UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

WASHINGTON,
D.C. 20549



FORM
10-Q



|[X]  | Quarterly
    Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|---- | -------------------------------------------------------------------------------------------
|     |                                                                                            
|     | For
    the quarterly period ended December 31, 2015                                       
|     |                                                                                            
|[  ] | Transition
    Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934       
|     |                                                                                            
|     | For
    the transition period from __________ to__________                                 
|     |                                                                                            
|     | Commission
    File Number: 000-55155                                                      



Nano Mobile
Healthcare, Inc.

(Exact name of
registrant as specified in its charter)



|Delaware                                                           | 93-0659770                           
|------------------------------------------------------------------ | -------------------------------------
|(State
    or other jurisdiction of incorporation or organization) | (IRS
    Employer Identification No.)



|3
                                         Columbus Circle, 15th Floor
        New
        York, NY 10019
|---------------------------------------------------------------------------------------------------------
|(Address
    of principal executive offices)                                                             



|(917)
    745-7202                                                                    
|--------------------------------------------------------------------------------------
|(Registrant’s
    telephone number)                                                   
|___________________________                                                           
|(Former
    name, former address and former fiscal year, if changed since last report)



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 preceding 12 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

[X] Yes [ ]
No



Indicate by
check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] 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.



|[
    ] Large accelerated filer | [
    ] Accelerated filer        
|------------------------------- | ---------------------------------
|[
    ] Non-accelerated filer   | [X]
    Smaller reporting company



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

[ ] Yes [X]
No



Indicate the
number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

435,712,455 shares of common stock as February 22, 2016





1


Table of Contents








Table
of Contents

|                                                                        |                                                                                       | Page
|----------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----
|                                                                       
|PART
                                         I – FINANCIAL INFORMATION
|                                                                       
|Item
    1:                                                             | Financial Statements                                                                  | 3   
|Item
    2:                                                             | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 4   
|Item
    3:                                                             | Quantitative and Qualitative Disclosures About Market Risk                            | 8   
|Item
    4:                                                             | Controls and Procedures                                                               | 8   
|                                                                       
|PART
    II – OTHER INFORMATION                                        
|                                                                       
|Item
    1:                                                             | Legal Proceedings                                                                     | 9   
|Item
    2:                                                             | Unregistered Sales of Equity Securities and Use of Proceeds                           | 9   
|Item
    3:                                                             | Defaults Upon Senior Securities                                                       | 10  
|Item
    4:                                                             | Mine Safety Disclosures                                                               | 10  
|Item
    5:                                                             | Other Information                                                                     | 10  
|Item
    6:                                                             | Exhibits                                                                              | 10  



2


Table of Contents




PART I - FINANCIAL
INFORMATION



Item 1. Financial
Statements



Our financial
statements included in this Form 10-Q are as follows:



|F-1 | Balance
    Sheets as of December 31, 2015 and June 30, 2015 (unaudited);                              
|--- | -------------------------------------------------------------------------------------------------------
|F-2 | Statements
    of Operations for the three and six months ended December 31, 2015 and 2014 (unaudited);
|F-3 | Statements
    of Cash Flows for the six months ended December 31, 2015 and 2014 (unaudited); and      
|F-4 | Notes
    to the unaudited Financial Statements.                                                       



These
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the interim period ended December 31, 2015 are not
necessarily indicative of the results that can be expected for the full year.



3


Table of Contents




NANO
MOBILE HEALTHCARE, INC.

BALANCE
SHEETS

AS
OF DECEMBER 31, 2015

(UNAUDITED)







|                                                                 |  | December 31, 2015 |             | June 30, 2015
|---------------------------------------------------------------- |  | ----------------- | ----------- | -------------
|ASSETS                                                           |  |                   |             |              
|Current assets                                                   |  |                   |             |              
|Cash and cash equivalents                                        |  | $                 | 32,986      |              
|Prepaid expenses and other
    current assets                    |  |                   | 32,213      |              
|Total current assets                                             |  |                   | 65,199      |              
|                                                                 |  |                   |             |              
|Fixed Assets                                                     |  |                   | 9,798       |              
|Securities-available for
    sale                                |  |                   | 400         |              
|Total assets                                                     |  |                   | 75,397      |              
|                                                                 |  |                   |             |              
|LIABILITIES AND STOCKHOLDERS' DEFICIT                            |  |                   |             |              
|Current liabilities                                              |  |                   |             |              
|Accounts payable and accrued liabilities                         |  | $                 | 290,898     |              
|Convertible notes payable                                        |  |                   | 670,769     |              
|Due to related parties                                           |  |                   | 553,194     |              
|Derivative liabilities                                           |  |                   | 5,701,672   |              
|Total current liabilities                                        |  |                   | 7,216,533   |              
|                                                                 |  |                   |             |              
|Convertible debt                                                 |  |                   | 109,612     |              
|                                                                 |  |                   |             |              
|Total liabilities                                                |  |                   | 7,326,145   |              
|                                                                 |  |                   |             |              
|Stockholders' deficit                                            |  |                   |             |              
|Preferred stock; $0.001 par value; 50,000,000 shares authorized; |  |                   |             |              
|23,473,368 and 0 shares issued and outstanding                   |  |                   |             |              
|as of December 31, 2015 and June 30, 2015, respectively          |  |                   | 23,473      |              
|Common stock; $0.001 par value; 450,000,000 shares authorized;   |  |                   |             |              
|370,255,933 and 227,720,396 shares issued and
    outstanding    |  |                   |             |              
|as of December 31, 2015 and June 30, 2014, respectively          |  |                   | 370,256     |              
|Additional paid-in capital                                       |  |                   | 4,017,859   |              
|Accumulated deficit                                              |  |                   | (11,662,336 | )            
|Total stockholders' deficit                                      |  |                   | (7,250,748  | )            
|                                                                 |  |                   |             |              
|Total liabilities and stockholders' deficit                      |  | $                 | 75,397      |              













See
accompanying notes to unaudited financial statements





F-1


Table of Contents




NANO
MOBILE HEALTHCARE , INC.

STATEMENTS
OF OPERATIONS

FOR
THE  THREE AND SIX MONTHS ENDED DECEMBER 31, 2015 AND 2014

(UNAUDITED)





|                                                 | For
    the three months ended | For the six
    months ended
|------------------------------------------------ | ------------------------------ | ----------------------------
|                                                 | December
    31, 2015          | December
    31, 2014       
|                                                 |                                |                             
|Operating expenses                               |                                |                             
|Professional
    fees                            |                                | 19,191                      
|General and administrative
    expenses          |                                | 53,439                      
|Officer and director
    compensation            |                                | —                           
|Consulting                                       |                                | 332,556                     
|Royalty
    expenses                             |                                | —                           
|Total
    operating expenses                     |                                | 405,186                     
|                                                 |                                |                             
|Loss from operations                             |                                | (405,186                    
|                                                 |                                |                             
|Other income (expense)                           |                                |                             
|Interest income (expense)                        |                                | (502,727                    
|Gain (loss) on derivative                        |                                | (4,187,019                  
|Unrealized
    loss on investment                |                                | —                           
|Total
    other income (expense)                 |                                | (4,689,746                  
|                                                 |                                |                             
|Net loss                                         | $                              | (5,094,932                  
|                                                 |                                |                             
|Net loss per common share:
    basic and diluted | $                              | (0.01                       
|                                                 |                                |                             
|weighted average common                          |                                |                             
|shares
    outstanding: basic and diluted        |                                | 319,500,994                 







See
accompanying notes to unaudited financial statements





F-2


Table of Contents




NANO
MOBILE HEALTHCARE, INC.

STATEMENTS
OF CASH FLOWS

FOR
THE  SIX MONTHS ENDED DECEMBER 31, 2015 AND 2014

(UNAUDITED)







|                                                                                |                                                    |                                                |             | For the six
    months ended
|------------------------------------------------------------------------------- | -------------------------------------------------- | ---------------------------------------------- | ----------- | ----------------------------
|                                                                                |                                                    |                                                |             | December 31, 2015           
|Cash Flows from Operating Activities                                            |                                                    |                                                |             |                             
|                                                                                | Net income (loss)                                  |                                                | (4,687,670) | $                           
|Adjustments to reconcile net loss to net cash used
    in operating activities: |                                                    |                                               
|                                                                                | Unrealized loss on investment                      |                                                | -           |                             
|                                                                                | Amortization of debt discount                      |                                                | 956,011     |                             
|                                                                                | Loss (gain) on derivative liability                |                                                | 2,759,830)  |                             
|                                                                                | Warrants issued for services                       |                                                | -           |                             
|                                                                                | Shares issued for services                         |                                                | 9,600       |                             
|                                                                                | Depreciation                                       |                                                | 872         |                             
|Changes in assets and liabilities                                               |                                                    |                                                |             |                             
|                                                                                | Prepaid expense                                    |                                                | 87,424      |                             
|                                                                                | Accounts payable and accrued expenses              |                                                | (28,588)    |                             
|                                                                                |                                                    | Net cash used in operating activities          |             | (902,521)                   
|                                                                                |                                                    |                                                |             |                             
|Cash Flows from Investing Activities                                            |                                                    |                                                |             |                             
|                                                                                | Purchase of fixed assets                           |                                                | -           |                             
|                                                                                |                                                    | Net cash used in investing activities          |             | -                           
|                                                                                |                                                    |                                                |             |                             
|Cash Flows from Financing Activities                                            |                                                    |                                                |             |                             
|                                                                                | Proceeds from related party debt                   |                                                | 667,075     |                             
|                                                                                | Payments on related party debt                     |                                                | (514,331)   |                             
|                                                                                | Proceeds from convertible notes payable            |                                                | 553,009     |                             
|                                                                                | Proceeds on loans payable                          |                                                | 28,501      |                             
|                                                                                | Payments on loans payable                          |                                                | (48,733)    |                             
|                                                                                |                                                    | Net cash from financing activities             |             | 685,521                     
|                                                                                |                                                    |                                                |             |                             
|Net increase (decrease) in cash                                                 |                                                    | (217,000)                                      |             | (134,812)                   
|                                                                                |                                                    |                                                |             |                             
|Cash, beginning of period                                                       |                                                    | 249,986                                        |             | 235,073                     
|                                                                                |                                                    |                                                |             |                             
|Cash, end of period                                                             | $                                                  | 32,986                                         | $           | 100,261                     
|                                                                                |                                                    |                                                |             |                             
|Supplemental disclosure of cash flow information                                |                                                    |                                                |             |                             
|                                                                                | Cash paid for interest                             | $                                              | -           | $                           
|                                                                                | Cash paid for tax                                  | $                                              | -           | $                           
|                                                                                |                                                    |                                                |             |                             
|Non-Cash investing and financing transactions                                   |                                                    |                                                |             |                             
|                                                                                | Common stock issued to settle convertible
    debt | $                                              | 294,898     | $                           
|                                                                                | Shares issued for intangible assets                | $                                              |             | $                           
|                                                                                |                                                    | Common stock issued to settle convertible debt | $           | 294,898                     
|                                                                                |                                                    | Recognition of derivative debt discount        | $           | 1,040,913                   
|                                                                                |                                                    | Conversion of derivative liability             | $           | 593,307                     
|                                                                                |                                                    | Exchange of common shares to preferred shares  | $           | 116,617                     



















See
accompanying notes to unaudited financial statements





F-3


Table of Contents


NANO
MOBILE HEALTHCARE, INC.

