Alfi, Inc. - Annual Report: 2021 (Form 10-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2021

For the transition period from                  to

Commission file number 001-40294

Alfi, Inc.

(Exact name of registrant as specified in its charter)

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Registrant’s telephone number including area code: (305) 395-4520

Securities registered pursuant to Section 12(b) of the Exchange Act:

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Securities registered under Section 12(g) of the Exchange Act: None

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 15(d) of the Exchange 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. Yes  ☐    No  ☒

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☐    No  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐    No  ☒

The aggregate market value of the voting common equity held by non-affiliates of the registrant as of June 30, 2021, was $118,809,433. As of April 30, 2022, there were 16,094,882 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

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USE OF MARKET AND INDUSTRY DATA

This Annual Report on Form 10-K includes market and industry data that we have obtained from third-party sources, including industry publications, as well as industry data prepared by our management on the basis of its knowledge of, and experience in, the industries in which we operate (including our management’s estimates and assumptions relating to such industries based on that knowledge). Management has developed its knowledge of such industries through its experience and participation in these industries. While our management believes the third-party sources referred to in this Annual Report on Form 10-K are reliable, neither we nor our management have independently verified any of the data from such sources referred to in this Annual Report on Form 10-K or ascertained the underlying economic assumptions relied upon by such sources. Furthermore, internally prepared and third-party market prospective information, in particular, are estimates only and there will usually be differences between the prospective and actual results, because events and circumstances frequently do not occur as expected, and those differences may be material. Also, references in this Annual Report on Form 10-K to any publications, reports, surveys or articles prepared by third parties should not be construed as depicting the complete findings of the entire publication, report, survey or article. The information in any such publication, report, survey or article is not incorporated by reference in this Annual Report on Form 10-K.

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TRADEMARKS, SERVICE MARKS AND TRADE NAMES

We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This Annual Report on Form 10-K may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks and trade names or products in this Annual Report on Form 10-K is not intended to, and does not imply a relationship with, or endorsement or sponsorship, by us. Solely for convenience, the trademarks, service marks and trade names referred to in this Annual Report on Form 10-K may appear without the ®, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable owner of these trademarks, service marks and trade names.

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OTHER PERTINENT INFORMATION

On March 1, 2021, we enacted a forward stock split on a 1.260023:1.000000 basis. Unless otherwise noted herein, all share and per share amounts reflected in this Annual Report on Form 10-K are presented post-split.

Unless the context otherwise indicates, when used in this Annual Report on Form 10-K, the terms “Alfi” “we,” “us,” “our,” the “Company” and similar terms refer to Alfi, Inc., a Delaware corporation and its wholly-owned subsidiary, Alfi (N.I.) Ltd.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. All statements included in this Annual Report on Form 10-K regarding our business and technology development, our strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. These forward-looking statements are based on management’s current beliefs, based on currently available information, as to the outcome and timing of future events. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements about:

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We caution you that the foregoing list may not contain all of the forward-looking statements made in this Annual Report on Form 10-K.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report on Form 10-K primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described elsewhere in this Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

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PART I

ITEM 1.BUSINESS

Overview

We seek to provide solutions that bring transparency and accountability to the digital out of home (“DOOH”) advertising marketplace. Alfi uses artificial intelligence and big data analytics to measure and disseminate audience presence and audience demographics. Our computer vision technology is powered by proprietary artificial intelligence, to determine the relevant demographic and geospecific information of the audience in front of an Alfi-enabled device, such as a tablet or kiosk.  Alfi can then deliver in real-time, the advertisements to that particular viewer based on the viewer’s demographic profile and/or geolocation.  Alfi is designed to deliver the right marketing content, to the right person at the right time in a responsible and ethical manner.  By delivering the advertisements most relevant to the audience in front of the device, we connect our advertising customers to the viewers they seek to target.  The result is higher click through rates (“CTRs”), higher QR code scans and higher cost per thousand rates (“CPMs”).

Alfi seeks to solve the problems facing advertisers in the DOOH marketplace, as its proprietary technology is designed to measure the audience when an advertisement is displayed.  Our data rich reporting functionality is able to inform the advertiser exactly when someone viewed each ad, as well as the general demographic and geospecific characteristics of the viewing audience. Alfi can provide large and small businesses access to data-driven insights by expanding their advertising capabilities, by providing analytical sophistication and by delivering it all over multiple devices.  In addition to the traditional Content Management System model that delivers adverts on a scheduled loop, Alfi’s technology is able to first analyze the audience and determine the most relevant content to be displayed.

Alfi has created an enterprise grade, multimedia computer vision and machine learning platform, capable of generating powerful advertising recommendations and insights.  Multiple technologies work together with viewer privacy and data-rich reporting as our primary objectives.  Alfi is able to use a facial fingerprinting process to make demographic determinations.  As such, Alfi makes no attempt to identify the individual in front of the screen.  Brand owners do not need to know someone’s name or invade their privacy to gain a deeper understanding of the consumers who view their content.  By providing age, gender and geolocation information, we believe brand owners should have the pertinent data they need for meaningful insight.  From an analytics perspective, these data points are intended to provide meaningful reporting instead of arbitrary calculations based on estimates of ad engagement.

Alfi seeks to solve the problem of providing real time, accurate and rich reporting on customer demographics, usage, interactivity and engagement while never storing any personally identifiable information.  No viewer is ever required, or requested by us, to enter any information about themselves on any Alfi-enabled device.

Our initial focus is to place our Alfi-enabled devices in malls, airports rideshares and taxis.  We also have begun offering our software solution to other DOOH media operators as a Software as a Service (“SaaS”) product.

Currently, we intend to charge customers solely based on a CPM, or ads delivered, model.  As we continue to deploy Alfi in the marketplace, we expect to charge customers based on a combination of CPM and CTR, and we expect we will generate higher CPM rates than typical DOOH advertising platforms because we have the ability to only deliver ads to the customer’s desired demographic.  In addition, we also intend to provide the aggregated data to the brands so they can make more informed advertising decisions.

Advertising Industry Background

According to the Interactive Advertising Bureau Internet Advertising Revenue Report, the digital advertising (internet) marketplace grew to $189 billion in 2021. The DOOH marketplace is experiencing rapid growth due to, among other things, the rise in digitization and the declining demand for traditional billboards, paired with easy data integration. Additionally, we believe that the reduced cost of digital screens will also drive the market opportunity. Previously, advertisers could not effectively target viewers in out of home (“OOH”) and DOOH, having instead to rely on either static boards, or if placed on digital screens, their advertisements could only be played in an ongoing multi-ad loop for mass reach without viewer-based targeting.

In online advertising, advertisers have had access to behavioral and personal user data to know more about the viewer through the use of “cookies”.  The tracking cookie has been a key component to the growth of online advertising, built into nearly every website

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and online / mobile advertising medium. Cookies are designed to provide a system to capture personal data about customers, their browsing history, and their preferences and behaviors.  Depending on the sophistication and the data solicited, an advertiser could learn a great deal about their potential customers and target their ad messaging accordingly. The data derived has been used in targeting and retargeting ads, behavioral marketing tactics and display advertising strategies.  Cookies are the reason the ads a viewer was served as they browsed websites on their phone, tablet or computer would align with their interests and browsing history.

