MGOM Migom Global Corporation (CE)

Item 1. Financial Statements

Migom Global Corp.

For the Six Months Ended June 30, 2022

Index to the Unaudited Condensed Consolidated Financial Statements

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

The accompanying notes are an integral part of these financial statements.

Migom Global Corp.

(formerly Alfacourse Inc.)

As of and for the Six months ended June 30, 2022 and 2021

Notes to the Consolidated Financial Statements

Note 1 – Organization and Operations

Migom Global Corp. (the “Company” or “Migom Global”) was incorporated as Alfacourse Inc. in the State of Nevada on February 29, 2016. On November 1, 2019, the Company amended its articles of incorporation and changed its name to Migom Global Corp. The change was made in anticipation of entering a new line of business operations which is a new company building synergistic ventures in international banking, securities brokerage, electronic money distribution as well as digital assets origination and market making.

On October 8, 2019, Heritage Equity Fund LP (“Heritage Equity Fund,” 80% owned by Thomas A. Schaetti (“Mr. Schaetti”)), entered into a Stock Purchase Agreement to acquire 5,000,000 shares, par value $0.001, of Migom Global and thereafter Heritage Equity Fund became 68.48% Controlling shareholder of Migom Global, Mr. Schaetti is 54.78% indirect owner of Migom Global Corp.

On November 1, 2019, the Company, amended its articles of incorporation change its name from Alfacourse Inc. to Migom Global Corp. The change was made in anticipation of entering into a new line of business operations. The Company changed its symbol from ALFC to MGOM on November 11, 2019.

On January 23, 2020, HRH Prince Maximillian Habsburg was appointed as Chairman of the Board of Directors of Migom Global Corp, (the “Company”). Also, on January 23, 2020, Mr. Thomas Schaetti and Mr. Stefan Lenhart were appointed as members of the Board of Directors of the Company. HRH Prince Maximillian Habsburg, Thomas Schaetti, and Stefan Lenhart accepted such appointments on January 23, 2020. Two appointees, Georgi Parrik and Stefan Lenhart, are qualified as an independent using the definition of independence under NASDAQ Listing Rule 5605(a)(2) and the standards established by the Securities and Exchange Commission.

On June 30, 2020, the Securities and Exchange Commission granted the request of Migom Global Corp (the “Company”) to change its Standard Industrial Code (SIC) to 6199. Such SIC reflects the current operations of the Company, which is now Finance Services.

On April 8, 2020, the Company filed with State of Nevada, a Certificate of Amendment for increasing its authorized shares by 650,000 so that they consisted of 75,000,000 common stocks and 650,000 preferred stocks. The holder of the series A preferred stock shall have no conversion right. Each share of series A preferred stock shall have the right to one vote for each share of common stock and is entitled to received dividend.

The Company entered into a Securities Exchange and Settlement Agreement (the “Agreement”) with its controlling shareholder, Heritage Equity Fund LP (“Heritage”), dated April 16, 2020, pursuant to which the Company agreed to issue Heritage 650,000 shares of its Series A Preferred Stock in exchange for $80,243 in accrued and unpaid debt principle and interest, under three convertible debentures held by Heritage. Also, on April 16, 2020, the Company issued 650,000 shares of its Series A Preferred Stock, par value $.001 per share, to Heritage, as described above. The shares of Series A Preferred Stock were issued pursuant to Section 3(a)(9) of the Securities Act of 1933. as it was exchange for existing securities of the Company.

On April 15, 2020, HRH Prince Maximillian Habsburg tendered his resignation from the Board of Directors to the Company. Also, on April 15, 2020, the remaining members of the Board of Directors of the Company accepted HRH Prince Maximillian Habsburg’s resignation.

On April 21, 2020, the Company licensed the use of certain assets to Migom Bank Ltd. (the “Bank”), pursuant to a license agreement, by and between the Company and the Bank (the “License Agreement”).

The completion of the acquisition of the transaction caused the Company to definitively cease being a “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act).

