UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended March 31,June 30, 2021

or

For the transition period from ____________ to ____________

Commission File Number 333-217451

(+852) 2116-3863

(Registrant’s telephone number, including area code)

Former address

Suite 1023, 10/Room 20, 8/F., Ocean Centre, 5 Canton Rd.Woon Lee Commercial Building, 7-9 Austin Ave., Tsim Sha Tsui, Kowloon, Hong KongKong

(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. ☒ YESYes     ☐ NONo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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). ☒ YESYes     ☐ NONo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth 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. ☐

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

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. ☐ YES     ☐ 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.

14,962,298shares of common stock issued and outstanding as of May 14,August 6, 2021.

TGS INTERNATIONAL LTD.

FORM 10-Q

TABLE OF CONTENTS

Contents

PART I – FINANCIAL INFORMATION

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

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

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

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

NOTE 1 – NATURE OF OPERATIONS AND GOING CONCERN

TGS International Ltd. (“TGS”, “the Company”) was incorporated in the state of Nevada, United States on December 1, 2016. On September 14, 2018, the Company entered into a 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”), 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 in the Republic of Seychelles on June 17, 2014, and its subsidiaries are engaged in fluorite mining operations in Mongolia, including the processing and sales of fluorite products. Up to March 31,June 30, 2021 and the date of this report, the Company owns three mining rights in Mongolia (Mining license numbers: MV-009918, MV-016819 MV-017305 and MV-009918)MV-017305). The Company has adopted open-pit mining at Mine A which is located in Uulbayansoum, Sukhbaatar province (Mining license number: MV-009918). Due to COVID-19, the Mongolian Government has implemented various precautionary measures, including but not limited to closing all ports of entry from and into China until May 31, 2021 (“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.

Basis of Presentation

These accompanying unaudited Consolidated Financial Statements of TGS as of and for the three and six months ended March 31,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 threesix months ended March 31,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 $172,668$443,406 for the threesix months ended March 31,June 30, 2021, and as of that date, the Company’s current liabilities exceeded its current assets by $1,384,100.$1,632,367. Notwithstanding the operating loss incurred for the threesix months ended March 31,June 30, 2021 and the net current liabilities as of March 31,June 30, 2021, the accompanying consolidated financial statements have been prepared on a going concern basis. Since the Company is currently in the exploration stage, it is still in the capital investing period. The management expects the formal production will gradually resume after the Precautionary Measures in Mongolia are relaxed. Management has prepared a business cash flow forecast and it indicates that the Company will have positive cash inflow after the commencement of formal production in mid-2021. Management believes the Company will have sufficient working capital to meet its financing 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 upon their experience and their assessment of the Company’s projected performance, production ability and product market. The ability of the Company to emerge from the exploration stage depends upon the success management's plans. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Comparative amounts

Certain comparative figures have been reclassified to conform with the current period’s presentation and disclosures.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recent issued accounting standards

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement 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 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 willwas originally becometo 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 2019-12, Income“Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. The amendments in this ASU simplify the accounting for income taxes, eliminateseliminate certain exceptions to the general principles in Topic 740 and clarifiesclarify certain aspects of the current guidance to improve consistent application among reporting entities. ASU 2019-12 is effective for fiscal years beginning after December 15, 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 Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements.

The 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.

NOTE 3 – OTHER PAYABLES

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

NOTE 4 – CONVERTIBLE BONDS

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

Existing convertibleConvertible 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 March 31,June 30, 2021, the Company amortized $1,012$1,354 and $341 of the discount and recognized non-cash interest of $2,371$3,161 and $790 to interest expenses. The unamortizedFor 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 March 31, 2021 was $342. Subsequent to the period end March 31,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 March 31,June 30, 2021 and December 31, 2020, loan from a related person included HK$3 million (equivalent to $385,853$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, has no collateral or guaranteeis 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. The loan originally was due to be repaidterm, repayable on May 20, 2019 however, on April 24, 2019, the repayment date wasand 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 paidincurred 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 March 31,June 30, 2021 and 2020, interest expense of HK$98,870103,801 (equivalent to $12,739)$13,369) and HK$97,50097,897 (equivalent to $12,545)$12,613), respectively, was paidincurred to related persons.

(c) Amounts due to stockholders

As of March 31,June 30, 2021, amount due to a stockholder, Kwing Chun Chu, was HK$501,370507,671 (equivalent to $64,485)$65,371). The amount due is unsecured, carries interest at 5% per annum and is repayable on September 11, 2021.

