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APPlife Digital Solutions Inc – ‘10-Q’ for 3/31/20

On:  Wednesday, 5/13/20, at 4:18pm ET   ·   For:  3/31/20   ·   Accession #:  1445866-20-612   ·   File #:  0-56144

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 5/13/20  APPlife Digital Solutions Inc     10-Q        3/31/20   41:1.7M                                   C Filings/FA

Quarterly Report   —   Form 10-Q   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Applife 10-Q                                        HTML    234K 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     19K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     19K 
 4: EX-32.1     Certification -- §906 - SOA'02                      HTML     16K 
12: R1          Document and Entity Information                     HTML     61K 
30: R2          Unaudited Condensed Consolidated Balance Sheets     HTML     84K 
35: R3          Unaudited Condensed Consolidated Balance Sheets     HTML     24K 
                (Parenthetical)                                                  
23: R4          Condesned Statements of Operations (Unaudited)      HTML     76K 
11: R5          Consolidated Statement of Stockholder's (Deficit)   HTML     73K 
                Equity (Unaudited)                                               
29: R6          Condensed Statements of Cash Flows (Unaudited)      HTML    100K 
34: R7          Note 1 - Organization And Summary Of Significant    HTML     40K 
                Accounting Policies                                              
22: R8          Note 2 - Investment In Smartrade Exchange           HTML     21K 
                Services, Inc.                                                   
13: R9          Note 3 - Notes Payable                              HTML     21K 
37: R10         Note 4 - Related Party Transactions                 HTML     19K 
32: R11         Note 5 - Concentrations                             HTML     17K 
14: R12         Note 6 - Commitments And Contingencies              HTML     20K 
24: R13         Note 7 - Shareholders' Equity (Deficit)             HTML     21K 
38: R14         Note 8 - Convertible Debt and Derivative Liability  HTML     34K 
33: R15         Note 9 - Subsequent Events                          HTML     20K 
15: R16         Note 1 - Organization And Summary Of Significant    HTML     83K 
                Accounting Policies (Policies)                                   
25: R17         Note 8 - Convertible Debt and Derivative Liability  HTML     36K 
                (Tables)                                                         
39: R18         Note 1 - Organization And Summary Of Significant    HTML     27K 
                Accounting Policies (Details)                                    
31: R19         Note 2 - Investment In Smartrade Exchange           HTML     31K 
                Services, Inc. (Details)                                         
17: R20         Note 3 - Notes Payable (Details)                    HTML     49K 
20: R21         Note 4 - Related Party Transactions (Details)       HTML     22K 
40: R22         Note 6 - Commitments And Contingencies (Details)    HTML     20K 
26: R23         Note 7 - Shareholders' Equity (Deficit) (Details)   HTML     52K 
18: R24         Note 8 - Convertible Debt and Derivative Liability  HTML     19K 
                (Details)                                                        
21: R25         Note 8 - Convertible Debt and Derivative Liability  HTML     28K 
                : Schedule of valuation methodology (Details)                    
41: R26         Note 8 - Convertible Debt and Derivative Liability  HTML     26K 
                : Fair Value, Liabilities Measured on Recurring                  
                Basis (Details)                                                  
27: R27         Note 8 - Convertible Debt and Derivative Liability  HTML     24K 
                : Schedule of changes in Level 3 liabilities                     
                (Details)                                                        
16: R28         Note 9 - Subsequent Events (Details Narrative)      HTML     25K 
28: XML         IDEA XML File -- Filing Summary                      XML     68K 
36: EXCEL       IDEA Workbook of Financial Reports                  XLSX     38K 
 7: EX-101.INS  XBRL Instance -- alds-20200331                       XML    421K 
 5: EX-101.CAL  XBRL Calculations -- alds-20200331_cal               XML     95K 
 6: EX-101.DEF  XBRL Definitions -- alds-20200331_def                XML    175K 
 8: EX-101.LAB  XBRL Labels -- alds-20200331_lab                     XML    390K 
 9: EX-101.PRE  XBRL Presentations -- alds-20200331_pre              XML    331K 
10: EX-101.SCH  XBRL Schema -- alds-20200331                         XSD     66K 
19: ZIP         XBRL Zipped Folder -- 0001445866-20-000612-xbrl      Zip     55K 


‘10-Q’   —   Applife 10-Q
Document Table of Contents

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11st Page  –  Filing Submission
"Management's Discussion and Analysis of Financial Condition and Results of Operations

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 C: 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 

FORM 10-Q

 

  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

 

 TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______ to _______

 

Commission File Number 000-54524

 

 

APPLIFE DIGITAL SOLUTIONS, INC.

(Name of small business issuer in its charter)

 

Nevada

 

30-0678378

(State of incorporation)

 

(I.R.S. Employer Identification No.)

