Pazoo (PZOO) 10-Q/A 20 Aug 15 2015 Q2 Quarterly report (amended) Financial data

Document and Entity Information

Document and Entity Information - Jun. 30, 2015 - USD ($)	Total
Document and Entity Information:
Entity Registrant Name	Pazoo, Inc.
Document Type	10-Q
Document Period End Date	Jun. 30, 2015
Trading Symbol	pzoo
Amendment Flag	false
Entity Central Index Key	1,533,427
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	667,848,681
Entity Public Float	$ 1,077,657
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2,015
Document Fiscal Period Focus	Q2

CONSOLIDATED BALANCE SHEETS (Un

CONSOLIDATED BALANCE SHEETS (Unaudited for June 30, 2015) - USD ($)	Jun. 30, 2015		Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 152,642		$ 733,637
Accounts receivable	89,370		87,949
Accounts receivable - related party	2,998		0
Stock subscription receivable	12,999		18,253
Inventories	2,668		2,668
Prepaid expenses	10,247		6,181
Total current assets	270,924		848,688
Total other assets
Fixed assets, net	381,671		0
Intangible assets, net	518,724		0
Total other assets	900,395		0
Total assets	1,171,319		848,688
Current liabilities:
Accounts payable and accrued liabilities	119,085		84,189
Loans payable	3,000		3,000
Interest payable	82,334		46,862
Convertible debt	1,216,877	[1]	895,664	[2]
Contingent consideration liabilites	1,118,581		0
Derivative liabilities	1,542,994		2,576,025
Total current liabilities	4,082,871		3,605,740
Long-term liabilities:
Long-term portion of convertible debt	98,348	[3]	28,832	[4]
Total long-term liabilities	98,348		28,832
Total liabilities	4,181,219		3,634,572
Stockholders' deficit
Common stock	667,848		193,031
Convertible preferred stock, Ser. A	2,463		1,204
Additional paid-in capital	9,092,353		4,438,643
Accumulated deficit	(12,775,281)		(7,419,949)
Total stockholders' deficit	(3,009,900)		(2,785,884)
Total liabilities and stockholders' deficit	1,171,319		848,688
Series B Preferred Stock
Stockholders' deficit
Preferred Stock, Value	1,637		1,187
Series C Preferred Stock
Stockholders' deficit
Preferred Stock, Value	$ 1,080		$ 0
[1]	Net of unamortized discounts of $995,770.
[2]	Net of unamortized discounts of $413,898.
[3]	Net of unamortized discounts of $875,130.
[4]	Net of unamortized discounts of $783,668.

Statement of Financial Position

Statement of Financial Position - Parenthetical - $ / shares	Jun. 30, 2015	Dec. 31, 2014
Preferred Stock, Par Value	$ 0	$ 0
Preferred Stock, Shares Authorized	0	0
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par Value	$ 0.001	$ 0.001
Common Stock, Shares Authorized	980,000,000	980,000,000
Common Stock, Shares Issued	667,848,681	193,030,398
Common Stock, Shares Outstanding	667,848,681	193,030,398
Warrants Issued	7,000,000	2,400,000
Warrants Outstanding	7,000,000	2,400,000
Preferred Stock Series A
Preferred Stock, Par Value	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares Issued	2,463,526	1,203,526
Preferred Stock, Shares Outstanding	2,463,526	1,203,526
Preferred Stock Series B
Preferred Stock, Par Value	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	2,500,000	2,500,000
Preferred Stock, Shares Issued	1,637,500	1,187,500
Preferred Stock, Shares Outstanding	1,637,500	1,187,500
Preferred Stock Series C
Preferred Stock, Par Value	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized	7,500,000	7,500,000
Preferred Stock, Shares Issued	1,080,000	0
Preferred Stock, Shares Outstanding	1,080,000	0