NOTES TO
FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 –
BASIS OF PRESENTATION AND GOING CONCERN



Basis of Presentation

The accompanying unaudited interim financial statements
of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America
and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements
and notes thereto contained in the Company’s most recent Annual Financial Statements filed with the SEC on Form 10-K. In
the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial
position and the results of operations for the interim period presented have been reflected herein. The results of operations
for the interim period are not necessarily indicative of the results to be expected for the full year. Notes to the financial
statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent
fiscal period, as reported in the Form 10-K, have been omitted.



Going concern

The accompanying financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has incurred cumulative net losses of $11,662,336 since its inception and requires capital for its contemplated
operational and marketing activities to take place. The ability of Nano Mobile Healthcare, Inc to continue as a going concern
is dependent on the Company generating cash from the sale of its common stock and/or obtaining debt financing and attaining future
profitable operations. Management’s plans include selling its equity securities and obtaining debt financing to fund its
capital requirement and ongoing operations; however, there can be no assurance the Company will be successful in these efforts.
The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going
concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome
of these aforementioned uncertainties.



NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Fair Value of Financial Instruments

The carrying amounts reflected in the balance sheets for
cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items.



As required by the Fair Value Measurements and Disclosures
Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in
measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other
than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs
in which there is little or no market data, which require the reporting entity to develop its own assumptions.



The three levels of the fair value hierarchy are described
below:



Level 1: Unadjusted quoted prices in active
markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;



Level 2: Quoted prices in markets that are not
active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;



Level 3: Prices or valuation techniques that
require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).



A financial instrument's categorization within the valuation
hierarchy is based upon the lowest level of input that is significant to the fair value measurement.





F-4


Table of Contents






Financial assets and liabilities measured at fair value
on a recurring basis are summarized below for December 31, 2015:





|                                 |  | Level 1 |     | Level 2 |  | Level 3 |   | Total
|-------------------------------- |  | ------- | --- | ------- |  | ------- | - | -----
|Assets                           |  |         |     |         |  |         |   |      
|Securities -available for sale   |  | $       | 400 |         |  | $       | — |      
|Liabilities                      |  |         |     |         |  |         |   |      
|Derivative Financial Instruments |  | $       | —   |         |  | $       | — |      





Financial assets and liabilities measured at fair value
on a recurring basis are summarized below for June 30, 2015:



|                                 |  | Level 1 |     | Level 2 |  | Level 3 |   | Total
|-------------------------------- |  | ------- | --- | ------- |  | ------- | - | -----
|Assets                           |  |         |     |         |  |         |   |      
|Securities -available for sale   |  | $       | 400 |         |  | $       | — |      
|Liabilities                      |  |         |     |         |  |         |   |      
|Derivative Financial Instruments |  | $       | —   |         |  | $       | — |      



Investment Securities

The Company has elected to account for its investments
in securities at fair value under the fair value option provisions of FASB ASC 825, Financial Instruments (“FASB
ASC 825”). The primary reason for electing the fair value option when it first became available in 2008, was to reduce the
burden of monitoring the differences between the cost and the fair value of the Company’s investments, previously classified
as available for sale securities, including the assessment as to whether the declines are temporary in nature and to further remove
an element of management judgment. In addition, the election was made for certain investments that were previously required to
be accounted for under the equity method because their fair value measurements were readily obtainable.



Such financial assets accounted for at fair value include
in general, securities that would otherwise qualify for available for sale treatment.



The changes in fair value (realized and unrealized
gains and losses) of these instruments for which the Company has elected the fair value option are recorded in principal transactions
and other income in the consolidated statements of operations. All of the investments for which the Company has elected the fair
value option are included as a component of securities available for sale, at fair value in the consolidated balance sheets. The
Company recognized net losses of $0 and $14,000 related to changes in fair value of investments that are included as a component
of other investments, at fair value during the three and six months ended December 31, 2015 and 2014,
respectively.



NOTE 3 – PREPAID EXPENSES



During the six months ended December 31, 2015, the Company
prepaid interest of $57,375 on convertible notes. As of December 31, 2015 and June 30, 2015, the balance that remained capitalized
as prepaid expenses was $32,213 and $41,637, respectively.



F-5


Table of Contents






NOTE 4 – SECURITIES AVAILABLE FOR SALE



On January 16, 2014, the Company acquired 2,000,000 restricted
common shares of a publicly traded company. The investment was acquired at market value of $0.03 per share, and is held for future
trade. The value of the investment will be adjusted quarterly to reflect the change in market value of the holding. The investment
does not represent a controlling interest in the publicly traded company. The company has elected the fair value option under
ASC 825 allowing gains and losses to be recorded in earnings each period. From receipt of the shares on January 16, 2014 through
December 31, 2015 the securities were reduced in value from $60,000 to $400 due to a change in the publicly traded company’s
stock price. These securities are measured under level 1 of ASC 820.



The Company reported an unrealized loss on investment
of $0 and $14,000 during the three and six months ending December 31, 2015 and 2014, respectively.



NOTE 5 – RELATED PARTY TRANSACTIONS



During the six months ended December 31, 2015 and 2014,
the Company received cash advances from its majority shareholder in the amount of $667,075 and 587,139, of which $514,331 and
$125,455 was repaid during the same period. As of December 31, 2015 and June 30, 2015 there was a balance due to the shareholder
of $533,194 and $400,450, respectively. All amounts advanced to the Company are unsecured, non-interest bearing and due upon demand.



NOTE 6 – LOANS PAYABLE



On July 1, 2015, the Company
issued a promissory note in the amount of $22,500 for $15,000 cash. The note was due on July 1, 2016 and bears interest at 15%
per annum. During the six month period ended December 31, 2015, the Company has repaid the entire note balance.



On September 1, 2015, the Company
issued a promissory note in the amount of $26,233 for $17,500 cash. The note was due on August 31, 2016 and bears interest at
15% per annum. During the six month period ended December 31, 2015, the Company has repaid the entire balance.



NOTE 7 - CONVERTIBLE NOTE PAYABLE



On April 18, 2014, the Company
issued a convertible promissory note in which the Company will be taking tranche payments on pre-defined dates, the total of these
payments cannot exceed $650,000. There is an original discount component of 10% per tranche and an additional expense fee of $5,000.
Therefore, the funds available to the Company will be $650,000 and the liability (net of interest) will be $750,000 when all disbursements
have been received by the Company. Each tranche is accounted for separately with each principal and OID balance becoming due 18
months after receipt. Each tranche bears interest at 8% per annum. The loan is secured by shares of the Company’s common
stock. Each portion of the loan becomes convertible 180 days after date of the note. The loan and any accrued interest can then
be converted into shares of the Company’s common stock at a rate of 50% multiplied by the market price, which is the lowest
quoted price for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion
date.



During the year ended June 30, 2015, the Company received
six additional tranche disbursements of $50,000 on July 15, 2014, $100,000 on September 30, 2014, $50,000 on November 3, 2014,
$50,000 on December 1, 2014, $50,000 on December 29, 2014, and $50,000 on February 2, 2015.



On July 20, 2015, the Company
entered into a settlement agreement with the holder of the convertible note. Under the agreement the note holder agreed not to
seek to enforce its rights or remedies under the Note in relation to the notice of conversion issued to convert a balance of the
note amounting to $57,933; to not to exercise its rights of conversion pursuant to the Note, and if an event of default occurs,
the Holder agrees not to sell any shares of common stock of the Company having an aggregate conversion value of $30,000 or more
per week until such time as it has sold all of the Company’s common stock that it owns.







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Under the agreement the Company
agreed to a penalty in relation to the issuance of a note in the amount of $95,000; to release the holder from its obligation
to advance additional funds to the Company; and to pay or refinance the amount due under the note plus accrued interest in four
installment payments due on July 20, 2015, August 10, 2015, September 14, 2015 and October 12, 2015. In accordance with the agreement,
the Company made the payments due on July 20, 2015 and August 10, 2015.



In respect of prepayment penalties payable to the Holder
pursuant to the Note, the Company agreed to issue to the Holder additional convertible promissory notes with each having the same
form, terms, and conditions as the original note. The value of the notes, which are due by each installment payment date, are
equal to 30% of the payment delivered. During the three months ended September 30, 2015, the Company issued two notes related
to the prepayment penalties of the installments due on July 20, 2015 and August 10, 2015 of $35,399 and $35,610, respectively.



After the payment was made on
August 10, 2015, the Company and the note holder agreed to forgo the final two payments, cancel the settlements agreement, and
therefore allow the noteholder to convert the notes as agreed to in the original note agreement. During the three months ended
September 30, 2015, the Company converted $5,000 of the penalty note issued on July 20, 2015 into 5,000,000 shares of common stock.



The following details the disbursements as of December 31, 2015:





|Tranche Date                        |  | Principal with OID |         | Accrued Interest |  | Converted to Stock |        | Balance -  December 31, 2015
|----------------------------------- |  | ------------------ | ------- | ---------------- |  | ------------------ | ------ | ----------------------------
|April 21, 2014                      |  | $                  | 110,776 |                  |  | $                  | 6,167  |                             
|May 6, 2014                         |  |                    | 55,384  |                  |  |                    | 4,443  |                             
|June 11, 2014                       |  |                    | 55,384  |                  |  |                    | 5,147  |                             
|July 16, 2014                       |  |                    | 55,384  |                  |  |                    | 4,236  |                             
|September 30, 2014                  |  |                    | 110,768 |                  |  |                    | 6,628  |                             
|November 3, 2014                    |  |                    | 55,384  |                  |  |                    | 4,006  |                             
|December 1, 2014                    |  |                    | 55,384  |                  |  |                    | 3,417  |                             
|December 29, 2014                   |  |                    | 55,384  |                  |  |                    | 3,110  |                             
|February 2, 2015                    |  |                    | 55,384  |                  |  |                    | 2,901  |                             
|July 14, 2015                       |  |                    | 35,610  |                  |  |                    | 609    |                             
|July 20, 2015                       |  |                    | 95,000  |                  |  |                    | 1,420  |                             
|August 20, 2015                     |  |                    | 35,399  |                  |  |                    | 318    |                             
|Unamortized Original Issue Discount |  |                    | (6,618  | )                |  |                    | —      |                             
|                                    |  | $                  | 768,623 |                  |  | $                  | 42,402 |                             



During the six months ended December 31, 2015 and 2014,
$14,918 and $5,078 of the debt discount related to the outstanding tranches was amortized, respectively.