 

555 California St, #4925

San Francisco, CA 94104

 (Address of principal executive offices)

1 (415) 659 1564

(Registrant's telephone number)

 

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.

 Yes       No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (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).    Yes     No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. 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

Non-accelerated filer

Smaller reporting company

(Do not check if smaller reporting company)

 

Emerging growth company

 

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

 Yes   No



As of May 11, 2020, there were 127,037,531 shares of the registrant's $0.001 par value common stock issued and outstanding.



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

12

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

16

ITEM 4.  CONTROLS AND PROCEDURES

16

PART II - OTHER INFORMATION

18

ITEM 1.  LEGAL PROCEEDINGS.

18

ITEM 1A.  RISK FACTORS.

18

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

18

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

18

ITEM 4.  MINE SAFETY DISCLOSURES.

18

ITEM 5.  OTHER INFORMATION.

18

ITEM 6.  EXHIBITS

18

 

 

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.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

June 30, 2019

 

ASSETS

Current assets

 

 

 

 

 

 

Cash

$

120,357 

 

 

65,654 

 

Prepaid expenses

 

62,522 

 

 

- 

 

Inventory

 

37,455 

 

 

- 

 

Other current assets

 

7,574 

 

 

- 

 

Total current assets

 

227,908 

 

 

65,654 

 

 

 

 

 

 

 

 

Equity method investment

 

- 

 

 

514,693 

 

 

 

 

 

 

 

 

Total assets

 

227,908 

 

 

580,347 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current liabilities

 

 

 

 

 

 

Accounts payable and accrued expenses

$

78,698  

 

 

85,276  

 

Due to Smartrade Exchange Services, Inc.

 

1,136  

 

 

61,034  

 

Notes payable

 

455,616  

 

 

70,624  

 

Due to officer

 

6,428  

 

 

9,580  

 

Common stock payable

 

54,999  

 

 

80,416  

 

Derivative liabilities

 

248,155  

 

 

19,824  

 

Total liabilities

 

845,032  

 

 

326,754  

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ (deficit) equity

 

 

 

 

 

 

Common stock, $0.001 par value, 500,000,000 shares authorized; 124,787,531 and 119,059,674 shares issued and outstanding as of March 31, 2020 and June 30, 2019, respectively

 

124,787  

 

 

119,059  

 

Additional paid-in capital

 

3,702,163  

 

 

1,796,170  

 

Accumulated (deficit)

 

(4,444,074) 

 

 

(1,661,636) 

 

Total stockholders’ (deficit) equity

 

(617,124) 

 

 

253,593  

 

Total liabilities and stockholders’ (deficit) equity

$

227,908  

 

 

580,347  

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements



APPLIFE DIGITAL SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

Nine Months Ended March 31,

 

 

 

2020

2019

 

 

2020

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

1,312 

 

 

 

 

1,458 

 

 

Cost of goods sold

 

 

(83)

 

 

 

 

(222)

 

 

Gross profit

 

 

1,229 

 

 

 

 

1,236 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

512,952 

 

 

467,859 

 

 

2,105,283 

 

 

928,718 

Impairment of equity method investment

 

 

 

 

 

 

500,055 

`

 

Loss from equity method investment

 

 

 

 

10,589 

 

 

14,638 

 

 

10,589 

Total operating expenses

 

 

512,952 

 

 

478,448 

 

 

2,619,976 

 

 

939,307 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(511,723)

 

 

(478,448)

 

 

(2,618,740)

 

 

(939,307)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(45,215)

 

 

(557)

 

 

(113,375)

 

 

(4,623)

Change in fair value of derivative liability

 

 

(32,690)

 

 

 

 

(50,323)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss before provision for income taxes

 

 

(589,628)

 

 

(479,005)

 

 

(2,782,438)

 

 

(943,930)

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss)

 

 

(589,628)

 

 

(479,005)

 

 

(2,782,438)

 

 

(943,930)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (loss) per share

 

 

(0.02)

 

 

(0.02)

 

 

(0.09)

 

 

(0.04)

 

 

 

 

 

 

 

 

 

 

 

 

 

Average number of common shares outstanding - basic and diluted

 

33,699,619 

 

 

27,944,425 

 

 

31,924,158 

 

 

24,899,587  

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements



APPLIFE DIGITAL SOLUTIONS, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDER'S (DEFICIT) EQUITY (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

 

 

 

 

Shares

 

Amount

 

Paid-In Capital

 

Deficit

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

 

117,687,765

 

 

117,687 

 

 

967,795 

 

 

(637,512)

 

 

447,970 

 

Common stock issued for cash

 

32,679

 

 

33 

 

 

1,967 

 

 

 

 

2,000 

 

Common stock issued to employees

 

-

 

 

- 

 

 

351,563 

 

 

 

 

351,563 

 


Common stock issued for services

 

239,230

 

 

239 

 

 

14,381 

 

 

 

 

14,620 

 

