<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 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 OCTOBER 30, 1999

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

                         Commission File Number 0-20035

                              NATURAL WONDERS, INC.
             (Exact name of Registrant as specified in its charter)

          DELAWARE                                      77-0141610
(State or other jurisdiction of               (IRS Employer Identification No.)
incorporation or organization)

                4209 TECHNOLOGY DRIVE, FREMONT, CALIFORNIA 94538
                    (Address of principal executive offices)
                                   (Zip code)

                                  510-252-9600
              (Registrant's telephone number, including area code)

     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
                              ------

Common stock outstanding as of December 13, 1999:  7,865,103  shares of
common stock.

                                     1 of 12

<PAGE>

                              NATURAL WONDERS, INC.

                                      INDEX
<TABLE>
<CAPTION>

                                                                           Page
                                                                          Number
<S>      <C>                                                              <C>
PART I.  FINANCIAL INFORMATION

ITEM 1.  Financial Statements (Unaudited)

         Condensed Statements of Operations                               3
         Quarters ended October 30, 1999 and October 31, 1998

         Condensed Balance Sheets                                         4
         October 30, 1999, January 30, 1999 and October 31, 1998

         Condensed Statements of Cash Flows                               5
         Nine months ended October 30, 1999 and October 31, 1998

         Notes to Condensed Financial Statements for the                  6
         period ended October 30, 1999

ITEM 2.  Management's Discussion and Analysis of                          7-10
         Financial Condition and Results of Operations

PART II. OTHER INFORMATION                                                11

ITEM 1.  Legal Proceedings - None

ITEM 2.  Changes in Securities - None

ITEM 3.  Defaults Upon Senior Securities - None

ITEM 4.  Submission of Matters to a Vote of Security Holders - None

ITEM 5.  Other Information - None

ITEM 6.  Exhibits and Reports on Form 8-K - None

         SIGNATURE                                                        12

</TABLE>
                                     2 of 12



<PAGE>



                              NATURAL WONDERS, INC.
                        CONDENSED STATEMENTS OF OPERATIONS
                     (In thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                   QUARTER ENDED          NINE MONTHS ENDED
                                             ------------------------  -----------------------
                                             OCTOBER 30,  OCTOBER 31,  OCTOBER 30,  OCTOBER 31,
                                                 1999        1998         1999         1998
                                             -----------  -----------  -----------  -----------
<S>                                          <C>          <C>          <C>          <C>
Net sales                                    $ 23,332     $ 24,464     $ 70,299     $ 75,173
Cost of goods sold and
     store occupancy expenses                  17,599       18,786       57,380       58,184
                                             -----------  -----------  -----------  -----------
         Gross margin                           5,733        5,678       12,919       16,989
Selling, general & administrative expenses     11,635       10,426       32,081       31,417
                                             -----------  -----------  -----------  -----------
         Operating loss                        (5,902)      (4,748)     (19,162)     (14,428)

Interest expense and other, net                   263            8          205           83
                                             -----------  -----------  -----------  -----------
         Loss before taxes                     (6,165)      (4,756)     (19,367)     (14,511)
Income tax benefit                              2,281        1,760        7,166        5,369
                                             -----------  -----------  -----------  -----------
         Net loss                            $ (3,884)    $ (2,996)    $(12,201)    $ (9,142)
                                             ===========  ===========  ===========  ===========
Net loss per common share
basic and diluted:                           $  (0.49)    $  (0.38)    $  (1.54)    $  (1.14)

Weighted average common shares outstanding
basic and diluted:                              7,865        7,978        7,915        8,037

Stores open at end of period                      203          194          203          194


</TABLE>

                        See notes to financial statements

                                   3 of 12

<PAGE>



                              NATURAL WONDERS, INC.
                             CONDENSED BALANCE SHEETS
                                 (In thousands)
                                  (Unaudited)

<TABLE>
<CAPTION>

                                                       OCTOBER 30,  JANUARY 30,  OCTOBER 31,
                                                           1999        1999        1998
                                                       -----------  -----------  -----------
                             ASSETS
<S>                                                    <C>          <C>          <C>
Current Assets:

