UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________

FORM 10-Q

_____________

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~September~~March 3031, ~~2016~~2017

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File No. 333-178037

PAZOO, INC.

(Exact name of registrant as specified in its charter)

Nevada		27-3984713
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
23 Vreeland Rd, Suite 110 Florham Park NJ		07932
34 DeForest Ave, Unit 9 East Hanover NJ		07936
(Address of Principal Executive Offices)		(Zip Code)

(973) 884-0136

(Registrant's Telephone Number, Including Area Code)

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 preceding12 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§230.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ 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 the definitions of "large accelerated file," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.

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

Yes ☐ No ☒

122,~~922~~080,~~610,419~~849 shares of common stock, par value $0.001 per share, outstanding as of ~~November~~June 1416, ~~2016~~2017.

Table of Contents

Pazoo, Inc.

Form 10-Q

Table of Contents

			Page
Part I	Financial Information		3
	Item 1	Condensed Consolidated Financial Statements	3
		Balance Sheets (Unaudited)	3
		Statements of Operations (Unaudited)	4
		Statements of Cash Flow (Unaudited)	5
		Statements of Cash Flows (Unaudited)	5
		Notes to Financial Statements (Unaudited)	6
	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	1514
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	1816
	Item 4	Controls and Procedures	1816
Part II	Other Information		1917
	Item 1	Legal Proceedings	1917
	Item 1A	Risk Factors	1917
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	1917
	Item 3	Defaults Upon Senior Securities	1917
	Item 4	Mine Safety Disclosures	1917
	Item 5	Other Information	1917
	Item 6	Exhibits	1918

Table of Contents

Part I – FINANCIAL INFORMATION

Item 1 Condensed Consolidated Financial Statements (Unaudited)

The results reflected in the unaudited Condensed Consolidated Statement of Operations for the ~~nine~~three month period ended ~~September~~March 3031, ~~2016~~2017 may not be indicative of results expected for the full year. The following unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Notes to the Financial Statements, Management's Discussion and Analysis of Financial Condition and Results of Operations shown in Item 2 of Part I of this report, as well as the audited financial statements and related notes to the financial statements in the Company's Annual Report on Form 10-K filed on April 1521, ~~2016~~2017 with the Securities and Exchange Commission (SEC) for the year ended December 31, ~~2015~~2016. Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the instructions to Article 8 Regulation S-X.

PAZOO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	September 30,			December 31,
	March 31,			December 31,
	2016			2015
	2017			2016
ASSETS
Current assets:
Cash	$	336,~~176~~843		$	1688,~~819~~909
Accounts receivable - related party		28,715			-
Prepaid expenses		5,536			5,536
Prepaid expenses		5,449			5,448
Total current assets		42,379			94,445
Total current assets		37,340			22,267
Fixed assets, net		566,828			613,332
Fixed assets, net		678,065			749,841
Total assets	$	609,207		$	707,777
Intangible assets, net		-			1,590,935
Total other assets		678,065			2,340,776
Total assets	$	715,405		$	2,363,043
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Lines of credit	$	2319,~~549~~172		$	1921,~~500~~039
Accounts payable and accrued liabilities		~~514~~735,~~534~~411			~~406~~608,~~176~~332
Loans payable		~~371~~959,~~631~~254			~~203~~615,~~000~~801
Interest payable		1,~~122~~814,~~599~~221			~~172~~1,~~709~~452,102
Convertible debt, net of unamortized discounts of $400,112 and $533,391		1,072,272			809,644
Convertible debt, net of unamortized discounts of $293,166 and $195,827		1,264,898			983,621
Contingent consideration liabilities		713,581			~~718~~713,581
Derivative liabilities		3,~~233~~639,~~317~~778			12,~~756~~925,~~435~~627
Capital lease liability		323,147			304,516
Capital lease liabilities		373,930			373,930
Total current liabilities		79,~~374~~520,~~630~~245			47,~~390~~694,~~561~~033
Long-term liabilities:
Long-term portion of convertible debt, net of unamortized discounts of $204,314, and $794,036		1,384,522			198,464
Long-term portion of convertible debt, net of unamortized discounts of $0, and $110,672		1,292,500			1,401,828
Capital lease		187,455			242,771
Capital lease liabilities		85,420			136,672
Total long-term liabilities		1,~~571~~377,~~977~~920			~~441~~1,~~235~~538,500
Total liabilities		810,~~946~~898,~~607~~165			49,~~831~~232,~~796~~533
Commitments
Commitments and contingencies
Stockholders' deficit:
Convertible Preferred Stock, 50,000,000 shares authorized, $0.001 par value
Series A; 10,000,000 shares authorized, 230,401 and 860,669 shares issued and outstanding, respectively.		230			861
Series A; 10,000,000 shares authorized, 230,476 and 230,401 shares issued and outstanding, respectively.		230			230
Series B; 5,000,000 shares authorized, 1,762,500 and 1,762,500 shares issued and outstanding, respectively.		1,762			1,762
Series B; 5,000,000 shares authorized, 2,150,000 and 1,762,500 shares issued and outstanding, respectively.		2,150			1,762
Series C; 10,000,000 shares authorized, 3,167,072 and 2,051,000 shares issued and outstanding, respectively.		3,167			2,051
Series C; 10,000,000 shares authorized, 2,621,375 and 2,621,375 shares issued and outstanding, respectively.		2,621			2,621
Series D; 12,500,000 shares authorized, 0 and 0 shares issued and outstanding, respectively.		-			-
Series E; 12,500,000 shares authorized, 0 and 0 shares issued and outstanding, respectively.		-			-
Common stock, $0.001 par value; 2,950,000,000 shares authorized, 1,071,565,002 and 14,865,053 shares issued and outstanding, respectively.		1,071,565			14,865
Common stock, $0.001 par value; 2,950,000,000 shares authorized, 10,510,361 and 9,137,630 shares issued and outstanding, respectively.		10,510			9,138
Additional paid-in capital		1112,~~007~~323,~~788~~622			912,~~410~~155,~~382~~641
Accumulated deficit		(2022,~~315~~628,~~714~~091	)		(1120,~~898~~694,~~674~~148	)
Total stockholders' deficit		(810,~~231~~288,~~202~~958	)		(28,~~468~~524,~~753~~756	)
Total liabilities and stockholders' deficit	$	~~715~~609,~~405~~207		$	2707,~~363,043~~777

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

PAZOO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2016			2015			2016			2015
	2017			2016
Revenues:
Management Fees - Related Party	$	11,919		$	-		$	30,515		$	-
Management fees - related party	$	-		$	-
Advertising Sales		-51			57,~~970~~326			-			~~27,602~~
Total revenues		~~11,919~~51			57,~~970~~326			~~30,515~~			~~27,602~~
Cost of sales
Operating expenses:
Merchandise sales		-			-			-			-
Selling, general and administrative expenses		537,095			701,686
Total cost of sales		-			-			-			-
Professional fees		180,004			144,443
Gross profit		11,919			5,970			30,515			27,602
Website setup		1,342			4,967
Operating expenses:
Total operating expenses		718,441			851,096
Selling, general and administrative expenses		164,144			306,756			2,292,314			1,789,539
Loss from operations		(718,390	)		(843,770	)
Professional fees		54,542			214,367			318,290			741,924
Other income/(expenses):
Loss on impairment of license		-			-			1,540,207			-
Gain/(loss) on derivative liabilities		(904,409	)		(2,406,761	)
Website setup		736			24,212			8,872			130,602
Gain/(loss) on debt extinguishment		286,266			(66,994	)
Total operating expenses		219,422			545,335			4,159,683			2,662,065
Gain on change in fair value of contingent consideration		-			5,000
Loss from operations		(207,503	)		(539,365	)		(4,129,168	)		(2,634,463	)
Interest expense		(597,335	)		(1,029,517	)
Other income/(expenses):
Total other income/(expenses)		(1,215,478	)		(3,498,272	)
Gain/(loss) on derivative liabilities		642,948			(274,017	)		(3,796,031	)		(267,987	)
Net loss	$	(1,933,868	)	$	(4,342,042	)
Gain on debt extinguishment		541,133			3,623,340			2,238,375			2,885,240
Series A preferred stock dividends		(19	)		(195	)
Gain on change in FV of contingent consideration		-			-			5,000			-
Net loss attributable to common stockholders	$	(1,933,887	)	$	(4,342,237	)
Loss on impairment of equity method investment		-			-			-			(780,209	)
Net loss per common share – basic and diluted	$	(0.20	)	$	(52.03	)
Interest expense		(1,068,853	)		(1,008,648	)		(2,735,216	)		(1,623,046	)
Weighted average common shares outstanding - basic and diluted		9,725,325			83,449
Net income (loss)	$	(92,275	)	$	1,801,310		$	(8,417,040	)	$	(2,420,465	)
Series A preferred stock dividends		(77	)		(2,016	)		(431	)		(35,155	)
Net loss attributable to common stockholders	$	(92,352	)	$	1,799,294		$	(8,417,471	)	$	(2,455,620	)
Net loss per common share – basic and diluted	$	(0.00	)	$	0.25		$	(0.03	)	$	(0.45	)
Weighted average common shares outstanding - basic and diluted		654,772,236			7,251,981			257,274,194			5,435,444

