UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended NovemberJune 30, 20172021

or

For the transition period from ____________ to ____________

Commission File Number 333-217451

(+852) 2116-3863

(Registrant’s telephone number, including area code)

Former address

Room 20, 8/F., Woon Lee Commercial Building, 7-9 Austin Ave., Tsim Sha Tsui, Kowloon, Hong Kong

(Former name, former address and former fiscal year, if changed since last report)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x YES   o NO ☒ Yes     ☐ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

¨ YES   ¨ NO ☒ Yes     ☐ No

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

o YES   x NO ☐ Yes     ☒ No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.

o ☐ YES     o ☐ NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

13,530,00014,962,298 shares of common sharesstock issued and outstanding as of January 12, 2018.August 6, 2021.

TGS INTERNATIONAL LTD.

FORM 10-Q

TABLE OF CONTENTS

Contents

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Table of contentsContents

PART I – FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our unaudited consolidated interim financial statements for the nine month period ended November 30, 2017 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with generally accepted accounting principles in the United States.

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TGS International Ltd.
Condensed Interim Consolidated Statements of Financial Position
Stated in US dollars
As at
		November 30, 2017				February 28, 2017
		(Unaudited)				(Audited)
ASSETS
Current
Cash and cash equivalents		$	6,331			$	20,867
Prepaid expenses			2,298				7,548
Trade receivable			5,488				1,490
			14,117				29,905
Long-term
Equipment and fixture (Note 4)			9,422				9,918
Total Assets		$	23,539			$	39,823
LIABILITIES
Current
Trades and other payables		$	12,114			$	19,955
Due to related parties (Note 5)			50,879				-
			62,993				19,955
Total Liabilities			62,993				19,955
STOCKHOLDERS’ DEFICIENCY
Capital Stock
Authorized
200,000,000 common stock, voting, par value $0.0001 each
100,000,000 preferred stock, non-voting, par value $0.0001 each
Issued
13,530,000 common stock (Note 6)			1,353				1,353
Additional paid in capital (Note 6)			33,094				33,094
Deficit			(73,633	)			(14,327	)
Accumulated other comprehensive loss			(268	)			(252	)
Total Stockholders’ Equity (Deficiency)			(39,454	)			19,868
Total Liabilities and Stockholders’ Equity		$	23,539			$	39,823

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

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

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

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

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NoteNOTE 1 – Nature and Continuance of OperationsNATURE 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 Mr. 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 June 30, 2021 and the date of this report, the Company owns three mining rights in Mongolia (Mining license numbers: MV-009918, MV-016819 and MV-017305). The Company has adopted open-pit mining at Mine A which is focusedlocated in Uulbayansoum, Sukhbaatar province (Mining license number: MV-009918). Due to COVID-19, the North American market.Mongolian Government has implemented various precautionary measures, including but not limited to closing all ports of entry from and into China (“Precautionary Measures”). The Company has not been able to perform any exploration work at Mine B which is located in Bayan-Ovoo soum, Khentii province (Mining license number: MV-016819) since early 2020.

Going ConcernBasis of Presentation

These condensedaccompanying unaudited Consolidated Financial Statements as of and for three and six months ended June 30, 2021 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 consolidated 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, 2020 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, 2020. The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results expected for the full year or for any future periods.

Going Concern

The Company incurred an operating loss of $443,406 for the six months ended June 30, 2021, and as of that date, the Company’s current liabilities exceeded its current assets by $1,632,367. Notwithstanding the operating loss incurred for the six months ended June 30, 2021 and the net current liabilities as of June 30, 2021, the accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable toon a going concern which assumes thatbasis. Since the Corporation and its subsidiariesCompany is currently in the exploration stage, it is still in the capital investing period. The management expects the formal production will be ablegradually resume after the Precautionary Measures in Mongolia are relaxed. Management believes the Company will have sufficient working capital to meet its obligationsfinancing requirements for the next 12 months based on the financial support of certain stockholders, issuance of new convertible bonds, proceeds from unrelated party loans and continue its operations for next fiscal year. Realization values may be substantially differentupon their experience and their assessment of the Company’s projected performance, production ability and product market. The ability of the Company to emerge 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 shouldexploration stage depends upon 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 castssuccess management's plans. These factors, among others, raise substantial doubt about the Corporation’sCompany’s ability to continue as a going concern. The Corporation’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations 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 be in the form of equity financing from the sale of common stock. Management may also seek to obtain short-term loans from the directors 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 consolidatedaccompanying 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 that might result from the information necessary for a fair presentationoutcome 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 conjunctionthis uncertainty.