On April 21, 2020, Heritage Equity Fund (the “Seller”) and Migom Global (the “Purchaser”) entered into an Asset Purchase Agreement where Migom Global acquired certain intellectual property involving core banking front end and back-end user interface software, banking and trading cloud-based and server software, etc. from Heritage Equity Fund.

On May 12, 2020, the Company entered into an acquisition agreement with Migom Bank Ltd. and Mr. Schaetti (the “Migom Agreement”).  Migom Bank Ltd. (“Migom Bank”) was incorporated on August 7, 2019, in Dominica. Pursuant to the Migom Agreement, the Company acquired all of the outstanding equity of Migom Bank. Migom Bank is a regulated full-service international bank, licensed by the Financial Services Unit of the Ministry of Finance of Commonwealth of Dominica, specializing in providing retail banking services to individuals and companies worldwide. In addition to the traditional services of a deposit institution Migom Bank offers lending, leasing, and investment services, provides money transmittal services, is authorized to issue and administer means of payment such as credit and debit cards, travelers cheques, bankers’ drafts and electronic money. Migom Bank is also authorized by its regulators to provide custody of securities, issue guarantees and commitments, provide credit reference services, safe custody of valuables, offer all forms of electronic banking and foreign exchange and precious metal dealing services. Migom Bank is also authorized by its regulators to perform a variety of investment banking and corporate finance services.

On May 12, 2020, the Company, entered into an acquisition agreement with Central Rich Trading Ltd. and Mr. Schaetti (the “Central Agreement”).  Central Rich Trading Ltd. (“Central”) was incorporated on November 16, 2017 in Hong Kong. Pursuant to the Central Agreement, the Company acquired all of the outstanding equity of Central. Central is a money service business that is licensed by the Hong Kong Customs and Excise Department to provide all forms of permitted money services, electronic money and payment services in the respective territories. In exchange for the equity of Central, the Company issued Mr. Schaetti 17,778 shares of common stock of the Company, at a price per share of $9.00. Central will operate under a separate business plan than the Company and Migom Bank.

On May 14, 2020, Mr. Thomas A. Schaetti was appointed as President of the Company and Georgi Parrik assumed the title of Chief Executive Officer.

For financial reporting purposes, the acquisitions of Migom Bank and Central and the entities controlled by Mr. Schaetti represented a transaction between entities under common control resulted in a change in reporting entity and required retrospective combination of entities for all periods presented, as if the combination had been in effect since the inception of common control. Accordingly, the condensed consolidated financial statements of Migom Global Corp. reflect the accounting of the combined acquired subsidiaries at historical carrying values, except that equity reflects the equity of Migom Global Corp.

Migom Global Corp. primarily develops and holds rights to essential software products and other intellectual property vital for operations of the companies, which it owns. Such intellectual property will be licensed to other companies in the financial industry either under Migom brand or white-labeled. As a stand-alone company, Migom Global Corp. intends to manage and operate as the proprietor of the closed-loop payment and global money transfer system, which will operate both on the rails of Migom Bank and licensed to other financial institutions. Additionally, Migom Global Corp. intends to provide advisory services to government institutions and large private companies in the fields of innovative fintech and blockchain technologies and application of the same to various industries.

Migom Bank is a regulated full-service international bank, licensed by the Financial Services Unit of the Ministry of Finance of Commonwealth of Dominica, specializing in providing retail banking services to individuals and companies worldwide. In addition to the traditional services of a deposit institution Migom Bank offers lending, leasing, and investment services, provides money transmittal services, is authorized to issue and administer means of payment such as credit and debit cards, travelers cheques, bankers’ drafts and electronic money. Migom Bank is also authorized by its regulators to provide custody of securities, issue guarantees and commitments, provide credit reference services, safe custody of valuables, offer all forms of electronic banking and foreign exchange and precious metal dealing services. Migom Bank is also authorized by its regulators to perform a variety of investment banking and corporate finance services.

Central Rich is a money service business that is licensed by the Hong Kong Customs and Excise Department to provide all forms of permitted money services, electronic money and payment services in the respective territories.

