<PAGE>

                                  FORM 10-K/A

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

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

                 For the fiscal year ended SEPTEMBER 26, 1998

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

                For the transition period from ______ to ______

                         Commission file No.  0-15338

                            SEATTLE FILMWORKS, INC.
                            -----------------------
            (Exact name of registrant as specified in its charter)


            Washington                                  91-0964899
 ----------------------------------                 -------------------
   (State or other jurisdiction                       (IRS Employer
 of incorporation or organization)                  Identification No.)


  1260 16th Avenue West, Seattle,  WA                      98119
---------------------------------------             ---------------------
(Address of principal executive offices)                (Zip Code)

 Registrant's telephone number, including area code:  (206) 281-1390

 Securities registered pursuant to Section 12(b) of the Act:   None

 Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
 value $.01 per share.

     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 the
filing requirements for the past 90 days.  Yes:  [X]   No:  [_]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]

     As of November 30, 1998, there were issued and outstanding 16,242,011
shares of Common Stock, par value $.01 per share.  As of November 30, 1998, the
aggregate market value of the Registrant's Common Stock held by non-affiliates
of the Registrant was $47,041,269, based on the last sale price of the
Registrant's Common Stock as reported by the Nasdaq National Market.

                     Documents incorporated by reference:

     Portions of the registrant's proxy statement relating to its 1998 annual
meeting of shareholders, to be held on February 9, 1999, are incorporated by
reference into Part III of this Annual Report on Form 10-K.

                                  Page 1 of 29

                           Exhibit Index at Page 25

<PAGE>

Explanatory Note

     This 10-K/A is being filed to clarify or expand certain disclosures in
Notes A, B, H, and J of Notes to Consolidated Financial Statements set forth in
Item 8 of this report.  This amendment does not restate reported results for any
period.


             ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                       2
<PAGE>

               Report of Ernst & Young LLP, Independent Auditors


Shareholders and Board of Directors
Seattle FilmWorks, Inc.

     We have audited the accompanying consolidated balance sheets of Seattle
FilmWorks, Inc. (the Company) as of September 26, 1998 and September 27, 1997,
and the related consolidated statements of income, shareholders' equity, and
cash flows for each of the three years in the period ended September 26, 1998.
Out audits also included the financial statement schedule listed in the Index at
Item 14(a).  These financial statements and schedule are the responsibility of
the Company's management.  Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Seattle FilmWorks, Inc. at September 26, 1998 and September 27, 1997, and the
results of its operations and its cash flows for each of the three years in the
period ended September 26, 1998, in conformity with generally accepted
accounting principles.  Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.


                                       /S/ ERNST & YOUNG LLP

Seattle, Washington
November 6, 1998

                                       3
<PAGE>

                            SEATTLE FILMWORKS, INC.
                          CONSOLIDATED BALANCE SHEETS
                (in thousands, except per share and share data)

                                    ASSETS
<TABLE>
<CAPTION>
                                                                         September 26,  September 27,
                                                                             1998           1997
                                                                         -------------  -------------
<S>                                                                           <C>            <C>
CURRENT ASSETS
 Cash and cash equivalents                                                    $11,780        $10,252
 Securities available-for-sale                                                  4,555          5,062
 Accounts receivable, net of allowance for doubtful accounts
   of $208 and $240 in 1998 and 1997, respectively                              1,914          3,680
 Inventories                                                                    7,561          8,998
 Capitalized promotional expenditures                                             121            211
 Prepaid expenses and other                                                       831            743
 Deferred income taxes                                                            387            313
                                                                              -------        -------
   TOTAL CURRENT ASSETS                                                        27,149         29,259

FURNITURE, FIXTURES, AND EQUIPMENT,
 at cost, less accumulated depreciation (Note D)                               10,954          7,564

CAPITALIZED CUSTOMER ACQUISITION EXPENDITURES (Note B)                         16,800         13,882

DEPOSITS AND OTHER ASSETS                                                         213            285

NONCOMPETE AGREEMENT (Note C)                                                                    376
                                                                              -------        -------
TOTAL ASSETS                                                                  $55,116        $51,366
                                                                              =======        =======

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
<S>                                                                           <C>           <C>
 Accounts payable                                                             $ 2,359        $ 3,588
 Current portion of capital lease obligation                                      174
 Accrued expenses                                                               1,376          1,402
 Accrued compensation                                                           1,570          1,931
 Income taxes payable                                                               7          2,450
                                                                              -------        -------
   TOTAL CURRENT LIABILITIES                                                    5,486          9,371

LONG-TERM CAPITAL LEASE OBLIGATIONS, net of current portion (Note F)                             706

DEFERRED INCOME TAXES                                                           5,223          4,394
                                                                              -------        -------
TOTAL LIABILITIES                                                              11,415         13,765

SHAREHOLDERS' EQUITY (Notes H and I)
 Preferred Stock, $.01 par value, authorized 2,000,000 shares, none issued
 Common Stock, $.01 par value, authorized 101,250,000 shares, issued and
   outstanding 16,641,891 and 16,436,258 in 1998 and 1997, respectively           167            164
 Additional paid-in capital                                                       981          2,459
 Retained earnings                                                             42,553         34,978
                                                                              -------        -------
   TOTAL SHAREHOLDERS' EQUITY                                                  43,701         37,601
                                                                              -------        -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                    $55,116        $51,366
                                                                              =======        =======
</TABLE>
See notes to consolidated financial statements.

                                       4
<PAGE>

                            SEATTLE FILMWORKS, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                (in thousands, except per share and share data)
<TABLE>
<CAPTION>


                                                    Fiscal Years Ended
                                       --------------------------------------------
                                       September 26,  September 27,  September 28,
                                           1998           1997            1996
                                       =============  =============  ==============
<S>                                    <C>            <C>            <C>

Net revenues                             $    96,716    $   101,189    $    84,152

Cost of goods and services                    56,023         58,624         49,159
                                         -----------    -----------    -----------
GROSS PROFIT                                  40,693         42,565         34,993

Operating expenses:
 Customer acquisition costs                   17,903         15,764         11,981
 Other selling expenses                        7,654          7,789          6,911
 Research and development                        588            696            732
 General and administrative                    4,361          3,503          3,460
                                         -----------    -----------    -----------
  Total operating expenses                    30,506         27,752         23,084
                                         -----------    -----------    -----------

INCOME FROM OPERATIONS                        10,187         14,813         11,909

Other income (expense):
 Interest income                                 731            561            449
 Nonoperating income (expense), net              209             13           (121)
                                         -----------    -----------    -----------
  Total other income                             940            574            328
                                         -----------    -----------    -----------

INCOME BEFORE INCOME TAXES                    11,127         15,387         12,237

Provision for income taxes (Note G)            3,552          5,242          4,220
                                         -----------    -----------    -----------
NET INCOME                               $     7,575    $    10,145    $     8,017
                                         ===========    ===========    ===========

Diluted earnings per share                      $.43           $.57           $.45
                                         ===========    ===========    ===========
Basic earnings per share                        $.45           $.62           $.50
                                         ===========    ===========    ===========
Weighted average shares and
 equivalents outstanding - Diluted        17,474,000     17,770,000     17,726,000
                                         ===========    ===========    ===========
Weighted average shares - Basic           16,652,000     16,307,000     16,170,000
                                         ===========    ===========    ===========

</TABLE>
See notes to consolidated financial statements.