The data that cookies gathered was intrusive, and consumers have come to distrust cookies primarily because of their invasive nature and privacy concerns.  Smart technologies and apps have been developed to allow consumers to block cookies, and many consumers have done so. Globally, cookies are generally in the process of being phased out for online advertising and major search engines, forcing advertisers to rely more on contextual-based marketing rather than viewer-based targeting. This has forced advertisers to look for new ways to track consumer behavior without invading a consumer’s privacy, exposing the need for a new, targeted advertising technology that also prioritizes privacy compliance.

Historically, in the DOOH advertising marketplace, the best targeting an advertiser could utilize was the geolocation of their ad delivery on a screen (kiosk, video wall, digital billboard, etc.), day parting (time specific ad delivery), or an estimated forecast of the expected number of people that would be in that area based on typical consumer traffic for that time of year (such as a mall or an airport).  Advertisers would not get any information on the audience that might have actually seen their ad, for how long the ad was viewed, or the actual count of people in the area when the ad was displayed.  This resulted in wasted advertising dollars spent reaching the wrong audience (target market) or no audience at all – also known as unmeasurable and unverifiable impressions. This approach of unverified impressions meant a significant percentage of DOOH campaigns were executed to the wrong targets or no targets at all.

Internet advertising has faced another growing issue with online ad fraud. Digital advertising fraud occurs when an ad is displayed on either a fake website or to a ‘bot’ in an effort to inflate web traffic numbers, or served below the viewing area on the screen (but still charged as a delivered “impression.”)  Data and confidence in ad delivery is critically important to advertisers.  Savvy advertisers recognize that they need to make their decisions based on more comprehensive and accurate data to improve the efficiency of their advertising dollars.  Currently, advertisers cannot get that data in DOOH because it does not exist.

By providing artificial intelligence based, facial detection driven real time and post campaign reporting data, and delivering advertisements to the desired demographic, Alfi seeks to solve both problems facing advertisers in the DOOH and digital advertising marketplace without invading the privacy of the person viewing the ad.

Our Strategy

Alfi seeks to solve the problems facing advertisers in the DOOH marketplace, as its proprietary technology is able to determine when an advertisement was displayed, verify someone was in front of the screen, as well as report basic demographic and geolocation information. This actualized information is the data that advertisers seek to make strategy decisions. In addition to providing a new type of data to the DOOH marketplace, by telling advertisers actualized numbers as well as the demographic makeup of their campaign’s viewing audience, Alfi’s technology is able to provide confirmation to advertisers that they have reached their desired demographic and total number of purchased impressions. By delivering verified impressions, advertisers know their ad dollars were not wasted and their desired audience was reached, bringing digital accountability and audience transparency to the DOOH marketplace.

The main elements of our growth strategy are:

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Our Products and Services

Alfi is an enterprise grade, multimedia state-of-the-art computer vision and machine learning platform, generating powerful advertising recommendations and insights.  Multiple technologies work together in Alfi with viewer privacy and data-rich reporting as our primary objectives. Alfi is able to use a facial fingerprinting process to make demographic determinations.  As such, Alfi makes no attempt to identify the individual in front of the screen.  Brand owners do not need to know a person’s name or invade their privacy to gain a deeper understanding of the consumers viewing their content.  By providing age, gender and geolocation information, we believe brand owners should have all of the data they need for meaningful interaction.  From an analytics perspective, these data points are intended to provide meaningful reporting instead of arbitrary calculations of ad engagement.

Alfi can be installed on most Linux or Android-based internet enabled devices enabled with a camera.  Our initial rollout of Alfi-owned devices started with tablets connected by cellular data service in taxis and rideshares.  The device rollout continues as we target airports and malls with kiosks.

We also will seek to license our software to other DOOH media operators on a subscription basis.  In addition to the subscription license fees, we will be able to capture additional data that should give us more detailed demographic information that we will be able to make available to advertisers.  We believe there are other uses for Alfi outside of advertising, and we will continue to explore and evaluate such uses so that we may endeavor to license the software for other uses.

Both our tablets and kiosks contain Alfi’s computer vision technology powered by proprietary artificial intelligence that determines the age, gender and geolocation of someone in front of the device.  Alfi can then deliver in real-time, curated advertisements to that particular viewer based on the viewer’s demographic and geolocation information.  Alfi is designed to deliver the right content, to the right person at the right time in a responsible and ethical manner.

Alfi gives large and small businesses access to data-driven insights by expanding their advertising capabilities, by providing analytical sophistication and by delivering it all over multiple devices.  If an advertiser wants to target a specific advert to a demographic, Alfi is able to deliver the content whenever a person fitting that demographic is in front of the device.

Marketing Strategy

We intend to market Alfi to advertisers and other DOOH and OOH media operators as the first facial detection-based ad technology offering verified impressions and true audience measurement based on “eyes on screens” (as opposed to measuring “exposed mobile devices” that are within a certain proximity of an OOH ad – which is currently the norm for measurement in the DOOH / OOH marketplace).

We provide Alfi-enabled tablets to independent ride share drivers and taxi fleets who install the tablets on the back of the passenger seat head rest in their vehicles. We intend to market Alfi tablets to the drivers as an additional source of income by earning monthly commissions based on their driving hours with passengers in front of our tablets.  We also intend to sell our kiosks into a variety of locations, including, airports, sports venues, shopping malls, hotels, hospitals, transit hubs and museums. We also will seek to enter into revenue sharing agreements with these place-based entities where we install our kiosks, video walls and digital boards, and to sell ads onto their screen network.

We intend to market Alfi to advertisers and ad agencies as the first artificial intelligence-based, demographic targeted digital out of home platform offering verified impressions. We will seek to sell advertising campaigns onto the Alfi tablet network in rideshare and taxi vehicles, and onto our kiosks through revenue share agreements with the place-based digital screen networks (airports, malls,

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transit hubs, etc.). By offering advertisers a verified audience / verified impressions capability, DOOH marketers will have the first out of home ad channels that confirm their campaign is being viewed by an actual person or people, in their targeted demographic, and provide data telling them when and where the ads were seen.  We believe that verified impressions will allow us (and our partners) to charge premium CPM rates compared with other DOOH and OOH media as well as realize additional revenue by charging for QR code activations, and paying for our data from true campaign measurement.

As mentioned above, we intend to market the Alfi tech stack, facial detection-based ad solution to other DOOH and OOH media operators. Our intended message is that media operators can license Alfi’s software to have it installed onto their screens, thus allowing them to charge more for advertising (because of the targeting capabilities), as well as giving them the access to Alfi’s audience measurement and data. We believe that these capabilities will allow place-based venues to take advantage of the Alfi audience information to sell more advertising, but also to identify the audience details of the people that in fact pass their screens each month and use that information to enhance their other business functions.

Our Technology

Alfi’s technology is a set of independent granular services joined together to create a SaaS cloud-based platform. Coupled with our proprietary artificial intelligence and machine learning enabled devices are able to conduct an analysis of an audience in many different contexts.

Additionally, as a member or members of the audience remain in front the device, Alfi is able to monitor the level of engagement and dwell time of that audience, reporting these metrics back to the cloud for curation. This information is then aggregated and disseminated back to the relevant parties via rich reporting with drill-through capabilities.