Comparative amounts

Certain comparative figures have been reclassified to conform with the annual consolidated financial statementscurrent period’s presentation and footnotes for the period ended February 28, 2017 included in the Corporation’s filed Form S-1.disclosures.

Basis of PresentationNOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Corporation’s condensed interim consolidated financial statements included herein are prepared under the accrual basis ofRecent issued accounting 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.

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

Use of Estimates

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,June 2016, the FASB issued ASU 2017-01, Business CombinationsNo. 2016-13, “Financial Instruments - Credit Losses (Topic 805)326): ClarifyingMeasurement of Credit Losses on Financial Instruments”. In November 2018, FASB issued ASU No. 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses”, which amends the Definitionscope and transition requirements of ASU 2016-13. Topic 326 requires a Business.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 was originally to be effective for the Company beginning January 1, 2020, with early adoption permitted, on a modified retrospective approach. As a smaller reporting company, the effective date for the Company has been delayed until fiscal years beginning after December 15, 2022, in accordance with ASU 2019-10, although early adoption is still permitted. This standard is not expected to have a material impact to the Company’s consolidated financial statements after evaluation.

In December 2019, the FASB issued ASU clarifies2019-12, “Income Taxes (Topic 740): Simplifying the definitionAccounting for Income Taxes”. The amendments in this ASU simplify the accounting for income taxes, eliminate certain exceptions to the general principles in Topic 740 and clarify certain aspects of a business in orderthe current guidance 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. Thisimprove consistent application among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 2016 (fiscal 2018),2021 and interim periods within annual periods beginning after December 15, 2022, though early adoption is permitted, including adoption in any interim period for which financial statements have not yet been issued. This standard is not expected to have a material impact to the Company’s consolidated financial statements after evaluation.

In August 2020, the FASB issued No. ASU 2020-06, ”Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU simplifies the accounting for convertible instruments. The guidance removes certain accounting models which separate the embedded conversion features from the host contract for convertible instruments. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted no earlier than the fiscal year beginning after December 15, 2020. The Corporation does not expectCompany is currently evaluating the impact of the adoption of this guidance will have a material impactstandard on its consolidated financial statements.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles – GoodwillThe Company has implemented all new accounting pronouncements that are in effect and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU requires the Company to perform its annual, or applicable interim, goodwill impairment test by comparing the 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 value 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 is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019 (fiscal 2021). The Corporation does not expect the adoption of this guidance will have a materialcould impact on its consolidated financial statements.

Other recentstatements and does not believe that there are any other new accounting pronouncements that have been issued, by the FASB (including its Emerging Issues Task Force) and the SEC did not orbut are not believed toyet effective, that might have a material impact on the Corporation’s present or future consolidated financial statements.statements of the Company.

NOTE 3 – BUSINESS ACQUISITIONOTHER PAYABLES

Other represents temporary fund transfers from employees to support short-term operations.

NOTE 4 – CONVERTIBLE BONDS

As of June 30, 2021 and December 31, 2020, the Company had the following convertible bonds outstanding:

Convertible bond agreements of HK$1.5 million

On November 26, 2019, a convertible bond agreement was signed including a HK$1.5 million (equivalent to $192,308) loan bearing interest of 5% per annum for six months. The convertible bond had a maturity date of May 25, 2020 with a conversion price of $3.60 per share. In addition, the Company recognized a beneficial conversion feature discount to the bond of $5,342 that was amortized over the period using the effective interest method. On May 11, 2020, the Company signed an extension letter with the bondholder to extend the maturity date from May 25, 2020 to September 30, 2020. Therefore, the Company recognized an additional beneficial conversion feature discount to the bond of $234 that was amortized over the period using the effective interest method. On September 11, 2020, the Company signed an extension letter with the bondholder to further extend the maturity date from September 30, 2020 to April 30, 2021. Therefore, the Company further recognized an additional beneficial conversion feature discount to the bond of $147 that is being amortized over the period using the effective interest method. For the year ended December 31, 2020, the Company amortized $3,340 of the discount and recognized non-cash interest of $9,634 to interest expenses. The unamortized debt discount on the convertible bond as of December 31, 2020 was $1,354.

