APPlife Digital (ALDS) posts Q2 loss amid heavy debt and dilution risk
APPlife Digital Solutions, Inc. (ALDS) reported significant losses and liquidity pressure for the quarter and six months ended December 31, 2025. The company generated revenue of
Cash was only
Positive
- None.
Negative
- Going concern uncertainty: Management cites accumulated deficit of
$4,524,325 , a working capital deficit of$3,265,749 , and stockholders’ deficit of$1,691,140 , concluding there is substantial doubt about the company’s ability to continue as a going concern. - High leverage and complex financing: Current liabilities of
$3,418,288 include$1,641,566 of assumed liabilities,$828,707 of derivative liabilities, and$429,446 of convertible notes, alongside dilutive preferred stock and a$15,000,000 equity line of credit.
Insights
Heavy leverage, derivatives and a thin cash position drive high financial risk for ALDS.
APPlife ended December 31, 2025 with cash of only
The company added multiple convertible notes in late
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
ACT OF 1934
For the quarterly period ended
OR
For the transition period from ______ to _______
Commission File Number
(Name of small business issuer in its charter)
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(Address of principal executive offices)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $0.001 PAR VALUE PER SHARE
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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. ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.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). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ |
| Accelerated filer | ☐ |
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| Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of February 11, 2026 a total of
APPLIFE DIGITAL SOLUTIONS, INC.*
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION | 1 | |
ITEM 1. | UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 1 |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 20 |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 26 |
ITEM 4. | CONTROLS AND PROCEDURES | 26 |
PART II - OTHER INFORMATION | 27 | |
ITEM 1. | LEGAL PROCEEDINGS. | 27 |
ITEM 1A. | RISK FACTORS. | 27 |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. | 27 |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. | 27 |
ITEM 4. | MINE SAFETY DISCLOSURES. | 27 |
ITEM 5. | OTHER INFORMATION. | 27 |
ITEM 6. | EXHIBITS | 28 |
Special Note Regarding Forward-Looking Statements
Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of APPlife Digital Solutions, Inc. (the "Company"), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend," or "project" or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
*Please note that throughout this Quarterly Report, except as otherwise indicated by the context, references in this report to "Company", "ALDS", "we", "us" and "our" are references to APPlife Digital Solutions, Inc.
APPLIFE DIGITAL SOLUTIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
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Goodwill |
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Accounts payable and accrued expenses |
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Convertible promissory notes, net of discounts |
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Convertible preferred stock liability – Series B preferred stock, Par value $ |
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Preferred Stock Series C of $ |
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Preferred Stock Series D of $ |
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Total liabilities and stockholders’ deficit |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
APPLIFE DIGITAL SOLUTIONS, INC. | |||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
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Finance expense |
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Amortization of discounts |
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Net income before provision for income taxes |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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APPLIFE DIGITAL SOLUTIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
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Balance, January 6, 2025 (Inception) |
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Balance, June 30, 2025 |
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Balance, September 30, 2025 |
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Balance, December 31, 2025 |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
APPLIFE DIGITAL SOLUTIONS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net loss | $ | ( |
Adjustments to reconcile net loss to net cash used in operating activities: |
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Loss on disposal of fixed asset |
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Net cash (used) in operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Cash and cash equivalents, end of period | $ | |
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Cash paid for interest | $ | |
Cash paid for taxes | $ | |
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Derivative liabilities recorded at inception of convertible promissory notes | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
APPLIFE DIGITAL SOLUTIONS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Organization, Going Concern and Summary of Significant Accounting Policies
Organization
APPlife Digital Solutions, Inc. (the “Company” or “Applife”) was formed March 5, 2018, in Nevada. The Company’s main operating subsidiary, Sugar Auto Parts, Inc. (“SAP”) is a Nevada corporation formed on January 6, 2025 (“inception”), by Mammoth Crest Capital, LLC, which is 50% owned by Michael Hill and Barrett Evans, who are related parties. The Company is headquartered in Santa Barbara, CA. The Company operates as an aftermarket automotive parts ecommerce business, specializing in online sales of suspension lift systems and related accessories through its flagship ecommerce platform. The Company serves customers across the United States, focusing on Jeep, truck, and SUV owners.
On April 30, 2025, SAP executed a Bill of Sale with AP4L ABC, LLC. (AP4L) to acquire substantially all of AP4L’s assets. Under the agreement, SAP purchased all intellectual property and general intangible assets, including domain names, the AP4L website and related rights, and certain supplier relationships that could be re-established or renegotiated. The Company operates primarily as an aftermarket automotive parts ecommerce business, specializing in online sales of suspension lift systems and related automotive accessories through its ecommerce platform. SAP leverages its digital presence to serve customers across the United States, offering a wide selection of products for Jeep, truck, and SUV owners.
On June 13, 2025, the Company completed its acquisition of SAP (the “Merger”). In accordance with ASC 805 Business Combinations (“ASC 805”) the transaction was treated as a reverse acquisition for financial reporting purposes, with Applife treated as the legal acquirer and SAP treated as the accounting acquirer. The Company remains the continuing registrant and reporting company. Accordingly, the historical financial and operating data of the Company, which covers periods prior to the closing date of the Merger, reflects the assets, liabilities, and results of operations for SAP and does not reflect the assets, liabilities and results of operations of the Company for the periods prior to June 13, 2025 (Note 2 – Business Combinations).
The Company does not currently have any international offices or subsidiaries. All management, business operations, and service providers are located in the United States, primarily in Nevada and California. The Company generates all of its revenue from its ecommerce platform serving U.S. customers, and there are no current plans to expand operations internationally.
Going Concern
The Company has generated losses and negative cash flows from operations since inception. The Company has historically financed its operations from debt and equity financing. The Company anticipates additional equity and debt financings to fund operations in the future. Should management fail to adequately address the issue, the Company may have to reduce its business activities or curtail its operations. There can be no assurance that any additional financing will be available to the Company on satisfactory terms and conditions, if at all. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and classification of liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might result if the Company is unable to continue as a going concern.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. All intercompany transactions have been eliminated in consolidation.
5
Cash and Cash Equivalents
For the purpose of the condensed consolidated statement of cash flows, the Company considers cash equivalents to include cash and investments with an original maturity of three months or less.
