Note				September 30, 2019				December 31, 2018
						(unaudited)
Assets
Current assets
Cash and cash equivalents						$	126,955			$	98,121
Other receivables							211,742				68,963
Prepayments and deposits							146,111				141,522
Total current assets							484,808				308,606
Non-current assets
Property, plant and equipment							1,926,439				1,557,622
Intangible assets							1,097,362				1,097,362
Deposits for property, plant and equipment							296,940				-
Right-of-use assets			3				229,125				-
Total assets						$	4,034,674			$	2,963,590
Liabilities and Stockholders’ Equity
Current liabilities
Accrued charges						$	194,464			$	301,413
Other payables			4				1,281,271				237,167
Lease liabilities			3				193,772				-
Amount due to a director			5(d)				28,061				73,560
Loans from related persons			5(a)				382,644				766,246
Total current liabilities							2,080,212				1,378,386
Non-current liabilities
Amounts due to shareholders			5(c)				700,024				398,208
Lease liabilities			3				44,404				-
Provision for asset retirement obligations							31,107				31,383
Provision for exploration asset compensation							101,226				102,127
Total liabilities							2,956,973				1,910,104
Stockholders’ equity
Capital Stock
-Authorized 200,000,000 common stock, voting, par value $0.0001 each;
-Authorized 100,000,000 preferred stock, non-voting, par value $0.0001 each;
-14,683,836 common stock issued and outstanding (December 31, 2018 – 14,165,000)							1,468				1,417
Additional paid in capital							10,423,474				8,937,243
Accumulated loss							(9,072,528	)			(7,617,451	)
Accumulated other comprehensive loss							(274,713	)			(267,723	)
Total stockholders’ equity							1,077,701				1,053,486
Total liabilities and stockholders’ equity						$	4,034,674			$	2,963,590

The accompanying notes are an integral part of these interim consolidated financial statementsstatements.

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TGS International Ltd.
Condensed Interim Consolidated Statements of Comprehensive Loss
Stated in US dollars
For the periods ended November 30, 2017
(Unaudited)
		Three months ended November 30,				Nine months ended November 30,
		2017				2017
Revenue		$	18,810			$	26,627
Cost of goods sold			(13,881	)			(18,633	)
Gross profit			4,929				7,994
Expenses
Depreciation			509				509
Filing fees			16,611				17,856
General & administration			4,279				6,914
Management fee			4,726				6,207
Professional fees			25,461				35,814
			(51,586	)			(67,300	)
Net loss			(46,657	)			(59,306	)
Other comprehensive income (loss)
Foreign currency adjustment			148				(16	)
Comprehensive loss		$	(46,509	)		$	(59,322	)
Basic and diluted loss per stock		$	(0.003	)		$	(0.004	)
Weighted average number of shares outstanding			13,530,000				13,530,000

(In United States dollars)

		Note				Three months ended September 30,								Nine months ended September 30,
						2019				2018				2019				2018
Net sales						$	-			$	434,728			$	-			$	434,728
Cost of sales							(321,263	)			(141,065	)			(466,169	)			(278,556	)
Gross (loss)/profit							(321,263	)			293,663				(466,169	)			156,172
Administrative expenses							(256,294	)			(354,027	)			(920,069	)			(885,533	)
Loss from operations							(577,557	)			(60,364	)			(1,386,238	)			(729,361	)
Other income							25				48,369				691				77,133
Interest expenses							(19,086	)			(22,317	)			(69,530	)			(53,015	)
Loss before provision for income taxes							(596,618	)			(34,312	)			(1,455,077	)			(705,243	)
Provision for income tax							-				-				-				-
Net loss							(596,618	)			(34,312	)			(1,455,077	)			(705,243	)
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments							2,006				(102,281	)			(6,990	)			(157,128	)
Comprehensive loss						$	(594,612	)		$	(136,593	)		$	(1,462,067	)		$	(862,371	)
Net loss per share:
Basic and diluted net loss per share			6			$	(0.04	)		$	(0.01	)		$	(0.10	)		$	(0.44	)
Weighted average number of common stock outstanding:
Basic and diluted							14,616,755				4,717,787				14,468,536				1,590,401

The accompanying notes are an integral part of these interim consolidated financial statementsstatements.

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(In United States dollars)

The accompanying notes are an integral part of these interim consolidated financial statementsstatements.