                                       5
<PAGE>

                            SEATTLE FILMWORKS, INC.
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                       (in thousands, except share data)
<TABLE>
<CAPTION>

                                                               Common Stock
                                            --------------------------------------------------
                                               Shares      Par    Paid-In   Retained
                                            Outstanding   Value   Capital   Earnings   Total
                                            ============  ======  ========  ========  ========
<S>                                         <C>           <C>     <C>       <C>       <C>
BALANCE AS OF SEPTEMBER 30, 1995             16,073,484    $160   $   954    $16,816  $17,930

 Stock options exercised                        155,902       2       350                 352
 Income tax benefit of stock options                                  424                 424
 Employee stock purchase plan                    20,172               162                 162
 Purchase and retirement of Common Stock        (17,712)             (210)               (210)
 Net income                                                                    8,017    8,017
                                             ----------     ---    ------    -------  -------
BALANCE AS OF SEPTEMBER 28, 1996             16,231,846     162     1,680     24,833   26,675

 Stock options exercised                        247,002       2       358                 360
 Income tax benefit of stock options                                  875                 875
 Employee stock purchase plan                    37,410       1       369                 370
 Purchase and retirement of Common Stock        (80,000)     (1)     (823)               (824)
 Net income                                                                   10,145   10,145
                                             ----------     ---     -----    -------  -------
BALANCE AS OF SEPTEMBER 27, 1997             16,436,258     164     2,459     34,978   37,601

 Stock options exercised                      1,013,618      10       778                 788
 Income tax benefit of stock options                                2,266               2,266
 Employee stock purchase plan                    35,382       1       299                 300
 Purchase and retirement of Common Stock       (843,367)     (8)   (4,821)             (4,829)
 Net income                                                                    7,575    7,575
                                             ----------     ---   -------    -------  -------
BALANCE AS OF SEPTEMBER 26, 1998             16,641,891    $167   $   981    $42,553  $43,701
                                             ==========    ====   =======    =======  =======

</TABLE>
See notes to consolidated financial statements.

                                       6
<PAGE>

                            SEATTLE FILMWORKS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                             Fiscal Years Ended
                                                             ------------------------------------------------
                                                              September 26,     September 27,   September 28,
                                                                  1998              1997            1996
                                                             ===============  ===============  ==============
<S>                                                        <C>                  <C>             <C>
OPERATING ACTIVITIES:
 Net income                                                       $  7,575        $ 10,145        $  8,017
 Charges to income not affecting cash:
  Depreciation                                                       3,422           2,488           1,642
  Amortization of non-compete                                          375             376             376
  Amortization of capitalized customer
    acquisition expenditures                                        16,558          14,723          10,772
  Deferred income taxes                                                755             790           1,379
 Net change in receivables, inventories,
    payables, and other                                              1,302          (1,785)         (2,802)
 Capitalized promotional expenditures, net                              90              27             (80)
 Additions to capitalized customer
  acquisition expenditures                                         (19,476)        (17,271)        (14,750)
                                                                  --------        --------        --------
NET CASH FROM OPERATING ACTIVITIES                                  10,601           9,493           4,554

INVESTING ACTIVITIES:
 Purchase of furniture, fixtures, and equipment                     (5,750)         (4,779)         (4,067)
 Purchases of securities available-for-sale                         (4,898)         (9,642)         (7,409)
 Sales of securities available-for-sale                              5,405           9,139           4,195
                                                                  --------        --------        --------
NET CASH USED IN INVESTING ACTIVITIES                               (5,243)         (5,282)         (7,281)

FINANCING ACTIVITIES:
 Proceeds from issuance of Common Stock                              1,088             730             512
 Payment on purchase of Common Stock                                (4,829)           (824)           (210)
 Payment on capital lease obligations                                  (89)
                                                                  --------        --------        --------
NET CASH FROM (USED IN) FINANCING ACTIVITIES                        (3,830)            (94)            302
                                                                  --------        --------        --------
INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS                                                    1,528           4,117          (2,425)

Cash and cash equivalents
 at beginning of year                                               10,252           6,135           8,560
                                                                  --------        --------        --------
CASH AND CASH EQUIVALENTS
 AT END OF YEAR                                                   $ 11,780        $ 10,252        $  6,135
                                                                  ========        ========        ========
Supplemental cash flow information:
 Cash paid for interest                                           $     26
 Cash paid for income taxes                                       $  3,315        $  2,095        $  2,300

Supplemental non-cash financing and investing activity:
 Capital lease obligation incurred                                $    969
</TABLE>

See notes to consolidated financial statements.

                                       7
<PAGE>

                            SEATTLE FILMWORKS, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  A --  OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SEATTLE FILMWORKS, INC. and subsidiaries (the "Company") is a leading direct-to-
consumer marketer and provider of high-quality amateur traditional
photofinishing and digital imaging services and products.  The Company offers an
array of complementary services and products, primarily on a mail-order basis,
under the brand name SeattleFilmWorks.  To a lesser extent, the Company provides
services, products, and photofinishing supplies on a wholesale basis to a
variety of commercial customers.

PRINCIPLES OF CONSOLIDATION:  The consolidated financial statements include
Seattle FilmWorks, Inc. and its subsidiaries, all of which are wholly-owned.
Significant inter-company accounts and transactions have been eliminated in
consolidation.

CASH AND CASH EQUIVALENTS:  Cash and cash equivalents include cash on hand and
highly liquid short-term investments with a maturity of three months or less on
the date of purchase.

SECURITIES AVAILABLE-FOR-SALE:  Securities available-for-sale consist primarily
of bankers' acceptances, commercial paper, and government securities issued by
financial institutions with high credit ratings; all of which mature no later
than November 1999.  Company policy limits the amount of credit exposure with
any one financial institution.  The fiscal 1998 and fiscal 1997 balance
consisted primarily of government securities.  Securities available-for-sale are
carried at amortized cost, which approximates market.

OTHER FINANCIAL INSTRUMENTS:  At September 26, 1998, the carrying value of
financial instruments such as trade receivables and payables, approximate their
fair values, based on the short-term maturities of these instruments.

ACCOUNTS RECEIVABLE:  Accounts receivable primarily include amounts due from
mail-order customers from the sale of related photographic products and amounts
due from wholesale customers from the sale of film and single-use cameras.  An
allowance for doubtful accounts is established for an estimate of bad debts.

INVENTORIES:  Inventories are stated at the lower of cost (using the first-in,
first-out method) or market.  Inventories consist primarily of film and
photofinishing supplies.

CAPITALIZED PROMOTIONAL EXPENDITURES:  The Company's promotional programs run
for periods of one to six months. Promotional expenditures primarily consist of
advertising and media costs related to generating consumer interest in the
Company's photofinishing services.  The Company capitalizes these costs as
capitalized promotional expenditures and expenses them the first time the
promotion is run.  Advertising expense was $3,610,000, $3,582,000, and
$2,989,000 in fiscal years 1998, 1997, and 1996, respectively.

DEPRECIATION:  Furniture, fixtures, and equipment are depreciated using the
straight-line and accelerated methods based on the estimated useful asset lives
ranging from three to five years.  Expenditures for major remodeling and
improvements are capitalized as leasehold improvements.  Leasehold improvements
are depreciated over the shorter of the life of the lease or the life of the
asset.

INCOME TAXES:  The provision for federal income taxes is computed based on
pretax income reported in the consolidated financial statements.  Research and
development tax credits are recorded as a reduction of the provision for federal
income taxes in the year realized.  The provision for income taxes differs from
income taxes currently payable because certain items of income and expense are
recognized in different periods for financial reporting purposes than they are
for federal income tax purposes.  Deferred income taxes have been recorded in
recognition of these temporary differences.

                                       8
<PAGE>

                            SEATTLE FILMWORKS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE  A --  OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

EARNINGS PER SHARE:  Earnings per share is based on the weighted average number
of shares and dilutive Common Stock equivalents outstanding during the fiscal
year. Common Stock equivalents consist of stock options.  The dilutive effect of
stock options is excluded from the calculation of basic earnings per share, but
included in the computation of diluted earnings per share.

STOCK-BASED COMPENSATION:  The Company has adopted the disclosure-only
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" and applies Accounting Principles Board Opinion No
25 (APB 25) and related Interpretations in accounting for its stock option
plans.  Accordingly, the Company's stock-based compensation expense is
recognized based on the intrinsic value of the option on the date of grant.  Pro
forma disclosure of diluted earnings per share under Statement 123 is provided
in Note H to the consolidated financial statements.

REVENUE RECOGNITION:  The Company recognizes revenue when products are shipped
or services are delivered.  The Company provides its customers with a 100%
satisfaction guarantee.  The majority of the Company's products and services
will not be returned but customers can request a refund if not satisfied.
During fiscal year 1998 refunds were less than 1% of net revenues.  An allowance
is recorded for expected future returns.

SEGMENT REPORTING:  In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosure
about Segments of an Enterprise and Related Information."  SFAS No. 131, which
is effective for years beginning after December 15, 1997, establishes standards
for the way that public business enterprises report information about operating
segments in published financial reports.  The Company will adopt the new
requirements in fiscal 1999.  Management has not yet determined the manner in
which it will present the information required by SFAS No. 131.