The Company maintains its cash and cash equivalents at financial institutions in the United States, which may, at times, exceed federally insured limits or similar limits in foreign jurisdictions. On December 31, 2025, the Company’s cash balance did not exceed the FDIC insurance limit. The Company has not experienced any losses in such accounts.
Income Taxes
The Company has adopted guidance issued by the FASB that clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold of more likely than not and a measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In making this assessment, a company must determine whether it is more likely than not that a tax position will be sustained upon examination, based solely on the technical merits of the position and must assume that the tax position will be examined by taxing authorities. The Company’s policy is to include interest and penalties related to unrecognized tax benefits in income tax expense. The Company had no accrual for interest or penalties as of December 31, 2025. The Company files income tax returns with the Internal Revenue Service (“IRS”) and the state of California.
Use of Estimates
Generally accepted accounting principles require that the condensed consolidated financial statements include estimates by management in the valuation of certain assets and liabilities. Significant matters requiring the use of estimates and assumptions include, but are not necessarily limited to, fair value of the Company’s stock, stock-based compensation, BCF (Beneficial Conversion Feature) liabilities feature of convertible debt, derivative liabilities, and valuation allowance relating to the Company’s deferred tax assets. Management uses its historical records and knowledge of its business in making these estimates. Management believes that its estimates and assumptions are reasonable, based on information that is available at the time they are made. Accordingly, actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue from the sale of products and services in accordance with ASC 606, ”Revenue from Contracts with Customers,” by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
Revenue from product sales is recorded at the net sales price, or “transaction price,” which includes coupons, discounts, and processing fees. The Company constrains revenue by considering factors that could otherwise lead to a probable reversal of revenue. Collectability of revenue is reasonably assured based on historical evidence of collectability between the Company and its customers.
We offer consumer products through our website. Revenue is recognized when control of the goods is transferred to the customer, which occurs upon shipment to the customer.
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is primarily generated from the sale of automotive lift kits and accessories through its online platform. Revenue from product sales is recognized at a point in time, typically upon shipment or delivery when control of the goods passes to the customer.
The Company applies the ASC 606 five-step model:
1.Identify the contract with a customer: Established when an order is placed and payment terms are set.
2.Identify performance obligations: Usually a single obligation—delivery of products. Extended warranties, if offered, are separate obligations recognized over the warranty period.
6
3.Determine the transaction price: Based on expected consideration, excluding sales taxes.
4.Allocate the transaction price: For multiple obligations, allocation is based on relative standalone selling prices.
5.Recognize revenue: Product sales are recognized at a point in time; extended warranties are recognized over time.
Shipping and handling after control passes are treated as fulfillment costs and expensed as incurred. Contracts generally do not include variable consideration; if present, it is estimated and included only if a significant reversal is not probable. Revenue is recognized only when collectability is probable. Contract modifications are accounted for as separate contracts or as part of the existing contract, depending on their nature.
Revenue is disaggregated by major product line and timing (point in time vs. over time) in the notes to the consolidated financial statements.
Stock Based Compensation
The Company accounts for share-based compensation in accordance with the fair value recognition provision of FASB ASC 718, Compensation – Stock Compensation (“ASC 718”), prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the condensed consolidated financial statements based on the estimated grant date fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505, Equity–based Payments to Non-Employees (“ASC 505”). Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Leases
The Company accounts for its leases in accordance with ASU 2016-02, “Leases” (Topic 842). This topic requires that a lessee recognize the assets and liabilities that arise from operating leases. The Company recognizes right-of-use assets and lease liabilities on the consolidated balance sheet for all leases with a term longer than 12 months and classifies them as operating leases. For leases with a term of 12 months or less, the Company elects not to recognize lease assets and lease liabilities on those leases. The right-of-use assets and lease liabilities have been measured by the present value of the Company’s remaining lease payments over the lease term using our incremental borrowing rates or implicit rates, when readily determinable.
Net Income (Loss) per Share
Basic net income (loss) per share is calculated by dividing the net income (loss) for the period by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is calculated by dividing the net income (loss) for the period by the weighted-average number of common shares outstanding during the period, increased by potentially dilutive common shares (“dilutive securities”) that were outstanding during the period. Dilutive securities include the conversion of convertible preferred stock, convertible notes and warrants. Diluted net income (loss) per common share was adjusted for the Series B and Series C Preferred shares. The Series B are convertible into approximately 176,875,000 common shares, the Series C are convertible into approximately 727,800,000 common shares and the Series D are convertible into 40,500,000 common shares on December 31, 2025. Therefore, the dilutive shares outstanding are approximately 945,175,000 shares. The potential dilutive shares are considered to be anti-dilutive. There were also
7
Fair Value of Financial Instruments
The Company follows FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) to measure and disclose the fair value of its financial instruments. ASC 820 establishes a framework for measuring fair value in U.S. GAAP and expands disclosures about fair value measurements and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy defined by ASC 820 are described below:
Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.
Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts reported in the Company’s financial statements for cash, and accounts payable and accrued expenses approximate their fair value because of the immediate or short-term nature of these financial instruments.
Derivative Liabilities
FASB ASC 815, Derivatives and Hedging, requires all derivatives to be recorded on the consolidated balance sheet at fair value. As of December 31, 2025, we used the Black-Scholes-Merton (BSM) model to estimate the fair value of the conversion feature of the convertible note. Key assumptions of the BSM model include the market price of our stock, the conversion price of the debt, applicable volatility rates, risk-free interest rates and the instrument’s remaining term. These assumptions require significant management judgment. In addition, changes in any of these variables during a period can result in material changes in the fair value (and resultant gains or losses) of this derivative instrument.
Inventories
Inventories, consisting of raw materials, work in process and products available for sale, are primarily accounted for using the first-in, first-out method (“FIFO”), and are valued at the lower of cost or net realizable value. This valuation requires management to make judgements based on currently available information about the likely method of disposition, such as through sales to individual customers and returns to product vendors.
Goodwill
Goodwill represents the excess of the acquisition price of a business over the fair value of identified net assets of that business. Goodwill has an indefinite lifespan and is not amortized. The Company evaluates goodwill for impairment at least annually and records an impairment charge when the carrying amount of a reporting unit with goodwill exceeds the fair value of the reporting unit.
The Company assesses qualitative factors to determine if it is necessary to conduct a quantitative goodwill impairment test. If deemed necessary, a quantitative assessment of the reporting unit’s fair value is conducted and compared to its carrying value in order to determine the impairment charge.