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(In United States dollars)

						For the Nine months ended September 30,
		Note				2019				2018
Cash flows from operating activities
Net loss						$	(1,455,077	)		$	(705,243	)
Adjustments to reconcile net loss to net cash used in operating activities:-
Depreciation of property, plant and equipment							35,072				36,224
Loss on disposal of property, plant and equipment							-				1,035
Amortization of right-of-use asset							141,204				-
Net foreign exchange losses							-				(52,917	)
Stock compensation expenses			7				122,100				-
Changes in assets and liabilities:-
Other receivables							(145,312	)			(26,604	)
Prepayments and deposits							(4,970	)			19,891
Accrued charges							(146,862	)			(84,372	)
Other payables							1,044,752				(172,469	)
Lease liabilities							(132,152	)			-
Net cash used in operating activities							(541,245	)			(984,455	)
Cash flows from investing activities
Sales proceeds from property, plant and equipment							-				4,097
Acquisition of property, plant and equipment							(420,195	)			(105,398	)
Deposits for property, plant and equipment							(298,860	)			-
Net cash used in investing activities							(719,055	)			(101,301	)
Cash flows from financing activities
Advances from shareholders							451,907				585,679
Proceeds from issuance of common stock							825,000				-
Proceeds from issuance of convertible bond							128,471				-
Proceeds from new loan-related person							-				510,980
Repayment of loans from related persons			5(a)				(127,563	)			-
Net cash provided by financing activities							1,277,815				1,096,659
Net increase in cash and cash equivalents							17,515				10,903
Effect of exchange rate changes on cash and cash equivalents							11,319				17,285
Cash and cash equivalents, beginning of year							98,121				38,943
Cash and cash equivalents, end of year						$	126,955			$	67,131
Supplemental disclosures:-
Interest paid						$	53,895			$	32,314
Income tax paid							-				-
Non-cash investing and financial transactions:-
Cancellation of shares							-				3
Capitalization of advances from shareholders			7			$	121,133			$	8,848,710
Capitalization of loans from related persons			7				289,578				-
Stock compensation expenses			7				122,100				-

The accompanying notes are an integral part of these interim consolidated financial statementsstatements.

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Note

NOTE 1 – Nature and Continuance of Operations- NATURE OF OPERATIONS AND GOING CONCERN

TGS International Ltd. (“TGS” or the “Corporation”, “the Company”) was incorporated in the state of Nevada, United States on December 1, 2016. On December 21, 2016,September 14, 2018, the CorporationCompany entered into a business combination by acquiring TGS Building Products Ltd.Share Exchange Agreement with Arcus Mining Holdings Limited (“Arcus”) and Chi Kin Loo, Billion Plus Limited, First Fortune Investment Limited, Great Win Limited and Master Value Holdings Limited (the “Selling Stockholders”), (“TGS Alberta”) (Note 3). TGS Alberta,pursuant to which the Selling Stockholders agreed to sell all of their ordinary shares of Arcus to the Company in exchange for an aggregate of 7,000,000 shares of common stock of the Company. Arcus, which was incorporated on March 8, 2016 specializes in the saleRepublic of Seychelles on June 17, 2014, and distributionits subsidiaries are engaged in fluorite mining operations in Mongolia, including the processing and installationsales of building materialsfluorite products. Up to September 30, 2019 and is focusedthe date of this report, the Company owns three mining rights in Mongolia (Mining license numbers: MV-016819, MV-017305 and MV-009918). During the nine-month period ended September 30, 2019, the Company did not commence regular mining operations due to the limitation of explosive factories trading to the public in Mongolia. Therefore, the Company has alternative arrangements of the manpower used for setting up the infrastructure at the mine sites in preparation for the exploratory work later so as to minimize the impact of insufficient explosives encountered in the North American market.period.

Reverse merger

On September 14, 2018, the Company and Arcus entered into a Share Exchange Agreement, dated September 14, 2018 with the Selling Stockholders, pursuant to which the Selling Stockholders agreed to sell all of their ordinary shares of Arcus to the Company in exchange for an aggregate of 7,000,000 shares of common stock of the Company. The merger closed on September 14, 2018 and resulted in the following:

Immediately prior to the Share Exchange, 6,500,000 shares of our outstanding common stock were cancelled and retired. A further 30,000 shares were canceled after the Share Exchange.

