Company Quick10K Filing
TGS
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 15 $-0
10-Q 2019-11-08 Quarter: 2019-09-30
10-Q 2019-08-08 Quarter: 2019-06-30
10-Q 2019-05-08 Quarter: 2019-03-31
10-K 2019-03-25 Annual: 2018-12-31
10-Q 2018-11-14 Quarter: 2018-09-30
10-Q 2018-07-11 Quarter: 2018-05-31
10-K 2018-05-29 Annual: 2018-02-28
10-Q 2018-01-12 Quarter: 2017-11-30
10-Q 2017-10-16 Quarter: 2017-08-31
8-K 2019-04-26 Officers
8-K 2018-09-14 Accountant, Exhibits
8-K 2018-09-14 Enter Agreement, M&A, Sale of Shares, Control, Amend Bylaw, Exhibits
8-K 2018-08-07 Officers
TGSL 2019-09-30
Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Note 1 - Nature of Operations and Going Concern
Note 3 - Leasing Arrangement
Note 4 - Other Payables
Note 5 - Significant Transactions with Related Parties
Note 6 - Net Loss per Share
Note 7 - Capital Stock
Note 8 - Warrant Equity
Note 9 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 tgsi_ex311.htm
EX-31.2 tgsi_ex312.htm
EX-32.1 tgsi_ex321.htm
EX-32.2 tgsi_ex322.htm

TGS Earnings 2019-09-30

TGSL 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
RMES 1 1 0 0 -0 -0 -0 0.5 -13%
SCTF 0 0 0 0 -0 -0 -0 3.0 -33%
SLDV 25 6 2 0 13 19 -1 0% -0.0 53%
POYE 0 0 0 0 -0 -0 -0 0.0 -1,973%
AOIP 9 2 1 1 0 1 -5 99% -9.8 3%
TCT 210 12 13 0 11 11 -200 0% -18.3 5%
VDI 1,766 1,288 779 0 465 632 222 0% 0.4 26%
MBCC 216 243 112 0 -7 10 215 0% 21.5 -3%
CNHC 12,949 11,626 877 0 149 771 5,714 0% 7.4 1%
NDRAU 3 1 0 0 -10 -10 -2 0.2 -320%

10-Q 1 tgsi_10q.htm FORM 10-Q tgsi_10q.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019

 

or

 

¨

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to ____________

 

Commission File Number 333-217451

 

TGS INTERNATIONAL LTD.

(Exact name of registrant as specified in its charter)

 

Nevada

 

N/A

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

Suite 1023, 10/F., Ocean Centre

5 Canton Rd., Tsim Sha Tsui

Kowloon, Hong Kong

 

N/A

(Address of principal executive offices)

 

(Zip Code)

     

+852.2116.3863

(Registrant’s telephone number, including area code)

 

N/A

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

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on

which registered

Common Stock

 

TGSI

 

OTC Markets – Pink Sheets

 

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 ¨     NO

 

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). x     YES ¨     NO

 

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)

  

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨

Smaller reporting company

x

 

Emerging Growth company

¨

 

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) ¨ YES      x 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. ¨     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.

 

14,683,836 shares of common stock issued and outstanding as of November 8, 2019.

 

 
 
 
 

 

 

TGS INTERNATIONAL LTD.

FORM 10-Q

TABLE OF CONTENTS

 

Contents

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

3

 

Consolidated Balance Sheet as of September 30, 2019 and December 31, 2018

4

 

Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2019 and 2018

5

 

Consolidated Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2019

6

 

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018

7

 

Notes to the Consolidated Financial Statements

8

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

13

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

16

 

Item 4.

Controls and Procedures

16

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings

18

 

Item 1A.

Risk Factors

18

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

18

 

Item 3.

Defaults Upon Senior Securities

18

 

Item 4.

Mine Safety Disclosures

18

 

Item 5.

Other Information

18

 

Item 6.