For the period ended December 31, 2025, the Company recorded no goodwill impairment charges.
8
Segment Information
In accordance with ASC 280, Segment Reporting (“ASC 280”), we identify our operating segments according to how our business activities are managed and evaluated. ASC 280 establishes standards for companies to report financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker (“CODM”), or group, in deciding how to allocate resources and assess performance.
Accounting Pronouncements
Recently Issued Accounting Standards Not Yet Adopted
In November 2024, the FASB issued Accounting Standards Update 2024-03 "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)" which requires that at each interim and annual reporting period an entity:
1. Disclose the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortization included in each relevant expense caption. A relevant expense caption is an expense caption presented on the face of the income statement within continuing operations that contains any of the listed expense categories.
2. Include certain amounts that are already required to be disclosed under current generally accepted accounting principles (GAAP) in the same disclosure as the other disaggregation requirements.
3. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively.
4. Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses.
These amendments are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027: either (1) prospectively to financial statements issued for reporting periods after the effective date of this Update or (2) retrospectively to any or all prior periods presented in the financial statements. The Company expects to enhance disclosures of expenses based on new requirements.
In November 2024, the FASB also issued Accounting Standards Update 2024-04 "Debt - Debt with Conversion and Other Options (Subtopic 470-20) “Induced Conversions of Convertible Debt Instruments” to clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. Under the amendments, to account for a settlement of a convertible debt instrument as an induced conversion, an inducement offer is required to provide the debt holder with, at a minimum, the consideration (in form and amount) issuable under the conversion privileges provided in the terms of the instrument. An entity should assess whether this criterion is satisfied as of the date the inducement offer is accepted by the holder. If, when applying this criterion, the convertible debt instrument had been exchanged or modified (without being deemed substantially different) within the one-year period leading up to the offer acceptance date, an entity should compare the terms provided in the inducement offer with the terms that existed one year before the offer acceptance date. The amendments in this Update also clarify that the induced conversion guidance applies to a convertible debt instrument that is not currently convertible as long as it had a substantive conversion feature as of both its issuance date and the date the inducement offer is accepted. The amendments are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The Company is examining the impact this pronouncement may have on the Company’s consolidated financial statements.
Other accounting pronouncements issued but not yet effective are not believed by management to be relevant or to have a material impact on the Company’s present or future consolidated financial statements.
Recently Adopted Accounting Standards
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” which is intended to enhance the transparency and decision usefulness of income tax disclosures. The
9
guidance addresses investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. The guidance is effective for annual periods beginning after December 15, 2024. The Company has adopted ASU 2023-09 as of July 1, 2025. The adoption did not have a material impact on the Company’s financial statements.
Note 2 – Business Combinations
Acquisition of AP4L ABC, LLC
On April 30, 2025, SAP acquired certain of the assets of AP4L ABC, LLC (“AP4L”), including intellectual property, domain names, the AP4L website, and certain supplier relationships. The acquisition was structured as an asset purchase and was intended to support SAP’s ecommerce operations through its ecommerce platform. The following is a summary of the transaction:
Assets acquired |
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|
|
Inventory | $ |
PP&E | |
Domain list | |
| |
|
|
Cash paid | $ |
Other items | |
Liabilities assumed | |
| |
|
|
Goodwill acquired | $ |
The Company issued common shares and Series C preferred stock to certain parties related to the AP4L transaction.
Reverse Acquisition with Sugar Auto Parts, Inc.
On June 13, 2025 (the "Closing Date"), SAP. closed an acquisition agreement with the Company (the “Merger”), as a result of which Applife assumed certain assets and liabilities of SAP. While Applife was the legal acquirer of SAP’s net assets in the Merger, for accounting purposes, the Merger is treated as a reverse recapitalization, whereby SAP is deemed to be the accounting acquirer, and the historical financial statements of SAP became the historical financial statements of Applife upon the closing of the Merger. Under this method of accounting, Applife was treated as the “acquired” company and SAP is treated as the acquirer for financial reporting purposes.
Accordingly, for accounting purposes, the Merger was treated as the equivalent of SAP issuing stock for the net assets of Applife, accompanied by a recapitalization. The net assets of Applife were stated at historical cost, with no goodwill or other intangible assets recorded.
As consideration, 1,740,000,000 shares of Applife’s common stock and 2,500 shares of Applife’s Series C Preferred Stock were issued by Applife to the shareholder of SAP. SAP also agreed to pay Applife Holdings an initial payment of $150,000 due upon closing of the acquisition agreement and a second payment of $150,000 due within ninety-five (95) days of closing. The $150,000 payable is included in due to Applife Holdings on the balance sheet as of December 31, 2025.
According to the terms of the acquisition agreement, 4,400 shares of Series B Preferred Stock were issued to certain vendors of Applife in order to settle approximately $440,000 of outstanding payables, notes or obligations of Applife. In addition, in connection with the reverse acquisition the Company issued shares of common stock to settle outstanding options, convertible debt and warrants and transferred all of the Company’s former subsidiaries to a new entity not under control of the Company.
As a result of the Merger, the shareholder of SAP gained voting rights equivalent to 87.4% of the voting rights for all classes of the Company’s issued and outstanding stock. The transaction costs and the fair value of the Common Stock and the fair value of the Preferred Stock were recorded as a reduction of additional paid-in capital.
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The following is a summary of the Applife balance sheet prior to the reverse merger:
| Recapitalization | |
Prepaids | $ | |
Total assets | $ | |
|
|
|
Accounts payable and accrued expenses | $ | |
Series B preferred stock, 4,400 shares, stated value of $440,000 |
| |
Total liabilities |
| |
|
|
|
Applife equity at June 13, 2025; 260,000,000 shares of common stock |
| ( |
Total liabilities and equity | $ | |
The following table reconciles the elements of the Merger to the Statements of Shareholders' Equity (Deficit) after the reverse merger:
|
| Recapitalization |
Recognition of Applife equity | $ | ( |
Less: transactions costs allocated to SAP equity |
| ( |
Effect of Merger, net of transaction costs | $ | ( |
The following table details the number of shares of Common Stock issued immediately following the consummation of the merger:
| Number of Shares |
Common Stock owned by Applife’s Pre-Merger shareholders | |
Common Stock consideration issued to SAP due to Merger | |
Total outstanding shares of Series A Preferred Stock immediately after the Merger | |
The following table details the number of shares of Series B Preferred Stock issued immediately following the consummation of the Merger:
| Number of Shares |
Series B Preferred Stock owned by Applife’s Pre-Merger shareholders | - |
Series B Preferred Stock consideration issued due to Merger | |
Total outstanding shares of Series B Preferred Stock immediately after the Merger | |
An additional 8,450 shares of Series B Preferred stock were issued in exchange for an assumed liability.