Net loss

 

-

 

 

- 

 

 

- 

 

 

(479,005)

 

 

(479,005)

Balance, March 31, 2019

 

117,959,674

 

 

117,959 

 

 

1,335,706 

 

 

(1,116,517)

 

 

337,148 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2019

 

123,537,531

 

 

123,537 

 

 

3,226,849 

 

 

(3,854,446)

 

 

(504,060)

 

Common stock issued for cash

 

1,000,000

 

 

1,000 

 

 

99,000 

 

 

 

 

100,000 

 

Stock compensation

 

-

 

 

- 

 

 

351,564 

 

 

 

 

351,564 

 

Common stock issued for services

 

250,000

 

 

250 

 

 

24,750 

 

 

 

 

25,000 

 

Conversion of notes payable to equity

 

-

 

 

- 

 

 

- 

 

 

 

 

 

Eliminate derivative liability upon repayment of debt

 

-

 

 

- 

 

 

- 

 

 

 

 

 

Net loss

 

-

 

 

- 

 

 

- 

 

 

(589,628)

 

 

(589,628)

Balance, March 31, 2020

 

124,787,531

 

 

124,787 

 

 

3,702,163 

 

 

(4,444,074)

 

 

(617,125)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2018

 

17,239,093

 

 

17,239 

 

 

67,761 

 

 

(172,587)

 

 

(87,587)

 

Common stock issued for cash

 

10,386,102

 

 

10,386 

 

 

615,152 

 

 

 

 

625,538 

 

Common stock issued to employees

 

90,000,000

 

 

90,000 

 

 

632,657 

 

 

 

 

722,657 

 

Common stock issued for services

 

334,479

 

 

334 

 

 

20,136 

 

 

 

 

20,470 

 

Net loss

 

-

 

 

- 

 

 

- 

 

 

(943,930)

 

 

(943,930)

Balance, March 31, 2019

 

117,959,674

 

 

117,959 

 

 

1,335,706 

 

 

(1,116,517)

 

 

337,148 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2019

 

119,059,674

 

 

119,059 

 

 

1,796,170 

 

 

(1,661,636)

 

 

253,593 

 

Common stock issued for cash

 

1,000,000

 

 

1,000 

 

 

99,000 

 

 

 

 

100,000 

 

Stock compensation

 

-

 

 

- 

 

 

1,054,691 

 

 

 

 

1,054,691 

 

Common stock issued for services

 

4,527,857

 

 

4,528 

 

 

731,923 

 

 

 

 

736,451 

 

Conversion of notes payable to equity

 

200,000

 

 

200 

 

 

6,794 

 

 

 

 

6,994 

 

Eliminate derivative liability upon repayment of debt

 

-

 

 

- 

 

 

13,585 

 

 

 

 

13,585 

 

Net loss

 

-

 

 

- 

 

 

- 

 

 

(2,782,438)

 

 

(2,782,438)

Balance, March 31, 2020

 

124,787,531

 

 

124,787 

 

 

3,702,163 

 

 

(4,444,074) 

 

 

(617,124) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements



APPLIFE DIGITAL SOLUTIONS, INC 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

Nine Months Ended March 31,

 

2020

2019

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net loss

$

(2,782,438) 

 

 

(943,930) 

Adjustment to reconcile change in net loss to net cash used in operating activities:

 

 

 

 

 

Amortization of debt discount

 

73,085  

 

 

 

Issuance of common stock for services

 

737,451  

 

 

20,470  

Issuance of common stock to employee

 

 

 

 

722,657  

Stock compensation expense

 

1,054,691  

 

 

 

Impairment of investment

 

500,055  

 

 

 

Loss from equity method investment

 

14,638  

 

 

10,589  

Common stock payable

 

(25,417) 

 

 

15,000  

Change in fair value of derivative liability

 

50,323  

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts Receivable

 

(7,574) 

 

 

 

Prepaid expenses and other current assets

 

(62,522) 

 

 

10,000  

Inventory

 

(37,455) 

 

 

 

Accounts payable and accrued expenses

 

(6,578) 

 

 

5,539  

Net cash (used) in operating activities

 

(491,741) 

 

 

(159,675) 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

Investment in affiliate

 

 

 

 

(317,716) 

Net cash (used) in investing activities

 

 

 

 

(317,716) 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from notes payable

 

520,000  

 

 

11,000  

Payment on notes payable

 

(9,506) 

 

 

(100,000) 

Payment on amounts due to Smartrade

 

(59,898) 

 

 

 

Payment on amounts due to officer

 

(3,152) 

 

 

 

Proceeds from issuance of common stock

 

99,000  

 

 

625,538  

Net cash provided from financing activities

 

546,444  

 

 

536,538  

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

54,703  

 

 

59,147  

Cash and cash equivalents, beginning of period

 

65,654  

 

 

11,490  

Cash and cash equivalents, end of period

$

120,357  

 

 

70,637  

 

 

 

 

 

 

Supplemental non-cash disclosure:

 

 

 

 

 

Conversion of notes payable to equity

$

5,119  

 

 

 

Eliminate derivative liability upon repayment of debt

$

13,585  

 

 

 

Due to Smartrade Exchange Services, Inc.

