UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2016.

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

For the transition period from to

Commission File Number: 000-52414

POW! Entertainment, Inc.

(Exact name of Registrant as specified in its charter)

Delaware		90-0139831
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

9440 Santa Monica Blvd #620

Beverly Hills, CA 90210

310-275-9933

(Address of principal executive offices)

Registrant’s telephone number, including area code

N/A
(Former name, former address and former fiscal year, if changed since last report.)

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 such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x
(do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes ¨ No x

The number of common shares outstanding on October 28, 2016 was 132,357,356.

POW! ENTERTAINMENT, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

		Page
PART I.	Financial Information

Item 1.	Financial Statements	3

	Consolidated Balance Sheets at September 30, 2016 (Unaudited) and December 31, 2015 (Audited)	3

	Consolidated Statements of Operations and Comprehensive Income (Unaudited) for the Three and Nine Months Ended September 30, 2016 and 2015.	4

	Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2016 and 2015.	5

	Notes to Consolidated Unaudited Financial Statements	6 – 11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12 – 15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	15

Item 4.	Controls and Procedures	15

PART II.	Other Information

Item 1.	Legal Proceedings	16

Item 1A.	Risk Factors	17

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	17

Item 6.	Exhibits	17

Signatures		20

PART I. ITEM 1. FINANCIAL STATEMENTS

POW! ENTERTAINMENT, INC.

CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2016			2015
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	188,163		$	382,266
Letter of credit		32,544			32,544
Marketable securities		283			239,848
Accounts receivable, net		-			97,235
Other receivables		2,297			5,090
Prepaid expenses		30,687			22,691
TOTAL CURRENT ASSETS		253,974			779,674
Property and equipment, net		3,279			5,892
INTANGIBLE AND OTHER ASSETS
Trademarks, net		19,213			18,113
TOTAL ASSETS	$	276,466		$	803,679

LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	492,543		$	355,651
Note payable		680,000			-
Advances payable		4,196,667			4,196,667
Deferred compensation-current		200,000			200,000
Deferred rent		1,620			9,530
Derivatives liability		4,908			3,379
TOTAL CURRENT LIABILITIES		5,575,738			4,765,227

Deferred compensation-long term		877,917			1,027,917
COMMITMENT AND CONTINGENCIES, note 8
SHAREHOLDERS' DEFICIT
Common shares, $0.001 par value.
199,000,000 common shares authorized, 1,000,000 preferred shares authorized
132,357,356 common shares issued and outstanding
at September 30, 2016 and December 31, 2015, respectively		132,358			132,358
Additional paid in capital		9,622,797			9,622,797
Accumulated deficit		(15,932,344	)		(14,722,749	)
Accumulated other comprehensive income		-			(21,871	)
TOTAL SHAREHOLDERS' DEFICIT		(6,177,189	)		(4,989,465	)
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT	$	276,466		$	803,679

See the accompanying notes to consolidated unaudited financial statements.

POW! ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended						Nine Months Ended
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015

REVENUES	$	250,896		$	757,142		$	483,359		$	1,876,742

OPERATING COSTS AND EXPENSES
Wages and benefits		323,278			351,289			1,028,416			1,106,041
Commission		500			11,800			500			11,800
Professional fees		77,504			125,405			331,873			333,497
Promotional and marketing		10,500			10,552			32,444			32,358
Rent and office		47,583			31,743			113,087			103,508
Other general and administration		61,287			49,479			152,637			148,235

TOTAL OPERATING COSTS AND EXPENSES		520,652			580,268			1,658,957			1,735,439

INCOME (LOSS) FROM OPERATIONS		(269,756	)		176,874			(1,175,598	)		141,303
OTHER INCOME AND (EXPENSES)
Interest and dividend income, net		-			2,607			2,393			6,853
Loss on marketable securities		-			-			(24,010	)		-
Recovery of bad debt		-			-			-			13,002
Gain (Loss) on change of derivative value		-			3,147			(1,529	)		3,147
LOSS BEFORE TAXES		(269,756	)		182,628			(1,198,744	)		164,305
Income taxes		-			-			(10,850	)		(12,849	)
NET INCOME (LOSS)	$	(269,756	)	$	182,628		$	(1,209,594	)	$	151,456

Net income (loss) per share
Basic and diluted	$	(0.00	)	$	0.00		$	(0.01	)	$	0.00

Weighted average shares outstanding, basic and diluted		132,357,356			132,357,356			132,357,356			132,357,356

Condensed Statement of Comprehensive Income
Net Income (Loss)	$	(269,756	)	$	182,628		$	(1,209,594	)	$	151,456
Other comprehensive Income (Loss)
Unrealized gain (loss) on marketable securities		-			(7,746	)		21,871			(6,626	)
Comprehensive Income (Loss)	$	(269,756	)	$	174,882		$	(1,187,723	)	$	144,830

See the accompanying notes to consolidated unaudited financial statements.