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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PAZOO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2016			2015
	2017			2016
Cash flows from operating activities:
Net loss	$	(81,~~417~~933,~~040~~868	)	$	(24,~~420~~342,~~465~~042	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discounts		1227,~~246,540~~700			1762,~~152,882~~237
Depreciation		7146,~~776~~504			646,~~469~~504
Amortization		~~50,728~~-			825,~~630~~365
Change in fair value of contingent consideration		(5,000	)		-
Capitalized interest expense		-			192,936
Stock-based compensation		1,226,131			937,101
Change in fair value of contingent consideration		-			(5,000	)
(Gain)/loss on derivative liabilities		3,796,031			267,987
Stock-based compensation		56,110			49,900
(Gain)/loss on debt extinguishment		(2,238,375	)		(2,885,240	)
(Gain)/loss on derivative liabilities		904,409			2,406,761
(Gain)/loss on impairment of intangibles		1,540,207			-
(Gain)/loss on debt extinguishment		(286,266	)		66,994
Loss on true-up of convertible notes		-			63,630
Additional common shares issued for true-up of convertible notes		-			93,087
Impairment loss on equity method investment		-			780,209
Changes in operating assets and liabilities:
Accounts receivable		~~(28,715~~-	)		(23,~~106~~842	)
Prepaid expenses and other current assets		-			~~54,368~~(1	)
Accounts payable, accrued liabilities and interest payable		1499,~~981,361~~546			~~296~~386,~~041~~924
Net cash used in operating activities		(~~776~~485,~~356~~865	)		(1413,~~647,407~~264	)
Cash flows from investing activities:
Cash paid for purchase of licenses		-			(307,500	)
Cash received in acquisition of MA & Associates		-			1,798
Acquisition of fixed assets		-			(21,136	)
Equity investment in equity method investee		-			(778,639	)
Net cash used in investing activities		-			(1,105,477	)
Cash flows from financing activities:
Proceeds from convertible note		~~638~~270,~~460~~617			1372,~~527,722~~750
Stock subscription receivable		-			5,254
Repayments on capital leases		(51,252	)		(31,069	)
Repayments on capital leases		(36,685	)		-
Repayments on convertible notes and loans		(144,899	)		(9,516	)
Repayments on convertible notes and loans		(103,411	)		(634,925	)
Repayment on loans payable- related party		(3,300	)		-
Proceeds from loans payable		~~170~~364,~~300~~500			~~200~~39,~~000~~100
Proceeds from issuing common stock		-			48,380
Proceeds from sale of Series C preferred stock		-			50,001
Proceeds from sale of Series A preferred stock and warrants		-			580,000
Lines of credit		(1,867	)		5,804
Proceeds from sale of Series C preferred stock		90,000			338,000
Net cash provided by financing activities		433,799			427,070
Lines of credit		4,049			-
Net (decrease) in cash and cash equivalents		(52,066	)		13,806
Net cash provided by financing activities		762,713			2,064,431
Cash and cash equivalents beginning of period		88,909			16,819
Net (decrease) in cash and cash equivalents		(13,643	)		(688,453	)
Cash and cash equivalents end of period	$	36,843		$	30,625
Cash and cash equivalents beginning of period		16,819			733,637
Cash and cash equivalents end of period	$	3,176		$	45,184
Supplemental Disclosure of Cash Flows Information
Cash paid for interest	$	-		$	-
Cash paid for income taxes		-			-
Noncash Investing and Financing Activities
Fixed assets acquired through capital lease	$	-		$	615,024
Common stock issued for the conversion of Series A preferred stock	$	-		$	369
Preferred shares issued for acquisition of MA & Associates		-			500,000
Debt discount due to derivative liabilities		223,604			406,336
Contingent consideration for acquisition of MA & Associates		-			1,228,581
Preferred shares issued for conversion of debt and interest		-			30,652
Common stock issued for the conversion of Series A and Series C preferred stock		163,659			131,500
Common shares issued for conversion of debt and interest		113,557			265,258
Debt discount due to derivative liabilities		1,353,842			1,707,481
Preferred shares issued for conversion of debt and interest		30,652			-
Common shares issued for conversion of debt and interest		957,808			1,103,879
Common shares issued for accrued liability		350,000			-
Convertible debt issued for rent expense		-			58,434

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Pazoo, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1—DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

The Company entered the pharmaceutical testing laboratory market with their acquisitions of MA & Associates, LLC which will operate pharmaceutical testing laboratories in Nevada, and Harris Lee Holdings, LLC which will operate pharmaceutical testing laboratories within other states, or license testing protocols as independently owned laboratories. These pharmaceutical testing laboratories focus on providing quality control services to the medical cannabis industry. The mission is ato ~~growth~~protect ~~stage~~the public health by providing infrastructure and ~~wellness~~analytical ~~company~~services to legally-authorized cannabis producers and distributors as well as to regulators. States ~~Presently,~~that have legalized cannabis are developing cannabis health and safety criteria that we will fulfill through their ~~business~~testing ~~consists~~laboratories. Harris ofLee ~~pazoo~~Holdings, LLC, due to Colorado residency requirements, entered into an advisory agreement with Harris Lee Colorado, LLC, a related party.~~com~~ Harris Lee Holdings, LLC had sub-licensed the testing protocols to Harris Lee Colorado, LLC in exchange for management fees for each test conducted. The Colorado MED approved the transfer of management of an ~~online~~existing laboratory, ~~content~~operating ~~driven~~as Steep Hill Colorado, adto ~~supported~~Harris ~~health~~Lee Colorado, LLC (a related party) and ~~wellness~~Harris ~~web~~Lee ~~site~~Holdings, ~~for~~LLC ~~people~~has derived management fees from Harris Lee Colorado, LLC in the year ending December 31, 2016 and ~~their~~March ~~pets~~31, 2017. However, ~~Additionally~~because of the failure to transfer the MED license to Harris Lee Colorado, ~~this~~LLC, ~~site~~the ~~has~~Denver ~~e-commerce~~laboratory ~~functionality~~was ~~which~~closed ~~allows~~by ~~pazoo~~the end 2016.~~com~~ The Company does not expect to bere-commence anoperations ~~online~~in ~~retailer~~the ofnear ~~nutritional~~future. ~~foods/supplements~~Lastly, ~~wellness~~the ~~goods~~Company's wholly owned subsidiary, CK Distribution LLC, provides the marketing and ~~fitness~~sales ~~apparel~~agent for the distribution of non-controlled hemp products throughout the USA. ~~Pazoo~~Non-controlled hemp products are the items utilized by the industry that support grow facilities, ~~Inc~~infusion companies and dispensaries. ~~does~~On ~~not~~January ~~have~~4, ~~any~~2017 ~~brick~~the Company's 100% wholly owned subsidiary MA & Associates received its final approval and ~~mortar~~Marijuana ~~establishments~~Testing License from the City of Las Vegas, NV and can now commence operations.

Further, the ~~Company~~business ~~entered~~consists ~~the pharmaceutical testing laboratory market with their acquisitions~~ of ~~MA & Associates~~pazoo.com, ~~LLC~~an ~~which will operate pharmaceutical testing laboratories in Nevada~~online, ~~and~~content ~~Harris Lee Holdings~~driven, ~~LLC~~ad ~~which~~supported will operate pharmaceutical testing laboratories within other states, or license testing protocols as independently owned laboratories. These pharmaceutical testing laboratories focus on providing quality control services to the medical cannabis industry. The mission is to protect the public health ~~by providing infrastructure~~ and ~~analytical~~wellness ~~services~~web tosite ~~legally-authorized~~for ~~cannabis~~people ~~producers~~ and ~~distributors~~their ~~as well as to regulators~~pets. ~~States~~ ~~that~~Additionally, ~~have~~this ~~legalized~~site ~~cannabis~~has ~~are~~e-commerce ~~developing~~functionality ~~cannabis~~which ~~health~~allows ~~and~~pazoo.com ~~safety~~to ~~criteria~~be ~~that~~an weonline ~~will~~retailer ~~fulfill~~of ~~through~~nutritional ~~their testing laboratories. Lastly~~foods/supplements, ~~the~~wellness ~~Company's wholly owned subsidiary~~goods, ~~CK Distribution LLC, provides the marketing~~ and ~~sales~~fitness ~~agent~~apparel. ~~for~~Pazoo, ~~the distribution of non-controlled hemp products throughout the USA~~Inc. ~~Non-controlled~~does ~~hemp~~not ~~products~~have ~~are~~any ~~the~~brick ~~items utilized by the industry that support grow facilities, infusion companies~~ and ~~dispensaries~~mortar establishments.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Pazoo, Inc. ("Pazoo" or the "Company") and its wholly-owned subsidiaries MA & Associates, LLC, Harris Lee Holdings, LLC, and CK ~~Distribution~~Distributions, LLC. These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). All significant inter-company transactions and accounts have been eliminated in consolidation.

In ~~March~~April ~~2016~~2017, the Company effected a 1-for-~~100~~250 reverse stock split of the outstanding common stock (the "Reverse Stock Split") whereby every ~~one~~two hundred fifty (~~100~~250) shares of outstanding common stock decreased to one (1) share of common stock. Similarly, the number of shares of common stock, par value $0.001 ("Common Stock") into which each outstanding Preferred stock ~~and warrant to purchase common stock~~ is to be exercisable decreased on a 1-for-~~100~~250 basis and the exercise price of each outstanding preferred stock ~~and warrant~~ to purchase common stock increased proportionately resulting in no effect from the reverse stock split. The impact of this reverse stock split has been retroactively applied to the consolidated financial statements and the related notes.

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the ~~nine~~three month period ended ~~September~~March 3031, ~~2016~~2017 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2016~~2017. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 as filed on April 1521, ~~2016~~2017.

Use of Estimates

In accordance with GAAP the preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amount of revenues and expenses during the reporting period.

Table of Contents

On an ongoing 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 and conditions. The most significant accounting estimates inherent in the preparation of the Company's financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. These accounting policies are described at relevant sections in the notes to the financial statements.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Pazoo and its subsidiaries, which are wholly owned. All significant intercompany transactions and balances have been eliminated in consolidation.

Fixed Asset

Fixed assets are presented at cost at the date of acquisition. Depreciation and amortization is calculated based on the straight-line method over the estimated useful lives of the depreciable assets, or in the case of leasehold improvements, the shorter of the lease term or the estimated useful life of the asset, a portion of which is allocated to cost of sales. Improvements are capitalized while repairs and maintenance are charged to operations as incurred.

Impairment of Long-Lived Assets

The Company's intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the historical-cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset. The Steep Hill and MA licenses were evaluated for impairment and no impairment loss was incurred as of December 31, 2015.

The Company, due to the uncertainties surrounding the license agreement, impaired 100% of the value of the Steep Hill Labs licenses due to the purported unsubstantiated termination of the license agreements in June 2016 between Steep Hill Labs and MA & Associates, LLC and Harris Lee, LLC respectively. The Company strongly believes that any attempted termination of the licenses on the part of Steep Hill Labs was ineffective for many reasons, including, without limitation, Steep Hill's failure to provide key deliverables including technology, scientific know-how and lab guidance. On July 6, 2016, the Company contested the improper attempted termination of the licenses which was based on no identifiable contractual justification, and to which Steep Hill has not formally responded. To the contrary, as of the date of this Report, Steep Hill Labs continues to list the Company as one of its "partners" and continues to display the Company's Las Vegas facility as a Steep Hill location. If Steep Hill Labs takes any further action to effectuate the ineffective termination of the licenses, this matter will be litigated under the terms and conditions of the respective license agreements, which management will vigorously defend.

Basic and Diluted Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share reflects, in addition to the weighted average number of common shares, the potential dilution if shares of convertible preferred stock were converted into shares of common stock and a corresponding accrued 5% dividend, unless the effects of such exercises and conversions would have been anti-dilutive.

Dilutive Securities

Potentially Dilutive Securities
	March 31, 2017		March 31, 2016

Convertible notes		149,849,934		3,392,479
Preferred series A shares & warrants		23,047,600		1,404,613
Preferred series B		430,000,000		1,410,000
Preferred series C		262,137,500		867,852
		865,035,034		7,074,944

	September 30, 2016		September 30, 2015
Common stock warrants		-		3,355
Convertible notes		39,542,005,182		7,354,189
Preferred series A shares & warrants		23,040,100		2,503,526
Preferred series C		316,707,200		1,233,000
		39,881,752,482		11,094,070

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Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued new guidance related to how an entity should recognize lease assets and lease liabilities. The guidance specifies that an entity who is a lessee under lease agreements should recognize lease assets and lease liabilities for those leases classified as operating leases under previous FASB guidance. Accounting for leases by lessors is largely unchanged under the new guidance. The guidance is effective for us beginning in the first quarter of 2019. Early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is evaluating the impact of adopting this guidance on our consolidated financial condition, results of operations and cash flows.

