UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): ~~May~~June 2621, 2006

PhotoWorks, Inc.

(Exact name of registrant as specified in its charter)

0-15338

(Commission File Number)

71 Columbia Street, Seattle, WA 98104

(Address of principal executive offices, with zip code)

206-281-1390

(Registrant's telephone number, including area code)

[Former Name or Former Address, if applicable]

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ]

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

~~0225103~~Item 1.0801 Entry into a Material Definitive Agreement

~~Item~~On 1June 21, 2006, Andrew Wood became a director of the Registrant.01 As ~~Entry~~part ~~into~~of Registrant’s compensation program for independent directors, Mr. Wood was granted an option to acquire 75,000 shares of Registrant’s common stock at an exercise price of $.31, the fair market value on the date of grant. The options vest ratably on a ~~Material~~quarterly ~~Definitive~~basis ~~Agreement~~over a four year period. The options have a term of ten years.

OnItem ~~May~~5.02. ~~26,~~Departure ~~2006, Registrant entered into Convertible Note and Warrant Purchase Agreements with respect to the sale by Registrant~~ of ~~convertible~~Directors ~~notes~~or inPrincipal ~~the~~Officers; ~~principal~~Election ~~amount~~ of ~~$2,500,000~~Directors; ~~and~~Appointment ~~warrants to purchase 1,250,000 shares~~ of ~~Common~~Principal ~~Stock. See Item 2.03 for the details of the transaction.~~Officers

~~Item~~ 2(d) On June 21, 2006, Mr.~~03.~~ ~~Creation~~Andrew ofWood became a ~~Direct~~member ~~Financial~~of ~~Obligation~~the orBoard anof ~~Obligation~~Directors. The ~~under~~size anof ~~Off-Balance~~the ~~Sheet~~board ~~Arrangement~~was ofincreased ato ~~Registrant~~six at that time.

~~(a) On~~Item ~~May 26, 2006, Registrant closed a $2,500,000 bridge financing~~5. ~~Registrant~~03 ~~issued~~Amendments ~~notes in the principal amount of $2,500,000 and issued warrants~~ to ~~purchase~~Articles ~~1,250,000 shares~~ of ~~Common~~Incorporation ~~Stock. The~~or ~~notes~~Bylaws; ~~bear~~Change ~~interest~~in atFiscal ~~10% per annum and interest is payable quarterly commencing June 30, 2006. The principal and accrued interest is due and payable March 29, 2011.~~ Year

InOn ~~the~~June ~~events~~22, ~~that~~2006, the Registrant ~~completes~~amended anits ~~equity~~Articles ~~financing~~of onIncorporation ~~or prior~~ to ~~September~~eliminate ~~30,~~its ~~2007~~staggered inboard. Directors ~~the amount of at least $2,000,000 , the notes~~ will ~~automatically~~now ~~convert~~be ~~into~~elected ~~shares~~annually ofto ~~the~~serve ~~class~~until ~~of equity issued in~~ the ~~financing~~next atannual ~~the same price~~meeting. InThe ~~the~~amendment ~~event~~was ~~such~~approved ~~an equity financing is not completed~~ by ~~September~~shareholders ~~30,~~at ~~2007, or in~~ the ~~event~~Special ofMeeting aheld ~~sale~~on orJune ~~merger of Registrant to or into another company prior to September 30~~28, ~~2007, the notes will be convertible into common stock at $~~2005.~~54 per share.~~

~~The~~Item ~~warrants~~9.01 ~~are~~Financial ~~exercisable~~Statements ~~immediately~~ and ~~expire on March 29, 2011. The warrants have an exercise price of $.40 per share.~~ Exhibits

~~Item~~(d) ~~3.02 Unregistered Sales of Equity Securities~~Exhibits

On3.7 ~~May~~Amendment ~~26, 2006, Registrant closed a bridge financing round that included convertible notes and warrants~~ to ~~purchase~~Third ~~Common~~Amended ~~Stock. Registrant sold the notes~~ and ~~warrants~~Restated ~~directly~~Articles ~~and~~of ~~no underwriter was involved in the transaction.~~Incorporation

~~The warrants are exercisable immediately and expire on March 29, 2011. The warrants have an exercise price of $.40 per share.~~-2-

In the events that Registrant completes an equity financing on or prior to September 30, 2007 in the amount of at least $2,000,000, the notes will automatically convert into shares of the class of equity issued in the financing at the same price. In the event such an equity financing is not completed by September 30, 2007, or in the event of a sale or merger of Registrant to or into another company prior to September 30, 2007, the notes will be convertible into common stock at $.54 per share. SIGNATURES

~~Registrant~~Pursuant ~~entered~~to ~~into~~the anrequirements ~~Investor~~of ~~Rights~~the ~~Agreement~~Securities ~~with~~Exchange ~~each~~Act ~~investor~~of in1934, the ~~transaction whereby~~ Registrant ~~agreed~~has toduly ~~file~~caused athis ~~registration~~report ~~statement under the Securities Act with respect~~ to ~~shares~~be ofsigned ~~Common~~on ~~Stock~~its ~~issuable~~behalf ~~upon~~by ~~conversion of~~ the ~~notes~~undersigned ~~and~~hereunto ~~exercise~~duly ~~of the warrants~~authorized.

~~The~~PhotoWorks, ~~notes and warrants were sold to investors who are accredited investors as defined in Rule 501 of Regulation D~~Inc. ~~The sale of the notes and warrants was exempt from registration under the Securities Act of 1933 by virtue of Section 4(2) thereof and Regulation D promulgated thereunder.~~

~~0225103.08~~Date: ~~-2-~~June 22, 2006 By: /s/ Philippe Sanchez

~~Item~~Philippe ~~9.01 Financial Statements and Exhibits~~Sanchez

~~(d) Exhibits.~~President

~~10.1 Convertible Note and Warrant Purchase Agreement dated as of May 26, 2006~~-3-

10.2 Form of Warrant

10.3 Form of Convertible Note

10.4 Form of Investor Rights Agreement

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 hereunto duly authorized.

PhotoWorks, Inc.

Date: June 1, 2006 By: /s/ Philippe Sanchez

Philippe Sanchez

President

0225103.08 -3-

Washington

91-0964899

(State or other jurisdiction of

(I.R.S. Employer Identification No.)

incorporation)

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