POW! ENTERTAINMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015

(UNAUDITED)

	September 30
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(1,209,594	)	$	151,456
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		2,381			10,950
Loss on sale of marketable securities		24,010			-
Loss on disposal of fixed assets		232			-
Changes in valuation of derivatives liability		1,529			(3,147	)
Deferred rent		(7,910	)		(11,153	)
Change in assets and liabilities:
Accounts receivable		97,235			46,049
Other receivable		2,793			-
Prepaid expenses		(7,996	)		(8,173	)
Accounts payable and accrued expenses		137,046			148,901
Deferred compensation		(150,000	)		(150,000	)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(1,110,274	)		184,883

CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for trademarks		(1,100	)		(700	)
Purchase of marketable securities		(3,312	)		(7,715	)
Sale of marketable securities		240,583			-

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		236,171			(8,415	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable		680,000			-
NET CASH PROVIDED BY FINANCING ACTIVITIES		680,000			-

NET INCREASE (DECREASE) IN CASH		(194,103	)		176,468
Cash and cash equivalents at beginning of period		382,266			583,044
Cash and cash equivalents at end of period	$	188,163		$	759,512

Supplemental disclosures of cash flow information:
Income taxes paid in cash	$	10,850		$	12,849

See the accompanying notes to consolidated unaudited financial statements.

POW! ENTERTAINMENT, INC

NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS

The Company and Basis of Presentation

Business Activity and Organization—The Company is a Delaware corporation, incorporated on August 17, 1998. POW! Entertainment, Inc. ("POW", "Company", “we”) has the following subsidiaries: POW! Entertainment, LLC (the operating company), QED Productions, LLC, PFD, LLC, and an inactive Delaware corporation: Pharmelle, Inc.

We have prepared the Company’s accompanying consolidated unaudited financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial statements and with instructions to Form 10-Q pursuant to the rules and regulations of Securities and Exchange Act of 1934, as amended, or the Exchange Act and Article 8-03 of Regulation S-X promulgated under the Exchange Act. Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of our management, we have included all adjustments considered necessary (consisting of normal recurring adjustments) for a fair presentation. Operating results for the three and nine months ended September 30, 2016 are not indicative of the results that may be expected for the fiscal year ending December 31, 2016. You should read these unaudited consolidated financial statements in conjunction with the audited financial statements and the notes thereto included in our annual report on Form 10-K for the year ended December 31, 2015.

Going Concern Qualifications

The Company's operation will be sustained through December 2016 by the promissory note from a party with which the Company has a joint venture and by $183,000 of revenue received for the show Lucky Man. For the nine months ended September 30, 2016, the Company had a net loss of $1,209,594 and has a negative working capital balance of approximately $5,300,000. Revenues fluctuate and are uncertain and these conditions raise substantial doubt about the Company's ability to continue as a going concern.

The Company is currently exploring various other sources of revenues, but there can be no assurances that we will be successful in finding other revenue streams sufficient to support our operational requirements and we may need to further scale back operations, defer executive salaries and reduce staff members. The financial statements for the three and nine months ended September 30, 2016 do not contain any adjustments to reflect future effects on the recoverability or classification of assets and liabilities that may result should we not able to continue as a going concern.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of conducting its business. The Company's ability to continue as a going concern is dependent upon various factors including, among others, its ability to generate income and positive cash flows from operations.

Summary of Significant Accounting Policies

Principles of Consolidation— The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company transactions and balances have been eliminated in consolidation.

Revenue Recognition— As a creator of intellectual property, the majority of the Company’s business is derived from contracts with third parties providing for the development and use of intellectual property developed by the Company.

The Company records revenue from these sources: artist consulting, film rights, animated television and comic-book royalties. In accounting for these contracts, the Company recognizes revenue when services have been rendered or when contractual parameters have been satisfied and are measureable.

Use of Estimates —The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the appropriate application of certain accounting policies, many of which require estimates and assumptions about future events and their impact on amounts reported in the financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the financial statements.

We have identified the first tier of estimates and assumptions as significant areas of estimation and assumptions to be the valuation of derivatives liabilities from the utilization of the Black-Scholes Pricing Model, which has inherent volatility that may greatly differ from the actual results. The second tier of estimation consists of the allowance for doubtful accounts and the net deferred income tax asset valuation allowance. While we deem the latter estimates to be significant, their infrequent occurrence in our operations are considered secondary compared to the first tier.

Concentration of Credit Risk—The Company maintains cash at financial institutions which may, at times, exceed insured limits.

