POW! ENTERTAINMENT, INC.

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 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.

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 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.

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.