How to transform the string "AABSSSD" into "2AB3SD"?

In your else part you should set counter to 1 instead of 0 as new character is having it's first occurrence,

else {
    newStr.append(count);
    newStr.append(temp);
    count = 1;//Just change this
}

and replace 1 instead of 0 from the String x = x.replace("1", ""); because 0A does not look valid as A occurred once in the String so it should be 1A instead of 0A.