Cash, Cash Equivalents and Marketable Securities—Cash, cash equivalents and marketable securities include cash, certificates of deposit, mutual funds and liquid investments with original maturities of three months or less. Marketable securities consist of securities classified as available for sale.

Accounts Receivable—The Company extends credit to its customers. These customers have specific contracts that detail the payments expected under their contract terms. Accounts receivable are customer obligations due under these contract terms. Management reviews accounts receivable on a regular basis, based on contracted terms and how recently payments have been received, to determine if any such amounts will potentially be uncollected. After all attempts to collect a receivable have failed, the receivable is written off.

Other Receivables—Other receivables are receivables from third parties deemed collectible.

Property and Equipment—Property and equipment are stated at cost. Depreciation and amortization are provided for using the straight-line method over the estimated useful lives of the assets over three to five years. Depreciation expense recorded for the three months ended September 30, 2016 and 2015 were $614 and $3,650, respectively. Depreciation expense recorded for the nine months ended September 30, 2016 and 2015 were $2,381 and $10,950, respectively.

Fair Value Measurements—The Company measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. exit price) in an orderly transaction between market participants at the measurement date. Additionally, the Company is required to provide disclosure and categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e. inputs) used in the valuation. Level 1 provides the most reliable measure of fair value while Level 3 generally requires significant management judgment. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The fair value hierarchy is defined as follows:

Level I – Quoted prices in active markets for identical assets and liabilities.

Level II – Other significant observable inputs for assets or liabilities through corroboration with market data at measurement date.

Level III – Significant unobservable inputs that reflect management’s best estimate of what market participants would use to price assets or liabilities at the measurement date.

The following table summarizes fair value measurements by level at December 31, 2015 for assets and liabilities measured at fair value on a recurring basis:

	Level I		Level II	Level III		Total
Cash	$	382,266				$	382,266
Letter of credit	$	32,544				$	32,544
Marketable securities	$	239,848				$	239,848
Derivatives liability				$	3,379	$	3,379

The following table summarizes fair value measurements by level at September 30, 2016 for assets and liabilities measured at fair value on a recurring basis:

	Level I		Level II	Level III		Total
Cash	$	188,163				$	188,163
Letter of credit	$	32,544				$	32,544
Marketable securities	$	283				$	283
Derivatives liability				$	4,908	$	4,908

The table below sets forth a summary of changes in fair value of the Company’s Level III liabilities for the nine months ended September 30, 2016.

Balance as of December 31, 2015	$	3,379
Change in Value		1,529
Balance as of September 30, 2016	$	4,908

The Company’s management believes the carrying amounts of accounts receivable, accounts payable and accrued expense approximate fair value due to their short maturity.

Valuation of Derivative Instruments—ASC 815-40 (formerly SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities”) requires that embedded derivative instruments be bifurcated and assessed, along with free-standing derivative instruments such as warrants, on their issuance date and in accordance with ASC 815-40-15 (formerly EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”) to determine whether they should be considered a derivative liability and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option pricing formula.

Marketable Securities— The following tables show the Company’s securities classified as available for sale with adjusted cost, unrealized gains (loss), and fair value by investment category recorded as of December 31, 2015:

	December 31, 2015
	Adjusted Cost		Unrealized Gain (Loss)			Aggregate Fair Value		Securities Available for Sale

Mutual Funds	$	261,849	$	(22,001	)	$	239,848	$	239,848

Marketable Securities consisted of $283 in cash and cash equivalents as of September 30, 2016.

Loss on Sale of Marketable Securities—The Company sold securities classified as available for sale with adjusted cost basis of $264,724 for net proceeds of $240,583 with a loss on sale totaling $24,010 during the nine months ended September 30, 2016. There was no sale of marketable securities during the nine months ended September 30, 2015.

Other Comprehensive Income—The Company’s other comprehensive income consists of unrealized gains (losses) on securities classified as available for sale that are recorded as an element of shareholders’ equity but are excluded from net income.

Income Taxes—Income taxes are accounted for under an asset and liability approach that requires the recognition of deferred income tax assets and liabilities for the expected future consequences of events that have been recognized in the Company’s financial statements and income tax returns. The Company provides a valuation allowance for deferred income tax assets when it is considered more likely than not that all or a portion of such deferred income tax assets will not be realized.

Earnings Per Share—Basic earnings per share is computed by dividing earnings available to common shareholders by the weighted-average number of common shares outstanding. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common share equivalents had been issued and if the additional common shares were dilutive. Common equivalent shares are excluded from the computation if their effect is anti-dilutive.

Concentrations—The Company has two major customers that individually exceeded 10% of total revenue and accounted for 89.6% and 86.8% of total revenue for the three months ended September 30, 2016 and 2015, respectively.

