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: ~~June~~September 30, 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)

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 ☒

83869,~~253~~645,~~710~~ 259 shares of common stock, par value $0.001 per share, outstanding as of ~~August~~February 307, ~~2017~~2018.

			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 Flows (Unaudited)	5
		Notes to Financial Statements (Unaudited)	6
	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	1715
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	2018
	Item 4	Controls and Procedures	2018
Part II	Other Information		2119
	Item 1	Legal Proceedings	2119
	Item 1A	Risk Factors	2119
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	2119
	Item 3	Defaults Upon Senior Securities	2119
	Item 4	Mine Safety Disclosures	2119
	Item 5	Other Information	2119
	Item 6	Exhibits	2220

PAZOO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30,			December 31,
	September 30,			December 31,
	2017			2016
ASSETS
Current assets:
Cash	$	~~103~~39,~~036~~047		$	88,909
Prepaid expenses		5,536			5,536
Total current assets		~~108~~44,~~572~~583			94,445
Fixed assets, net		~~520~~473,~~323~~817			613,332
Total assets	$	~~628~~518,~~895~~400		$	707,777
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Lines of credit	$	16,070		$	21,039
Accounts payable and accrued liabilities		~~882~~905,~~628~~190			608,332
Loans payable		1,262,879			615,801
Loans payable ($1,504,449 and $546,717 to related party)		1,536,349			615,801
Interest payable		2,029,751			1,452,102
Interest payable ($416,248 and $227,033 to related party)		2,124,309			1,452,102
Convertible debt, net of unamortized discounts of $187,768 and $195,827		1,489,042			983,621
Convertible debt, net of unamortized discounts of $316,297 and $195,827		1,284,672			983,621
Contingent consideration liabilities		713,581			713,581
Derivative liabilities		14,~~842~~304,~~405~~752			2,925,627
Capital lease liabilities		~~373~~356,~~930~~712			373,930
Total current liabilities		811,~~610~~241,~~286~~635			7,694,033
Long-term liabilities:
Long-term portion of convertible debt, net of unamortized discounts of $0, and $110,672		1,292,500			1,401,828
Long-term portion of convertible debt, net of unamortized discounts of $0, and $110,672 ($800,000 and $800,000 to related party)		1,292,500			1,401,828
Capital lease liabilities		~~34,052~~-			136,672
Total long-term liabilities		1,~~326~~292,~~552~~500			1,538,500
Total liabilities		912,~~936~~534,~~838~~135			9,232,533
Commitments and contingencies
Stockholders' deficit:
Convertible Preferred Stock, 50,000,000 shares authorized, $0.001 par value
Series A; 10,000,000 shares authorized, 215,139 and 230,401 shares issued and outstanding, respectively.		215			230
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, 2,610,375 and 2,621,375 shares issued and outstanding, respectively.		2,610			2,621
Series C; 10,000,000 shares authorized, 2,643,709 and 2,621,375 shares issued and outstanding, respectively.		2,644			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, 33,788,532 and 9,137,630 shares issued and outstanding, respectively.		33,788			9,138
Common stock, $0.001 par value; 2,950,000,000 shares authorized, 123,589,339 and 9,137,630 shares issued and outstanding, respectively.		123,589			9,138
Additional paid-in capital		12,~~497~~590,~~170~~391			12,155,641
Accumulated deficit		(2124,~~843~~734,~~876~~724	)		(20,694,148	)
Total stockholders' deficit		(912,~~307~~015,~~943~~735	)		(8,524,756	)
Total liabilities and stockholders' deficit	$	~~628~~518,~~895~~400		$	707,777