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014
Revenues:
Advertising sales	$ 1,399	$ 34,058	$ 21,632	$ 51,167
Merchandise sales - revenue	0	35	0	252
Total revenues	1,399	34,093	21,632	51,419
Cost of goods sold
Merchandise sales - cost	0	244	0	569
Total cost of goods sold	0	244	0	569
Gross profit	1,399	33,849	21,632	50,850
Operating expenses:
Selling, general and administrative expenses	401,921	320,808	1,482,783	605,039
Professional fees	299,035	136,701	527,556	172,134
Website setup	49,271	34,702	106,391	57,110
Total operating expenses	750,227	492,211	2,116,730	834,283
Loss from operations	(748,828)	(458,362)	(2,095,098)	(783,433)
Other expenses:
Gain/(Loss) on derivative liabilities	(433,082)	(38,887)	6,031	(337,300)
Goodwill impairment	(2,260,179)	0	(2,260,179)	0
Gain on change in fair value of contingent consideration	258,500	0	(258,500)	0
Net gain on change in fair of equity method investment	567,028	0	68,028	0
Interest expense	(814,243)	(6,000)	(1,332,614)	(12,000)
Total other expenses	(2,681,976)	(44,887)	(3,260,234)	(349,300)
Net loss	(3,430,804)	(503,249)	(5,355,332)	(1,132,733)
Series A preferred stock dividends	(24,177)	(5,133)	(33,139)	(10,209)
Net loss attributable to common stockholders	$ (3,454,981)	$ (508,382)	$ (5,388,471)	$ (1,142,942)
Net loss per common share - basic and diluted	$ (0.01)	$ 0	$ (0.01)	$ (0.01)
Weighted average common shares outstanding - basic and diluted	611,091,133	111,809,486	451,212,156	108,865,363

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)		6 Months Ended
		Jun. 30, 2015	Jun. 30, 2014
Cash flows from operating activities:
Net loss		$ (5,355,332)	$ (1,132,733)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of debt discounts		1,111,453	83,526
Goodwill impairment		2,260,179	0
Depreciation		6,469	0
Amortization		6,105	0
Gain on change in fair value of contingent consideration		(258,500)	0
Stock-based compensation		898,444	346,268
Gain/(Loss) on derivative liabilities		(6,031)	337,300
Loss on true-up of convertible notes		44,383	0
Additional common shares issued for true-up of convertible notes		93,087	0
Impairment loss on equity method investment		778,639	0
Change in fair value of equity method investment		(846,667)	0
Changes in operating assets and liabilities:
Accounts receivable (increase/decrease)		(1,421)	(19,240)
Accounts receivable - related party (increase/decrease)		70	0
Stock subscription receivable (increase/decrease)		5,254	0
Inventory (increase/decrease)		0	1,323
Prepaid expenses and other current assets (increase/decrease)		9,985	121
Accounts payable and accrued liabilities (increase/decrease)		18,917	18,933
Interest payable (increase/decrease)		167,645	0
Net cash used in operating activities		(1,067,321)	(364,502)
Cash flows from investing activities:
Deposit made on acquisition of investment		0	(198,000)
Cash paid for intangible asset		(307,500)	0
Cash received in acquisition	[1]	1,798	0
Investment in equity method investee		(778,639)	0
Net cash used in investing activities		(1,084,341)	(198,000)
Cash flows from financing activities:
Borrowings on convertible note, net of original issue discounts		1,250,287	344,725
Repayments on convertible notes		(350,000)	0
Capital contributions from management		42,000	0
Proceeds from issuing common stock		48,380	0
Proceeds from exercise of Series A preferred warrants		0	40,000
Proceeds from sale of Series A preferred stock and warrants		580,000	270,270
Net cash provided by financing activities		1,570,667	654,995
Net increase (decrease) in cash and cash equivalents		(580,995)	92,493
Cash and cash equivalents beginning of period		733,637	35,848
Cash and cash equivalents end of period		152,642	128,341
Supplemental Disclosure of Cash Flows Information
Cash paid for interest		0	0
Cash paid for income taxes		0	0
Noncash Investing and Financing Activities
Preferred shares issued for acquisition	[1]	635,000	0
Contingent consideration for acquisition	[1]	1,377,081	0
Common stock issued for the conversion of Series A preferred stock		111,500	1,700
Debt discount due to derivative liabilities		855,101	319,581
Payments of accounts payable by third party		0	2,075
Original issue discount on convertible note		0	15,500
Resolution of derivative liabilities		1,882,101	0
Convertible debt issued for accrued rent expense		14,051	16,601
Common shares issued for conversion of debt and interest		$ 952,305	$ 0
[1]	Of MA & Associates.