In March 2016, the FASB issued new guidance which involves several aspects of the accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Under the new standard, income tax benefits and deficiencies are to be recognized as income tax expense or benefit in the income statement and the tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity should also recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Excess tax benefits should be classified along with other income tax cash flows as an operating activity. In regards to forfeitures, the entity may make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. This ASU is effective for fiscal years beginning after December 15, 2016 including interim periods within that reporting period, however early adoption is permitted. The Company is currently evaluating the guidance to determine the Company's adoption method and the effect it will have on the Company's Consolidated Financial Statements.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed to have a material impact on our present or future consolidated financial statements.

Fair Value of Financial Instruments

The Company's financial instruments consist principally of cash ~~and cash equivalents~~, derivatives, convertible debt, and accounts payable. The Company believes that the recorded values of all of its other financial instruments approximate their fair values because of their nature and respective maturity dates or durations. The fair value of our long-term debt is determined by using estimated market prices. Assets and liabilities measured at fair value are categorized based on whether or not the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into three levels (with Level 3 being the lowest) defined as follows:

Level 1: Inputs are based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level 2: Inputs include quoted prices for similar assets or liabilities in active markets and/or quoted prices for identical or similar assets or liabilities in markets that are not active near the measurement date.

Level 3: Inputs include management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument's valuation.

8The following table sets forth by level within the fair value hierarchy the Company's financial assets and liabilities that were accounted for at fair value as of March 31, 2017 and December 31, 2016.

Recurring Fair Value Measurements	Level 1			Level 2			Level 3			Total
LIABILITIES:
Derivative liability – March 31, 2017		$	-		$	-		$	3,639,778		$	3,639,778
Derivative liability – December 31, 2016		$	-		$	-		$	2,925,627		$	2,925,627

Recent Accounting Pronouncements

February 2016, the Financial Accounting Standards Board ("FASB") issued new guidance related to how an entity should recognize lease assets and lease liabilities. The guidance specifies that an entity who is a lessee under lease agreements should recognize lease assets and lease liabilities for those leases classified as operating leases under previous FASB guidance. Accounting for leases by lessors is largely unchanged under the new guidance. The guidance is effective for us beginning in the first quarter of 2019. Early adoption is permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company is evaluating the impact of adopting this guidance on our consolidated financial condition, results of operations and cash flows.

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~~Revenue~~In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in ASU 2016-01, among other things, requires equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables); Eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities. The amendments in this ASU are effective for non-public companies for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning December 15, 2019. Early adoption of the amendments in the ASU is permitted as early as the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The adoption of this standard is not expected to have a material effect on the consolidated financial position and results of operations and statements of cash flows.

~~Revenues~~In ~~are~~September ~~recognized~~2015, ~~when~~the ~~evidence~~FASB ofissued anAccounting ~~agreement~~Standards ~~exists~~Update (ASU) 2015-16—Business Combinations, as part of its initiative to reduce complexity in accounting standards (the ~~price~~Simplification isInitiative). ~~fixed~~The oramendment ~~determinable,~~eliminates ~~collectability~~the requirement to retrospectively apply adjustments made to provisional amounts recognized in a business combination. The amendment is ~~reasonably~~effective ~~assured~~for fiscal years, and ~~goods~~interim ~~have~~periods ~~been~~within ~~delivered~~those orfiscal ~~services~~years, ~~performed~~beginning after December 15, 2016. Early adoption is permitted. The Company isadopted ~~paid~~this ~~revenue~~guidance ~~from~~for ~~various~~the ~~advertising,~~year ~~cannabis~~ended ~~testing~~December 31, ~~and~~2017. ~~sales~~The adoption of this standard is not expected to have a material effect on the consolidated financial position and ~~distribution~~results of ~~non-controlled~~operations ~~hemp~~and ~~products.~~statements of cash flows

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which delayed the effective date of the new standard from January 1, 2017 to January 1, 2018. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. This ASU permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. The Company does not expect the adoption of this standard to have a material effect to the financial statements.

Other recent accounting pronouncements issued by the FASB did not or are not believed to have a material impact on our present or future consolidated financial statements.

Note 2—GOING CONCERN

During the ~~nine~~three months ended ~~September~~March ~~2015~~2016 and ~~2016~~2017, the Company incurred net losses of $24,~~420~~342,~~465~~042 and $81,~~417~~933,~~040~~868, respectively. In addition, as of ~~September~~March 3031, ~~2016~~2017, the Company had a working capital deficit of $79,~~337~~477,~~290~~866. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon our ability to generate sufficient cash flow and raise additional capital to meet our obligations on a timely basis and ultimately attain profitability. If the Company is unable to generate sufficient cash flow or raise additional capital, it could be forced to cease operations. The Company's continuation as a going concern is dependent upon our ability to generate sufficient cash flow and raise additional capital to meet our obligations on a timely basis and ultimately attain profitability. The Company does not have sufficient capital for the next 12 months from the issuance of these financial statements.

The Company's liquidity is highly dependent on its ability to obtain additional capital in the near future. The Company's failure to raise new capital would impair its ability to both continue its current operations and could result in its failure to continue to operate as a going concern. Substantial doubt about its ability to continue as a going concern may also create negative reactions to the price of the Company's common stock, and the Company may not be able to obtain additional financing in the future. The Company is currently exploring potential transactions, specifically through the filing of its Form 14C in January 2017 which will set up the characteristics of the Series D Preferred stock in anticipation of a large financial investment. If the Company is unable to raise additional capital on terms acceptable to the Company and on a timely basis, the Company will be required to downsize or wind down its operations through liquidation, bankruptcy, or a sale of its assets. In addition, to the extent additional capital is raised through the sale of equity or convertible debt securities, such securities may be sold at a discount from the market price of the Company's common stock. The issuance of these securities could also result in significant dilution to some or all of the Company's stockholders, depending on the terms of the transaction. There are no assurances that the Company will be able to consummate additional capital raises.

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Note 3—FIXED ASSETS

Fixed assets consists of the following:

Fixed Assets

Fixed Assets
	Estimated Useful Life (in years)		March 31, 2017			December 31, 2016

Cost:
Equipment		3-5	$	643,195		$	643,195
Furniture and fixture		7		6,687			6,687
Leasehold improvements		3-5		238,620			238,620
Website		3		1,385			1,385
			$	889,887		$	889,887

Accumulated depreciation and amortization				(323,059	)		(276,555	)

Fixed Assets, Net			$	566,828		$	613,332

	Estimated Useful Life (in years)		September 30, 2016			December 31, 2015
Cost:
Equipment		3-5	$	643,195		$	643,195
Furniture and fixture		7		6,687			6,687
Leasehold improvements		3-5		238,620			238,620
Website		3		1,385			1,385
			$	889,887		$	889,887
Accumulated depreciation and amortization				(211,822	)		(140,046	)
Fixed Assets, Net			$	678,065		$	749,841

Costs of assets acquired under capital leases were approximately $615,000 as of March 31, 2017 and December 31, 2016, respectively. The capital lease represents a total of three leases for testing equipment. The leases hold an interest rate of 0% and monthly payments are approximately $17,000 per month. The depreciation for the three months ended March 31, 2017 and March 31, 2016 was $46,504 and $46,504, respectively. As of March 31, 2017 and December 31, 2016, accumulated depreciation related to assets under capital lease was approximately $190,151 and $159,401, respectively. All leased equipment is collateral under the respective lease agreements. As of March 31, 2017, the Company was currently in default of these lease agreements, as scheduled payments were not made. Commencing in 2017, the Company began making payments toward the capital leases again.

~~Costs~~Note of4—LINES ~~assets~~OF acquired under capital leases were approximately $615,000 as of September 30, 2016 and December 31, 2015. The capital lease represents a total of three leases for testing equipment. The leases hold an interest rate of 0% and monthly payments are approximately $17,000 per month. As of September 30, 2016 and at December 31, 2015, accumulated depreciation related to assets was $211,822 and $140,046, respectively.CREDIT

~~Note~~The ~~4—INTANGIBLE~~Company ~~ASSETS~~entered into a line of credit with Wells Fargo in December 2015 in the amount of $25,000. The credit line bears an interest rate of 9.75% annually, compounded daily, and there is no term on the account. There are no financial covenants and the guarantor on the account is Steve Basloe. The line of credit has been used for general operating expenses.

~~Intangible~~The ~~assets~~Company asentered ofinto ~~December~~a ~~31,~~line ~~2015 consisted~~ of acredit ~~license~~with ~~agreement~~Wells ~~acquired~~Fargo ~~for~~in ~~$307,500~~May ~~from~~2016 ~~Steep~~in ~~Hill Labs for~~ the ~~right~~amount ~~to take the Steep Hill software and methodology to states above and beyond Nevada, and the MA license derived from the acquisition~~ of $15,~~345,771~~000. As ofThe ~~September~~credit ~~30,~~line ~~2016,~~bears ~~the~~an ~~Company~~interest ~~has~~rate ~~impaired~~of ~~100~~24.24% offor the ~~Steep~~first ~~Hill~~year ~~license~~and ~~agreement~~then ~~acquired~~9.75% ~~for $307~~annually,~~500~~ ascompounded ~~well~~daily, asand ~~the~~there MAis ~~license~~no ~~derived~~term ~~from~~on ~~acquisition~~the ~~of $1,345,771~~account. ~~The~~There ~~impairment~~are ~~was~~no ~~due~~financial tocovenants and the ~~uncertainties~~guarantor ~~surrounding~~on the ~~license~~account ~~agreement,~~is asDavid ~~well~~Cunic, as the ~~purported unsubstantiated~~Company's ~~termination~~CEO. ofThe ~~the~~credit ~~license~~has ~~agreements~~been inused ~~June~~for ~~2016~~general ~~between~~operating ~~Steep Hill Labs and MA & Associates, LLC and Harris Lee, LLC respectively~~expenses.

The combined lines of credit at December 31, 2016 totaled $21,039 compared to $19,172 at March 31, 2017.

Note 5—DERIVATIVE LIABILITIES

The Company evaluates all of it financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

Under ASC-815 the conversion options embedded in the notes payable described in Note 6 require liability classification because they do not contain an explicit limit to the number of shares that could be issued upon settlement.

