PhotoChannel Networks Inc.
TSX VENTURE : PN
OTC Bulletin Board : PNWIF

PhotoChannel Networks Inc.

January 29, 2007 20:39 ET

PhotoChannel Releases Year End, Audited Financials

Records First EBITDA Positive Quarter in Q4

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Jan. 29, 2007) - PhotoChannel Networks Inc. (TSX VENTURE:PN)(OTCBB:PNWIF) ("PhotoChannel" or the "Company"), the leading innovator in online media solutions for retailers, reports its financial results for the one year period ending September 30, 2006. The following discussion is qualified in its entirety by reference to the company's audited financial statements and accompanying management discussion and analysis for the years ended September 30, 2006 and 2005, accessible on SEDAR at www.sedar.com.

During the year, the Company saw its large retail partners continue an aggressive marketing campaign of their online services. The Company believes this will continue during 2007 as they attempt to maintain and increase their market share. The marketplace, where PhotoChannel provides one of the dominant online solutions for photofinishers, continues to accelerate rapidly. The unique features of the new PNI Digital Media Platform, such as the up-sell to higher margin items, is providing retailers with opportunities to expand their service capabilities to their consumers.

In the last year PhotoChannel has increased the focus of its sales efforts in the US and International markets by aggressively targeting large retailers and educating the industry on the value of the new PNI Digital Media Platform. This resulted in the Company signing a contract with CVS Pharmacy, Inc. one of the United States' largest retailers.

"PhotoChannel is pleased to report the strongest year in its history, as we continue to experience triple digit transaction revenue growth year over year," states Peter Fitzgerald, Chairman and CEO of PhotoChannel. "During the year the Company invested heavily in both time and money on the development of the new PNI Digital Media platform, which now allows us to deliver best in class site experience for our retailers and their customers. With this new platform we can compete with anyone in the world and it provides us the ability to offer other forms of digital content, as we move forward. We are looking forward to the continued growth of revenues from both existing and new retailers."

2006 Fiscal Highlights

- Records first quarter of EBITDA positive (fourth quarter fiscal 2006), with net loss of $185,000, a decrease of 82% from a $1 million net loss in the corresponding quarter of fiscal 2005.

- Records revenues for a fiscal year of over $4 million, up 93% from $2.1 million in fiscal 2005.

- Invested over $2.2 million in Research and Development, which included a significant investment in an online music initiative.

- At December 31, 2006 the Company had over $3 million cash on hand.

- Signed contract with Costco Wholesale in Canada and CVS Pharmacy, Inc. in the United States both of which are now connected for direct-to-store one-hour printing.

About PhotoChannel- Founded in 1995, PhotoChannel operates PNI Digital Media to provide services for major retailers, wireless carriers and content providers. The PNI Digital Media Platform connects consumer ordered digital content with retailers that have on demand manufacturing capabilities for the production of merchandise. Currently PNI Digital Media generates transactions for retailers and their thousands of locations across North America, including Wal-Mart Canada, CVS/pharmacy, Eckerd Drugs and Costco Canada. For more information please visit www.photochannel.com.

PhotoChannel relies upon litigation protection for "forward-looking" statements.

Caveat

The statements that are not historical facts contained in this release are forward-looking statements that involve risks and uncertainties. PhotoChannel's actual results could differ materially for those expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, changes in technology, employee retention, inability to deliver on contracts, failure of customers to continue marketing the online solution, competition, general economic conditions, foreign exchange and other risks detailed in the Company's annual report and other filings. Additional information related to the Company can be found on SEDAR at www.sedar.com.

WARNING: The TSX Venture Exchange has neither approved nor disapproved the information contained in this release.

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