As of March 31,June 30, 2021, amounts due to stockholders, Kwong Bun Mak, Xianqin Pan and Kwing Chun Chu, and Kam Shing William Yeung, were $396,634,$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 $21,112$48,553 of working capital to meet the financing requirements for the threesix months ended March 31,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 10, 2020, Mr. Chi Kin Loo was appointed as a director of the Company. As of March 31,June 30, 2021 and December 31, 2020, there was an amount due to the director of HK$7,473,1267,886,026 (equivalent to $961,175)$1,015,448) and HK$7,378,106 (equivalent to $951,569), respectively. During the threesix months ended March 31,June 30, 2021, he advanced HK$100,300513,300 (equivalent to $12,900)$66,122) to the Company. ThisThe 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 LOANLOANS

As of March 31,June 30, 2021 and December 31, 2020, a loan of HK$222,475226,412 (equivalent to $28,522)$29,154) and HK$217,133 (equivalent to $27,837), respectively was borrowedoutstanding from 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 the 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 March 31,June 30, 2021 and December 31, 2020, a loan of $146,921$151,384 and $147,326, respectively was borrowedoutstanding from an unrelated party. The loan is unsecured, has no collateral or guaranty, carries interest at 11.61% per annum and repayablethe 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 the three and six months ended March 31,June 30, 2021 and 2020:

Note: During the three and six months ended March 31,June 30, 2021 and 2020, the Company had warrants outstanding which could potentially dilute basic loss per share in the 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.

NOTE 8 – CAPITAL STOCK

For the year ended December 31, 2020, there werewas a total of four new convertible bond agreements entered into between the Company, a subsidiary of the Company, Arcus, Mining Holdings Limited (“Arcus”), and third party investors.

On January 2, 2020, a convertible bond agreement was entered into between the Company, Arcus and a third 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 $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 2018, the Company issued First Subscription Package of up to $52,500, consisting of 150,000 common shares and 50,000 warrants exercisable at $1.00 (the “Warrants”) to purchase common stock within three years from the issuance date, November 21, 2018, to accredited subscribers.

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 two investors in the First Subscription Package, which was completed on November 21, 2018, forfeited their rights to exercise the total of 50,000 warrant at $1.00 of their own accord.

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

Subsequent to the period end March 31, 2021, the Company signed a supplementary agreement with the bondholder to further extend the maturity date of the HK$1.5 million (equivalent to $192,308) convertible bonds from April 30, 2021 to May 20, 2021, change the interest rate from 5% to 8%, and revoke the convertible option. (See note 4)

The Company was supposed to resume exploratory and construction work at Mine B early in the second quarter of 2020. However, the global COVID-19 outbreak resulted in delays in the resumption of work, as Chinese workers whom we rely on, cannot enter Mongolia until May 31, 2021 at the earliest.

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 since May 31, 2021.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 of the COVID-19 outbreak 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 ($) 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 to the consolidated financial statements included elsewhere in this 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 stock” refer to the common stock in our capital stock.

As used in this quarterly report, the terms “we”, “us”, “our” or the “Company” mean TGS International Ltd., a Nevada corporation, and our subsidiaries, unless otherwise indicated.

General Overview

TGS International Ltd. was established on December 1, 2016 in Nevada, USA. On September 14, 2018, TGS International Ltd. 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 International Ltd.

We are a mining 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 respectivelyrespectively. Mine C, which is located adjacent to Mine B (Mining license number: MV-017305) ("Mine C"), is currently in the mine preparation stage and have been ongoing since that time.did not contribute any revenue yet.

Due to the global outbreaks of COVID-19 pandemic (the “Pandemic”), since February 2020, the Mongolian Government has implemented various precautionary measures, including but not limitedPrecautionary Measures. As the borders are gradually reopening, our business is expected to closing portsrecover gradually in the second half of entry from2021, in terms of labor supply and into China until May 31, 2021 (“Precautionary Measures”). The Mongolian Government proposes to lift the measure on May 31, 2021. Our business could be materially and adversely affected, and may continue to affect, by the outbreak of a widespread Pandemic, causing labor shortages and increasingdownsizing government regulations, all of which may negatively impactbring positive effect to the business, financial condition, growth strategies and results of operations of the Company.