The Notes are shown net of an unamortized original issue
discount of $6,618 as of December 31, 2015.



The Company analyzed the conversion options embedded in
the Convertible Promissory Notes for derivative accounting consideration under ASC 815, Derivatives and Hedging, and determined
that seven tranches received on November 3, 2014, December 1, 2014, December 29, 2014, February 2, 2015, July 14, 2015, July 20,
2015, and August 20, 2015 were convertible during the quarter ended September 30, 2015.



In accordance with the terms of the Note, the holder fully
converted the tranche issued on April 21, 2014 during the year ended June 30, 2015 for 3,711,969 shares of common stock for principal
and accrued interest of $116,943.



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The Company recorded a debt discount in the amount of $110,776 in connection with the initial
valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the
term of the note. Further, the Company recognized a derivative liability of $192,038 and an initial loss of $81,262 based on the
Black Scholes Merton pricing model.



On October 21, 2014, the Note issued on May 6, 2014 became
convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $55,384 in connection
with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of
accretion over the term of the note. Further, the Company recognized a derivative liability of $95,215 and an initial loss of
$39,831 based on the Black Scholes Merton pricing model.



In accordance with the terms of the Note, the holder fully
converted the tranche during the year ended June 30, 2015 for 4,943,581 shares of common stock for principal and interest of $59,827.



On December 8, 2014, the Note issued on June 11, 2014
became convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $55,384 in
connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest
method of accretion over the term of the note. Further, the Company recognized a derivative liability of $90,678 and initial loss
on derivative liability of $35,294 based on the Black Scholes Merton pricing model.



During the quarter ended September 30, 2015, the note
was assigned to another lender. As of December 31, 2015, $55,384 of the debt discount has been amortized. The fair value of the
derivative liability at December 31, 2015 December 31, 2015 and June 30, 2015 was $0 and $91,995, respectively resulting in a
gain on the change in fair value of the derivative of $91,995 during the six months ended December 31, 2015.



On January 12, 2015, the Note issued on July 16, 2014
became convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $55,384 in
connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest
method of accretion over the term of the note. Further, the Company recognized a derivative liability of $91,094 and initial loss
on derivative liability of $35,710 based on the Black Scholes Merton pricing model.



During the six months ended December 31, 2015, the note
was assigned to another lender. As of December 31, 2015, $55,384 of the debt discount has been amortized. The fair value of the
derivative liability at December 31, 2015 and June 30, 2015 was $0 and $96,644 resulting in a gain on the change in fair value
of the derivative of $96,644.



On March 29, 2015, the Note issued on September 30, 2014
became convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $110,768 in
connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest
method of accretion over the term of the note. Further, the Company recognized a derivative liability of $182,755 and initial
loss on derivative liability of $71,987 based on the Black Scholes Merton pricing model.



In accordance with the terms of the Note, the holder converted
$16,221of the note balance during the six month ended December 31, 2015 into 33,754,806 shares of common stock. The value of the
share on the date of conversion was $34,753.



As of December 31, 2015, $62,419 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 is $306,746 and $213,077
resulting in a gain on the change in fair value of the derivative of $158,744. The Note is shown net of a derivative debt discount
of $20,280 at December 31, 2015.



On May 2, 2015, the Note issued on November 3, 2014 became
convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $55,384 in connection
with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of
accretion over the term of the note. Further, the Company recognized a derivative liability of $94,120 and initial loss on derivative
liability of $38,736 based on the Black Scholes Merton pricing model.



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As of December 31, 2015, $30,776 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 was $190,768 and $109,960,
respectively resulting in a loss on the change in fair value of the derivative of $80,808. The Note is shown net of a derivative
debt discount of $15,704 at December 31, 2015.



On May 30, 2015, the Note issued on December 1, 2014 became
convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $55,384 in connection
with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of
accretion over the term of the note. Further, the Company recognized a derivative liability of $95,257 and initial loss on derivative
liability of $39,873 based on the Black Scholes Merton pricing model.



As of December 31, 2015, $29,631 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 was $198,292 and $115,438
resulting in a loss on the change in fair value of the derivative of $82,854 during the six months ended December 31, 2015. The
Note is shown net of a derivative debt discount of $21,087 at December 31, 2015.



On June 29, 2015, the Note issued on December 29, 2014
became convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $55,384 in
connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest
method of accretion over the term of the note. Further, the Company recognized a derivative liability of $102,520 and initial
loss on derivative liability of $47,136 based on the Black Scholes Merton pricing model.



As of December 31, 2015, $27,914 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 was $203,347 and $116,072,
respectively resulting in a loss on the change in fair value of the derivative of $87,275 during the six months ended December
31, 2015. The Note is shown net of a derivative debt discount of $27,018 at December 31, 2015.



On August 1, 2015, the Note issued on February 2, 2015
became convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $55,384 in
connection with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest
method of accretion over the term of the note. Further, the Company recognized a derivative liability of $93,642 and initial loss
on derivative liability of $38,258 based on the Black Scholes Merton pricing model.



As of December 31, 2015, $22,938 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 was $202,585 and $0, respectively
resulting in a loss on the change in fair value of the derivative of $147,201 during the six months ended December 31, 2015. The
Note is shown net of a derivative debt discount of $32,446 at December 31, 2015.



On July 20, 2015, the Note issued on July 20, 2015 became
convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $95,000 in connection
with the initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of
accretion over the term of the note. Further, the Company recognized a derivative liability of $119,837 and initial loss on derivative
liability of $24,837 based on the Black Scholes Merton pricing model.



In accordance with the terms of the Note, the holder partially
converted the note during the six months ended December 31, 2015 for 24,000,000 shares of common stock for principal of $16,500.
The fair value of at the date of conversion of $33,003 was written off to additional paid in capital.



As of December 31, 2015, $88,838 of the debt discount has been amortized. The
fair value of the derivative liability at December 31, 2015 and June 30, 2015 was $45,284 and $0, respectively resulting in a
gain on the change in fair value of the derivative of $74,553 during the six months ended December 31, 2015. The Note is shown
net of a derivative debt discount of $6,162 at December 31, 2015.



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On October 1, 2014, the Company
issued a short-term convertible promissory note in the amount of $70,000 for $50,000 cash, an original issue discount of $12,500,
and prepaid interest of $7,500. The note was due on March 30, 2015 and bears interest at 15% per annum, which was prepaid by the
Company and is being amortized over the life of the loan. The loan is secured by shares of the Company’s common stock. The
loan becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted into shares
of the Company’s common stock at a rate of 50% multiplied by the market price, which
is the lowest quoted price for the common stock during the 25 trading day period ending on the latest complete trading day prior
to the conversion date. During the year ended June 30, 2015, $12,500 of the debt discount was been amortized. The note matured
on March 30, 2015.



The Company elected to prepay the entire term’s
interest of $7,500. This payment was capitalized as a prepaid asset and has been amortized over the term of the note. The interest
expense related to this loan was $0 for the quarter ending December 31, 2015 and 2014.



On March 30, 2015, the Note became convertible at the option of the holder.
On this date the Company recorded a debt discount in the amount of $70,000 in connection with the initial valuation of the derivative
liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further,
the Company recognized a derivative liability of $70,014 and initial loss of $14 based on the Black Scholes Merton pricing model.



As of June 30, 2015, $70,000 of the debt discount has
been amortized. The fair value of the derivative liability at June 30, 2015 is $20,632.



As of December 31, 2015 and June 30, 2015, the holder
of the note exercised his right to convert $14,000 and $56,000 of the note balance into 2,222,222 and 3,188,125 shares of common
stock, respectively. The fair value of the derivative liability related to the converted debt as of December 31, 2015 and June
30, 2015 was $13,784 and $79,464, respectively.



On November 17, 2014, the Company
issued a short-term convertible promissory note in the amount of $70,000, which consisted of cash proceeds of $50,000, a debt
discount of $12,500 and prepaid interest of $7,500. The note is due on November 14, 2015 and bears interest at 15% per annum,
which was prepaid by the Company and is being amortized over the life of the loan. The loan is secured by shares of the Company’s
common stock. The loan becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted
into shares of the Company’s common stock at a rate of 50% multiplied by the market
price, which is the lowest quoted price for the common stock during the 25 trading day period ending on the latest complete trading
day prior to the conversion date. As of September 30, 2015, $10,946 of the debt discount has been amortized. The Note is shown
net of an unamortized debt discount of $1,554 at September 30, 2015.



The Company elected to prepay the entire term’s
interest of $7,500. This payment was capitalized as a prepaid asset and has been amortized over the term of the note. The interest
expense related to this loan was $1,885 and $0 for the quarter ending December 31, 2015 and 2014. As of December 31, 2015 and
June 30, 2015 the remaining prepaid interest balance was $353 and $2,838, respectively.



On May 16, 2015, the Note became convertible at the option
of the holder. On this date the Company recorded a debt discount in the amount of $70,000 in connection with the initial valuation
of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of
the note. Further, the Company recognized a derivative liability of $93,179 and initial loss of $23,179 based on the Black Scholes
Merton pricing model.



As of December 31, 2015, the holder of the note exercised
his right to convert $14,950 of the note balance into 26,045,455 shares of common stock, respectively. The fair value of the derivative
liability related to the converted debt as of December 31, 2015 was $21,145.



As of December 31, 2015 and June 30, 2015, the holder
of the note exercised his right to convert $20,000 and $35,000 of the note balance into 8,695,652 and 4,404,515 shares of common
stock. The fair value of the derivative liability related to the converted debt at December 31, 2015 and June 30, 2015 was $57,121
and $54,324, respectively.



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As of December 31, 2015, $52,692 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 was $76,217 and $56,108,
respectively resulting in a loss on the change in fair value of the derivative of $20,109. The Note is shown net of a derivative
discount of $0 at December 31, 2015.



On December 23, 2014, the Company
issued a short-term convertible promissory note in the amount of $70,000, which consisted of cash proceeds of $50,000, a debt
discount of $12,500 and prepaid interest of $7,500. The note is due on December 18, 2015 and bears interest at 15% per annum,
which was prepaid by the Company and is being amortized over the life of the loan. The loan is secured by shares of the Company’s
common stock. The loan becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted
into shares of the Company’s common stock at a rate of 50% multiplied by the market
price, which is the lowest quoted price for the common stock during the 25 trading day period ending on the latest complete trading
day prior to the conversion date. During the year ended June 30, 2015, $6,562 of the debt discount has been amortized. The Note
is shown net of an unamortized debt discount of $2,743 at September 30, 2015.



The Company elected to prepay the entire term’s
interest of $7,500. This payment was capitalized as a prepaid asset and has been amortized over the term of the note. The interest
expense related to this loan was $1,896 and $0 for the year ending September 30, 2015 and 2014. As of September 30, 2015, the
remaining prepaid interest balance was $782



On June 21, 2015, the Note became convertible at the option of the holder.
On this date the Company recorded a debt discount in the amount of $70,000 in connection with the initial valuation of the derivative
liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further,
the Company recognized a derivative liability of $104,711 and initial loss of $34,711 based on the Black Scholes Merton pricing
model.