The following table details the number of shares of Series C Preferred Stock issued immediately following the consummation of the Merger:
| Number of Shares |
Series C Preferred Stock owned by Applife’s Pre-Merger shareholders | - |
Series C Preferred Stock consideration issued due to Merger | |
Total outstanding shares of Series C Preferred Stock immediately after the Merger | |
Note 3 – Commitments and Contingencies
Legal Matters
From time to time the Company may be involved in certain legal actions and claims arising in the ordinary course of business. The Company was not a party to any specific legal actions or claims on December 31, 2025.
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Note 4 – Other Liabilities
Debt related to the assumed liabilities consisted of the following:
December 31, 2025 |
| June 30, 2025 | |||
Former SAP creditors – Credit facilities* | $ |
| $ | ||
Mammoth Crest Capital* |
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| ||
Credit cards |
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| ||
Chris Davenport * |
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| ||
Vendor payables |
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| ||
Total | $ |
| $ | ||
*Related parties as common shares have been issued to the creditors
Note 5 – Series B Preferred Stock
On June 13, 2025, the Company issued Series B preferred stock to certain vendors of the Company prior to the Reverse Acquisition and for the Conversion of Convertible notes payable. Under the terms of the Series B Preferred stock, the Company issued 4,400 shares to former vendors and creditors of ALDS and 8,450 shares of Series B preferred stock upon the conversion of $
December 31, 2025 | |
Series B Preferred stock - 12,850 shares | $ |
Discount | ( |
Total | $ |
On December 8, 2025, the Company issued an additional 1,300 shares of Series B Preferred Stock under the same terms as the June 13, 2025 issuance to their directors as a bonus for filing the Form S-1. Amortization of the discount will commence January 1, 2026.
December 31, 2025 | |
Series B Preferred stock – 1,300 shares | $ |
Discount | ( |
Total | $ |
The carrying amount of the
December 31, 2025 | |
Series B Preferred stock - 14,150 shares | $ |
Discount | ( |
Total | $ |
The Company amortized $
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Note 6 – Convertible Notes Payable
The Company entered into convertible notes payable as follows as of December 31, 2025. The chart below does not include convertible notes payable that were converted prior to July 1, 2025.
|
| December 31, 2025 |
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| |
Convertible note entered into August 1, 2025 due August 1, 2026; One-time interest charge of $22,440 (12%) added to principal at inception. OID of $20,000 on this convertible note. |
| $ |
| |
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|
Convertible note entered into November 10, 2025 due November 10, 2026; One-time interest charge of $7,200 (12%) added to principal at inception. OID and debt discount of $67,200 on this convertible note. | (a) |
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Convertible note entered into November 10, 2025 due November 10, 2026; One-time interest charge of $7,200 (12%) added to principal at inception. OID and debt discount of $67,200 on this convertible note. | (b) |
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Convertible note entered into November 18, 2025 due November 18, 2026; One-time interest charge of $7,200 (12%) added to principal at inception. OID and debt discount of $67,200 on this convertible note. | (c) |
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Convertible note entered into November 20, 2025 due November 20, 2026; One-time interest charge of $7,200 (12%) added to principal at inception. OID and debt discount of $67,200 on this convertible note. | (d) |
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Convertible note entered into November 20, 2025 due August 20, 2026 at 5% interest per annum. OID and debt discount of $85,165 on this convertible note. | (e) |
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Convertible note entered into November 20, 2025 due August 20, 2026 at 8% interest per annum on the Equity Line of Credit. OID and debt discount of $127,748 on this convertible note. | (f) |
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Convertible note entered into November 25, 2025 due November 25, 2026; One-time interest charge of $7,200 (12%) added to principal at inception. OID and debt discount of $67,200 on this convertible note. | (g) |
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Total |
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|
| |
Less: Current portion |
|
| ( |
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Less: Discounts |
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| ( |
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Long-term debt |
| $ |
| |
Prior to July 1, 2025
The Company issued convertible debt with detachable warrants for $
The initial allocation of the proceeds was as follows:
|
|
Fair value of the warrants issued | $ |
Discount on debt | ( |
Initial finance cost | $ |
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The debt discount was amortized to interest expense which brought the carrying amount of the convertible notes to $
Subsequent to July 1, 2025
Equity Line of Credit
On November 20, 2025, we entered into the Purchase Agreement with the CM Selling Stockholder (the “CM Purchase Agreement”), pursuant to which the CM Selling Stockholder has agreed to purchase from us up to $15,000,000 of our common stock (subject to certain limitations). Also, on November 20, 2025, we entered into a Registration Rights Agreement, with the CM Selling Stockholder, pursuant to which we agreed to file a registration statement with the SEC to register the Selling Stockholder’s resale of shares of common stock issuable by us pursuant to the CM Purchase Agreement. In addition, pursuant to the CM Purchase Agreement, we issued a Note in the amount of $225,0000, (representing commitment fee valued at 1.5% of the CM Purchase Agreement amount).
The CM Purchase Agreement provides that, upon the terms and subject to the conditions set forth in the CM Purchase Agreement, the Company may issue and sell to CM, and CM shall purchase from the Company, up to $15,000,000, subject to certain limitations including the Selling Stockholder’s 4.99% beneficial ownership limitation.
The CM Purchase Agreement and the sale of up to $15,000,000 of shares of common stock thereunder was approved by the Company’s Board of Directors on November 20, 2025.