Exhibits

18

 

SIGNATURES

19

 

 
2
 
Table of Contents

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements (unaudited)

 

The accompanying unaudited consolidated interim financial statements are presented in United States Dollars (US$) and have been prepared in accordance with accounting principles generally accepted in United States for interim financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and such adjustments of a normal recurring nature.

 

Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that can be expected for the year ending December 31, 2019.

 

 
3
 
Table of Contents

 

TGS International Ltd.

Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018

 

(In United States dollars)

 

 

 

Note

 

 

September 30,

2019

 

 

December 31,

2018

 

 

 

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

$126,955

 

 

$98,121

 

Other receivables

 

 

 

 

 

211,742

 

 

 

68,963

 

Prepayments and deposits

 

 

 

 

 

146,111

 

 

 

141,522

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

 

 

 

484,808

 

 

 

308,606

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

 

 

 

1,926,439

 

 

 

1,557,622

 

Intangible assets

 

 

 

 

 

1,097,362

 

 

 

1,097,362

 

Deposits for property, plant and equipment

 

 

 

 

 

296,940

 

 

 

-

 

Right-of-use assets

 

 

3

 

 

 

229,125

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

 

$4,034,674

 

 

$2,963,590

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accrued charges

 

 

 

 

 

$194,464

 

 

$301,413

 

Other payables

 

 

4

 

 

 

1,281,271

 

 

 

237,167

 

Lease liabilities

 

 

3

 

 

 

193,772

 

 

 

-

 

Amount due to a director

 

 

5(d)

 

 

28,061

 

 

 

73,560

 

Loans from related persons

 

 

5(a)

 

 

382,644

 

 

 

766,246

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

 

 

 

 

2,080,212

 

 

 

1,378,386

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Amounts due to shareholders

 

 

5(c)

 

 

700,024

 

 

 

398,208

 

Lease liabilities

 

 

3

 

 

 

44,404

 

 

 

-

 

Provision for asset retirement obligations

 

 

 

 

 

 

31,107

 

 

 

31,383

 

Provision for exploration asset compensation

 

 

 

 

 

 

101,226

 

 

 

102,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

 

 

 

2,956,973

 

 

 

1,910,104

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

Capital Stock

 

 

 

 

 

 

 

 

 

 

 

 

-Authorized 200,000,000 common stock, voting, par value $0.0001 each;

 

 

 

 

 

 

 

 

 

 

 

 

-Authorized 100,000,000 preferred stock, non-voting, par value $0.0001 each;

 

 

 

 

 

 

 

 

 

 

 

 

-14,683,836 common stock issued and outstanding (December 31, 2018 – 14,165,000)

 

 

 

 

 

 

1,468

 

 

 

1,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional paid in capital

 

 

 

 

 

 

10,423,474

 

 

 

8,937,243

 

Accumulated loss

 

 

 

 

 

 

(9,072,528)

 

 

(7,617,451)

Accumulated other comprehensive loss

 

 

 

 

 

 

(274,713)

 

 

(267,723)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

 

 

 

 

 

1,077,701

 

 

 

1,053,486

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

 

 

 

 

$4,034,674

 

 

$2,963,590

 

 

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

 

 
4
 
Table of Contents

  

TGS International Ltd.

Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2019 and 2018

(unaudited)

 

(In United States dollars)

 

 

Note

 

Three months ended

September 30,

 

Nine months ended

September 30,

 

2019

 

2018

 

2019

 

2018

 

Net sales

 

$

-

 

$

434,728

 

$

-

 

$

434,728

 

Cost of sales

 

(321,263

)

 

(141,065

)

 

(466,169

)

 

(278,556

)

 

Gross (loss)/profit

 

(321,263

)

 

293,663

 

(466,169

)

 

156,172

 

Administrative expenses

 

(256,294

)

 

(354,027

)

 

(920,069

)

 

(885,533

)

 

Loss from operations

 

(577,557

)

 

(60,364

)

 

(1,386,238

)

 

(729,361

)

Other income

 

25

 

48,369

 

691

 

77,133

 

Interest expenses

 

(19,086

)

 

(22,317

)

 

(69,530

)

 

(53,015

)

Loss before provision for income taxes

 