For the nine months ended September 30, 2016, four major customers accounted for 91.8% and individually exceeded 10% of the total revenue. The Company has two major customers that individually exceeded 10% and accounted for 58.4% of the total revenue for the nine months ended September 30, 2015.

Recently Issued or Newly Adopted Accounting Standards—In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The update intends to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information and addresses certain aspects of the recognition, measurement, presentation, and disclosure of financial instruments. The new standard affects all entities that hold financial assets or owe financial liabilities. For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this guidance is not expected to have a material impact on the consolidated financial condition, results of operations or liquidity of the Company.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in "Leases (Topic 840)" and generally requires all leases to be recognized in the consolidated balance sheet. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach. The Company is currently evaluating the impact of the adoption of this standard, if any, on its Consolidated Financial Statements.

In May 2014, FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. The standard will eliminate the transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2017. Early adoption is not permitted. The revenue recognition standard is required to be applied retrospectively, including any combination of practical expedients as allowed in the standard. We are evaluating the impact, if any, of the adoption of ASU 2014-09 to our financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

In April 2016, the FASB issued AS 2016-10, Revenue from Contracts with Customers (Topic 606), which amends certain aspects of the Board’s new revenue standard, ASU 2014-09, Revenue from Contracts with Customers. The standard should be adopted concurrently with adoption of ASU 2014-09 which is effective for annual and interim periods beginning after December 15, 2017. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting.

In August 2014, the FASB issued FASB ASU2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. FASB ASU 2014-15 changes to the disclosure of uncertainties about an entity’s ability to continue as a going concern. These changes require an entity’s management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that financial statements are issued. Substantial doubt is defined as an indication that it is probable that an entity will be unable to meet its obligations as they become due within one year after the date that financial statements are issued. If management has concluded that substantial doubt exists, then the following disclosures should be made in the financial statements: (i) principal conditions or events that raised the substantial doubt, (ii) management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations, (iii) management’s plans that alleviated the initial substantial doubt or, if substantial doubt was not alleviated, management’s plans that are intended to at least mitigate the conditions or events that raise substantial doubt, and (iv) if the latter in (iii) is disclosed, an explicit statement that there is substantial doubt about the entity’s ability to continue as a going concern. These changes become effective for the Company for the 2016 annual period. The adoption of this guidance is not expected to have a material impact on the consolidated Financial Statements. Subsequent to adoption, this guidance will need to be applied by management at the end of each annual period and interim period therein to determine what, if any, impact there will be on the consolidated financial statements in a given reporting period.

Advances Payable

The contract with Silver Creek contained recoupable advance payments per annum of $550,000 for five years. The agreement ended December 31, 2014. The amounts were recorded by the Company as advances payable pursuant to the contractual clause in which the advances are recoupable by Silver Creek if at all from projects in development during the term of the agreement. As of September 30, 2016, cumulative advances received from Silver Creek were $4,196,667 and such amount remains unchanged. This amount was recoupable by Silver Creek solely from projects which were in development during the term of the agreement. At September 30, 2016, the Company had no projects “in development” under the agreement with Silver Creek, so no recoupment payments were owed.

Deferred Compensation

Deferred compensation consists of accrued and unpaid salaries of executives, which will be paid as the Company increases its cash, over time, or by obtaining additional financing. The balance at September 30, 2016 reflects payments made during the three months in the amount of $150,000.

Related Party Transactions.

From time to time, Stan Lee has appeared and will continue to appear at certain events or projects for which both he and the Company receive payments. There were no fees paid to Mr. Lee or the Company during the nine months ended September 30, 2016. Both Mr. Lee and the Company were paid approximately $20,000 during the nine months ended September 30, 2015. The Company believes that his ability to appear at these events enhances the Company’s brand without additional costs to the Company.

For the nine months ended September 30, 2015, $13,002 was collected from the equity partner from Stan Lee Power Concerts (“SLPC”), which was previously written-off as bad debt.

The Company entered into a promissory note for $680,000 from a party with which the Company has a joint venture. The balance currently outstanding is $680,000. The advances bear interest at the Prime Rate announced by Citibank, N. A., from time to time, and are to be repaid with principal at the maturity date of December 31, 2016, unless sooner due as a result of a change in control of the Company. The Note may be prepaid, in whole or in part, at any time without penalty.

Warrants and Options for Non-Employees

On December 2, 2010, the Company issued warrants to purchase 350,000 shares of common stock at $0.1905 per share in lieu of the remaining balance of an accrued commission of $125,000 to a consultant. The contract has an anti-dilutive clause, vests immediately and originally was scheduled to expire in 2012 and was later extended to expire in December 2017. Accordingly, the Company uses the guidance in ASC 815-40-15 to scope and measure the warrants for non-employees as a derivative liability.