      Cash and cash equivalents                        $    802     $  4,841     $     14
      Short-term investments                                  0        7,380            0
      Merchandise inventories                            53,805       22,707       38,693
      Prepaid income taxes                                7,313        1,403        5,423
      Prepaid expenses and other current assets           4,926        4,318        6,048
                                                       -----------  -----------  -----------
               Total current assets                      66,846       40,649       50,178
Property and Equipment:
      Leasehold improvements                             30,479       30,077       30,173
      Property and equipment under capital lease              0            0        4,189
      Furniture, fixtures and equipment                  31,572       34,106       28,925
                                                       -----------  -----------  -----------
                                                         62,051       64,183       63,287
      Less accumulated depreciation and amortization    (36,041)     (37,510)     (35,662)
                                                       -----------  -----------  -----------
                                                         26,010       26,673       27,625
Other Assets                                              3,310        3,526        2,226
                                                       -----------  -----------  -----------
Total Assets                                           $ 96,166     $ 70,848     $ 80,029
                                                       ===========  ===========  ===========

              LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

      Trade accounts payable                           $ 25,535     $  8,500     $ 12,216
      Accrued compensation and related costs              1,736        2,300        1,467
      Accrued liabilities                                 2,408        3,037        2,133
      Short-term borrowings                              22,331            0       14,500
                                                       -----------  -----------  -----------
              Total current liabilities                  52,010       13,837       30,316
Deferred Rents                                            3,244        3,561        3,630
Commitments and Contingencies
Stockholders' Equity:

      Common stock, par value $.0001; authorized
      17,000,000 shares; issued and outstanding
      7,865,103; 7,951,392; 7,942,289 shares                  1            1            1
      Capital in excess of par value                     33,736       34,073       33,951
      Retained earnings                                   7,175       19,376       12,131
                                                       -----------  -----------  -----------
              Total stockholders' equity                 40,912       53,450       46,083
                                                       -----------  -----------  -----------
Total Liabilities and Stockholders' Equity             $ 96,166     $ 70,848     $ 80,029
                                                       ===========  ===========  ===========
</TABLE>


                        See notes to financial statements


                                   4 of 12
<PAGE>

                              NATURAL WONDERS, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                            NINE MONTHS ENDED
                                                                    --------------------------------------
                                                                    OCTOBER 30, 1999      OCTOBER 31, 1998
                                                                    ----------------      ----------------
<S>                                                                 <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net Loss                                                        $      (12,201)       $    (9,142)
    Adjustments to reconcile net loss to
    net cash used in operating activities:
      Depreciation and amortization                                          5,660              5,411
      Loss on disposition of asset                                             106                978
      Change in operating assets and liabilities:
         Merchandise inventories                                           (31,098)           (15,509)
         Prepaid expenses and other assets                                  (6,302)            (6,139)
         Trade accounts payable                                             17,035              4,219
         Accrued compensation and related costs                               (564)            (1,358)
         Accrued liabilities                                                  (629)            (1,503)
         Income tax payable                                                      0             (1,857)
         Deferred rent                                                        (317)              (175)
                                                                    ----------------      ----------------
         Net cash used in operating activities                             (28,310)           (25,075)

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of short-term investments                                           0             (6,900)
   Sales of short-term investments                                           7,380             20,300
   Purchases of property and equipment                                      (5,103)            (5,170)
                                                                    ----------------      ----------------
         Net cash provided by investing activities                           2,277              8,230

CASH FLOWS FROM FINANCING ACTIVITIES:
   Principal payments on capital lease obligations                               0             (1,327)
   Principal payments on long-term debt                                          0             (2,088)
   Net borrowing on line of credit                                          22,331             14,500
   Purchase of treasury stock                                                 (366)              (896)
   Issuance of common stock under employee stock purchase program               29                 37
   Exercise of stock options and warrants                                        0                282
                                                                    ----------------      ----------------
         Net cash provided by financing activities                          21,994             10,508

NET DECREASE IN CASH AND CASH EQUIVALENTS                                   (4,039)            (6,337)

CASH AND CASH EQUIVALENTS:

   Beginning of period                                                       4,841              6,351
                                                                    ----------------      ----------------
   End of period                                                    $          802                 14
                                                                    ================      ================
CASH PAID DURING PERIOD:

   Interest                                                         $          289                285
   Income taxes                                                     $           97              1,857

</TABLE>

                        See notes to financial statements


                                   5 of 12

<PAGE>

                              NATURAL WONDERS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS AS OF OCTOBER 30, 1999 AND OCTOBER
31, 1998 AND FOR THE THREE AND NINE MONTH PERIODS ENDED OCTOBER 30, 1999 AND
OCTOBER 31, 1998

1.    The financial statements are unaudited and reflect all adjustments
      (consisting only of normal recurring adjustments) which, in the opinion of
      management, are necessary for a fair presentation of the financial
      position, results of operations, and cash flows. The results of operations
      for the interim periods presented are not necessarily indicative of the
      results to be expected for any full fiscal year.

