UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 2000

                                       OR

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

                For the transition period from _______ to _______

                         Commission File Number 0-24860

                              PIERCING PAGODA, INC.

             (Exact Name of Registrant as Specified in its Charter)

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


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

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

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


     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]

     The  number of  shares  outstanding  of the  registrant's  common  stock is
9,195,389 (as of August 11, 2000)

<PAGE>





                                     PIERCING PAGODA, INC.

                                             INDEX
                                                                            PAGE
                          PART I - FINANCIAL INFORMATION               NUMBER

   Item 1.    Financial Statements

              Consolidated balance sheets as of
              June 30, 2000 (unaudited) and March 31, 2000                3

              Consolidated statements of operations for the three
              months
              ended June 30, 2000 and 1999 (unaudited)                    4

              Consolidated statements of cash flows for the  three
              months ended June 30, 2000 and 1999 (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 Market
              Risk                                                        15

                            PART II - OTHER INFORMATION

     Item 1.  Legal Proceedings                                           16

     Item 2.  Changes in Securities and Use of Proceeds                   16

     Item 3.  Defaults Upon Senior Securities                             16

     Item 4.  Submission of Matters to a Vote of Security Holders         16

   Item 5.    Other Information                                           16

   Item 6.    Exhibits and Reports on Form 8-K                            17

              Signatures                                                  18



<PAGE>


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

                                                         June 30,       March 31,
                                                           2000           2000
                                                       ------------   -------------
   Assets                                              (Unaudited)

Current assets
<S>                                                    <C>            <C>
   Cash                                                  $ 3,998       $ 1,137
   Accounts receivable                                     2,545         2,909
   Inventory                                              58,557        63,960
   Deposits for inventory purchases                          433           197
   Prepaid expenses and other current assets               1,347         1,476
   Deferred tax assets                                       705           992
                                                       ------------   -------------
Total current assets                                      67,585        70,671

Property, fixtures and equipment, net                     35,621        35,692
Goodwill, net                                             18,757        19,155
Other assets                                               1,705         1,775
                                                       ------------   -------------
                                                       $ 123,668      $ 127,293
                                                       ============   =============
   Liabilities and Stockholders' Equity

Current liabilities
   Accounts payable                                      $ 4,843       $ 2,912
   Current installments of long-term debt and revolving   11,449        17,639
   line of credit
   Income taxes payable                                       29            50
   Accrued expenses and other current liabilities         12,415        12,234
                                                       ------------   -------------
Total current liabilities                                 28,736        32,835

Long-term debt, less current installments                  4,778         4,929
Deferred tax liabilities                                   4,143         4,144
Other liabilities                                            685           671
                                                       ------------   -------------
Total liabilities                                         38,342        42,579

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 9,188,298 shares and 9,179,988 at June 30,       92            92
   2000 and
      March 31, 2000, respectively.
   Additional paid-in capital                             41,438        41,339
   Treasury stock, at cost                                (3,191)       (3,191)
   Retained earnings                                      46,987        46,474
                                                       ------------   -------------
Total stockholders' equity                                85,326        84,714
                                                       ------------   -------------
                                                       $ 123,668      $ 127,293
                                                       ============   =============
</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
                                                                   June 30,
                                                              -------------------
                                                                2000      1999
                                                              --------  ---------

<S>                                                           <C>       <C>
Net sales                                                     $ 60,166  $ 58,154
Cost of goods sold and occupancy
  expenses, (excluding depreciation on kiosks
  and store fixtures)                                           33,328    32,665
                                                              --------  ---------
Gross profit                                                    26,838    25,489

Selling, general and administrative
  expenses, (including depreciation on kiosks
    and store fixtures)                                         25,382    25,348
                                                              --------  ---------
Income from operations                                           1,456       141

Interest and other income                                           41        41
Interest expense                                                   646       702
                                                              --------  ---------
Earnings (loss) before income taxes                                851      (520)

Income tax expense (benefit)                                       338      (209)
                                                              --------  ---------
Net income (loss)                                                $ 513    ($ 311)
                                                              ========  =========

Basic earnings (loss) per share                                 $ 0.06    ($0.03)
                                                              ========  =========
Diluted earnings (loss) per share                               $ 0.06    ($0.03)
                                                              ========  =========
</TABLE>

See accompanying notes to consolidated financial statements.



