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 December 31, 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 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
9,176,838 (as of February 10, 2000)


<PAGE>


                              PIERCING PAGODA, INC.


                                      INDEX
                                                                          PAGE
                         PART I - FINANCIAL INFORMATION                   NUMBER

   Item 1.    Financial Statements

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

              Consolidated statements of operations for
              the three months ended December 31, 1999 and 1998
              (unaudited) and the nine months ended
              December 31, 1999 and 1998 (unaudited)                     4

              Consolidated statements of cash flows for the nine
              months ended December 31, 1999 and 1998 (unaudited)        5

              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            16
              Market Risk

                           PART II - OTHER INFORMATION

   Item 1.    Legal Proceedings                                         17

   Item 2.    Changes in Securities and Use of Proceeds                 17

   Item 3.    Defaults Upon Senior Securities                           17

   Item 4.    Submission of Matters to a Vote of Security Holders       17

   Item 5.    Other Information                                         18

   Item 6.    Exhibits and Reports on Form 8-K                          18

              Signatures                                                19



<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

                                                        December       March 31,
                                                           31,            1999
                                                          1999
                                                       ------------   -------------
   Assets                                              (Unaudited)

Current assets
<S>                                                      <C>           <C>
   Cash                                                  $ 1,107       $ 4,068
   Accounts receivable                                     2,550         4,674
   Inventory                                              75,357        53,685
   Deposits for inventory purchases                          357           707
   Prepaid expenses and other current assets                 479         1,337
   Prepaid income taxes                                        -           131
   Deferred tax assets                                     1,649         2,213

                                                       ------------   -------------
Total current assets                                      81,499        66,815

Property, fixtures and equipment, net                     36,190        34,293
Goodwill, net                                             19,330        20,199
Other assets                                               1,982         1,993

                                                       ============   =============
                                                       $ 139,001      $ 123,300
                                                       ============   =============
   Liabilities and Stockholders' Equity

Current liabilities
   Accounts payable                                     $ 15,721       $ 3,934
   Current installments of long-term debt and              3,930           432
   revolving line of credit
   Income taxes payable                                    6,363           125
   Accrued expenses and other current liabilities         18,839        14,753

                                                       ------------   -------------
Total current liabilities                                 44,853        19,244

Long-term debt, less current installments                  5,184        25,169
Deferred tax liabilities                                   4,001         3,476
Other liabilities                                            752           920

                                                       ------------   -------------
Total liabilities                                         54,790        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 9,168,892 shares and
   9,133,901                                                  92            92
      at December 31, 1999 and March 31, 1999,
   respectively.
   Additional paid-in capital                             41,228        40,906
   Treasury stock at cost                                 (2,580)            -
   Retained earnings                                      45,471        33,493

                                                       ------------   -------------
Total stockholders' equity                                84,211        74,491
                                                       ------------   -------------
                                                       $ 139,001      $ 123,300
                                                       ============   =============
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>




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

                                       Three months ended     Nine months ended
                                          December 31,           December 31,
                                      ---------------------   -------------------
                                        1999        1998       1999       1998
                                      ----------  ---------   --------  ---------

<S>                                   <C>         <C>         <C>        <C>
Net sales                             $ 105,279   $ 101,985   $ 218,260  $199,673
Cost of goods sold and occupancy
 expenses, (excluding depreciation
 on kiosks and store fixtures)           50,186      51,919     112,059   106,172
                                      ----------  ---------    --------   ---------
Gross profit                             55,093      50,066     106,201    93,501

Selling, general and administrative
 expenses, (including depreciation
 on kiosks and store fixtures)           32,388      32,356      83,584    77,283
                                      ----------  ---------    --------   ---------
Income from operations                   22,705      17,710      22,617    16,218

Interest and other income                    51          47         146       232
Interest expense                          1,360       1,130       3,006     2,530
                                      ----------  ---------    --------  ---------
Income before income taxes               21,396      16,627      19,757    13,920

Income tax expense                        8,424       6,458       7,779     5,413
                                      ==========  =========    ========  =========
Net income                             $ 12,972    $ 10,169     $11,978   $ 8,507

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

Basic earnings per share                $ 1.43      $ 1.12      $ 1.32     $ 0.93
                                      ==========  =========    ========  =========

Diluted earnings per share              $ 1.41       $1.10      $1.30     $ 0.91
                                      ==========  =========    ========  =========
</TABLE>

See accompanying notes to consolidated financial statements.