As of December 31, 2015, $70,000 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 was $190,068 and $116,694
resulting in a loss on the change in fair value of the derivative of $73,374. The Note is shown net of a derivative discount of
$0 at December 31, 2015.



On January 13, 2015, the Company issued a short-term convertible promissory
note in the amount of $74,000. The note is due on October 15, 2015 and bears interest at 8% per annum. The loan is secured by
shares of the Company’s common stock. The loan becomes convertible 180 days after date of the note. The loan and any accrued
interest can then be converted into shares of the Company’s common stock at a rate of 58% multiplied by the market price,
which is the average of the lowest three quoted prices for the common stock during the 10 trading day period ending on the latest
complete trading day prior to the conversion date.



On July 12, 2015, the Note became convertible at the option of the holder.
On this date the Company recorded a debt discount in the amount of $74,000 in connection with the initial valuation of the derivative
liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further,
the Company recognized a derivative liability of $59,654 based on the Black Scholes Merton pricing model.



As of September 30, 2015, the holder of the note exercised
his right to convert $76,960 of the note balance and accrued interest into 15,175,261 shares of common stock. The fair value of
the derivative liability related to the converted debt at the date of conversion was $124,660.



On January 26, 2015, the Company
issued a convertible promissory note in which the Company will be taking tranche payments based on amounts determined by the note
holder for total payments of not more than $250,000. There is an original discount component of $25,000. Therefore, the funds
available to the Company will be $225,000 and the liability (net of interest) will be $250,000 when all disbursements have been
received by the Company. Each tranche is accounted for separately with each principal and OID balance becoming due 24 months after
receipt. Each tranche bears interest at 12% per annum. The loan is secured by shares of the Company’s common stock. Each
portion of the loan becomes convertible immediately upon issuance. The loan and any accrued interest can then be converted into
shares of the Company’s common stock at a rate of the lesser of $0.045 per share or 60% multiplied by the market price per
share, which is the lowest quoted



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price for the common stock during the 25 trading day period ending on the latest complete trading
day prior to the conversion date.During the period ended June 30, 2015, the Company has
received two tranche disbursements of $75,000 on January 26, 2015 and 25,000 on April 28, 2015.



As of December 31, 2015, $38,679 of the debt discount
has been amortized. The Notes are shown net of an unamortized debt discount of $51,431 at December 31, 2015.



On January 26, 2015, the first tranche became convertible
at the option of the holder. On this date the Company recorded a debt discount in the amount of $82,500 in connection with the
initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion
over the term of the note. Further, the Company recognized a derivative liability of $135,740 and initial loss on derivative liabilities
of $53,240 based on the Black Scholes Merton pricing model.



As of December 31, 2015, the holder of the note exercised
his right to convert $57,975 of the note balance into 59,183,000 shares of common stock. The fair value of the derivative liability
related to the converted debt at December 31, 2015 was $151,708.





As of December 31, 2015, $30,177 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 was $93,235 and $152,892
resulting in a loss on the change in fair value of the derivative of $76,083. The Note is shown net of a derivative discount of
$34,806 at December 31, 2015.



On April 28, 2015, the second tranche became convertible at the option of the holder.
On this date the Company recorded a debt discount in the amount of $27,500 in connection with the initial valuation of the derivative
liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further,
the Company recognized a derivative liability of $44,209 and initial loss on derivative liabilities of $16,709 based on the Black
Scholes Merton pricing model.



As of December 31, 2015, $8,502 of the debt discount has been amortized. The fair value
of the derivative liability at December 31, 2015 and June 30, 2015 was $106,534 and $54,756, respectively resulting in a loss on
the change in fair value of the derivative of $41,778. The Note is shown net of a debt discount of $16,625 at December 31, 2015.



On April 15, 2015, the Company issued a short-term
convertible promissory note in the amount of $70,000 for $50,000 cash, an original issue discount of $9,500, and prepaid interest
of $10,500. The note is due on April 15, 2016 and bears interest at 15% per annum, which was prepaid by the Company and is being
amortized over the life of the loan. The loan is secured by shares of the Company’s common stock. The loan becomes convertible
180 days after date of the note. The loan and any accrued interest can then be converted into shares of the Company’s common
stock at a rate of 50% multiplied by the market price, which is the lowest quoted price for the common stock during the 25 trading
day period ending on the latest complete trading day prior to the conversion date. As of the quarter ended September 30, 2015,
$4,361 of the debt discount has been amortized and the note is shown net $5,139 in unamortized debt discount.





On October 12, 2015, the Note became convertible at the option of the holder.
On this date the Company recorded a debt discount in the amount of $60,500 in connection with the initial valuation of the derivative
liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further,
the Company recognized a derivative liability of $248,055 and an initial loss on derivative liabilities of $187,555 based on the
Black Scholes Merton pricing model.



As of December 31, 2015, $26,022 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 was $286,113 and $0, respectively
resulting in a loss on the change in fair value of the derivative of $98,558. The Note is shown net of a debt discount of $34,478
at December 31, 2015.



On May 20, 2015, the Company
issued a convertible promissory note in the amount of $43,000 for $43,000 cash. The note is due on February 22, 2016 and bears
interest at 8% per annum. The loan becomes convertible 180 days after date of the note. The loan can then be converted into shares
of the Company’s common stock at a rate of 58% multiplied by the market price, which
is the average of the lowest three (3) quoted price for the common stock during the 10 trading day period ending on the latest
complete trading day prior to the conversion date. As of September 30, 2015, the note has not become convertible.



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On November 16, 2015, the Note became convertible at the option of the holder.
On this date the Company recorded a debt discount in the amount of $43,000 in connection with the initial valuation of the derivative
liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further,
the Company recognized a derivative liability of $52,875 and an initial loss on derivative liabilities of $9,875 based on the
Black Scholes Merton pricing model.



As of December 31, 2015, the holder of the note exercised
his right to convert $5,625 of the note balance into 17,045,455 shares of common stock. The fair value of the derivative liability
related to the converted debt as of December 31, 2015 was $8,910.



As of December 31, 2015, $19,745 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 was $144,435 and $0, respectively
resulting in a loss on the change in fair value of the derivative of $91,560. The Note is shown net of a debt discount of 23,255
at December 31, 2015.



On June 7, 2015, the Company
issued a short-term convertible promissory note in the amount of $70,000 for $50,000 cash, an original issue discount of $9,500,
and prepaid interest of $10,500. The note is due on June 8, 2016 and bears interest at 15% per annum, which was prepaid by the
Company and is being amortized over the life of the loan. The loan is secured by shares of the Company’s common stock. The
loan becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted into shares
of the Company’s common stock at a rate of 50% multiplied by the market price, which
is the lowest quoted price for the common stock during the 25 trading day period ending on the latest complete trading day prior
to the conversion date. As of December 31, 2015, $5,358 of the debt discount has been amortized and the note is shown net $4,142
in unamortized debt discount.



On December 4, 2015, the Note became convertible at the option of the holder.
On this date the Company recorded a debt discount in the amount of $60,500 in connection with the initial valuation of the derivative
liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further,
the Company recognized a derivative liability of $121.252 and an initial loss on derivative liabilities of $60,752 based on the
Black Scholes Merton pricing model.



As of December 31, 2015, $8,735 of the debt discount has
been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 was $305,445 and $0, respectively
resulting in a loss on the change in fair value of the derivative of $184,193. The Note is shown net of a debt discount of 51,765
at December 31, 2015.



On June 19, 2015, the Company
issued a short-term convertible promissory note in the amount of $37,500 for $25,000 cash, an original issue discount of $6,875,
and prepaid interest of $5,625. The note is due on June 19, 2016 and bears interest at 15% per annum, which was prepaid by the
Company and is being amortized over the life of the loan. The loan is secured by shares of the Company’s common stock. The
loan becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted into shares
of the Company’s common stock at a rate of 50% multiplied by the market price, which
is the lowest quoted price for the common stock during the 25 trading day period ending on the latest complete trading day prior
to the conversion date. As of December 31, 2015, $3,663 of the debt discount has been amortized and the note is shown net $3,212
in unamortized debt discount.



On December 16, 2015, the Note became convertible at the option of the holder.
On this date the Company recorded a debt discount in the amount of $30,625 in connection with the initial valuation of the derivative
liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further,
the Company recognized a derivative liability of $122,955 and an initial loss on derivative liabilities of $92,330 based on the
Black Scholes Merton pricing model.



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As of December 31, 2015, $2,470 of the debt discount has
been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 was $166,587 and $0, respectively
resulting in a loss on the change in fair value of the derivative of $43,632. The Note is shown net of a debt discount of 28,155
at December 31, 2015.



On June 28, 2015, the Company
issued a convertible promissory note in the amount of $150,000 for $100,000 cash, an original issue discount of $50,000. The note
is due on December 28, 2016 and bears interest at 15% per annum. The loan becomes convertible 180 days after date of the note.
The loan can then be converted into shares of the Company’s common stock at a rate
of 50% multiplied by the market price, which is the lowest quoted price for the common stock during the 25 trading day period
ending on the latest complete trading day to the conversion date. As of December 31, 2015, $16,940 of the debt discount has been
amortized and the note is shown net $33,060 in unamortized debt discount.



On December 25, 2015, the Note became convertible at the option of the holder.
On this date the Company recorded a debt discount in the amount of $100,000 in connection with the initial valuation of the derivative
liability of the note to be amortized utilizing the effective interest method of accretion over the term of the note. Further,
the Company recognized a derivative liability of $624,135 and an initial loss on derivative liabilities of $524,135 based on the
Black Scholes Merton pricing model.



As of December 31, 2015, $1,626 of the debt discount has
been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 was $685,878 and $0, respectively
resulting in a loss on the change in fair value of the derivative of $61,743. The Note is shown net of a debt discount of $98,374
at December 31, 2015.



On June 29, 2015, the Company issued a convertible
promissory note in which the Company will be taking tranche payments based on amounts determined by the note holder for total
payments of not more than $100,000. There is an original discount component of $10,000. Therefore, the funds available to the
Company will be $90,000 and the liability (net of interest) will be $100,000 when all disbursements have been received by the
Company. Each tranche is accounted for separately with each principal and OID balance becoming due 24 months after receipt. Each
tranche bears interest at 15% per annum. Each portion of the loan becomes convertible immediately upon issuance. The loan and
any accrued interest can then be converted into shares of the Company’s common stock at a rate of the lesser of $0.02 per
share or 50% multiplied by the market price per share, which is the lowest quoted price for the common stock during the 25 trading
days immediately preceding the conversion date.During the period ended June 30, 2015, the
Company has received one tranche disbursements of $30,000 on June 29, 2015.



As of December 31, 2015, $760 of the debt discount has
been amortized. The Note is shown net of an unamortized debt discount of $2,240 at December 31, 2015.