<PAGE>



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

                                                              Three months ended
                                                                        June 30,
                                                        -------------------------
                                                           2000          1999
                                                        ------------  -----------

Cash flows from operating activities:
<S>                                                        <C>          <C>
  Net income (loss)                                         $ 513        ($ 311)
  Adjustments to reconcile net income (loss)
    to net cash used in operating activities:
     Depreciation and amortization                          2,125         1,983
     Loss on disposal of property, fixtures and equipment     182             -
     Other changes in other assets                             42            20
     Deferred income taxes                                    286            72
     Change in operating assets and liabilities
        net of effects of acquisitions:
      Accounts receivable                                     364           166
      Inventory                                             5,403          (158)
      Deposits for inventory purchases                       (236)       (1,455)
      Prepaid expenses and other current assets               129           535
      Prepaid income taxes                                      -          (211)
      Accounts payable                                      1,931           681
      Accrued expenses and other current liabilities          181        (1,631)
      Income taxes payable                                    (21)         (125)
      Other liabilities                                        14           (71)

                                                        ------------  -----------
Net cash provided by (used in) operating activities        10,913          (505)

Cash flows from investing activities:
  Additions to property, fixtures and equipment            (1,765)       (2,296)
  Payments for purchase of businesses                           -          (298)
  Noncurrent deposits, net                                      9           (42)

                                                        ------------  -----------
Net cash used in investing activities                      (1,756)       (2,636)

Cash flows from financing activities:
  Repayments of long-term debt                               (141)         (146)
  Revolving line of credit, net                            (6,200)        2,800
  Loan fees paid                                              (54)          (13)
  Net proceeds from issuance of common stock under             99            70
employee share plans

                                                        ------------  -----------
Net cash provided by (used in) financing activities        (6,296)        2,711

                                                        ------------  -----------
Net increase (decrease) in cash                             2,861          (430)

Cash at beginning of period                                 1,137         4,068

                                                        ------------  -----------
Cash at end of period                                      $3,998       $ 3,638
                                                        ============  ===========
</TABLE>



<PAGE>




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

                                                              Three months ended
                                                                        June 30,
                                                        -------------------------
                                                             2000         1999
                                                        ------------  -----------
Supplemental  disclosures of cash flow information:  Cash paid during the period
  for:
<S>                                                         <C>           <C>
   Interest                                                 $ 647         $ 703
                                                        ============  ===========
   Income taxes, net                                         $ 73          $ 55
                                                        ============  ===========
</TABLE>

See accompanying notes to consolidated financial statements.



<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1            Summary of significant accounting policies

     The accompanying consolidated financial statements of Piercing Pagoda, Inc.
and  subsidiaries  (the  "Company")  have been prepared in  accordance  with the
instructions  to  Form  10-Q  and do not  include  all  of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial  statements.  These  consolidated  financial  statements  include  the
results  of  operations  for  Piercing   Pagoda,   Inc.  and  its  wholly  owned
subsidiaries.   All   intercompany   transactions   have  been   eliminated   in
consolidation.  These  consolidated  financial  statements  should  be  read  in
conjunction  with the  Company's  consolidated  financial  statements  and notes
thereto for the year ended March 31, 2000.  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  period ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the entire fiscal
year.

Note 2            Earnings Per Share

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


                                           2000              1999
                                        ---------         ---------
<S>                                     <C>               <C>
      Basic                             8,930,866         9,143,105
      Dilutive effect of outstanding
        stock options, using the
        treasury stock method (1)         220,509                -


                                        ---------         ---------
      Diluted                           9,151,375         9,143,105
                                        =========         =========
</TABLE>

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

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


<PAGE>



Note 3            Property, Fixtures and Equipment

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

<TABLE>
<CAPTION>
                                                            June 30,         March 31,
                                                              2000             2000
                                                        ----------------   ------------
<S>                                                     <C>                <C>
       Land                                             $      688         $      688
       Furniture and fixtures                                6,725             6,416
       Kiosks                                               34,344            33,744
       Buildings and improvements                            7,335             7,327
       Computer equipment, software and other equipment      9,692            12,988
                                                        ----------------   ------------
                                                            58,784            61,163
       Less accumulated depreciation and amortization       23,163            25,471
                                                        ----------------   ------------
                                                          $ 35,621          $ 35,692
                                                        ================   ============

</TABLE>


Note 4            Accrued Expenses and Other Current Liabilities

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

<TABLE>
<CAPTION>
                                                           June 30,         March 31,
                                                              2000             2000
                                                        ----------------   ------------
<S>                                                        <C>              <C>
       Accrued payroll, vacation and related taxes         $ 5,596          $ 5,083
       Sales tax payable                                       887              834
       Accrued rents payable                                   974            1,129
       Liability under jewelry club program                    590              540
       Liability under product guarantee program               801              901
       Accrued store closure costs                             486              493
       Other accrued expenses                                3,081            3,254
                                                        ----------------   ------------
                                                          $ 12,415         $ 12,234
                                                        ================   ============

</TABLE>

     During the period ended June 30, 2000,  the Company  disposed of two kiosks
during the period for which disposal costs had previously  been accrued at March
31, 2000. Accordingly, the Company's accrual for store closure costs was reduced
to reflect this activity.

