VNTH Nano Mobile Healthcare Inc (PK)

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(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 $16,765,650 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.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

Financial assets and liabilities measured at fair value on a recurring basis are summarized below for March 31, 2016:

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

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 nine months ended March 31, 2016 and 2015, respectively.

NOTE 3 – PREPAID EXPENSES

During the nine months ended March 31, 2016, the Company prepaid interest of $57,375 on convertible notes. As of March 31, 2016 and June 30, 2015, the balance that remained capitalized as prepaid expenses was $8,415 and $41,637, respectively.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

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 March 31, 2016 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 $19,800 during the three and nine months ending March 31, 2016 and 2015, respectively.

NOTE 5 – RELATED PARTY TRANSACTIONS

During the nine months ended March 31, 2016 and 2015, the Company received cash advances from its majority shareholder in the amount of $911,631 and 1,031,677, of which $551,558 and $292,662 was repaid during the same period. As of March 31, 2016 and June 30, 2015 there was a balance due to the shareholder of $760,523 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 nine month period ended March 31, 2016, 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 nine month period ended March 31, 2016, 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.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

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 nine months ended March 31, 2016, the Company has converted $21,300 of the penalty note issued on July 20, 2015 into 4,000,000 (post split) shares of common stock.

The following details the disbursements as of March 31, 2016:

During the nine months ended March 31, 2016 and 2014, $18,496 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 $3,039 as of March 31, 2016.

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, August 20, 2015, July 14, 2015, and August 20, 2015, and were convertible as of March 31, 2016.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

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 371,197(post split) shares of common stock for principal and accrued interest of $116,943. 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 494,358(post split) 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 March 31, 2016, $55,384 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 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 nine months ended March 31, 2016.

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 nine months ended March 31, 2016, the note was assigned to another lender. As of March 31, 2016, $55,384 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 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 nine months ended March 31, 2016 into 3,375,481(post split) shares of common stock. The value of the share on the date of conversion was $34,753.

As of March 31, 2016, $82,699 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 is $472,525 and $213,077 resulting in a loss on the change in fair value of the derivative of $259,448. The Note is shown net of a derivative debt discount of $0 at March 31, 2016.

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.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

As of March 31, 2016, $46,480 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 was $275,595 and $109,960, respectively resulting in a loss on the change in fair value of the derivative of $165,635. The Note is shown net of a derivative debt discount of $4,179 at March 31, 2016.

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 March 31, 2016, $42,173 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 was $275,832 and $115,438 resulting in a loss on the change in fair value of the derivative of $160,394 during the nine months ended March 31, 2016. The Note is shown net of a derivative debt discount of $8,545 at March 31, 2016.

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 March 31, 2016, $41,498 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 was $276,463 and $116,072, respectively resulting in a loss on the change in fair value of the derivative of $160,391 during the nine months ended March 31, 2016. The Note is shown net of a derivative debt discount of $13,434 at March 31, 2016.

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 March 31, 2016, $22,938 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 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 March 31, 2016 for 4,000,000 shares (post split) of common stock for principal of $21,300. The fair value of at the date of conversion of $140,205 was written off to additional paid in capital.

As of March 31, 2016, $95,000 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 was $368,272 and $0, respectively resulting in a loss on the change in fair value of the derivative of $368,272 during the nine months ended March 31, 2016. The Note is shown net of a derivative debt discount of $0 at December 31, 2015.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

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 March 31, 2016 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 had been amortized. The fair value of the derivative liability at June 30, 2015 is $20,632.

As of March 31, 2016 and June 30, 2015, the holder of the note exercised his right to convert $14,000 and $56,000 of the note balance into 222,222 and 318,813 shares (post split) of common stock, respectively. The fair value of the derivative liability related to the converted debt as of March 31, 2016 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 $2,849 and $0 for the nine months ending March 31, 2016 and 2014. As of March 31, 2016 and June 30, 2015 the remaining prepaid interest balance was $0 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 March 31, 2016 and June 30, 2015, the holder of the note exercised his right to convert $20,000 and $35,000 of the note balance into 869,565 and 440,452 shares of common stock (post split). The fair value of the derivative liability related to the converted debt at March 31, 2016 and June 30, 2015 was $57,121 and $54,324, respectively.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

As of March 31, 2016, $70,000 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 was $160,322 and $56,108, respectively resulting in a loss on the change in fair value of the derivative of $104,214. 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 $3,573 and $0 for the year ending Marchr 31, 2016 and 2014. As of March 31, 2016, the remaining prepaid interest balance was $0

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 March 31, 2016, $70,000 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 was $399,800 and $116,694 resulting in a loss on the change in fair value of the derivative of $283,106. The Note is shown net of a derivative discount of $0 at March 31, 2016.