Note 1-Description of Business

Note 1-Description of Business and Basis of Presentation	6 Months Ended
	Jun. 30, 2015
Notes
Note 1-Description of Business and Basis of Presentation	Note 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Financial Presentation The unaudited Consolidated Balance Sheets, Consolidated Statements of Operations, and Consolidated Statements of Cash Flows of Pazoo, Inc. (“we”, “our”, “Pazoo” or the “Company”) reflect all normal recurring adjustments the nature of which are, in the opinion of management, necessary for a fair presentation of financial position and the results of operations for the interim periods presented. Certain prior-year amounts have been reclassified to conform to the current period presentation. Description of Business We are an early growth stage health and wellness company. Presently, our primary business is pazoo.com, an online, content driven, ad supported health and wellness web site for people and their pets. Additionally, this site has e-commerce functionality which allows pazoo.com to be an online retailer of nutritional foods/supplements, wellness goods, and fitness apparel. Pazoo, Inc. does not have any brick and mortar establishments. We entered the pharmaceutical testing laboratory market with our acquisitions of MA & Associates, LLC which will operate pharmaceutical testing laboratories in Nevada, and Harris Lee Holdings, LLC which will operate pharmaceutical testing laboratories in other states. 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 services to legally-authorized cannabis producers and distributors as well as to regulators. States that have legalized cannabis are developing cannabis health and safety criteria that we will fulfill through our testing laboratories. Principles of Consolidation The accompanying consolidated financial statements include the amounts of the Company and its wholly-owned subsidiaries Harris Lee Holdings LLC and MA & Associates, LLC, each a Nevada limited liability company. All intercompany accounts and transactions have been eliminated as of June 30, 2015. Intangible Assets Intangible assets as of June 30, 2015 consisted of a license agreement acquired for $307,500 from Steep Hill Labs for the right to take the Steep Hill software and methodology to states above and beyond Nevada , $100,000 from the MA license and 117,329 in in-process research & development. The cost basis of the intangible asset will be amortized over the initial 9-year term of the license. Amortization expense during the three months ended June 30, 2015 was $6,105. 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 license, along with the in-process research & development, were evaluated for impairment and no impairment loss was incurred as of June 30, 2015.

Note 2-Going Concern

Note 2-Going Concern	6 Months Ended
	Jun. 30, 2015
Notes
Note 2-Going Concern	Note 2—GOING CONCERN From inception of November 16, 2010 through June 30, 2015, the Company has incurred net losses of $12,775,281 and the Company has a working capital deficit as of June 30, 2015. These factors, among others, raise significant doubt about the Company’s ability to continue as a going concern. These 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 to meet our obligations on a timely basis and ultimately attain profitability. Management believes that we can alleviate the facts and circumstances which indicate a going concern by expanding our services, expert advice and online products. We aim to become more than a web based company by providing information, services and products through direct response, retail, and advertising revenue, in addition to our website. Furthermore, we look to expand our business and further eliminate the ongoing concern by establishing our medical marijuana testing labs in Denver, CO, Las Vegas, NV, and Portland, OR.

Note 3-Stockholders' Equity

Note 3-Stockholders' Equity	6 Months Ended
	Jun. 30, 2015
Notes
Note 3-Stockholders' Equity	Note 3—STOCKHOLDERS’ EQUITY Capital Contributions MA & Associates: the Company contributed $42,000 for voluntary capital contributions to MA & Associates for the six months ended June 30, 2015. Common Stock During the six months ending June 30, 2015, the Company issued 474,818,283 common shares for the following purposes. 6,158,333 shares for third-party services valued at $51,194 5,460,125 shares issued for cash for cash proceeds of $48,380 12,165,163 shares issued for true-up of loan conversion valued and expensed at $93,087 111,500,000 shares resulting from Series A Preferred Stock holders converting 1,115,000 shares 339,534,662 shares resulting from debt holders converting $952,305 of debt into common stock 474,818,283 shares issued total 193,030,398 shares at December 31, 2014 667,848,681 shares at June 30, 2015 Preferred Stock During the first six months ending June 30, 2015, the Company issued 1,260,000 net shares of Series A preferred stock for the following purposes. (1,115,000) shares converted into 111,500,000 common shares 2,375,000 shares issued for $580,000 in cash 1,260,000 shares total 1,203,526 shares at December 31, 2014 2,463,526 shares at June 30, 2015 During the six months ending June 30, 2015, the Company issued 450,000 net shares of Series B preferred stock and issued 1,080,000 shares of Series C preferred stock as a part of its investments in Harris Lee Holdings, LLC and MA & Associates, LLC investments. The total value of preferred shares at issuance was $1,482,250. Warrants Simultaneous with issuing Series A Preferred Stock to ICPI in the six month period ended June 30, 2015, and under Investment Agreement No. 5 (October 2014) and Investment Agreement No. 6 (February 2015), we issued 2,325,000 warrants. These warrants allow the holder to purchase one share of Series A Preferred Stock for each Series A Preferred Stock at an exercise price of $0.50, subject to the terms of the warrant agreement between the warrant agent and us. These warrants are exercisable up to five years from the issuance date. The following table presents the Series A preferred stock warrant activity during the six months ended June 30, 2015: Warrants Weighted Average Exercise Price Outstanding - December 31, 2014 1,030,226 $ 2.23 Granted 2,325,000 0.50 Forfeited/Canceled (50,000) 0.05 Exercised - - Outstanding - June 30, 2015 3,305,226 0.96 Exercisable - June 30, 2015 3,305,226 $ 0.96 The weighted average remaining life of the outstanding Series A preferred stock warrants as of June 30, 2015 and December 31, 2014 was 4.22 and 3.26 years, respectively. The following table presents the common stock warrant activity during the six months ended June 30, 2015: Warrants Weighted Average Exercise Price Outstanding - December 31, 2014 6,130,470 $ 0.05 Granted - - Forfeited/Canceled (5,000,000 ) 0.05 Exercised - - Outstanding - June 30, 2015 1,130,470 0.01 Exercisable - June 30, 2015 1,130,470 $ 0.01 The weighted average remaining life of the outstanding common stock warrants as of June 30, 2015 and December 31, 2014 was 0.92 and 0.48 years, respectively.

