Table of Contents

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Alfi, Inc.

f/k/a Lectrefy, Inc.

Consolidated Balance SheetSheets

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See accompanying notes to the consolidated financial statements

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Alfi, Inc.

f/k/a Lectrefy, Inc.

Condensed

Consolidated StatementStatements of Operations

(Unaudited)

See accompanying notes to the condensed consolidated financial statements​

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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 CashflowsChanges to Stockholders’ Equity (Deficit)

(Unaudited)

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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

(Unaudited)

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See accompanying notes to the consolidated financial statements

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ALFI, INC.

f/k/a LECTREFY, INC.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2021 (Unaudited)

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NOTE 1 BUSINESS DESCRIPTION BACKGROUND

Alfi, Inc. is a C -corporation formedC-corporation incorporated in Delaware that operates in the technology sector; specifically, Software as a Service (SaaS)(“SaaS”) in the Digital Out Of Home (DOOH)(“DOOH”) Smart Advertising segment. This segment includes artificial intelligence, machine & deep learning, edge computing, Big Data, telecommunications, and the Internet of Things (IoT). Alfi, Inc. includes its wholly owned subsidiary Alfi NI(N.I.) Ltd, the results of which are presented on a combinedconsolidated basis in the consolidated financial statements included in this Report.Quarterly Report on Form 10-Q (this “Quarterly Report”). Alfi NI(N.I.) Ltd is a registered business in Belfast, Ireland. Collectively, the combined consolidated entity is referred to as the “Company” or “Alfi” throughout this Quarterly Report.

The Company’sCompany's timeline of events relative to its current formation above began on April 4, 2018, when Lectrefy, Inc., a Florida corporation, was organized.incorporated. On July 6, 2018, Lectrefy, Inc. of, a Delaware corporation, was organized.incorporated. On July 11, 2018, Lectrefy, Inc. of Florida’s assets were, the Florida corporation, was merged into the newly created entity Lectrefy, Inc. of Delaware., the Delaware corporation. On July 25, 2018, Lectrefy, Inc. of Delaware was registered as a foreign entitybecame qualified to do business in the State of Florida. On January 31, 2020, Lectrefy, Inc. of Delaware’schanged its name was changed to Alfi, Inc., a Delaware corporation.

On September 18, 2018, Lectrefy, NI(N.I.) Ltd was organized in Belfast, Ireland. On February 4, 2020, Lectrefy, NI(N.I.) Ltd’s name was changed to Alfi NI Ltd, registered in Belfast, Ireland.(N.I.) Ltd. On February 13, 2020, Lectrefy, Inc. Delaware C-corporation operatingregistered its name change to Alfi, Inc. in the stateState of Florida as a foreign entity name was restated as Florida.

Alfi Inc.

In 2019,seeks to provide solutions that bring transparency and accountability to the Company’s software product received initial certification compliance with GDPR government regulatory standards, the highest level of privacy compliance certification available in its jurisdiction. As of June 2020, the Company’s products were fully developed  and are currently being deployed to customers.

The CompanyDOOH advertising marketplace. Alfi uses artificial intelligence and big data analytics to measure and predict human response. Itsdisseminate audience presence and audience demographics. The Company’s computer vision technology is powered by proprietary artificial intelligence, to determine the age, gender, ethnicity, geolocation,relevant demographic and emotiongeospecific information of someonethe audience in front of an Alfi-enabled device, such as a tablet or kiosk. Its softwareAlfi can then deliver in real-time, the advertisements to that particular viewer based on the viewer’s demographic and psychographic profile. It deliversprofile and/or geolocation. By delivering the right content,advertisements most relevant to the right person at the right time in a responsible and ethical manner. By delivering advertisements a viewer wants, the Company provides its advertising customers the viewers they want and the result is higher click through rates, or CTRs and higher CPM, cost per thousand, rates.

The Company has created 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 its software with viewer privacy and reporting objectives as the Company’s two goals. The software uses a facial fingerprinting process to make demographic determinations. As such, the Company makes no attempt to identify the individualaudience in front of the screen. By providing age, gender, ethnicity and geolocation information, brand owners have all ofdevice, Alfi connects its advertising customers to the dataviewers they need for meaningful interaction.

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

target.

The Company’s initial focus is to place its Alfi-enabled devices in malls, airports, rideshares retailers, malls, and airports.taxis. In addition, the Company has begun offering its software solution to other DOOH media operators as a SaaS product.