As a result of the transactions described above, the Company became the record and beneficial owner of 100% of the share capital of Arcus and therefore owns 100% of the share capital of its subsidiaries.

As a result of the Share Exchange, the cancellation of 6,530,000 shares and the issuance of 7,000,000 shares, the Company has 14,000,000 shares of common stock issued and outstanding on September 14, 2018.

The transaction is accounted for as a “reverse acquisition”, with Arcus being treated as the accounting acquirer for financial reporting purposes. The historical consolidated financial statements include the operations of the accounting acquirer and its subsidiaries for all periods presented.

Basis of Presentation

These accompanying unaudited Consolidated Financial Statements of TGS as of and for the period ended September 30, 2019 have been prepared in accordance with accounting principles generally accepted in United States of America (“U.S. GAAP”) for interim financial statements. Accordingly, the Consolidated Financial Statements do not include all the information and footnotes required by U.S. GAAP for complete annual financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The balance sheet as of December 31, 2018 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm. These Consolidated Financial Statements should be read in conjunction with the annual financial statements and notes thereto in the Company’s Form 10-K for the year ended December 31, 2018. The results of operations for the nine months ended September 30, 2019 are not necessarily indicative of the results expected for the full year or for any future periods.

Going Concern

These condensed interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable toon a going concern basis. The Company has incurred an operating loss of $1,455,077 for the nine months ended September 30, 2019 and as of that date, the Company’s current liabilities exceeded its current assets by $1,595,404 which assumes that the Corporation and its subsidiaries will be able to meet its obligations and continue its operations for next fiscal year. Realization values may be substantially different from carrying values as shown and these consolidated financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Corporation be unable to continue as a going concern. At November 30, 2017, the Corporation had not yet achieved profitable operations and has a negative working capital of $48,876 and accumulated losses of $73,633 since its inception. The Corporation expects to incur further losses in the development of its business, all of which castsraises substantial doubt about the Corporation’s ability to continue as a going concern. The Corporation’s ability to continue as a going concern is dependent upon itsCompany’s ability to generate future profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management anticipates that additional funding will beSince the Company is currently in the formdevelopment and trial-production stage, it is still in the capital investing period. The Company’s business forecast indicates that the Company will have positive cash inflow after the commencement of equityformal production. Management believes the Company will have sufficient working capital to meet its financing fromrequirements based on the salefinancial support of common stock. Management may also seek to obtain short-term loans from the directorsshareholders and upon their experience and their assessment of the Corporation. There are no current arrangements in place for equity funding or short-term loans.

Note 2 – Summary of Significant Accounting Policies

This summary of significant accounting policies is presented to assist in understanding the condensed interim consolidatedCompany’s projected performance, production ability and product market. The financial statements. The condensed interim consolidated financial statements and notes are the representations of the Corporation’s management, who is responsible for their integrity and objectivity. The condensed interim consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 210 8-03 of Regulation S-X, and therefore do not include allany adjustments relating to the informationrecoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. These condensed interim consolidated financial statements should be read in conjunction with the annual consolidated financial statements and footnotes for the period ended February 28, 2017 included in the Corporation’s filed Form S-1.

Basis of Presentation

The Corporation’s condensed interim consolidated financial statements included herein are prepared underevent the accrual basis of accountingCompany cannot continue in accordance with accounting principles generally accepted in the United States of America. These condensed interim consolidated financial statements include the Corporation’s wholly owned subsidiary, TGS Building Products Ltd., and 100 percent of its assets, liabilities and net income or loss. All inter-company accounts and transactions have been eliminated.

The functional currency of the Corporation and its subsidiaries is Canadian dollars (“C$”). The Corporation’s reporting currency is the United States currency (“US dollars”).

While the information presented in the accompanying condensed interim consolidated financial statements is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operation and cash flows for the interim periods presented. All adjustments are of a normal recurring nature. Operating results for the period ended November 30, 2017 are not necessarily indicative of the results that can be expected for the year ended February 28, 2018.existence.

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Note 2 – Summary of Significant Accounting Policies (CONT.)