Note 4-Related Party Transactio

Note 4-Related Party Transactions	6 Months Ended
	Jun. 30, 2015
Notes
Note 4-Related Party Transactions	Note 4—RELATED PARTY TRANSACTIONS In July 2013, we entered into a consulting agreement with an affiliate of Mr. Basloe. The agreement provides for consulting on marketing-related services for use in our business operations. The amounts paid under this agreement in the six months ended June 30, 2015 and June 30, 2014 were $36,000 and $35,875, respectively. In January 2015, we entered into a services agreement with a family member of Mr. Basloe. The agreement provided for consultation services related to the Colorado recreational and medical marijuana marketplace and onsite retail operations studies in Boulder, CO and Denver, CO. The consultant was granted 250,000 common shares under the agreement which vest after six months. The fair value of the award was determined to be $1,750, of which $1,750 was recognized during the six months ended June 30, 2015 as stock-based compensation. The shares will be issued upon vesting. In connection with the investments in Harris Lee Holdings, LLC and MA & Associates, LLC the Company issued Series B and Series C Preferred shares to two current board members, Mr. Del Hierro and Mr. Lierberthal. Mr. Del Hierro was issued 150,000 shares of Series B Preferred shares valued at $150 and 140,000 shares of Series C Preferred shares valued at $204,400. Mr. Lieberthal was issued 150,000 shares of Series B Preferred shares valued at $150 and 140,000 shares of Series C Preferred shares valued at $204,400.