On June 29, 2015, the first trance became convertible
at the option of the holder. On this date the Company recorded a debt discount in the amount of $33,000 in connection with the
initial valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion
over the term of the note. Further, the Company recognized a derivative liability of $67,818 and initial loss on derivative liabilities
of $34,818 based on the Black Scholes Merton pricing model.



As of December 31, 2015, $8,340 of the debt discount has
been amortized. The fair value of the derivative liability at December 31, 2015 and June 30, 2015 is $154,753 and $79,497, respectively
resulting in a loss on the change in fair value of the derivative of $75,256 The Note is shown net of a derivative debt discount
of $24,615 at December 31, 2015.



On July 7, 2015, the Company
issued a convertible promissory note in the amount of $40,000 for $38,000 cash. The note is due on June 30, 2016 and bears interest
at 8% per annum. The loan is secured by shares of the Company’s common stock. The loan becomes convertible as of the date
of the note. The loan and any accrued interest can then be converted into shares of the Company’s common
stock at a rate of 60% multiplied by the market price, which is the lowest quoted price for the common stock during the 25 trading
day period ending on the latest complete trading day prior to the conversion date. During the six months ended December 31, 2015,
$986 of the debt discount has been amortized. The Note is shown net of an unamortized debt discount of $1,014 at December 31,
2015.



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On July 7, 2015, the note became convertible at the option
of the holder. On this date the Company recorded a debt discount in the amount of $40,000 in connection with the initial valuation
of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of
the note. Further, the Company recognized a derivative liability of $60,307 and initial loss on derivative liabilities of $20,307
based on the Black Scholes Merton pricing model.



As of December 31, 2015, $19,721 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015, was $121,109 resulting in a loss on the change
in fair value of the derivative of $60,802. The Note is shown net of a derivative discount of $20,279 at December 31, 2015.



On July 24, 2015, the Company
issued a convertible promissory note in the amount of $56,250 for $50,000 cash. The note is due on April 24, 2016 and bears interest
at 10% per annum, which was prepaid by the Company and is being amortized over the life of the loan. The loan is secured by shares
of the Company’s common stock. The loan becomes convertible as of the date of the note. The loan and any accrued interest
can then be converted into shares of the Company’s common stock at a rate of 50% multiplied
by the market price, which is the lowest quoted price for the common stock during the 20 trading day period ending on the latest
complete trading day prior to the conversion date. The Note is shown net of an unamortized debt discount of $4,705at September
30, 2015.



On July 24, 2015, the note became convertible at the option
of the holder. On this date the Company recorded a debt discount in the amount of $56,250 in connection with the initial valuation
of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the term of
the note. Further, the Company recognized a derivative liability of $101,339 and initial loss on derivative liabilities of $45,089
based on the Black Scholes Merton pricing model.



As of December 31, 2015, $32,727 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015, was $235,493 resulting in a loss on the change
in fair value of the derivative of $134,154. The Note is shown net of a derivative discount of $23,523 at December 31, 2015.



On August 3, 2015, the Company
issued a convertible promissory note in the amount of $75,000 for $50,000 cash, an original issue discount of $13,750 and prepaid
interest of $11,250. The note is due on January 29, 2016 and bears interest at 15% per annum, which was prepaid by the Company
and is being amortized over the life of the loan. The loan is secured by shares of the Company’s common stock. The loan
becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted into shares of the
Company’s common stock at a rate of 50% multiplied by the market price, which is the
lowest quoted price for the common stock during the 25 trading day period ending on the latest complete trading day prior to the
conversion date. During the six months ended December 31, 2015, $13,750 of the debt discount has been amortized. The Note is shown
net of an unamortized debt discount of $0 at December 31, 2015. As of December 31, 2015, the note has not become convertible.



On August 5, 2015, the Company
issued a convertible promissory note in the amount of $37,500 for $25,000 cash, an original issue discount of $6,875 and prepaid
interest of $5,625. The note is due on January 29, 2017 and bears interest at 15% per annum, which was prepaid by the Company
and is being amortized over the life of the loan. The loan is secured by shares of the Company’s common stock. The loan
becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted into shares of the
Company’s common stock at a rate of 50% multiplied by the market price, which is the
lowest quoted price for the common stock during the 25 trading day period ending on the latest complete trading day prior to the
conversion date. During the six months ended December 31, 2015, $1,874 of the debt discount has been amortized. The Note is shown
net of an unamortized debt discount of $5,001 at December 31, 2015. As of December 31, 2015, the note has not become convertible.



On August 12, 2015, the Company
issued a convertible promissory note in the amount of $50,000 for $44,000 cash, an original issue discount of $6,000. The note
is due on February 12, 2016 and bears interest at 12% per annum, which was prepaid by the Company and is being amortized over
the life of the loan. The loan is secured by shares of the Company’s common stock. The loan becomes convertible as of the
date of the note. The loan and any accrued interest can then be converted into shares of



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the Company’s common
stock at a rate of 50% multiplied by the market price, which is the lesser of lowest quoted price for the common stock during
the previous 20 trading day period ending on the conversion date and the lowest trading price on the 30th trading day
after the funding of the note. During the six months ended December 31, 2015, $4,598 of the debt discount has been amortized.
The Note is shown net of an unamortized debt discount of $1,402 at December 31, 2015.



On August 12, 2015, the note became convertible at the
option of the holder. On this date the Company recorded a debt discount in the amount of $50,000 in connection with the initial
valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the
term of the note. Further, the Company recognized a derivative liability of $358,250 and initial loss on derivative liabilities
of $308,250 based on the Black Scholes Merton pricing model.



As of December 31, 2015, $38,315 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015 was $153,697 resulting in a gain on the change
in fair value of the derivative of $204,553. The Note is shown net of a derivative discount of $11,685 at December 31, 2015.



On August 12, 2015, the Company
issued a convertible promissory note in the amount of $115,000 for $115,000 cash. The note is due on August 12, 2016 and bears
interest at 12% per annum, which was prepaid by the Company and is being amortized over the life of the loan. The loan is secured
by shares of the Company’s common stock. The loan becomes convertible as of the date of the note. The loan and any accrued
interest can then be converted into shares of the Company’s common stock at a rate
of 50% multiplied by the market price, which is the lesser of lowest quoted price for the common stock during the previous 20
trading day period ending on the conversion date and the lowest trading price on the 30th trading day after the funding
of the note.



On August 12, 2015, the note became convertible at the
option of the holder. On this date the Company recorded a debt discount in the amount of $115,000 in connection with the initial
valuation of the derivative liability of the note to be amortized utilizing the effective interest method of accretion over the
term of the note. Further, the Company recognized a derivative liability of $215,932 and initial loss on derivative liabilities
of $100,932 based on the Black Scholes Merton pricing model.



As of December 31, 2015, the holder of the note exercised
his right to convert $23,334 of the note balance into 41,816,074 shares of common stock, respectively. The fair value of the derivative
liability related to the converted debt as of December 31, 2015 was $69,667.



As of December 31, 2015, $44,425 of the debt discount
has been amortized. The fair value of the derivative liability at December 31, 2015 was $54,786 resulting in a gain on the change
in fair value of the derivative of $161,146. The Note is shown net of a derivative discount of $70,575 at December 31, 2015.



On September 8, 2015, the Company
issued a short-term convertible promissory note in the amount of $70,000 for $50,000 cash, an original issue discount of $9,500,
and prepaid interest of $10,500. The note is due on September 9, 2016 and bears interest at 15% per annum, which was prepaid by
the Company and is being amortized over the life of the loan. The loan is secured by shares of the Company’s common stock.
The loan becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted into shares
of the Company’s common stock at a rate of 50% multiplied by the market price, which
is the lowest quoted price for the common stock during the 25 trading day period ending on the latest complete trading day prior
to the conversion date. During the year ended December 31, 2015, $2,951 of the debt discount has been amortized and the note is
shown net $6,549 in unamortized debt discount. As of December 31, 2015, the note has not become convertible.



On October 29, 2015, the Company
issued a convertible promissory note in the amount of $37,500 for $25,000 cash, an original issue discount of $7,500 and prepaid
interest of $2,500. The note is due on October 28, 2016 and bears interest at 15% per annum, which was prepaid by the Company
and is being amortized over the life of the loan. The loan is secured by shares of the Company’s common stock. The loan
becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted into shares of the
Company’s common stock at a rate of 50% multiplied by the market price, which is the
lowest quoted price for the common stock during the 25 trading day period ending on the latest complete trading day prior to the
conversion date. During the three months ended December 31, 2015, $1,295 of the debt discount has been amortized. The Note is
shown net of an unamortized debt discount of $6,205 at December 31, 2015. As of December 31, 2015, the note has not become convertible.



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On November 25, 2015, the Company
issued two short-term convertible promissory note in the amount of $300,000 for $200,000 cash, an original issue discount of $75,000,
and prepaid interest of $25,000. The notes are due on May 22, 2016 and bears interest at 15% per annum, which was prepaid by the
Company and is being amortized over the life of the loan. The loan is secured by shares of the Company’s common stock. The
loan becomes convertible 180 days after date of the note. The loan and any accrued interest can then be converted into shares
of the Company’s common stock at a rate of 50% multiplied by the market price, which
is the lowest quoted price for the common stock during the 25 trading day period ending on the latest complete trading day prior
to the conversion date. During the six months ended December 31, 2015, $15,084 of the debt discount has been amortized and the
note is shown net $59,916 in unamortized debt discount. As of December 31, 2015, the note has not become convertible.



Derivative liability for these notes were valued under
the Black-Scholes model, with the following assumptions:



|Fair value assumptions – derivative notes: |  | December 31, 2015
|------------------------------------------ |  | -----------------
|Risk free interest rate                    |  |                  
|Expected term (years)                      |  |                  
|Expected volatility                        |  |                  
|Expected dividends                         |  |                  
|                                           |  |                  
|Fair value assumptions – derivative notes: |  | June 30, 2015    
|Risk free interest rate                    |  |                  
|Expected term (years)                      |  |                  
|Expected volatility                        |  |                  
|Expected dividends                         |  |                  





As of December 31, 2015, the company had the below commitments
related to its outstanding convertible notes payable.



|Commitments:                      |  | Amount |          
|--------------------------------- |  | ------ | ---------
|Within one year                   |  | $      | 1,694,127
|After one year and within 5 years |  |        | 0        
|Total                             |  | $      | 1,694,127



NOTE 8 – COMMON STOCK



On August 24, 2015, the Company filed with the Secretary
of State of the State of Delaware a Certificate of Designations of Rights, Preferences, Privileges and Restrictions of Series
A Convertible Preferred Stock.