The Company’s primary activities since inception have been research and development, managing collaborations, and raising capital. As

NOTE 2 BASIS OF PRESENTATION

The accompanying interim consolidated financial statements have been prepared based upon U.S. Securities and Exchange Commission rules that permit reduced disclosure for interim periods. Therefore, they do not include all information and footnote disclosures necessary for a complete presentation of the dateCompany’s financial position, results of thisoperations and cash flows, in conformity with generally accepted accounting principles. The Company filed audited consolidated financial statements as of and for the fiscal years ended December 31, 2021, 2020 and 2019, which included all information and notes necessary for such complete presentation in conjunction with its 2021 Annual Report on Form 10-K.

The results of operations for the Company has approximately 9,600 tablets either held as Other Assets (complimentary devices)interim period ended March 31, 2022 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year. These interim consolidated financial statements should be read in operation currently being used by customers.conjunction with the audited consolidated financial statements for the year ended December 31, 2021, which are contained in the Company’s 2021 Annual Report on Form 10-K. For further discussion refer to Note 2 – “Significant Accounting Policies” to the consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

NOTE 23 GOING CONCERN AND MANAGEMENT’S LIQUIDITY PLANS

As of March 31, 2021, the Company had cash of $96,021 and has a monthly cash run rate of approximately $500,000. As of the date of this Quarterly Report, the Company has not yet generated substantial revenue from customers and business activity has mainly consisted of cash outflows associated with its capital project.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.

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The Company’s primary source of operating funds since inception has beenthrough 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.

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 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 can beis no assurance that such a plan will be successful.

Accordingly, the accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”),GAAP, which contemplate continuation of the Company as a going concern and the realization of assets and satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not necessarily purport to represent realizable or settlement values. The consolidated financial statements do not include any adjustment that might result from the outcome of this uncertainty.

NOTE 4 RESTATEMENTS OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Subsequent toPrior Period Restatements

On March 11, 2022, the Audit Committee (the “Audit Committee”) of the Company’s Board of Directors (the “Board”) and the Company’s management concluded that the previously issued audited financial statements for the years ended December 31, 2021, in May 2021, the Company completed an initial public offering yielding gross proceed to the Company if approximately $17,800,000 from sale of common stock2019 and warrants on the Nasdaq Capital Market. The capital raise2020, included funding for working capital to launch and expand operations in accordance with its business model. 

NOTE 3 SIGNIFICANT ACCOUNTING POLICIES

Revenue Recognition

Under Financial Accounting Standards Board (FASB) issued Accounting Standards Update (“ASU”) No. 2014-09 (Topic 606) “Revenue from Contracts with Customers”, revenue from contracts with customers is measured based on the consideration specified in the contract with the customer.

Alfi intends to generate revenues from three sources. First, Alfi will sell advertising and contentCompany’s Registration Statement on its Alfi-enabled tablets and other devices such as kiosks. Second, Alfi will also license its technology to other companies as a Software-as-a-Service (SaaS) product. Third, Alfi will also sell the aggregated data reflecting viewer engagement it derives from users of an Alfi-enabled device to advertisers and content providers. Alfi has different customers for each of its revenue streams: (1) companies that buy content space, like CNN, NBC, etc.Form S-1 (File No. 333-251959), or companies that buy ad space like Coke, Ford, etc.; (2) companies that pay a per screen fee on a SaaS basis to operate Alfi software on their network, where they sell ads & content and on their own devices; and (3) companies that purchase viewer engagement data on a subscription basis.

With respect to Alfi-enabled tablets or devices placed into service by Alfi, Alfi will recognize revenue on a cost per thousand impression (CPM) basis for both the content and advertisements. Alfi will have a contract with both the advertiser and the content provider that will specify the amounts to be paid to Alfi for displaying the advertisement or content. The number of impressions the advertiser or content provider is willing to pay and the duration of each campaign is set by the advertiser or content provider. Content and advertisements are provided to Alfi by companies desiring to deliver content for viewer engagement. In general, Alfi does not pay for content, to the extent it does, the cost of acquiring content would be expensed as cost of sales. Alfi will recognize revenue under these contracts upon the validated delivery of impressions to the end user of the Alfi-enabled device.