Note 5-Equity Method Investment

Note 5-Equity Method Investments and Acquisitions	6 Months Ended
	Jun. 30, 2015
Notes
Note 5-Equity Method Investments and Acquisitions	Note 5—EQUITY METHOD INVESTMENTS AND ACQUISITIONS MA & Associates, LLC Equity method investees are all entities over which the Company has significant influence, but not control. Significant influence is presumed with a shareholding of between 20% and 50% of the voting rights. Investments in equity method investees are accounted for using the equity method of accounting and are initially recognized at cost. As of June 30, 2015, the Company has control of MA & Associates, LLC. On April 8, 2014 the Company entered into a Limited Liability Company Membership Interest Purchase Agreement with MA & Associates, LLC (“MA”) under which the Company agreed to acquire a 40% equity interest in MA for two testing locations in exchange for a purchase price of $2,000,000 and 150,000 shares of the Company’s Series C Preferred Stock. MA was formed to become a marijuana testing laboratory within the State of Nevada. In 2014 the Company paid an aggregate of $542,780 of the cash portion of the purchase price. This equity method investment was fully impaired during 2014. In 2015, the Company paid an additional $778,639 of the $2,000,000 cash portion of the purchase price and issued 100,000 of the 150,000. The $778,639 equity method investment was fully impaired in 2015. The fair value of the 100,000 Series C shares was determined to be $146,000 and it was recognized as compensation expense to the sellers of MA. In addition, there are 60,000 additional Series C shares to be issued for compensation upon achieving certain milestones in 2015 of which 30,000 were issued valued and expensed at $43,800. On June 3, 2015, the Company entered into an agreement to acquire the remaining 60% interest in MA & Associates, LLC for 1,000,000 shares of Series C preferred stock. 500,000 of the shares were issued and valued at $635,000. The remaining 500,000 shares under the 60% agreement and the remaining 50,000 shares under the 40% agreement will be issued in the future after the testing laboratory is operational. The fair value of the additional 550,000 shares was determined to be $698,500 as of the date of this acquisition and this fair value, along with the remaining cash payments due under the 40% acquisition, were recognized as a contingent consideration liability of $1,377,081. As of June 30, 2015, the fair value of the contingent consideration liability was determined to be $1,118,581 resulting in a gain on the change in fair value of contingent consideration of $258,500. In accounting for this step-acquisition, the Company estimated the fair value of the previous equity method investment to be $846,667 as of the date control was obtained. This resulted in a gain on the change in fair value of equity method investment of $846,667 as the carrying value of the equity method investment was $0. In accordance with the purchase agreement to acquire MA & Associates, LLC, ICPI is entitled to 500,000 Series C shares of which 300,000 were issued valued and expensed at $438,000. The remaining 200,000 shares will be issued upon achieving certain milestones in 2015. The aggregate purchase price for the business acquisition was approximately $2.9 million consisting of contingent consideration with a fair value of $1,377,081, 500,000 shares of Series C valued at $635,000 and the fair value of the previously held equity method investment of $846,667. The acquisitions were accounted for using the purchase method and accordingly, the purchase price was allocated based on the estimated fair market values of the assets acquired and liabilities assumed on the date of each acquisition. As of the date of acquisition we felt that the entire acquisition cost should be impaired as MA & Associates, LLC had not yet begun its testing operations and it is uncertain when the testing operations would begin. The goodwill from the transaction was $2,260,179 and the impaired value of the goodwill was equal to $2,260,179. The fair value of the assets acquired and liabilities assumed for this acquisition is as follows: ACQUIRED ASSETS: Current assets $ 4,866 In-process research & development 117,329 Licensing 100,000 Other assets 388,140 Total assets acquired $ 610,335 LIABILITIES ASSUMED: Current liabilities $ (11,756) Other liabilities (9) Total liabilities assumed $ (11,766) Net assets acquired $ 598,569 Unaudited pro forma results of operations data for the three and six months ended June 30, 2015 and 2014 are shown below as if the Company and the entities described above had been combined on January 1, 2014. The pro forma results include estimates and assumptions which management believes are reasonable. However, pro forma results do not include any anticipated cost savings or other effects of the planned integration of these entities, and are not necessarily indicative of the results that would have occurred if the business combinations had been in effect on the dates indicated, or which may result in the future. Unaudited Pro Forma Results of Operations Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Revenues $ - $ - $ - $ - Loss from operations - - - - Net income (loss) $ - $ - $ - $ - Harris Lee Holdings, LLC At December 31, 2014, the Company owned 45% of Harris Lee Holdings, LLC (“Harris Lee”). Pursuant to an October 2014 agreement, during the first quarter of 2015, the company acquired an additional 10% interest in Harris Lee in exchange for 150,000 shares of the Company’s Series C Preferred stock to be issued based on a series of milestone events. In January 2015, the Company acquired the remaining 45% of Harris Lee in exchange for 450,000 shares of the Company’s Series B Preferred Stock. The aggregate fair value of the 450,000 Series B and the 150,000 Series C shares was determined to be $219,450 and it was recognized as compensation expense to the sellers of Harris Lee. Harris Lee is now consolidated in the Company’s financial results. During the quarter ended June 30, 2015, Harris Lee was not operating and its impact on the Company’s Statement of Operations was zero as it was determined to be nominal. As of the date of acquisition we felt that the entire acquisition cost should be impaired as Harris Lee Holdings, LLC had not yet begun its testing operations and it is uncertain when the testing operations would begin.