USE OF ESTIMATES:  The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes.  Actual results could differ from those
estimates.

RECLASSIFICATIONS:  Certain prior year balances have been reclassified to
conform to the current year's presentation.

NOTE  B --  CUSTOMER AQUISITION EXPENDITURES

     The Company's principal technique for acquiring new customers is its
Introductory Offer of two rolls of 35mm film for $2.00 or less.  Customer
acquisition costs are comprised of the costs of generating a lead and the
amortization of direct costs associated with the Company's promotional offers
sent to prospective and existing customers.  The costs of generating a lead,
which are expensed when the promotion is run, include all direct-response media,
advertising, and other costs associated with developing target customer lists.
The direct costs of customer acquisition include film, postage, and printed
material costs associated with mailings to prospective and existing customers.
For periods prior to and including fiscal year 1998, the direct costs of
customer acquisition were capitalized as an asset on the Company's consolidated
balance sheet under "capitalized customer acquisition expenditures" and
amortized over a three year period on an accelerated basis.

                                       9
<PAGE>

                            SEATTLE FILMWORKS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE  B -- CUSTOMER AQUISITION EXPENDITURES (Continued)

     In accounting for customer acquisition costs, the Company follows the
American Institute of Certified Public Accountants Statement of Position 93-7,
Reporting on Advertising Costs (SOP 93-7).  Using unique customer numbers and
coded promotional response forms the Company tracks both the direct-response
mailing to which the customer responded and the revenues generated over the life
of the customer.  The Company has therefore been capable of matching specific
revenues associated with a specific pool of customers with the related
capitalized customer acquisition cost.  For all periods prior to the fourth
quarter of fiscal 1998, this data provided the basis for the three year
amortization schedule of 55% the first year, 29% the second year and 16% the
third year.

     Quarterly analyses prior to fiscal year 1998 indicated that the marketing
programs for which costs were capitalized were consistently yielding net profits
from identifiable rolls in excess of the program costs.  During fiscal year
1998, the quarterly analyses of identifiable rolls began to show a decline in
net profitability from identifiable rolls, but the programs were still
profitable overall.  The analysis done during the third quarter of fiscal 1998
indicated that production problems during the fourth quarter of fiscal 1997 had
caused an extraordinary impact on customer responses, but the amount of customer
acquisition costs then capitalized were not believed to be in excess of the
estimated net profit from future identifiable rolls to be received under the
programs.  In the fourth quarter, continued deterioration in the performance of
the Company's customer acquisition programs occurred.  This trend was discussed
in the MD&A set forth in the Company's Form 10-Q for the quarter ended June 27,
1998 when the Company indicated photofinishing revenues were weaker in the
latter part of June (1998) and this pattern was continuing into the month of
July.  While increased competition and other factors may have been contributing
to reduced photofinishing volumes, management's statistical analysis of
marketing programs indicated that photofinishing volumes continued to be
negatively affected by extended delivery times experienced by customers during
the summer of fiscal 1997.  Upon completing the quarterly review of the
recoverability of the capitalized costs as of September 26, 1998, management
concluded lower response rates to customer acquisition programs required an
adjustment to the amount of capitalized costs associated with those programs.
The Company recorded a charge of $613,000 in the fourth quarter of fiscal 1998
to write-down the Customer Acquisition Costs recorded as an asset to the
probable remaining future net profitability expected to result directly from the
deferred customer acquisition costs.  The assessment of the realizability of the
asset was completed on a monthly pool-by-pool basis.  Based upon photofinishing
volumes through the fourth quarter of 1998, estimates for future net
profitability of the majority of customer acquisition programs conducted during
fiscal 1998 were less than the corresponding amounts that remained unamortized.
In accordance with SOP 93-7, these estimates only included revenue that could be
specifically identified as resulting from a particular program.  Although these
marketing programs remained profitable on an overall basis if customer orders
which could not be specifically tracked were included in the analysis, the net
profit that could be specifically isolated to the capitalized costs did not
support the amount of unamortized costs on the balance sheet.  Thus, the net
realizability of a portion of the asset could not be supported and expensing of
certain previously capitalized costs became appropriate.  Accordingly, the asset
was written down $613,000 to bring the net capitalized cost to estimated break-
even performance for estimated future identifiable roll volume.

     The Company believes the reliability of accounting estimates decreases as
the length of the period for which such estimates are made increases. Therefore,
the period over which the benefits of direct response advertising should be
amortized is no longer than the greater of one year or one operating cycle.
During the past, when the nature of the marketing programs was essentially
static and consistently utilized, the Company was able to demonstrate, with
reasonable reliability, that the duration of the probable future benefits was up
to three years. Management now expects the percentage of unidentifiable
respondents to increase. New marketing programs scheduled for launch in the next
several quarters will remove management's ability to reliably measure

                                       10
<PAGE>

                            SEATTLE FILMWORKS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued


NOTE  B -- CUSTOMER AQUISITION EXPENDITURES (Continued)

customer responses beyond twelve months.  With changes in marketing programs,
coupled with expansion of retail operations, management can no longer conclude
as to the specific advertising, if any (e.g. in the case of retail signage
promotions) to which a customer is responding.  Under current marketing plans, a
significant number of customers, for which a portion of the costs of previous
direct marketing efforts remain capitalized, will be impacted by the new
programs during fiscal 1999.  As a result, management does not believe that the
prior measured timing of responses is indicative of future measurable responses
from the prior marketing programs, and that, once these pools are tainted by the
supplemental marketing to these customers, conclusive data no longer will exist
to continue to support amortizing the remaining capitalized costs of previous
programs for more than a period of twelve months.  Planned marketing programs in
1999 contemplate that pools will become tainted at some point throughout the
year by supplemental marketing efforts.  Accordingly, effective in the first
quarter of fiscal 1999, the Company will expense customer acquisition costs as
incurred and will amortize the remaining $16,800,000 of capitalized customer
acquisition costs over a twelve month period on a straight-line basis.  This is
management's best estimate of the period in which the benefits of the previous
marketing costs to this customer base will be visible before the measurable
benefits of these previous programs are obsoleted by the supplemental marketing
efforts to this customer base.  Furthermore, management estimates that the gross
margin associated with future photofinishing orders would support a twelve month
amortization period.  This change in estimate does not impact fiscal year 1998
and management believes the change in estimate from a three year accelerated
amortization to a twelve month straight-line amortization will result in
incremental amortization of previously deferred customer acquisition costs
during fiscal year 1999 of approximately  $5,810,000, or $.24 per share.

NOTE  C --  ACQUISITION OF PRIVATE LABEL FILM BUSINESS

     On December 30, 1993, the Company acquired certain assets of Private Label
Film, Inc. for approximately $1,637,000.  The assets relate to the manufacture
and sale of private-label film and related products to retailers and commercial
users.    This acquisition has been accounted for using the purchase method.
The purchase price was recorded as follows:  equipment $100,000; and other
assets of $1,536,830 related to non-compete agreements, which includes
capitalized legal and accounting expenses.  The non-compete agreement was
amortized as other selling expenses on a straight-line basis over five years and
has been fully amortized at September 26, 1998.

NOTE  D --  FURNITURE, FIXTURES, AND EQUIPMENT

Furniture, fixtures, and equipment, at cost consist of the following:
<TABLE>
<CAPTION>

                                                  September 26,   September 27,
                                                       1998            1997
                                                  ==============  ==============
                                                          (in thousands)
<S>                                               <C>             <C>

Furniture, fixtures, and equipment                     $ 20,437        $ 15,389
Equipment under capital lease                               969
Leasehold improvements                                    3,176           2,949
                                                       --------        --------
                                                         24,582          18,338
Less accumulated depreciation and amortization          (13,628)        (10,774)
                                                       --------        --------
                                                       $ 10,954        $  7,564
                                                       ========        ========
</TABLE>

                                       11
<PAGE>

                            SEATTLE FILMWORKS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE  E --  CREDIT AGREEMENT

     At September 26, 1998, the Company had a $6,000,000 available line of
credit. At the option of the Company, the interest rate on borrowings under the
agreement may be at the lending bank's prime rate or at a rate of 0.75% above
the London Interbank Offered Rate. There were no borrowings outstanding at the
end of fiscal 1998 or fiscal 1997 under the line of credit.

NOTE  F --  PROPERTY AND LEASES

     The Company's primary operating leases relate to its main operating
facilities. These two leases, one for 60,000 square feet and one for 46,000
square feet, expire in September 2005 and 2000, respectively. Both leases have
five-year options to extend through September 2010. The Company has a lease
agreement for additional warehouse and production space, which expires in
January 1999 with an option to extend the lease for two one-year periods. The
Company also has various operating leases for its retail stores, with lease
terms generally ranging from three to five years. During fiscal 1998, the
Company entered into a five-year capital lease transaction to finance the
purchase of certain equipment. At September 26, 1998, future minimum payments
under capital leases and non-cancelable operating leases are as follows:
<TABLE>
<CAPTION>

                                               Capital   Operating
                                                Lease     Leases
                                               ========  =========
                                                 (in thousands)
<S>                                            <C>       <C>
Fiscal 1999                                     $  227      $1,149
Fiscal 2000                                        227         993
Fiscal 2001                                        227         586
Fiscal 2002                                        227         430
Fiscal 2003                                        111         400
Thereafter                                                     774
                                                ------      ------
                                                 1,019      $4,332
                                                            ======
Amounts representing interest                     (139)
                                                ------
Present value of net minimum lease payments
  (including current portion of $174)           $  880
                                                ======
</TABLE>

     Rental expense relating to operating leases for fiscal years 1998, 1997,
and 1996 was $1,119,000, $792,000, and $481,000, respectively.  Interest expense
relating to the capital lease was $26,000 for fiscal year 1998.

                                       12
<PAGE>

                            SEATTLE FILMWORKS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>


NOTE  G --  INCOME TAXES
<S>                                                                                              <C>      <C>      <C>
The provision for income taxes is as follows (in thousands):
                                                                                                   1998     1997     1996
                                                                                                 ======   ======   ======
Provision for income taxes:
  Current                                                                                        $2,797   $4,452   $2,841
  Deferred                                                                                          755      790    1,379
                                                                                                 ------   ------   ------
                                                                                                 $3,552   $5,242   $4,220
                                                                                                 ======   ======   ======

A reconciliation of the federal statutory tax rates to the effective tax rates is as follows:
                                                                                                   1998     1997     1996
                                                                                                 ======   ======   ======

Statutory tax rate                                                                                 34.0%    35.0%    35.0%
Research and development tax credits                                                                (.4)     (.3)     (.1)
Tax exempt interest                                                                                 (.8)     (.5)     (.1)
Other, net                                                                                          (.9)     (.1)     (.3)
                                                                                                 ------   ------   ------
                                                                                                   31.9%    34.1%    34.5%
                                                                                                 ======   ======   ======

Principal items comprising the cumulative deferred income taxes are as follows:

                                                                                                   1998     1997
                                                                                                 ======   ======
Deferred tax liabilities:
 Customer acquisition expenditures                                                               $5,880   $4,859
 Other liabilities                                                                                  190      300
                                                                                                 ------   ------
Total deferred tax liabilities                                                                    6,070    5,159

Deferred tax assets:
 Accrued expenses                                                                                   577      342
 Non-compete agreement                                                                              368      272
 Depreciation and amortization                                                                      289      464
                                                                                                 ------   ------
Total deferred tax assets                                                                         1,234    1,078
                                                                                                 ------   ------
Net deferred tax liabilities                                                                     $4,836   $4,081
                                                                                                 ======   ======
</TABLE>
NOTE  H --  STOCK-BASED COMPENSATION

Stock Options

     Pursuant to the Company's Stock Option Plans adopted in 1982 and 1987,
options may be granted to purchase up to 6,904,688 shares of Common Stock at
prices equal to the fair market value of the shares at the time the options are
granted.  Options generally vest over four years and become exercisable
commencing one year after the date of grant and expiring five years after the
date of grant.

                                       13
<PAGE>

                            SEATTLE FILMWORKS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE  H --  STOCK-BASED COMPENSATION (Continued)

     The following schedule summarizes stock option activity for fiscal years
1996, 1997, and 1998.
<TABLE>
<CAPTION>

                                     Number           Price Per       Weighted Average
                                    of Shares           Share          Exercise Price
                                   ===========     ==============     ================
<S>                                <C>             <C>                 <C>
  Balance at September 30, 1995     1,947,932     $ 0.19 -  $ 9.44       $ 1.72
    Granted during 1996               213,075     $ 8.55 -  $13.67       $11.37
    Canceled during 1996              (28,886)    $ 2.07 -  $ 9.44       $ 4.68
    Exercised during 1996            (155,902)    $ 0.19 -  $ 6.78       $ 2.24
                                   ----------

  Balance at September 28, 1996     1,976,219     $ 0.21 -  $13.67       $ 2.67
    Granted during 1997               194,100     $ 9.63 -  $14.67       $12.04
    Canceled during 1997              (25,679)    $ 2.07 -  $14.67       $ 5.48
    Exercised during 1997            (247,002)    $ 0.21 -  $11.72       $ 1.45
                                   ----------

  Balance at September 27, 1997     1,897,638     $ 0.21 -  $14.67       $ 3.75
    Granted during 1998               206,650     $ 3.75 -  $11.31       $ 8.96
    Canceled during 1998              (29,677)    $ 2.67 -  $14.67       $11.23
    Exercised during 1998          (1,013,618)    $ 0.21 -  $ 4.96       $ 0.78
                                   ----------

  Balance at September 26, 1998     1,060,993     $ 0.21 -  $14.67       $ 7.41
                                   ==========
</TABLE>

          The following schedule summarizes the weighted-average remaining
contractual life and weighted-average exercise price of options outstanding and
options exercisable as of September 26, 1998.
<TABLE>
<CAPTION>

                                     Options Outstanding          Options Exercisable
                           -----------------------------------    -------------------
<S>                      <C>           <C>           <C>       <C>          <C>
                                         Remaining
Range of                     Options    Contractual   Exercise    Options    Exercise
Exercise Prices            Outstanding  Life (Years)    Price   Exercisable   Price
-------------------------  -----------  -----------   --------  -----------  --------

  $0.21 -  $2.00             151,212        1.7       $ 0.92      151,212     $ 0.92
  $2.01 -  $5.00             210,264        3.2       $ 3.79      192,554     $ 3.71
  $5.01 - $10.00             338,968        4.1       $ 7.90      161,432     $ 6.89
 $10.01 - $14.67             360,549        3.9       $11.79      197,019     $11.77
                            --------                              -------
                           1,060,993        2.3       $ 7.41      702,217     $ 6.10
                          ==========                              =======
</TABLE>

     Options considered fully vested as of September 26, 1998, September 27,
1997 and September 28, 1996 were 702,217, 1,553,053 and 1,562,568, respectively,
at weighted average exercise prices of $6.10, $2.31 and $1.60, respectively.
Shares of Common Stock reserved for issuance under these stock option plans
totaled 1,269,514 at September 26, 1998, of which 208,521 shares were available
for options to be granted in the future.

    The per share weighted-average fair value of stock options granted during
fiscal years 1998, 1997 and 1996 was $.26, $5.90,  and $5.49, respectively.

                                       14
<PAGE>

                            SEATTLE FILMWORKS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE  H --  STOCK-BASED COMPENSATION (Continued)

     Pro forma information regarding net income and diluted earnings per share
required by Statement No. 123 has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for the options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions on the option grant date: Risk free interest rate of 5.59% for
fiscal year 1998, 6.39% for fiscal year 1997, and 5.74% for fiscal year 1996,
expected volatility of 58.27% for fiscal year 1998 and 46.75% for fiscal years
1997 and 1996, expected option life of 4.47 years for fiscal year 1998 and 4.99
for fiscal years 1997 and 1996, and a dividend yield of 0.0%.

