(Mark One)

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

For the quarterly period ended: March 31, 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: 0-11927

(Exact name of registrant as specified in its charter)

Delaware 31-1080650
(State or other jurisdiction of (IRS Employer Identification Number)

Incorporation or organization)

(Address of principal executive offices with Zip Code)

(Registrant's telephone number, including area code)

(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 ____

APPLICABLE ONLY TO ISSUERS IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes______ No______

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of common stock:

As of May 8, 2000:

7,738,521 - Voting Common, 0 - Non - Voting Common

Part I. Financial Information

Part II. Other Information

Moto Photo, Inc. and Subsidiaries

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (all of which are of normal recurring nature) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2000, are not necessarily indicative of the results that may be expected for the year ended December 31, 2000.

The internal accounting for the Company is on a fiscal calendar quarter basis. The fiscal quarter dates may vary from the calendar quarter dates, (i.e., April 1 vs. March 31 for the first quarter 2000), except for the fourth quarter which ends on December 31. The differences in ending dates are immaterial.

The financial statements at March 31, 2000, have been derived from the unaudited accounting records at that date and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect amounts reported in the financial statements. Actual results could differ from those estimates.

For further information, refer to the consolidated financial statements and footnotes thereto included in Moto Photo, Inc. and Subsidiaries' annual report on Form 10-K for the year ended December 31, 1999.

Certain amounts from the prior period have been reclassified to conform to the current period presentation.

Noncash items in the first quarter of 2000 included $220,144 of capital expenditures for the company store segment from entering into capitalized leases and trade-in of equipment.

The following table sets forth the calculation of basic and diluted earnings per share for the periods indicated.

The Company reported a net loss of $546,241, or a loss per common share, basic and diluted, of $.09 for the first quarter 2000 compared to a net loss of $193,207, or a loss per common share, basic and diluted, of $.03 for the first quarter 1999. Per share calculations are made after provision for preferred dividend requirements. The 2000 dividend requirement is an imputed amount, and no cash payments are required. Due to the Company's common share price of approximately $1.00, certain securities could become dilutive and have a significant impact on diluted earnings per share in subsequent periods.

Development segment revenue decreased by $37,000, or 42%, in 2000 compared to 1999 due to the Company changing its franchise offering and having a lower cost franchise fee program for stores that open by December 31, 2000.

Company store revenue was up $403,000, or 15%, in 2000 compared to 1999 primarily due to the 16 company stores opened or acquired during the last half of 1999 and the first quarter 2000.

Company store segment operating contribution decreased by $427,000 in 2000 compared to 1999. Of
this, $300,000 was from losses incurred during the ramp-up phase of the new stores, $28,000 from the cyclical weak first quarter of the acquired stores, and $99,000 from stores opened more than one year, primarily as a result of 4.6% lower revenues.

The Company implemented in 2000 a Discovery Team whose mission is to explore strategies to test, refine, and implement conceptual enhancements, new technologies and new ways of communicating with customers, franchisees and employees. This activity increased selling general and administrative expenses by approximately $50,000.

Depreciation and amortization expenses increased by $89,000, or 32%, in 2000 compared to 1999 primarily as a result of depreciation on the property and equipment in the new company stores.

Interest expense increased $103,000, or 96%, in 2000 compared to 1999 due to increased borrowings to support Company store asset additions, the expansion discussed above, higher interest rates during the quarter and the effect of converting $2,700,000 of accounts payable to a term note. Interest income, which is primarily interest income from notes receivable and temporary investments of cash, decreased in 2000 due to lower notes receivable and cash balances.

Cash used in operating activities decreased by $1,800,000 in 2000 compared to 1999, largely due to a reduction of accounts payable of $1,500,000 due to timing differences, and a $350,000 larger loss.

In 2000, net cash provided by investing activities was $356,000 as compared to net cash utilized by investing activities of $312,000 in 1999. Increases in collections of note receivable of $420,000 and a decrease of $209,000 in cash purchases of property and equipment were primarily responsible for the differences

Net cash utilized in financing activities increased by $631,000 in 2000 compared to 1999 primarily due to principal payments exceeding proceeds from borrowings by $800,000.

All statements, other than statements of historical fact included in this report, which address activities, events or developments which the Company expects or anticipates will or may occur in the future constitute "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, and expected future developments, as well as other factors it believes are appropriate in the circumstances. These forward looking statements are subject to all the risks and uncertainties incident to the Company's business, including, without limitation, competition in the photo processing industry, possible development of new technology affecting the Company's ability to compete, uncertainties with respect to the ability of the Company to expand its business through franchising, new store development, the level of consumer acceptance of the Company's programs and services, continued stability in market prices of key supply items, decline in demand for the products and services offered, continuity of management, liquidity of the franchise system, the ability of the Company to locate and obtain favorable store sites at acceptable lease terms, management's ability to manage its franchisee, lender and supply relationships, economic conditions, the effect of severe weather or natural disasters, and competitive pressure from other retailers. For all of the foregoing reasons, actual results may vary materially from the forward looking statements. The Company assumes no obligation to update any forward looking statements.

PART II. OTHER INFORMATION

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

1. Exhibits: See Exhibit Index immediately preceding exhibits.
2. Reports on Form 8-K. The Company filed no reports on Form 8-K during the quarter ended March 31, 2000.

SIGNATURE

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

Date: May 10, 2000

EXHIBITS TO

FORM 10-Q

for the quarter ended

March 31, 2000

Copies of the following documents are filed as exhibits to this report:

No. Description

*10.1 Cancellation and Release Agreement, dated as of March 21, 2000, with Lloyd F. Noland

27.0 Financial Data Schedule

* Indicates compensatory plan