<PAGE>



Note 5            Revolving Line of Credit

     On July 24, 2000, the Company entered into a new revolving  credit and gold
consignment  facility with a syndicate of banks led by its primary lender.  This
new  agreement  provides  for maximum  borrowings  of $115.0  million  through a
combination  of cash advances,  standby  letters of credit (which may not exceed
$10.0  million)  and gold  consignment  (which  may not exceed  $80.0  million.)
Amounts borrowed under the new facility  generally accrue interest at the higher
of (i) the prime rate of the  Company's  primary  lender or (ii) a rate based on
overnight federal funds transactions with Federal Reserve System members plus 50
basis points.  However,  the Company may elect to have all or any portion of the
outstanding  balance under the facility  accrue interest at a rate based on one,
two,  three or six month LIBOR plus a LIBOR Margin of 150 to 187.5 basis points.
The LIBOR margin is determined  quarterly  based upon the Company's Fixed Charge
Coverage Ratio as defined in the  agreement.  Fees are paid on letters of credit
based on amounts  outstanding at an annual rate  equivalent to the current LIBOR
Margin.

     The new loan  agreement  contains  various  covenants  which,  among  other
things,  limit  certain  corporate  acts  of the  Company  such as  mergers  and
acquisitions; requires the Company to maintain certain minimum financial ratios,
place  limitations on the Company's  ability to incur  additional  debt or grant
security  interests  in its assets and  restricts  the  redemption,  purchase or
retirement  of its  capital  stock.  The Company  was in  compliance  with these
covenants as of June 30, 2000.


<PAGE>


ITEM 2.

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

Background

     The  Company's  consolidated  net  sales  are  comprised  solely  of  sales
generated by the Company's  stores.  Cost of goods sold and  occupancy  expenses
include the cost of merchandise,  rent and occupancy,  and the cost of preparing
merchandise for sale. Selling, general and administrative expenses include store
and supervisory  payroll,  corporate  overhead and non-occupancy  store expenses
including depreciation of kiosks and amortization of goodwill.

Results of operations

Three months ended June 30, 2000 and 1999

     Consolidated  net sales  increased $2.0 million,  or 3%, from $58.2 million
for the three months  ended June 30, 1999 to $60.2  million for the three months
ended June 30, 2000.  This increase was due primarily to a $1.1 million,  or 2%,
increase in comparable store net sales. There were a total of 939 stores open at
June 30, 2000  compared to 934 at June 30, 1999,  an increase of 1%.  During the
three months ended June 30,  2000,  the Company  opened 11 stores and closed 12.
The average jewelry units sold per comparable store during the quarter decreased
4% to 2,400 for the three months  ended June 30, 2000  compared to 2,500 at June
30, 1999.  The average  price per jewelry unit sold  increased to $26.70 for the
three months  ended June 30, 2000  compared to $25.05 for the three months ended
June 30, 1999. The decrease in average jewelry units sold and in the increase in
average price per jewelry unit sold reflect the  introduction of new merchandise
styles  with  higher  gross  profit  margins  and a  reduction  in the  level of
promotional  activity  in the  current  period  compared to the same period last
year.

     Gross profit  increased  $1.3  million,  or 5%, from $25.5  million for the
three  months  ended June 30, 1999 to $26.8  million for the three  months ended
June 30, 2000.  The Company's  gross profit margin  increased from 43.8% for the
three  months  ended June 30, 1999 to 44.6% for the three  months ended June 30,
2000.  This increase  primarily  reflects a change in the Company's  promotional
strategy  and the  introduction  of new  merchandise  with higher  gross  profit
margins  partially  offset by higher rent and occupancy costs as a percentage of
net sales.  Beginning in the last fiscal year, the Company  implemented  certain
changes to its  merchandise  selection that had a favorable  impact on sales and
gross profit margin.  These changes include the  introduction of new 10k and 14k
gold  merchandise  styles with higher gross profit  margins and  increasing  the
selection of non-gold  merchandise.  In  addition,  the Company has modified its
promotional  strategy,  reducing the amount of storewide  promotions in favor of
promotions on selected merchandise.  As a result, a greater amount of sales were
achieved at a higher average unit price and produced better gross profit dollars
and margin.  Rent  increased  slightly as a percentage  of net sales  reflecting
increases  in rent and  occupancy  costs  that  were  only  partially  offset by
increases in net sales.


