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): March 28, 2005

PHOTOWORKS, INC.

(Exact name of registrant as specified in its charter)

1260 16th Avenue West

Seattle, Washington 98119

(Address of principal executive office)

(206) 281-1390

(Registrant’s telephone number including area code)

Item 1.01. Entry into a Material Definitive Agreement.

On March 28, 2005, the Board of Directors of the Company approved the recommendation of the Compensation Committee of the Board and raised the annual base salary of the Company's Chief Executive Officer, Mr. Philippe Sanchez, to $275,000. On March 30, 2005, the Board also gave Mr. Sanchez a cash bonus of $67,500.

SIGNATURE

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