The following table summarizes the changes in the derivative liabilities during three months ended March 31, 2017:

Balance as of December 31, 2016	$	2,925,627

Grant date fair value		1,217,319
Extinguished		(413,862	)
Change in fair value		(89,306	)

Balance as of March 31, 2017	$	3,639,778

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~~Note~~The ~~5—LINES~~Company OFuses ~~CREDIT~~the Black Scholes Option Pricing Model to value its convertible debt and warrant derivative liabilities based upon the following assumptions during the three months ended March 31, 2017 and 2016:

The Company entered into a line of credit with Wells Fargo in December 2015 in the amount of $25,000. The credit line bears an interest rate of 9.75% annually, compounded daily, and there is no term on the account. There are no financial covenants and the guarantor on the account is Steve Basloe, the Company's President. The line of credit has been used for general operating expenses. The balance at December 31, 2015 and September 30, 2016 was $19,500 and $18,666, respectively.

	March 31, 2017			March 31, 2016

Dividend yield		0	%		0	%
Expected volatility		80	%		80	%
Risk-free interest rate	0.74% to 0.91%			0.16% to 0.39%
Expected life (years)	0.03 to 0.62			0.04 to 0.86

~~The~~During ~~Company~~three ~~entered~~months ~~into~~ended aMarch ~~line~~31, of2017 ~~credit~~and ~~with~~2016, ~~Wells~~the ~~Fargo~~aggregate ingain/(loss) ~~May~~on ~~2016~~derivative inliability ~~the~~was ~~amount of~~ ($5904,~~000.~~409) ~~The credit line bears an interest rate of 24.24% for the first year~~ and ~~then 9.75% annually~~($2,406,761), ~~compounded daily~~respectively, ~~and~~consisting ~~there~~of isinitial noderivative ~~term~~expense ~~on the account. There are no financial covenants~~ and the ~~guarantor~~change onin ~~the~~fair ~~account~~value isof ~~David Cunic,~~ the ~~Company's~~derivative ~~CEO~~liabilities. ~~The balance at September 30, 2016 was $4,883. The credit has been used for general operating expenses.~~

Note 6—~~DERIVATIVE~~CONVERTIBLE ~~LIABILITIES~~NOTES

The ~~Company~~following ~~evaluates~~table ~~all~~summarizes of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the ~~derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with~~ changes in the ~~fair~~convertible ~~value~~notes ~~reported~~in asthe ~~charges~~year orended ~~credits~~December ~~to income. For option-based derivative financial instruments~~31, ~~the~~2016 ~~Company~~and ~~uses~~ the ~~Black-Scholes~~three ~~option-pricing~~months ~~model~~ending toMarch ~~value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments~~31, ~~including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.~~2017:

Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

	Short Term			Long Term			Total
Balance as of January 1, 2016 - Gross	$	1,343,035		$	992,500		$	2,335,535
Cash additions		373,460			300,000			673,460
Interest added to notes payable		111,778			116,600			228,378
Cash payments		(118,223	)		-			(118,223	)
Conversions		(474,777	)		-			(474,777	)
Reassignments		(103,400	)		103,400			-
Original issue discount		47,575			-			47,575
Total	$	1,179,448		$	1,512,500		$	2,691,948
Less: unamortized discount		(195,827	)		(110,672	)		(306,499	)
Balance as of December 31, 2016 - Net	$	983,621		$	1,401,828		$	2,385,449
Add back: unamortized discount		195,827			110,672			306,499
Balance as of December 31, 2016 - Gross	$	1,179,448		$	1,512,500		$	2,691,948
Cash additions		270,617			-			270,617
Cash payments		(119,636	)		-			(119,636	)
Conversions		(24,927	)		-			(24,927	)
Reclassification to short-term		220,000			(220,000	)		-
Original issue discount		32,562			-			32,562
Total gross balance	$	1,558,064		$	1,292,500		$	2,850,564
Less: unamortized discount		(293,166	)		-			(293,166	)
Balance as of March 31, 2017 - Net	$	1,264,898		$	1,292,500		$	2,557,398

Under ASC-815 the conversion options embedded in the notes payable described in Note 8 require liability classification because they do not contain an explicit limit to the number of shares that could be issued upon settlement.

	Year Ended March 31,
	2018		2019		2020		2021		2022		Thereafter		Total
Convertible notes	$	1,558,064	$	-	$	-	$	300,000	$	792,500	$	200,000	$	2,850,564
Short-term non-convertible notes		959,254		-		-		-		-		-		959,254
	$	2,517,318	$	-	$	-	$	300,000	$	792,500	$	200,000	$	3,809,818

In January 2017, the company entered into a convertible note agreement for an aggregate total of $206,379. The ~~following~~interest ~~table~~rate ~~summarizes~~is 12% and the ~~changes~~conversion interms are 50% of the ~~derivative~~average ~~liabilities~~of the lowest 3 trading prices during ~~nine~~the ~~months~~20 ~~ended~~trading ~~September~~days 30prior to conversion. The maturity date is December 2017. The proceeds from the note were used to pay off previous notes from the lender. In addition, ~~2016:~~the Company paid back $44,575 as of March 31, 2017.

~~Deritvative~~In ~~Liability~~February ~~Table~~2017, the Company entered into a convertible note agreement for a total of $63,800. The interest rate is 10% and the conversion terms are the lower of (a) $0.009 or (b) 45% of the lowest trading price during the 30 trading days prior to conversion. The maturity date is February 2018.

Balance as of December 31, 2015	$	1,756,435
Initial value derivatives		4,525,309
Extinguished		(3,672,811	)
Change in fair value		624,384
Balance as of September 30, 2016	$	3,233,317

The Company uses the Black Scholes Option Pricing Model to value its convertible debt derivative liabilities based upon the following assumptions during the nine months ended September 30, 2016:

	September 30, 2016
Dividend yield:			0
Expected volatility		0.00% to 100.00%
Risk free interest rate	0.29% to 0.35%
Expected life (years)	0.01 to 1.38

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~~During~~In ~~the~~March ~~nine months ended September 30~~2017, ~~2016~~the ~~and~~Company ~~2015~~entered ~~the~~into ~~aggregate~~a ~~gain/(loss)~~convertible onnote ~~change~~agreement infor ~~derivative~~a ~~liability~~total ~~was~~of ($333,~~796,031)~~000. ~~and~~The ~~($267,987),~~interest ~~respectively,~~rate ~~consisting~~is of12% ~~charges~~and ~~for~~ the ~~initial~~conversion ~~derivative~~terms ~~value~~are in65% ~~excess~~ of the ~~face~~average ~~value~~ of the ~~associated~~two ~~debt~~lowest atclosing ~~inception~~prices ~~($3,171,647)~~during ~~for nine months ended September 30, 2016 and~~ the ~~change~~15 intrading ~~fair~~days ~~value~~prior ofto ~~the~~conversion. ~~derivative~~The ~~liabilities~~maturity asdate ~~noted~~is ~~above~~December 2017.

~~Note~~The ~~7—STOCKHOLDERS'~~Company ~~EQUITY~~evaluated all convertible notes describe above under ASC 815 and determined that certain conversion features qualify as derivative liabilities (see Note 5).

During the three months ended March 31, 2017 the Company incurred approximately $286,000 of a gain in debt extinguishment primarily as a result of various notes converting to equity, with the corresponding derivative liability value at the date of conversion being written off to debt extinguishment as a gain, offset by the unamortized discount on the convertible debt at the time of conversion.

In addition to the funds received, noteholders converted $24,927 during the three months ended March 31, 2017 into common stock exclusive of accrued interest. At March 31, 2017, a total of 8 notes with a principle balance of $798,396 were past due. The Company has adequately accrued all default interest and associated penalties related to these instruments. Additionally, cross default clauses exist within certain other instruments containing terms which would make the notes immediately due and payable, however no cross default clauses have been triggered as of yet.

Note 7—LOANS PAYABLE

	Short Term			Long Term		Total
Balance as of January 1, 2016	$	203,000		$	-	$	203,000
Cash additions		447,100			-		447,100
Interest added to notes payable		22,717			-		22,717
Cash payments		(57,016	)		-		(57,016	)
Balance as of December 31, 2016	$	615,801		$	-	$	615,801
Cash additions		364,500			-		364,500
Interest added to notes payable		7,516			-		7,516
Cash payments		(28,563	)		-		(28,563	)
Balance as of March 31, 2017	$	959,254		$	-	$	959,254

The Company received $364,500 of new cash additions in the three months ended March 31, 2017. Cash payments consisted of $28,563. Interest added to the note payables in the three months ended March 31, 2017 totaled $7,516. The interest rates on the loans ranged from 8% to 12%. These additions coincide as an advance on the 14C filing for the Preferred Series D Shares.

Note 8—STOCKHOLDERS' EQUITY (DEFICIT)

Common Stock Split

In 2017, the Company filed a Form 14-C in order to effectuate a 1-for-250 reverse stock split of the outstanding common stock (the "Reverse Stock Split") whereby every two hundred and fifty (250) shares of outstanding common stock decreases to one (1) share of common stock. The current Reverse Stock Split went effective on April 26, 2017. All shares and per share amounts have been retroactively restated for all periods presented.

Preferred Stock

~~Total~~In ~~stock~~January 2017, the Company filed a Form 14-~~based~~C ~~compensation~~Information ~~recognized~~Statement atadvising ~~September~~all ~~30,~~shareholders ~~2016~~of ~~totaled~~the $1Company that the Board of Directors,~~226,131,~~ ~~consisting~~as ratified by the majority of 60the votes of equity holders in late April 2017,~~000~~ ~~common~~approved ~~shares~~of a reverse stock split (at a ratio of 250:1) and 2setting forth the proposed terms and characteristics of the Series D Preferred Stock. The Series D Preferred Stock will carry a 5% annual dividend,~~277~~ will have no voting rights prior to conversion,~~500~~ ~~Series~~and Cwill ~~preferred~~convert ~~shares~~into common stock at a ratio which ~~include~~will 2be determined by the amount of debt to be retired,~~200~~ and new money to be invested,~~000~~ ~~Series~~and Cthe ~~preferred~~then ~~shares~~outstanding ~~issued~~common tostock ~~ICPI.~~of the Company on a fully diluted basis (See, the filed Form 14C for more details)

~~During~~The purpose of reconstituting the ~~nine~~characteristics ~~months~~of ~~ended~~the ~~September~~Series 30D Preferred Stock is to have the ability to consummate the contemplated sale of the Company's Series D Preferred Stock as set forth in the Form 14C. If, ~~2016~~and when, the ~~Company~~agreement ~~issued~~has 55been ~~shares~~finalized for the sale of the Series AD Preferred Stock, ~~for~~the ~~2015~~characteristics ~~Dividends~~of the Series D Preferred Stock will be set forth in a Certificate of Designations to be filed with the Secretary of State of the State of Nevada. If the characteristics are substantively different than as previously approved by the Board of Directors, and ratified by the majority of the votes of equity holders, new approval will be sought. The proposed terms of the agreement are to be 80% of the common stock on a fully diluted basis.