      These financial statements should be read in conjunction with the audited
      financial statements and notes thereto included in the Company's 1998
      Annual Report to Stockholders and Form 10-K for the fiscal year ended
      January 30, 1999 as filed with the Securities and Exchange Commission.

2.    New Accounting Pronouncements: SFAS No. 133, "Accounting for Derivative
      Instruments and Hedging Activities", as delayed by SFAS No. 137, will be
      effective for the Company in June 2000. SFAS No. 133 established
      accounting and reporting standards for derivative instruments embedded in
      other contracts, and hedging activities. It requires that an entity
      recognize all derivatives as either assets or liabilities in the statement
      of financial position and measure those instruments at fair value. The
      Company has not yet evaluated the potential impact of SFAS No. 133 on its
      financial statements.

3.    The Company entered into an amended and restated credit facility agreement
      with a commercial bank effective June 15, 1999 for the purpose of
      financing seasonal working capital needs. This line of credit is for a
      term of three years, with a maximum credit line of $30,000,000, and is
      provided by the same bank as the Company's previous credit facility
      agreement, together with an additional lender acting as administrative
      agent. The line provides for revolving advances up to the lesser of 60% of
      the value of eligible inventory, 80% of the net retail liquidation value
      of eligible inventory, or the maximum credit line. As of October 30, 1999,
      total availability under the line was $25,920,000, of which $22,331,000
      was outstanding. The line includes up to $5,000,000 for the issuance of
      commercial and standby letters of credit. The line of credit must be fully
      repaid for a 30-day consecutive period between January 1 and February 15
      each year. The Company has the option of choosing interest payable at a
      rate based on LIBOR plus 2.25% or a rate equal to the bank's prime rate.
      The agreement contains restrictive covenants, which include maintaining
      certain minimum tangible net worth levels and requiring bank consent for
      the payment of dividends. As of October 30, 1999, the Company was in
      compliance with these covenants. The agreement also includes certain
      prepayment penalties.

      The Company's previous credit facility agreement allowed for total
      borrowings on the line of credit and the letters of credit up to
      $23,000,000 during the increase period or $12,000,000 during the remainder
      of the term. The Company was out of compliance with the bank covenants as
      of May 1, 1999 and received a waiver valid through June 15, 1999, at which
      time the Company entered into the amended and restated credit facility
      agreement.

                                     6 of 12
<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

RESULTS OF OPERATIONS

GENERAL

         As of October 30, 1999, Natural Wonders operated 203 stores in 39
states compared to 194 stores in 36 states as of October 31, 1998. In the first
nine months of 1999, six new permanent stores were opened, five stores were
closed (three holiday stores from 1998 and two permanent stores) and 22
temporary holiday stores were opened, as compared to nine permanent stores
opened, three permanent stores closed and 17 temporary holiday stores opened in
the first nine months of fiscal 1998.

SALES

         During the third quarter of 1999, sales decreased 4.6% over the same
period in 1998. The decrease was primarily due to decreased comparable store
sales. Comparable store sales decreased 6.0% in the third quarter of 1999, as
compared to the same period in 1998. The decrease in the comparable store sales
in the third quarter was primarily due to continued weakness in the Discovery,
Apparel and Media merchandising areas. In the first nine months of 1999, sales
decreased 6.5% over the same period in 1998 due to decreased comparable store
sales of 8.0%.

COST OF GOODS SOLD AND STORE OCCUPANCY EXPENSES

         Cost of goods sold and store occupancy expenses include distribution
center costs and other expenses associated with acquiring inventory. As a
percentage of sales, these costs decreased to 75.4% in the third quarter of 1999
from 76.8% in the third quarter of 1998 and increased to 81.6% in the first nine
months of 1999 from 77.4 % in the first nine months of 1998. The decrease in the
third quarter cost of goods sold as a percentage of sales was due to the effect
of inventory processing and handling costs capitalization associated with an
increasing inventory balance, partially offset by fixed store occupancy costs
for more stores with lower sales per store, while product costs remained flat.
The increase in the first nine months of 1999, compared to 1998 was due to fixed
store occupancy costs for more stores with lower sales per store and a slightly
higher product cost, partially offset by The decrease in the third quarter cost
of goods sold as a percentage of sales was due to the effect of inventory
processing and handling costs capitalization associated with an increasing
inventory balance.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

         Selling, general and administrative expenses, (SG&A), are primarily
non-occupancy store expenses and corporate overhead. As a percentage of sales,
these costs increased to 49.9% in the third quarter of 1999 from 42.6 % in the
third quarter of 1998, due to lower sales per store. Excluding timing variances
and one time adjustments in the third quarter of 1998, selling, general and


                                     7 of 12
<PAGE>

administrative expenses declined slightly from year to year on an absolute
dollar basis. In the first nine months of 1999 these costs increased from 41.8%
in 1998 to 45.6% in 1999, due to lower sales per store. Excluding timing
variances and one-time adjustments in 1998, selling, general and administrative
expenses declined from year to year on an absolute dollar basis.