A loss on change in derivative liability was recorded to reflect an increase of $1,529 for the nine months ended September 30, 2016. A gain on change in derivative liability was recorded to reflect a decrease of $3,147 for the nine months ended September 30, 2015.

The fair value of stock warrants and options at the date of grant and derivative liability were estimated using the Black-Scholes option-pricing model, based on the following assumptions:

	Nine Months Ended September 30,
	2016			2015
Risk-free interest rate		1.14	%		1.37	%
Expected life		1.25 years			2.25 years
Expected Volatility		313.87	%		278.62	%
Dividend yield		0.00	%		0.00	%

Note Payable

Commitments and Contingencies

Legal Proceedings

From time to time the Company may become involved in various legal proceedings in the normal conduct of its business.

On February 14, 2011, the Company and its subsidiary, QED Productions, LLC, were named in a lawsuit citing, among other things, trademark infringement. The Company filed a motion to dismiss the lawsuit on March 15, 2011. On August 23, 2012, Judge Wilson of the U.S. District Court for the Central District of California dismissed the case. On October 29, 2014, the dismissal was affirmed by the Ninth Circuit Court of Appeals. SMI filed a writ of certiorari to the US Supreme Court on February 12, 2015, which was denied on March 30, 2015.

On August 11, 2015, Shawn Lukaszewicz filed a complaint in the Superior Court of the State of California against Stan Lee and the Company, among others, alleging multiple causes of action related to plaintiff's performance of services. Plaintiff was never an employee, independent consultant or other service provider to the Company, and has no contractual or other relationship with the Company, and the Company believes that such claims are without merit. The parties have filed a number of motions in Superior Court relating to this matter.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

FORWARD-LOOKING STATEMENTS

Some of the statements in the Form 10-Q are forward-looking statements about what may happen in the future. Forward-looking statements include statements regarding our current beliefs, goals, and expectations about matters such as our expected financial position and operating results, our business strategy, and our financing plans. The forward-looking statements in the Form 10-Q are not based on historical facts, but rather reflect the current expectations of our management concerning future results and events. The forward-looking statements generally can be identified by the use of terms such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “foresee,” “likely” or other similar words or phrases. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance and achievements expressed or implied by these statements. We cannot guarantee that our forward-looking statements will turn out to be correct or that our beliefs and goals will not change. Our actual results could be very different from and worse than our expectations for various reasons. You should review carefully all information, including the discussion of risk factors under “Item 1A: Risk Factors” and “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Form 10-K for the year ended December 31, 2015.

Overview

The Company is a multimedia development and licensing company that creates and licenses animated and live-action fantasy and superhero entertainment content and merchandise, leveraging the creative output and branded image of Stan Lee. The Company develops originally created franchises for new media such as mobile, on-line, and videogames, where content is currently in high demand, and for traditional entertainment media such as feature length films in both live action and animation, DVD, television programming, merchandising and related ancillary markets. All of the Company’s intellectual property, which may include characters and stories, is vertically integrated in that each property is developed into as many products as possible, to create a branded franchise to accelerate global identity from the synergy created across various media.

Currently, the Company plans to focus on:

creating project concepts, primarily in the form of story treatments,

identifying select partners willing to participate in, and/or finance, the development of the Company’s projects,

identifying talented and suitable writers to write scripts for the Company’s projects, and

negotiating agreements for the production of the projects (i.e ., the filming of a movie or television series, the creation of games, etc.)

Going Concern Qualifications

Projects in Development

The Company begins with story ideas from Stan Lee and, prior to January 2015 presented the ideas to Disney pursuant to the “first look” contract (See Transactions with Affiliates of The Walt Disney Company), then third parties (such as writers, directors, producers or studios) to develop the project at the third party’s expense. The Company considers a project to be “in development” once we have packaged the project and handed the project off to a third party. At that point, the project has left the control of the Company and is in the purview of the third party. Since the Company does not control the process once it is in the hands of others it is unable to indicate with much, if any, certainty when that project will be produced or the cost that such other party may incur to produce it. The numbers of projects in development tend to vary at any given point in time, but they are in the 15-20 projects range. A majority of projects “in development” are never produced, or are produced only after lengthy delays.

We believe that the odds are against the typical project “in development” being produced because there are a very large number of people who come up with ideas for movies, television shows, and other forms of entertainment, but only a limited number of entities with the financial and personnel resources required to produce and distribute these projects. However, we believe that several factors improve the odds of the Company’s projects being produced and, if produced being successful.

First, Stan Lee’s has co-created a large number of very successful characters and projects.

Second, through Stan Lee, we have established relationships with a variety of well-known writers, directors and producers.

Third, Stan Lee’s natural inclination and focus are on superheroes, action characters and other characters that have potential to become “franchises” (i.e. that lend themselves to sequels, to licensing to other media, to merchandising and to other ancillary opportunities).