Note 6-Convertible Notes

Note 6-Convertible Notes	6 Months Ended
	Jun. 30, 2015
Notes
Note 6-Convertible Notes	Note 6—CONVERTIBLE NOTES During the six months ended June 30, 2015, the Company recorded discounts of $909,657 on the notes of which $855,101 resulted from derivative liabilities and $54,556 resulted from original issue discounts. During the six months ended June 30, 2015, the Company recognized a total of $137,470 in losses on true-up of convertible notes of which $44,383 related to additional principal and $93,087 related to additional shares issued. Aggregate amortization of debt discounts was $1,111,453 for the six months ended June 30, 2015. The following table summarizes the changes in the convertible notes for the six months ending June 30, 2015: Short Term Long Term Total Balance as of December 31, 2014 - Net $ 898,664 $ 28,832 $ 927,496 Add back: unamortized discount (413,898 ) (783,668 ) (1,197,566 ) Balance as of December 31, 2014 - Gross $ 1,312,562 $ 812,500 $ 2,125,062 Cash additions 970,287 280,000 1,250,287 Non-cash additions 58,434 - 58,434 (a) Cash payments (350,000 ) - (350,000 ) Conversions (724,344 ) (100,000 ) (824,344 ) (b) Original issue discount 54,556 - 54,556 Total 1,321,495 992,500 2,313,995 Less: unamortized discount (101,618 ) (894,152 ) (995,770 ) Balance as of June 30, 2015 $ 1,219,877 $ 98,348 $ 1,318,225 (a) The Statement of Cash Flows reflects $14,051 for accrued rent and $44,383 for true up of shares. (b) The Statement of Cash Flows reflects $952,305 which consists of $824,344 in principal plus $127,961 in interest. Both were converted into common shares. The Company uses 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 June 30, 2015: June 30, 2015 Dividend yield: 0 Expected volatility 161.0% to 214.0% Risk free interest rate 0.02% to 1.63% Expected life (years) 0.16 to 4.89

Note 7-Derivative Liabilities

Note 7-Derivative Liabilities	6 Months Ended
	Jun. 30, 2015
Notes
Note 7-Derivative Liabilities	Note 7—DERIVATIVE LIABILITIES The following table summarizes the changes in the derivative liabilities during the period ending June 30, 2015: Balance as of December 31, 2014 $ 2,576,025 Debt discount 855,101 Original issuance discount - Extinguished (1,882,101) Change in fair value (6,031) Ending balance as of June 30, 2015 $ 1,542,944

Note 8-Fair Value Measurements

Note 8-Fair Value Measurements and Derivative Liability	6 Months Ended
	Jun. 30, 2015
Notes
Note 8-Fair Value Measurements and Derivative Liability	Note 8—FAIR VALUE MEASUREMENTS AND DERIVATIVE LIABILITY 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. 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. Under ASC-815 the conversion options embedded in the notes payable described in Note 5 require liability classification because they do not contain an explicit limit to the number of shares that could be issued upon settlement. As defined in FASB ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilized the market data of similar entities in its industry or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement). The three levels of the fair value hierarchy are as follows: Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities. Level 2 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. The 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 at the period ending June 30, 2015. Recurring Fair Value Measurements Level 1 Level 2 Level 3 Total LIABILITIES: Derivative liabilities – June 30, 2015 - - 2,661,575 2,661,575 Derivative liabilities – December 31, 2014 - - 2,576,025 2,576,025

Note 9-Subsequent Events

Note 9-Subsequent Events	6 Months Ended
	Jun. 30, 2015
Notes
Note 9-Subsequent Events	Note 9—SUBSEQUENT EVENTS In accordance with FASB ASC 855-10-50-1 we evaluated our subsequent events through August 19, 2015. During this period, we entered into the following debt and equity transactions: Investors converted $97,405 of Convertible Promissory Notes into 36,208,656 common shares. Investors converted 200,000 Convertible Preferred Series A Stock into 20,000,000 shares of common stock. The Company borrowed one Convertible Note of $125,000 under convertible notes with the following terms: 8.0% interest, maturity date of 4/14/16, and a conversion price calculated at 50% discount to the lowest trading price of the previous 15 days. The Company took an investment of $125,000 in exchange for Convertible Series C Stock which converts to 12,500,000 common shares. The Company has not yet issued any shares as a result of this agreement and no cash has been received. On July 24, 2015, the Company entered into a revolving loan agreement whereby the Company will act as Lender to Harris Lee Colorado, LLC. The maximum principal of the loan is $2,500,000, of which $0 is outstanding as of this date. The maturity date for the loan is January 24, 2023 and has an interest rate of the higher of 1.77% per annum or LIBOR + 50 bps, but not to exceed 4.0% per annum. The Company issued a total of 4,500,000 warrant exercise shares less 166,387 exercise shares in cashless exercise.

Note 1-Description of Busines15

Note 1-Description of Business and Basis of Presentation: Financial Presentation (Policies)	6 Months Ended
	Jun. 30, 2015
Policies
Financial Presentation	Financial Presentation The unaudited Consolidated Balance Sheets, Consolidated Statements of Operations, and Consolidated Statements of Cash Flows of Pazoo, Inc. (“we”, “our”, “Pazoo” or the “Company”) reflect all normal recurring adjustments the nature of which are, in the opinion of management, necessary for a fair presentation of financial position and the results of operations for the interim periods presented. Certain prior-year amounts have been reclassified to conform to the current period presentation.