With respect to SaaS licenses, Alfi expects to enter into license agreements with third parties that place their own devices for advertising together with the remote management access and data reporting that the Alfi platform provides. These licenses may be for a specified duration or on a renewable subscription basis. Alfi will charge these third parties on a monthly, per screen fee for use of the Alfi platform. Alfi will recognize the revenue from these licenses on a monthly basis in accordance with Topic 606.

Alfi believes that the aggregated data of viewer engagement will have significant value to advertisers and content providers. Alfi will sell 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.

Alfi has distributed and activated into operations over 1,000 devices tablets and kiosks at no cost to rideshare, mall, or airport owner(s). It is the viewers of the Alfi-enabled device, rather than the rideshare, mall or airport owner that the Alfi-enabled device engages with and to whom Alfi delivers advertising and content. It is projected that Alfi will begin selling advertising and content for those tablets placed into operationCompany’s previously issued interim financial statements included in the third quarter of 2021.

Alfi has not yet recognized revenue from any of its three potential distinct revenue sources. Irrespective of revenue generationCompany’s Quarterly Reports on devices, when they are physically placed into service, devices are expensed in accordance withForms 10-Q for the Company’s Cost of Sales policy.

The contract with a rideshare, mall or airport owner for placing a device in service will not provide for payment from such party to Alfi. With respect to a kiosk in a mall or airport, Alfi may be paid a separate service fee to maintain the device, but Alfi does not anticipate that to be a material source of revenue. Alfi’s contract with a device host may provide that we will pay a revenue sharing amount, or fee, based on the revenue Alfi derives from that device. Alfi will expense that fee in Cost of Sales in accordance with its Cost of Sales policy. In general, a rideshare will not be required to return tablets distributed by Alfi at any time. Removing a tablet from the vehicle or returning it to Alfi would automatically cancel the opportunity for a rideshare to receive commissions. Thus, Alfi does not anticipate that a rideshare would seek to return a tablet. Kiosks, because of their high cost, may either be returned to Alfi or purchased by the facility owner at the end of the contract.

For the three and twelve monthsquarters ended March 31, 2021 and December 31, 2020,June 30, 2021 (collectively, the “Prior Period Financial Statements”), should no longer be relied upon as a result of the accounting errors described below and should be restated. Similarly, any previously furnished or filed reports, press releases, earnings releases, investor presentations or other communications describing the Prior Period Financial Statements and related financial information should not be relied upon.

In connection with the Company’s evaluation of the issues and findings identified in the Company’s previously disclosed internal independent investigation (the “Investigation”), the Company had earnedreviewed the Prior Period Financial Statements and recorded $17,450 and $-0- revenue during each period, respectively. Net revenue consisted of one customer concentration, which represented 100% of sales foridentified the three months ended March 31, 2021.following accounting errors:

Accounts Receivable

The Company records accounts receivable at its net realizable value. At

(a)

The Company incorrectly capitalized certain general and administrative expenses incurred during the years ended December 31, 2018, 2019, and 2020, and incorrectly included those costs in intangible assets in its balance sheets as of December 31, 2019 and 2020, March 31, 2021, and June 30, 2021.

(b)

The Company overstated the carrying value of tablets by incorrectly reporting them at cost with no allowance for depreciation, resulting in an overstatement of other assets (complimentary devices), net, in its balance sheets as of December 31, 2019 and 2020, March 31, 2021, and June 30, 2021.

(c)

The Company overstated total assets and total liabilities as of December 31, 2020, by incorrectly recording a note receivable (related parties) and a liability included in current portion of long-term debt (related parties). This note receivable represents a bridge loan provided to the Company by certain related parties that was executed in December 2020 but not fully funded until April 2021.

(d)

The Company did not recognize and report on its balance sheets as of December 31, 2019 and 2020, March 31, 2021, and June 30, 2021, an office lease in accordance with FASB Accounting Standards Update No. 2018-11, Leases (Topic 842).

On May 16, 2022, the Company had recorded net customer accounts receivable of $17,450 and $-0-, respectively. The Company makes periodic assessment of collectability of accounts receivable balances. Net accounts receivable consisted of one customer concentration at March 31, 2021 and December 31, 2020, respectively. The Company believes there to be no allowance for doubtful accounts as of March 31, 2021 and December 31, 2020, respectively.

Consolidation

Thefiled interim consolidated financial statements includerestated to correct the accounts of Alfi, Inc.accounting errors and its wholly owned subsidiary. Collectively, these entities make up the consolidated financial statements during the periods presented in this Report. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. At March 31, 2021 and December 31, 2020, the Company had $96,021 and $8,335 in cash and cash equivalents, respectively.