Transactions with Affiliates of The Walt Disney Company

Silver Creek Pictures, Inc. (“Silver Creek”), an affiliate of The Walt Disney Company (“Disney”), entered into an agreement with the Company in 2006 and subsequently amended (the “Silver Creek Agreement”) pursuant to which, among other things, the Company provided Silver Creek with a “first look” at all of the Company’s creative intellectual property and the right to acquire any such properties, in Silver Creek’s discretion under prescribed terms, and Silver Creek compensated the Company for all properties that were in development by Silver Creek into revenue producing works pursuant to complex terms, typical in the film and media industry.

The Silver Creek Agreement provided for Silver Creek to pay the Company overhead allowance amounts equal to $700,000 per annum from 2010 through 2014, and an additional $550,000 per annum advance against certain future payments due from Silver Creek. Silver Creek is entitled to recoup the $550,000 annual payments from proceeds of Company projects, which were in development during the term of the Silver Creek Agreement. At September 30, 2016, Silver Creek was entitled to $4,196,667 in recoupment payments. At September 30, 2016, the Company had no projects “in development” under the agreement with Silver Creek, so no recoupment payments were owed.

The Silver Creek Agreement, including all amendments, are exhibits to the Form 10 filed with the Securities and Exchange Commission on December 10, 2010 and the foregoing summary is subject to the actual terms provided therein.

Additionally, Catalyst Investments, LLC (“Catalyst Investments”), another Disney affiliate, purchased on December 31, 2009 ten percent of the then-outstanding shares of common stock of the Company for $2,500,000 (the “Catalyst Investment”).

Critical Accounting Policies and Estimates

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.

Results of Operations

We believe that, due to the complex nature and long term cycle of our business operations, period-to-period comparisons of our operating results are not necessarily meaningful and should not be relied on as an indication of future performance. However, it is still important that you review the audited financial statements filed on the Form 10-K for the year ended December 31, 2015 and the related notes in addition to thoroughly reading our current plan of operations.

For Three Months Ended September 30, 2016 and 2015

The Company's revenues for the three months ended September 30, 2016 were $250,896, a decrease of $506,246 or 67% compared to the three months ended September 30, 2015. During the three months ended September 30, 2016, the Company received revenues for the show Lucky Man totaling $183,000 and from various other projects. Our new sources of revenue did not result in similar revenue streams compared to 2015 revenues. Project development revenues have fluctuated and are uncertain.

For the three months ended September 30, 2016, net loss was $269,756 compared to net income of $182,628 for the three months ended September 30, 2015.

Total operating costs decreased by $59,616, mainly due to decreases in wages and benefits and professional fees compared to prior year. Other expenses have been held constant compared to prior year.

For Nine Months Ended September 30, 2016 and 2015

The Company's revenues for the nine months ended September 30, 2016 were $483,359, a decrease of $1,393,383 or 74% compared to the nine months ended September 30, 2015. During the nine months ended September 30, 2016, the Company received revenues for the show Lucky Man and from various other projects. Our new sources of revenue did not result in similar revenue streams compared to 2015 revenues. Project development revenues have fluctuated and are uncertain.

For the nine months ended September 30, 2016, net loss was $1,209,594 compared to net income of $151,456 for the nine months ended September 30, 2015.

Total operating costs decreased by $76,483 mainly due to decreases in wages and benefits. Other expenses have been held constant compared to prior year.

Liquidity and Capital Resources

Historically, our liquidity and capital resources were provided principally through our agreement with Silver Creek Pictures. We have a deficiency in working capital of $5,321,764 and $3,985,553 as of September 30, 2016 and December 31, 2015, respectively. As of September 30, 2016, cumulative advances received from Silver Creek were $4,196,667 and such amount remains unchanged. This amount was recoupable by Silver Creek solely from projects which were in development during the term of the agreement. At September 30, 2016, the Company had no projects “in development” under the agreement with Silver Creek, so no recoupment payments were owed.

The Silver Creek agreement expired in December 2014 and the agreement was not extended. The Company is currently exploring various other sources of revenues, but there can be no assurances that we will be successful in finding other revenue streams sufficient to support our current operational requirements. During 2015 and 2016, the Company found various strategic new partners to develop new projects which resulted in the revenues received in 2015 and 2016. During the nine months ended September 30, 2016, the Company received revenues for the show Lucky Man totaling $183,000 and from various other projects. The revenue sources did not replace the Silver Creek agreement and were one-time revenue streams. The Company continues to search for new strategic partners.

The Company entered into a promissory note for $680,000 from a party with which the Company has a joint venture. The balance currently outstanding is $680,000. The advances bear interest at the Prime Rate announced by Citibank, N. A., from time to time, and are to be repaid on December 31, 2016, unless sooner due as a result of a change in control of the Company or the Company's bankruptcy. The Note may be prepaid, in whole or in part, at any time without penalty.