$

 

 

 

118,000  

Cash paid for interest

$

 

 

 

 

Cash paid for taxes

$

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed unaudited consolidated financial statements



1.ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

 

Organization

 

APPlife Digital Solutions Inc. (the “Company”) is a business incubator and portfolio manager that uses digital technology to create and invest in e-commerce and cloud-based solutions. The Company was formed March 5, 2018 in Nevada and has offices in San Francisco, California and Shanghai, China. The Company’s mission is using digital technology to create APPs and websites that make life, business and living easier, more efficient and just smarter. Shanghai APPlife Technology Consulting Inc. (“APPlife Shangai”), is a wholly foreign-owned enterprise created for the benefit of doing business is China on behalf of the Company.

 

Rooster Essentials APP SPV, LLC (the “Rooster”), incorporated on April 9, 2019, is a wholly owned subsidiary of the Company. Rooster is a fully customizable men’s subscription service that delivers daily use grooming needs and essential items.

 

B2BCHX SPV LLC (the “B2BCHX”), incorporated on June 5, 2019, is a wholly owned subsidiary of the Company. B2BCHX does an independent background check on mainland Chinese companies for small businesses globally.

 

Going Concern

 

The Company has generated losses and negative cash flows from operations since inception.  The Company has historically financed its operations from equity financing. The Company anticipates additional equity 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 financings, would be available to the company unsatisfactory terms and conditions if at all. The current pandemic known as COVID-19 as described in Note 9, creates additional uncertainty.

 

The accompanying unaudited condensed 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 unaudited condensed 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 Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for the interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. The unaudited condensed consolidated financial statements include the accounts of all subsidiaries in which the Company holds a controlling financial interest as of the financial statement date. All intercompany transactions have been eliminated in consolidation. However, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the financial position and operating results have been included in these statements. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10–K for the fiscal year ended June 30, 2019, as filed with the SEC on September 30, 2019. Operating results for the nine months ended March 31, 2020 are not necessarily indicative of the results that may be expected for any subsequent quarters or for the fiscal year ending June 30, 2020.



Cash and Cash Equivalents

 

For the purpose of the statement of cash flows, the Company considers cash equivalents to include cash and investments with an original maturity of three months or less.

 

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 March 31, 2020.  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 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 and stock-based compensation. 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.

 

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 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.

 

Net Loss per Share

 

Basic net loss per share is calculated by dividing the net 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 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 stock options and warrants granted, convertible debt, and convertible preferred stock.  There were no potentially dilutive securities for the period ended March 31, 2020 and year ended June 30, 2019.



Fair Value of Financial Instruments

 

The Company follows FASB ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) to measure and disclosure 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 1Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. 

 

Level 2Pricing 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 3Pricing 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 consolidated financial statements for cash, accounts payable and accrued expenses approximate their fair value because of the immediate or short-term nature of these consolidated financial instruments.  

 

Equity Method Investments

 

We began accounting for our ownership in Smartrade Exchange Services, Inc (“Smartrade”) using the equity method of accounting during the quarter ended March 31, 2019. In prior periods, the investment was accounted for under the cost method. The equity method states that if the investment provides us the ability to exercise significant influence, but not control, over the investee, we account for the investment under the equity method. Significant influence is generally deemed to exist if the Company’s ownership interest in the voting stock of the investee ranges between 20% and 50%, although other factors, such as representation on the investee’s board of directors, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting, the investment is recorded at its initial carrying value in the balance sheet and is periodically adjusted for capital contributions, dividends received and our share of the investee’s earnings or losses together with other-than-temporary impairments which are recorded as a component of other income (expense), net in the statements of operations. The Company’s effective ownership in Smartrade was 30% and 25% at December 31, 2019 and June 30, 2019, respectively.  In addition, the Company fully impaired its investment in Smartade as of December 31, 2019 see note 2.

 

Derivative Liability

 

FASB ASC 815, Derivatives and Hedging requires all derivatives to be recorded on the consolidated balance sheet at fair value.  As of June 30, 2019, 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.



Leases

 

In February 2016, the Financial Accounting Standards Board (the “FASB”) established ASC Topic 842, “Leases”, by issuing Accounting Standards Update (“ASU”) No. 2016-02, which requires lessees to now recognize operating leases on the balance sheet and disclose key information about leasing arrangements. ASC Topic 842 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. Lessor accounting under the new standard is substantially unchanged. Additional qualitative and quantitative disclosures are also required. Adoption of this standard did not result in any material changes to the financial statements.