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 March 31, 2016, the holder of the note exercised his right to convert $76,960 of the note balance and accrued interest into 1,517,526 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 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.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

As of March 31, 2016, $48,596 of the debt discount has been amortized. The Notes are shown net of an unamortized debt discount of $33,904 at March 31, 2016.

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 March 31, 2016, the holder of the note exercised his right to convert $57,975 of the note balance into 5,918,300 shares of common stock (post-split). The fair value of the derivative liability related to the converted debt at March 31, 2016 was $151,708.

As of March 31, 2016, $48,596 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 was $163,422 and $152,892 resulting in a loss on the change in fair value of the derivative of $10,530. The Note is shown net of a derivative discount of $33,309 at March 31, 2016.

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 March 31, 2016, $12,773 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 was $183,255 and $54,756, respectively resulting in a loss on the change in fair value of the derivative of $128,499. The Note is shown net of a debt discount of $14,767 at March 31, 2016.

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 March 31, 2016, $9,111 of the debt discount has been amortized and the note is shown net $389 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 March 31, 2016, $55,621 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 was $558,084 and $0, respectively resulting in a loss on the change in fair value of the derivative of $558,084. The Note is shown net of a debt discount of $4,879 at March 31, 2016.

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.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

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 1,704,546 shares of common stock. The fair value of the derivative liability related to the converted debt as of March 31, 2016 was $8,910.

As of March 31, 2016, $43,000 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 was $148,597 and $0, respectively resulting in a loss on the change in fair value of the derivative of $148,597. The Note is shown net of a debt discount of $0 at March 31, 2016.

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 March 31, 2016, $7,714 of the debt discount has been amortized and the note is shown net $1,781 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 $147,829 and an initial loss on derivative liabilities of $87,329 based on the Black Scholes Merton pricing model.

As of March 31, 2016, $38,176 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 was $558,400 and $0, respectively resulting in a loss on the change in fair value of the derivative of $558,400. The Note is shown net of a debt discount of 22,324 at March 31, 2016.

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 March 31, 2016, $5,372 of the debt discount has been amortized and the note is shown net $1,503 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.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

As of March 31, 2016, $17,453 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 was $299,226 and $0, respectively resulting in a loss on the change in fair value of the derivative of $299,226. The Note is shown net of a debt discount of $13,172 at March 31, 2016.

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 March 31, 2016, $26,287 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 was $1,199,423 and $0, respectively resulting in a loss on the change in fair value of the derivative of $1,199,423. The Note is shown net of a debt discount of $73,713 at March 31, 2016.

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 March 31, 2016, $1,134 of the debt discount has been amortized. The Note is shown net of an unamortized debt discount of $1,866 at March 31, 2016.

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 March 31, 2016, $12,460 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 and June 30, 2015 is $228,923 and $79,497, respectively resulting in a loss on the change in fair value of the derivative of $149,426 The Note is shown net of a derivative debt discount of $20,540 at March 31, 2016.

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.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

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 March 31, 2016, $29,861 of the debt discount has been amortized. The fair value of the derivative liability at December 31, 2015, was $159,723 resulting in a loss on the change in fair value of the derivative of $159,723. The Note is shown net of a derivative discount of $10,139 at March 31, 2016.

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 $4,705 at 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 March 31, 2016, $51,341 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016, was $389,744 resulting in a loss on the change in fair value of the derivative of $389,744. The Note is shown net of a derivative discount of $4,909 at March 31, 2016.

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. As of March 31, 2016, $13,750 of the debt discount has been amortized. The Note is shown net of an unamortized debt discount of $0 at March 31, 2016.

On January 30, 2016, the note became convertible at the option of the holder. On this date the Company recorded a debt discount in the amount of $61,250 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 $300,208 and initial loss on derivative liabilities of $238,958 based on the Black Scholes Merton pricing model.

As of March 31, 2016, $61,250 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016, was $599,362 resulting in a loss on the change in fair value of the derivative of $599,362. The Note is shown net of a derivative discount of $0 at March 31, 2016.

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. As of March 31, 2016, $3,026 of the debt discount has been amortized. The Note is shown net of an unamortized debt discount of $3,849 at March 31, 2016.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

On February 1, 2016, 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 $183,481 and initial loss on derivative liabilities of $152,856 based on the Black Scholes Merton pricing model.

As of March 31, 2016, $4,978 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016, was $299,867 resulting in a loss on the change in fair value of the derivative of $116,386. The Note is shown net of a derivative discount of $25,647 at March 31, 2016.

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 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 30 ^th trading day after the funding of the note. As of March 31, 2016, $6,000 of the debt discount has been amortized. The Note is shown net of an unamortized debt discount of $0 at March 31, 2016.

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 March 31, 2016, $50,000 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 was $333,001 resulting in a gain on the change in fair value of the derivative of $333,001. The Note is shown net of a derivative discount of $0 at March 31, 2016.