<PAGE>



                     PIERCING PAGODA, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                           Nine months ended
                                                              December 31,
                                                        -------------------------
                                                        1999          1998
                                                        ------------  -----------

Cash flows from operating activities:
<S>                                                      <C>            <C>
  Net income                                             $ 11,978       $ 8,507
  Adjustments to reconcile net income to net cash
    provided by operating activities:
     Depreciation and amortization                          6,240         5,101
     Earnings on disposal of furniture, fixtures
      and equipment                                           633           242
     Other changes in other assets                            108           107
     Deferred income taxes                                  1,089           384
     Change in operating assets and liabilities
        net of effects of acquisitions:
      Accounts receivable                                   2,124           574
      Inventory                                           (21,672)       (1,698)
      Deposits for inventory purchases                        350            15
      Prepaid expenses and other current assets               858           724
      Prepaid income taxes                                    131           215
      Accounts payable                                     11,787         6,895
      Accrued expenses and other current liabilities        4,086         7,047
      Income taxes payable                                  6,247         3,551
      Other liabilities                                      (168)         (210)

                                                        ------------  -----------
Net cash provided by operating activities                  23,791        31,454

Cash flows from investing activities:
  Additions to property, fixtures and equipment            (7,378)      (10,141)
  Payments for purchase of businesses                        (298)      (14,867)
  Noncurrent deposits, net                                   (309)         (400)

                                                        ------------  -----------
Net cash used in investing activities                      (7,985)      (25,408)

Cash flows from financing activities:
  Repayments of long-term debt                               (187)          (26)
  Revolving line of credit, net                           (16,300)       (8,742)
  Proceeds from issuance of long-term debt                      -         2,565
  Loan fees paid                                              (13)         (150)
  Net proceeds from issuance of common stock under
    employee share plans                                      313           341
  Purchase of treasury stock                               (2,580)            -

                                                        ------------  -----------
Net cash used in financing activities                     (18,767)       (6,012)

                                                        ------------  -----------
Net increase (decrease) in cash                            (2,961)           34

Cash at beginning of period                                 4,068         2,699

                                                        ============  ===========
Cash at end of period                                     $ 1,107       $ 2,733
                                                        ============  ===========
</TABLE>



<PAGE>




                     PIERCING PAGODA, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                           Nine months ended
                                                              December 31,
                                                        -------------------------
                                                           1999          1998
                                                        ------------  -----------
Supplemental disclosures of cash flow information:

Cash paid during the period for:
<S>                                                       <C>           <C>
   Interest                                               $ 2,868       $ 2,448
                                                        ============  ===========
   Income taxes, net                                        $ 519       $ 1,356
                                                        ============  ===========
</TABLE>

Supplemental disclosure of non-cash operating and investing activities:

During  the  period  ended  December  31,  1998,  the  Company  entered  into  a
non-competition agreement for $500,000.



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.

     Operating results for the three-month and nine-month periods ended December
     31, 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 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.
<TABLE>
<CAPTION>

                                         2000                  1999
                               --------------------  --------------------
                               Quarter      YTD      Quarter      YTD
                               ---------  ---------  ---------  ---------
<S>                            <C>        <C>        <C>        <C>
      Basic                    9,054,383  9,072,341  9,103,868  9,099,043
      Dilutive effect of
        outstanding stock
        options, using the
        treasury stock
        method                   157,197    168,185    138,280    277,388
                               =========  =========  =========  =========
      Diluted                  9,211,580  9,240,526  9,242,148  9,376,431
                               =========  =========  =========  =========
</TABLE>