Our

The operation of Mine B, which generates majorgenerally 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 since the first quarterCOVID-19. The operation of 2020. There has been extremely low operation income for the year ended December 31, 2020 which was generated mainly from Mine A and there was no operation income in the first quarter in 2021 from Mine A as it washas 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. Further, there were high expenses in our three offices: the Hong Kong headquarters, the Erenhot office in China and the Mongolian office.

The construction of the refinery at Mine B was completed in late November 2019 while the last step of power supply upgrade at Mine B is still in progress. We expect to getcomplete the power supply upgraded in 2021upgrade once our Chinese workers are permitted to enter Mongolia. The entire refinery could be put to trial once it is ready.

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 itits dependency on the future developmenteasing 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 onin 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 unpredictable.China. Currently, we have been strictly prudent towardsare 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 March 31,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 March 31,June 30, 2021, we had nil revenue, asthe decrease compared to a total $53,963 revenue in the three months ended March 31, 2020. The decrease was due to no sales activities dueJune 30, 2020 is similar to the Precautionary Measures imposed by the Mongolian Government due to the Pandemic.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. Exploration

For the six months ended June 30, 2021, exploration costs decreased significantlyincreased from $53,392 for$99,380 to $112,482, representing an increase of approximately 13% as compared to the first threesix months in 2020 to $4,147 for the first three months in 2021.ended June 30, 2020. The decreaseincrease was mainly due to increase in salary and social insurance expenses.

For the decreasethree 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 construction service fee as no operating activities were carried out.salary and social insurance expense.

Selling and distribution cost

Selling and 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.

Selling and distribution costs decreased significantly from $46,637$56,628 for the first threesix months inended June 30, 2020 to $8,560$15,527 for the first threesix months ended June 30, 2021, representing a significant decrease of approximately 73%. The decrease was mainly due to the decrease in 2021.royalty tax paid to the Mongolian Government due to the minimal operations under the Pandemic.

Selling and distribution costs decreased from $9,991 for six months ended June 30, 2020 to $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 benefits, consulting, audit, tax, legal, insurance, rent and utilities, net foreign exchange losses and other general operating expenses.

Administrative expenses decreased significantly from $341,530$659,834 for the first threesix months inended June 30, 2020 to $129,838$278,642 for the first threesix months in 2021.ended June 30, 2021, representing a significant decrease of approximately 58%. 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.

For the three months ended June 30, 2021, administrative expenses decreased from $318,304 to $148,804 for the three months ended 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 loanloans interest, related party loan interest and bond interest arising from convertible bonds.

Interest expenses decreased from $29,821$54,193 for the first threesix months inended June 30, 2020 to $21,103$42,832 for the first threesix months in 2021.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 $172,668$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 March 31, 2021 as compared to $426,631 for the three months ended March 31, 2020.June 30, 2020, representing a decrease of approximately 23%. Although we had nil revenue in the first threesix months in 2021, the net loss resulted mainly from the decreasenet effect from increase in exploration cost, decrease in selling and distribution costcosts 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 March 31,June 30, 2021 and December 31, 2020, the Company’s cash was $76,470$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 several 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 and the proceeds from issuance of convertible bonds.stock.

We expect to continue to make capital expenditures to keep pace with the expansion of the production and scale ofmaintain minimal operations ofon our mining sites, which we expect to fund in part with the proceeds fromare funded by issuance of convertible bonds and other loans in the future. We expect that the proceeds from the above and our existing cash will be used to fund working capital and for capital 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 acceptable to us.

Cash Flows

As of March 31,June 30, 2021, we had $76,470$133,522 in cash and cash equivalents, as compared to $69,401 on December 31, 2020.

Net cash used ingenerated from operating activities

OurThe net cash used inflow from operating activities decreased significantly to $10,151has reversed from a net cash outflow of $633,025 for the first threesix months of 2021 from $458,546 for the first three months2020 to a net cash inflow of 2020.$30,679. Net cash used ingenerated from operating activities for the first threesix months of 2021 primarily reflected our net loss of $172,668$443,406 and the add-back of non-cash items, mainly consisting of depreciation of property, plant and equipment of $11,811,$22,739, loss on disposal of property, plant and equipment of $2,197, amortization of non-cash interest expenses and bond discount related to convertible bonds of $3,383,$1,354, non-cash interest expenses related to other loans of $17,543,$9,908, and changes in operating assets and liabilities primarily consisting of a decreasean increase in accounts receivable of $119,310, an increase$154,410, a decrease of other receivables of $37,677,$37,751, an increase of deposits and prepayments of $63,111,$112,361, and a decreasean increase of trade and other payables of $16,232.$170,486.

