets  and  liabilities.  Net  cash  used in
    operating  activities in the six months ended  September 30, 1998  primarily
    reflects increases in inventory to stock newly acquired and opened stores as
    well as a seasonal  increase in inventory in  anticipation  for the year-end
    holiday  selling  season.  This was  partially  offset by  depreciation  and
    amortization and an increase in accounts payable.

    Net cash used in investing activities was $5.1 million during the six months
    ended  September 30, 1999  compared to $21.6  million  during the six months
    ended  September 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.  Investing
    activities in the six months ended September 30, 1998 primarily  reflect the
    purchase of approximately 104 locations from Sedgwick Sales, Inc. in July of
    1998, the  acquisition of the Company's  Florida  Licensee in August of 1998
    and the addition of property,  fixtures and equipment in connection with the
    opening of new stores,  the renovation of existing  stores and the expansion
    of the Company's warehouse and distribution facilities.

    Net cash  provided by  financing  activities  was $12.8  million for the six
    months ended  September 30, 1999 versus $34.2 million  during the six months
    ended September 30, 1998. Net cash provided by financing  activities  during
    the six  months  ended  September  30,  1999  primarily  reflects  increased
    borrowings  under the Company's  existing line of credit to fund operations.
    Net cash  provided  by  financing  activities  during the six  months  ended
    September  30,  1998  primarily  reflects  increased  borrowings  under  the
    Company's  existing  line of credit  and the  proceeds  of $2.6  million  in
    Industrial Development Authority financing.


<PAGE>



    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 September 30,
    1999,  the  Company had $19.2  million  available  to be borrowed  under its
    revolving  credit  facility  and was  either in  compliance  with  covenants
    contained in the agreement or had obtained  appropriate waivers. 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 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 this
    process.  For the  remainder  of calendar  1999,  the Company will focus its
    efforts  developing  and  refining  contingency  plans to address  Year 2000
    related  issues  which  may occur as a result of  circumstances  beyond  the
    Company's  control.  The Company has  created a Year 2000  contingency  plan
    which  addresses how the Company will respond to potential failures of third
    party systems.  These  preparations  primarily  include  responses to power,
    telecommunication  and  transportation  systems  failures  at  either  store
    locations or the Company's corporate office and distribution facility.

    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,  other than hardware and software purchases,  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.


<PAGE>



    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  has sought  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.

    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

<PAGE>


    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,  1999,  the  previously  announced  securities  class  action
    litigation  that had been  filed  against  the  Company  and  certain of its
    officers by Israel H. Buck et al. was dismissed with prejudice by the United
    States District Court for the Eastern District of Pennsylvania.  The Company
    does not know whether the dismissal will be appealed by the plaintiffs.


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

      On  September  15,  1999,  the  Registrant  held  its  Annual  Meeting  of
    Stockholders. The stockholders approved the following proposals:

1.     To elect John F.  Eureyecko  a  director  to hold  office  until the 2002
       Annual  Meeting of  Stockholders  and until his  successor  has been duly
       elected and qualified.

           Votes For         Votes to Withhold
                                Authority

           7,370,950            330,542

2.    To amend the Piercing Pagoda,  Inc. 1994 Stock Option Plan in
       order  to  increase  the  number  of  shares  available
       thereunder.

         Votes For    Votes Against      Abstain

         7,269,042      399,931          12,224

3.     To  ratify  the  appointment  of KPMG  LLP as the  Company's  independent
       auditors for the 2000 fiscal year.

         Votes For    Votes Against      Abstain

         7,690,481        5,883           5,128



<PAGE>



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



    Date:  November 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                           21