<PAGE>



     Basic  earnings  per share is  computed  by  dividing  net  earnings by the
     weighted  average  number of common shares  outstanding  during the period.
     Diluted  earnings  per share is computed by  dividing  net  earnings 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>

                                              December 31,    March 31,
                                                  1999          1999
                                              --------------  -----------
<S>                                           <C>            <C>
      Land                                    $     688      $     688
      Furniture and fixtures                      6,155          5,043
      Kiosks                                     33,874         30,681
      Buildings and improvements                  7,320          7,283
      Computer equipment,software and
       other equipment                           12,794         11,622
                                              --------------  -----------
                                                 60,831         55,317
      Less  accumulated depreciation and
       amortization                              24,641         21,024
                                              ==============  ===========
                                               $ 36,190       $ 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>

                                               December       March 31,
                                                  31,           1999
                                                 1999
                                              --------------  -----------
<S>                                             <C>          <C>
      Accrued   payroll, vacation and
       related taxes                            $ 7,437      $  6,254
      Sales tax payable                           3,530           719
      Accrued rents payable                       2,041         1,089
      Liability under jewelry club program        1,039           989
      Liability under  merchandise
        guarantee program                         1,321         1,321
      Accrued store closure costs                   663         1,250
      Other accrued expenses                      2,808         3,131
                                              ==============  ===========
                                                $18,839       $14,753
                                              ==============  ===========
</TABLE>


     During the nine months  ended  December  31,  1999,  the Company  closed 30
     stores,  including 12 stores for which  anticipated  closure costs had been
     accrued at March 31, 1999. In addition, the Company made payments to settle
     28 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 and November 22, 1999 the  Company's  Board of Directors
     authorized  the  repurchase  of up to a  total  of  400,000  shares  of the
     Company's  common stock.  At December 31, 1999, the Company had repurchased
     206,500 shares of its common stock at an average price of $12.49 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.  No
     appeal of the  dismissal  was filed by the  plaintiffs  within the required
     time period.





<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 December 31, 1999 and 1998

     Consolidated  net sales increased $3.3 million,  or 3%, from $102.0 million
     for the three  months  ended  December  31, 1998 to $105.3  million for the
     three months ended December 31, 1999.  This increase was due primarily to a
     $4.1 million,  or 4%, increase in comparable  store net sales and net sales
     generated  by new stores  opened or acquired by the  Company.  There were a
     total of 947 stores open at December  31, 1999  compared to 957 at December
     31, 1998, a decrease of 1%. The average  jewelry units sold per  comparable
     store  during the quarter  decreased 5% to 4,000 for the three months ended
     December 31, 1999 compared to 4,200 at December 31, 1998. The average price
     per jewelry  unit sold per  comparable  store  increased  to $28.07 for the
     three  months  ended  December  31,  1999  compared to $25.74 for the three
     months ended December 31, 1998.

     Gross profit  increased  $5.0  million,  or 10%, from $50.1 million for the
     three months ended  December 31, 1998 to $55.1 million for the three months
     ended December 31, 1999. The Company's  gross profit margin  increased from
     49.1% for the three months  ended  December 31, 1998 to 52.3% for the three
     months ended  December 31,  1999.  The increase in gross profit  dollars is
     primarily  attributable  to the  increase in the gross profit  margin.  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
     costs have  resulted in lower  store rent  expense as a  percentage  of net
     sales.  Since the  beginning of the previous  fiscal year,  the Company has
     closed 109  underperforming  stores and worked to improve the operations at
     its remaining stores.

     Selling,  general and administrative  expenses were unchanged for the three
     months ended December 31, 1999, totaling $32.4 million; comparable with the
     three  months  ended  December  31,  1998.  As a  percentage  of net sales,
     selling,  general and administrative  expenses decreased from 31.7% for the
     three  months  ended  December 31, 1998 to 30.8% for the three months ended
     December 31, 1999. Changes in selling,  general and administrative expenses
     as a percentage of net sales primarily reflect lower direct store expenses,
     including  payroll,  as a percentage  of sales  partially  offset by higher
     deprecation and amortization expense as a percentage of net sales.