Concentration of Credit Risk

The Company’s financial instruments that are exposed to a concentration of credit risk is cash. Generally, the Company’s cash in non-interest-bearing accounts may exceed FDIC insurance limits from time to time. The financial stability of these institutions is periodically reviewed by senior Management.

Complimentary Devices

The Company purchased approximately 9,600 Lenovo tablet hardware devices in 2020 (the “devices”), which are held for placement with rideshare and other businesses. Alfi’s devices represent an incentive-based outreach program by which devices are provided complimentary to rideshare or other businesses that sign up for Alfi’s Software-as-a-Service (SaaS) product. As part of Alfi sales agreements with rideshare and other businesses, devices are provided as a complimentary product in exchange for monetization of the respective set of business consumer’s attention.

The Company records these devices at the lower of cost or fair market value. Devices are accounted for as Other assets (complimentary devices) on the consolidated balance sheet until they are provided to a rideshare or other businesses. Upon being placed into service for consumer use, the Company expenses Other Assets (complimentary devices) to Cost of Sales.

Property and Equipment

Property plant and equipment consists of office equipment recorded at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which for office equipment is three to five years. The Company maintains a capitalization policy for individual items greater than $500 and an estimated useful life greater than one year.

Expenditures for major renewals and betterments that extend the useful lives property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Property plant and equipment are tested for asset impairment on no less than a quarterly basis by Management.

Intangible Assets

The Company recognizes amortizable intangible assets associated with the costs to acquire or cost to complete its technology development projects. The Company places intangible assets into service upon the date in which they are available for use. Intangible assets are tested for asset impairment on no less than a quarterly basis by Management, of which none were identified during the periods included in this Report.

Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to Management. The respective carrying value (net book value) of certain on-balance- sheet financial instruments approximated their fair values. These financial instruments include cash, accounts payable notes payable, fixed assets, and amortizable intangible assets. Fair values approximate carrying values for cash, accounts payable, notes payable, fixed assets, and amortizable intangible assets at March 31, 2021 and December 31, 2020, respectively.

Net Income (Loss) per Share of Common Stock

The Company computes basic net loss per share by dividing net income (loss) per share available to common stockholders by the weighted average number of common shares outstanding for the period and excludes the effects of any potentially dilutive securities. Diluted earnings per share, if presented, would include the dilution that would occur upon the exercise or conversion of all potentially dilutive securities into common stock using the “treasury stock” and/or “if converted” methods as applicable. The computation of basic and diluted income (loss) per share for the periods ended March 31, 2021 and December 31, 2020 excludes potentially dilutive securities when their inclusion would be anti- dilutive, or if their exercise prices were greater than the average market price of the common stock during the period.

Potentially dilutive securities excluded from the computation of basic net income (loss) per share as of March 31, 2021 and 2020 are as follows:

A reconciliation of the numerator and denominator for basic and fully dilutive net income (loss) per share is as follows for periods ended March 31, 2021 and December 31, 2020, respectively:

Common Stock

The Company issued 3,150,000 shares of common stock on April 4, 2018 to Founders. At March 31, 2021 and December 31, 2020, outstanding shares of common stock totaled 4,599,084 and 3,150,058, respectively. The Company incurred no stock buybacks or treasury transactions during the periods included in this report. The Company paid no dividends on common stock issued during the periods ended March 31, 2021 and December 31, 2020, respectively. The Company accounts for common stock at par value. In 2021, the Company increased total authorized common shares from 15,000,000 to 80,000,000.

Convertible Instruments

U.S. GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur, and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. An exception to this rule is when the host instrument is deemed to be conventional.

The Company has determined that the embedded conversion options should not be bifurcated from their host instruments and the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments (the beneficial conversion feature) based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

During the periods ended March 31, 2021 and December 31, 2020, the Company did not record or issue convertible notes with beneficial conversion features and did not record debt discounts related to beneficial conversion features. During 2020 and 2019, the Company issued Convertible Series Seed Preferred stock which has option for stockholders to convert into common stock on a 1:1.260023 basis, and is classified as stockholders’ equity on the balance sheet at March 31, 2021 and December 31, 2020, respectively. If converted into common stock by Series Seed stockholders, its fair value would approximate the existing carrying (book) value of the Series Seed Preferred stock as stated. Thus, no embedded derivatives were identified on the conversion option of Convertible Series Seed Preferred stock at March 31, 2021 or December 31, 2020, respectively. In May 2020, Convertible Series Seed Preferred Stock converted 2,500,000 shares into 3,150,058 shares of common stock.