Recent changes in accounting standards

Use of EstimatesRecently Adopted

The preparation of condensed interim consolidated 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 disclosures of contingent assets and liabilities at the date of consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

The Corporation adopts new pronouncements relating to accounting principles generally accepted in the United States of America applicable to the Corporation as they are issued, which may be in advance of their effective date. Management does not believe that any recently issued, but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This ASU clarifies the definition of a business in order to assist companies in the evaluation of whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The amended guidance also removes the existing evaluation of a market participant’s ability to replace missing elements and narrows the definition of output to achieve consistency with other topics. This ASU is effective for fiscal years beginning after December 15,February 2016, (fiscal 2018), and interim periods within those fiscal years. The Corporation does not expect the adoption of this guidance will have a material impact on its consolidated financial statements.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles – Goodwill and Other2016-02, Leases (Topic 350): Simplifying the Test842), which amends existing accounting standards for Goodwill Impairment. Thisleases. The ASU requires lessees to recognize most leases on their balance sheet as a lease liability with a corresponding right-of-use asset. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. The criteria for evaluating are similar to those applied in current lease accounting.

The Company elected to transition to Accounting Standards Codification (“ASC”) 842 using the option to apply the standard on its effective date, January 1, 2019. The comparative periods presented reflect the former lease accounting guidance and the required comparative disclosures are included in Note 3, Leasing Arrangements. There was not a material cumulative-effect adjustment to the beginning accumulated losses as a result of adopting ASC 842. We have recognized additional right-of-use assets of $369,874 and $229,125 as of January 1, 2019 and September 30, 2019 and lease liabilities of $369,874 and $238,176 as of January 1, 2019 and September 30, 2019, respectively. We elected not to reassess prior conclusions related to the identification, classification and accounting for initial direct costs for leases that commenced prior to January 1, 2019. For additional disclosure and detail, see Note 3, Leasing Arrangements.

Not Yet Adopted

In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. In November 2018, FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which amends the scope and transition requirements of ASU 2016-13. Topic 326 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported amount. Topic 326 will become effective for the Company beginning January 1, 2020, with early adoption permitted, on a modified retrospective approach. The Company is currently evaluating the impact this guidance will have on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to perform its annual, or applicable interim, goodwill impairment testthe Disclosure Requirements for Fair Value Measurement. The objective of ASU 2018-13 is to improve the effectiveness of disclosures in the notes to the financial statements by comparing theremoving, modifying, and adding certain fair value of a reporting unit with its carrying amount. An impairment charge must be recognized at the amount by which the carrying amount exceeds the fair valuedisclosure requirements to facilitate clear communication of the reporting unit; however, the charge recognized should not exceed the total amount of goodwill allocated to that reporting unit. Income tax effects resulting from any tax deductible goodwill should be considered when measuring the goodwill impairment loss, if applicable. This ASU isinformation required by generally accepted accounting principles. The amendments are effective for annual orall entities for fiscal years, and interim goodwill impairment tests inperiods within those fiscal years, beginning after December 15, 2019 (fiscal 2021).with early adoption permitted upon issuance of this ASU. The Corporation does not expectCompany is currently evaluating the adoption ofimpact this guidance will have a material impact on itsthe Company’s consolidated financial statements.

Other recent accounting pronouncements issued byIn October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This Update states a private company (reporting entity) may elect not to apply VIE guidance to legal entities under common control (including its Emerging Issues Task Force)common control leasing arrangements) if both the parent and the SEC did not orlegal entity being evaluated for consolidation are not believedpublic business entities. This Update also states indirect interests held through related parties in common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests. This is consistent with how indirect interests held through related parties under common control are considered for determining whether a reporting entity must consolidate a VIE. For the Company, this Update is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. All entities are required to apply the amendments in this Update retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. Early adoption is permitted. The adoption of ASU 2018-17 is not expected to have a material impact on the Corporation’s present or futureCompany’s consolidated financial statements.statements in 2019.

NOTE 3 – BUSINESS ACQUISITIONThe Company has implemented all new accounting pronouncements that are in effect and that could impact its consolidated financial statements and does not believe that there are any other new accounting pronouncements that have been issued, but are not yet effective, that might have a material impact on the consolidated financial statements of the Company.

On December 21, 2016, the Corporation acquired all of the issued and outstanding stock of TGS Alberta from related parties for cash of $154. This acquisition enables the company to operate in the Canadian market.