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 30 ^th 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 March 31, 2016, 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 March 31, 2016 was $69,667.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

As of March 31, 2016, $73,096 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 was $275,717 resulting in a gain on the change in fair value of the derivative of $59,785. The Note is shown net of a derivative discount of $41,904 at March 31, 2016.

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. As of March 31, 2016, $5,307 of the debt discount has been amortized and the note is shown net $4,193 in unamortized debt discount.

On September 8, 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 $406,912 and initial loss on derivative liabilities of $346,412 based on the Black Scholes Merton pricing model.

As of March 31, 2016, $8,088 of the debt discount has been amortized. The fair value of the derivative liability at March 31, 2016 was $559,465 resulting in a gain on the change in fair value of the derivative of $152,553. The Note is shown net of a derivative discount of $52,412 at March 31, 2016.

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. As ofMarch 31, 2016, $3,164 of the debt discount has been amortized. The Note is shown net of an unamortized debt discount of $4,336 at March 31, 2016. As of March 31, 2016, the note has not become convertible.

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. As of March 31, 2016, $53,212 of the debt discount has been amortized and the note is shown net $21,788 in unamortized debt discount. As of March 31, 2016, the note has not become convertible.

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

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

As of March 31, 2016, the company had the below commitments related to its outstanding convertible notes payable.

NOTE 8 – COMMON STOCK

On March 21, 2016, the “Company filed (i) a Certificate of Amendment to its Certificate of Incorporation (the “Charter”), with the Secretary of State of the State of Delaware, to effect a 10:1 reverse stock split of the Company’s shares of common stock, $0.001 par value and (ii) a Certificate of Amendment to its Charter with the Secretary of State of the State of Delaware, to increase its authorized capital stock from 500,000,000 to 1,000,000,000 shares. The effect of the stock split has been retroactively reflected in the financial statements.

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.

On August 25, 2015, the Company entered into an exchange agreement with its majority shareholder, Nanobeak, LLC, pursuant to which Nanobeak exchanged 11,736,684 (post-split) 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 nine months ended March 31, 2016, the Company issued 33,393,889 (post-split) shares of common stock valued at $307,447 for the conversion of notes payable.

During the six months ended December 31, 2015, the Company issued 400,000 (post-split) shares of common stock valued at $9,600 for services.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

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 200,000 shares (post-split) 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 2,500,000 shares (post-split) 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 387,500 warrants for the Company’s common stock (post-split) 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 500,000 warrants for the Company’s common stock (post-split) 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 20,000 shares of common stock (post-split) 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 800,000 shares of common stock (post-split)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.

During the quarter ended March 31, 2016 and 2015, the Company issued 79,687,500 and 29,149 warrants, (post-split) 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.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

On April 17, 2014 the Company granted stock warrants for 118,519 shares of common stock (post-split) 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 70,523 shares of common stock (post-split) 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 55,384 shares of common stock (post-split) 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 29,149 shares of common stock (post-split) 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 32,012 shares of common stock (post-split) 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 80,769 shares of common stock (post-split) 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 115,894 shares of common stock (post-split) 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 256,098 shares of common stock (post-split) 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.

On June 7, 2015 the Company granted stock warrants for 437,500 shares of common stock (post-split) 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 255,682 shares of common stock (post-split) 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.

NANO MOBILE HEALTHCARE, INC

NOTES TO THE FINANCIAL STATEMENTS

March 31, 2016

(UNAUDITED)

On June 28, 2015 the Company granted stock warrants for 1,184,211 shares of common stock (post-split) 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 3,500,000 shares of common stock (post-split) 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 75,000,000 shares of common stock (post-split) 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 4,687,500 shares of common stock (post-split) 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 3,887,500 shares of common stock (post-split) 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 $38,858 and $913,168 as of March 31, 2016 and June 30, 2015, respectively. During the nine months ended March 31, 2016 and 2014, the Company recorded a gain of $874,310 and $0, respectively, related to the change in fair value on the warrants.

In total the derivative liability related to the warrants as of March 31, 2016 and June 30, 2015 was $897,080 and $1,270,470, respectively and the Company recorded a gain in the change in fair value due to derivative warrant liability of $373,390 and $32,325 during the nine months ended March 31, 2016 and 2015, 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 March 31, 2016, $180,377 of the debt discount has been amortized. The associated notes are shown net of the $94,623 discount

NOTE 10 – DERIVATIVE LIABILITY

The Company determined the fair value of the derivative liabilities to be $9,713,164 as of March 31, 2016, and the Company recorded a loss on the change in fair value of derivative liabilities of $6,980,711 for the nine months ended May 31, 2016.

The following table summarizes the derivative liabilities included in the balance sheet:

NOTE 11 – 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 nine months ended March 31, 2016 and 2015, the Company expensed $68,160 and $681,091 and 269,195 and $849,897, 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 March 31, 2016 and 2015, $0 and $25,000 of the royalties were recognized as an expense.