Common Stock Purchase Warrants and Other Derivative Financial Instruments

The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedging relationships and the types of relationships designated are based on the exposures hedged. At March 31, 2021 and December 31, 2020, the Company did not have any derivative instruments that were designated as hedges.

The Company adopted Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features.

Stock based compensation

The Company maintains a stock equity incentive plan under which they may grant non-qualified stock options, incentive stock options, stock appreciation rights, stock awards, performance and performance-based awards, or stock units to employees, non-employee directors and consultants.

Income Taxes

Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is more likely than not that these deferred income tax assets will be realized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of March 31, 2021 and December 31, 2020, the Company has not recorded any unrecognized tax benefits. The Company’s policy is to classify assessments, if any, for tax-related interest as interest expense and penalties as general and administrative expenses in the statements of operations. The Company did not recognize any such penalties or interest during the periods presented under this Report.

Change in Accounting Estimate / Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to current period presentation including a change in the estimated useful life of capitalized platform production costs (see Note 10).  Management originally determined 10 years as a reasonable useful life estimate for these assets, but has revised it to 5 years basedan amended Quarterly Report on external market competition and other technological factors.   The Company made the change as part of its standard review of its accounting policies in connection with the auditForm 10-Q/A for the yearquarter ended DecemberMarch 31, 2020.2021. The Company has considered the change in estimated useful life a change in accounting estimate under GAAP, and has accounted for it prospectively in theinterim consolidated financial statements.  Based on current conditions,statements for the Company believes its revised estimated useful life allocation reasonable for these assets.

Recent Accounting Pronouncements

There are various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

Forward Stock Split

Onquarter ended March 1,31, 2021, the Company effected a forward stock split on a ratio of 1.260023 to 1.000000 basis. Share amounts reflectedincluded in this Quarterly Report are presented post-split, unless otherwise noted.reflect all such restatements.

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Subsequent Events​

The Company evaluates events that have occurred after the balance sheet date through June 10, 2021. See Note 14.Table of Contents

Table of $75,211 and $-0-, respectively. Outstanding principal associated with bridge loan from related party investor at March 31, 2021 and December 31, 2020 was $2,000,000 and $2,000,000, respectively. In May 2020, this bridge funding was paid in full.Contents

During the three months ended March 31, 2021, the Company entered into a $250,000 bridge loan with related party investors. Terms of the bridge loan with related party includes repayment of principal on or before June 30, 2021, and an annual interest rate of 18%. In addition to repayment of principal and interest under the bridge loan with related party, the Company issued investors 157,561 shares of common stock. Outstanding principal associated with bridge loan from related party investor at March 31, 2021 and December 31, 2020 was $250,000 and $-0-, respectively. In May 2020, the related party bridge loan was paid in full .

NOTE 6 INCOME TAXES

The Company files Federal and state tax returns in as a C-corporation, To the Company’s knowledge, no returns are subject to examination by taxing authorities.

The Company has recorded no provision for income taxes or accrued a deferred tax asset (or liability) in the consolidated financial statements, on the basis that, although expected, the likelihood of the Company realizing any tax benefit (or liability) in the future cannot be calculated as of the date of this Report. As of the date of this Report, the Company is in compliance with all required local, state, and federal tax filings.

NOTE 7 COMMITMENTS AND CONTINGENCIES

Concentration of Credit Risk

Operating leases

DuringGenerally, the three months periods endedCompany’s cash balances, which are deposited in non-interest-bearing accounts may exceed FDIC insurance limits from time to time. The financial stability of these institutions is periodically reviewed by senior management. At March 31, 2021 and 2020, the Company had two operating leases for office space in Miami, Florida and Belfast, Ireland.

Rent expense under the operating leases totaled approximately $135,000 and $25,000 during the three months ended March 31, 2021 and 2020, respectively.

Employee Equity (Stock) Incentive Plan

The Company created an employee stock ownership plan in which, at its sole discretion, it may award employees of the Company common stock as an incentive for performance (the “Plan”). 1,575,029 shares of common stock are reserved for issuance under the Plan. During the periods ended March 31, 20212022, and December 31, 2020, respectively, the Company granted 53,3532021, cash balances in excess of FDIC requirements were $95,949 and 611,913 common stock options under the Plan.$4,141,816, respectively.