Our Intellectual Property

We believe that our intellectual property rights are important to our business. We rely on a combination of patents, trademarks, service marks, copyrights, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary technology and other intellectual property. We have registered, and applied for the registration of, U.S. and international trademarks, service marks, and domain names. Our domestically-applied for trademarks include, among others, the word mark ALFI, our stylized A and ALFI logos for various software and hardware related to our business.  We have registered the word mark ALFI, our stylized A and ALFI logos

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mark in a number of foreign countries. Additional domestic and foreign trademark applications are pending.  The trademarks that we currently use have not been registered in all of the countries outside of the U.S. in which we do business or may do business in the future and may never be registered in all of these countries.  We have been granted two patents and have additional patent applications pending in the U.S. and foreign countries related to certain aspects of our technology.  We have also registered our ownership of the internet domain name “www.getalfi.com” and other internet domain names. We have in the past protected, and expect to continue to protect, our proprietary rights. We cannot predict whether steps taken by us to protect our proprietary rights will be adequate to prevent misappropriation of these rights or the use by others of features based upon, or otherwise similar to, our concept, services, and products. Any actions or litigation undertaken to enforce our rights will likely be costly. In addition, we may face claims of misappropriation or infringement of third parties’ trademarks, patents or other intellectual property rights. Defending these claims may be costly and, if unsuccessful, may prevent us from continuing to use certain intellectual property rights or information in the future and may result in a judgment or monetary damages.

Privacy Regulation and Compliance

Multiple technologies work together in Alfi with viewer privacy and reporting objectives as our two goals.  Alfi uses a facial fingerprinting process to make demographic determinations. As such, Alfi makes no attempt to identify the individual in front of the screen.  Brand owners do not need to know someone’s name or invade their privacy to gain a deeper understanding of the consumers viewing their content.  By providing age, gender and geolocation information, we believe brand owners should have all of the data they need for meaningful interaction.  From an analytics perspective, these data points are intended to provide meaningful reporting instead of arbitrary calculations of ad engagement.

Alfi seeks to solve the problem of providing real time, accurate and rich reporting on customer demographics, usage, interactivity and engagement while never storing any personal identifiable information.  No viewer is ever required, or requested by us, to enter any information about themselves on any Alfi-enabled device.  Alfi is designed to be fully compliant with all privacy regulations, including the General Data Protection Regulation (“GDPR”) in Europe, the California Consumer Privacy Act and the Health Insurance Portability and Accountability Act.

The GDPR is a comprehensive data privacy law intended to protect fundamental rights and freedoms of natural persons related to their personal data.  The GDPR applies to the processing of personal data wholly or partly by automated means and to the processing other than by automated means of personal data which form part of a filing system or are intended to form part of a filing system. Personal data is defined as any information relating to an identified or identifiable natural person data subject; an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person.  The legal requirements of the GDPR, however, do not apply if the personal data is not processed.  Alfi is specifically designed to comply with the most stringent privacy standard of the GDPR.  All of Alfi’s capture data systems anonymize incoming data, making the system incapable of identifying a specific person or processing any of their personal data.

Alfi’s data analysis and storage systems prevent violations and hacking through a complex system of protections and maintain privacy compliance as follows:

We continually monitor evolving privacy standards to make sure Alfi is compliant with the most stringent standards that could apply to our data.

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Competition

The digital video advertising market is intensely competitive, with many companies providing competing solutions. We believe rideshare and taxi- based advertising is a growing segment of the expanding DOOH and OOH marketplace.  In-car digital video ads playing on internet connected networks of tablets in the backseat is a popular media option in the rideshare based area. Alfi primarily competes with companies that have in-car tablet networks, and secondarily with companies providing rideshare advertising opportunities in general; through digital screens mounted on top of the cars and also messaging outside the car with vehicle wraps.  The competitive in-car tablet networks are operated by Octopus (recently purchased by T-Mobile), Curb Mobility (Taxi TV), Creative Mobile Technology (CMT), and Firefly Systems.  Each competitor has in-car digital tablets through which they sell advertising to the rideshare audience of passengers.

Alfi will also compete with online advertising publishers, online search engines, and social media platforms, such as Google (YouTube and DoubleClick), The Trade Desk and Facebook, for advertisers and ad networks.

Alfi’s SaaS product is a full stack ad tech solution utilizing artificial intelligence based, facial detection technology for content management, ad serving and audience measurement to DOOH media network operators such as airports, shopping malls, sports venues, transit hubs, etc. In this regard, we will compete with other software as service business such as Quividi (from France) and Ad Mobilize (from Miami Lakes, Florida).

Our competitors may establish or strengthen cooperative relationships with advertisers, or other parties, which will limit our ability to promote our solutions and generate revenue. For example, advertiser customers that adopt demand-side advertiser platforms disrupt our direct customer relationship with those customers. Competitors could also seek to gain market share by reducing the prices they charge to publishers or advertisers, introducing products and solutions that are similar to ours or introducing new technology tools for advertisers and digital media properties. Moreover, increased competition for video advertising inventory from digital media properties could result in an increase in the portion of advertiser revenue that we must pay to digital media property owners to acquire that advertising inventory.

Some large advertising agencies that represent advertising customers have their own relationships with digital media properties and can directly connect advertisers with digital media properties. Our business will suffer to the extent that our advertisers and digital media properties purchase and sell advertising inventory directly from one another or through other companies that act as intermediaries between advertisers and digital media properties. Other companies that offer analytics, mediation, ad exchange or other third-party solutions have or may become intermediaries between advertisers and digital media properties and thereby compete with us. Any of these developments would make it more difficult for us to sell our solutions and could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses or the loss of market share.

Our Team

We are a development stage company and currently have approximately 40 employees, including 33 full time employees. Of our employees, 13 are technical developers of Alfi and 10 are sales and marketing focused. We have been able to locate and engage highly qualified employees as needed and do not expect our growth efforts to be constrained by a lack of qualified personnel. None of our employees are represented by a union or parties to a collective bargaining agreement. We consider our relations with our employees and consultants to be good.

Organizational and Corporate Information

Alfi, Inc. is incorporated in Delaware. The Company’s timeline of events relative to its current formation began on April 4, 2018, when Lectrefy, Inc., a Florida corporation, was incorporated. On July 6, 2018, Lectrefy, Inc., a Delaware corporation, was incorporated. On July 11, 2018, Lectrefy, Inc., the Florida corporation, was merged into the newly created entity Lectrefy, Inc., the Delaware corporation. On July 25, 2018, Lectrefy, Inc., the Delaware corporation, became qualified to do business in Florida. On January 31, 2020, Lectrefy, Inc., the Delaware corporation, changed its name to Alfi, Inc.

Our mailing address is 429 Lenox Avenue, Miami Beach, Florida, 33139. Our telephone number is (305) 395-4520.

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Available Information

Our website, www.getALFI.com, provides access, without charge, to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (“SEC”). The information provided on our website is not part of this Annual Report on Form 10-K (this “Annual Report”) and is therefore not incorporated by reference unless such information is otherwise specifically referenced elsewhere in this Annual Report. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding our company that we file electronically with the SEC.

The references to our website, www.getALFI.com, in this Annual Report do not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this Annual Report.

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Implications of Being an Emerging Growth Company

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). For as long as we are an emerging growth company, unlike public companies that are not emerging growth companies under the JOBS Act, we will not be required to:

We will cease to be an emerging growth company upon the earliest of the:

We have elected to take advantage of certain of the reduced disclosure obligations in this Annual Report and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.

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 of 1933, as amended (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.

Recent Updates

Initial Public Offering

On May 3, 2021, our registration statement on Form S-1(File No. 333-251959) was declared effective by the SEC, and we completed its IPO on May 6, 2021. In connection with the IPO, we issued and sold 4,291,045 shares of our common stock, $0.0001 par value per share (the “Common Stock”), and warrants to purchase 4,291,045 shares of Common Stock (including 559,701 shares of Common Stock and warrants to purchase 559,701 shares of Common Stock pursuant to the full exercise of the underwriters' overallotment option), at the combined public offering price of $4.15, for aggregate gross proceeds of approximately $17.8 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by us. The warrants were exercisable immediately upon issuance and at any time up to the date that is five years from the date of issuance and have an exercise price of $4.57 per share.