For the six months and three months ended June 30, 2021, the Company amortized $1,354 and $341 of the discount and recognized non-cash interest of $3,161 and $790 to interest expenses. For the six months and three months ended June 30, 2020, the Company amortized $2,863 and $1,576 of the discount and recognized non-cash interest of $4,786 and $2,399 to interest expenses. All the debt discount on the convertible bond has been amortized as of June 30, 2021. On April 30, 2021, the Company signed a supplementary agreement with the bondholder to further extend the maturity date from April 30, 2021 to May 20, 2021, change the interest rate from 5% to 8%, and revoke the convertible option. As a result, the HK$1.5m is reclassified to other loans. The further development of the loan is disclosed in note 6.

Other convertible bond agreements

For the year ended December 31, 2020, four new convertible bond agreements were entered into between the Company, Arcus and third party investors. All of them matured during year 2020 and were settled by issuing 92,275 common shares at a price stated in the respective agreements, representing loans of HK$2.6 million and interest expenses of HK$5,521, for a total of HK$2,605,521 (equivalent to $334,027) (see note 8). In addition, the Company recognized a beneficial conversion feature discount to the bond of $7,390 that was amortized and recognized non-cash interest of $695 on these bonds during the year ended December 31, 2020.

NOTE 5 – SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES

(a)Loan from a related person

As of June 30, 2021 and December 31, 2020, loan from a related person included HK$3 million (equivalent to $386,296 and $386,916, respectively) borrowed from the wife of one of the Company’s stockholders on May 21, 2018. The loan is unsecured, is guaranteed by three stockholders and carried 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, repayable on May 20, 2019 and subsequently extended to May 20, 2020. The related party lender borrowed the funds that were loaned to Arcus Mining Holdings Limited (“Arcus”), a subsidiary of the Company. Arcus has guaranteed the repayment by the related party of the funds borrowed by the related party. On April 28, 2020, the repayment date was extended to May 20, 2021, and the interest changed to be at a monthly rate of 2.08% for the first month and a monthly rate of 1.08% for the rest of the term. As of the date of this report, no further agreements have been signed. Our management is negotiating the repayment schedule and/or renewal terms with the loan holder. Until such time as the negotiations achieve more favorable terms, the loan is repayable on demand.

(b)Interest expense incurred to related persons

During the six months ended June 30, 2021 and 2020, interest expense of HK$202,671 (equivalent to $26,108) and HK$225,000 (equivalent to $28,989), respectively, was incurred to related persons.

During the three months ended June 30, 2021 and 2020, interest expense of HK$103,801 (equivalent to $13,369) and HK$97,897 (equivalent to $12,613), respectively, was incurred to related persons.

(c)Amounts due to stockholders

As of June 30, 2021, amount due to a stockholder, Kwing Chun Chu, was HK$507,671 (equivalent to $65,371). The amount due is unsecured, carries interest at 5% per annum and is repayable on September 11, 2021.

As of June 30, 2021, amounts due to stockholders, Kwong Bun Mak, Xianqin Pan and Kwing Chun Chu, were $360,001, and as of December 31, 2020, amounts due to stockholders, Kwong Bun Mak, Xianqin Pan and Kwing Chun Chu, were $374,246. The stockholders advanced $48,553 of working capital to meet the financing requirements for the six months ended June 30, 2021. Amounts due to stockholders are unsecured, interest-free and there are no fixed terms for repayment. The stockholders have agreed not to demand repayment within the next 12 months from the balance sheet date.