At March 31, 2021 and December 31, 2020, total common stock options issued under the Plan was 723,729 and 670,376, respectively. Weighted average strike price per employee stock option is approximately $1.01 per share. Management recorded stock-based compensation expense associated with the issuance of employee stock options of $49,113 and $229,712 for the three and twelve months ended March 31, 2021 and December 31, 2020, respectively.

As of the date of this Report, no employee stock options were exercised.

License Agreement

The Company expects to finalize license agreements with customers for its technology services in fiscal year 2021. The Company currently has agreements with rideshare and other businesses for placement of its Software-as-a-service (SaaS) and technology products into tablet devices and smart screens (See Note 3).

Litigation, Claims, and Assessments

The Company may be involvedis in legal proceedings, claims and assessments arising in the ordinary course of business.assessments. Such matters are subject to many uncertainties, and outcomes are not predictablepredictable.

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 assurance. Thererespect 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 Securities and Exchange Commission (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 nonow captioned Rodriguez, et al. v. Alfi, Inc., et al., Case No. 21-cv-24232-KMW. The Company intends to vigorously defend these actions. The Company is currently unable to estimate the costs and timing of the resolution of this matter.

During February and March 2022, 2 former employees filed breach of contract claims against the Company. The Company is currently unable to estimate the costs and timing of arbitration of these claims.

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 matters asdocuments 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 is currently unable to estimate the costs and timing of the resolution of 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 Investigation (see Note 11) 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 January 1, 2022 through March 31, 2021.2022.  Additional amounts may be subject to claims for

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Theadvancement and indemnification, but the Company entered into agreements with related parties duringis unable to estimate the threeamount of additional fees and twelve months ended March 31, 2021 and December 31, 2020, respectively (see Note 5 and Note 13).expenses that may be subject to advancement or indemnification.

NOTE 8 STOCKHOLDERS’ EQUITY

As of March 31, 2021, there is not a viable market forCommon shares issued before the Company’s common stock to determine its fair value; therefore, management estimated the fair value to be utilized in the determining the fair value of issued conversion options. In estimating the fair value, management considered theIPO were recorded at estimated fair valuevalue. In May 2021, the Company completed its IPO of assets received in exchange for equity instruments and placement agents’ assessments ofits Common Stock. The Common Stock is listed on the underlying common shares relating to our issuance of our senior convertible preferred stock. Considerable management judgment is necessary to estimateNasdaq Capital Market under the fair value. Accordingly, actual results could vary significantly from management’s estimates.symbol “ALF”.

In 2018, the Company created a class of Preferredthe Series Seed stock (“Preferred stock”). Par value for the Preferred stock is $0.0001 per shareStock and 2,500,000 shares of Series Seed Preferred stockStock were authorized. During 2018 and 2019, 2,500,000 shares of Series Seed Preferred stock wasStock were issued to an investor in exchange for $2,500,000 cash consideration. At March 31, 2021 and December 31, 2020, totalShares of Series Seed Preferred stock shares issued and outstanding were 2,500,000Stock converted to Common Stock at a ratio of 1.260023:1 at any time at the endoption of each period.

the holder. Holders of Series Seed Preferred stockholders haveStock had preferential liquidation rights in the event of the Company’s dissolution. TheShares of Series Seed Preferred stock shares convert to common stock at a ratio of 1:1.260023 at any time and from time to time in the sole discretion of the holder. Preferred stock shares bear nobore 0 interest or dividend payments to its Holders.

holders. The Series Seed Preferred stock hasStock had a buyout feature if not converted into common stockCommon Stock by investor.the holder. Series Seed Preferred stock canStock could be bought out by the Company if full return of principal iswas made to investor ($2,500,000), plus an additional 1x return of capital to investorthe holder ($2,500,000). The Preferred stock will convert to common stock upon an IPO.

As of March 31, 2021 andOn December 31, 2020, no2,500,000 Series Seed Preferred stockStock shares had been converted into common stock by its holders.were issued and outstanding. In May 2020,2021, 2,500,000 shares of convertible preferred series seed stockSeries Seed Preferred Stock were converted by into 3,150,058 shares of commonCommon Stock at a conversion ratio of 1:1.260023. During the year ended December 31, 2021, and the three months ended March 31, 2022, 0 preferred stock uponwas issued by the consummationCompany, and 0 shares of the Company’s initial public offering.preferred stock were outstanding as of March 31, 2022.