Note 1-Description of Busines16

Note 1-Description of Business and Basis of Presentation: Description of Business (Policies)	6 Months Ended
	Jun. 30, 2015
Policies
Description of Business	Description of Business We are an early growth stage health and wellness company. Presently, our primary business is pazoo.com, an online, content driven, ad supported health and wellness web site for people and their pets. Additionally, this site has e-commerce functionality which allows pazoo.com to be an online retailer of nutritional foods/supplements, wellness goods, and fitness apparel. Pazoo, Inc. does not have any brick and mortar establishments. We entered the pharmaceutical testing laboratory market with our acquisitions of MA & Associates, LLC which will operate pharmaceutical testing laboratories in Nevada, and Harris Lee Holdings, LLC which will operate pharmaceutical testing laboratories in other states. 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 services to legally-authorized cannabis producers and distributors as well as to regulators. States that have legalized cannabis are developing cannabis health and safety criteria that we will fulfill through our testing laboratories.

Note 1-Description of Busines17

Note 1-Description of Business and Basis of Presentation: Principles of Consolidation (Policies)	6 Months Ended
	Jun. 30, 2015
Policies
Principles of Consolidation	Principles of Consolidation The accompanying consolidated financial statements include the amounts of the Company and its wholly-owned subsidiaries Harris Lee Holdings LLC and MA & Associates, LLC, each a Nevada limited liability company. All intercompany accounts and transactions have been eliminated as of June 30, 2015.

Note 1-Description of Busines18

Note 1-Description of Business and Basis of Presentation: Intangible Assets (Policies)	6 Months Ended
	Jun. 30, 2015
Policies
Intangible Assets	Intangible Assets Intangible assets as of June 30, 2015 consisted of a license agreement acquired for $307,500 from Steep Hill Labs for the right to take the Steep Hill software and methodology to states above and beyond Nevada , $100,000 from the MA license and 117,329 in in-process research & development. The cost basis of the intangible asset will be amortized over the initial 9-year term of the license. Amortization expense during the three months ended June 30, 2015 was $6,105.

Note 1-Description of Busines19

Note 1-Description of Business and Basis of Presentation: Impairment of Long-Lived Assets (Policies)	6 Months Ended
	Jun. 30, 2015
Policies
Impairment of Long-Lived Assets	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 license, along with the in-process research & development, were evaluated for impairment and no impairment loss was incurred as of June 30, 2015.

Note 3-Stockholders' Equity_ Sc

Note 3-Stockholders' Equity: Schedule of Preferred Units (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Schedule of Preferred Units	Warrants Weighted Average Exercise Price Outstanding - December 31, 2014 1,030,226 $ 2.23 Granted 2,325,000 0.50 Forfeited/Canceled (50,000) 0.05 Exercised - - Outstanding - June 30, 2015 3,305,226 0.96 Exercisable - June 30, 2015 3,305,226 $ 0.96

Note 3-Stockholders' Equity_ 21

Note 3-Stockholders' Equity: Schedule of Stockholders' Equity Note, Warrants or Rights (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Schedule of Stockholders' Equity Note, Warrants or Rights	Warrants Weighted Average Exercise Price Outstanding - December 31, 2014 6,130,470 $ 0.05 Granted - - Forfeited/Canceled (5,000,000 ) 0.05 Exercised - - Outstanding - June 30, 2015 1,130,470 0.01 Exercisable - June 30, 2015 1,130,470 $ 0.01

Note 5-Equity Method Investme22

Note 5-Equity Method Investments and Acquisitions: Schedule of Business Acquisitions, by Acquisition (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Schedule of Business Acquisitions, by Acquisition	ACQUIRED ASSETS: Current assets $ 4,866 In-process research & development 117,329 Licensing 100,000 Other assets 388,140 Total assets acquired $ 610,335 LIABILITIES ASSUMED: Current liabilities $ (11,756) Other liabilities (9) Total liabilities assumed $ (11,766) Net assets acquired $ 598,569

Note 5-Equity Method Investme23

Note 5-Equity Method Investments and Acquisitions: Business Acquisition, Pro Forma Information, Nonrecurring Adjustments (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Business Acquisition, Pro Forma Information, Nonrecurring Adjustments	Unaudited Pro Forma Results of Operations Three Months Ended June 30, Six Months Ended June 30, 2015 2014 2015 2014 Revenues $ - $ - $ - $ - Loss from operations - - - - Net income (loss) $ - $ - $ - $ -