The CM Purchase Agreement essentially gives us the right to put (or offer to sell) common stock to CM as described below. Specifically, the purchase and sale terms provided for by the CM Purchase Agreement are summarized as follows:
(i)
| Fixed Purchase. On any business day, the Company has the right to direct CM to purchase shares of common stock at a purchase price equal to 95% of the lower of (A) the daily volume weighted average price (“VWAP”) of the Company’s common stock for the five trading days immediately preceding the applicable purchase date for such Fixed Purchase and (B) the lowest trading price of a share of common stock on such date; provided that if the closing price of the common stock on such date is lower than such purchase price, then the purchase price shall be reduced to equal such closing price, and provided further that such purchases shall be subject to a daily limitation of $100,000; |
(ii) | VWAP Purchase. On any business day, the Company has the right to direct CM to purchase common stock at a purchase price equal to 95% of the lower of (A) the closing sale price on such date and (B) the VWAP during the applicable VWAAP Purchase Period. , provided that such purchases shall be subject to a daily limitation of $100,000; and |
(iii) | Additional VWAP Purchase. In addition to the foregoing, the Company also has the right to direct CM to purchase common stock at a purchase price equal to 95% of the lower of (A) the VWAP for the applicable Additional VWAP Purchase Period during the applicable Additional VWAP Purchase Date for such Additional VWAP Purchase, and (B) the Closing Sale Price of the Common Stock on such applicable Additional VWAP Purchase Date for such Additional VWAP Purchase, provided that such purchases shall be subject to a daily limitation of $100,000. |
The foregoing purchase terms are subject to certain conditions and limitations, including daily volume and dollar amount limitations with respect to each type of purchase described above within a given day, and a 4.99% beneficial ownership limitation with respect to CM’s ownership of the Company’s common stock.
The Company agreed to comply with certain covenants and conditions under the CM Purchase Agreement, which are set forth therein.
Unless earlier terminated as provided under the CM Purchase Agreement, the CM Purchase Agreement shall terminate automatically on the earliest to occur of (i) the expiration of the registration statement of which this prospectus forms a part pursuant to Rule 415(a)(5) of the Securities Act, (ii) the date on which CM shall have purchased the maximum amount pursuant to the CM Purchase Agreement, (iii) the date on which the Company’s common stock shall have failed to be listed or quoted on the OTC Markets OTCID Basic Market or on another national securities exchange, (iv) 30 trading days following commencement of bankruptcy proceedings, and (v) the date on which, pursuant to or within the meaning of any bankruptcy law, a custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors.
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In addition, the Company may terminate the CM Purchase Agreement by giving CM, one trading day’s prior written notice, and CM may terminate the CM Purchase Agreement by giving the Company 10 tradings days’ prior written notice upon the occurrence of certain specified events which more particularly set forth in the CM Purchase Agreement, [need to review these items] including any failure to maintain the effectiveness of a registration statement registering the resale of the shares of common stock issuable under the CM Purchase Agreement, failure to maintain listing of the common stock on the OTC Markets OTCID Basic Market or a national securities exchange, and the occurrence of certain other enumerated events.
Registration Rights Agreement
In connection with the CM Purchase Agreement, on November 20, 2025 the Company also entered into a Registration Rights Agreement with CM pursuant to which the Company agreed to register CM’s resale of the shares of common stock issuable under the CM Purchase Agreement (such shares, the “ELOC Shares”) on a registration statement on Form S-1 or S-3 filed with the SEC within 30 days of this Agreement and to cause such registration statement to be declared effective the earlier of (A) the 60th day following the date on which the Company was required to file such registration statement, if such registration statement is subject to review by the SEC, and (B) the third business day following the date the Company is notified by the SEC that such registration statement will not be reviewed. Like the CM Purchase Agreement, CM has agreed to waive the timing discussed in this paragraph but not the obligation. The Company filed a Form S-1 on December 8, 2025.
Interest Expense and Amortization of Discounts
In connection with the aforementioned convertible notes, the Company in the six months ended recorded $
A summary of the finance expense is as follows:
Origination fee on ELOC |
| $ |
| |
Excess of derivative liability over net proceeds of convertible notes |
|
|
| |
Interest expense and other |
|
|
| |
Balance at December 31, 2025 |
| $ |
|
For the six months ended December 31, 2025, the Company recorded $77,919 in amortization of discount associated with these convertible notes payable. The unamortized discount as of December 31, 2025 is $490,994. The Company also amortized $74,422 in discount on Series B preferred stock for a total amortization expense of $152,341.
Note 7 – Derivative Liabilities
Warrants Granted in June 13, 2025 Note Offering
The Company evaluated the Warrants in accordance with the guidance at ASC 480 and ASC 815-40 and determined that the Warrants are precluded from being considered indexed to the entity’s own stock, resulting in the Warrants being classified as a liability. The measurement of fair value of the Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $
A roll forward of the derivative liability is as follows:
Balance at June 30, 2025 |
| $ |
| |
Change in fair value of derivative liability |
|
| ( |
|
Balance at December 31, 2025 |
| $ |
|
Convertible Notes Issued Prior to July 1, 2025
The Company evaluated the terms of the Convertible Note issued in June 2025 in accordance with the guidance at ASC 815-40 and determined that prior to conversion, no liability characteristics existed to treat the conversion option as a derivative liability as the note is not yet convertible.
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Convertible Notes Issued Subsequent to July 1, 2025
The Company evaluated the terms of the Convertible Note issued subsequent to July 1, 2025 in accordance with the guidance at ASC 815-40 and determined that each of the notes met the criteria necessary for bifurcation and the conversion option was reclassified to derivative liability as follows:
Derivative Liability at Inception |
| $ | 640,250 |
|
Change in fair value of derivative liability |
|
| ( |
|
Balance at December 31, 2025 |
| $ |
|
As of December 31, 2025 the balance in derivative liabilities is $828,665 as follows:
A roll forward of the derivative liability is as follows:
Balance at June 30, 2025 |
| $ |
| |
New additions |
|
|
| |
Change in fair value of derivative liability |
|
| ( |
|
Balance at December 31, 2025 |
| $ |
|
Note 8 – Equity
Capitalization
The Company is authorized to issue a total of
Common Stock
The Company is authorized to issue up to
Preferred Stock
Series A Convertible Preferred Stock
The Series A, par value $
Series B Convertible Preferred Stock
The Series B, par value $
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conversion of the Series B Stock shall be the product of one share of Series B shall convert into $100 of common stock on the date of conversion based upon the previous day’s closing price of the common stock of the Company.
Series C Convertible Preferred Stock
The Series C, par value $
Series D Convertible Preferred Stock
The Series D, par value $
The Series D Preferred Stock include certain reset and anti-dilution provisions that could reduce the conversion prices and exercise prices thereof if and whenever the Company grants, issues or sells any shares of Common Stock for a consideration per share (the "New Issuance Price") less than a price equal to the Conversion Price in effect immediately prior to such granting, issuance or sale or deemed granting, issuance or sale (such Conversion Price then in effect is referred to herein as the "Applicable Price" ( the foregoing a "Dilutive Issuance"), then, immediately after such Dilutive Issuance, the Conversion Price then in effect shall be reduced to an amount equal to the New Issuance Price.