OPERATING INCOME

         As a result of the foregoing, the operating loss was $5,902,000 or
25.3% of sales in the third quarter of 1999 versus $4,748,000 or 19.4% of sales
in the third quarter of 1998. For the first nine months of 1999, the operating
loss was $19,162,000 or 27.3% of sales compared to an operating loss of
$14,428,000 or 19.2% of sales in the first nine months of 1998.

INTEREST EXPENSE AND OTHER, NET

         Interest Expense and Other, Net was 1.1% of sales in the third quarter
of 1999 compared to 0.0% in the third quarter of 1998 and 0.3% of sales for the
first nine months of 1999 compared to 0.1% of sales in the first nine months of
1998.

NET LOSS

         As a result of the foregoing, the net loss increased to $3,884,000 or
16.6% of sales in the third quarter of 1999 from $2,996,000 or 12.2% of sales in
the third quarter of 1998. For the first nine months of 1999, the net loss
increased from $12,201,000 or 17.4% of sales compared to $9,142,000 or 12.2% of
sales in the first nine months of 1998.

LIQUIDITY AND CAPITAL RESOURCES

         The Company's primary sources of capital in recent years have been net
cash flow from operations. Seasonal working capital requirements have been met
through short-term bank borrowings.

         During the first nine months of fiscal 1999, cash and investments
decreased $11,419,000. This was primarily due to seasonal operating losses,
historically incurred in the first three fiscal quarters and construction and
fixtures for new stores. Increased pre-holiday inventory was paid for with
short- term borrowings and increased accounts payable. In fiscal 1997 the Board
of Directors of the Company authorized the repurchase of up to $2,000,000 of the
Company's outstanding common stock. Beginning in February 1998, the Company
began repurchasing stock and as of the end of the third quarter of 1999 has
purchased 338,257 shares for a total of $1,273,000.

         Compared to the third quarter in the prior year, cash and investments
remained flat. The increase in short-term borrowings, accounts payable and
merchandise inventories was offset by higher operating losses, construction and
fixture purchases for new and remodeled stores, and the repurchase of stock.

         During the remainder of 1999, the Company plans to open 3 new stores
and, during the holiday season, approximately 4 temporary store locations. The
Company anticipates that cash for the remainder of 1999 will primarily be used
for capital expenditures and merchandise inventory for new and temporary
locations, and to purchase inventory for the Company's existing stores,
particularly prior to and during the peak holiday selling season.


                                     8 of 12
<PAGE>

         The Company has conducted a review of its computer systems to identify
those areas that could be affected by the Year 2000 issue. The Company presently
believes, with the new merchandise and financial information system placed in
service in February 1998, the Year 2000 will not pose significant operational
problems. The Company also believes that customers are not likely to be
significantly affected by the Year 2000 issue. However, there can be no
guarantee that the systems of other companies on which the Company's systems
rely will be converted on a timely basis and would not have an adverse effect on
the Company. The Company will utilize both internal and external resources to
reprogram or replace, and test the software for the Year 2000 modifications.
During 1998, the Company rolled out a new operating system along with related
merchandising, distribution and accounting software, and upgraded the payroll
system. In early 1999 the Company also upgraded the existing human resources
information system to be Year 2000 compliant, and implemented a new system in
the third quarter, that is also Year 2000 compliant, and is currently running in
parallel with the old system. All systems that need to be reviewed have been
identified and the Company continues to review questionnaires sent out to the
vendors and testing systems for compliance. The Company does not expect
expenditures related to the Year 2000 issue to be material and as such, costs
associated with Year 2000 have not and are not expected to have a significant
impact on the Company's results of operations, liquidity, or capital resources.
To date, the Company has not accelerated any system replacements or incurred any
costs for upgrades or additional personnel in order to make any systems Year
2000 compliant. It is the opinion of management that the reasonably likely worst
case scenario would arise from external causes such as utility or banking
industry problems, rather than internal system or operational issues. The
Company has developed Year 2000 contingency plans.