~~During~~The ~~the~~conversion ~~nine~~rates ~~months~~for ~~ended~~all ~~September~~of ~~30,~~the ~~2016,~~Preferred ~~investors~~Series ~~converted~~of ~~691,629~~Stock ~~shares~~are ofnot ~~Series~~affected Aby ~~Preferred~~the ~~Stock~~reverse ~~into~~stock 34split,~~658,826~~ ~~shares~~effected ofin ~~common~~April ~~stock~~2017.

During the nine months ended September 30, 2016, the Company sold 128,572 Series C Preferred Stock for $90,000.

During the nine months ended September 30, 2016, investors converted 1,290,000 shares of Series C Preferred Stock into 129,000,000 shares of common stock.

During the nine months ended September 30, 2016, investor converted a total of $30,652 of notes payable into 61,306 shares of Series A Preferred Stock.

At September 30, 2016 the Company's Series D and Series E Preferred shares terms and conditions are not yet determined and neither certificates of designation have been filed with the State of Nevada.

Common Stock

Issuances

During the nine months ended, September 30, 2016, the Company issued 892,981,123 common shares with conversion of debt valued at $364,784 and accrued interest of $12,676.

Preferred Stock Warrants

The following table presents the Series A preferred stock warrant activity during the nine months ended September 30, 2016:

	Warrants			Weighted Average Exercise Price
Outstanding – December 31, 2015		2,958,083		$	1.17
Granted		-			-
Forfeited/Canceled		(2,958,083	)	$	1.17
Exercised		-			-
Outstanding – September 30, 2016		0		$	0

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~~In April 2016, pursuant to a Settlement Agreement with ICPI, all remaining~~ Series A Warrants have been retired in exchange for the issuance of Series C Preferred Stock. A total of 1,700,000 Series C Preferred Shares were issued to ICPI in exchange for the retirement of all remaining Series A Warrants and the waiver of unpaid dividends on Series A Preferred stock held by ICPI for the years 2014, 2015 and 2016. Additionally, 500,000 Series C preferred shares were issued to ICPI for settlement of liability to issue shares for services.

~~Note~~During ~~8—CONVERTIBLE~~2017, ~~NOTES~~75 shares of Series A Preferred stock were issued for dividends.

~~The~~Series ~~following table summarizes the changes in the convertible notes in the nine months ending September 30, 2016:~~B

	Short Term			Long Term			Total
Balance as of December 31, 2015 - Net	$	809,644		$	198,464		$	1,008,108
Add back: unamortized discount		533,391			794,036			1,327,427
Balance as of December 31, 2015 - Gross	$	1,343,035		$	992,500		$	2,335,535
Cash additions		338,460			300,000			638,460
Interest added to notes payable		330,426			192,936			523,362
Cash payments		(86,311	)		-			(86,311	)
Conversions		(395,400	)		-			(395,400	)
Reassignments		(103,400	)		103,400			-
Original issue discount		45,574			-			45,574
Total	$	1,472,384		$	1,588,836		$	3,061,220
Less: unamortized discount		(400,112	)		(204,314	)		(604,426	)
Balance as of September 30, 2016	$	1,072,272		$	1,384,522		$	2,456,794

In 2017, the Company issued an aggregate of 387,500 Series B Preferred Stock, valued at approximately $56,000, to Board Members as compensation in connection with MA and Associates, LLC receiving its license to operate.

	Year Ended September 30, 2016
	2017		2018		2019		2020		2021		Thereafter		Total
Convertible notes		1,472,384		296,336		-		-		350,000		942,500		3,061,220
Short-term non-convertible notes (see Note 9)		371,631		-		-		-		-		-		371,631
Total		1,844,015		296,336		-		-		350,000		942,500		3,432,851

Series C

In ~~February 2016~~2017, ~~the~~there ~~Company~~have ~~entered~~been ~~into~~no ~~convertible~~issuances ~~note~~or ~~agreements~~sales ~~for an aggregate total~~ of ~~$77,750.~~Series ~~The~~C ~~interest~~Preferred ~~rates range from 8% - 12% and the conversion terms are at a 50% discount to the 25 prior trading days~~Stock. ~~The maturity dates range from November 2016 to February 2017.~~

InSeries ~~March 2016, the Company entered into a convertible agreement note with private investors for the amount of $300,000 with an interest rate of 12% and a maturity date of March 2021.~~D&E

In 2017, there have been no issuances or sales of Series D Preferred Stock or Series E Preferred Stock as the Certificate of Designation has not been filed as it depends on the 14C Filing offering the Preferred D Series Stock.

Common Stock

Issuances

During the three months ended, March 31, 2017, the Company issued an aggregate of 1,372,731 common shares in connection with conversion of debt and interest valued at $113,557.

Note 9—RELATED PARTY TRANSACTIONS

In July 2013, the Company entered into a consulting agreement with an affiliate of Mr. Basloe, a board member of the Company. The agreement provides for consulting on marketing-related services for the Company. Amounts incurred under this agreement for the three months ended March 31 2017 and 2016, totaled $9,200 and $6,500, respectively.

In 2016, the Company managed Harris Lee Colorado, LLC, an existing lab in Denver, Colorado, after receiving approval from the Colorado Marijuana Enforcement Division in February of 2016. Harris Lee Holdings, LLC has sub-licensed the testing protocols to Harris Lee Colorado, LLC in exchange for a management fee for each test conducted. The Colorado MED has recently approved the transfer of management of an existing laboratory, to Harris Lee Colorado, LLC (a related party) and Harris Lee Holdings, LLC has begun to derive management fees from Harris Lee Colorado, LLC. The revenue derived from these management fees for the three months ended March 31, 2017 and 2016 are $0 and $30,515. The laboratory closed during 2016 and the Company does not have plans to re-open in the near future.

In August 2016, Pazoo, Inc. entered into a loan agreement with David Cunic, Company CEO, and totaling $5,000. The note has an interest rate of 0.70% and the maturity date is August 2018. As of March 2017, $0 remains outstanding.

In September 2016, Pazoo, Inc. entered into a loan agreement with Steve Basloe, Company President, and totaling $2,500. The note has an interest rate of 0.70% and the maturity date is September 2018. As of March 2017, $2,500 remains outstanding.

Note 10—COMMITMENTS AND CONTINGENCIES

On March 10, 2015, Harris Lee signed a 9-year licensing agreement with Steep Hill Labs, LLC, with options to renew for an additional 9 years. The purpose of the agreement is to take the Steep Hill licensing to additional states to test medical marijuana above and beyond the State of Nevada, namely Oregon and Colorado. Under the license agreement for the first two states (Oregon and Colorado), if certain gross revenue thresholds are met, the Company is obligated to pay an additional $250,000. In addition, the Company is obligated to pay certain royalties over the life of the license agreement to Steep Hill Labs, Inc, based on the greater of the number of tests ($5 dollars a test) or an escalating royalty rate (7% to 15%) of the initial purchase price. The Company has the option to enter into additional states with similar commitments and royalties. In June 2016, the Company, due to the uncertainties surrounding the license agreement with Steep Hill, impaired 100% of the value of the Steep Hill Labs licenses due to the purported unsubstantiated termination of the license agreements in June 2016 between Steep Hill Labs and MA & Associates, LLC and Harris Lee, LLC respectively.

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In ~~April 2016~~2015, ~~the~~MA ~~Company~~and Associates, LLC entered into avarious ~~convertible~~capital ~~note~~lease ~~agreement~~agreements ~~for~~to afinance ~~total~~fixed ofasset purchases for approximately $58615,000. ~~The~~Total ~~note~~monthly ~~carries~~payments anover ~~interest rate of 10% and~~ the ~~maturity~~36 ~~date~~month ~~is April 2017. The conversion~~ terms are atapproximately ~~a 50% discount to the 20 prior trading dates~~$17,000.

InThe ~~May 2016, the~~ Company's ~~entered~~subsidiary ~~into~~MA ~~convertible~~and ~~note agreements for an aggregate total of $118~~Associates,~~250.~~ ~~The~~LLC ~~interest~~rents ~~rates~~space ~~are~~in ~~12%~~Nevada ~~and~~with ~~the conversion terms are at~~ a ~~50%~~60 ~~discount~~month toterm ~~the~~ending ~~20-25~~in ~~prior~~May ~~trading~~of ~~dates.~~2019, ~~The~~with ~~maturity~~monthly ~~dates~~rent ~~range~~expense ~~from~~of ~~May 2017 to June 2017~~$2,242.

InThe ~~August 2016, the~~ Company ~~entered~~rents ~~into~~office aspace ~~convertible~~in ~~note~~New ~~agreement~~Jersey ~~for~~with a ~~total~~term ofending ~~$130,035.~~on ~~The~~May ~~note carries an interest rate~~ of ~~12%~~2018 and ~~the~~monthly ~~maturity~~payments ~~date~~of isapproximately ~~August 2017~~$700. ~~The conversion terms are at a 50% discount to the 20 prior trading dates.~~

InAs ~~addition~~of toMarch ~~the funds received~~31, ~~noteholders~~2017 ~~converted $395,400 during~~ the ~~nine~~Company ~~months~~was ~~ended~~still ~~September~~obligated ~~30,~~to ~~2016~~pay ~~into~~the ~~common~~remaining ~~stock~~portion ~~exclusive~~under ~~of accrued interest. Non-cash additions, which are due to~~ the ~~increase~~original in2014 ~~principle~~40% ~~for~~investment ~~compounding~~agreement ~~interest,~~with ~~including~~MA ~~accrued~~and ~~interest~~Associates, ~~to new assignee~~LLC, ~~totaled~~consisting of $~~523~~678,~~362~~000 ~~in the first nine months~~ of ~~2016. At~~cash ~~September~~and 3050,000 ~~2016,~~shares ~~a total~~ of 6Series ~~notes~~C ~~with~~Preferred aStock ~~principle~~(valued ~~balance~~at of $~~690~~35,~~398~~000 ~~were~~as ~~past~~of ~~due. The~~March ~~Company~~31, ~~has~~2017), ~~adequately~~totaling ~~accrued~~$713,581 ~~all default interest~~ and ~~associated~~included ~~penalties~~in ~~related~~contingent toconsideration ~~these~~liability ~~instruments. Additionally,~~on ~~cross~~the ~~default~~accompanying ~~clauses~~consolidated ~~exist~~balance ~~within~~sheet ~~certain~~and ~~other~~will ~~instruments~~be ~~containing~~issued ~~terms~~in ~~which~~the ~~would~~future ~~make~~after the ~~notes~~testing ~~immediately~~laboratory ~~due~~is ~~and payable, however no cross default clauses have been triggered as of yet~~operational.