Deferred compensation due to executives totaled $1,077,917 and $1,227,917 as of September 30, 2016 and December 31, 2015, respectively. During the nine months ended September 30, 2016, the Company paid down deferred compensation totaling $150,000.

Off Balance Sheet Arrangements

We are not party to any material off-balance sheet financing arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

None

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this report, we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Under the direction of our Chief Executive Officer, we evaluated our disclosure controls and procedures and concluded that our disclosure controls and procedures were not effective as of September 30, 2016.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonable likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time the Company may become involved in various legal proceedings in the normal conduct of its business.

Stan Lee Media, Inc.

Stan Lee Media, Inc. (“SLM”) was a publicly-traded entity listed on the NASDAQ during 1999. SLM operated as a typical dot com company during the dot com bubble, in that it created and developed new properties and franchises for the internet, in this case under the Stan Lee signature, but without any sustainable revenue source other than new debt or equity financings. While Stan Lee was the Chairman of the Board of Directors and Chief Creative Officer of SLM and Gill Champion was the Chief Operating Officer of SLM, the President and Chief Executive Officer of SLM was a party who is unrelated to the Company. Stan Lee terminated his employment agreement with SLM in January 2001 because, among other reasons, SLM had ceased paying him thereunder.

On July 9, 2007, SLM filed a lawsuit in the United States District Court for the Central District of California against Stan Lee, QED and the Company entitled Stan Lee Media, Inc. v. Lee, et al. (the “SLM Suit”). In this suit, SLM sought declaratory relief and asserted claims for misappropriation of corporate opportunity, breach of contract, civil conspiracy, an accounting for profit, violation of the Lanham Act, copyright infringement, cyber squatting, and unfair business practices naming various defendants, including the Company. Specifically, SLM petitioned the court for an order declaring that SLM is the rightful owner of certain intellectual property and, as such, is the only entity that can use and benefit from such property. In January 2011, the U.S. District Court for the Central District of California directed that SLM file a Consolidated Complaint in that Court, consolidating all the litigation pending in that Court. In February 2011, SLM filed its Consolidated Complaint seeking substantially the same relief sought in the complaint previously filed and dismissed in New York Federal Court. In March 2011, the Company filed a motion to dismiss the newest complaint on the grounds that the claims are barred by res judicata and statutes of limitation, among other grounds, based in part on the prior New York decision. On August 23, 2012, Judge Wilson dismissed the case. On October 29, 2014, the dismissal was affirmed by the Ninth Circuit Court of Appeals. SLM filed a writ of certiorari on February 12, 2015 to the US Supreme Court. On March 30, 2015, the writ of certiorari was denied by the US Supreme Court.

ITEM 1A—RISK FACTORS

There are no changes to the risk factors set forth in the “Risk Factors” section of our Form 10-K for the year ended December 31, 2015.

ITEM 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

NONE

ITEM 6—EXHIBITS

Exhibit No.	Exhibit Index	Method of Filing

3.1	Restated Certificate of Incorporation of POW! Entertainment, Inc., dated December 6, 2010	Incorporated by reference as Exhibit 3.1 to Form 10 filed December 10, 2010

3.2	By-Laws of POW! Entertainment Inc., as amended and restated effective June 11, 2012	Incorporated by reference as Exhibit 3.3 to Form 8-K filed June 14, 2012

4.1	Form of Warrant granted to the Stanley L. Compton, Trustee of the Compton Family Trust dated April 11, 1988	Incorporated by reference as Exhibit 4.1 to Form 10 filed December 10, 2010

4.2	Form of Warrant Agreement granting warrants to Arthur Lieberman and Stan Lee	Incorporated by reference as Exhibit 4.2 to Form 10 filed December 10, 2010

4.3	Amendment to Form of Warrant granted to The Stanley L. Compton, Trustee of the Compton Family Trust dated April 11, 1988	Incorporated by reference as Exhibit 4.3 to Form 10-K filed March 29, 2013

10.1	Overall Agreement Dated as of March 20, 2006 Between Silver Creek Pictures, Inc. and POW! Entertainment, Inc. For Services of Stan Lee (“Silver Creek Agreement”)	Incorporated by reference as Exhibit 10.1 to Form 10 filed December 10, 2010

10.2	Amendment Letter to Silver Creek Agreement, dated March 20, 2006	Incorporated by reference as Exhibit 10.2 to Form 10 filed December 10, 2010

10.3	Amendment Letter to Silver Creek Agreement, dated September 12, 2006	Incorporated by reference as Exhibit 10.3 to Form 10 filed December 10, 2010