Under the terms of the Certificate of Designation, 24,000,000
shares of the Company’s preferred stock will be designated as Series A Convertible Preferred. Each share of the Series A
Convertible Preferred shall be convertible into five (5) shares of Common Stock without the payment of additional consideration
by the holder thereof, subject to certain terms, conditions and adjustments as described in the Certificate of Designation. The
holders of Series A Convertible Preferred shall be entitled to receive any dividends before the holders of the Common Stock, in
an amount at least equal to the product of (x) the dividend payable on each share of Common Stock and (y) the number of shares
of Common Stock issuable upon conversion of a share of Series A Convertible Preferred, in each case calculated on the record date
for determination of holders entitled to receive such dividend. Each holder of outstanding Series A Convertible Preferred shall
be entitled to vote with the holders of the Common Stock, as a single class, on all matters presented to the holders of Common
Stock an as-converted basis calculated as of the record date for such vote.





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On August 25, 2015, the Company entered into an exchange
agreement with its majority shareholder, Nanobeak, LLC, pursuant to which Nanobeak exchanged 117,366,840 shares of the Company’s
common stock in exchange for 23,473,368 shares of the Company’s Series A Convertible Preferred Stock.



During the six months ended December 31, 2015, the Company
issued 255,152,377 shares of common stock valued at $294,898 for the conversion of notes payable.



During the six months ended December 31, 2015, the Company
issued 4,000,000 shares of common stock valued at $9,600 for services.



NOTE 9 – STOCK WARRANTS



On December 16, 2013, the Board of Directors of the Company
approved the election of William S. Rees, Jr. to serve as a member of the Board effective December 16, 2014. Mr. Rees has not
yet been appointed to serve on any committee of the Board. There are no arrangements or understandings between Mr. Rees and any
other person pursuant to which Mr. Rees was appointed as a director. The Company entered into an agreement with Mr. Rees pursuant
to which it agreed to issue to him, in consideration of his services, a warrant to purchase up to 2,000,000 shares of the Company’s
common stock for a period of five years at an exercise price of $0.05 per share. The Company determined the fair value of the
warrants to be $99,764 using the Black Scholes Valuation Model. As of June 30, 2014 the warrants were fully vested and the Company
recorded $99,764 as stock-based compensation expense.



On December 31, 2013, we issued to Accent Healthcare Advisors,
LLC, a California limited liability company, as compensation for their past and future advisory services for the next several
years in the bio-pharmaceutical and healthcare industries, a warrant to purchase up to 25,000,000 shares of the Company’s
common stock, par value $.01 per share, for a period of seven years at an exercise price of $0.049 per share. The warrants issued
vest immediately. The exercise price was calculated based on the prior ten days average closing price per share. The holder may
not exercise the Warrant such that the number of shares of common stock beneficially owned by the holder and its affiliates exceeds
4.9% of the total outstanding shares of common stock of the Company. The fair value of the warrants using the Black Scholes valuation
model was determined to be $2,994,407. The exercise price and number of Warrant Shares are subject to adjustment upon the subdivision
or combination of the Company’s common stock. Further, upon the consolidation, merger or sale of the Company, the holder
is entitled to receive, at the Company’s discretion, either (a) if the Warrant is exercised, the consideration payable with
respect to or in exchange for those Warrant Shares that would have been received if no consolidation, merger or sale had taken
place or (b) cash equal to the value of the Warrant as determined in accordance with the Black-Scholes option pricing formula.
As of June 30, 2014 the stock-based compensation expense related to this issuance was $2,994,407.



On November 27, 2013, the Company issued 3,875,000 warrants
for the Company’s common stock as stock based compensation for a three year period, par value $.01 per share, at an exercise
price per share equal to $0.05. The warrants issued vest immediately. The warrants are exercisable any time after November 27,
2013 for a period of five years from date of issuance. The fair value of the warrants using the Black Scholes Valuation Model
was $204,904. As of June 30, 2014 the stock-based compensation expense related to this issuance was 204,904.



On December 10, 2013, the Company issued 5,000,000 warrants
for the Company’s common stock as stock based compensation for a three year period, par value $.01 per share, at an exercise
price per share equal to the closing price on December 10, 2013 of $0.0478. The warrants are exercisable any time after December
10, 2013 for a period of seven years from date of issuance. The fair value of the warrants using the Black Scholes Valuation Model
was $238,925. As of June 30, 2014 the stock-based compensation expense related to this issuance was $238,925.



On July 1, 2014 the Company granted stock warrants for
200,000 shares of common stock for services, which vested immediately. These warrants had an expiration date of July 1, 2019,
and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.29/share, the exercise price
is $0.12495/share, the value of the issuance is $58,000.



On January 15, 2015, the Company granted stock warrants
for 8,000,000 shares of common stock for services, which vested immediately. These warrants had an expiration date of January
15, 2020, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.0332/share, the exercise
price is $0.05/share, the value of the issuance was $263,669.





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During the quarter ended December 31, 2015 and 2014, the
Company issued 796,875,000 and 291,494 warrants, respectively for shares of common stock to lenders in connection with loans received
by the Company. The warrants have anti-dilution provisions, including a provision for adjustments to the exercise price and to
the number of warrant shares purchasable if we issue or sell common shares at a price less than the then current exercise price.
We determined that the warrants were not afforded equity classification because the warrants are not considered to be indexed
to our own stock due to the anti-dilution provision. Accordingly, the warrants are treated as a derivative liability and are carried
at fair value. We estimate the fair value of these derivative warrants at each balance sheet date and the changes in fair value
are recognized in earnings in the statement of operations until such time as the derivative warrants are exercised or expire.



On April 17, 2014 the Company
granted stock warrants for 1,185,192 shares of common stock in association with a long-term loan at no cost to the lender. These
warrants had an expiration date of April 17, 2019, and were valued using the Black Scholes Valuation Model, the stock price at
the grant date was $0.09/share, the exercise price is $0.0701/share, the value of the issuance is $106,426.



On May 5, 2014 the Company granted stock warrants for
705,229 shares of common stock in association with a long-term loan at no cost to the lender. These warrants had an expiration
date of May 5, 2019, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.09/share,
the exercise price is $0.0589/share, the value of the issuance is $63,468.



On June 11, 2014 the Company granted stock warrants for
553,840 shares of common stock in association with a long-term loan at no cost to the lender. These warrants had an expiration
date of June 11, 2019, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.1284/share,
the exercise price is $0.0750/share, the value of the issuance is $71,110.



On July 15, 2014 the Company granted stock warrants for
291,494 shares of common stock in association with a long-term loan at no cost to the lender. These warrants have an expiration
date of July 15, 2019, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.24/share,
the exercise price is $0.0143/share, the value of the issuance is $69,956.



On October 1, 2014 the Company granted stock warrants
for 320,122 shares of common stock in association with a short-term loan at no cost to the lender. These warrants have a term
of five years, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.164/share, the
exercise price is $0.123/share, the value of the issuance is $52,498.



On November 17, 2014 the Company granted stock warrants
for 807,692 shares of common stock in association with a long-term loan at no cost to the lender. These warrants have a term of
five years, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.065/share, the exercise
price is $0.049/share, the value of the issuance is $52,498.



On December 23, 2014 the Company granted stock warrants
for 1,158,940 shares of common stock in association with a long-term loan at no cost to the lender. These warrants have a term
of five years, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.045/share, the
exercise price is $0.034/share, the value of the issuance is $52,152.



On April 15, 2015 the Company granted stock warrants for
2,560,976 shares of common stock in association with a short-term loan at no cost to the lender. These warrants have a term of
five years, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.0443/share, the
exercise price is $0.017/share, the value of the issuance is $113,438.





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On June 7, 2015 the Company granted stock warrants for
4,375,000 shares of common stock in association with a short-term loan at no cost to the lender. These warrants have a term of
five years, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.024/share, the exercise
price is $0.009/share, the value of the issuance is $104,985.



On June 19, 2015 the Company granted stock warrants for
2,556,818 shares of common stock in association with a short-term loan at no cost to the lender. These warrants have a term of
five years, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.025/share, the exercise
price is $0.009/share, the value of the issuance is $63,911.



On June 28, 2015 the Company granted stock warrants for
11,842,105 shares of common stock in association with a long-term loan at no cost to the lender. These warrants have a term of
five years, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.021/share, the exercise
price is $0.008/share, the value of the issuance is $278,251.



On September 8, 2015 the Company granted stock warrants
for 35,000,000 shares of common stock in association with a short-term loan at no cost to the lender. These warrants have a term
of five years, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.0034/share, the
exercise price is $0.001/share, the value of the issuance is $118,985.



On November 23, 2015 the Company granted stock warrants
for 750,000,000 shares of common stock in association with a short-term loan at no cost to the lender. These warrants have a term
of five years, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.0012/share, the
exercise price is $0.0045/share, the value of the issuance is $524,937.



On October 29, 2015 the Company granted stock warrants
for 46,875,000 shares of common stock in association with a short-term loan at no cost to the lender. These warrants have a term
of five years, and were valued using the Black Scholes Valuation Model, the stock price at the grant date was $0.0012/share, the
exercise price is $0.0045/share, the value of the issuance is $60,930.



We issued warrants to purchase 38,874,998 shares of common
stock to non-employees during the year ended June 30, 2014, during such time the warrants were accounted for as equity. During
the year end June 30, 2015, the Company issued convertible notes payable that provide for the issuance of shares of common stock
that became convertible. The conversion term for the convertible notes are variable based on certain factors. As of September
30, 2015, the number of shares to be issued under the notes are indeterminate. Due to the fact that the number of shares issuable
are indeterminate, the equity environment is tainted and the warrants are included in the value of the derivative. On the date
the equity environment became tainted, the Company recorded a reduction to additional paid in capital in the amount of $6,157,610
in connection with the initial valuation of the derivative liability of the warrants based on the Black Scholes Merton pricing
model. The derivative liability related to these warrants was $45,780 and $913,168 as of December 31, 2015 and June 30, 2015,
respectively. During the six months ended December 31, 2015 and 2014, the Company recorded a gain of $858,818 and $0, respectively,
related to the change in fair value on the warrants.