     Under Statement No. 123, if the Company had elected to recognize the
compensation cost based upon the fair value of the options granted at grant
date, net income would have been reduced as follows:
<TABLE>
<CAPTION>

                                                               September 26,  September 27,  September 28,
                                                                    1998           1997           1996
                                                              -------------  -------------  -------------
                                                                 (in thousands, except per share data)
<S>                                                           <C>            <C>            <C>
Net income:
  As reported...............................................         $7,575        $10,145         $8,017
  Pro forma.................................................         $7,034        $ 9,687         $7,706
Diluted earnings per share:
  As reported.............................................           $  .43        $   .57         $  .45
  Pro forma.................................................         $  .40        $   .54         $  .43
Basic earnings per share:
  As reported.............................................           $  .45        $   .62         $  .50
  Pro forma.................................................         $  .42        $   .59         $  .48
</TABLE>

    The pro forma effects on net income for fiscal year 1998, 1997 and 1996 are
not indicative of pro forma effects in future years because SFAS No. 123 does
not apply to grants prior to fiscal 1996 and additional grants in future years
are anticipated.

     In September 1998, the Board of Directors passed a resolution to allow
employees the opportunity to surrender previously granted options in exchange
for a new option grant at current market prices. Employees would be granted
options for two shares of common stock in exchange for the surrender of options
for three shares of common stock. All vesting periods would start at the new
grant date at the rate of 25% for each year employed after the new grant date.
The new grant date was October 9, 1998, with a grant price equal to fair market
value of $3.125. Total old options surrendered and canceled were 217,150. Total
new options issued on October 9, 1998 were 144,765. Executive officers and non-
employee directors were not eligible to participate in this option exchange.

     No compensation expense was recognized upon the October 9, 1998 exchange
because there was no intrinsic value in the new options as of that date.

Employee Stock Purchase Plan

     Effective September 22, 1993, the Company adopted an Employee Stock
Purchase Plan under which substantially all employees have the option to
purchase 506,250 shares of Common Stock. Under the Plan, eligible employees may
purchase shares of the Company's Common Stock at six-month intervals at 85% of
the fair market value on the first or last day of the six-month offering period,
whichever is lower. Employees may purchase shares having a value not exceeding
10% of their gross compensation during the purchase period. During fiscal 1998
and 1997, shares totaling 35,382 and 37,410 were issued under the Plan at an
average price of $8.47 and $9.89 per share, respectively. At September 26, 1998,
231,492 shares were reserved for future issuance.

                                       15
<PAGE>

                            SEATTLE FILMWORKS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE  I --  SHAREHOLDERS' EQUITY

Stock Splits

     All share data, per share data, and related accounts in the accompanying
consolidated financial statements and these notes reflect a retroactive
adjustment for a three-for-two stock split effective March 15, 1996, and a
three-for-two stock split effective March 17, 1997.

Share Repurchases

     In January 1997, the Board of Directors authorized the repurchase of the
Company's Common Stock, either through open market purchases at prevailing
market prices, through block purchases or in privately negotiated transactions.
Repurchases may be commenced or discontinued at any time.  Although the number
of shares to be repurchased is uncertain, any repurchased shares will to some
degree offset the dilutive effect on earnings per share of shares of Common
Stock issued under the Company's stock option and stock purchase plans.

     During fiscal year 1998, the Company had purchased a total of 843,367
shares for a total of $4,829,000.  In addition, in October 1998, the Company
purchased a total of 466,000 shares for a total of $1,493,000.

NOTE  J  --  EARNINGS PER SHARE

     The Company calculates earnings per share in accordance with the Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 128,
"Earnings per Share".  Statement No. 128 replaced the previously reported
primary and fully diluted earnings per share with basic and diluted earnings per
share.  Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options.  Diluted earnings per share is similar to the
previously reported primary earnings per share.  All earnings per share amounts
for all prior periods presented have been restated to conform to Statement No.
128 requirements.

     The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>

                                                       September 26, 1998  September 27, 1997  September 26, 1996
                                                       ==================  ==================  ==================
<S>                                                    <C>                 <C>                 <C>
Numerator for basic and diluted earnings per share:
   Net income                                                 $ 7,575,000         $10,145,000         $ 8,017,000
                                                              ===========         ===========         ===========
Denominator:
   Denominator for basic earnings per share -
      weighted-average shares                                  16,652,000          16,307,000          16,170,000

   Effect of dilutive securities:
      Stock options                                               822,000           1,463,000           1,556,000
                                                              -----------         -----------         -----------
   Denominator for diluted earnings per share                  17,474,000          17,770,000          17,726,000
                                                              ===========         ===========         ===========
Basic earnings per share                                      $       .45         $       .62         $       .50
                                                              ===========         ===========         ===========
Diluted earnings per share                                    $       .43         $       .57         $       .45
                                                              ===========         ===========         ===========
</TABLE>

                                       16
<PAGE>

                            SEATTLE FILMWORKS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE  J  --  EARNINGS PER SHARE (Continued)

     Excluded from the computation of diluted earnings per share for the year
ended September 26, 1998 are options to acquire 575,049 shares of common stock
with a weighted average exercise price of $10.81.  Excluded from the computation
of diluted earnings per share for the year ended September 27, 1997 are options
to acquire 14,587 shares of common stock with a weighted average exercise price
of $13.44.  Excluded from the computation of diluted earnings per share for the
year ended September 28, 1996 are options to acquire 168,150 shares of common
stock with a weighted average exercise price of $11.73.  The impact of these
options were excluded from the computation of diluted earnings per share because
their effects would be antidilutive.

NOTE  K --  RETIREMENT AND PROFIT SHARING PLAN

     The Company maintains a 401(k) Plan for substantially all employees. The
Company's contributions are based on matching a percentage of up to 2% of
voluntary employee contributions and discretionary profit sharing contribution
determined by the Board of Directors. The Company's contributions were $377,000,
$547,000, and $488,000 for fiscal years 1998, 1997, and 1996, respectively.

NOTE L  --  CONTINGENCIES

     The Company is a defendant in a legal proceeding filed by Fuji Photo Film
Co., Ltd. ("Fuji") with the International Trade Commission ("ITC") on February
13, 1998. The action was filed against a number of importers, including the
Company's OptiColor, Inc. subsidiary, alleging patent infringement of U.S.
patents on single use cameras through the importation and resale into the U.S.
of recycled cameras. Fuji is seeking an order prohibiting importation of the
alleged infringing cameras into the U.S. and prohibiting further sales of such
products which have been imported. Sales of recycled cameras accounted for 3.8 %
of the Company's net revenues during fiscal 1998. An evidentiary hearing before
an ITC Administrative Law Judge ("ALJ") was held in November, 1998 and the ALJ
is expected to issue an initial decision in February, 1999. Such decision is
subject to review by the ITC Commissioners, who would then issue a final
decision, most likely in May, 1999. That decision would be subject to appeal to
the Federal Circuit Court of Appeals. In addition, the Company is involved in
various routine legal proceedings incident to the ordinary course of its
business.

NOTE  M  --  SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

     The following table sets forth summary financial data for the Company by
quarter for fiscal years 1998 and 1997 (in thousands, except per share data).
<TABLE>
<CAPTION>
                                                 Quarters
                                     ----------------------------------
                                     First   Second    Third     Fourth
                                    -------  -------  --------  -------
<S>                                 <C>      <C>      <C>       <C>
Fiscal 1998
-----------
     Net revenue                    $22,471  $21,439   $24,928  $27,878
     Gross profit                     9,499    9,031    10,635   11,528
     Net income                       1,558    1,177     2,241    2,599
     Diluted earnings per share         .09      .07       .13      .15
     Basic earnings per share           .09      .07       .13      .15

Fiscal 1997
-----------
     Net revenue                    $21,236  $21,657   $25,553  $32,743
     Gross profit                     8,254    8,895    11,576   13,840
     Net income                       1,357    1,146     2,792    4,850
     Diluted earnings per share*        .08      .06       .16      .27
     Basic earnings per share*          .08      .07       .17      .30

</TABLE>

                                       17
<PAGE>

                            SEATTLE FILMWORKS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


NOTE  M  -- SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
(Continued)

   * The 1997 earnings per share amounts have been restated to comply with
Statement of Financial Accounting Standards No. 128, Earnings per share.

     The sum of quarterly diluted earnings per share will not necessarily equal
the diluted earnings per share reported for the entire year since the weighted
average shares outstanding used in the diluted earnings per share computation
changes throughout the year.  All diluted earnings per share data presented
above have been adjusted to reflect stock splits.  See Note J.


ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     None.
                                    PART IV

ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

a. Index to Consolidated Financial Statements and Consolidated Financial
Statement Schedules
<TABLE>
<CAPTION>

<S>    <C>                                                                            <C>
(1)    Consolidated Financial Statements                                              Page
       -----------------------------------------------------------------------------  -----
       Report of Ernst & Young LLP, Independent Auditors                                 31

       Consolidated Balance Sheets as of September 26, 1998 and September 27, 1997       32

       Consolidated Statements of Income for the years ended September 26, 1998,
       September 27, 1997, and September 28, 1996                                        33

       Consolidated Statements of Shareholders' Equity for the years ended
       September 26, 1998, September 27, 1997, and September 28, 1996                    34

       Consolidated Statements of Cash Flows for the years ended September 26, 1998,
       September 27, 1997, and September 28, 1996                                        35

       Notes to Consolidated Financial Statements                                      36-44
</TABLE>

     Supplemental Consolidated Financial Statement Schedule.  The following
additional information should be read in conjunction with the Consolidated
Financial Statements of the Company included in Part II, Item 8.

                                       18
<PAGE>

  (2)  Schedule                                             Page

       II - Valuation and Qualifying Accounts                50

     All other schedules have been omitted because the required information is
included in the consolidated financial statements or the notes thereto, or is
not applicable or required.

b. Reports on Form 8-K

     None.



c. Exhibits

     The only exhibit filed with this 10-K/A is an updated consent of Ernst &
Young, LLP, at item 23 below.

     The following list is a subset of the exhibits set forth below and contains
all compensatory plans, contracts, or arrangements in which any director or
executive officer of the Company is a participant, unless the method of
allocation of benefits thereunder is the same for management and non-management
participants:

     (1)         The Company's Incentive Stock Option Plan, as amended and
                 restated as of April 1, 1996. See Exhibit 10.5

     (2)         The Company's 1987 Stock Option Plan, as amended and restated
                 as of April 1, 1996. See Exhibit 10.7

Exhibit
Number    Exhibit Description
-------   -------------------
3.1       Articles of Incorporation of the Company, as amended through February
          23, 1989. (Incorporated by reference to Exhibit 3.1 filed with the
          Company's Annual Report on Form 10-K for the year ended September 30,
          1989.)

3.2       Bylaws of the Company, as amended and restated on November 13, 1996.
          (Incorporated by reference to Exhibit 3.2 filed with the Company's
          Annual Report on Form 10-K for the year ended September 28, 1996.)

3.3       Articles of Amendment to Articles of Incorporation dated March 2,
          1994. (Incorporated by reference to Exhibit 3.4 filed with the
          Company's Annual Report on Form 10-K for the year ended September 24,
          1994.)

3.4       Articles of Amendment to Articles of Incorporation dated February 16,
          1995. (Incorporated by reference to Exhibit 3.4 filed with the
          Company's Annual Report on Form 10-Q for the year ended March 25,
          1995.)

3.5       Second Restated Articles of Incorporation of Seattle FilmWorks, Inc.
          dated March 5, 1996. (Incorporated by reference to Exhibit 3.0 filed
          with the Company's Quarterly Report on Form 10-Q for the quarter ended
          March 30, 1996.)

                                       19
<PAGE>

3.6       Articles of Amendment to Articles of Incorporation dated February 13,
          1997. (Incorporated by reference to Exhibit 3.0 filed with the
          Company's Quarterly Report on Form 10-Q for the quarter ended March
          29, 1997.)

10.1      Lease Agreement dated September 10, 1985 between Gilbert Scherer and
          Marlyn Friedlander, Lessors, and the Company with respect to certain
          office and plant facilities in Seattle, Washington. (Incorporated by
          reference to the exhibit with a corresponding number filed with the
          Company's registration statement on Form S-1 (file no. 33-4388.)

10.2      First Amendment to Facility Lease Agreement dated April 29, 1989, with
          Gilbert Scherer and Marlyn Friedlander, Lessors. (Incorporated by
          reference to Exhibit 10.48 filed with the Company's Annual Report on
          Form 10-K for the year ended September 30, 1989.)

10.3      Second Amendment to Facility Lease Agreement dated November 2, 1998,
          with Gilbert Scherer and Marlyn Friedlander, Lessors.

10.4      Consent to Sublease dated September 30, 1996, between Gilbert Scherer
          and Marlyn Friedlander and Seattle FilmWorks, Inc. (Incorporated by
          reference to Exhibit 10.3 filed with the Company's Annual Report on
          Form 10-K for the year ended September 28, 1996.)

10.5      Incentive Stock Option Plan, as amended and restated as of April 1,
          1996. (Incorporated by reference to Exhibit 10.1 filed with the
          Company's Quarterly Report on Form 10-Q for the quarter ended June 29,
          1996.)

10.6      Form of Incentive Stock Option Agreement. (Incorporated by reference
          to Exhibit 10.2 filed with the Company's Registration Statement on
          Form S-8, file no. 33-24107.)

10.7      1987 Stock Option Plan, as amended and restated as of April 1, 1996.
          (Incorporated by reference to Exhibit 10.2 filed with the Company's
          Quarterly Report on Form 10-Q for the quarter ended June 29, 1996.)

10.8      Form of Stock Option Agreement. (Incorporated by reference to Exhibit
          10.4 filed with the Company's Registration Statement on Form S-8, file
          no. 33-24107.)

10.9      1993 Employee Stock Purchase Plan as amended and restated as of May
          31, 1995. (Incorporated by reference to Exhibit 10.58 filed with the
          Company's Annual Report on Form 10-K for the year ended September 30,
          1995.)

10.10     Purchase and Sale Agreement dated as of December 16, 1993 and related
          Amendment to Purchase and Sale Agreement dated December 30, 1993 among
          Seattle FilmWorks, Inc., Private Label Film, Inc. and certain
          shareholders of Private Label Film, Inc. (Incorporated by reference to
          Exhibits 2.1 and 2.2 filed with the Company's Report on Form 10-Q
          dated February 7, 1994.)

10.11     Business Loan Agreement with First Interstate Bank of Washington N.A.
          as amended and restated on March 31, 1994. (Incorporated by reference
          to Exhibit 10.60 filed with the Company's Annual Report on Form 10-K
          for the year ended September 24, 1994.)

                                       20
<PAGE>

10.12     Business Loan Agreement with First Interstate Bank of Washington N.A.
          as amended and restated on February 28, 1995. (Incorporated by
          reference to Exhibit 10.0 filed with the Company's Quarterly Report on
          Form 10-Q for the quarter ended March 25, 1995.)

10.13     Business Loan Agreement with First Interstate Bank of Washington N.A.
          as amended and restated on January 31, 1996. (Incorporated by
          reference to Exhibit 10.1 filed with the Company's Quarterly Report on
          Form 10-Q for the quarter ended March 30, 1996.)

10.14     Business Loan Agreement with Wells Fargo Bank, National Association as
          amended and restated on December 13, 1996. (Incorporated by reference
          to Exhibit 10.13 filed with the Company's Annual Report on Form 10-K
          for the year ended September 28, 1996.)

10.15     Credit Agreement with Wells Fargo Bank, National Association as of
          March 1, 1997. (Incorporated by reference to Exhibit 10.1 filed with
          the Company's Quarterly Report on Form 10-Q for the quarter ended June
          28, 1997.)

10.16     First Amendment to Credit Agreement with Wells Fargo Bank, National
          Association as of February 24, 1998 (Incorporated by reference to
          Exhibit 10.1 filed with the Company's Quarterly Report on Form 10-Q
          for the quarter ended June 27, 1998.)

10.17     Stock Redemption Agreement dated July 20,1994 between the Company and
          Sam Rubinstein and related promissory note. (Incorporated by reference
          to Exhibits 5.1 and 5.2 filed with the Company's Report on Form 8-K
          dated July 22, 1994.)

10.18     Lease Agreement dated September 22, 1995 between the United States of
          America, Lessors, and the Company with respect to certain plant and
          warehouse facilities in Seattle, Washington. (Incorporated by
          reference to Exhibit 10.63 filed with the Company's Annual Report on
          Form 10-K for the year ended September 30, 1995.)