On the 19th of January 2021, Heritage Equity Fund LP and Migom Verwaltungs GMBH entered into a restricted shares acquisition transaction; on which Migom Verwaltungs GMBH acquired 5,030,000 restricted shares. The transaction was treated as a transfer of shares, given that Mr. Thomas Schätti is the sole shareholder of both legal entities.

On the 28th of April 2021 Heritage Equity Fund LP and Migom Verwaltungs GMBH entered into a restricted class A shares acquisition transaction; on which Migom Verwaltungs GMBH acquired 650,000 restricted class A shares. The transaction was treated as a transfer of shares, given that Mr. Thomas Schätti is the sole shareholder of both legal entities.

On 28^th of June 2021, Mr. Ricardo Salcedo Sanchez was appointed Chief Financial Officer of Migom Global Corp.

On 27^th of September 2021, Migom Global Corp sold a majority stake of Central Rich Trading Limited (99% of share capital) to Mr. Chin Sin Kwok for HKD 79,768 or USD 10,252 (at closing exchange rate of 27^th of September 2021).

On the 17^th of June 2022, Migom Global Corp entered into a share subscription agreement with Baltic International Bank SE for 845,070 shares for EUR 5,999,997, subject to regulatory approval.

Note 2 – Significant and Critical Accounting Policies and Practices

Basis of Presentation

The Company’s consolidated financial statements have been prepared in accordance with US GAAP.

Common Control

The transactions between the Company and Migom Bank and Central, which all three are under common control, resulted in a change in reporting entity and required retrospective combination of the entities for all periods presented, as if the combination had been in effect since the inception of common control. Accordingly, the consolidated financial statements of the Company reflect the accounting of the combined acquired subsidiaries at historical carrying values, except that equity reflects the equity of Migom Global.

Principles of Consolidation

The accompanying unaudited consolidated financial statements include all of the accounts of Migom Global Corp. and its wholly owned subsidiaries, Migom Bank and Central. All significant intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimate(s) and assumption(s) affecting the financial statements was (were):

(i) Assumption as a going concern: Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

(ii) Valuation allowance for deferred tax assets: Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

Actual results could differ from those estimates.

Fair Value Measurements

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts payable, due to related party and note payable approximate their fair values because of the short maturity of these instruments.

Cash, Due from Banks and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. The cash and cash equivalents consist of cash deposits of bank accounts holders and the Company’s operating cash.

The Commonwealth of Dominica banking regulators do not require bank subsidiaries to maintain minimum average reserve balances, either in the form of vault cash or reserve balances held with central banks or other financial institutes.

 Negative interest rate

The European Central Bank and the central banks of Denmark, Japan, Sweden, and Switzerland have implemented negative interest rates policy to stimulate their countries’ economies which essentially making banks pay to park their excess cash at the central bank. The Company is subject to negative interest rate for its cash deposits in a Switzerland bank account.

Negative interest rate expenses were $43,993 and $56,578 for the Six months ended June 30, 2022 and 2021.

Intangible Assets

Costs incurred to acquire intangibles are capitalized when the Company believes that there is a high likelihood that the software will be utilized and there will be future economic benefit associated with the software. These costs will be amortized on a straight-line basis over a 10 years and 7 years life from the date of acquisition for Migom Bank and Migom Corp, respectively.

In accordance with the provisions of the applicable authoritative guidance, the Company’s long-lived assets and amortizable intangible assets are tested for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. The Company assesses the recoverability of such assets by determining whether their carrying value can be recovered through undiscounted future operating cash flows, including its estimates of revenue driven by assumed market segment share and estimated costs. If impairment is indicated, the Company measures the amount of such impairment by comparing the fair value to the carrying value.