 

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. As of March 31, 2020, the Company had inventories of $37,455. The Company has no allowance for inventory reserves.

 

2.INVESTMENT IN SMARTRADE EXCHANGE SERVICES, INC. 

 

On May 3, 2018, the Company entered into an agreement (“Subscription Agreement”) to purchase 21% of “Smartrade” for $450,000 in various tranches based on defined milestones. Payment shall be made in five installments, each are 45 days apart, over six months beginning on October 15, 2018, as each milestone is completed. On the date the agreement, Smartrade issued 4.66% of its common stock, on a fully diluted basis, to the Company. In exchange, the Company paid the first installment to Smartrade of $100,000 on October 16, 2018.

 

On September 4, 2018, the Company acquired an additional 3% of Smartrade’s common stock for $64,286.  On October 18, 2018, the Company entered into an agreement to purchase an additional 1% of Smartrade’s common stock for $21,429 and receive a royalty of 2.5% of gross revenues of Smartrade to be distributed on a quarterly basis.  On December 7, 2018, the Company paid the second installment of $100,000 for an additional 4.66% of Smartrade’s common stock. On January 18, 2019, the Company paid the third installment of 100,000 for an additional 4.66 % of Smartrade’s common stock.

 

On March 5, 2019, the Company amended the Subscription Agreement that changed the final two payments.  In accordance with the terms of the amendment, on March 6, 2019, the Company paid $32,000 for 7.02% and the remaining $118,000 will be paid in agreed upon monthly payments.  This payment brought the total equity position in Smartrade to 25%.  Accordingly, at March 5, 2019, the Company changed its method of accounting the investment in Smartrade to the equity method. In October 2019, Company gained an additional 5% of Smartrade, in exchange for providing marketing services, bringing its equity position to 30%.

 

During the quarter ended December 31, 2019, Smartrade suspended operations. Because of this and other factors, the Company considered its investment in Smartrade more than temporarily impaired and recorded an impairment charge of $500,055 as of December 31, 2019 bringing the carrying value of this investments to $0.

 

At March 31, 2020 and June 30, 2019, the Company owned 30% and 25% of Smartrade’s common stock.

 

3.NOTES PAYABLE 

 

In March 2018, the Company issued notes that carry an 8% annual interest rate and mature through December 31, 2019. In December 2019, $5,119 of principal was converted into Company common stock and payments



were made of $11,381. The balance of the March 2018 notes was $67,500 and $84,000 at March 31, 2020 and June 30, 2019.  The note is currently past due, and the Company is in discussion with the note holder to renegotiate the terms.

 

On July 3, 2019, the Company issued a $250,000 convertible promissory note (the “July 2019 Note”) to a lender (the “Lender”).  According to the terms the Lender funded the July 2019 Note as follows: $100,000 upon the execution of the Note, $50,000 on August 1, 2019, $50,000 on September 1, 2019, and the remaining $50,000 on October 1, 2019.  The outstanding principal balance of the Note shall bear interest at the rate of twelve percent (12%) per annum.  The balance of the Note was $250,000 at March 31, 2020.

 

On October 1, 2019, the Company entered into a securities purchase agreement with an investor (“Investor”) to issue up to $220,000 of convertible promissory notes in monthly tranches of $55,000 at the Investor’s discretion.  As of March 31, 2020, the balance of these promissory notes was $177,500.  These notes accrue interest at 10% per annum.

 

On November 22, 2019, Company issued a $170,000 convertible promissory note (the “November 2019 Note”) to the Lender that accrues interest at 12% per annum.  The July and November Notes contain embedded derivatives, see Note 8.

 

4.RELATED PARTY TRANSACTIONS 

 

Due to Officer

 

The balance due to the officer at March 31, 2020 and June 30, 2019 was $6,428 and $9,580. There are no definitive repayment terms and no interest is accruing on these advances.

 

Due to Smartrade

 

At March 31, 2020 and June 30, 2019, the Company had a balance payable totaling $1,136 and $61,034, respectively, for the purchase of interest in Smartrade (See note 2).

 

5.CONCENTRATIONS 

 

Cash Concentration

 

The Company maintains its cash and cash equivalents at a financial institution which may, at times, exceed federally insured limits. At March 31, 2020, the Company’s cash balance did not exceed the FDIC insurance limit.  The Company has not experienced any losses in such accounts.  

 

6.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 at March 31, 2020.

 

Agreements

 

On April 4, 2018, the Company entered into an agreement with GHS, where the Company is entitled, at its sole discretion, to request equity investments of up to $5 million over twenty-four months following an effective registration of the underlying shares.

 

Common Stock Payable

 

As of March 31, 2020, and June 30, 2019, the Company owes a vendor $54,999 and $80,416 worth of common stock for services rendered, respectively.