10.19     Addendum to Lease Agreement dated January 1, 1996 between the United
          States of America, Lessors, and the Company. (Incorporated by
          reference to Exhibit 10.3 filed with the Company's Quarterly Report on
          Form 10-Q for the quarter ended March 30, 1996.)

10.20     Supplemental Lease Agreement dated October 21, 1996 between the United
          States of America, Lessors, and the Company. (Incorporated by
          reference to Exhibit 10.17 filed with the Company's Annual Report on
          Form 10-K for the year ended September 28, 1996.)

10.21     Lease agreement dated March 4, 1997 between Smith Cove Partnership and
          the Company. (Incorporated by reference to Exhibit 10.3 filed with the
          Company's Quarterly Report on Form 10-Q for the quarter ended March
          29, 1997.)

10.22*    Sales contract dated August 18, 1995 between the Company and Agfa
          Division of Miles, Inc. with respect to the purchase of certain
          products. (Incorporated by reference to Exhibit 10.64 filed with the
          Company's Quarterly Report on Form 10-Q for the quarter ended March
          30, 1996.)

10.23*    Supplement to sales contract with Agfa Division of Miles, Inc. dated
          March 29, 1996. (Incorporated by reference to Exhibit 10.2 filed with
          the Company's Quarterly Report on Form 10-Q for the quarter ended
          March 30, 1996.)

                                       21
<PAGE>

10.24*    Agfa Sales Contract and Sales Contract Addendum dated May 21, 1997.
          (Incorporated by reference to Exhibit 10.2 filed with the Company's
          Quarterly Report on Form 10-Q for the quarter ended June 28, 1997.)

10.25*    Supply Agreement effective January 1, 1997 with Fuji Photo Film
          U.S.A., Inc. (Incorporated by reference to Exhibit 10.1 filed with the
          Company's Quarterly Report on Form 10-Q for the quarter ended March
          29, 1997.)

10.26*    Kodak Agreement dated May 13, 1997. (Incorporated by reference to
          Exhibit 10.3 filed with the Company's Quarterly Report on Form 10-Q
          for the quarter ended June 28, 1997.)

10.27*    AT&T Agreement dated March 5, 1997. (Incorporated by reference to
          Exhibit 10.2 filed with the Company's Quarterly Report on Form 10-Q
          for the quarter ended March 29, 1997.)

10.28     Warehouse Sublease between Seattle FilmWorks, Inc. and OptiColor, Inc.
          dated September 30, 1996. (Incorporated by reference to Exhibit 10.20
          filed with the Company's Annual Report on Form 10-K for the year ended
          September 28, 1996.)

10.29     Warehouse Sublease between Seattle FilmWorks, Inc. and Seattle
          FilmWorks Manufacturing Company dated September 30, 1996.
          (Incorporated by reference to Exhibit 10.21 filed with the Company's
          Annual Report on Form 10-K for the year ended September 28, 1996.)

10.30     1260 16th Avenue West Sublease between Seattle FilmWorks, Inc. and
          OptiColor Inc. dated September 30, 1996. (Incorporated by reference to
          Exhibit 10.22 filed with the Company's Annual Report on Form 10-K for
          the year ended September 28, 1996.)

10.31     1260 16th Avenue West Sublease between Seattle FilmWorks, Inc. and
          Seattle FilmWorks Manufacturing Company dated September 30, 1996.
          (Incorporated by reference to Exhibit 10.23 filed with the Company's
          Annual Report on Form 10-K for the year ended September 28, 1996.)

10.32     General Assignment between Seattle FilmWorks, Inc., Seattle FilmWorks
          Manufacturing Company and OptiColor, Inc. dated September 30, 1996.
          (Incorporated by reference to Exhibit 10.24 filed with the Company's
          Annual Report on Form 10-K for the year ended September 28, 1996.)

21        Seattle FilmWorks, Inc. Subsidiaries

23        Consent of Ernst & Young LLP, Independent Auditors

27.1      Financial Data Schedule

27.2      Financial Data Schedule  Restated 1997

27.3      Financial Data Schedule  Restated 1996

   * Exhibit for which confidential treatment has been granted.

                                       22
<PAGE>

                            SEATTLE FILMWORKS, INC.

                                  SCHEDULE  II

                       VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)
<TABLE>
<CAPTION>


                                                     Additions
                                               ----------------------
                                   Balance at  Charged to  Charged to               Balance
                                   Beginning   Costs and     Other                  at End
           Description              of Year     Expenses    Accounts   Deductions  of Period
=================================  ==========  ==========  ==========  ==========  =========
<S>                                <C>         <C>         <C>         <C>         <C>
FOR THE YEAR ENDED
SEPTEMBER 28, 1996

Allowance for doubtful accounts        $546        $158          $0        $417       $287
Allowance for returns                  $ 97        $130          $0        $182       $ 45

FOR THE YEAR ENDED
SEPTEMBER 27, 1997

Allowance for doubtful accounts        $287        $ 97          $0        $144       $240
Allowance for returns                  $ 45        $155          $0        $147       $ 53

FOR THE YEAR ENDED
SEPTEMBER 26, 1998

Allowance for doubtful accounts        $240        $ 53          $0        $ 85       $208
Allowance for returns                  $ 53        $105          $0        $143       $ 15
</TABLE>
____________________________

                                       23
<PAGE>

                                  SIGNATURES


Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                       SEATTLE FILMWORKS,  INC.
                                       (REGISTRANT)

DATED:  June 11, 1999                  By /s/ Gary R. Christophersen
                                          --------------------------
                                          Gary R. Christophersen
                                          President and Chief Executive Officer
                                          (Principal Executive Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.


  NAME                               TITLE                         DATE

  By:  /s/ Gary R. Christophersen    President                     June 11, 1999
      ----------------------------   Chief Executive Officer
       Gary R. Christophersen        Director
                                     (Principal Executive Officer)



  By:  /s/ Case H. Kuehn             Vice President-Finance        June 11, 1999
       ------------------            Chief Financial Officer
       Case H. Kuehn                 (Principal Financial and
                                     Accounting Officer)


                                       24
<PAGE>

The only exhibit filed with this 10-K/A is an updated consent of Ernst & Young,
LLP, at item 23 below.

                                 EXHIBIT INDEX

                           Annual Report on Form 10-K
                     For The Year Ended September 26, 1998

Exhibit
Number    Exhibit Description
-------   -------------------

3.1       Articles of Incorporation of the Company, as amended through February
          23, 1989. (Incorporated by reference to Exhibit 3.1 filed with the
          Company's Annual Report on Form 10-K for the year ended September 30,
          1989.)

3.2       Bylaws of the Company, as amended and restated on November 13, 1996.
          (Incorporated by reference to Exhibit 3.2 filed with the Company's
          Annual Report on Form 10-K for the year ended September 28, 1996.)

3.3       Articles of Amendment to Articles of Incorporation dated March 2,
          1994. (Incorporated by reference to Exhibit 3.4 filed with the
          Company's Annual Report on Form 10-K for the year ended September 24,
          1994.)

3.4       Articles of Amendment to Articles of Incorporation dated February 16,
          1995. (Incorporated by reference to Exhibit 3.4 filed with the
          Company's Annual Report on Form 10-Q for the year ended March 25,
          1995.)

3.5       Second Restated Articles of Incorporation of Seattle FilmWorks, Inc.
          dated March 5, 1996. (Incorporated by reference to Exhibit 3.0 filed
          with the Company's Quarterly Report on Form 10-Q for the quarter ended
          March 30, 1996.)

3.6       Articles of Amendment to Articles of Incorporation dated February 13,
          1997. (Incorporated by reference to Exhibit 3.0 filed with the
          Company's Quarterly Report on Form 10-Q for the quarter ended March
          29, 1997.)

10.1      Lease Agreement dated September 10, 1985 between Gilbert Scherer and
          Marlyn Friedlander, Lessors, and the Company with respect to certain
          office and plant facilities in Seattle, Washington. (Incorporated by
          reference to the exhibit with a corresponding number filed with the
          Company's registration statement on Form S-1 (file no. 33-4388.)

10.2      First Amendment to Facility Lease Agreement dated April 29, 1989, with
          Gilbert Scherer and Marlyn Friedlander, Lessors. (Incorporated by
          reference to Exhibit 10.48 filed with the Company's Annual Report on
          Form 10-K for the year ended September 30, 1989.)