10.4	Amendment Letter to Silver Creek Agreement, dated March 13, 2007 (“Second Amendment”)	Incorporated by reference as Exhibit 10.4 to Form 10 filed December 10, 2010

10.5	Amendment Letter to Silver Creek Agreement, dated September 10, 2007 (“Third Amendment”)	Incorporated by reference as Exhibit 10.5 to Form 10 filed December 10, 2010

10.6	Amendment Letter to Silver Creek Agreement, dated May 2, 2008 (“Fourth Amendment”)	Incorporated by reference as Exhibit 10.6 to Form 10 filed December 10, 2010

10.7	Amendment Letter to Silver Creek Agreement, dated December 18, 2009 (“Fifth Amendment”)	Incorporated by reference as Exhibit 10.7 to Form 10 filed December 10, 2010

10.8	Stock Purchase Agreement, dated December 31, 2009 by and between POW! Entertainment, Inc. and Catalyst Investments, LLC	Incorporated by reference as Exhibit 10.8 to Form 10 filed December 10, 2010

10.9	Letter Agreement between Catalyst and the Company dated December 31, 2009	Incorporated by reference as Exhibit 10.09 to Form 10 filed December 10, 2010

10.10	Employment Agreement-Stan Lee, dated as of January 1, 2010 between POW! Entertainment, Inc. and Stan Lee	Incorporated by reference as Exhibit 10.10 to Form 10 filed December 10, 2010

10.11	Employment Agreement-Champion, dated as of January 1, 2010 between POW! Entertainment, Inc. and Gill Champion	Incorporated by reference as Exhibit 10.11 to Form 10 filed December 10, 2010

10.12	Employment Agreement-Lieberman, dated as of January 1, 2010 between POW! Entertainment, Inc. and Arthur Lieberman	Incorporated by reference as Exhibit 10.12 to Form 10 filed December 10, 2010

10.13	Amended and Restated Deferred Compensation Payment Agreement dated as of November 22, 2010 by and among POW! Entertainment, Inc., Stan Lee and Arthur Lieberman	Incorporated by reference as Exhibit 10.13 to Form 10 filed December 10, 2010

10.14	Agreement, dated as of June 8, 2005 between Stanley L. Compton and POW! Entertainment, Inc.	Incorporated by reference as Exhibit 10.14 to Form 10 filed December 10, 2010

10.15	Agreement, dated as of September 9, 2010 between Cooper Global Communications and POW! Entertainment, Inc.	Incorporated by reference as Exhibit 10.15 to Form 10-K filed March 28, 2011

10.16	Amendment to Employment Agreements-Stan Lee, Dated December 1, 2011 and referred to in Exhibit 10.10	Incorporated by reference as Exhibit 10.16 to Form 10-K Filed March 23, 2012

10.17	Agreement, dated June 1, 2011 between POW! Entertainment and Bick Le	Incorporated by reference as Exhibit 10.17 to Form 10-Q filed August 4, 2011

10.18	Amendment to Employment Agreements-Gill Champion, dated December 1, 2011 and referred to in Exhibit 10.11	Incorporated by reference as Exhibit 10.18 to Form 10-K filed March 23, 2012

10.19	Amendment to Employment Agreements-Arthur Lieberman, dated December 1, 2011 and referred to in Exhibit 10.12	Incorporated by reference as Exhibit 10.19 to Form 10-K filed March 23, 2012

10.20	Indemnity Agreements dated December 2004	Incorporated by reference as Exhibit 10.20 to Form 10-K filed March 23, 2012

10.21	Agreement, dated June 11, 2012 between POW! Entertainment and Bick Le	Incorporated by reference as Exhibit 10.21 to Form 10-Q filed August 14, 2012

10.22	Promissory Note, dated April 12, 2016	Incorporated by reference as Exhibit 10.22 to Form 8-K filed April 16, 2016

Exhibit No.	Exhibit Index	Method of Filing
31.1	Certification by Chief Executive Officer	Filed herewith
31.2	Certification by Chief Financial Officer	Filed herewith
32.1	Section 1350 Certification by Principal Executive Officer	Filed herewith
32.2	Section 1350 Certification by Principal Financial Officer	Filed herewith
101.INS	XBRL Instance Document.	Filed herewith
101.SCH	XBRL Taxonomy Schema.	Filed herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase.	Filed herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase.	Filed herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase.	Filed herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase.	Filed herewith

SIGNATURES

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

	POW! Entertainment, Inc.

November 14, 2016	By:	/s/ GILL CHAMPION
		Gill Champion
		President and Chief Executive Officer
		Principal Executive Officer

November 14, 2016	By:	/s/ BICK LE
		Bick Le
		Principal Financial Officer

POW! ENTERTAINMENT, INC. 10-Q