(d)Amount due to directors

On December 21, 2016, the Corporation acquired all10, 2020, Mr. Chi Kin Loo was appointed as a director of the issuedCompany. As of June 30, 2021 and December 31, 2020, there was an amount due to the director of HK$7,886,026 (equivalent to $1,015,448) and HK$7,378,106 (equivalent to $951,569), respectively. During the six months ended June 30, 2021, he advanced HK$513,300 (equivalent to $66,122) to the Company. The amount due is unsecured, interest-free and there are no fixed terms for repayment. The director has agreed not to demand repayment within 12 months of the balance sheet date.

As of December 31, 2020, amount due to a director, Mr. Tak Shing Eddie Wong, of HK$604,500 (equivalent to $77,964) was unsecured, had no collateral or guaranty and was interest-free. The amount was fully repaid on March 3, 2021. Mr. Tak Shing Eddie Wong resigned as director on March 31, 2021.

NOTE 6 – OTHER LOANS

As of June 30, 2021 and December 31, 2020, a loan of HK$226,412 (equivalent to $29,154) and HK$217,133 (equivalent to $27,837), respectively was outstanding stockfrom an unrelated party. The loan is unsecured, has no collateral or guaranty, carries interest at 10% per annum, and repayable on June 23, 2021 and was further extended to December 23, 2021.

On April 30, 2020, at the maturity of TGS Albertathe convertible bond of HK$1,500,000 (equivalent to $192,308) (see note 4), the Company signed a supplementary agreement that revoked the conversion option and renewed the loan to May 20, 2021. As a result, the convertible bond has been reclassified to other loans, and on May 21, 2021, the Company signed an amended loan agreement with the unrelated party. The loan is repayable on May 31, 2021, carries interest at 8% per annum and is guaranteed by a director of the Company. As of the date of this report, no further agreements have been signed. Our management is negotiating the repayment schedule and/or renewal terms with the loan holder. Until such time as the negotiations achieve more favorable terms, the loan is repayable on demand.

As of June 30, 2021 and December 31, 2020, a loan of $151,384 and $147,326, respectively was outstanding from related partiesan unrelated party. The loan is unsecured, has no collateral or guaranty, carries interest at 11.61% per annum and the indebtedness of $395,801 will be repaid on December 31, 2029.

NOTE 7 – NET LOSS PER SHARE

The following table presents the computation of basic and diluted net loss per share for cash of $154. This acquisition enables the company to operatethree and six months ended June 30, 2021 and 2020:

Note: During the three and six months ended June 30, 2021 and 2020, the Company had warrants outstanding which could potentially dilute basic loss per share in the Canadian market.future, but were excluded from the computation of diluted net loss per share, as their effect would have been anti-dilutive due to the net losses.

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NOTE 8 – CAPITAL STOCK

NOTE 3 – BUSINESS ACQUISITION (CONT.)

��

The acquisition constitutesFor the year ended December 31, 2020, there was a business combinationtotal of four new convertible bond agreements entered into between the Company, Arcus, and is accounted for in accordance with Accounting Standards Codification 805 – Business Combinations.

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.third party investors.

On January 28, 2017,2, 2020, a convertible bond agreement was entered into between the Corporation closedCompany, Arcus and a private placementthird party investor. On February 1, 2020, the convertible bond matured and was settled by issuing 53,236 common shares at a price of $3.62 per share representing loans of HK$1.5 million and interest expenses of HK$3,185, for a total of HK$1,503,185 (equivalent to issue 4,030,000 common stocks for gross proceeds of $30,733.$192,708).

On January 14, 2020, a convertible bond agreement was entered into between the Company, Arcus and a third party investor. On February 13, 2020, the convertible bond matured and was settled by issuing 14,196 common shares at a price of $3.62 per share representing loans of HK$400,000 and interest expenses of HK$849, for a total of HK$400,849 (equivalent to $51,389).

On February 24, 2020, a convertible bond agreement was entered into between the Company, Arcus and a third party investor. On March 25, 2020, the convertible bond matured and was settled by issuing 7,098 common shares at a price of $3.62 per share representing loans of HK$200,000 and interest expenses of HK$425, for a total of HK$200,425 (equivalent to $25,695).