The Board of Directors of the Corporation is authorized to provide, by resolution, for one or more series of Preferred Stock to be comprised of authorized but unissued shares of Preferred Stock. Except as may be required by law, the shares in any series of Preferred Stock need not be identical to any other series of Preferred Stock. Before any shares of any such series of Preferred Stock are issued, the Board of Directors shall fix, and is hereby expressly empowered to fix, by resolution the rights, preferences and privileges of, and qualifications, restrictions and limitations applicable to, such series.
The Board of Directors is authorized to increase the number of shares of the Preferred Stock designated for any existing series of Preferred Stock by a resolution adding to such series authorized and unissued shares of the Preferred Stock not designated for any other series of Preferred Stock. The Board of Directors is authorized to decrease the number of shares of the Preferred Stock designated for any existing series of Preferred Stock by a resolution, subtracting from such series unissued shares of the Preferred Stock designated for such series.
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Note 9 – Leases
The Company has an operating lease agreement with a term of 3 years.
On June 13, 2025, the Company entered into a month-to-month operating lease that commenced on the same date with EMC2 Capital, a related party. The lease renews automatically on a month-to-month basis and provides for a fixed monthly rental payment of $
The Company’s weighted-average remaining lease term relating to its operating leases is
The following table presents information about the amount and timing of liabilities arising from the Company’s operating leases as of December 31, 2025:
Year ended June 30, 2026 |
| $ |
| |
Year ended June 30, 2027 |
|
|
| |
Total undiscounted operating lease payments |
|
|
| |
Less: Imputed interest |
|
| ( |
|
Present value of operating lease liabilities |
| $ |
|
Note 10 – Segment Reporting
The CODM has been identified as the Chief Executive Officer, who reviews the operating results for the Company as a whole to make decisions about allocating resources and assessing financial performance. Accordingly, management has determined that the Company operates in one operating segment, and therefore one reportable segment. Our determination that we operate as a single operating segment is consistent with the financial information regularly reviewed by management for purposes of evaluating performance, allocating resources, setting incentive compensation targets, and planning and forecasting for future periods. The accounting policies for our single operating segment are the same as those described in the summary of significant accounting policies.
The key measures of segment profit or loss reviewed by our CODM are revenue, cost of goods sold, and operating expenses. These items are reviewed and monitored by the CODM to manage and forecast cash. The CODM also reviews these items to manage, maintain and enforce all contractual agreements to ensure costs are aligned with all agreements and budget.
Note 11 – Subsequent Events
Management has evaluated all subsequent events in accordance with ASC 855-10, Subsequent Events, through February 11, 2026, the date the financial statements were available to be issued. No subsequent events requiring recognition or disclosure were identified during this period, other than the following:
On January 26, 2026, the Company issued 2,128,000 shares of common stock in conversion of $10,002 in convertible promissory notes.
On January 26, 2026, the Company received a Notice of Effectiveness for its S-1 registration.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
Overview
AppLife Digital Solutions, Inc. (the “Company” or “Applife”) was formed March 5, 2018, in Nevada. The Company’s main operating subsidiary, Sugar Auto Parts, Inc. (“SAP”) is a Nevada corporation formed on January 6, 2025, by Mammoth Crest Capital, LLC, a Wyoming corporation that is 50% owned by Michael Hill and Barrett Evans, who are related parties. The Company is headquartered at 701 Anacapa St., Suite C, Santa Barbara, CA 93101. SAP operates primarily as an aftermarket automotive parts e-commerce business, specializing in online sales of suspension lift systems and related accessories through its flagship ecommerce platform. The Company serves customers across the United States, offering a wide selection of products for Jeep, truck, and SUV owners.
Reverse Merger with Sugar Auto Parts, Inc.
On June 13, 2025, SAP became a wholly-owned subsidiary of Applife.
Plan of Operation
Applife operates with a streamlined executive team led by Michael Hill and Barrett Evans, with all management and business operations based in the United States. We rely on its executive leadership and a network of independent contractors and professional service providers for business management, accounting, legal, and investor relations functions. All executive and management functions are located in Nevada and California, and there are no employees or contractors located internationally. We generate all of our revenue from our ecommerce platform serving U.S. customers. We have no current plans to develop operations outside the United States.
Our business model is focused on expanding our ecommerce operations, strengthening our product offerings, and pursuing strategic acquisitions that align with our vision for growth. We will continue to explore new opportunities to invest in projects and partnerships that can enhance our market position and revenue streams. Capital raised will be allocated to marketing, acquisitions, and revenue generation initiatives.
We are committed to building value through operational efficiency, targeted marketing, and strategic partnerships. We seek acquisition targets that fit our vision and areas of interest, are currently generating revenue with room for growth, and have strong management teams that will remain in place post-acquisition.
Results of Operations for Six Months Ended December 31, 2025
| December 31, 2025 |
Revenue | $1,358,481 |
Cost of goods sold | (1,026,603) |
Operating expenses | 1,242,667 |
Other income (expenses) | 8,245 |
Net loss | $(902,544) |
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Revenue
For the six months ended December 31, 2025, we had revenues of $1,358,481. This growth was primarily driven by the successful completion of key technical enhancements to our ecommerce platform during the quarter. These improvements helped us to significantly broaden our product inventory selection, making a wider array of high-demand items available to customers. At the same time, we accelerated our media and marketing initiatives, leveraging expanded reach and more targeted campaigns to drive higher traffic and conversion rates. Together, these strategic advancements directly contributed to the uplift in sales volume and overall revenue performance. Costs of sales were $1,026,603 which were approximately 76% of revenue. Gross margin was $331,878.
Operating Expenses
For the six ended December 31, 2025, we had operating expenses of $1,242,667. This expense was primarily attributable to payments to contractors, employees and other operating expenses, including marketing and advertising.
Other Income (Expenses)
For the six months ended December 31, 2025, other expenses include finance expense of $421,307, amortization of debt discounts on Series B Preferred Stock and convertible promissory notes of $152,341, other expenses of $1,239, a loss on disposal of fixed assets of $1,000, offset by other income which is the change in the fair value of the derivative liabilities of $614,132.
Net loss
We reported a net loss of $902,544 for the six months ended December 31, 2025.
Results of Operations for Three Months Ended December 31, 2025
| December 31, 2025 |
Revenue | $894,309 |
Cost of goods sold | (667,455) |
Operating expenses | 774,701 |
Other income (expenses) | (451,019) |
Net loss | $(998,866) |
Revenue
For the three months ended December 31, 2025, we had revenues of $894,309. This growth was primarily driven by the successful completion of key technical enhancements to our ecommerce platform during the quarter. These improvements helped us to significantly broaden our product inventory selection, making a wider array of high-demand items available to customers. At the same time, we accelerated our media and marketing initiatives, leveraging expanded reach and more targeted campaigns to drive higher traffic and conversion rates. Together, these strategic advancements directly contributed to the uplift in sales volume and overall revenue performance. Costs of sales were $667,455 which were approximately 75% of revenue. Gross margin was $226,854.
Operating Expenses
For the three ended December 31, 2025, we had operating expenses of $774,701. This expense was primarily attributable to payments to contractors, employees and other operating expenses, including marketing and advertising.
Other Income (Expenses)
For the three months ended December 31, 2025, other expenses include finance expense of $404,883, amortization of debt discounts on Series B Preferred Stock and convertible promissory notes of $152,341, a loss on disposal of fixed assets of $1,000, offset by other income which includes other income of $9,460 and the change in the fair value of the derivative liabilities of $96,751.
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Net loss
We reported a net loss of $998,866 for the three months ended December 31, 2025.
Going Concern
As reflected in the accompanying consolidated financial statements, the Company has revenue generating operations and has an accumulated deficit of $4,644,325. In addition, there is a working capital deficiency of approximately $3,385,749 and a stockholder’s deficiency of $1,811,140 as of December 31, 2025. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
The Company anticipates additional equity and debt financing to fund operations in the future. Should management fail to adequately address the issue, the Company may have to reduce its business activities or curtail its operations.
Liquidity and Capital Resources
Our cash balance was $137,330 on December 31, 2025. We recorded a net loss of $1,022,544 for the six months ended December 31, 2025. We expect our expenses will continue to increase during the foreseeable future as a result of increased operations and the development of our business operations. Consequently, we are dependent on the proceeds raised in the convertible notes which generated $515,600 in cash, as well as the new ELOC entered into during the six months ended December 31, 2025 to continue to fund our operations and implement our business plan. If we are unable to raise sufficient capital, we will be required to delay or forego some portion of our business plan, which would have a material adverse effect on our anticipated results from operations and consolidated financial condition. There is no assurance that we will be able to obtain necessary amounts of capital or that our estimates of our capital requirements will prove to be accurate.
Due to our operating losses, our operations have not been a source of liquidity. We will need to obtain additional capital in order to expand operations and become profitable. In order to obtain additional capital beyond the current ELOC, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If additional funds are raised through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuance of stock in lieu of cash, which may also result in dilution to existing shareholders. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing.
No assurance can be given that sources of financing will be available to us and/or that demand for our equity/debt instruments will be sufficient to meet our capital needs, or that financing will be available on terms favorable to us. If funding is insufficient at any time in the future, we may not be able to take advantage of business opportunities or respond to competitive pressures or may be required to reduce the scope of our planned marketing efforts and development of our apps, any of which could have a negative impact on our business and operating results. In addition, insufficient funding may have a material adverse effect on our financial condition, which could require us to:
∙Curtail the development of our business,
∙Seek strategic partnerships that may force us to relinquish significant rights to our business, or
∙Explore potential mergers or sales of significant assets of our Company.
Working Capital Deficit
|
| December 31, 2025 |
Current assets | $ | 152,539 |
Current liabilities |
| 3,418,288 |
Working capital (deficit) | $ | (3,265,749) |
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We anticipate generating losses and, therefore, may be unable to continue operations in the future. We expect to require additional capital, and we will have to issue debt or equity principally through the ELOC or enter into a strategic arrangement with a third party. The current liabilities of $3,418,288 include $1,641,566 of assumed liabilities, $828,707 of derivative liabilities, and $429,446 in convertible promissory notes, net of discounts.
Cash Flows
| December 31, 2025 | |
Net Cash Used in Operating Activities | $ | (489,667) |
Net Cash Used in Investing Activities |
| - |
Net Cash Provided by Financing Activities |
| 515,600 |
Net Increase in Cash | $ | 25,933 |
Operating Activities
During the six months ended December 31, 2025, cash used in the Company’s operating activities amounted to $489,667, which mainly consisted of the Company’s net loss amounting to $902,544. This amount was adjusted by noncash items of financing expense of $451,307 and a decrease from change in fair value of derivative liabilities of $614,132, and common and preferred shares issued for services of $119,667. Changes in assets and liabilities include an increase in prepaid expenses and other assets, decrease in inventories, increases in accounts payable and accrued expenses, and decrease in other liabilities of $267,427.
Investing Activities
During the six months ended December 31, 2025, the Company used $0 in cash for investing activities.
Financing Activities
During the six months ended December 31, 2025, the Company received $515,600 in proceeds from the issuance of convertible promissory notes.
Critical Accounting Policies and Estimates
The preparation of the company’s consolidated financial statements and related disclosures are in conformity with U.S. generally accepted accounting principles (“GAAP”). The Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported in its consolidated financial statements and accompanying notes. Note 1, “Summary of Significant Accounting Policies,” of the Notes to Financial Statements included in this Form 10-K, describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.
Management believes the Company’s critical accounting policies and estimates are those related to revenue recognition, determination of fair value of stock-based compensation and determination of the fair value of the conversion feature of the convertible notes. Management considers these policies critical because they are both important to the portrayal of the Company’s financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters. The Company’s management has reviewed these critical accounting policies and related disclosures.
Revenue Recognition
The Company recognizes revenue from the sale of products and services in accordance with ASC 606, ”Revenue from Contracts with Customers,” by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
Revenue from product sales is recorded at the net sales price, or “transaction price,” which includes coupons, discounts, and processing fees. The Company constrains revenue by considering factors that could otherwise lead to a probable reversal of revenue. Collectability of revenue is reasonably assured based on historical evidence of collectability between the Company and its customers.