The intangible assets consists of source code, all the backups therefor, supporting documentation, manuals, schematics, computer graphics and the underlying custom images, copyrights therefor, URL domain names, as well as all the software technology and knowhow and any and all other worldwide intellectual property rights in full force and effect currently in perpetuity from the date hereof and all the associated intangible assets related to as well as involved in the design, reproduction, deployment on servers and in the cloud and exploitation of the following items:

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the related parties include (a) affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include:  (a) the nature of the relationship(s) involved; (b) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Leases

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities - current, and operating lease liabilities - noncurrent on the balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in our balance sheets. The initial lease liability is equal to the future fixed minimum lease payments discounted using the Company’s incremental borrowing rate, on a secured basis. The initial measurement of the right-of-use asset is equal to the initial lease liability plus any initial direct costs and prepayments, less any lease incentives.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Impairment of Long-lived Assets

The Company follows paragraph 360-10-05-4 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, such as intellectual property, are required to be reviewed for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.

The Company determined that there were no impairments of long-lived assets at June 30, 2022 and December 31, 2021.

Revenue Recognition

In 2014, the FASB issued guidance on revenue recognition (“ASC 606”), with final amendments issued in 2016. The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. The Company has concluded that the new guidance did not require any significant change to its revenue recognition processes.

The Company generates revenue from service fees such as opening of bank account, currency exchange fee and banking services fee. The banking service fee is transactional based on deposit and withdrawals and FX conversions. Service fees charged to banking clients are based on standard rates established by the Company for each category of clients. The Company can also charge customized rates to specific client based on negotiated terms or other preferences such as volume of transactions, account balances, etc.

Cost of Revenue

Cost of revenue is comprised of commissions paid to banking partners, and commissions paid to other financial institutions, such as EMI’s (Electronic Money Institutions), both partners operating in Europe; and interest on deposits due to negative interest rate paid to our banking partners.

Segment Information

The Company adopted ASC-280, Disclosures about Segments of an Enterprise and Related Information, which requires certain financial and supplementary information to be disclosed on an annual and interim basis for each reportable segment of an enterprise. The Company believes that it operates in one business segment which is banking services, and in one geographical segment in Dominica as all of the Company’s current operations are conducted in Dominica.

Income Taxes

Income taxes are provided in accordance with ASC No. 740, Accounting for Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry-forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net Income (Loss) per Common Share

The Company computes basic and diluted income (loss) per share amounts pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic loss per share is computed by dividing net loss available to common shareholders, by the weighted average number of shares of common stock outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted loss per share is computed by dividing net loss available to common shareholders by the diluted weighted average number of shares of common stock during the period. The diluted weighted average number of common shares outstanding is the basic weighted number of shares adjusted as of the first day of the year for any potentially diluted debt or equity.

The dilutive effect of outstanding convertible securities and preferred stock is reflected in diluted earnings per share by application of the if-converted method.

Foreign Currency Translation and Transactions

The Caribbean Dollar (“XCD) is the functional currency for Migom Bank Ltd operating expenses in Dominica. Whereas the financial statements are reported in United States Dollar (“USD,” “$”). Assets and liabilities are translated based on the exchange rates at the balance sheet date, while revenue and expense accounts are translated at the average exchange rates prevailing during the period. Equity accounts are translated at historical exchange rates. The resulting translation gain and loss adjustments are accumulated as a component of stockholders’ equity and other comprehensive loss.

Comprehensive Income/Loss

The Company reports comprehensive loss and its components in its financial statements. Comprehensive loss consists of net loss on foreign currency translation adjustments affecting stockholders’ equity that, under U.S. GAAP, are excluded from net loss.

Cash Flows Reporting

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.  The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU provides an exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, (2) requires an entity to evaluate when a step-up in the tax basis of goodwill should be considered part of the business combination in which goodwill was originally recognized for accounting purposes and when it should be considered a separate transaction, and (3) requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The standard is effective for the Company for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments.” This pronouncement, along with subsequent ASUs issued to clarify provisions of ASU 2016-13, changes the impairment model for most financial assets and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In developing the estimate for lifetime expected credit loss, entities must incorporate historical experience, current conditions, and reasonable and supportable forecasts. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. On November 19, 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), finalized various effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses (CECL), the revised effective date is January 2023.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

Note 3 – Going Concern

The financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

As reflected in the financial statements, the Company had generated revenues of $18,806,281 with limited operations and net income of $9,060,869 for the Six months ended June 30, 2022, and revenues of $8,052,624 with limited operations and net income of $5,289,880 for the Six months ended June 30, 2021.