10.3      Second Amendment to Facility Lease Agreement dated November 2, 1998,
          with Gilbert Scherer and Marlyn Friedlander, Lessors.

10.4      Consent to Sublease dated September 30, 1996, between Gilbert Scherer
          and Marlyn Friedlander and Seattle FilmWorks, Inc. (Incorporated by
          reference to Exhibit 10.3 filed with the Company's Annual Report on
          Form 10-K for the year ended September 28, 1996.)

10.5      Incentive Stock Option Plan, as amended and restated as of April 1,
          1996. (Incorporated by reference to Exhibit 10.1 filed with the
          Company's Quarterly Report on Form 10-Q for the quarter ended June 29,
          1996.)

                                       25
<PAGE>

10.6      Form of Incentive Stock Option Agreement. (Incorporated by reference
          to Exhibit 10.2 filed with the Company's Registration Statement on
          Form S-8, file no. 33-24107.)

10.7      1987 Stock Option Plan, as amended and restated as of April 1, 1996.
          (Incorporated by reference to Exhibit 10.2 filed with the Company's
          Quarterly Report on Form 10-Q for the quarter ended June 29, 1996.)

10.8      Form of Stock Option Agreement. (Incorporated by reference to Exhibit
          10.4 filed with the Company's Registration Statement on Form S-8, file
          no. 33-24107.)

10.9      1993 Employee Stock Purchase Plan as amended and restated as of May
          31, 1995. (Incorporated by reference to Exhibit 10.58 filed with the
          Company's Annual Report on Form 10-K for the year ended September 30,
          1995.)

10.10     Purchase and Sale Agreement dated as of December 16, 1993 and related
          Amendment to Purchase and Sale Agreement dated December 30, 1993 among
          Seattle FilmWorks, Inc., Private Label Film, Inc. and certain
          shareholders of Private Label Film, Inc. (Incorporated by reference to
          Exhibits 2.1 and 2.2 filed with the Company's Report on Form 10-Q
          dated February 7, 1994.)

10.11     Business Loan Agreement with First Interstate Bank of Washington N.A.
          as amended and restated on March 31, 1994. (Incorporated by reference
          to Exhibit 10.60 filed with the Company's Annual Report on Form 10-K
          for the year ended September 24, 1994.)

10.12     Business Loan Agreement with First Interstate Bank of Washington N.A.
          as amended and restated on February 28, 1995. (Incorporated by
          reference to Exhibit 10.0 filed with the Company's Quarterly Report on
          Form 10-Q for the quarter ended March 25, 1995.)

10.13     Business Loan Agreement with First Interstate Bank of Washington N.A.
          as amended and restated on January 31, 1996. (Incorporated by
          reference to Exhibit 10.1 filed with the Company's Quarterly Report on
          Form 10-Q for the quarter ended March 30, 1996.)

10.14     Business Loan Agreement with Wells Fargo Bank, National Association as
          amended and restated on December 13, 1996. (Incorporated by reference
          to Exhibit 10.13 filed with the Company's Annual Report on Form 10-K
          for the year ended September 28, 1996.)

10.15     Credit Agreement with Wells Fargo Bank, National Association as of
          March 1, 1997.  (Incorporated by reference to Exhibit 10.1 filed with
          the Company's Quarterly Report on Form 10-Q for the quarter ended June
          28, 1997.)

10.16     First Amendment to Credit Agreement with Wells Fargo Bank, National
          Association as of February 24, 1998 (Incorporated by reference to
          Exhibit 10.1 filed with the Company's Quarterly Report on Form 10-Q
          for the quarter ended June 27, 1998.)

10.17     Stock Redemption Agreement dated July 20,1994 between the Company and
          Sam Rubinstein and related promissory note. (Incorporated by reference
          to Exhibits 5.1 and 5.2 filed with the Company's Report on Form 8-K
          dated July 22, 1994.)

                                       26
<PAGE>

10.18     Lease Agreement dated September 22, 1995 between the United States of
          America, Lessors, and the Company with respect to certain plant and
          warehouse facilities in Seattle, Washington. (Incorporated by
          reference to Exhibit 10.63 filed with the Company's Annual Report on
          Form 10-K for the year ended September 30, 1995.)

10.19     Addendum to Lease Agreement dated January 1, 1996 between the United
          States of America, Lessors, and the Company. (Incorporated by
          reference to Exhibit 10.3 filed with the Company's Quarterly Report on
          Form 10-Q for the quarter ended March 30, 1996.)

10.20     Supplemental Lease Agreement dated October 21, 1996 between the United
          States of America, Lessors, and the Company. (Incorporated by
          reference to Exhibit 10.17 filed with the Company's Annual Report on
          Form 10-K for the year ended September 28, 1996.)

10.21     Lease agreement dated March 4, 1997 between Smith Cove Partnership and
          the Company. (Incorporated by reference to Exhibit 10.3 filed with the
          Company's Quarterly Report on Form 10-Q for the quarter ended March
          29, 1997.)

10.22*    Sales contract dated August 18, 1995 between the Company and Agfa
          Division of Miles, Inc. with respect to the purchase of certain
          products. (Incorporated by reference to Exhibit 10.64 filed with the
          Company's Quarterly Report on Form 10-Q for the quarter ended March
          30, 1996.)

10.23*    Supplement to sales contract with Agfa Division of Miles, Inc. dated
          March 29, 1996. (Incorporated by reference to Exhibit 10.2 filed with
          the Company's Quarterly Report on Form 10-Q for the quarter ended
          March 30, 1996.)

10.24*    Agfa Sales Contract and Sales Contract Addendum dated May 21, 1997.
          (Incorporated by reference to Exhibit 10.2 filed with the Company's
          Quarterly Report on Form 10-Q for the quarter ended June 28, 1997.)

10.25*    Supply Agreement effective January 1, 1997 with Fuji Photo Film
          U.S.A., Inc. (Incorporated by reference to Exhibit 10.1 filed with the
          Company's Quarterly Report on Form 10-Q for the quarter ended March
          29, 1997.)

10.26*    Kodak Agreement dated May 13, 1997. (Incorporated by reference to
          Exhibit 10.3 filed with the Company's Quarterly Report on Form 10-Q
          for the quarter ended June 28, 1997.)

10.27*    AT&T Agreement dated March 5, 1997. (Incorporated by reference to
          Exhibit 10.2 filed with the Company's Quarterly Report on Form 10-Q
          for the quarter ended March 29, 1997.)

10.28     Warehouse Sublease between Seattle FilmWorks, Inc. and OptiColor, Inc.
          dated September 30, 1996. (Incorporated by reference to Exhibit 10.20
          filed with the Company's Annual Report on Form 10-K for the year ended
          September 28, 1996.)

10.29     Warehouse Sublease between Seattle FilmWorks, Inc. and Seattle
          FilmWorks Manufacturing Company dated September 30, 1996.
          (Incorporated by reference to Exhibit 10.21 filed with the Company's
          Annual Report on Form 10-K for the year ended September 28, 1996.)

10.30     1260 16th Avenue West Sublease between Seattle FilmWorks, Inc. and
          OptiColor Inc. dated September 30, 1996. (Incorporated by reference to
          Exhibit 10.22 filed with the Company's Annual Report on Form 10-K for
          the year ended September 28, 1996.)

                                       27
<PAGE>

10.31     1260 16th Avenue West Sublease between Seattle FilmWorks, Inc. and
          Seattle FilmWorks Manufacturing Company dated September 30, 1996.
          (Incorporated by reference to Exhibit 10.23 filed with the Company's
          Annual Report on Form 10-K for the year ended September 28, 1996.)

10.32     General Assignment between Seattle FilmWorks, Inc., Seattle FilmWorks
          Manufacturing Company and OptiColor, Inc. dated September 30, 1996.
          (Incorporated by reference to Exhibit 10.24 filed with the Company's
          Annual Report on Form 10-K for the year ended September 28, 1996.)

21        Seattle FilmWorks, Inc. Subsidiaries

23        Consent of Ernst & Young LLP, Independent Auditors

27.1      Financial Data Schedule

27.2      Financial Data Schedule  Restated 1997

27.3      Financial Data Schedule  Restated 1996

   * Exhibit for which confidential treatment has been granted.

                                       28