Net cash used in investing activities

Our net cash used in investing activities increaseddecreased significantly to $2,697 for the first threesix months of 2021 from $1,373$15,692 for the first threesix months of 2020. This was represented by the net effect of acquisition of property, plant and equipment at mine sites and proceeds from disposal of property, plant and equipment.

Net cash provided by financing activities

Our net cash provided by financing activities decreased significantly to $19,929$36,098 for the first threesix months of 2021 from $487,065$612,599 for the first threesix months of 2020. This was mainly the result of a decrease in advances from stockholders of $111,165$267,497 and no proceeds from other loan and issuance of convertible bonds in the first threesix months of 2021.

Future Financings

We anticipate continuing to rely on related party and unrelated party loans convertible bonds or equity sales of our common stock in order to continue to fund our business operations. We believe this will enable us to meet our cash needs for the next 12 months. Issuances of additional shares will result in dilution to our existing stockholders. Importantly, thereThere is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing (whether from related parties or otherwise) to fund our planned business activities.

Except for the convertible bonds and other loans, we presently do not have any other arrangements or commitments for additional financing for the expansion of our operations, and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.

Going Concern

The Company incurred an operating loss of $172,668$443,406 for the threesix months ended March 31,June 30, 2021, and as of that date, the Company’s current liabilities exceeded its current assets by $1,384,100.$1,632,367. Notwithstanding the operating loss incurred for the threesix months ended March 31,June 30, 2021 and the net current liabilities as of March 31,June 30, 2021, the accompanying consolidated financial statements have been prepared on a going concern basis. Since the Company is currently in the exploration stage, it is still in the capital investing period. The management expects the formal production will gradually resume after the Precautionary Measures in Mongolia are relaxed. Management has prepared a business cash flow forecast and it indicates that the Company will have positive cash inflow after the commencement of formal production in mid-2021. Management believes the Company will have sufficient working capital to meet its financing 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 upon their experience and their assessment of the Company’s projected performance, production ability and product market. The ability of the Company to emerge from the exploration stage depends upon the success management's plans. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, our management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31,June 30, 2021.

Our management, with the participation of our chief executive officer (our principal executive officer) and chief financial officer (principal accounting officer and principal financial officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, our chief executive officer (our principal executive officer) and chief financial officer (principal accounting officer and principal financial officer) concluded that, as of the end of such period, our disclosure controls and procedures were effective to ensure that information that is required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Evaluation of Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our president and chief executive officer (our principal executive officer) and chief financial officer (principal accounting officer and principal financial officer), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of our Company are being made only in accordance with authorizations of management and directors of our Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our Company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not provide absolute assurance that a misstatement of our financial statements would be prevented or detected.

Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

An evaluation of the effectiveness of our internal control over financial reporting, with the participation of our president and chief executive officer (our principal executive officer) and chief financial officer (principal accounting officer and principal financial officer), will be conducted annually in accordance with the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes in our internal control over financial reporting identified in connection with the evaluation described above during the threesix months ended March 31,June 30, 2021 that has materially affected or is reasonably likely to materially affect our internal controls over financial reporting. Management concluded that as of March 31,June 30, 2021, our Company’s internal control over financial reporting was effective.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, executive officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

Item 1A. Risk Factors

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by this Item 1A.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On March 31, 2021, Mr. Sai Kit Leung resigned as the Chief Financial Officer and Secretary of the Company and Mr. Tak Shing Eddie Wong, resigned as the Chairman of the Board of Directors, President and Chief Executive Officer of the Company. On the same date, Mr. Chun Wah John Sung is appointed as the new Chief Executive Officer of the Company and Mr. Tao Wang is appointed as the new Chief Financial Officer and Secretary. Mr. Chi Kin Loo, a director of the Company, is appointed as the new Chairman of the Board of Directors and President.

On May 11, 2021, we changed independent accountants from Moore Stephens CPA Limited to MSPC Certified Public Accountants and Advisors, P.C. In our three most recent fiscal years, there were no changes in and no disagreements with either of our principal independent accountants on any matters with regard to our accounting and financial disclosure.

Item 6. Exhibits

_________

*Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.