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On May 3, 2021, pursuant to the underwriting agreement for the IPO, we issued to the underwriters warrants to purchase up to an aggregate of 186,567 shares of Common Stock. The warrants may be exercised beginning on May 3, 2022 until May 3, 2026. The initial exercise price of each warrant is $5.19 per share.

Warrants Exercises

As of December 31, 2021, holders of warrants issued in our IPO have exercised warrants to purchase 3,508,227 shares of Common Stock, providing us with $16,034,189 in additional funding. In connection therewith, we issued 3,508,227 shares of Common Stock.

As of December 31, 2021, there were outstanding warrants issued in our IPO to purchase 969,385 share of Common Stock.

Share Buy-Back

On June 23, 2021, we announced a $2.0 million buy-back of the Common Stock.  The buy-back was completed on July 9, 2021, with us acquiring 137,650 shares of Common Stock, for an aggregate price of $1,999,997, which are recorded as treasury stock.

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ITEM 1A.RISK FACTORS

Not applicable to smaller reporting companies.

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ITEM 1B.UNRESOLVED STAFF COMMENTS

None.

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ITEM 2.PROPERTIES

Our principal executive office is located at 429 Lenox Avenue, Miami Beach, Florida, where we lease approximately 404 square feet of general office space pursuant to a lease agreement which expires in August 2022.

Our research and development facilities are located at 1321 15^th Street, Denver, Colorado, where we lease approximately 11,321 square feet pursuant to a lease agreement which expires in September 2022.

We lease approximately 3,188 square feet of space at 5th Floor, City Exchange Building 11-13 Gloucester Street Belfast, BT14GB, pursuant to a lease agreement which expires in December 2028 and may be earlier terminated at our option in December 2023. We previously used this space for research and development. We vacated this space in March 2022, and we are in negotiations with the landlord to terminate the lease early. Two employees who previously worked at this location now work remotely.

We lease approximately 413 square feet of warehouse space in Hialeah Gardens, Florida, pursuant to a month-to-month lease agreement.

Our rent expense totaled approximately $422,075 in 2021. We do not own any real property. We believe our current premises are sufficient for our needs at this time and that we can acquire suitable additional or alternative space as needed.

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ITEM 3.LEGAL PROCEEDINGS

We are party to the legal proceedings described below. We are unable to provide any assurances as to the ultimate outcome of these proceedings and intend to vigorously defend these matters.

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Litigation

On December 2, 2021, the Company and certain of its present and former officers and directors were named as defendants in a putative class action lawsuit styled Steppacher v. Alfi, Inc., et al., Case No. 1:21-cv-24232, brought in the United States District Court for the Southern District of Florida. On December 15, 2021, the Company, certain of its present and former officers and directors, and the underwriters in the Company’s IPO were named as defendants in a second putative class action styled Kleinschmidt v. Alfi, Inc., et al., Case No. 1:21-cv-24338, also brought in the United States District Court for the Southern District of Florida. The complaints in both actions allege that the Company and other named defendants violated Sections 11 and 15 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to allegedly false and misleading statements included in the registration statement and prospectus supplements issued in connection with the Company’s IPO (the “Offering Documents”) in May 2021, and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, by allegedly making false and materially misleading statements and failing to disclose material adverse facts in the Company’s public filings with the SEC. Both complaints assert that the putative plaintiff class includes: (i) persons or entities, other than the defendants, who purchased or acquired the Common Stock or warrants to purchase the Common Stock pursuant and/or traceable to the Offering Documents; and (ii) persons or entities, other than the defendants, who purchased or acquired the Company’s securities between May 4, 2021, and November 15, 2021 (both dates inclusive). The plaintiffs seek unspecified compensatory damages, including interest, and costs and expenses, including attorney’s and expert fees. On February 3, 2022, the court consolidated the two actions under the caption Steppacher, Jr., et al. v. Alfi, Inc. et al., Case No. 21-cv-24232-KMW. Three putative stockholders (or groups of stockholders) moved to be appointed as lead plaintiff, and the court appointed Candido Rodriguez as lead plaintiff. The consolidated actions are now captioned Rodriguez, et al. v. Alfi, Inc., et al., Case No. 21-cv-24232-KMW. The Company intends to vigorously defend these actions.

On April 27, 2022, Ryan Dodgson filed a Verified Shareholder Derivative Complaint on behalf of the Company styled Ryan Dodgson, derivatively on behalf of Alfi, Inc., Plaintiff, v. Paul Pereira, Dennis McIntosh, Charles Pereira, Peter Bordes, John M. Cook, II, Justin Elkouri, Allison Ficken, Jim Lee, Richard Mowser, and Frank Smith, Defendants, and Alfi, Inc., Nominal Defendant, Case 1:22-cv-21318, in the United States District Court for the Southern District of Florida.  The complaint alleges, as to the defendants: (i) violations of Section 10(b) and Rule 10b-5 of the Exchange Act; (ii) violations of Section 20(a) of the Exchange Act; (iii) breach of fiduciary duties; (iv) unjust enrichment; (v) abuse of control; (vi) gross mismanagement; and (vii) waste of corporate assets, in connection with alleged improper corporate transactions, an alleged pattern and practice of abuse of control of the Company and allegedly deficient internal controls, among other things.  The complaint also seeks contribution under Section 11(f) of the Securities Act and Section 21D of the Exchange Act as to the defendants, and seeks contribution under Sections 10(b) and 21D of the Exchange Act as to defendants P. Pereira and McIntosh.  Plaintiff requests a declaration that the defendants have breached or aided and abetted the breach of their fiduciary duties to the Company, an award of damages to the Company, restitution, and an award of plaintiff’s costs and disbursements in the action, including reasonable attorneys’ and experts’ fees, costs and expenses, and alleged improvements to the Company’s corporate governance and internal procedures regarding compliance with laws.

Arbitration

On February 23, 2022, Fred Figueroa, a former Executive Assistant at the Company, filed a Demand for Arbitration against the Company with the American Arbitration Association (“AAA”), alleging overtime violations of the Fair Labor Standards Act, as amended, and breach of contract claims involving alleged termination without cause in violation of Mr. Figueroa’s employment agreement. In his Demand for Arbitration, Mr. Figueroa seeks damages in the amount of $81,000 for base salary and 5,000 shares of Common Stock in the amount of $16,650 pursuant to a stock option award from the Company, as well as attorneys’ fees and costs. The arbitration proceeding was initiated pursuant to the arbitration provision in Mr. Figueroa’s employment agreement with the Company. The Company is in the process of responding to Mr. Figueroa’s claims. The Company is currently unable to estimate the costs and timing of the arbitration, including any potential damages, if Mr. Figueroa were to prevail on any of his claims.

On March 10, 2022, Charles Pereira, a former Chief Technology Officer of the Company, filed a Statement of Claim against the Company with the AAA, alleging various breaches of contract and torts with respect to his employment, his compensation, and the termination of his employment. In his Statement of Claim, Mr. Pereira seeks damages in an amount to be determined at the hearing, but not less than $10 million dollars, and certain declaratory relief and other money damages. The arbitration proceeding was initiated pursuant to the arbitration provision in Mr. Pereira’s employment agreement with the Company. The Company is in the process of responding to Mr. Pereira’s claims. The Company is currently unable to estimate the costs and timing of the arbitration, including any potential damages, if Mr. Pereira were to prevail on any of his claims.