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We offer consumer products through our website. Revenue is recognized when control of the goods is transferred to the customer, which occurs upon shipment to the customer.
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. Revenue is primarily generated from the sale of automotive lift kits and accessories through its online platform. Revenue from product sales is recognized at a point in time, typically upon shipment or delivery when control of the goods passes to the customer.
The Company applies the ASC 606 five-step model:
1.Identify the contract with a customer: Established when an order is placed and payment terms are set.
2.Identify performance obligations: Usually a single obligation—delivery of products. Extended warranties, if offered, are separate obligations recognized over the warranty period.
3.Determine the transaction price: Based on expected consideration, excluding sales taxes.
4.Allocate the transaction price: For multiple obligations, allocation is based on relative standalone selling prices.
5.Recognize revenue: Product sales are recognized at a point in time; extended warranties are recognized over time.
Shipping and handling after control passes are treated as fulfillment costs and expensed as incurred. Contracts generally do not include variable consideration; if present, it is estimated and included only if a significant reversal is not probable. Revenue is recognized only when collectability is probable. Contract modifications are accounted for as separate contracts or as part of the existing contract, depending on their nature.
Revenue is disaggregated by major product line and timing (point in time vs. over time) in the notes to the consolidated financial statements.
Stock Based Compensation
The Company accounts for share-based compensation in accordance with the fair value recognition provision of FASB ASC 718, Compensation – Stock Compensation (“ASC 718”), prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the consolidated financial statements based on the estimated grant date fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505, Equity–based Payments to Non-Employees (“ASC 505”). Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Derivative Liabilities
FASB ASC 815, Derivatives and Hedging, requires all derivatives to be recorded on the consolidated balance sheet at fair value. As of December 31, 2025, we used the Black-Scholes-Merton (BSM) model to estimate the fair value of the conversion feature of the convertible note. Key assumptions of the BSM model include the market price of our stock, the conversion price of the debt, applicable volatility rates, risk-free interest rates and the instrument’s remaining term. These assumptions require significant management judgment. In addition, changes in any of these variables during a period can result in material changes in the fair value (and resultant gains or losses) of this derivative instrument.
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Business Combination
The Company applies the provisions of ASC 805, “Business Combination” and allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Goodwill generated from a business combination is primarily attributable to synergies.
When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include but are not limited to future expected cash flows from acquired technology and acquired customer relationships from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred (Note 2 – Business Combinations).
Seasonality
We do not expect our sales to be impacted by seasonal demands for our products and services.
We are susceptible to general economic conditions, natural catastrophic events and public health crises, and a potential downturn in advertising and marketing spending by advertisers could adversely affect our operating results in the near future.
Our business is subject to the impact of natural catastrophic events, such as earthquakes, or floods, public health crisis, such as disease outbreaks, epidemics, or pandemics, and all these could result in a decrease or sharp downturn of economies, including our markets and business locations in the current and future periods. The outbreak of the coronavirus (COVID-19) resulted in increased travel restrictions, and shutdown of businesses, which may cause slower recovery of the economy. We may experience impact from quarantines, market downturns and changes in customer behavior related to pandemic fears and impact on our workforce if the virus continues to spread. In addition, one or more of our customers, partners, service providers or suppliers may experience financial distress, delayed or defaults on payment, file for bankruptcy protection, sharp diminishing of business, or suffer disruptions in their business due to the outbreak. The extent to which the coronavirus impacts our results will depend on future developments and reactions throughout the world, which are highly uncertain and will include emerging information concerning the severity of the coronavirus and the actions taken by governments and private businesses to attempt to contain the coronavirus. It is likely to result in a potential material adverse impact on our business, results of operations and financial condition. Wider-spread COVID-19 globally could prolong the deterioration in economic conditions and could cause decreases in or delays in advertising spending and reduce and/or negatively impact our short-term ability to grow our revenues. Any decreased collectability of accounts receivable, bankruptcy of small and medium businesses, or early termination of agreements due to deterioration in economic conditions could negatively impact our results of operations.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
As required by the SEC Rules 13a-15(b) and 15d-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level due to material weaknesses in internal controls over financial reporting (as described below).
Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting during the period ended December 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 1A. RISK FACTORS.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
An investment in our common stock involves a high degree of risk. You should carefully consider the following risks and all of the other information contained in this Annual Report before deciding whether to invest in our common stock. If any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose all or part of your investment in our common stock. Additional risks of which we are not presently aware or that we currently believe are immaterial may also harm our business and results of operations. Some statements in this Annual Report, including such statements in the following risk factors, constitute forward-looking statements. See the section entitled “Cautionary Note Regarding Forward-Looking Statements.”
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS
Exhibit Number |
| Description of Exhibit |
| Filing |
31.1 |
| Certification of Principal Executive Officer Pursuant to Rule 13a-14 |
| Filed herewith. |
31.2 |
| Certification of Principal Financial Officer Pursuant to Rule 13a-14 |
| Filed herewith. |
32.1 |
| CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act |
| Filed herewith. |
32.2 |
| CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act |
| Filed herewith. |
101.INS* |
| XBRL Instance Document |
| Filed herewith. |
101.SCH* |
| XBRL Taxonomy Extension Schema Document |
| Filed herewith. |
101.CAL* |
| XBRL Taxonomy Extension Calculation Linkbase Document |
| Filed herewith. |
101.LAB* |
| XBRL Taxonomy Extension Labels Linkbase Document |
| Filed herewith. |
101.PRE* |
| XBRL Taxonomy Extension Presentation Linkbase Document |
| Filed herewith. |
101.DEF* |
| XBRL Taxonomy Extension Definition Linkbase Document |
| Filed herewith. |
*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| APPLIFE DIGITAL SOLUTIONS, INC. |
|
|
Dated: February 11, 2026 | /s/ Michael Hill |
| Michael Hill, Chief Executive Officer and Director |
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FAQ
How much revenue did APPlife Digital Solutions (ALDS) generate in the six months ended December 31, 2025?
What was APPlife Digital Solutions’ net loss for the six months ended December 31, 2025?
What is the liquidity position and working capital deficit of APPlife Digital Solutions (ALDS)?
Why does APPlife Digital Solutions disclose substantial doubt about its ability to continue as a going concern?
What major financing arrangements does APPlife Digital Solutions have outstanding?
How many APPlife Digital Solutions shares are outstanding and what preferred stock is in place?