The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 4 – Acquisitions

Acquisition of Migom Bank Ltd.

On May 12, 2020, the Company entered into an acquisition agreement with Migom Bank Ltd. and Thomas A. Schaetti (“Mr. Schaetti”) (the “Migom Agreement”). Pursuant to the Migom Agreement, the Company acquired all of the outstanding equity of Migom Bank Ltd. (“Migom Bank”). Migom Bank is a regulated full-service international bank, licensed by the Financial Services Unit of the Ministry of Finance of Commonwealth of Dominica, specializing in providing retail banking services to individuals and companies worldwide. In addition to the traditional services of a deposit institution Migom Bank offers lending, leasing, and investment services, provides money transmittal services, is authorized to issue and administer means of payment such as credit and debit cards, travelers cheques, bankers’ drafts and electronic money. Migom Bank is also authorized by its regulators to provide custody of securities, issue guarantees and commitments, provide credit reference services, safe custody of valuables, offer all forms of electronic banking and foreign exchange and precious metal dealing services. Migom Bank is also authorized by its regulators to perform a variety of investment banking and corporate finance services. In exchange for the equity Migom Bank, the Company issued Mr. Schaetti 126,222 shares of common stock of the Company, at a price per share of $9.00 for total consideration of $1,136,000.

Acquisition of Central Rich Trading Limited

On May 12, 2020, the Company, entered into an acquisition agreement with Central Rich Trading Ltd. (“Central”) and Mr. Schaetti (the “Central Agreement”). Pursuant to the Central Agreement, the Company acquired all of the outstanding equity of Central. Central is a money service business that is licensed by the Hong Kong Customs and Excise Department to provide all forms of permitted money services, electronic money and payment services in the respective territories. In exchange for the equity of Central, the Company issued Mr. Schaetti 17,778 shares of common stock of the Company, at a price per share of $9.00 for total consideration of $160,000.

Disposal of Central Rich Trading Limited

On 27^th of September 2021, Migom Global Corp sold a majority stake of Central Rich Trading Limited (99% of share capital) to Mr. Chin Sin Kwok for HKD 79,768 or USD 10,252 (at closing exchange rate of 27^th of September 2021).

Common Control

The transactions between the Company and Migom Bank and Central, which all three are under common control, resulted in a change in reporting entity and required retrospective combination of the entities for all periods presented, as if the combination had been in effect since the inception of common control. Accordingly, the consolidated financial statements of the Company reflect the accounting of the combined acquired subsidiaries at historical carrying values, except that equity reflects the equity of Migom Global.

Note 5 – Regulatory Matters

The Company is subject to following regulatory requirements established by the Commonwealth of Dominica banking regulators:

Depreciation expense was $nil and $ nil for the Six months ended June 30, 2022 and 2021, respectively.

Amortization expense was $82,412 and $118,701 for the Six months ended June 30, 2022 and for the year ended December 31, 2021, respectively.

Note 8 – Deposits

Deposits consists of funds placed into banking institution by the bank accounts holders for safekeeping. The account holder has the right to withdraw deposited funds accordingly.

The composition of deposits was as follows:

Note 9– Shareholders’ Equity

Shares Authorized

Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is seventy-five million (75,000,000) shares of which seventy-five million (75,000,000) shares shall be common stock, par value $0.001 per share.

On April 8, 2020, the Company filed a Certificate of Amendment with the State of Nevada increasing its authorized shares by 650,000 so that they consisted of 75,000,000 shares of common stock and 650,000 shares of series A preferred stock. The holder of the series A preferred stock shall have no conversion right. Each share of series A preferred stock shall have the right to one vote for each share of common stock and is entitled to received dividend.

Common Stock

As of June 30, 2022, there were 7,539,000 total shares issued and outstanding.