In total the derivative liability related to the warrants
as of December 31, 2015 and June 30, 2015 was $1,075,446 and $1,270,470, respectively and the Company recorded a gain in the
change in fair value due to derivative warrant liability of $195,024 and $237,469 during the six months ended December 31, 2015
and 2014, respectively. The Company as recorded debt discount associated with the warrants in the amount of $275,000 and an initial
loss of $429,852. As of December 31, 2015, $61,611 of the debt discount has been amortized. The associated notes are shown net
of the $213,389 discount





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|Fair value
    assumptions – derivative warrants: |  | Grant
    Date |            
|------------------------------------------------- |  | -------------- | -----------
|Risk free interest rate                           |  |                | 1.59%- 1.88
|Expected term (years)                             |  |                | 5-7        
|Expected volatility                               |  |                | 206-362    
|Expected dividends                                |  |                | 0          



|Fair value assumptions –
    derivative warrants: |  | June 30, 2015 |       
|------------------------------------------------- |  | ------------- | ------
|Risk free interest rate                           |  |               | 1.63  
|Expected term (years)                             |  |               | 5-7   
|Expected volatility                               |  |               | 206.48
|Expected dividends                                |  |               | 0     



|Fair value assumptions –
    derivative warrants: |  | December 31 2015 |       
|------------------------------------------------- |  | ---------------- | ------
|Risk free interest rate                           |  |                  | 1.76  
|Expected term (years)                             |  |                  | 3-7   
|Expected volatility                               |  |                  | 303.02
|Expected dividends                                |  |                  | 0     





NOTE 10 – COMMITMENTS



On January 1, 2014, the Company entered into a Sub-License
Agreement affiliated with the National Aeronautics and Space Administration (“NASA”) pursuant to which the Company
was granted a royalty-bearing, non-transferable license to certain inventions and patent rights owned by NASA relating to chemical
sensing nanotechnology, for use within the United States and its territories. The License is effective as of December 31, 2013
and subject to an initial five year term, during which the License will be exclusive to the Company. Following the initial five-year
term, the License shall automatically convert to a non-exclusive license. The License may be terminated by NASA following a 30
day cure period, among other reasons, upon a breach of the License Agreement or upon its determination that the Company has failed
to adequately develop or commercialize the licensed patents. Specific milestones and commercialization requirements are set forth
in the License Agreement. NASA provides no warranties under the License Agreement and assumes no responsibility for our use, sale
or other disposition of the licensed technology. We agree to indemnify NASA against all liabilities arising from such use, sale
or other disposition. We must pay certain royalties in connection with the License as set forth in the License Agreement.



During the three and six months ended December 31, 2015
and 2014, the Company expensed $332,556 and $612,931 and 294,116 and $580,701, respectfully.



In relation to a sub-licensing agreement with NASA, a
shareholder has paid royalty fees applicable to 2014 on behalf of the Company. The $100,000 payment was an additional investment
in the Company and is not required to be repaid. During the three months ending December 31, 2015 and 2014, $0 and $25,000 of
the royalties were recognized as an expense.



NOTE 11 – SUBSEQUENT EVENTS



On June 29, 2015, the Company
issued a convertible promissory note in which the Company will be taking tranche payments based on amounts determined by the note
holder for total payments of not more than $100,000. There is an original discount component of $10,000. Therefore, the funds
available to the Company will be $90,000 and the liability (net of interest) will be $100,000 when all disbursements have been
received by the Company. Each tranche is accounted for separately with each principal and OID balance becoming due 24 months after
receipt. Each tranche bears interest at 15% per annum. Each portion of the loan becomes convertible immediately upon issuance.
The loan and any accrued interest can then be converted into shares of the Company’s common stock at a rate of the lesser
of $0.02 per share or 50% multiplied by the market price per share, which is the lowest quoted price for the common stock during
the 25 trading days immediately preceding the conversion date.During the period ended June
30, 2015, the Company has received one tranche disbursements of $30,000 on June 29, 2015. Subsequent to year end the Company issued
25,000,000 shares of common stock for the conversion of $4,375 of the note payable.



On July 20, 2015, the Company
entered into a settlement agreement with the holder of the convertible note. Under the agreement the note holder agreed to not
to seek to enforce its rights or remedies under the Note in relation to the notice of conversion issued to convert a balance of
the note amounting to $57,933; to not to exercise its rights of conversion pursuant to the Note, and if an event of default occurs,
the Holder agrees not to sell any shares of common stock of the Company having an aggregate conversion value of $30,000 or more
per week until such time as it has sold all of the Company’s common stock that it owns. Under the agreement the Company
agreed to a penalty in relation to the issuance of a note in the amount of $95,000. Subsequent to quarter end, the Company issued
16,000,000 shares for the conversion of $4,800 of the note payable.



On July 24, 2015, the Company
issued a convertible promissory note in the amount of $56,250 for $50,000 cash. The note is due on April 24, 2016 and bears interest
at 10% per annum, which was prepaid by the Company and is being amortized over the life of the loan. The loan is secured by shares
of the Company’s common stock. The loan becomes convertible as of the date of the note. The loan and any accrued interest
can then be converted into shares of the Company’s common stock at a rate of 50% multiplied
by the market price, which is the lowest quoted price for the common stock during the 20 trading day period ending on the latest
complete trading day prior to the conversion date.Subsequent to quarter end, the Company
issued 24,456,522 shares for the conversion of $1,774 of the note payable.



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



Forward-Looking
Statements



Certain statements,
other than purely historical information, including estimates, projections, statements relating to our business plans, objectives,
and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements.”
These forward-looking statements generally are identified by the words “believes,” “project,” “expects,”
“anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,”
“will,” “would,” “will be,” “will continue,” “will likely result,”
and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks
and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict
results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse
affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions,
legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles.
These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not
be placed on such statements.



Overview



We were incorporated
in the State of Nevada on April 21, 2010. We were initially in the business of becoming a pharmaceutical manufacturer with the
specific intention of bidding on South African government health care contracts and tenders. We abandoned that business plan when,
on November 7, 2013, Nanobeak, LLC, a Delaware limited liability company (formerly Nanobeak, Inc., a California corporation) (“Nanobeak”)
acquired a majority interest in our company through the stock purchase of a controlling interest in our company from Bayview Terrace
Limited.



Since the change
of control, we have implemented a new business plan. On January 1, 2014, Nanobeak entered into a License Agreement (the “License
Agreement”) with the National Aeronautics and Space Administration (“NASA”) pursuant to which Nanobeak was granted
a royalty-bearing, non-transferable license (the “License”) to certain inventions and patent rights owned by NASA
relating to chemical sensing nanotechnology, for use within the United States and its territories.



The License
is effective as of December 31, 2013 and subject to an initial five year term, during which the License will be exclusive to Nanobeak.
Following the initial five-year term, the License shall automatically convert to a non-exclusive license. Under the License, Nanobeak
is required to develop and commercialize the licensed patents. NASA provided no warranties under the License Agreement and assumed
no responsibility for our use, sale or other disposition of the licensed technology. Nanobeak has agreed to indemnify NASA against
all liabilities arising from such use, sale or other disposition.



Pursuant to
Section 3.1.1 of the License Agreement, Nanobeak is permitted to sublicense its rights under the License Agreement to subcontractors.
Effective as of February 20, 2014, Nanobeak has sublicensed such rights to us as set forth in a Sublicense Agreement.



The Sublicense
Agreement grants patent rights to us on the same terms as such rights have been granted to Nanobeak under the License Agreement;
provided, however, that the field of use for the patent rights granted to us is limited to disease detection.



We must pay
to Nanobeak certain royalties in connection with the Sublicense Agreement, which royalties are equivalent to those owed by Nanobeak
to NASA pursuant to the License Agreement. We must further comply with other obligations of Nanobeak under the License Agreement
as though we were a party thereto, including achievement of practical application of the patent rights and certain reporting obligations.



The Sublicense
Agreement will terminate upon the earlier of (i) termination of the License Agreement or (ii) termination by either party to the
Sublicense Agreement as set forth therein.



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As a result
of the License Agreement and Sublicense Agreement, we are now a mobile health technology company that is developing personalized
and point-of-care screening using applications based upon chemical sensing methods.



We have been
developing a low cost point-of-care screening device that will detect and analyze common components from human breath and provide
an early indication of chronic diseases such as heart failure and various forms of cancer, as well as contagious diseases such
as strep throat. The principles of operation are driven by technology developed by NASA. The sensor can connect via Bluetooth
to any capable smart device running an iOS or Android operating system. Development efforts on the sensor were concluded and the
device is now in a clinical environment. The final development stage for the healthcare sensor will be formal clinical trials
and ultimately to obtain FDA approval.



The current
Breathalyzer has a small footprint and can easily be operated by anyone with minimal instruction. State-of-the art engineering
design techniques, advanced nanotechnology, and bio-informatics have been combined to create the following three main pieces of
the device that is now being used to collect sample data from test patients for certain key biomarkers in a clinical setting:



1. Breath Capture
Device – This component of the device attaches to the sensor module, captures breath from patient’s mouth, pre-filters
the breath, and sends it to the sensor module at a controlled flow rate. Recent design improvements to the Breath Capture Device
include the capability to simultaneously monitor respiratory rate, lung function, heart rate, and core body temperature. Iterations
of the current design, which were optimized, using CAD (computer-aided design) and flow simulation tools, will soon be manufactured
and tested using rapid prototyping techniques (3D printing).



1. Sensor Module
– This component of the device contains an array filled with dozens of micro-fabricated nanomaterial-based chemical sensors,
device hardware, and a battery pack. Each of these individual sensors is coated with specially formulated sensing materials that
will show high sensitivity and specificity towards detecting biomarkers known by medical experts to be associated with particular
diseases. Thus, the device will be used to simultaneously quantify levels of critical biomarkers exhaled by patients, record other
medically relevant patient data (respiratory rate, core body temperature, and heart rate), and document experimentally relevant
conditions (humidity, temperature, and pressure). Patient data collected by the Sensor Module will be sent to an iOS or Android
smart device via Bluetooth, where it is collected, further processed, compared to an existing data library, and analyzed by our
iOS/Android app. Design challenges that previously delayed critical milestones have been solved. Sensor Modules have been delivered
to clinical researchers and preliminary data is being collected and analyzed. This data will be used to calibrate the device and
quantify specific VOC’s known to be associated with the disease conditions that will be targeted first.



1. App/Software
for the Smart Devices – This essential component of the device communicates with smart devices using a proprietary iOS/Android
app, is used to interpret and present the results collected by the Sensor Module, and can easily be updated as the medical team
collects more sample calibration data. It can also be calibrated to detect other diseases when sample data for those are collected.
Each time a test is run on the breath capture device, data received by the app will be seamlessly pre-processed and post-processed
through the algorithm and in nearly real-time a conclusive summary result will be provided on the device and/or sent/shared with
Physicians via phone or Internet connections.



The sensor and
related devices will ultimately be used to demonstrate an integrated approach that can be used to collect data from human breath
and evaluate it for early disease screening purposes, effectively linking experts in the field, data scientists, and decision
makers with results generated in real-time.



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We have entered
into a Strategic Partnership with Scripps Translational Sciences Institute (STSI) to assist in the development, advancement, and
commercialization of the mobile technology. Scripps will also provide the testing, evaluation, and detection of certain combinations
of Volatile Organic Compounds (VOCs) known as the breath signature and will assist in managing our clinical trials in partnership
with several other research hospitals in the United States. These clinical trials will support the 510K that will be submitted
to the FDA. It is expected that the contemplated clinical trials will take approximately four months with another four months
expected for the 510K process within the FDA. We have not yet started the clinical trials. The clinical trials can cost as much
as $5,000,000. We will first have to raise the money to commence the trials.



We have also
entered into a Strategic Partnership with Theranostics Laboratory, a translational research company, with offices in the USA and
New Zealand. Theranostics laboratory was founded at the Cleveland Clinic in 2010 and works on subcontracted research, in collaboration
with the Auckland Bioengineering Institute (ABI), in New Zealand, and with NASA (via NASA Grant NCC 9-58).