          The Company had a credit facility agreement with a commercial bank for
the purpose of financing seasonal working capital needs. The total borrowings on
the line of credit and the letters of credit could not exceed $23,000,000 during
the increase period or $12,000,000 during the remainder of the term. The Company
was out of compliance with the bank covenants as of May 1, 1999 and received a
waiver valid through June 15, 1999. The Company entered into an amended and
restated line effective June 15, 1999. The new line is for a term of three
years, with a maximum credit line of $30,000,000, and is provided by the same
commercial bank, together with an additional lender acting as administrative
agent. The line provides for revolving advances up to the lesser of 60% of the
value of eligible inventory, 80% of the net retail liquidation value of eligible
inventory, or the maximum credit line. As of October 30 1999, total availability
under the line was $25,920,000. The line includes up to $5,000,000 for the
issuance of commercial and standby letters of credit. The line of credit must be
fully repaid for a 30-day consecutive period between January 1 and February 15.
The Company has the option of choosing interest payable at a rate based on LIBOR
plus 2.25% or a rate equal to the bank's prime rate. The agreement contains
restrictive covenants, which include maintaining certain minimum tangible net
worth levels and requiring bank consent for the payment of dividends. As of
October 30, 1999, the Company was in compliance with these covenants. The
agreement also includes certain prepayment penalties.

         The Company believes that current cash and short-term investments
together with its cash flow from operations, and funds available under its
credit facility agreement will be sufficient to fund the Company's operations
for the next 12 months.


                                     9 of 12
<PAGE>

INFLATION AND SEASONALITY

         The Company does not believe that its operations have been materially
affected by inflation during the three recent fiscal years or in 1999 to date.
However, there is no assurance that its business will not be affected by
inflation in the future.

         The Company's business is subject to substantial seasonal variations in
demand. Historically, a significant portion of the Company's sales and
substantially all its net earnings have been realized during the fourth quarter
(which includes the November/December holiday season), and levels of sales and
net earnings have been significantly lower in the first three quarters, usually
resulting in losses in these quarters. If for any reason the Company's sales
were substantially below seasonal norms during the months of November and
December, as was the case in 1998, the Company's annual results would be
adversely affected. The Company's quarterly results of operations may fluctuate
significantly as a result of comparable store sales levels, the timing of new
store openings and the amount of revenue contributed by new stores.

ACCOUNTING PRONOUNCEMENTS

         SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as delayed by SFAS No. 137, will be effective for the Company in
June 2000. SFAS No. 133 established accounting and reporting standards for
derivative instruments embedded in other contracts, and hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The Company has not yet evaluated the potential impact of SFAS
No. 133 on its financial statements.

FUTURE RESULTS

         This report contains forward-looking statements regarding, among other
matters, the Company's future strategy, store opening plans, merchandising
strategy and growth. The forward-looking statements are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements address matters, which are subject to a number of
risks and uncertainties. In addition to the general risks associated with the
operation of specialty retail stores in a highly competitive environment, the
success of the Company will depend on a variety of factors. The success of the
Company's operations depends upon a number of factors relating to consumer
spending, including economic conditions affecting disposable consumer income
such as employment, business conditions, interest rates and taxation. The
Company's continued growth also depends upon the demand for its products, which
in turn is dependent upon various factors, such as the introduction and
acceptance of new products and the continued popularity of existing products, as
well as the timely supply of all merchandise. Reference is made to the Company's
filings with the Securities and Exchange Commission for further discussion of
risks and uncertainties regarding the Company's business.


                                    10 of 12
<PAGE>

PART II. OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     a.  EXHIBITS

         Exhibit 10.28.5: Amendment Number One to Amended and Restated Loan
         and Security Agreement entered into on June 15, 1999 among the Company,
         Wells Fargo Bank, National Association and Foothill Capital
         Corporation.

         Exhibit 11.1:  Computation of Per Share Loss

         Exhibit 27:    Financial Data Schedule

     b.  REPORTS ON FORM 8-K

         No reports on Form 8-K were filed with the Securities and Exchange
         Commission during the third quarter of fiscal 1999.

                                    11 of 12
<PAGE>

                                    SIGNATURE

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.

Dated:  December 14, 1999

                                  NATURAL WONDERS, INC.
                                    (Registrant)

                                  /s/ Peter G. Hanelt
                                  --------------------------------------
                                  Peter G. Hanelt,
                                    Chief Executive Officer, President and
                                  Chief Financial Officer
                                  (Signing on behalf of the registrant and
                                  as Principal Accounting and Financial Officer)

                                    12 of 12