Note 6-Convertible Notes_ Conve

Note 6-Convertible Notes: Convertible Debt (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Convertible Debt	Short Term Long Term Total Balance as of December 31, 2014 - Net $ 898,664 $ 28,832 $ 927,496 Add back: unamortized discount (413,898 ) (783,668 ) (1,197,566 ) Balance as of December 31, 2014 - Gross $ 1,312,562 $ 812,500 $ 2,125,062 Cash additions 970,287 280,000 1,250,287 Non-cash additions 58,434 - 58,434 (a) Cash payments (350,000 ) - (350,000 ) Conversions (724,344 ) (100,000 ) (824,344 ) (b) Original issue discount 54,556 - 54,556 Total 1,321,495 992,500 2,313,995 Less: unamortized discount (101,618 ) (894,152 ) (995,770 ) Balance as of June 30, 2015 $ 1,219,877 $ 98,348 $ 1,318,225

Note 6-Convertible Notes_ Sched

Note 6-Convertible Notes: Schedule of Interest Rate Derivatives (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Schedule of Interest Rate Derivatives	June 30, 2015 Dividend yield: 0 Expected volatility 161.0% to 214.0% Risk free interest rate 0.02% to 1.63% Expected life (years) 0.16 to 4.89

Note 7-Derivative Liabilities_

Note 7-Derivative Liabilities: Schedule of Derivative Liabilities at Fair Value (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Schedule of Derivative Liabilities at Fair Value	Balance as of December 31, 2014 $ 2,576,025 Debt discount 855,101 Original issuance discount - Extinguished (1,882,101) Change in fair value (6,031) Ending balance as of June 30, 2015 $ 1,542,944

Note 8-Fair Value Measurement27

Note 8-Fair Value Measurements and Derivative Liability: Fair Value, Liabilities Measured on Recurring Basis (Tables)	6 Months Ended
	Jun. 30, 2015
Tables/Schedules
Fair Value, Liabilities Measured on Recurring Basis	Recurring Fair Value Measurements Level 1 Level 2 Level 3 Total LIABILITIES: Derivative liabilities – June 30, 2015 - - 2,661,575 2,661,575 Derivative liabilities – December 31, 2014 - - 2,576,025 2,576,025

Note 1-Description of Busines28

Note 1-Description of Business and Basis of Presentation: Intangible Assets (Details) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Details
Cash paid for intangible asset	$ 307,500	$ 0
Amortization	$ 6,105	$ 0

Note 2-Going Concern (Details)

Note 2-Going Concern (Details) - USD ($)	3 Months Ended		6 Months Ended		56 Months Ended
	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015	Jun. 30, 2014	Jun. 30, 2015
Details
Net loss	$ 3,430,804	$ 503,249	$ 5,355,332	$ 1,132,733	$ 12,775,281

Note 3-Stockholders' Equity (De

Note 3-Stockholders' Equity (Details) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Details
Capital contributions from management	$ 42,000	$ 0
Stock Issued During Period, Shares, New Issues	474,818,283
Stock Issued During Period, Shares, Issued for Services	6,158,333
Stock Issued During Period, Value, Issued for Services	$ 51,194
Development Stage Entities, Stock Issued, Shares, Issued for Cash	5,460,125
Development Stage Entities, Stock Issued, Value, Issued for Cash	$ 48,380
Stock Issued During Period, Shares, Conversion of Convertible Securities	111,500,000
Stock Issued During Period, Shares, Conversion of Units	339,534,662
Common shares issued for conversion of debt and interest	$ 952,305	$ 0
Auction Market Preferred Securities, Shares, Issued	1,260,000

Note 4-Related Party Transact31

Note 4-Related Party Transactions (Details) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Details
Professional and Contract Services Expense	$ 36,000	$ 35,875
Employee Service Share-based Compensation, Cash Received from Exercise of Stock Options	$ 1,750

Note 5-Equity Method Investme32

Note 5-Equity Method Investments and Acquisitions (Details)	Jun. 30, 2015USD ($)
Details
Business Acquisition, Contingent Consideration, at Fair Value, Current	$ 1,377,081
Goodwill, Fair Value Disclosure	2,260,179
Goodwill, Impaired, Accumulated Impairment Loss	$ 2,260,179

Note 6-Convertible Notes (Detai

Note 6-Convertible Notes (Details) - USD ($)	6 Months Ended
	Jun. 30, 2015	Jun. 30, 2014
Details
Amortization of debt discounts	$ 1,111,453	$ 83,526