~~Note~~On ~~9—LOANS~~or ~~PAYABLE~~about April 21, 2017, Eri Eveland filed a Complaint in District Court of Denver County Colorado against Harris Lee Colorado, LLC, Harris Lee Holdings, LLC and Pazoo Inc. Ms. Eveland is a former employee of Harris Lee Colorado, LLC and is claiming less than $15,000 in unpaid salary/wages. Inasmuch as Ms. Eveland was not an employee of Harris Lee Holdings, LLC nor Pazoo, Inc., her claims against the Company are derivative in nature and based on theories of corporate alter ego. The Company disputes any liability. As of the date of this report, neither Harris Lee Holdings, LLC nor Pazoo, Inc. have been served with the Complaint. The Company feels it has many valid defenses to this action and, once served, will seek to have the Complaint summarily dismissed as to the Company.

InNote ~~September~~11—SUBSEQUENT 2015, Pazoo, Inc. entered into a loan note totaling $200,000 with Mark Sarna and Sarna Family Limited Partnership. The note has an interest rate of 15.0% and matures September 22, 2016. As of September 30, 2016, $215,431 still remains outstanding.EVENTS

InThe ~~January~~company ~~2016,~~issued ~~Pazoo,~~an ~~Inc.~~aggregate ~~entered~~of ~~into a loan note totaling $5~~8,~~000 with RBF Unlimited~~934,303 ~~LLC. The~~common ~~note~~shares ~~has~~for anconversion ~~interest rate~~ of ~~0.70%~~debt and ~~matures~~for ~~January~~the ~~27,~~settlement ~~2017. As~~ of ~~September~~other ~~30,~~liabilities ~~2016,~~valued ~~loan~~at ~~was~~a ~~paid~~total ~~back~~of ~~in full~~$49,850.

InThe ~~January~~company ~~2016,~~issued ~~Pazoo, Inc. entered into~~ a ~~loan~~total ~~agreement~~of ~~with Kabbage Loans totaling $9~~2,~~100.~~485 ~~The~~common ~~loan~~shares ~~has~~to avarious ~~monthly~~fractional ~~payment~~common ~~consisting~~shareholders offor ~~$500 to~~ the ~~principal~~rounding ~~and~~up ~~$210 to fees, totaling a monthly cost~~ of ~~$710.~~shares ~~The~~resulting ~~loan~~from ~~will~~the bereverse ~~paid~~split ~~off~~effectuated inon aApril ~~maximum of 12 months. As of September 30~~26, ~~2016, $1,420 still remains outstanding~~2017.

InPreferred ~~February~~Stock ~~2016,~~shareholders ~~Pazoo~~converted 15,337 ~~Inc.~~Series ~~entered~~A ~~into~~Preferred ashares ~~loan~~into ~~note totaling $25~~1,~~000 with LG Capital~~533,700 ~~LLC.~~shares ~~The note has an interest~~ of 8%common ~~and it matures on October 4, 2017~~stock. ~~As of September 30, 2016, $25,000 still remains outstanding.~~

InPreferred ~~June~~Stock ~~2016,~~shareholders ~~Pazoo,~~converted ~~Inc. entered into a loan agreement with Kabbage Loans totaling $35~~11,000~~. The~~ ~~loan~~Series ~~will~~C bePreferred ~~paid~~shares ~~off~~into ~~in a maximum of 12 months and has a monthly payment consisting of $3~~1,~~792 to the principal and $875 to fees~~100,000 ~~totaling~~shares ~~a monthly cost~~ of ~~$4,667. As~~common ~~of September 30, 2016, $35,000 remains outstanding~~stock.

InThe ~~July~~Company ~~2016, Pazoo, Inc.~~ entered into a loan ~~agreement~~advances with ~~Kabbage~~a ~~Loans~~private ~~totaling~~investor for $7154,500. The ~~loan~~advances ~~will~~are ~~be paid off~~ in aconjunction ~~maximum~~with ofthe 6investment ~~months~~for ~~and~~Preferred ~~has~~D ashares ~~monthly~~disclosed ~~payment~~in ~~consisting of $1,250 to~~ the ~~principal~~Form ~~and~~14C ~~$188~~filed toin ~~fees,~~January ~~totaling a monthly cost~~ of ~~$1,438~~2017. ~~As of September 30, 2016, $7,500 remains outstanding.~~

InThe ~~August~~Company ~~2016, Pazoo, Inc,~~ entered into ~~loan~~convertible note agreements ~~totaling~~for an aggregate total of $8178,000 ~~with a private investor~~. The ~~notes~~interest ~~have~~rates anrange ~~interest~~from ~~rate~~8% ofto 812% and ~~maturity~~the ~~dates~~conversion terms range from ~~October~~a ~~2016~~35% to ~~August~~50% ~~2017. As~~discount of ~~September~~the ~~30,~~lowest ~~2016,~~fair ~~$81,000~~value ~~still~~in ~~remains~~the ~~outstanding~~preceding 15 days.

In September 2016, Pazoo, Inc. entered into a loan agreement with Kabbage Loans totaling $7,700. The loan will be paid off in a maximum of 6 months and has a monthly payment consisting of $1,284 to the principal and $193 to fees, totaling a monthly cost of $1,477. As of September 30, 2016, $7,700 remains outstanding.

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Note 10---RELATED PARTIES

In July 2013, the Company entered into a consulting agreement with an affiliate of Mr. Basloe, President and Chairman of the Company. The agreement provides for consulting on marketing-related services for the Company. Amounts incurred under this agreement for the nine months ended September 30, 2016 and 2015, totaled $6,500 and $15,000, respectively.

In July 2015, Harris Lee Holdings, LLC entered into a series of agreements related to the operations of the Colorado testing facility being managed by Harris Lee Colorado, LLC. The Managing Member of Harris Lee Colorado, LLC is an immediate family member of Steve Basloe, President and Director of the Company.

The Company is currently managing Harris Lee Colorado, LLC, an existing lab in Denver, Colorado, after receiving approval from the Colorado Marijuana Enforcement Division in February of 2016. Harris Lee Holdings, LLC has sub-licensed the testing protocols to Harris Lee Colorado, LLC in exchange for a testing fee for each test conducted. The Colorado MED has recently approved the transfer of management of an existing laboratory, to Harris Lee Colorado, LLC (a related party) and Harris Lee Holdings, LLC has begun to derive testing revenue from Harris Lee Colorado, LLC. The revenue derived from these tests for the nine months ended September 30, 2016 was $30,515.

Note 11—COMMITMENTS

In 2015, MA and Associates, LLC entered into various capital lease agreements to finance fixed asset purchases for approximately $615,000. Total monthly payments over the 36 month terms are approximately $17,000.

The Company's MA and Associates, LLC subsidiary rents space in Nevada with a 60 month term ending in May of 2019, with monthly rent expense of $1,632. The Company's Harris Lee, LLC subsidiary rents space in Portland, Oregon under a 96 month lease, ending October of 2023 with escalating monthly rental payments from $1,650 to $2,322.

As of September 30, 2016 the Company was still obligated to pay the remaining portion under the original 2014 40% investment agreement with MA and Associates, LLC, consisting of $678,000 of cash and 50,000 shares of Series C Preferred Stock (valued at $35,000 as of June 30, 2016), totaling $713,581 and included in contingent consideration liability on the accompanying consolidated balance sheet and will be issued in the future after the testing laboratory is operational.

As of September 30, 2016 the Company was obligated to pay Blue Moon Advisors, Inc., per the November 2015 Incubation Agreement. The Company is obligated to pay $17,000 per month starting on January 1, 2016, throughout the year of 2016, totaling $204,000.

Note 12—SUBSEQUENT EVENTS

The company issued an aggregate of 796,475,717 common shares to debt holders valued at a total of $50,298 for conversions pursuant to convertible notes.

Investors converted 545,697 shares of Series C Preferred stock into 54,569,700 shares of common stock.

The Company entered into loan agreements with a private investor for $112,000. The loan has an interest rate of 8% and the maturity date is October 2017.

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Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements in this Quarterly Report that are not statements of historical facts are forward-looking statements, which involve risks and uncertainties. Without limiting the foregoing, the words "believes," "anticipates," "plans," "expects," and similar expressions are intended to identify forward-looking statements. Our actual results may differ materially from those indicated in the forward-looking statements as a result of the factors set forth elsewhere in this Quarterly Report on Form 10-Q, including under "Risk Factors." You should read the following discussion and analysis together with our unaudited financial statements for the periods specified and the related notes included herein. Further reference should be made to our Registration Statement on Form S10-1K filed with the Securities and Exchange Commission.

This Quarterly Report on Form 10-Q contains terminology referring to Pazoo, Inc., such as "us," "our," and "the Company."

Management intends the following discussion to assist in the understanding of our financial position and our results of operations for the three months ~~and nine months~~ ended ~~September~~March 3031, 2016 and ~~September~~March 3031, ~~2015~~2017.

Overview

We were incorporated as a C-Corporation in the State of Nevada as IUCSS, Inc. on November 16, 2010 and we established a fiscal year end of December 31. On May 9, 2011, we changed our name to Pazoo, Inc. to take advantage of unique branding and website opportunities. We are a start-up health and wellness social community that has developed its website (www.pazoo.com) to provide information, services, and online products for improvement of everyday living. Our mission is to be 1) a leading social community offering best-in-class health and wellness products for both people and pets; 2) an important resource for consumers and professionals with diverse information about health and wellness and 3) specifically as it relates to medical marijuana and the testing of medical marijuana to ensure quality and safety for the consumer.

Our principal executive offices are located at 2334 ~~Vreeland~~DeForest RdAve, ~~Suite~~Unit ~~110~~9, ~~Florham~~East ~~Park~~Hanover NJ ~~07923~~07936. Our telephone number is (855) PAZOO-US. Our internet address is www.pazoo.com.

OnWe orare ~~about~~a ~~April~~health 8and wellness company. Presently, ~~2014~~our ~~Pazoo~~only ~~moved~~sources ~~into~~of ~~the~~revenue ~~pharmaceutical~~are ~~testing~~pazoo.com ~~space~~and ~~with~~management ~~the~~fees ~~acquisition~~derived offrom MAHarris &Lee ~~Associates~~Holdings, LLC. aPazoo.com ~~Nevada~~is ~~limited~~an ~~liability~~online, ~~company~~content ~~formed~~driven, ~~with~~advertising ~~the~~supported ~~purpose~~health ofand ~~opening~~wellness aweb ~~cannabis~~site ~~testing~~for ~~laboratory~~people ~~based~~and intheir ~~Las~~pets. ~~Vegas,~~This ~~Nevada~~site has e-commerce functionality which allows pazoo.com to be ~~branded~~an ~~under~~online ~~the~~retailer ~~Steep~~of ~~Hill~~nutritional ~~Labs~~foods/supplements, ~~name~~wellness goods, and fitness apparel. The Company has also moved into the cannabis industry where it seeks to provide, through its wholly owned subsidiaries (MA & Associates, LLC and previously Harris Lee Holdings, LLC), ~~was~~quality ~~formed,~~control asservices ato ~~Nevada~~the ~~limited~~medical ~~liability~~and ~~company,~~recreational oncannabis orindustry. The ~~about~~Company's ~~July~~primary ~~23,~~mission ~~2014~~is to protect the public health by providing infrastructure and ~~was~~analytical ~~formed~~services to ~~hold~~legally aauthorized ~~License~~distributors ~~from~~and ~~Steep~~producers ~~Hill~~of ~~Labs,~~cannabis ~~Inc~~and to regulators tracking their operations. The ~~for~~Company will provide the medical cannabis ~~testing~~industry ~~protocols~~guidelines ~~and~~on how the ~~use~~regulation ofand ~~the~~inspection ~~Steep~~by ~~Hill~~public ~~Labs~~health ~~name. Both~~authorities ~~entities~~is ~~are~~to ~~now~~be aimplemented. It ~~wholly~~is ~~owned~~anticipated ~~subsidiaries~~that this segment of the ~~Company~~company will be its primary revenue source in the future. The ~~intent~~cannabis industry is ~~that~~heavily ~~Harris~~regulated ~~Lee~~on ~~Holdings~~the Federal, ~~LLC~~State ~~will~~and ~~directly~~Local ~~own~~levels and ~~operate~~the ~~testing~~Company ~~laboratories~~is insubject ~~states~~to ~~where~~changing ~~permitted~~regulation toand doenforcement. ~~so,~~As ~~and~~of ~~sub-license~~December ~~the~~31, ~~Steep~~2016, ~~Hill~~the cannabis testing ~~protocol~~laboratory in ~~states~~Denver, ~~where~~Colorado ~~direct~~is ~~ownership~~closed ~~would~~and bethe ~~prohibited~~Company does not have any plans to re-open the facility in the near future.

~~The~~Lines ~~Company, due to the uncertainties surrounding the license agreement, impaired 100%~~ of the value of the Steep Hill Labs licenses due to the purported unsubstantiated termination of the license agreements in June 2016 between Steep Hill Labs and MA & Associates, LLC and Harris Lee, LLC respectively. The Company strongly believes that any attempted termination of the licenses on the part of Steep Hill Labs was ineffective for many reasons, including, without limitation, Steep Hill's failure to provide key deliverables including technology, scientific know-how and lab guidance. On July 6, 2016, the Company contested the improper attempted termination of the licenses which was based on no identifiable contractual justification, and to which Steep Hill has not formally responded. To the contrary, as of the date of this Report, Steep Hill Labs continues to list the Company as one of its "partners" and continues to display the Company's Las Vegas facility as a Steep Hill location. If Steep Hill Labs takes any further action to effectuate the ineffective termination of the licenses, this matter will be litigated under the terms and conditions of the respective license agreements, which management will vigorously defend.Business

~~Sources~~We currently have two lines of ~~Revenue~~business relating to and revolving around the health and wellness arena; at this time no significant revenue has been derived from any of these sources.

● Pharmaceutical Testing Facilities. We ~~currently~~entered ~~have~~this ~~three~~arena ~~lines~~through our acquisition of ~~business~~a ~~relating~~100% equity stake in MA & Associates, LLC in order to set up two testing locations. MA & Associates, LLC was launched in September of 2013 to provide quality control services to the medical cannabis industry. MA & Associates, LLC's primary mission is to protect the public health by providing infrastructure and ~~revolving~~analytical ~~around~~services to legally authorized distributors and producers of cannabis and to regulators tracking their operations. The company will provide the medical cannabis industry guidelines on how the regulation and inspection by public health authorities is to be implemented. MA & Associates, LLC's primary customer base includes all of the licensed cannabis cultivators, in the State of Nevada, who are required by law to have their products tested before they can be transferred to the dispensaries. MA & Associates received its operational license from the State of Nevada on January 4, 2017. MA & Associates reported its first revenue through a press release dated May 16, 2017 through PR Newswire. The Company expects to be fully operational and ~~wellness~~revenue ~~arena:~~generating in the upcoming months. Furthermore, we have acquired all of the Membership interest in Harris Lee Holdings, LLC. Harris Lee was set up to take the MA model and testing operations to additional states above and beyond Nevada either in direct testing laboratories or through licensing

~~● Pazoo.com has a unique and compelling online marketing platform. Pazoo.com offers the following important marketing advantages to its target audiences:~~14

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the testing protocol. As such, we are in a unique position to provide the mandated health and safety testing in this burgeoning industry. Lastly, Harris Lee Holdings, LLC, due to Colorado residency requirements, entered into an advisory agreement with Harris Lee Colorado, LLC, Harris Lee Holdings, LLC has sub-licensed the testing protocols to Harris Lee Colorado, LLC in exchange for a management fee for each test conducted. The Colorado MED approved the transfer of management of an existing laboratory, operating as Steep Hill Colorado, to Harris Lee Colorado, LLC (a related party) and Harris Lee Holdings, LLC has derived management fees from Harris Lee Colorado, LLC in the year ending December 31, 2016. All 2016 revenue was derived from these related-party management fees for the year ended December 31, 2016. However, because of the failure to transfer the MED license to Harris Lee Colorado, LLC, the Denver laboratory was closed by the end 2016. Currently, operations have not come back online and the Company is concentrating its focus on MA & Associates, LLC in Nevada.

●

Advertising Revenue from our Website, www.pazoo.com. Through advertising providers and agencies, pazoo.com is paid for every ad impression that appears on a page for which a visitor goes to. As we build our visitor base, ad revenue is anticipated to increase. However, just having the traffic does not effectively increase advertising revenue. To get the full value of each visitor, the time on site must be long enough so that a visitor is interested in going to multiple pages for which there are ads on each page. The only way this will transpire is if the visitor's experience is gratifying. This is why pazoo.com is so focused on quality content that's interesting and informative. A bad visitor experience will result in a low time on site and fewer page views. Internet tracking tools have much improved over the past decade and will continue to improve in the coming years, especially when it comes to advertising and overall website analytics. Pazoo continues to constantly improve is this area at all times.

Pazoo.com has a unique and compelling online marketing platform. Pazoo.com offers the following important marketing advantages to its target audiences:

A comprehensive solution as a content source – information on a full spectrum of disciplines within the health and wellness marketplace;

Health and wellness experts that have expertise in these varied disciplines and write about their areas expertise; and

3. Content that is both for the health and wellness of people as well as their pets (over 6050% of American homes have pets).

~~● E-commerce~~4. ~~Our~~Content ~~e-commerce~~in ~~offerings~~the ~~will~~Health ~~increase~~and asWellness wesector ~~build~~of ~~the traffic coming to pazoo~~cannabis.~~com.~~ InTo ~~this~~empower ~~way~~users weto ~~could~~read ~~establish~~and alearn ~~revenue~~about ~~source~~the ~~over~~benefits and ~~above~~the ~~advertising~~need tofor ~~increase~~ the ~~value~~testing of ~~each visitor. We have~~ the ~~following~~cannabis ~~e-commerce elements ready for an activated marketing program:~~plant.

1. An e-commerce platform that is functional;

2. Relationships with manufacturers, distributors and other e-commerce companies so that increasing product offerings will not be time consuming;

3. Members on the pazoo.com content team with merchandising experience: i.e. a Pazoo expert is buyer of pet products for a large pet retailer; and

4. Members on the pazoo.com content team that are experienced in e-commerce marketing; i.e. we will look to offer our consumers low cost and timely delivery of product by negotiating with shipping companies to offer a flat rates on various products.

● Pharmaceutical Testing Facilities. MA & Associates was launched to provide quality control services to the medical cannabis industry. MA & Associates' primary mission is to protect the public health by providing infrastructure and analytical services to legally authorized distributors and producers of cannabis and to regulators tracking their operations. As of June, 2015, we have acquired a 100% equity stake in MA & Associates, LLC and the testing laboratory in Las Vegas Nevada is open for business.

The company will provide the medical cannabis industry guidelines on how the regulation and inspection by public health authorities is to be implemented. MA & Associates' primary customer base includes all of the licensed cannabis cultivators, in the State of Nevada, and their customers are required by law to have their products tested before they can be transferred to the dispensaries.

We have further expanded our footprint in this arena through Harris Lee Holdings, LLC, a company formed to take the MA & Associates testing model outside of Nevada and into other states. The company is currently managing Harris Lee Colorado, LLC, an existing lab in Denver, Colorado, after receiving approval from the Colorado Marijuana Enforcement Division in February of 2016. Harris Lee Holdings, LLC has sub-licensed the testing protocols to Harris Lee Colorado, LLC in exchange for a testing fee for each test conducted. The Colorado MED has recently approved the transfer of management of an existing laboratory, to Harris Lee Colorado, LLC (a related party) and Harris Lee Holdings, LLC has begun to derive testing revenue from Harris Lee Colorado, LLC. The revenue derived from these tests for the nine months ended September 30, 2016 was $30,515.

The Company also announced it has leased a space in Portland, Oregon where it will be establishing a testing lab. We are in a unique position to provide the mandated health and safety testing upon which this burgeoning industry must hinge moving forward. Lastly, our wholly owned subsidiary CK Distribution LLC, provides the marketing and sales agent for the distribution of non-controlled hemp products throughout the USA. Non-controlled hemp products are the items utilized by the industry that support grow facilities, infusion companies and dispensaries.

Critical Accounting Policy and Estimates

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue 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.

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Results of Operations

Comparison of the three months ended ~~September~~March 3031, ~~2016~~2017 to the three months ended ~~September~~March 3031, ~~2015~~2016

~~Revenues~~Net Sales. We had ~~revenues~~net sales of $~~11,919~~51 and $57,~~970~~326 in the three months ended ~~September~~March 3031, ~~2016~~2017 and ~~September~~March 3031, ~~2015~~2016, respectively. This was due to a decrease in online advertising and a shift of focus to the testing laboratory in Las Vegas Nevada.

Operating Expenses. Operating expenses consisted primarily of selling, general and administrative expenses, ~~and~~ professional fees and website set up. Total operating expenses decreased to $~~219~~718,~~422~~441 for the three month period ended ~~September~~March 3031, ~~2016~~2017 from $~~545~~851,~~335~~096 for the three month period ended ~~September~~March 3031, ~~2015~~2016. The components of operating expenses are detailed below.

Selling, General and Administrative expenses decreased to $~~164~~537,~~144~~095 from $~~306~~701,~~756~~686, in ~~2016~~2017 versus ~~2015~~2016 which was mainly comprised of administrative fees, ~~stock compensation,~~ and marketing & advertising. The SG&A decrease was due primarily to a lack of marketing and advertising as compared to 2016 as the focus of the company has shifted to the testing laboratory in Nevada.

Professional fees ~~decreased~~increased to $54180,~~542~~004 from $~~214~~144,~~367~~443 in ~~2016~~2017 versus ~~2015~~2016. The ~~decrease~~increase in professional fees was attributed to aan ~~decrease~~increase in investor relations and ~~investor~~financial consultants.

Net Income (Loss). Our net loss decreased to ~~a net loss of~~ $921,~~275~~933,868 for the three months ended ~~September~~March 3031, ~~2016~~2017 compared to ~~a net gain of~~ $14,~~801~~342,~~310~~042 for the same period in ~~2015~~2016. The decrease is primarily attributable to ~~the~~gain (loss) on debt extinguishment from the various debt conversions in each period. The decrease in interest expense was mostly due to amortization of debt discounts and ~~gain/~~derivative liability from initial loss on debt discount. Because less notes were acquired in the three months ended March 31, 2016 compared to the three months ended March 31, 2017, both interest expense and derivative liability decreased, as well as some of the other debt discounts fully amortized.

~~Comparison of the nine months ended September 30, 2016 to the nine months September 30, 2015~~ 15

Revenues. We had revenues of $30,515 and $27,602 in the nine months ended September 30, 2016 and September 30, 2015, respectively.

Operating Expenses. Operating expenses consisted primarily of selling, general and administrative expenses and professional fees. Total operating expenses increased to $4,159,683 for the nine month period ended September 30, 2016 from $2,662,065 for the nine month period ended September 30, 2015. The components of operating expenses are detailed below.

Selling, General and Administrative expenses increased to $2,292,314 from $1,789,539, in 2016 versus 2015 which was mainly comprised of administrative fees, stock compensation, and marketing & advertising.

Professional fees decreased to $318,290 from $741,924 in 2016 versus 2015. The decrease in professional fees was attributed to a decrease in investor relations and investor consultants.

Assets. We had $715,405 of total assets at September 30, 2016 compared to total assets of $2,363,043 at December 31, 2015. As of September 30, 2016, the Company has impaired 100% of the Steep Hill license agreement acquired for $307,500 as well as the MA license derived from acquisition of $1,345,771, totaling a loss of impairment to the license of $1,653,271.

Net Income (Loss). Our net loss increased to a net loss of $8,417,040 for the nine months ended September 30, 2016 compared to a net loss of $2,420,465 for the same period in 2015. The increase is primarily attributable a loss on derivative liabilities of $3,796,031 compared to a loss of $267,987 for the same period in 2015, as well as an interest expense of $2,735,216 for the nine months ended September 30, 2016 compared to an interest expense of $1,623,046 for the nine months ended September 30, 2015.

As of September 30, 2016, we had outstanding 1,071,565,002 common shares, 230,401 Series A Preferred Stock shares, 1,762,500 Series B preferred stock, and 3,167,072 shares of Series C Preferred Stock shares to fund business operations and invest in companies.

Our total assets were $715,405 as of September 30, 2016, which primarily consisted of fixed assets of $678,065.

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WeLiquidity ~~had~~and ~~negative~~Capital ~~working capital of $7,337,290 as of September 30, 2016.~~Resources

~~Our~~As ~~total~~of ~~liabilities~~March ~~were $8~~31,~~946,607~~ ~~which~~2017 ~~was~~and ~~mainly~~March ~~comprised~~31, ~~of derivative liabilities of $3~~2016,~~233,317,~~ ~~capital~~the ~~lease~~Company ofhad ~~$323,147,~~cash ~~convertible~~and ~~debt~~cash equivalents of $236,~~456,794~~843 and ~~contingent consideration liabilities of~~ $~~713~~30,~~581~~625.

~~Our~~The ~~total~~Company ~~stockholders'~~has ~~deficit~~no asagreements, ofarrangements ~~September~~or 30understandings with any officer, ~~2016~~director ~~was~~or $8shareholder as to any future financing,~~231,202~~ ~~and~~either weequity ~~had~~or andebt. ~~accumulated~~In ~~deficit~~view of ~~$20~~general economic conditions,~~315~~ there can be no assurance that any additional financing will be available to us,~~714~~ that any affiliate will provide additional investments in the Company or that adequate funds for our operations will otherwise be available when needed or on terms acceptable to us.

We ~~used~~had ~~$776,356~~negative inworking ~~net~~capital ~~cash~~of ~~for~~$9,477,866 ~~operating~~as ~~activities~~of ~~for~~March ~~the~~31, ~~nine~~2017 ~~months~~compared ~~ended~~to ~~September 30~~$7, ~~2016~~599,588 ~~which~~at ~~included~~December ~~a net loss of $8~~31,~~417,040~~ 2016.

We ~~had~~used $~~762~~485,~~713~~865 ~~net~~in ~~cash~~operating ~~provided~~activities byfor ~~financing~~the ~~activities~~three inmonths ~~the~~ended ~~nine~~March ~~month~~31, ~~period~~2017 compared to $413,264 for the three months ended ~~September~~March 3031, 2016, ~~due~~which ~~primarily~~included toa ~~borrowings~~net onloss ~~convertible~~of ~~notes~~$1,933,868 and $4,342,042, respectively.

~~The~~We consolidated financial statements included in this report have been prepared in conformity with generally accepted accounting principles that contemplate our continuance as a going concern. The Company has had ~~minimal~~$433,799 ~~revenues~~provided ~~and~~by ~~has~~financing ~~generated~~activities ~~losses from operation. As set forth~~ in ~~Note 2 of these financial statements,~~ the ~~continuation~~three ofmonth ~~the~~period ~~Company~~ended asMarch a31, ~~going~~2017 ~~concern~~compared ~~is dependent upon the Company obtaining adequate capital~~ to ~~fund operating losses until it becomes profitable~~$427,070 iffor ~~ever. The financial statements do not include any adjustments to~~ the ~~recoverability~~three ~~and~~months ~~classification~~ended ofMarch ~~recorded~~31, ~~asset~~2016, ~~amounts~~due ~~and~~primarily ~~classification of liabilities that might be necessary should the Company be unable~~ to ~~continue~~proceeds asfrom aloans ~~going concern~~payable.

The consolidated financial statements included in this report have been prepared in conformity with generally accepted accounting principles that contemplate our continuance as a going concern. The Company has had minimal revenues and has generated losses from operation. As set forth in Note 2 of these financial statements, the continuation of the Company as a going concern is dependent upon the Company obtaining adequate capital to fund operating losses until it becomes profitable, if ever. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern is dependent upon our ability to generate sufficient cash flow and raise additional capital to meet our obligations on a timely basis and ultimately attain profitability. If the Company is unable to generate sufficient cash flow or raise additional capital, it could be forced to cease operations. The Company's continuation as a going concern is dependent upon our ability to generate sufficient cash flow and raise additional capital to meet our obligations on a timely basis and ultimately attain profitability. The Company does not have sufficient capital for the next 12 months from the issuance of these financial statements.

Off-Balance Sheet Arrangements. We have no off-balance sheet arrangements.

Item 3 Quantitative and Qualitative Disclosures About Market Risk

As a "smaller reporting company", as defined by Item 10(f) of Regulation S-K, we are not required to provide the information required by Item 3.

Item 4 Controls and Procedures

Evaluation of disclosure controls and procedures.

We carried out an evaluation, under the supervision of and with our executive officers, David M. Cunic in his role as Chief Executive Officer and Ben Hoehn in his role as Chief Operating Officer and Acting Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based upon that evaluation, the officers concluded that because of the limited size and resources of our organization our disclosure controls and procedures are not effective as of ~~September~~March 3031, ~~2016~~2017.

We have not made any changes in our internal control over financial reporting during the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1 Legal Proceedings

~~Pazoo~~In April 2013, the Company filed a complaint against Edataworx, Inc. vfor ~~EData~~return ~~Worx~~of monies and stock under an agreement dated August 2012. On November 4, 2013, the Company filed an amended complaint now seeking total damages of $105,000 and a return, for cancellation, of the 20,000 shares of company's common stock issued to Edataworx Inc. On November 21, 2013 Edataworx, Inc. filed an Answer to the Amended Complaint denying the allegations and asserted a Counter-Claim against the Company in the amount of $25,000. Edataworx, Inc. also filed a Third-Party Complaint against Integrated Capital Partners, Inc. (an investor of the Company) for the same $25,000. On February 27, 2015, the parties agreed to settle all claims whereby Edataworx, Inc. will pay to the Company a total of $35,000 in three installments. Additionally, Edataworx, Inc. will be allowed to retain a minimum of 15,000 shares of the Company's common stock previously issued with the possibility to retain all 20,000 shares if Edataworx Inc. elects to sell the 15,000 shares agreed upon, and the aggregate sales price is less than $2.00 per share. Edataworx, Inc. failed to make any required payments. On February 25, 2016 new action to enforce the Settlement Agreement, including a claim for attorney's fees as provided for in the Settlement Agreement, was filed. Edataworx failed to respond to the Complaint in the action to enforce the Settlement Agreement. On September 16, 2016 a Judgment was entered in favor of the Company in the Amount of $35,012. The Company is currently seeking to enforce the Judgment.

On ~~September~~or 16about April 21, ~~2016~~2017, ~~the~~Eri ~~Superior~~Eveland filed a Complaint in District Court of ~~New~~Denver ~~Jersey~~County Colorado against Harris Lee Colorado, ~~Morris~~LLC, ~~County~~Harris ~~entered~~Lee Holdings, LLC and Pazoo Inc. Ms. Eveland is a ~~default~~former ~~judgment~~employee of Harris Lee Colorado, LLC and is claiming less than $15,000 in ~~the~~unpaid ~~amount~~salary/wages. Inasmuch as Ms. Eveland was not an employee of ~~$35~~Harris Lee Holdings,~~012~~ LLC nor Pazoo, Inc., her claims against the Company are derivative in nature and ~~reserved~~based on theories of corporate alter ego. The Company disputes any liability. As of the date of this report, neither Harris Lee Holdings, LLC nor Pazoo, Inc. have been served with the Complaint. The Company's ~~right~~feels it has many valid defenses to this action and, once served, will seek ~~legal~~to ~~fees~~have ~~and~~the ~~costs~~Complaint summarily dismissed as to the Company.

Item 1A Risk Factors

As a "smaller reporting company" as defined by Item 10(f) of Regulation S-K, we are not required to provide information required by this item.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3 Defaults Upon Senior Securities

None.

Item 4 (Reserved)

Item 5 Other Information

None.

Item 6 Exhibits

Exhibit Numbr		Description
Exhibit Number		Description
31.1		Certification of David Cunic, Chairman and Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2		Certification of Ben Hoehn, Acting Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1		Certification of David Cunic, Chief Executive Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Ben Hoehn, Acting Chief Financial Officer pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURE

In accordance with 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.

November 21, 2016	PAZOO, INC.
June 16, 2017	PAZOO, INC.
	/s/ David M. Cunic
	David M. Cunic
	Chief Executive Officer
	(Principal Executive Officer)
June 16, 2017	PAZOO, INC.
November 21, 2016	PAZOO, INC.
	/s/ Ben Hoehn
	Ben Hoehn,
	Ben Hoehn
	Chief Operating Officer, Acting Chief Financial Officer (Principal Financial and Accounting Officer)

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