     Depreciation and amortization  expense increased 16% to $2.2 million in the
     three months ended  December 31, 1999 from $1.9 million in the three months
     ended  December  31,  1998.  The  increase  was due  primarily  to  capital
     expenditures  made for new  stores,  the  upgrading  of kiosks in  existing
     locations and higher  amortization of goodwill  recorded in connection with
     recent Company acquisitions.

     Interest  expense  increased  $230,000,  or 20%,  from $1.1 million for the
     three months  ended  December 31, 1998 to $1.4 million for the three months
     ended  December 31, 1999,  and as a percentage of net sales  increased from
     1.1% for the three  months  ended  December  31, 1998 to 1.3% for the three
     months ended December 31, 1999. The increase in interest expense  primarily
     reflects  higher  average  interest  rates charged on borrowings  under the
     Company's revolving line of credit agreement and an increase in the average
     number  of  ounces   consigned   under  the  Company's   gold   consignment
     arrangements.

     Income tax expense  increased  $1.9  million to $8.4  million for the three
     months ended December 31, 1999 from $6.5 million for the three months ended
     December 31, 1998. As a percentage  of income  before income taxes,  income
     tax expense increased to 39.4% for the three months ended December 31, 1999
     from 38.8% for the three  months ended  December 31, 1998.  The increase in
     income tax expense is due to the increase in the Company's  earnings before
     income taxes.

     As a result of the foregoing, the Company's net income increased from $10.2
     million for the three months ended  December 31, 1998 to $13.0  million for
     the three months ended December 31, 1999.


<PAGE>



Nine months ended December 31, 1999 and 1998

     Consolidated  net sales increased $18.6 million,  or 9% from $199.7 million
     for the nine months ended  December 31, 1998 to $218.3 million for the nine
     months  ended  December  31,  1999.  This was due  primarily  to net  sales
     generated by new stores opened or acquired by the Company. Comparable store
     sales increased $8.7 million or 5% in the nine-month  period.  There were a
     total of 947 stores open at December  31, 1999  compared to 957 at December
     31, 1998, a decrease of 1%. The average  jewelry units sold per  comparable
     store were flat at 9,200 units sold in the nine months  ended  December 31,
     1999.  The average price per jewelry unit sold increased  approximately  5%
     from $25.03 for the nine months  ended  December 31, 1998 to $26.29 for the
     nine months ended December 31, 1999.

     Gross profit  increased  $12.7 million,  or 14%, from $93.5 million for the
     nine months ended  December 31, 1998 to $106.2  million for the nine months
     ended  December 31, 1999. The Company's  gross profit margin  improved from
     46.8% for the nine  months  ended  December  31, 1998 to 48.7% for the nine
     months ended  December 31,  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 to
     lower merchandise costs, less promotional  activity during the third fiscal
     quarter and changes in  merchandise  mix  compared  to the  previous  year.
     Additionally,  better  leverage  of fixed  rent and  occupancy  costs  have
     resulted in lower store rent  expense as a percentage  of net sales.  Since
     the  beginning  of the  previous  fiscal  year,  the Company has closed 109
     underperforming  stores  and  worked  to  improve  the  operations  at  its
     remaining stores.

     Selling, general and administrative expenses increased $6.3 million, or 8%,
     from $77.3  million for the nine months  ended  December  31, 1998 to $83.6
     million for the nine months ended December 31, 1999. As a percentage of net
     sales,  selling,  general and administrative  expenses decreased from 38.7%
     for the nine months  ended  December  31, 1998 to 38.3% for the nine months
     ended   December   31,  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 46 new stores in the nine-month  period ended December 31, 1999
     versus 209 new stores in the same period of the prior year.  Administrative
     costs  increased   primarily  to  support   expansion  of  the  merchandise
     purchasing and human resource functions.