The Auckland
Bioengineering Institute is recognized as a world-leader in the field of personalized modeling and is part of the international
Virtual Physiologic Human (VPH) project. The Institute has successfully commercialized numerous mHealth technologies, including
wireless telemetry systems, wearable sensors and a needle-free injectable system into the US market.



The partnership
between the Theranostics laboratory and the Auckland Bioengineering Institute (ABI) is a strategic alliance for us through which
the lab will act as principal investigators for us in the areas of mobile strep detection, mobile virus detection and other related
areas including breath sample conditioning methodologies. The partnership gives us access to world-class expertise and skill in
the field of personalized modeling. It also provides us with cost-efficiencies working across multiple time zones, as well as
insight into the Australasian MedTech market.



We have decided
to work in conjunction with our majority shareholder, Nanobeak and NASA, to develop a mobile app to be used in connection with
our sensor that will enable law enforcement to screen for marijuana use and deliver in-the-moment results to the officer’s
smartphone, tablet or laptop in the field. We will not be distracted from our current efforts and resources in continuing to develop
early lung cancer detection and detection for other diseases. The ability to go-to-market will be much faster than the process
required for obtaining FDA approval for our lung cancer screening technology because the marijuana detection sensor for use by
law enforcement will be exempt from the FDA approval process. With our President’s background and relationships, we believe
we have an advantage when entering the law enforcement market with this product.



Results of
operations for the three months ended December 31, 2015 and 2014



We have earned
no revenues since our inception. We do not expect to earn any revenues until we complete our technology and bring it to market.



Our operating
expenses decreased to $405,186 for the three months ended December 31, 2015, as compared with operating expenses of $552,110 for
the three months ended December 31, 2014. Our operating expenses for the three months ended December 31, 2015 consisted of consulting
expenses of $332,556, general and administrative expenses of $53,439 and professional fees in the amount of $19,191. Our operating
expenses for the three months ended December 31, 2014 consisted of consulting expenses of $294,116, general and administrative
expenses of $159,737, professional fees of $57,320, royalty expense of $25,000 and officer and director compensation of $15,937.



Our operating
expenses decreased to $867,466 for the six months ended December 31, 2015, as compared with operating expenses of $1,239,504 for
the six months ended December 31, 2014. Our operating expenses for the six months ended December 31, 2015 consisted of consulting
expenses of $612,931, general and administrative expenses of $155,692, professional fees in the amount of $62,746 and compensation
to our officers and directors of $36,097. Our operating expenses for the six months ended December 31, 2014 consisted of consulting
expenses of $580,701, general and administrative expenses of $321,845, professional fees of $194,840, royalty expense of $100,000
and compensation to our officers and directors of $42,118.



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We anticipate
our operating expenses will increase as we undertake our plan of operations. The increase will be attributable to administrative
and operating costs associated with developing and commercializing our technology and our continued reporting obligations with
the Securities and Exchange Commission.



We recognized
other expenses of $4,689,746 for the three months ended December 31, 2015, as compared with other expenses of $155,934 for the
three months ended December 31, 2014. Our expenses in 2015 was attributable to a loss in the change in fair value due to derivative
debt and warrant liability of $4,187,019 and by interest expense of $502,727.



We recognized
other expenses of $3,820,204 for the six months ended December 31, 2015, as compared with other expenses of $10,374 for the six
months ended December 31, 2014. Other expenses in 2015 was mainly attributable to a loss in the change in fair value due to derivative
debt and warrant liability of $2,759,830, and by interest expense of $1,060,374.



We incurred
a net loss of $5,094,932 for the three months ended December 31, 2015, compared with a net loss of $708,044 for the three months
ended December 31, 2014. We incurred a net loss of $4,687,670 for the six months ended December 31, 2015, compared with a net
loss of $1,249,878 for the six months ended December 31, 2014.



We have not
attained profitable operations and are dependent upon obtaining financing to continue with our business plan. For these reasons,
there is substantial doubt that we will be able to continue as a going concern.



Liquidity
and Capital Resources



As of December
31, 2015, we had total current assets of $65,199, consisting of cash and prepaid expenses. We had current liabilities of $7,216,533
as of December 31, 2015. Accordingly, we had negative working capital of $7,151,334 as of December 31, 2015.



Operating activities
used $902,521 in cash for six months ended December 31, 2015, as compared with $1,034,347 for six months ended December 31, 2014.
Our negative operating cash flow for the six months ended December 31, 2015 was mainly attributable to our net loss for the period
and offset mainly by a derivative gain and the amortization of debt discount.



Investing activities
used $0 in cash for the six months ended December 31, 2015, as compared with $12,149 in cash used in investing activities for
the six months ended December 31, 2014, associated with the purchase of fixed assets.



Financing activities
for the six months ended December 31, 2015 provided $685,521 in cash, as compared with cash flows provided by financing activities
of $911,684 for the six months ended December 31, 2014. Our positive cash flow for the six months ended December 31, 2015 was
mainly the result of proceeds from related party debt and convertible notes, offset by payments on related party debt.



We
continue to be dependent on raising capital to operate our business. As mentioned above, our plan is to develop a low cost
point-of-care screening device that will detect and analyze common components from human breath and provide an early
indication of chronic diseases. It  could cost us up to $5,000,000 to conduct clinical trials before our product is ready for
market. We are also working on a device to enable law enforcement to detect marijuana use. This, we hope, will provide us a
product to generate revenues without the expenses and timeframe associated with a lengthy FDA process. However, we will need
capital for both ventures in connection with marketing, distribution and sales efforts to commercialize our products. We will
also need capital to maintain compliant with our filing obligations with the SEC.



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To date, we
have relied on related party advances and convertible notes for our immediate financing needs. We will need to find a more suitable
arrangement to raise the money we need to implement our business plan. If we raise less than what we need, we will have to scale
back our operations commensurate with the funding, if any, that we receive. Our efforts are ongoing but we can provide no assurance
that we will be able to raise the optimal amount needed to implement our business plan.



We have been
busy strategizing and outlining a plan to meet the requirements for making our company more attractive to the capital markets
and to maintain our eligibility requirements on the OTCQB. As part of that process, we have approved a 10 for 1 reverse split
of our common stock and an increase in our authorized common stock from 500,000,000 to 1,000,000,000 shares.





We hope the split and increase of authorized stock will make us more attractive to
institutional investors whose investment strategies include working with companies on long-term financing. We have been
working with our majority shareholder, Nanobeak, to develop and articulate a plan to attract seasoned investment bankers to
assist us in raising capital. This process will take time and is not guaranteed, but we believe with hard work and the right
partners, it is extremely achievable. As of the date of this report, Nanobeak has two such investment banking firms under
agreement: China Merchants Bank New York and Barclays Capital Inc. We believe these firms care more about the fundamentals of
our business and understand the long-term value of our company, our technology and our products. We have not yet raised
capital but we hope to in the coming months.





As of December
31, 2015, we had $32,986 in cash. Until we are able to sustain our ongoing operations through sales revenue, we intend to fund
operations through debt and/or equity financing arrangements, which may be insufficient to fund our capital expenditures, working
capital, or other cash requirements. We do not have any formal commitments or arrangements for the sales of stock or the advancement
or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable
terms, or at all.



Off
Balance Sheet Arrangements



As
ofDecember 31, 2015, there were no off balance sheet
arrangements.



Going Concern



We have incurred
cumulative net losses of $11,662,336 since our inception and require capital for our contemplated operational and marketing activities
to take place. Our ability to continue as a going concern is dependent on us generating cash from the sale of our common stock
and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling our equity
securities and obtaining debt financing to fund our capital requirement and ongoing operations; however, there can be no assurance
we will be successful in these efforts. The ability to successfully resolve these factors raise substantial doubt about our ability
to continue as a going concern.



Item 3. Quantitative
and Qualitative Disclosures about Market Risk



A smaller reporting
company is not required to provide the information required by this Item.



Item 4. Controls
and Procedures



Disclosure
Controls and Procedures



As required
by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated
our company's disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of
the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial
officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective
to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities
Exchange Commission and to ensure that such information is accumulated and communicated to our company's management, including
our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The
conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses
in internal control over financial reporting which are indicative of many small companies with small staff: (i) inadequate segregation
of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting
with respect to the requirements and application of both United States generally accepted accounting principles and Securities
and Exchange Commission guidelines. Management anticipates that such disclosure controls and procedures will not be effective
until the material weaknesses are remediated.



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We plan to take
steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly
report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses,
we plan to implement the following changes during our fiscal year ending June 30, 2016, subject to obtaining additional financing:
(i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii)
adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out above
are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are
unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.



Because of the
inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues,
if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making
can be faulty and that breakdowns can occur because of simple error or mistake.



Changes in
Internal Control over Financial Reporting



There were no
changes in our internal control over financial reporting during the quarter ended December 31, 2015 that have materially affected
or are reasonably likely to materially affect, our internal control over financial reporting.



PART II –
OTHER INFORMATION



Item 1. Legal
Proceedings



We are not a
party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors,
or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.



Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds



Aside from that
provided below, there have been no issuances of securities without registration under the Securities Act of 1933 during the reporting
period which were not previously included in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.



During the six
months ended December 31, 2015, we issued 255,152,377 shares of common stock valued at $294,898 for the conversion of notes payable.



During the six
months ended December 31, 2015, we issued 4,000,000 shares of common stock valued at $9,600 for services.



On September
8, 2015 we granted stock warrants for 15,441,176 shares of common stock in association with a short-term loan at no cost to the
lender. These warrants have a term of five years and an exercise price of $0.001/share.



On November
23, 2015 we granted stock warrants for 187,500,000 shares of common stock in association with a short-term loan at no cost to
the lender. These warrants have a term of five years and an exercise price of $0.0045/share.



On October 29,
2015 we granted stock warrants for 23,437,500 shares of common stock in association with a short-term loan at no cost to the lender.
These warrants have a term of five years and an exercise price of $0.0045/share.



Subsequent to quarter ended December 31, 2015, we issued 40,456,522 shares for the conversion
of $6,574 in notes payable.





The above securities
were issued in reliance upon the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended,
and Regulation D promulgated thereunder.



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Item 3. Defaults
upon Senior Securities



None



Item 4. Mine
Safety Disclosures



Not applicable.



Item 5. Other
Information



None



Item 6. Exhibits



|Exhibit
    Number | Description
    of Exhibit                                                                                                                                                          
|------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1               | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                   
|31.2               | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                   
|32.1               | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002       
|101**              | The
    following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2015 formatted
    in Extensible Business Reporting Language (XBRL).

**Provided herewith



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SIGNATURES



Pursuant to 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.



|       | Nano
    Mobile Healthcare, Inc.
|------ | --------------------------------
|       |                                 
|Date:  | February
    22, 2016           
|       |                                 
|By:    | /s/ Joseph C. Peters            
|       | Joseph
    C. Peters            
|Title: | Chief
    Executive Officer     



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