On April 21, 2020, the Company entered into an asset purchase agreement with Heritage Equity Fund (the “Asset Agreement”). Pursuant to the Asset Agreement, the Company acquired all of the intellectual property of Heritage Equity Fund related to core banking front end and back-end user interface software, banking and trading cloud-based and server software, and mobile applications (collectively, the “Assets”). In exchange for the Assets, the Company issued Heritage Equity Fund 30,000 shares of common stock of the Company, at a price per share of $9.00 for total consideration of $270,000.

On May 12, 2020, the Company entered into an acquisition agreement with Migom Bank (see Note 4). The Company issued Mr. Schaetti 126,222 shares of common stock of the Company, at a price per share of $9.00.

On May 12, 2020, the Company entered into an acquisition agreement with Central (see Note 4). The Company issued Mr. Schaetti 17,778 shares of common stock of the Company, at a price per share of $9.00.

On the 19th of January 2021, Heritage Equity Fund LP and Migom Verwaltungs GMBH entered into a restricted shares acquisition transaction; on which Migom Verwaltungs GMBH acquired 5,030,000 restricted shares. The transaction was treated as a transfer of shares, given that Mr. Thomas Schätti is the sole shareholder of both legal entities.

Preferred Stock

As of June 30, 2022, there were 650,000 total shares issued and outstanding. The holder of each series A preferred stock has no conversion rights. Each stock has right to one vote. The holders of these shares shall be entitled to receive dividends. No dividends have been paid to these shareholders.

The Company entered into a Securities Exchange and Settlement Agreement with its controlling shareholder, Heritage Equity Fund, dated April 16, 2020, pursuant to which the Company agreed to issue Heritage Equity Fund 650,000 shares of its Series A Preferred Stock in exchange for $80,243 in accrued and unpaid debt principal and interest, under three convertible debentures held by Heritage Equity Fund. (Refer to Note 10)

On July 1, 2020, the Company reversed the additional paid-in capital contributed by Thomas A. Schaetti in the amount of $71,199 to related party debt because Mr. Schaetti is no longer a shareholder of Migom Bank Ltd.

On the 28th of April 2021 Heritage Equity Fund LP and Migom Verwaltungs GMBH entered into a restricted class A shares acquisition transaction; on which Migom Verwaltungs GMBH acquired 650,000 restricted class A shares. The transaction was treated as a transfer of shares, given that Mr. Thomas Schätti is the sole shareholder of both legal entities.

Note 10 – Notes payable to related party

On October 9, 2019, the Company entered into a convertible note agreement with Heritage Equity Fund, for $20,000 and $22,814, with maturity date of July 9, 2020. The note bears interest rate of 8% and is convertible into shares of common stock at $0.0025 per share.

On April 14, 2020, the Company entered into a convertible note agreement with Heritage Equity Fund, for $35,697, maturity date of July 1, 2021, the note bears interest of 8% per annum and is convertible into shares of the common stock at $0.0025 per share.

On April 16, 2020, the notes payable to related party and interest payable indicated above have been settled by issuance of Preferred Stock Series A through a settlement agreement. (Refer to Note 9)

Heritage Equity Fund is a related party as it is controlled by Thomas A. Schaetti, director and majority shareholder of the Company. (Refer to Note 11)  

On April 14, 2020, the Company entered into a convertible note agreement with Heritage Equity Fund, for $35,697, maturity date of July 1, 2021, the note bears interest of 8% per annum and is convertible into shares of the common stock at $0.0025 per share.

Rental fees

The Company rent office space occasionally from Migom Verwaltung for client meetings in Vienna.

Acquisition of intellectual property

On April 21, 2020, the Company entered into an asset purchase agreement with Heritage Equity Fund, who was 80% owned by Thomas A. Schaetti, (the “Asset Agreement”). Pursuant to the Asset Agreement, the Company acquired all of the intellectual property of Heritage Equity Fund related to core banking front end and back-end user interface software, banking and trading cloud-based and server software, and mobile applications (collectively, the “Assets”). In exchange for the Assets, the Company issued Heritage Equity Fund 30,000 shares of common stock of the Company, at a price per share of $9.00 for total consideration for $270,000.

No acquisitions of intellectual property took place during Six months ended June 30, 2022.

Marketing fees

The Company engaged Migom AG, a related party of the Company, for marketing service to refer customers to open bank accounts at Migom Bank in 2020. The marketing fees were recorded as cost of revenue as it is directly related to account opening service revenues. The Company did not engage into any marketing service activities with Migom AG during Six months ended June 30, 2022.

Loan to related party

On the 29^th of June 2022, the Company received an interest free, unsecured loan of EUR 6,000,000 from Migom Bank Ltd to fund the prepayment to Baltic International Bank SE.

Note 12 – Income taxes

USA

The Company is subject to federal taxes in the United States (tax rate of 21%), state taxes in Nevada. The Company did not recognize any deferred tax assets or liabilities as of March 31, 2022 and December 31, 2021.

Deferred Tax Assets

As of December 31, 2022, the Company had net operating loss (“NOL”) carry forwards for Federal income tax purposes of $422,770 that may be offset against future taxable income indefinitely limited to 80% of taxable income. No tax benefit has been recorded with respect to these net operating loss carry-forwards in the accompanying financial statements as the management of the Company believes that the realization of the Company’s net deferred tax assets of approximately $88,781 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by the full valuation allowance.

Components of deferred tax assets are as follows:

A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:

Dominica

Migom Bank was incorporated under the Dominica tax law. The Statutory corporate tax rate is 25% of the profit of the company financial year. If the Company’s directors or shareholders withdraw any monies as salaries, directors’ allowances or dividend, there is a 15% withholding tax to be paid to the Tax Authorities by the Company.

Note 13 – Commitments and contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur.  The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  Management does not believe, based upon information available at this time that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

Covid-19

The Company has been affected negatively by COVID-19 directly and adversely affected the development this year as follows: (a) administrative lockdowns impeded the Company’s ability to scout, interview and recruit both key management staff and clerical and support employees as opening new offices and training of new employees has been impeded. Furthermore, due to travel restrictions and closures of administrative and regulatory offices in various target markets internationally, new development plans have been put on hold. Attracting capital investment has become more challenging due to travel and social interaction restrictions, which prevented the Company from being able to make in-person presentations and roadshows to investors. Interaction with the acquisition targets, regulators, banks and other vendors of requisite services in Dominica have been made very difficult due to travel restrictions to the respective areas and has been mainly put on hold. Key personnel of the Company have been directly affected by COVID-19, in particular, which certain employees and vital outsourced contractors had contracted and suffered through active COVID-19 infections.

Legal Matters

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of March 31, 2022, there were no pending or threatened lawsuits.

Leases

The original lease agreement was less than 12 months and subsequently it is expensed out on a monthly basis. The Company has elected not to recognize lease assets and liabilities for lease with a term less than twelve months.

Note 14 – Concentrations, uncertainties, and risks

Concentration by Geographic Location

The Company operation is located in Dominica with clients primarily from European countries.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk are cash and cash equivalents, transaction monetary assets held for clients, mark to market assets for open trading positions arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions to minimize the interest rate and credit risk of cash. The Company routinely assesses the financial strength of the financial institution, based upon factors surrounding the credit risk of the financial institutions. Credit risk of cash and cash equivalents is managed by depositing cash at renowned financial institutions where certain government regulations are in place to protect clients’ cash balances.

Regulatory risks

The Company operates in the financial service industry that requires a license to be provided by the Dominica Financial Service Unit. The Company therefore is subject to abide to the regulations set by the governing bodies. Any change in regulations or legislation may affect the Company or the industry which may cause a negative impact to the Company or across the industry. Such change in regulations may increase the costs of the Company’s operations, introduce legal and administrative hurdles, and sometimes may even restrict the Company from continuing its business. In addition, the Company’s failure to abide to the regulations may result in revocation of its license which may significantly disrupt its operations and business.