     Depreciation and amortization  expense increased 22% to $6.2 million in the
     nine months  ended  December  31, 1999 from $5.1 million in the nine months
     ended  December  31,  1998.  The  increase  was due  primarily  to  capital
     expenditures  made for new  stores,  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 $476,000, or 19%, from $2.5 million for the nine
     months  ended  December  31, 1998 to $3.0 million for the nine months ended
     December 31, 1999,  and as a percentage of net sales  increased to 1.4% for
     the nine months ended  December 31, 1999 versus 1.3% in the previous  year.
     The increase in interest expense primarily reflects higher average balances
     on the  Company's  revolving  line  of  credit  agreement,  higher  average
     interest  rates charged under that  agreement and an increase in the number
     of ounces consigned under the Company's gold consignment arrangements.

     Income tax  expense  increased  $2.4  million to $7.8  million for the nine
     months ended  December 31, 1999 from $5.4 million for the nine months ended
     December 31, 1998. As a percentage  of income  before income taxes,  income
     tax expense  increased to 39.4% for the nine months ended December 31, 1999
     from 38.9% for the nine months ended  December  31,  1998.  The increase in
     income tax expense is due to the increase in the Company's  earnings before
     income taxes.

     As a result of the foregoing,  the Company's net income increased from $8.5
     million for the nine months ended  December  31, 1998 to $12.0  million for
     the nine months ended December 31, 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  decreased to $36.6  million at
     December  31,  1999 from $47.6  million at March 31,  1999.  This  decrease
     primarily  reflects  increases in accounts  payable and accrued expenses as
     well as the  current  classification  of the  Company's  revolving  line of
     credit that is due in July of 2000.  These were  partially  offset by a net
     increase in current assets due to increases in inventory  partially  offset
     by  decreases in cash and accounts  receivable.  At December 31, 1999,  the
     Company had outstanding borrowings of $3.5 million under its revolving line
     of  credit  and $5.6  million  of  long-term  debt  outstanding,  including
     $430,000  classified as a current liability.  In addition,  the Company had
     consigned 156,546 ounces of gold under its gold consignment  program valued
     at approximately $45.4 million.

     Net cash  provided by operating  activities  was $23.8 million for the nine
     months  ended  December  31, 1999  compared  to $31.5  million for the same
     period  in the  prior  year.  Net cash  provided  by  operating  activities
     primarily  reflects the results of the year-end  holiday  shopping  season,
     non-cash  charges for depreciation and amortization as well as increases in
     current liabilities partially offset by an increase in inventory.


<PAGE>



     Net cash used in  investing  activities  was $8.0  million  during the nine
     months ended  December 31, 1999 compared to $25.4  million  during the nine
     months  ended  December 31,  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 nine months ended  December 31, 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 and the  renovation
     of existing stores.

     Net cash used in financing activities was $18.8 million for the nine months
     ended  December 31, 1999 versus $6.0  million  during the nine months ended
     December 31, 1998.  Net cash used in financing  activities  during the nine
     months ended December 31, 1999 primarily reflects a reduction in borrowings
     under  the  Company's  revolving  line of  credit  and  repurchases  of the
     Company's common stock authorized by the Company's Board of Directors.

     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 December 31,
     1999,  the Company had $52.8  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.


<PAGE>



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 has  completed  its Year 2000 Project as  scheduled,  including
     addressing leap year calendar date calculation  concerns.  With the passing
     of January 1, 2000, the possibility of significant  interruptions of normal
     operations  has been  reduced.  As of  February  11,  2000,  the  Company's
     products,   computing,  and  communications   infrastructure  systems  have
     operated  without  Year 2000  related  problems  and appear to be Year 2000
     ready.  The  Company  is not  aware  that  any of its  major  customers  or
     third-party  suppliers  has  experienced   significant  Year  2000  related
     problems.

     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.

     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.


<PAGE>



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,  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.  No
     appeal of the  dismissal  was filed by the  plaintiffs  within the required
     time period.


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.



<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  December 31, 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:  February 11, 2000             /s/ John F. Eureyecko
                                          ------------------------------
                                          John F. Eureyecko
                                          President,
                                          Chief Operating Officer
                                          (Principal Financial Officer)



     Date:  February 11, 2000             /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







<PAGE>