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Other Matters

As previously disclosed, on November 9, 2021, the Company received a letter from the staff of the SEC indicating that the Company, its affiliates and agents may possess documents and data relevant to an ongoing investigation being conducted by the staff of the SEC and notifying the Company that such documents and data should be reasonably preserved and retained until further notice. The materials to be preserved and retained include documents and data created on or after April 1, 2018 that: (i) were created, modified or accessed by certain named former and current officers and directors of the Company or any other officer or director of the Company; or (ii) relate or refer to the condominium or the sports tournament sponsorship identified in the Company’s Current Report on Form 8-K filed on November 1, 2021, or financial reporting and disclosure controls, policies or procedures. On March 8, 2022, the Company received a subpoena from the SEC relating to the investigation.  The Company intends to cooperate fully with the SEC in this matter.

The Company’s former Chief Executive Officer and former Chief Financial Officer have made claims that the Company indemnify and advance the legal fees and expenses incurred by them in connection with the previously announced independent internal investigation (“Investigation”) (see Note 12 to our consolidated financial statements included in this Annual Report) and the putative class action litigations and the SEC investigation, each referred to above. With respect to the advancement of fees and expenses incurred in connection with the Investigation prior to December 31, 2021, the amount of such fees and expenses that is subject to advancement is approximately $147,000. The former officers have also demanded advancement of fees and expenses of additional amounts of approximately $339,000 for the period from January 1, 2022 through March 31, 2022.  Additional amounts may be subject to claims for advancement and indemnification, but the Company is unable to estimate the amount of additional fees and expenses that may be subject to advancement or indemnification.

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ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The Common Stock is listed on the Nasdaq Capital Market under the symbol “ALF.” The warrants to purchase Common Stock issued in our IPO are listed on The Nasdaq Capital Market under the symbol “ALFIW.”

Holders of Record

As of April 30, 2022, we had approximately 14 holders of record of the Common Stock.

Dividends

We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business, and therefore do not intend to pay cash dividends on the Common Stock for the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of the Company’s Board of Directors (the “Board”) and will depend on, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors the Board may deem relevant.

Recent Sales of Unregistered Securities

On August 1, 2018, November 21, 2018, January 23, 2019 and April 18, 2019, the Company issued 1,000,000, 500,000, 500,000 and 500,000 shares, respectively, of the Company’s Series Seed Preferred Stock, $0.0001 par value per share (the “Series Seed Preferred Stock”), to an investor in exchange for $2,500,000 cash consideration. On May 3, 2021, 2,500,000 shares of Series Seed Preferred Stock were converted into 3,150,058 shares of Common Stock at a conversion ratio of 1:1.260023. The Series Seed Preferred Stock, and the shares of Common Stock issued upon conversion of the shares of Series Seed Preferred Stock, were issued in a transaction not involving a public offering, in reliance upon an exemption from registration under Section 4(a)(2) of the Securities Act. See Note 9 to our consolidated financial statements included in this Annual Report.

In connection with bridge loans entered into on December 30, 2020, March 22, 2021, and April 1, 2021, the Company issued to the lenders, who are all accredited investors, an aggregate of 1,732,532 shares of Common Stock. The shares of Common Stock were issued in a transaction not involving a public offering, in reliance upon an exemption from registration under Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder. See Note 9 to our consolidated financial statements included in this Annual Report.

On March 31, 2020 and May 13, 2021, the Company issued to an investor relations firm 31,501 and 150,000 shares, respectively, of Common Stock, pursuant to agreements with such firm. On May 13, 2021, the Company issued to a consultant 150,000 shares of Common Stock, pursuant to an agreement with such consultant. These shares of Common Stock were issued in a transaction not involving a public offering, in reliance upon an exemption from registration under Section 4(a)(2) of the Securities Act. See “Findings of the Investigation” in Note 12, and Note 9, to our consolidated financial statements included in this Annual Report.

On August 31, 2021, the Company issued to the organizer of a sports tournament 31,683 shares of Common Stock, pursuant to an agreement to sponsor such tournament. The shares of Common Stock were issued in a transaction not involving a public offering, in reliance upon an exemption from registration under Section 4(a)(2) of the Securities Act. The Company has since obtained, in connection with the Company’s termination of the sponsorship agreement, the return of the 31,683 shares of Common Stock. See “Findings of the Investigation” in Note 12 to our consolidated financial statements included in this Annual Report.

Prior to our IPO, from May 1, 2020 through March 15, 2021, the Company issued pursuant to the Alfi, Inc. 2018 Stock Incentive Plan (the “2018 Plan”) to employees, for services rendered or to be rendered, options to purchase an aggregate of 433,927 shares of Common Stock, at an average weighted exercise price of $1.52 per share, which vest over four years. The foregoing securities were issued in reliance upon an exemption from registration under Rule 701 promulgated under the Securities Act.

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Use of Proceeds From Registered Securities

On May 3, 2021, the SEC declared effective our registration statement on Form S-1 (333-251959), as amended, filed in connection with our IPO. Pursuant to the registration statement, we registered the offering and sale of: (i) 3,731,344 shares of Common Stock and warrants to purchase 3,731,344 shares of Common Stock, at a combined public offering price of $4.15; and (ii) an additional 559,701 shares of Common Stock and additional warrants to purchase 559,701 shares of Common Stock, at a combined public offering price of $4.15, pursuant to an over-allotment option granted to the underwriters in our IPO. Each warrant is exerciseable for one share of Common Stock at an exercise price of $4.57 per share. Kingswood Capital Markets, division of Benchmark Investments, Inc., served as the representative of the underwriters in our IPO.

On May 6, 2021, we completed our IPO selling 3,731,344 shares of Common Stock and warrants to purchase 3,731,344 shares of Common Stock at a combined public offering price of $4.15, for aggregate gross proceeds of approximately $15.5 million, prior to deducting underwriting discounts, commissions, and other offering expenses and excluding any exercise of the underwriters’ option to purchase any additional securities. On May 10, 2021, Kingswood Capital Markets exercised the over-allotment option for an aggregate of 559,701 shares of Common Stock, and warrants to purchase 559,701 shares of Common Stock, yielding gross proceeds to the Company of approximately $2.3 million, prior to deducting underwriting discounts, commissions, and other offering expenses.

Total gross proceeds to us from our IPO, including the over-allotment option, were approximately $17.8 million, prior to deducting underwriting discounts, commissions, and other offering expenses. The offering has terminated.

From the effective date of our registration statement on Form S-1 (333-251959), the Company has incurred underwriting discounts, commissions, and other offering expenses in connection with the IPO totaling approximately $2.1 million, resulting in net offering proceeds from the IPO to us of approximately $15.7 million. No payments for such expenses were made directly or indirectly to: (i) any of our officers or directors or their associates, (ii) any persons owning 10% or more of any class of our equity securities or (iii) any of our affiliates.

