Your images only go through the server but they are not saved anywhere. Neither are the result images. Save your results before leaving the page or closing the result.
Basically the image goes through the server, PHP loops through the image and adds shapes. After that it will base64 encode the result image and show it to the user.
The sample size of the colorpicker is always 1px. PHP GD does not allow bigger sample sizes by default but i might code a function that calculates the color from a bigger area in the future.