7. SHAREHOLDERS’ EQUITY (DEFICIT) 

 

Common Stock

 

As of March 31, 2020, and June 30, 2019, there were 124,787,531 and 119,059,674 shares of common stock issued and outstanding, respectively.

 

In December 2019, the Company issued $200,000 of common stock for the conversion of $6,994 of debt and accrued interest.

 

On March 23, 2020, the Company sold 1,000,000 shares of common stock to an existing shareholder at $0.10 per share, or $100,000.

 

During the nine months ended March 31, 2020, the Company issued 4,527,857 shares of common stock to consultants and board members for services valued between $0.10 and $0.21 per share, or $736,451.

 

During the 2018 fiscal year, the Company issued 90,000,000 shares of restricted common stock to the officer as compensation for services as Chief Executive Officer.  The shares vest over four years and were valued at $0.0625 per share.  The shares are being expensed over four years, or $1.4 million per year. For the three and nine months ended March 31, 2020, $351,563 and $1,054,688 of stock compensation was recognized, respectively. The Company determined fair value of its shares of common stock based on the price at which the Company was selling its shares of common stock to third party investors.

 

8.CONVERTIBLE DEBT AND DERIVATIVE LIABILITY 

 

The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate.  Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and shares to be issued were recorded as derivative liabilities on the issuance date.

 

The Company recognized a derivative liability which it valued using the Black-Scholes-Merton model. A summary of quantitative information with respect to valuation methodology and significant unobservable inputs used for the Company’s common stock purchase warrants that are categorized within Level 3 of the fair value hierarchy at March 31, 2020 is as follows:

 

 

 

 March 31, 2020

 

Stock price

 

$

0.19

 

Exercise price

 

$

0.24 – 0.401

 

Contractual term (in years)

 

 

1.25 – 1.64

 

Volatility (annual)

 

 

290.7%

 

Risk-free rate

 

 

0.23%

 

 

The foregoing assumptions are reviewed quarterly and are subject to change based primarily on management’s assessment of the probability of the events described occurring. Accordingly, changes to these assessments could materially affect the valuations.

 

Financial Liabilities Measured at Fair Value on a Recurring Basis

 

Financial liabilities measured at fair value on a recurring basis are summarized below and disclosed on the balance sheet under Derivative liability – warrants and derivative liabilities:

 



 

 

Fair value measured at March 31, 2020

 

 

 

Quoted prices in active

 

 

Significant other

 

 

Significant

 

 

 

 

 

 

markets

 

 

observable inputs

 

 

unobservable inputs

 

 

Fair value at

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

March 31, 2020

 

Derivative liability – convertible note

 

$

 

 

$

 

 

$

248,155

 

 

$

248,155

 

Total

 

$

 

 

$

 

 

$

248,155

 

 

$

248,155

 

 

The fair value accounting standards define fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is determined based upon assumptions that market participants would use in pricing an asset or liability. Fair value measurements are rated on a three-tier hierarchy as follows:

 

 

Level 1 inputs: Quoted prices (unadjusted) for identical assets or liabilities in active markets;

 

 

Level 2 inputs: Inputs, other than quoted prices included in Level 1, that are observable either directly or indirectly; and

 

 

Level 3 inputs: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

There were no transfers between Level 1, 2 or 3 during the nine months ended March 31, 2020.

 

During the nine months ended March 31, 2020, the Company recorded a loss from change in fair value of derivative liability of $50,323.

 

The following table presents changes in Level 3 liabilities measured at fair value for the period ended March 31, 2020

 

 

Derivative Liability

 

 

 

Balance – June 30, 2018

$

                           —

Liabilities

 

21,021  

Change in fair value of warrant liability

(1,197) 

Balance – June 30, 2019

$

19,824  

Changes due to issuances and redemptions

 

178,008  

Change in fair value of warrant liability

50,323  

Balance – March 31, 2020

$

248,155  

 

The balance of the derivative liability at March 31, 2020 and June 30, 2019 was $248,155 and $19,824, respectively.

 

9.SUBSEQUENT EVENTS 

 

Subsequent to March 31, 2020, the global economy has continued to be severely impacted by the COVID-19 pandemic and the Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how it will impact the Company’s ability to raise capital, develop future projects and /or market existing ecommerce platforms. While we did not incur significant disruptions from the COVID-19 pandemic during the nine months ended March 31, 2020, we expect this situation could have an impact on our



future business and results of operations in later periods of 2020 that may be material, but cannot be reasonably estimated at this time due to numerous uncertainties.

 

On April 7, 2020, the Company entered into a Securities Purchase Agreement with an investor pursuant to which the Company sold a convertible note bearing 8% interest in the principal amount of $111,290.

 

On April 22, 2020, the Company, entered into a letter agreement with Maxim Group, LLC (“Maxim”) for Maxim to provide general financial advisory, investment banking, and digital marketing services for the Company.  The fees paid to Maxim in exchange for the services under the agreement are a combination of cash and common stock.  On May 7, 2020, the Company issued 2,250,000 shares of common stock to Maxim.