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NOTE 3 – LEASING ARRANGEMENT

The Company leases certain office and warehouse spaces under operating leases in Hong Kong and Mongolia. Operating lease assets and obligations are reflected within right-of-use asset, net, current lease liability, and non-current lease liability, respectively, on the unaudited Consolidated Balance Sheet.

The discount rate implicit within the leases is generally not determinable and therefore the Company determines the discount rate based on its incremental borrowing rate. The incremental borrowing rate for the leases is determined based on lease term and currency in which lease payments are made, adjusted for impacts of collateral. The weighted average discount rate used to measure the operating lease liabilities as of September 30, 2019 was 11%.

Balance Sheet as of September 30, 2019

Maturity Analysis of Lease Liabilities:

Lease commitment as of December 31, 2018 were as follows:

NOTE 3 – BUSINESS ACQUISITION (CONT.)

��

The acquisition constitutes a business combination andOther information related to leases is accounted for in accordance with Accounting Standards Codification 805 – Business Combinations.as follows:

The acquisition date fair value of consideration transferred in the transaction was $3,145 which approximates the fair value of the net assets received. All costs associated with the transaction were expensed as incurred. At the time of acquisition, gross contractual amounts receivable were $3,916, and were collected subsequent to the transaction.

NOTE 4 – PROPERTY AND EQUIPMENT

NOTE 5 – DUE TO RELATED PARTIES

As at November 30, 2017, the Corporation was obligated to shareholders for funds advanced to the Corporation for working capital, in the amount of $50,879 (February 28, 2017 - $Nil). The advances are unsecured and no interest rate or payback schedule has been established.

NOTE 6 – COMMON STOCK

On December 1, 2016, the date of incorporation, the Corporation received $723 to issue 9,500,000 common stocks.

On January 28, 2017, the Corporation closed a private placement to issue 4,030,000 common stocks for gross proceeds of $30,733.

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NOTE 4 — OTHER PAYABLES

(In United States dollars)

NOTE 5 – SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES

As of September 30, 2019 and December 31, 2018, loans from related persons included a HK$3 million (equivalent to $382,644) and HK$4 million (equivalent to $510,830) respectively loan borrowed from the wife of one of the shareholders of TGS on May 21, 2018. The loan is unsecured, has no collateral or guarantee and carries interest at a monthly rate of 3.08% for the first month and a monthly rate of 1.08% for the rest of the term. The loan originally was due to be repaid on May 20, 2019, however, on April 24, 2019, the repayment date was extended to May 20, 2020. The Company repaid HK$1 million (equivalent to $127,563) loan on April 24, 2019.

As of December 31, 2018, loans from related persons included a HK$1 million (equivalent to $127,708) loan borrowed from the son of the CFO of TGS on October 6, 2016. The loan is unsecured, has no collateral or guarantee and carries interest at 8% per annum. The loan was fully repaid by issuing new common stock of TGS on May 15, 2019 (see Note 7).

As of December 31, 2018, loans from related persons included HK$1 million (equivalent to$127,708) loans borrowed from the sisters of one of the shareholders of TGS and the ultimate shareholder on October 31, 2016. The loans are unsecured, have no collateral or guarantee and carry interest at 8% per annum. The loans were fully repaid by issuing new common stock of TGS on May 15, 2019 (see Note 7).

During the nine-month periods ended September 30, 2019 and 2018, interest expense of HK$366,909 (equivalent to $46,804) and HK$372,564 (equivalent to $47,522), respectively, was paid to related persons.

The Company is currently in the development and trial-production stage, the shareholders advanced $451,907 working capital to meet the financing requirement during the first nine months of 2019. On September 29, 2019, the Company issued 33,096 common stock at a price of $3.66 to settle the amount due to a shareholder of HK$944,832 (equivalent to $121,133). Amounts due to shareholders are unsecured, interest-free and not demand for repayment within 12 months.

As of September 30, 2019 and December 31, 2018, amount due to a director, Tak Shing Eddie Wong, of HK$220,000 (equivalent to $28,061) and HK$576,000 (equivalent to $73,560) respectively. The amount is unsecured, has no collateral or guarantee and is interest-free. 

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NOTE 6 — NET LOSS PER SHARE

The following table presents the computation of basic and diluted net loss per share for the three and nine months ended September 30, 2019 and 2018: