Annual Report for Fiscal Year Ending 06-30, 2026 (Form 10-K)

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 Year Ended June 30, 2026 and Period January 6, 2025 to June 30, 2025

	June 30, 2026
Revenue	$2,297,200
Cost of goods sold	(1,796.910)
Operating expenses	4,878,869
Other income (expenses)	(294,971)
Net loss	$(4,673,550)
	June 30, 2025
Revenue	$315,130
Cost of goods sold	(270,891)
Operating expenses	246,137
Other income (expenses)	(795,865)
Net loss	$(997,763)

Revenue

For the year ended June 30, 2026 and period January 6, 2025 to June 30, 2025, we had revenues of $2,297,200 and $315,130, respectively. 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 $1,796,910 and $270,891, respectively, which were approximately 78% and 86% of revenue. Gross margin was $500,290 and $44,239, respectively.

Operating Expenses

For the year ended June 30, 2026 and period January 6, 2025 to June 30, 2025, we had operating expenses of $4,878,869 and $246,137, respectively. This expense was primarily attributable to payments to contractors, employees and other operating expenses, including marketing and advertising and impairment of goodwill in the amount of $2,697,728.

Other Income (Expenses)

For the year ended June 30, 2026, other expenses include finance expense of $532,115, amortization of debt discounts on Series B Preferred Stock, convertible promissory notes and promissory notes to related and non-related parties of $707,755, other expenses of $17,621, a loss on disposal of fixed assets of $1,000, extinguishment loss of $12,013, offset by other income which is the change in the fair value of the derivative liabilities of $967,333. For the period ended January 6, 2025 to June 30, 2025, a majority of the other expenses represent $803,589 in financing expenses.

Net loss

We reported a net loss of $4,673,550 and $997,763 for the year ended June 30, 2026 and period January 6, 2025 to June 30, 2025.

Going Concern

As reflected in the accompanying consolidated financial statements, the Company has revenue generating operations and has an accumulated deficit of $8,295,331 as of June 30, 2026. In addition, there is a working capital deficiency of approximately $4,012,622 and a stockholder's deficiency of $5,258,043 as of June 30, 2026. 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 $21,725 on June 30, 2026. We recorded a net loss of $4,673,550 and $997,763 for the year ended June 30, 2026 and period January 6, 2025 to June 30, 2025. We expect our expenses will continue to increase with the exception of the impairment of goodwill 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 from related and non-related parties of which generated $663,320 in cash, as well as the ELOC entered into during the year ended June 30, 2026 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

		June 30, 2026
Current assets	$	68,327
Current liabilities		4,080,949
Working capital (deficit)	$	(4,012,622)

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 $4,080,949 include $1,635,651 of assumed liabilities, $665,017 of derivative liabilities, and $804,751 in convertible promissory notes and promissory notes

from related and non-related parties, net of discounts. In addition, accounts payable and accrued expenses of $379,107 have been increasing as amounts owed to consultants and vendors go unpaid due to cash flow shortages.

As of the date of this report, we are in default under the convertible promissory note issued to Labrys Fund II, L.P. on August 1, 2025, the two convertible promissory notes issued to C/M Capital Master Fund, LP that matured on August 20, 2026, and the credit card facility provided by our Chief Executive Officer. We do not have the cash to repay these obligations and are seeking extensions, waivers or other resolutions with these lenders. See "Risk Factors" and Notes 6, 11 and 13 to the consolidated financial statements.

Cash Flows

	June 30, 2026
Net Cash Used in Operating Activities	$	(752,992)
Net Cash Used in Investing Activities		-
Net Cash Provided by Financing Activities		663,320
Net Decrease in Cash	$	(89,672)

	June 30, 2025
Net Cash Used in Operating Activities	$	(159,964)
Net Cash Used in Investing Activities		(185,000)
Net Cash Provided by Financing Activities		456,361
Net Increase in Cash	$	111,397

Operating Activities

During the year ended June 30, 2026, cash used in the Company's operating activities amounted to $752,992, which mainly consisted of the Company's net loss amounting to $4,673,550. This amount was adjusted by noncash items in 2026 of financing expense of $532,115, an impairment of goodwill of $2,697,728 and a decrease from change in fair value of derivative liabilities of $967,333, and common and preferred shares issued for services of $269,265. 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 $684,802.

During the period January 6, 2025 to June 30, 2025, cash used in the Company's operating activities amounted to $159,964, which mainly consisted of the Company's net loss amounting to $997,763. This amount was adjusted by noncash items in 2025 of financing expense of $803,589 and an increase in accounts payable and accrued expenses, and decrease in other liabilities of $41,934.

Investing Activities

During the year ended June 30, 2026 and period January 6, 2025 to June 30, 2025, the Company used $0 and $185,000 in cash for investing activities.

Financing Activities

During the year ended June 30, 2026 and period January 6, 2025 to June 30, 2025, the Company received $663,320 and $600,000 in proceeds from the issuance of convertible promissory notes from related and non-related parties in 2026 and promissory notes in 2025.

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.

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 FASB ASC 718, Compensation - Stock Compensation ("ASC 718"). Following the Company's adoption of ASU 2018-07, awards to non-employees are measured and accounted for using the same model applied to employee awards, generally at grant-date fair value.

Derivative Liabilities

FASB ASC 815, Derivatives and Hedging, requires all derivatives to be recorded on the consolidated balance sheet at fair value. As of June 30, 2026, we used the Black-Scholes-Merton (BSM) model to estimate the fair value of the warrant liability and the conversion feature bifurcated from our convertible notes. 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.

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).