Dividends

Holders of Preferredpreferred stock are not entitled to any dividend payment but do have liquidation preference in the event of dissolution of the Company. Holders of common stockCommon Stock are not entitled to any dividend payments but would receive such payments in the event dividend payments were made to stockholders. There were nowas 0 dividend

payments payment made on any class of stock (common (Common Stock or preferred) for the three and twelve months ended preferred stock) through March 31, 2021 and December 31, 2020.2022.

Common Stock

The Company is authorized to issue 80,000,000 shares of common stock,Common Stock, par value $0.0001. In 2018, 3,150,0003,150,058 shares of common stockCommon Stock were issued to the ‘Company’s Founders.three management members who are the Company’s founders, at par. In March 2021, a 1.260023 to 1 forward stock split was effected. Common Stock share numbers contained herein in this Quarterly Report are presented on a post-split basis unless specifically noted otherwise.

During the twelve monthsyear ended December 31, 2020, the Company issued 31,50031,501 shares of common stockCommon Stock to an unaffiliated third party in exchange for services associated with investment relations and fundraising, and to support the development of revenue producing contracts. Management valued this issuance of common shares as stock-based compensation  expenseat $25,000 and recorded that amount in fiscal year 2020 for approximately $25,000.other general and administrative expense.

During the twelve monthsyear ended December 31, 2020, the Company issued 1,260,0631,260,023 shares of common stockCommon Stock to an investorrelated party investors in exchange for bridge loan funding necessary to procure ongoing business operations. Management valued this issuance of common shares as stock-based compensation  expense duringat $2,000,000 and recorded that amount in interest expense.

During the twelve monthsyear ended December 31, 2020 for approximately $2,000,000.

During the three months ended March 31, 2021, the Company arranged two bridge loans with related party investors. The Company issued 157,561472,510 shares of common stock to an investorCommon Stock in exchange for bridge loan funding necessary to procure ongoing business operations. Management valued these issuances of shares at $750,000 and recorded that amount in interest expense.

During the year ended December 31, 2021, the Company also issued 300,000 shares of Common Stock in connection with certain vendor contracts. Management valued this issuance of common shares as stock-based compensation  expenseat $476,180 and recorded that amount in other general and administrative expense.

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 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

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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. Net IPO proceeds of approximately $15.7 million were allocated $11.0 million to Common Stock and $4.7 million to warrants. 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.

Warrants Issued and Exercised

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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 $16,034,189 in additional funding. As of December 31, 2021, there were warrants to purchase 969,385 shares of Common Stock outstanding. NaN warrants to purchase shares of Common Stock were issued or exercised during the three monthsquarter ended March 31, 2022022. As of March 31, 2022, there were warrants to purchase 969,385 shares of Common Stock outstanding.

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Share Buy-Back

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On June 23, 2021, Alfi announced a $2.0 million buy-back of its Common Stock.  The buyback was completed on July 9, 2021, with Alfi acquiring 137,650 shares of Common Stock, for approximately $250,000.an aggregate price of $1,999,997, which are recorded as treasury stock.

Employee Equity (Stock) Incentive Plan

The Company created an employeehas a stock ownershipequity incentive plan, the 2018 Plan, in which, at its sole discretion, it may award employees of the Company common stockCommon Stock or Common Stock options, among other awards, as an incentive for performance (the “Plan”).performance. Total shares of common stockCommon Stock reserved under the 2018 Plan for employee stock optionsgrants is not to exceed 1,575,029 shares.

During the three months ended March 31, 2022 and 2021, and 2020,respectively, the Company issued approximately 53,353granted -0- and 59,063 common stock197,668 Common Stock options to employees in each period, respectively. Atunder the 2018 Plan.

On March 31, 2022 and 2021, total Common Stock options issuedand December 31, 2020, total unexercised common stock options issued to employeesoutstanding under the Company’s employee stock option ownership incentive plan was 723,7292018 Plan were 429,939 and 670,376, respectively.

