Hi Sir Crimson,
Can you give the following settings a shot and see if that works for you?
First off, you need to set the default impact damage depth. Since it was set to -1 it wasn’t reacting to any impacts even though you had set a impact damage of 7. I left mine at 1 though.
The main thing you want to adjust here and tweak to your benefit is the damage value.
As a note, I did not use the projectile with the yellow ball. I used a line trace and added an impulse. Because of this there may be some values that need to be adjusted in the damage and impact sections, but this should be enough to get you started.
Let me know if you have any questions. 
Tim