We have used the net proceeds of our IPO to pay: (i) approximately $6.3 million, including accrued and unpaid interest, owed under outstanding promissory notes and borrowings pursuant to bridge loan agreements with related party investors; (ii) approximately $4.5 million for capital expenditures; (iii) approximately $2.0 million to repurchase shares of Common Stock; and (iv) approximately $2.9 million for general corporate purposes, including working capital, business development, and sales and marketing activities. Repayments of related party debt payable included approximately $5.4 million owed to Lee Aerospace, Inc., a corporation controlled by James Lee, one of our Board members and a greater than 10% stockholder (“Lee Aerospace”), and a total of approximately $927,000 owed to Paul Pereira (our former Chief Executive Officer), Dennis McIntosh (our former Chief Financial Officer), Charles Pereira (our former Chief Technology Officer), Peter Bordes (our Interim CEO), Rachael Pereira (the wife of Paul Pereira) and three unaffiliated investors.

Except for the use of proceeds to repurchase shares of Common Stock, there has been no material change in the use of proceeds of our IPO from the use of proceeds described in the prospectus filed as part of our registration statement on Form S-1 (333-251959).

Issuer Purchases of Equity Securities

During the three months ended December 31, 2021, we did not repurchase any shares of the Common Stock.

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth certain information with respect to securities to be issued under our equity compensation plans as of December 31, 2021.

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ITEM 6.[RESERVED.]

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context requires otherwise, references to the “Company,” “Alfi,” “we,” “us” and “our” refer to Alfi, Inc., a Delaware corporation and its wholly owned subsidiary, Alfi (N.I.) Ltd, formed in Belfast, Northern Ireland on September 18, 2018. Unless otherwise noted, the share and per share information in this Annual Report on Form 10-K (this “Annual Report”) reflect a forward stock split of the Common Stock privately held before the IPO at a percentage of 1.260023 effective on March 15, 2021.

Overview

Alfi is a Delaware corporation, incorporated in July 2018.

We seek to provide solutions that bring transparency and accountability to the digital out of home, or (“DOOH”) advertising marketplace. Alfi uses artificial intelligence and big data analytics to measure and disseminate audience presence and audience demographics. Our computer vision technology is powered by proprietary artificial intelligence, to determine the relevant demographic and geospecific information of the audience in front of an Alfi-enabled device, such as a tablet or kiosk. Alfi can then deliver in real-time, the advertisements to that particular viewer based on the viewer’s demographic profile and/or geolocation. Alfi is designed to deliver the right marketing content, to the right person at the right time in a responsible and ethical manner. By delivering the advertisements most relevant to the audience in front of the device, we connect our advertising customers to the viewers they seek to target. The result is higher click through rates (“CTRs”), higher QR code scans, and higher cost per thousand rates (“CPMs”).

Alfi seeks to solve the problems facing advertisers in the DOOH marketplace, as its proprietary technology is designed to measure the audience when an advertisement is displayed. Our data rich reporting functionality is able to inform the advertiser exactly when someone viewed each ad, as well as the general demographic and geospecific characteristics of the viewing audience.  Alfi can provide large and small businesses access to data-driven insights by expanding their advertising capabilities, by providing analytical sophistication and by delivering it all over multiple devices. In addition to the traditional Content Management System model that delivers adverts on a scheduled loop, Alfi’s technology is able to first analyze the audience and determine the most relevant content to be displayed.

Alfi has created an enterprise grade, multimedia computer vision and machine learning platform, capable of generating powerful advertising recommendations and insights. Multiple technologies work together with viewer privacy and data-rich reporting as our primary objectives. Alfi is able to use a facial fingerprinting process to make demographic determinations. As such, Alfi makes no attempt to identify the individual in front of the screen. Brand owners do not need to know someone’s name or invade their privacy to gain a deeper understanding of the consumers who view their content. By providing age, gender, and geolocation information, we believe brand owners should have the pertinent data they need for meaningful insight. From an analytics perspective, these data points are intended to provide meaningful reporting instead of arbitrary calculations based on estimates of ad engagement.

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Alfi seeks to solve the problem of providing real time, accurate and rich reporting on customer demographics, usage, interactivity, and engagement while never storing any personally identifiable information. No viewer is ever required, or requested by us, to enter any information about themselves on any Alfi-enabled device.

Our initial focus is to place our Alfi-enabled devices in malls, airports, rideshares and taxis. We also have begun offering our software solution to other DOOH media operators as a Software as a Service (“SaaS”) product.

Currently, we intend to charge customers solely based on a CPM, or ads delivered, model. As we continue to deploy Alfi in the marketplace, we expect to charge customers based on a combination of CPM and CTR, and we expect we will generate higher CPM rates than typical DOOH advertising platforms because we have the ability to only deliver ads to the customer’s desired demographic. In addition, we also intend to provide the aggregated data to the brands so they can make more informed advertising decisions.

With respect to Alfi-enabled tablets placed in rideshares or devices placed into service by Alfi, Alfi will recognize revenue on a CPM impression basis or a related basis for both the content and advertisements delivered. Alfi contracts (also called insertion orders) for both the advertiser and the content provider specify the amounts to be paid to Alfi for displaying the advertisement or content. Content and advertisements are provided to Alfi by companies desiring to deliver content for viewer engagement.

With respect to SaaS licenses, Alfi has entered into two license agreements with third parties to use Alfi-placed devices on customer property and share in advertising revenues. Under these agreements, the customer and Alfi work together to generate advertising revenue, and the devices have remote management access and data reporting that the Alfi platform provides. Alfi began to earn revenue from advertisers during the fourth quarter of 2021. Alfi will recognize the revenue from these contracts monthly, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update No. 2014‑09 (Topic 606) “Revenue from Contracts with Customers”.

Alfi believes that the aggregated data of viewer engagement has significant value for advertisers and content providers. Alfi intends to offer such data to third parties on a subscription basis and recognize revenue as the subscription payments are received depending on the nature of the contract. For subscriptions that are prepaid, revenue will be recognized as earned; with respect to subscriptions that are not prepaid, revenue will be recognized when the data is delivered to the subscriber.

As of the date of this Annual Report, Alfi has distributed approximately 7,600 devices (tablets and kiosks) at no cost to rideshare, mall, or airport owner(s) and has approximately 17,000 devices on hand. It is the viewers of the Alfi-enabled device, rather than the rideshare driver, mall, or airport owner that the Alfi-enabled device engages with and to whom Alfi delivers advertising and content. Alfi commenced selling advertising and content for those tablets placed into operation during the first quarter of 2022.

Recent Developments

Initial Public Offering

On May 3, 2021, the Company’s registration statement on Form S-1 (File No. 333-251959) was declared effective by the SEC and the Company completed its initial public offering (“IPO”) on May 6, 2021. In connection with the IPO, the Company issued and sold 4,291,045 shares of Common Stock and warrants to purchase 4,291,045 shares of Common Stock (including 559,701 shares of Common Stock and warrants to purchase 559,701 shares of Common Stock pursuant to the full exercise of the underwriters’ overallotment option), at the combined public offering price of $4.15 for aggregate gross proceeds of approximately $17.8 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by Alfi. The warrants were exercisable immediately upon issuance and at any time up to the date that is five years from the date of issuance and have an exercise price of $4.57 per share.

On May 3, 2021, pursuant to the underwriting agreement for the IPO, we issued to the underwriters warrants to purchase up to an aggregate of 186,567 shares of Common Stock (“Underwriter's Warrants”). The Underwriter's Warrants may be exercised beginning on May 3, 2022 until May 3, 2026. The initial exercise price of each Underwriter's Warrant is $5.19 per share.

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Warrants Exercised

Warrants to purchase 4,477,612 shares of Common Stock were issued in connection with the Company’s May 2021 IPO. As of December 31, 2021, warrant holders have exercised warrants to purchase 3,508,227 shares of Common Stock, providing Alfi with $16,034,541 in additional funding. As of December 31, 2021, there were warrants to purchase 969,385 shares of Common Stock outstanding.