Weighted433,927, respectively, and weighted average strike price per employee stock option iswas approximately $1.01$2.37 and $1.52 per share.share, respectively. Management recorded stock-based compensation expense associated with the issuance of employee stock options of $49,113$68,038 and $229,712$46,684 for the periods endingthree months ended March 31, 2022 and 2021, and December 31, 2020, respectively. At

During the three months ended March 31, 2021, there is not a viable market for the Company’s common stock to determine its fair value; therefore, management estimated the fair value to be utilized in the determining the fair value of issued employee stock conversion options. Considerable management judgment is necessary to estimate the fair value of employee2022, 2 employees exercised stock options issued employees. Accordingly, actual results could vary significantly from management’s estimates.

Asand received 23,072 restricted shares of the date of this Report, no employee stock options were exercised by participants of the plan.

Stock Option and Warrant Valuation

Common Stock.

Stock option and warrant valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from an index of historical stock prices for comparable entities. For warrants and stock options issued to non- employees, the Company accounts for the expected life based on the contractual life of the warrants and stock options. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for ��plain-vanilla”“plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options.

Potentially dilutive securities excluded from the computation of basic net loss per share as of are as follows:

Forward stock split​

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NOTE 9 PROPERTY AND EQUIPMENT

Property and equipment, balances, net of accumulated depreciation, at March 31, 2021 and December 31, 2020 were $116,368 and $117,474, respectively, and consistconsists of equipment purchases the Company made for IT server and other depreciable computer hardware assets. These assets were assigned a 5-year average useful life.following:

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The Company incurred depreciation expense of $8,898$372,317 and $23,915$203,308 for the three and twelve months ended March 31, 2021 and December 31, 2020, respectively.

A summary of property plant and equipment balances as of March 31, 2021 and December 31, 2020 is as follows:

Accumulated depreciation recorded as of March 31, 2021 and December 31, 2020 totaled $54,979 and $46,081, respectively. The Company incurred no fixed asset dispositions or identified asset impairments during thethree-month periods ended March 31, 20212022, and December 31, 2020,2021, respectively.

Property and equipment includes approximately 27,000 Lenovo tablet hardware devices including over 9,000 tablets placed with rideshare and other businesses. Tablets are provided to rideshare and other businesses at no charge but remain the property of the Company and must be returned to the Company upon termination of the rideshare or other use agreement. The Company may pay a revenue share or commission to such third party for the placement of the Alfi-enabled device.

NOTE 10 INTANGIBLE ASSETS – INTELLECTUAL PROPERTY

Intellectual Property – Software Development and Patent and ProductionAcquisition Costs

The Company'sCompany’s intellectual property includes capitalized software development and patent and platform productionacquisition costs associated with creation of its technology (see Note 1). IncludedDuring the period between the Company’s formation in capitalized patent costs are2018 through June 2020, the legalCompany created and logistics expenses directly associated with patentdeveloped the proprietary software that is the basis of its ability to deliver targeted digital advertising. The Company considers this software to be internal-use software, as it is used exclusively by the Company on devices it controls to deliver the advertising services it is engaged to provide. The Company determined that the application development acquisition,phase for this software began in May 2018 and filing. Includedended in capitalized platformJune 2020, and its first release of production costs are the direct labor, design, testing, acquisition, and allocation for administrative overhead associated with software development. Upon being placed into servicewas activated in a tablet in July 2020.

On July 1, 2020 forward, the Company commenced amortization of these intangible assets. The Company estimated a 5-year useful life for beta testing, capitalized patent and platform productionsoftware development costs and their anticipated useful lives are summarized as follows:

The Company assigned a 15-year estimated useful life for patent acquisition costs, and a 5-year estimated useful life for technology platform production costs. The Company has been awarded a patent and has patents pending with the United States Patent Trademark Office (USPTO). Patents have a legal lifespan of 20 years. Between 2018 and 2020, the Company has incurred production costs associated with its technology platform.

Management’s determination of useful life estimate for patent acquisition costs is reasonable given the statutory periods for patents of 20 years. Management selected a 5-year useful life for productionsoftware development costs as a conservativean expectation of the length of time the Company expects its technology product set to produce future cash flows consideringassuming that there are no significant software or version upgrades. However, with new upgrades to the Alfi platform we believe that the useful life will be extended out further. (See Note 3, Change in Accounting Estimate / Prior Period Reclassifications).All software development costs incurred beyond June 30, 2020 are being expensed.

A summary of intangible asset,Intangible assets, net of accumulated amortization, balances asconsists of the following:

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