On February 29, 2020, a convertible bond agreement was entered into between the Company, Arcus and a third party investor. On March 30, 2020, the convertible bond matured and was settled by issuing 17,745 common shares at a price of $3.62 per share representing loans of HK$500,000 and interest expenses of HK$1,062, for a total of HK$501,062 (equivalent to $64,235).

NOTE 9 – WARRANT EQUITY

In 2019, the Company issued Second Subscription Package of up to $825,000, consisting of 330,000 common shares and 66,000 warrants exercisable at $3.00 to purchase common stock within three years from the respective issuance dates, to accredited subscribers.

The Company determined that these warrants are free standing financial instruments that are legally detachable and separately exercisable from the common stock included in the subscriptions. All of the Company’s outstanding warrants are considered to be indexed to the Company’s own stock and are therefore classified as equity under ASC 480. The warrants, in specified situations, provide for certain compensation remedies to a holder if the Company fails to timely deliver the shares underlying the warrants in accordance with the warrant terms.

The warrants outstanding and fair values at each of the respective valuation dates are summarized below:

NOTE 10 – SUBSEQUENT EVENTS

The Company is dependent on its workforce, mainly Chinese workers, to perform the mining work, resume exploratory and construction work. The closure of borders implemented by the Mongolian Government has impacted the Company’s ability to deploy its workforce effectively. While expected to be temporary, prolonged workforce disruptions have negatively impacted sales in Mine B in subsequent periods and the Company’s overall liquidity.

If these developments continue throughout 2021, we expect very limited sales and operations in Mine B in 2021 as well. However, the Mongolian office has liaised with the relevant government departments to prepare visa applications for the Chinese workers, in case workers are allowed to enter into Mongolia once the Precaution Measures were removed.

Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, the Company is not able to estimate the effects on its results of operations, financial condition, or liquidity for the 2021 fiscal year.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD LOOKING STATEMENTS

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited financial statements are stated in United States Dollars (US$($) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appearto the consolidated financial statements included elsewhere in this quarterly report.Form 10-Q. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares”stock” refer to the common sharesstock in our capital stock.

As used in this quarterly report, the terms “we”, “us”, “our” or the “company”“Company” mean TGS International Ltd., a Nevada corporation, and our wholly owned subsidiary, TGS Building Products Ltd., an Alberta corporation,subsidiaries, unless otherwise indicated.

General Overview

TGS International Ltd. (“TGS International”) was established on December 1, 2016 in Nevada, USA. On December 21, 2016,September 14, 2018, TGS International acquiredLtd. and Arcus entered into a Share Exchange Agreement, dated September 14, 2018, with Mr. Chi Kin Loo, Billion Plus Limited, First Fortune Investment Limited, Great Win Limited and Master Value Holdings Limited, 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 TGS Building ProductsInternational Ltd. of Alberta (“TGS Alberta”) as its wholly subsidiary. TGS Alberta was established in March, 2016 in Alberta, Canada to engage in the sale and of PVC wall and ceiling panels in North America, and to carry on a local PVC panel installation and renovation business. TGS Alberta has worked closely with a PVC products manufacturer in China to bring the Company’s newly-formulated PVC products into Canada.

We are a developmentmining company focused on both fluorite mining operations in Mongolia (3 mines in total, Mining license numbers: MV-016819, MV-017305 and MV-009918) and sales of fluorite across Mongolia and China. We have three offices in Hong Kong, in China, and in Mongolia for our operations. Between 2015 to 2017, we set up infrastructure at Mine B, which is located in Bayan-Ovoo soum, Khentii province, Mongolia (Mining license number: MV-016819) (“Mine B”), and appointed SRK Consulting China Limited for resource exploration for Mine A, which is located in Uulbayansoum, Sukhbaatar province, Mongolia (Mining license number: MV-009918) (“Mine A”), and Mine B. The trial production at Mine A and Mine B started in 2019 and 2018 respectively. Mine C, which is located adjacent to Mine B (Mining license number: MV-017305) ("Mine C"), is currently in the mine preparation stage company; having entered into the development stage on December 21, 2016.and did not contribute any revenue yet.