 

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”) was formed March 5, 2018, in Nevada and has offices in San Francisco, California and Shanghai, China.  Our office in San Francisco, California allows us to take advantage of the marketing opportunities available in the United States as well as keeping close proximity to sources of capital whether it is debt or equity.  Our offices in Shanghai, China allows us to take advantage of a high concentration of skilled tech coders and developers at lower capital costs than in more developed countries such as the United States or Europe.  The Company’s mission is using digital technology to create and invest in APPs and websites that make life, business and living easier, more efficient and just smarter.  

 

Plan of Operation

 

During the next twelve months, the Company plans to complete the current projects we have already begun coding. Our marketing and business management/executive team will operate from both Shanghai China and our offices in San Francisco. We will continue to explore new concepts and opportunities to invest in projects that meet our criteria We have not generated any revenue and have incurred expenses and operating losses, as part of our developmental stage activities in developing three apps, B2BCHX, DRINX and ROOSTER.  B2BCHX is our first fully developed app that is available in iTunes App Store and Google Play and a functioning ecommerce website.  B2BCHX allows business owners around the world to order three levels of background checks on Chinese companies to prevent fraudulent business transactions.  The retail price for each report is US$79, $399 and $1299.

 

Our DRINX app is in development and we believe the beta version will be ready by the middle of the first quarter of fiscal year 2020.  DRINX app allows anyone to purchase a virtual drink ticket anywhere and at any time for friends and colleagues.  We anticipate the sources of revenue will come from advertising and sponsorships from alcohol companies promoting products on the app, user fee of $0.99 to send each drink and discounts provided by the bars and restaurants for purchases made by the app.

Our ROOSTER app and ecommerce website has been developed and launched full commercial operations in the



second quarter of fiscal year 2020.  ROOSTER allows men to order their entire toiletry kit delivered on a monthly or bi-monthly schedule through the dashboard of the app.  We anticipate the sources of revenue will come from subscriptions averaging $500 per year and advertising and sponsorships.

Our business model is to develop and build out our Drinx and Rooster Apps and web-based business over the next year.  We plan to engage multiple resources and partners to market our first two completed projects B2BCHX and Smartrade.  We anticipate that Drinx and Rooster will launch and be marketed within the next twelve months.  In additional to our App development, we intend to find projects that can be assisted by our marketing and capitalization capabilities where we can play an active role in the project’s success.

Results of Operations for Three Months Ended March 31, 2020 and March 31, 2019

 

Revenue

 

For the three months ended March 31, 2020, we generated revenue of $1,312 through our subsidiary Rooster. The Company has been in the process of marketing and developing its apps, hiring developers and coders, incurring professional fees for registering its common stock and identifying other apps and partnerships to generate revenues as the Company expands its operations.

 

Operating expense

 

For the three months ended March 31, 2020 and 2019 we had a loss from operations of $512,952 and $478,448, respectively.  This increase in loss was primarily due to the expenses incurred by one of the Company’s newly formed entity Applife Shanghai.

 

Other expense

 

For the three months ended March 31, 2020 and 2019, we incurred $77,905 and $11,146 of other expense, respectively, which was primarily due to the increase in fair value of derivative liability of $32,690 and $0 and interest expense of $45,215 and $557, respectively. 

 

Net loss

 

We reported a net loss of $589,628 and $479,005 for the three months ended March 31, 2020 and 2019, respectively.

 

Results of Operations for Nine Months Ended March 31, 2020 and March 31, 2019

 

Revenue

 

For the nine months ended March 31, 2020, we generated revenue of $1,458 through our subsidiary Rooster. The Company has been in the process of marketing and developing its apps, hiring developers and coders, incurring professional fees for registering its common stock and identifying other apps and partnerships to generate revenues as the Company expands its operations.

 

Operating expense

 

For the nine months ended March 31, 2020 and 2019 we had operating expenses of $2,619,976 and $939,307, respectively. This loss was due primarily the stock compensation to the CEO, impairment on equity method investment and professional fees paid to consultants.

 

Other expense

 

For the nine months ended March 31, 2020 and 2019, we incurred $678,391 and $15,212 of other expense, respectively which was due to interest expense of $113,375 and change in fair value of derivative liability of $50,323.  

 

Net loss

 

We reported a net loss of $2,782,438 and $943,930 for the nine months ended March 31, 2020 and 2019, respectively.



Working Capital

 

 

March 31, 2020

Current assets

$

227,908  

Current liabilities

 

(845,032) 

Working capital / (deficit)

$

(617,124) 

 

We anticipate generating losses and, therefore, may be unable to continue operations in the future. If we require additional capital, we would have to issue debt or equity or enter into a strategic arrangement with a third party.

