Definitely report her! I can't begin to tell you all how much I despise backyard breeders. In all my time as a vet nurse I've seen way too many horrible outcomes from backyard breeders and puppy farmers (and with the turnover of puppies she has I'd class her as a puppy farmer!).

And don't even get me started on "free" or "cheap" puppies. Do you know the type of people that want a "free" or "cheap" puppy? People who don't want to spend, or can't afford to spend any money on the puppy once they get it. Not shots, no desexing, no medical treatment if it's ill...

Ok, now I'm just ranting because I'm so passionate and emotional about the subject.

Jesses girl - Thanks for being so observant and noticing what she's doing. And for caring enough to ask her about it and consider reporting her. Personally I'd call the police, her council (if you know it) and the RSPCA too.