Share Buy-Back

On June 23, 2021, Alfi announced a $2.0 million buy-back of its Common Stock. The buy-back was completed on July 9, 2021, with Alfi acquiring 137,650 shares of Common Stock, for an aggregate price of $1,999,997, which are recorded as treasury stock.

Changes in Management

As previously disclosed in the Company’s filings with the SEC on October 22, 2021, the Company’s Board of Directors (the “Board”) placed each of Paul Pereira, the Company’s then President and Chief Executive Officer, Dennis McIntosh, the Company’s then Chief Financial Officer and Treasurer, and Charles Pereira, the Company’s then Chief Technology Officer, on paid administrative leave and authorized an independent internal investigation  (the “Investigation”) into certain corporate transactions and other matters.

Also as previously disclosed, since placing the former executives on leave, the Board has appointed: (i) James Lee as Chairman of the Board, replacing Mr. P. Pereira in such role; (ii) new management personnel, including Peter Bordes as Interim Chief Executive Officer, Louis Almerini as Interim Chief Financial Officer and David Gardner as Chief Technology Officer; (iii) two new independent directors to the Board, Allen Capsuto and Patrick Dolan; and (iv) Mr. Capsuto as Chair of the Audit Committee of the Board (the “Audit Committee”) and Mr. Dolan as a member of the Compensation Committee (the “Compensation Committee”) and the Nominating and Corporate Governance Committee of the Board (the “Nominating and Corporate Governance Committee”). Furthermore, Mr. P. Pereira resigned as a director and from all positions he held with the Company, Mr. McIntosh resigned from all positions he held with the Company, and Mr. C. Pereira’s employment with the Company was terminated.

Findings of the Investigation

The Investigation was conducted by a special committee of the Board (the “Special Committee”) consisting of Mr. Capsuto, the Audit Committee Chair, who was appointed to the Special Committee on November 8, 2021. The Special Committee retained outside legal counsel to assist in conducting the Investigation, and such counsel retained additional advisors to provide forensic accounting services, computer forensics and e-discovery services and other legal services.

The Investigation found, among other things, that the Company’s former senior management caused the Company to enter into certain transactions and certain agreements that were not approved by the Board, some of which included the unauthorized issuance of shares of Common Stock, as follows:

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These findings and other conduct by the Company’s former senior management were previously disclosed in the Company’s Current Report on Form 8-K filed on February 23, 2022.

The Investigation found the Company’s internal control over financial reporting to be deficient with respect to: (i) the disbursement process for third-party vendors; (ii) the review and approval process for significant vendor contracts; (iii) the use of Company credit cards by executives; (iv) the supervision and approval of travel and entertainment expenses incurred by executives; (v) the segregation of duties in connection with the payment and recording of invoices and related bank reconciliations; (vi) the lack of a sufficient accounting manual; and (vii) guidelines for the capitalization of fixed assets.

Credit and Security Agreement – Related Party

On April 12, 2022, the Company entered into a Credit and Security Agreement (the “Credit Agreement”) with a related party lender. Pursuant to the agreement, the Company may borrow up to $2,500,000 for up to one year. Through May 10, 2022, the lender has funded to the Company $1,000,000 under the Credit Agreement. Prior to the maturity date, the Company may borrow an additional $1.5 million under the Credit Agreement, in the lender’s sole discretion and subject to the Company requesting such additional funds from the lender in accordance with the Credit Agreement, the accuracy of the Company’s representations in the Credit Agreement and related documents, and that no default under the Credit Agreement has occurred and is continuing.

The line of credit note matures on the earlier of (i) the date upon which the Company consummates a debt or equity financing in an amount equal to or greater than $4,000,000 or (ii) April 12, 2023. Borrowings under the Credit Agreement are collateralized by a security interest in the Company’s assets. Interest on the unpaid principal amount accrues at an annual rate of 6% through October 12, 2022 and an annual rate of 9% thereafter, except that in event of default additional penalty interest at an annual rate of 3% will accrue on borrowings through October 12, 2022. In connection with the Credit Agreement, the Company issued a warrant to the lender pursuant to which the lender may purchase up to 1,250,000 shares of the Common Stock at a price of $1.51 per share. The warrant can be exercised commencing on the three-month anniversary of the Credit Agreement (i.e., on July 12, 2022) and expires on April 12, 2025.

Impact of COVID-19

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency caused by a new strain of the coronavirus and advised of the risks to the international community as the virus spread globally. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. The spread of COVID-19 coronavirus has caused public health officials to recommend precautions to mitigate the spread of the virus, especially as to travel and congregating in large numbers. In addition, certain states and municipalities have enacted quarantining regulations which severely limit the ability of people to move and travel.

COVID-19 has adversely affected the Company’s financial condition and results of operations. The impact of the COVID-19 outbreak on businesses and the economy in the United States is expected to continue to be significant. The extent to which the COVID-19 outbreak will continue to impact businesses and the economy is highly uncertain. Accordingly, the Company cannot predict the extent to which its financial condition and results of operation will be affected.

In addition, the Company is uncertain of the full effect the pandemic will have on it for the longer term since the scope and duration of the pandemic is unknown, and evolving factors such as the level and timing of the distribution of efficacious vaccines across the world and the extent of any resurgences of the virus or emergence of new variants of the virus, such as the Delta variant and the Omicron variant, will impact the stability of economic recovery and growth. The Company may experience long-term disruptions to its operations resulting from changes in government policy or guidance; quarantines of employees, customers and suppliers in areas affected by the pandemic; and closures of businesses or manufacturing facilities critical to its business.

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Results of Operations

Revenues

In general, Alfi earns revenue from rideshares or SaaS contracts with operating companies who maintain their own network and lease the Alfi platform.

Operating Expenses

Compensation and benefits expenses include compensation expenses related to our executive, finance, and administrative personnel (including salaries, commissions, bonuses, stock-based compensation, payroll taxes, and contract labor costs). Other general and administrative expenses include communications and technology costs, professional fees, selling and marketing fees, legal fees, and rent and occupancy expense.

Results of Operations for the Year Ended December 31, 2021 Compared with the Year Ended December 31, 2020

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Revenues

For the year ended December 31, 2021, net revenues were $26,465. Through September 30, 2021, the Company earned revenue from a single customer. During the three-month period ended December 31, 2021, the Company for the first time earned revenues from customers for advertising delivered through Alfi-owned devices.

For the year ended December 31, 2020, we had no net revenues. We were engaged in beta testing of our Alfi-enabled devices and had not yet begun charging advertisers for delivering advertisements.

Operating Expenses

For the years ended December 31, 2021 and December 31, 2020, total operating expenses were $18,212,700 and $3,505,907, respectively, an increase of $14,706,793. Compensation and benefits expense increased as independent contractors became full time employees effective March 1, 2021, and the Company added staff to support product distribution and its operation as a newly public company. Other general and administrative expenses increased due to higher costs related to the Company’s growth and launch of its technology platform and the Company’s May 2021 listing as a public company. The increase in other general and administrative

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expenses reflected higher investor relations, insurance, recruiting, legal and professional fees, and marketing costs incurred during the year ended December 31, 2021. Software development and patent acquisition costs totaling $307,728 were capitalized during the year ended December 31, 2020, resulting in a reduction in compensation and benefits and other general and administrative expenses of that amount. All software development and patent costs were expensed during the year ended December 31, 2021. Depreciation and amortization charges increased as the year ended December 31, 2021 included additional depreciation charges for tablets acquired during 2021.

Operating Loss

For the year ended December 31, 2021, the operating loss increased from $3,505,907 to $18,186,235, an increase of  $14,680,328 compared with the year ended December 31, 2020. The increase was primarily due to higher operating expenses related to the Company’s growth and launch of its technology platform and additional expenses incurred to operate as a public company subsequent to the Company’s May 2021 IPO.

Other Income (Expense)

Other income of $160,671 and $198,704 for the years ended December 31, 2021 and December 31, 2020, respectively, included realized and collected foreign tax credits of $152,278 and $195,040, respectively, associated with its wholly owned subsidiary Alfi (N.I.) Ltd. For the years ended December 31, 2021 and December 31, 2020, interest expense of $918,878 and $2,240,072 included the value of Common Stock issued to related parties who provided bridge financing prior to the Company’s May 2021 IPO.

Net Loss

For the year ended December 31, 2021, the net loss increased from $5,547,275 to $18,944,442, an increase of  $13,397,167  compared with the year ended December 31, 2020. The increase was primarily due to higher operating expenses related to the Company’s growth and launch of its technology platform and additional expenses incurred to operate as a public company subsequent to the Company’s May 2021 IPO.

Results of Operations for the Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019

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Revenues, net

For the years ended December 31, 2020 and December 31, 2019, we had no net revenues. We were engaged in beta testing of our Alfi-enabled devices and had not yet begun charging advertisers for delivering advertisements.

Operating Expenses

For the years ended December 31, 2020 and December 31, 2019, total operating expenses were $3,505,907 and $1,688,033, respectively, an increase of $1,817,874. Compensation and benefits expense increased as the Company added staff to support product development. The Company capitalized certain software development and patent acquisition costs incurred throughout 2019 and during the six-month period ended June 30, 2020, which reduced operating expenses for the years ended December 31, 2020 and December 31, 2019 by $501,685 and $307,728, respectively. It was determined that the application development phase for its software ended in June 2020, and all software development and patent acquisition costs incurred after June 30, 2020 were expensed. Depreciation and amortization charges increased, as the year ended December 31, 2020 included additional depreciation charges for tablets acquired during 2020.

Operating Loss

For the year ended December 31, 2020, the operating loss increased from $1,688,033 to $3,505,907, an increase of $1,817,874 compared with the year ended December 31, 2019. The increase was primarily due to higher operating expenses related to product development, as discussed above.

Other Income (Expense)

Other income of $198,704 and $97,379 for the years ended December 31, 2020 and December 31, 2019, respectively, included realized and collected foreign tax credits of $195,040 and $87,348, respectively, associated with its wholly owned subsidiary Alfi (N.I.) Ltd. Interest expense of $2,240,072 and $8,478 for the years ended December 31, 2020 and December 31, 2019, respectively, rose significantly in 2021 as the Company increased borrowings from related parties to finance ongoing product development. The year ended December 31, 2020 included the value of Common Stock issued to related parties who agreed to provide bridge financing prior to the Company’s May 2021 IPO.

Net Loss

For the year ended December 31, 2020, the net loss increased from $1,599,132 to $5,547,275, an increase of  $3,948,143  compared with the year ended December 31, 2019. The increase was primarily due to higher operating expenses related to the Company’s ongoing product development, as discussed above.

Liquidity and Capital Resources

As of the date of this Annual Report, the Company has not yet generated substantial revenue from customers and business activity has mainly consisted of cash outflows associated with its business development activities. These conditions indicate that there is substantial doubt about the Company’s ability to continue as a going concern within one year from the issuance date of the consolidated financial statements.

The Company’s primary source of operating funds since inception through April 2021 was cash proceeds from the private placements of preferred equity and debt securities. During 2021, the Company completed its IPO yielding net proceeds to the Company of approximately $15.7 million from the sale of Common Stock and warrants and approximately $16.0 million from the exercise of warrants. The capital raised included funding for working capital to launch and expand operations in accordance with its business model. On April 12, 2022, the Company entered into a Credit Agreement with a related party lender, pursuant to which it may borrow up to $2,500,000 for up to one year. Through May 10, 2022, the lender has funded to the Company $1,000,000 under the Credit Agreement.

The Company intends to raise additional capital through private placements of debt and equity securities, but there can be no assurance that these funds will be available on terms acceptable to the Company or will be sufficient to enable the Company to fully complete its development activities or sustain operations. If the Company is unable to raise sufficient additional funds, it will have to

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develop and implement a plan to further extend payables, reduce overhead, or scale back its current business plan until sufficient additional capital is raised to support further operations. There is no assurance that such a plan will be successful.

Off-Balance Sheet Arrangements

We did not have, during the period presented, and we do not currently have, any relationships with any organizations or financial partnerships, such as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Significant Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements as well as the reported expenses during the reporting periods. Actual results may differ materially from these estimates.

We believe that the assumptions and estimates associated with the evaluation of revenue recognition criteria, including the determination of revenue recognition as net versus gross in our revenue arrangements, useful lives of long-lived assets and stock-based compensation expense have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ materially from these estimates.

Our significant accounting policies are more fully described in our consolidated financial statements (Note 2) included in this Annual Report.

Recently Issued Accounting Standards

Our analysis of recently issued accounting standards are more fully described in our consolidated financial statements (Note 2) included in this Annual Report.

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ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.

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ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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TABLE OF CONTENTS FOR THE FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of Alfi, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Alfi, Inc. and subsidiary (the "Company") as of December 31, 2021, 2020, and 2019, and the related consolidated statements of operations, changes in stockholders' equity (deficit) and cash flows for the years then ended, and the related notes (collectively referred to as the consolidated financial statements).  In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, 2020, and 2019, and the results of their operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Restatement of the 2020 and 2019 Financial Statements

As discussed in Note 4 to the consolidated financial statements, the accompanying consolidated financial statements as of and for the years ended December 31, 2020 and 2019 have been restated to correct misstatements.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has not yet generated substantial revenue from customers and has experienced significant operating losses and negative operating cash flows. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.  Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audits of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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Capitalized software development costs

As described in Note 2 and Note 11 to financial statements, the Company capitalizes certain costs related to internally developed software. Management determines the amount of internal software development costs to be capitalized based on the amount of time spent by developers on projects in the application stage of development. The determination of the application development stage period, as well as the estimation of capitalizable costs, involves judgment.

We identified capitalized software development costs as a critical audit matter. Our principal considerations for this determination were the high degree of auditor judgment and subjectivity required in evaluating management’s determination of the activities and costs that qualify for capitalization and the relevant software development guidance to be applied under the applicable accounting standards.

The primary procedures we performed to address this critical audit matter included:

/s/ Frazier & Deeter, LLC

We have served as the Company’s auditor since 2021.

Tampa, Florida

May 16, 2022

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Alfi, Inc.

f/k/a Lectrefy, Inc.

Consolidated Balance Sheets

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See accompanying notes to the consolidated financial statements

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Alfi, Inc.

f/k/a Lectrefy, Inc.

Consolidated Statements of Operations

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See accompanying notes to the consolidated financial statements

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Alfi Inc.

f/k/a Lectrefy, Inc.

Consolidated Statement of Changes to Stockholders’ Equity (Deficit)

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See accompanying notes to the consolidated financial statements

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Alfi, Inc.

f/k/a Lectrefy, Inc.

Consolidated Statements of Cash Flows