 

Going Concern

 

As reflected in the accompanying financial statements, the Company has currently small revenue generating operations and has an accumulated deficit $4,444,074 and $1,661,636 as of March 31, 2020 and June 30, 2019, respectively. In addition, the Company has experienced negative cash flows from operations since inception. 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 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 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

 

Liquidity and Capital Resources

 

 

 

Nine Months Ended

March 31, 2020

 

Nine Months Ended March 31, 2019

Net Cash Used in Operating Activities

$

(491,741) 

 

(159,675) 

Net Cash Used in Investing Activities

 

 

(317,716) 

Net Cash Provided by Financing Activities

 

546,444  

 

536,538  

Net Increase (Decrease) in Cash

$

54,703  

 

59,147  

 

Our cash was $120,357 at March 31, 2020.  We recorded a net loss of $589,628 and $2,782,438 for the three and nine months ended March 31, 2020.  We expect our expenses will continue to increase during the foreseeable future as a result of increased operations and the development of our apps and business operations.  We anticipate generating revenues with our B2BCHX app, but only minimal revenues for our other apps over the next twelve months.  Consequently, we are dependent on the proceeds from future debt or equity investments to sustain 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 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.

 

We presently do not have any significant credit available, bank financing or other external sources of liquidity.  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 capital, 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 apps, 

 

·Seek strategic partnerships that may force us to relinquish significant rights to our apps, or 

 

·Explore potential mergers or sales of significant assets of our Company

 

Investing Activities

 

On March 5, 2019, the Company amended the Subscription Agreement that changed the final two payments.  In accordance with the terms of the amendment, on March 6, 2019, the Company paid $32,000 for 7.02% and the remaining $118,000 will be paid in agreed upon monthly payments.  This payment brought the total equity position in Smartrade to 25%.  Accordingly, at March 5, 2019, the Company changed its method of accounting the investment in Smartrade to the equity method. In October 2019, Company gained 5% of Smartrade share bringing its equity position to 30% of Smartrade.

 

At December 31, 2019, the Company owned 30% of Smartrade’s common stock. At December 31, 2018, the Company owned 4.66% of Smartrade’s common stock, respectively.

 

During December 31, 2019, Smartrade ceased operations. As a result, the Company considered its investment in Smartrade more than temporarily impaired and has written off the full amount of investment of $500,055.

 

Financing Activities  

 

During the nine months ended March 31, 2020, the Company received $546,444 from the proceeds of notes payable.

 

Professional Fees

 

Professional fees were $743,461 and $109,215 for the nine months ended March 31, 2020 and 2019, respectively. The Company expects professional fee costs to increase as the Company is a public reporting company with the Securities and Exchange Commission, which requires that it maintain relationships with both PCAOB registered audit firms and securities counsel to assist with the SEC reporting requirements. In addition, the Company may also attempt to purchase other entities or assets and operations of other entities if the advantageous situation presents itself. This could require the Company to incur substantial professional fees.

 

Critical Accounting Policies and Estimates

 

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles (“GAAP”) and 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 financial statements and accompanying notes. Note 1, “Organization and Summary of Significant Accounting Policies,” of the Notes to Financial Statements included in this Form 10-Q, describes the significant accounting policies and methods used in the preparation of the Company’s 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. 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 will recognize 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.

 

Emerging Growth Company

 

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.

 

Recently Issued Accounting Pronouncements

 

We do not expect the adoption of any recently issued accounting pronouncements to have a significant impact on our net results of operations, financial position, or cash flows.

 

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.

 

 

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

 

Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act").  Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2020, due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. 

 

Changes in Internal Control over Financial Reporting

 

Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.

 

The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.



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.

 

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

On March 23, 2020, the Company sold 1,000,000 shares of common stock to an existing shareholder at $0.10 per share, or $100,000.

 

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4.  MINE SAFETY DISCLOSURES.

 

Not Applicable.

 

ITEM 5.  OTHER INFORMATION.

 

None.

 

ITEM 6.  EXHIBITS

 

Exhibit Number

Description of Exhibit

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 and 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: May 13, 2020

/s/ Matt Reid 

  

Matt Reid, Principal Executive Officer, Principal Accounting Officer and Director

  

 


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
6/30/20
Filed on:5/13/20
5/11/208-K
5/7/20
4/22/20EFFECT
4/7/20
For Period end:3/31/20
3/23/20
12/31/1910-Q
11/22/198-K
10/1/198-K
9/30/1910-K,  10-Q
9/1/19
8/1/198-K
7/3/198-K
6/30/1910-K,  10-K/A
6/5/19
4/9/19
3/31/1910-Q
3/6/19
3/5/19
1/18/19
12/31/1810-Q,  NT 10-Q
12/7/18
10/18/18S-1
10/16/18
10/15/18
9/4/18
6/30/18
5/3/18
4/4/18
3/5/18
 List all Filings 
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