Unless the context requires otherwise, references to the "Company," "Alfi ," "we," "us" and "our" refer toAlfi, Inc. , aDelaware corporation and its wholly owned subsidiary,Alfi (N.I.), Ltd , formed inBelfast, Northern Ireland onSeptember 18, 2018 . Unless otherwise noted, the share and per share information in this Quarterly Report reflect a forward stock split of the Common Stock privately held before the IPO at a percentage of 1.260023 effective onMarch 15, 2021 .
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange Act of 1934, as amended (the "Exchange Act"), Forward-looking statements generally relate to future events or our future financial or operating performance. Forward-looking statements in this Quarterly Report include statements regarding our business and technology development, our strategy, future operations, anticipated financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management. 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 not guarantees of future performance; they reflect our current views with respect to future events and are based on assumptions and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from expectations or results projected or implied by forward-looking statements. We discuss many of these risks in other filings we make from time to time with theSEC . Also, these forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report, which are inherently subject to change and involve risks and uncertainties. Unless required by federal securities laws, we assume no obligation to update any of these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated, to reflect circumstances or events that occur after the statements are made. Given these uncertainties, investors should not place undue reliance on these forward-looking statements. Investors should read this Quarterly Report, and the documents that we reference in this Quarterly Report and have filed with theSEC , with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Overview
We seek to provide solutions that bring transparency and accountability to the 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 anAlfi -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 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. 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 consumerswho view their content. By providing age, gender and geolocation information, we 23
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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 anyAlfi -enabled device.
Our initial focus is to place our
Currently, we intend to charge customers solely based on a CPM, or ads delivered, model. As we continue to proveAlfi 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.
Recent Developments
Initial Public Offering
OnMay 3, 2021 , the Company's registration statement on Form S-1 (File No. 333-251959) was declared effective by theSEC and the Company completed its IPO onMay 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 byAlfi . 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. Pursuant to the underwriting agreement for the IPO, the Company also 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 onMay 3, 2022 untilMay 3, 2026 . The initial exercise price of each Underwriter's Warrant is S5.19 per share. As ofJune 10, 2021 (the Original Filing date of the Company's Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2021 ), no warrants had been exercised and there were 4,477,612 warrants outstanding.
Impact of COVID-19
OnJanuary 30, 2020 , theWorld 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. InMarch 2020 , theWHO 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 inthe 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. 24 Table of Contents Results of Operations Revenues
In general,
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. Three-Month Period EndedMarch 31, 2021 , compared to Three-Month Period EndedMarch 31, 2020 Three months Three months ended Mar 31, ended Mar 31, 2021 2020 $Change % Change Revenues$ 17,450 $ -$ 17,450 N/M Operating expenses Compensation and benefits 883,211 169,769 713,442 420.2 % Other general and administrative 1,251,859 430,589 821,270 190.7 % Depreciation and amortization 247,315 9,563 237,752 N/M Total operating expenses 2,382,385 609,921 1,772,464 290.6 % Operating loss (2,364,935) (609,921) (1,755,014) 287.7 % Other income (expense) Other income 13,018 10,358 2,660 25.7 % Interest expense (356,914) (16,392) (340,522) N/M Total other expense (343,896) (6,034) (337,862) N/M
Net loss before provision for income taxes (2,708,831) (615,955) (2,092,876) 339.8 % Provision for income taxes
- - - N/M Net loss$ (2,708,831) $ (615,955) $ (2,092,876) 339.8 % Revenues For the three months endedMarch 31, 2021 and 2020, net revenues were$17,450 and$-0 -, respectively. The increase of$17,450 was due toAlfi's first SaaS contract revenue generated from a retailer that is payingAlfi for the cost of the initial pilot for the company.
Operating Expenses
For the three months endedMarch 31, 2021 and 2020, total operating expenses were$2,382,385 and$609,921 , respectively, an increase of$1,772,464 . Compensation and benefits expense increased as independent contractors became full time employees effectiveMarch 1, 2021 . Other general and administrative expenses increased due to higher costs related to the Company's growth and launch of its technology platform and preparation for listing as a public company. The increase in other general and administrative expenses reflected higher recruiting fees, marketing expense, rent, software development costs, and taxes and license fees incurred during the three-month period endedMarch 31, 2021 . Depreciation and amortization charges increased as the three months endedMarch 31, 2021 included additional depreciation charges for tablets acquired during 2020. 25 Table of Contents Operating Loss For the three months endedMarch 31, 2021 , the operating loss increased from$609,921 to$2,364,935 , an increase of$1,755,014 compared with the three months endedMarch 31, 2020 . The increase was primarily due to higher operating expenses related to the Company's growth and launch of its technology platform and preparation for listing as a public company.
Other Income (Expense)
Other income of$13,018 and$10,358 for the three-month periods endedMarch 31, 2021 , andMarch 31, 2020 , respectively, included realized and collected foreign tax credits associated with its wholly owned subsidiaryAlfi (N.I.) Ltd of$15,960 and$9,152 , respectively. Interest expense of$356,914 and$16,392 for the three-month periods endedMarch 31, 2021 and 2020, respectively, rose primarily due to additional interest expense incurred for related-party financing provided during the three months endedMarch 31, 2021 .
Net Loss
For the three months endedMarch 31, 2021 , the net loss increased from$615,955 to$2,708,831 , an increase of$2,092,876 compared with the three-month period endedMarch 31, 2020 . The increase was primarily due to higher operating expenses related to the Company's growth and launch of its technology platform and preparation for listing as a public company.
Liquidity and Capital Resources
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 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 throughApril 2021 was cash proceeds from the private placements of preferred equity and debt securities. InMay 2021 , the Company completed its IPO yielding net proceeds to the Company of approximately$15.7 million from sale of Common Stock and 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 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 withU.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. The accounting estimates that require our most significant, difficult, and subjective judgments have an impact on revenue recognition, financial instruments and the determination of share-based compensation and the useful lives of long-lived assets. We evaluate our estimates and judgments on an ongoing basis. Actual results may differ materially from these estimates under different assumptions or conditions. 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 26 Table of Contents
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 Quarterly 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 Quarterly Report.
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