Our executive officesDue to the global outbreaks of COVID-19 pandemic (the “Pandemic”) since 2020, the Mongolian Government has implemented various Precautionary Measures. As the borders are located at Unit 3, 6420 – 4 Street NE, Calgary, Alberta, Canada T2K 5M8. Our telephone numbergradually reopening, our business is (403) 616 - 9226.expected to recover gradually in the second half of 2021, in terms of labor supply and downsizing government regulations, all of which may bring positive effect to the business, financial condition, growth strategies and results of operations of the Company.

Our Company specializes in the design, procurement, marketing, sale, distribution, and installation of indoor PVC (polyvinyl chloride) wall and ceiling panels for residential, commercial, and industrial applications. Initially, the Company is focusing on the production and sale of white PVC wall and ceiling panels in standard width of 16 inches to better streamline its operations, and to ensure quality control and timely delivery of its products to customers. Colored and textured panels will be offered as special custom orders on a per project basis.

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The operation of Mine B, which generally generated the majority operation income for the Company, has been suspended since late November 2019 due to the regular winter break and the outbreak of COVID-19. The operation of Mine A has been suspended since December 2020 due to the Precautionary Measures. We expect to gradually resume the operations of Mine A and Mine B after the Mongolian Government re-opens the ports of entry.

The construction of the refinery at Mine B was completed in late November 2019 while the power supply upgrade at Mine B is still in progress. We expect to complete the power supply upgrade once our Chinese workers are permitted to enter Mongolia.

The resolution of the current Pandemic remains uncertain – as well as the government’s response to the changing situation. The global economic outlook for 2021 remains pessimistic, given its dependency on the future easing of global trade tensions, the monetary policy stance of major central banks, and the impact of COVID-19. Taking a strictly prudent response, the Company is stringent in managing working capital, from both existing and potential investors, to ensure we have sufficient cash flow for daily operations, which is vital to weathering the currently difficult operating and economic environment.

The financial situation of the Company is currently volatile but the Precaution Measures are expected to be relaxed in Mongolia and China. Currently, we are still operating conservatively due to the Pandemic. The Company will continuously and closely monitor the developments of COVID-19, evaluate and proactively address its impact on the Company’s financial position and performance. For the remainder of 2021, the management will continue to be diligent in keeping the operations streamlined and optimizing operations, endeavoring to do our best so to minimize the negative impact on our operations and trial production.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2021 and 2020

Revenue

For the six months ended June 30, 2021, we had nil revenue due to no sales activities under the Precautionary Measures imposed by the Mongolian Government. Revenue of $92,723 in the six months ended June 30, 2020 consisted mainly of fluorspar products generated from the trial productions at Mine A.

For the three months ended June 30, 2021, the decrease compared to the three months ended June 30, 2020 is similar to the discussion above.

Exploration cost

Exploration costs are expensed as incurred and included labor and benefits, construction service fee, mining overhead, including food, supplies, utilities and lubricants related to mine exploration.

For the six months ended June 30, 2021, exploration costs increased from $99,380 to $112,482, representing an increase of approximately 13% as compared to the six months ended June 30, 2020. The increase was mainly due to increase in salary and social insurance expenses.

For the three months ended June 30, 2021, exploration costs increased from $45,988 to $108,335, representing a significant increase of approximately 136%, as compared to the three months ended June 30, 2020. The result of such significant increase was mainly due to increase in salary and social insurance expense.

Selling and distribution cost

The Company has designed a mold for its PVC panels as shown below. The mold has been manufacturedSelling and placed with its manufacturer in China.distribution costs included transportation and handling costs related to the movement of finished goods from mines to customer designated locations, security fee, royalty and custom tax.

(dimensionsSelling and distribution costs decreased significantly from $56,628 for the six months ended June 30, 2020 to $15,527 for the six months ended June 30, 2021, representing a significant decrease of approximately 73%. The decrease was mainly due to the decrease in mm)royalty tax paid to the Mongolian Government due to the minimal operations under the Pandemic.