<PAGE>



     Selling,  general and administrative  expenses were virtually  unchanged at
$25.3  million for the three months  ended June 30, 1999 from $25.4  million for
the three  months ended June 30, 2000.  As a percentage  of net sales,  selling,
general and  administrative  expenses  decreased from 43.6% for the three months
ended  June 30,  1999 to 42.2% for the three  months  ended June 30,  2000.  The
change in  selling,  general  and  administrative  expenses  primarily  reflects
reductions  in  store  supervisory  payroll  and  related  expenses,  offset  by
increases in corporate  overhead,  depreciation and amortization.  In the fourth
quarter of fiscal 2000, the Company  implemented a  reorganization  of its field
supervisory staff, significantly reducing the number of store supervisors.  This
reduction is reflected in lower  supervisor  payroll and related expenses in the
three  months  ended  June 2000  compared  to the same  period  last  year.  The
Company's  corporate  overhead  expense  increased due to higher marketing costs
associated with the Company's revised "Jewelry Club" program,  costs incurred to
close stores that were not  previously  accrued and higher payroll for expansion
in the  Company's  human  resource  and  training  functions.  Depreciation  and
amortization expense increased 5% to $2.1 million in the three months ended June
30, 2000 from $2.0 million in the three months ended June 30, 1999 due primarily
to capital  expenditures  for new stores and the upgrading of kiosks in existing
locations.

     Interest expense  decreased  $56,000,  or 8.0%, from $702,000 for the three
months ended June 30, 1999 to $646,000 for the three months ended June 30, 2000,
and as a percentage of net sales  decreased from 1.2% for the three months ended
June 30, 1999 to 1.1% for the three months ended June 30, 2000.  The decrease in
interest expense reflects lower average balances on the Company's revolving line
of credit agreement and lower average gold consignment  rates,  offset by higher
average  interest  charged on borrowings  under the Company's  revolving line of
credit.

     As a result of the  foregoing,  the Company's net income  increased  from a
loss of  $311,000  for the three  months  ended  June 30,  1999 to net income of
$513,000 for the three months ended June 30, 2000.


<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 2003, operating lease commitments and store expansion.  The Company's
primary  sources of liquidity have been funds provided from  operations,  a gold
consignment  program and a revolving  credit  facility.  The  Company's  working
capital  increased to $38.8 million at June 30, 2000 from $37.8 million at March
31, 2000.  At June 30, 2000,  the Company had  outstanding  borrowings  of $11.0
million  under its revolving  line of credit and $5.2 million of long-term  debt
outstanding,  including $449,000 classified as a current liability. In addition,
the  Company had  consigned  140,209  ounces of gold under its gold  consignment
program valued at approximately $40.4 million.

     Net cash provided by operating  activities  was $10.9 million for the three
months ended June 30, 2000 compared to net cash used in operating  activities of
$505,000 for the same period in the prior year.  Net cash  provided by operating
activities primarily reflects net earnings plus depreciation and amortization, a
decrease in inventory,  and other changes in operating  assets and  liabilities.
Net cash  used in  operating  activities  in the  quarter  ended  June 30,  1999
primarily  reflects increases in inventory deposits made to secure production of
holiday  merchandise  and reductions in accrued  expenses,  partially  offset by
depreciation and amortization.

     Net cash used in investing  activities  was $1.8  million  during the three
months  ended June 30, 2000  compared to $2.6  million  during the three  months
ended June 30, 1999. Net cash used in investing  activities  primarily  reflects
the addition of property,  fixtures and equipment in connection with the opening
of new stores, and the renovation of existing stores.

     Net cash used in financing activities was $6.3 million for the three months
ended June 30, 2000 versus cash provided by financing activities of $2.7 million
during  the  three  months  ended  June 30,  1999.  Net cash  used in  financing
activities  during the three  months  ended  June 30,  2000  primarily  reflects
payments  on the  Company's  then  current  revolving  line of credit as well as
payments on long-term debt. Net cash provided by financing activities during the
three months ended June 30, 1999 primarily reflects  increased  borrowings under
the Company's existing line of credit to fund operations.

     The  Company's  revolving  credit  facility in  existence  at June 30, 2000
provided for maximum  borrowings of $105.0 million through a combination of cash
advances (which may not exceed $65 million) and letters of credit (which may not
exceed $70 million) to support the Company's gold consignment financing program.
At June 30, 2000,  the Company had $49.9 million  available to be borrowed under
its then existing revolving credit facility and was in compliance with covenants
contained in the agreement.



<PAGE>


     On July 24, 2000, the Company entered into a new revolving  credit and gold
consignment  facility with a syndicate of banks led by its primary lender.  This
new  agreement  provides  for maximum  borrowings  of $115.0  million  through a
combination  of cash advances,  standby  letters of credit (which may not exceed
$10.0  million)  and gold  consignment  (which  may not exceed  $80.0  million.)
Amounts borrowed under the new facility  generally accrue interest at the higher
of (i) the prime rate of the  Company's  primary  lender or (ii) a rate based on
overnight federal funds transactions with Federal Reserve System members plus 50
basis points.  However,  the Company may elect to have all or any portion of the
outstanding  balance under the facility  accrue interest at a rate based on one,
two,  three or six month LIBOR plus a LIBOR Margin of 150 to 187.5 basis points.
The LIBOR margin is determined  quarterly  based upon the Company's Fixed Charge
Coverage Ratio as defined in the  agreement.  Fees are paid on letters of credit
based on amounts  outstanding at an annual rate  equivalent to the current LIBOR
Margin.

     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 for the foreseeable future.


<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 successfully  transitioned into the Year 2000 (Y2K) without any
major  disruption of systems or business  operations.  No significant Y2K issues
were  experienced  relative to the Company's  merchandise  and other third party
vendors.  Accordingly,  it has not been necessary to invoke any of the Company's
contingency  plans,  which  were  developed  for use in the  event  of  supplier
delivery delay or failure, or critical system or support equipment  interruption
or failure.  The Company will continue to monitor its computer  applications and
those of its suppliers and vendors throughout the year to ensure that any latent
Y2K matters that may arise are addressed promptly.

     Expenditures for Y2K efforts have been funded through operating cash flows.
Any expenses incurred in the current fiscal year did not have a material adverse
effect on the Company's  financial  condition or operating results.  The Company
does not believe that the Y2K issue  presents a material  risk to the  Company's
future results of operations, liquidity or capital resources.


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, 2000.


<PAGE>



PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

         There are no material legal proceedings against the Company.


ITEM 2.     CHANGES IN SECURITIES AND USE OF PROCEEDS

         None.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

         None.

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

         None.

ITEM 5.     OTHER INFORMATION

     On August 11, 2000, Zale Corporation  ("Zale") and the Company entered into
a definitive agreement for Zale to acquire the Company.

     Under the terms of the  agreement,  a  subsidiary  of Zale will  commence a
tender offer for all of the  outstanding  shares of the Company  common stock at
$21.50  per  share in cash.  The  tender  offer  will be  subject  to at least a
majority of the outstanding the Company shares, on a fully diluted basis,  being
validly  tendered  and not  withdrawn.  The tender offer will also be subject to
regulatory approvals and other customary conditions.

     Copies of the Agreement and Plan of Merger, Tender and Voting Agreement and
Restrictive Covenant Agreement are filed as exhibits to this Form 10-Q.

<PAGE>



ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

a)    Exhibits

            10.64 Agreement and Plan of Merger dated August 11, 2000.

            10.65 Tender and Voting Agreement dated August 11, 2000.

            10.66 Restrictive Covenant Agreement dated August 1, 2000.

               27 Financial Data Schedule.

      b)    Reports on Form 8-K

            During the quarter  ended June 30, 2000, no reports on Form 8-K were
            filed.


<PAGE>



SIGNATURES


     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.





                                          PIERCING PAGODA, INC.
                                                (Registrant)



     Date:  August 11, 2000               /s/ John F. Eureyecko
                                          John F. Eureyecko
                                          President,
                                          Chief Operating Officer
                                          (Principal Financial Officer)



     Date:  August 11, 2000               /s/ Brandon R. Lehman
                                          Brandon R. Lehman
                                          Treasurer
                                          (Principal Accounting Officer)



<PAGE>



                                       INDEX TO EXHIBITS
                                                                    Sequentially
 Exhibit Number                                                       Numbered
                                                                            Page

     10.64    Agreement and Plan of Merger dated August 11, 2000.         20

     10.65    Tender and Voting Agreement dated August 11, 2000.          67

     10.66    Restrictive Covenant Agreement dated August 11, 2000.       90

       27     Financial Data Schedule                                     94