Photoworks 8-K Total sales rise for the first time in eight years

Exhibit 99.1

PHOTOWORKS 1^ST QUARTER DIGITAL REVENUE UP 44%

Total sales rise for the first time in eight years

SEATTLE—Feb. 15, 2007--PhotoWorks(R), Inc. (OTCBB: PHTW), a leading Internet-based digital photo-publishing company, today reported results for the first quarter of fiscal year 2007 ended December 31, 2006.

Ø Digital revenue increased 44%

Ø Non print revenue increased to 83% of overall revenue

Ø Average dollars per customer $64.28

Ø Average dollars per order $42.73

"This achievement is more evidence that our strategy of returning the company to significant growth is working well, as it’s the first quarter in more than eight years that a fiscal first quarter - our big seasonal quarter - had revenue greater than the comparable quarter of the prior year,” said Andy Wood, President and CEO of PhotoWorks. “That fact, combined with our increase in order sizes and volumes in high margin products, such as photo books, cards, calendars and keepsakes, demonstrate the success of PhotoWorks’ philosophy of giving customers new, more sophisticated and creative ways to express themselves, indulge their passions and preserve their digital memories.”

For the 1st quarter for 2007:

Digital revenue totaled $3.3 million, an increase of 44% from $2.3 million in the 1st quarter of 2006. Traditional film processing revenue totaled $933,000, a 43.1% decline from $1.6 million. Total net revenue of $4.3 million was up by almost 8% over the same quarter last year, when net revenue totaled $4.0 Million.

More than 83% of PhotoWorks’ revenue was driven from the sale of non-print products, such as customer created books, cards and calendars. In addition, average dollars per customer was $65.28 and average dollars per order was $42.73.

The Company reported a net loss of $2.3 million compared to a net loss of $328,000 in the first quarter of fiscal year 2006. The majority of the loss reported for the 1^st quarter of 2007 was due to a non-recurring, non-cash beneficial conversion of $1.8 million as a consequence of a bridge note converting to stock during the quarter.

About PhotoWorks, Inc.

PhotoWorks(R), Inc. is an Internet-based digital photo-publishing company. The company's web-based services allow PC and Mac users to create hardbound photo books, customized greeting cards, calendars, prints and other photography-sourced products straight from their computers. Formerly known as Seattle Film Works, PhotoWorks has a 30-year national heritage of helping photographers share and preserve their memories with innovative and inspiring products and services. More information on the Company is available at www.photoworks.com or by e-mailing customercare@photoworks.com.

PhotoWorks(R) is a trademark of PhotoWorks, Inc.

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PHOTOWORKS, INC. CONSOLIDATED BALANCE SHEETS (in thousands)
		December 31,		September 30,
ASSETS		2006		2006
		(Unaudited)		(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	4,797	$	825
Employee advances		-		3
Short-term vendor receivable		78		95
Inventories		192		183
Prepaid expenses		158		146
TOTAL CURRENT ASSETS		5,225		1,252
PROPERTY AND EQUIPMENT, NET		449		383
OTHER ASSETS
Long-term vendor receivable		95		95
Lease deposits		24		24
TOTAL OTHER ASSETS		119		119
TOTAL ASSETS	$	5,793	$	1,754
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable	$	2,186	$	1,133
Accrued compensation		207		370
Other accrued expenses		194		179
ITC penalty, current portion		201		201
Deferred revenues		271		227
TOTAL CURRENT LIABILITIES		3,059		2,110
LONG-TERM LIABILITIES
ITC penalty, non-current portion		250		250
Capital lease obligations, net of current portion		-		-
Debentures Payable		-		1,274
Debenture interest		-		115
TOTAL LONG-TERM LIABILITIES		250		1,639
TOTAL LIABILITIES		3,309		3,749
COMMITMENTS AND CONTINGENCIES		-		-
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, 2,000,000 shares authorized
$0.01 per value, 0 shares issued and outstanding
Common stock, 101,250,000 shares authorized,
$0.01 par value; 39,440,042 and 19,799,922 shares
issued and outstanding, respectively		394		198
Additional paid-in capital		32,622		26086
Accumulated deficit		(30,532)		(28,279)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)		2,484		(1,995)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY/DEFICIT	$	5,793	$	1,754
The accompanying condensed notes are an integral part of these interim consolidated financial statements.

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PHOTOWORKS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands)
	Three Months Ended
	December 31, 2006 (Unaudited)	December 24, 2005 (Unaudited)
REVENUES
Digital	$ 3,344	$ 2,323
Film	933	1,641
TOTAL REVENUES	$ 4,277	$ 3,964
COST OF GOODS AND SERVICES
Digital	1,966	1,095
Film	489	1,136
TOTAL COST OF GOODS AND SERVICES	2,455	2,231
GROSS PROFIT	1,822	1,733
OPERATING EXPENSES
Sales and marketing	1,034	1,223
Engineering	561	450
General and administrative	526	380
TOTAL OPERATING EXPENSES	2,121	2,053
LOSS FROM OPERATIONS	(299)	(320)
OTHER INCOME (EXPENSE)
Interest Income	23	3
Benefit conversion/non-cash Interest	(1,790)
Stock option valuation	(107)	(51)
Depreciation	(73)	(10)
Other income (expense), net	(7)	50
TOTAL OTHER INCOME (EXPENSE)	(1,954)	(8)
LOSS BEFORE INCOME TAXES	(2,253)	(328)
INCOME TAX	-	-
NET LOSS	$ (2,253)	$ (328)
BASIC AND DILUTED NET LOSS PER COMMON SHARE	$ 0.06	$ 0.02
WEIGHTED AVERAGE NUMBER OF COMMON
STOCK SHARES OUTSTANDING, BASIC AND DILUTED	39,440,042	19,794,672
The accompanying condensed notes are an interim part of these interim consolidated financial statements.

MEDIA CONTACT:

Hal Bienstock

Maloney & Fox

646.356.8307

hbienstock@maloneyfox.com