In additionSelling and distribution costs decreased from $9,991 for six months ended June 30, 2020 to PVC wall$6,967 for the six months ended June 30, 2021, representing a decrease of approximately 30%. The result of such decrease was mainly due to the decrease in royalty tax paid to the Mongolian Government due to the minimal operations under the Pandemic.

Administrative expenses

Administrative expenses included salaries and ceiling panels,benefits, consulting, audit, tax, legal, insurance, rent and utilities, net foreign exchange losses and other general operating expenses.

Administrative expenses decreased significantly from $659,834 for the company also offerssix months ended June 30, 2020 to $278,642 for the six months ended June 30, 2021, representing a selectionsignificant decrease of PVC floorings as a partapproximately 58%. The significant decrease was mainly due to the net effect of the company’s product line.decrease in net foreign exchange losses, lease expenses and legal and professional fees.

Plan of operationFor the three months ended June 30, 2021, administrative expenses decreased from $318,304 to $148,804 for the 12three months beginningended June 30, 2021, representing a significant decrease of approximately 53%. The significant decrease was mainly due to the net effect of the decrease in net foreign exchange losses, lease expenses and legal and professional fees.

Interest expenses

Interest expenses mainly included other loans interest, related party loan interest and bond interest arising from convertible bonds.

Interest expenses decreased from $54,193 for the six months ended June 30, 2020 to $42,832 for the six months ended June 30, 2021, representing a decrease of approximately 21%. The decrease was mainly due to the decrease in convertible bond interest.

For the three months ended June 30, 2021, interest expenses decreased from $24,373 to $21,729 for the three months ended June 30, 2021, representing a decrease of approximately 11%. The decrease was mainly due to the decrease in convertible bond interest.

Net loss

As a result of the factors described above, we had a net loss of $443,406 for the six months ended June 30, 2021 as compared to $780,008 for the six months ended June 30, 2020, representing a decrease of approximately 43%. Also, we had a net loss of $270,738 for three months ended June 30, 2021 as compared to $353,377 for the three months ended June 30, 2020, representing a decrease of approximately 23%. Although we had nil revenue in the first six months in 2021, the net loss resulted mainly from the net effect from increase in exploration cost, decrease in selling and distribution costs and decrease in net foreign exchange losses.

Liquidity and Capital Resources

Cash and cash equivalents are short-term, highly liquid investments with original maturities of three months or less. As of June 30, 2021 and December 1, 201731, 2020, the Company’s cash was $133,522 and $69,401, respectively. There were no cash equivalents.

Factors affecting our liquidity include (i) net cash used in operating activities that consists of (a) cash required to fund the mining sites operating activities and continued expansion of our mining sites, and (b) our working capital needs, which include advanced payments for mining supplies and repair and maintenance, payment of our operating expenses; and (ii) net cash used in investing activities that consists of the investments in purchasing new and additional property, plant and equipment for mining sites. To date, we have financed our liquidity needs primarily through advances from stockholders, proceeds from related parties and unrelated parties loans, and proceeds from issuance of common stock.

We intendexpect to continue to developmake capital expenditures to maintain minimal operations on our PVC panel salesmining sites, which are funded by issuance of convertible bonds and distribution network duringother loans in the twelve months beginning December 1, 2017.future. We estimateexpect that the proceeds from the above and our operating expenses andexisting cash will be used to fund working capital requirementsand for the twelve month period beginning September 1, 2017capital expenditures and other general corporate purposes, such as partnering arrangements, or reduction of debt obligations. However, there can be no assurance that we will be able to obtain financing, if at all or upon terms that will be as follows:acceptable to us.

Cash Flows

At present, our cash requirements for the next 12 months (beginning December 1, 2017) outweigh the funds available to maintain or develop our business. Of the estimated $125,000 that we require for the 12 months,As of June 30, 2021, we had approximately $6,331$133,522 in cash and cash equivalents, as at November 30, 2017. In ordercompared to improve our liquidity, we plan to pursue additional equity financing$69,401 on December 31, 2020.

Net cash generated from private investors or possiblyoperating activities