PAZOO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three Months Ended						~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2017			2016			2017			2016
Revenues:
Management fees - related party	$	-		$	11,~~270~~919		$	-		$	1830,~~596~~515
Advertising Sales		-			-			51			-
Total revenues		-			11,~~270~~919			51			1830,~~596~~515
Operating expenses:
Selling, general and administrative expenses		~~328~~188,~~509~~173			1164,~~426,484~~144			~~865~~1,~~604~~053,777			2,~~128~~292,~~170~~314
Professional fees		~~163~~81,~~155~~559			~~119~~55,~~305~~278			~~343~~428,~~159~~286			~~263~~327,~~748~~162
Loss on impairment of license		-			~~1,540,207~~-			-			1,540,207
Website setup		2,226			3,169			3,568			8,136
Total operating expenses		269,732			219,422			1,482,063			4,159,683
Total operating expenses		493,890			3,089,165			1,212,331			3,940,261
Loss from operations		(269,732	)		(207,503	)		(1,482,012	)		(4,129,168	)
Loss from operations		(493,890	)		(3,077,895	)		(1,212,280	)		(3,921,665	)
Other income/(expenses):
Gain/(loss) on derivative liabilities		1(2,~~278~~421,~~503~~000	)		(2642,~~032,218~~948	)		~~374~~(2,~~094~~046,906	)		(43,~~438~~796,~~979~~031	)
Gain/(loss) on debt extinguishment		~~429~~37,~~601~~397			1541,~~764,236~~133			~~715~~753,~~867~~264			12,~~697~~238,~~242~~375
Gain on change in fair value of contingent consideration		-			-			-			5,000
Interest expense		(~~429~~237,~~999~~513	)		(~~636~~1,~~846~~068,853	)		(1,~~027~~264,~~334~~847	)		(12,~~666~~735,~~363~~216	)
Other expense		-			-			-			-
Total other income/(expenses)		(2,621,116	)		115,228			(2,558,489	)		(4,287,872	)
Total other income/(expenses)		1,278,105			(904,828	)		62,627			(4,403,100	)
Net loss	$	(2,890,848	)	$	(92,275	)	$	(4,040,501	)	$	(8,417,040	)
Net income (loss)	$	784,215		$	(3,982,723	)	$	(1,149,653	)	$	(8,324,765	)
Series A preferred stock dividends		(16	)		(77	)		(52	)		(431	)
Series A preferred stock dividends		(17	)		(159	)		(36	)		(354	)
Net loss attributable to common stockholders	$	(2,890,864	)	$	(92,352	)	$	(4,040,553	)	$	(8,417,471	)
Net income (loss) attributable to common stockholders	$	784,198		$	(3,982,882	)	$	(1,149,689	)	$	(8,325,119	)
Basic and dilutive net loss per common share	$	(0.04	)	$	(0.04	)	$	(0.12	)	$	(8.18	)
Basic net income (loss) per common share	$	0.04		$	(10.84	)	$	(0.08	)	$	(36.94	)
Weighted average common shares outstanding – basic and diluted		75,357,664			2,619,089			34,616,005			1,029,097
Weighted average common shares outstanding - basic		18,043,791			367,280			13,907,537			225,364
Diluted net income (loss) per common share	$	0.00		$	(10.84	)	$	(0.08	)	$	(36.94	)
Weighted average common shares outstanding - diluted		1,556,057,691			367,280			13,907,537			225,364

PAZOO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Six Months Ended
	Nine Months Ended
	June 30,
	September 30,
	2017			2016
Cash flows from operating activities:
Net loss	$	(14,~~149~~040,~~653~~501	)	$	(8,~~324~~417,~~765~~040	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discounts		~~410~~480,~~134~~082			1,~~309~~246,~~066~~540
Depreciation		93139,~~009~~515			2571,~~272~~776
Amortization		-			50,728
Change in fair value of contingent consideration		-			(5,000	)
Stock-based compensation		5666,110			1,~~196~~226,131
(Gain)/loss on derivative liabilities		~~(374~~2,~~094~~046,906	)		43,~~438~~796,~~979~~031
(Gain)/loss on debt extinguishment		(~~715~~753,~~867~~264	)		(12,~~697~~238,~~242~~375	)
(Gain)/loss on impairment of intangibles		-			1,540,207
Changes in operating assets and liabilities:
Accounts receivable		-			(1728,~~308~~715	)
Prepaid expenses and other current assets		-			(1	)
Accounts payable, accrued liabilities and interest payable		~~925~~1,~~607~~065,979			~~830~~1,~~836~~981,361
Net cash used in operating activities		(~~754~~995,~~754~~173	)		(~~653~~776,~~097~~356	)
Cash flows from financing activities:
Proceeds from convertible note		523,605			522,250
Proceeds from convertible debt		523,605			638,460
Repayments on capital leases		(~~102~~153,~~620~~890	)		(3136,~~069~~685	)
Repayments on convertible notes		(279,660	)		(20,314	)
Repayments on convertible debt		(305,757	)		(86,311	)
Repayments on loans		(51,175	)		(20,314	)
Repayments on loans payable		(57,100	)		(17,100	)
Repayment on loans payable- related party		(3,300	)		-
Proceeds from loans payable		~~687~~946,~~000~~722			74170,~~100~~300
Proceeds from sale of Series C preferred stock		-			90,000
Lines of credit		(4,969	)		54,~~389~~049
Net cash provided by financing activities		~~768~~945,~~881~~311			~~620~~762,~~042~~713
Net increase (decrease) in cash and cash equivalents		14,127			(33,055	)
Net decrease in cash and cash equivalents		(49,862	)		(13,643	)
Cash and cash equivalents beginning of period		88,909			16,819
Cash and cash equivalents end of period	$	~~103~~39,~~036~~047		$	~~(16~~3,~~236~~176	)
Noncash Investing and Financing Activities
Common stock issued for the conversion of Series A and C preferred stock	$	2,634		$	49163,659
Debt discount for derivative convertible feature		256,854			906,492
Debt discount for derivative convertible feature and OID		471,592			1,353,842
Preferred shares issued for conversion of debt and interest		-			30,652
Common shares issued for conversion of debt and interest		~~297~~483,~~662~~412			~~858~~957,~~968~~808
Common shares issued for accrued liability		-			350,000
Accrued interest converted to convertible debt and loans payable		57,667			134,495

Potentially Dilutive Securities	Nine Months Ended
	September 30, 2017		September 30, 2016

Convertible notes		5,015,062,816		158,168,021
Preferred series A shares & warrants		21,513,900		92,160
Preferred series B		430,000,000		1,410,000
Preferred series C		264,370,900		1,266,829
		5,730,947,616		160,937,010

	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Numerator:
Net income	$	784,215		$	(3,982,723	)	$	(1,149,653	)	$	(8,324,765	)
Preferred stock dividends		(17	)		(159	)		(36	)		(354	)
Numerator for basic EPS — income available to common stockholders	$	784,198		$	(3,982,882	)	$	(1,149,689	)	$	(8,325,119	)
Effect of dilutive securities:
Interest expense on convertible debt instruments considered dilutive	$	38,775		$	-		$	-		$	-
Series A preferred stock dividends		17			-			-			-
	$	38,792		$	-		$	-		$	-
Numerator for diluted EPS — income available to common stockholders after assumed conversions	$	822,990		$	(3,982,882	)	$	(1,149,689	)	$	(8,325,119	)

Potentially Dilutive Securities	Six Months Ended
	June 30, 2017		June 30, 2016
Convertible notes		2,070,034,657		17,334,400
Preferred series A shares & warrants		21,513,900		172,138
Preferred series B		430,000,000		1,410,000
Preferred series C		261,037,500		1,642,829
		2,782,586,057		20,559,367

Recurring Fair Value Measurements	Level 1			Level 2			Level 3			Total
LIABILITIES:
Derivative liability – June 30, 2017		$	-		$	-		$	1,842,405		$	1,842,405
Derivative liability – December 31, 2016		$	-		$	-		$	2,925,627		$	2,925,627

Fixed Assets
	Estimated Useful Life (in years)		~~June~~September 30, 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				(~~369~~416,~~564~~070	)		(276,555	)
Fixed Assets, Net			$	~~520~~473,~~323~~817		$	613,332

Balance as of December 31, 2016	$	2,925,627
Grant date fair value		12,~~283~~030,~~526~~299
Extinguished		(~~966~~1,~~432~~139,373	)
Change in fair value		(1488,~~400,316~~199	)
Balance as of June 30, 2017	$	1,842,405
Balance as of September 30, 2017	$	4,304,752

	June 30, 2017			June 30, 2016
	September 30, 2017			September 30, 2016
Dividend yield		0	%		0	%
Expected volatility		80	%		80	%
Risk-free interest rate	~~0.20% to 0.14~~	0.20% to 1.06	%	~~0.20% to 0.45~~	0.29% to 0.35	%
Expected life (years)	~~0.11 to 0.64~~	0.00 to 0.39		~~0.27 to 0.61~~	0.01 to 1.38

	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		523,605			-			523,605
Interest added to notes payable		23,441			-			23,441
Cash payments		(282,960	)		-			(282,960	)
Conversions		(63,071	)		-			(63,071	)
Reclassification to short-term		220,000			(220,000	)		-
Original issue discount		76,347			-			76,347
Total gross balance	$	1,676,810		$	1,292,500		$	2,969,310
Less: unamortized discount		(187,768	)		-			(187,768	)
Balance as of June 30, 2017 - Net	$	1,489,042		$	1,292,500		$	2,781,542

	Year Ended June 30,
	2018			2019			2020			2021			2022			Thereafter			Total
Convertible notes		$	1,676,810		$	-		$	-		$	350,000		$	942,500		$	-		$	2,969,310
Short-term non-convertible notes			1,262,879			-			-			-			-			-			1,262,879
		$	2,939,689		$	-		$	-		$	350,000		$	942,500		$	-		$	4,232,189

	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		523,605			-			523,605
Interest added to notes payable		23,441			-			23,441
Cash payments		(305,757	)		-			(305,757	)
Conversions		(116,116	)		-			(116,116	)
Reclassification to short-term		220,000			(220,000	)		-
Original issue discount		76,348			-			76,348
Total gross balance	$	1,600,969		$	1,292,500		$	2,893,469
Less: unamortized discount		(316,297	)		-			(316,297	)
Balance as of September 30, 2017 - Net	$	1,284,672		$	1,292,500		$	2,577,172

	Year Ended September 30,
	2018			2019			2020			2021			2022			Thereafter			Total

Convertible notes		$	1,600,969		$	-		$	-		$	350,000		$	942,500		$	-		$	2,893,469
Short-term non-convertible notes			1,536,349			-			-			-			-			-			1,536,349
		$	3,137,318		$	-		$	-		$	350,000		$	942,500		$	-		$	4,429,818

Exhibit Number		Description
31.1		Certification of ~~David~~Steve ~~Cunic~~Basloe, 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~~Steve ~~Cunic~~Basloe, 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.

August 31, 2017	PAZOO, INC.
February 7, 2018	PAZOO, INC.
	/s/ David M. Cunic
	/s/ Steve Basloe
	David M. Cunic
	Steve Basloe
	Chief Executive Officer
August 31, 2017	PAZOO, INC.
February 7, 2018	PAZOO, INC.
	/s/ Ben Hoehn
	Ben Hoehn
	Chief Operating Officer, Acting Chief Financial Officer (Principal Financial and Accounting Officer)

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