(596,618

)

 

(34,312

)

 

(1,455,077

)

 

(705,243

)

 

Provision for income tax

 

-

 

-

 

-

 

-

 

Net loss

 

(596,618

)

 

(34,312

)

 

(1,455,077

)

 

(705,243

)

Other comprehensive income/(loss), net of tax:

 

Foreign currency translation adjustments

 

2,006

 

(102,281

)

 

(6,990

)

 

(157,128

)

Comprehensive loss

 

$

(594,612

)

 

$

(136,593

)

 

$

(1,462,067

)

 

$

(862,371

)

Net loss per share:

 

Basic and diluted net loss per share

 

6

 

$

(0.04

)

 

$

(0.01

)

 

$

(0.10

)

 

$

(0.44

)

 

Weighted average number of common stock outstanding:

 

Basic and diluted

 

14,616,755

 

4,717,787

 

14,468,536

 

1,590,401

 

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

 

 
5
 
Table of Contents

    

TGS International Ltd.

Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 30, 2019

(unaudited)

 

(In United States dollars)

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Accumulated

other

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

comprehensive

 

 

 

 

 

 

Note

 

 

Shares

 

 

Amount

 

 

Capital

 

 

losses

 

 

loss

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2018

 

 

 

 

 

14,165,000

 

 

$1,417

 

 

$8,937,243

 

 

$(7,617,451)

 

$(267,723)

 

$1,053,486

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

7

 

 

 

518,836

 

 

 

51

 

 

 

1,486,231

 

 

 

-

 

 

 

-

 

 

 

1,486,282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,455,077)

 

 

-

 

 

 

(1,455,077)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,990)

 

 

(6,990)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of September 30, 2019

 

 

 

 

 

 

14,683,836

 

 

$1,468

 

 

$10,423,474

 

 

$(9,072,528)

 

$(274,713)

 

$1,077,701

 

 

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

 

 
6
 
Table of Contents

    

TGS International Ltd.

Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018

(unaudited)

 

(In United States dollars)

 

 

For the

Nine months ended

September 30,

 

Note

 

2019

 

2018

 

Cash flows from operating activities

 

Net loss

 

$

(1,455,077

)

 

$

(705,243

)

 

Adjustments to reconcile net loss to net cash used in operating activities:-

 

Depreciation of property, plant and equipment

 

35,072

 

36,224

 

Loss on disposal of property, plant and equipment

 

-

 

1,035

 

Amortization of right-of-use asset

 

141,204

 

-

 

Net foreign exchange losses

 

-

 

(52,917

)

Stock compensation expenses

 

7

 

122,100

 

-

 

Changes in assets and liabilities:-

 

Other receivables

 

(145,312

)

 

(26,604

)

Prepayments and deposits

 

(4,970

)

 

19,891

 

Accrued charges

 

(146,862

)

 

(84,372

)

Other payables

 

1,044,752

 

(172,469

)

Lease liabilities

 

(132,152

)

 

-

 

Net cash used in operating activities

 

(541,245

)

 

(984,455

)

 

Cash flows from investing activities

 

Sales proceeds from property, plant and equipment

 

-

 

4,097

 

Acquisition of property, plant and equipment

 

(420,195

)

 

(105,398

)

Deposits for property, plant and equipment

 

(298,860

)

 

-

 

Net cash used in investing activities

 

(719,055

)

 

(101,301

)

 

Cash flows from financing activities

 

Advances from shareholders

 

451,907

 

585,679

 

Proceeds from issuance of common stock

 

825,000

 

-

 

Proceeds from issuance of convertible bond

 

128,471

 

-

 

Proceeds from new loan-related person

 

-

 

510,980

 

Repayment of loans from related persons

 

5(a)

 

(127,563

)

 

-

 

Net cash provided by financing activities

 

1,277,815

 

1,096,659

 

Net increase in cash and cash equivalents

 

17,515

 

10,903

 

Effect of exchange rate changes on cash and cash equivalents

 

11,319

 

17,285

 

Cash and cash equivalents, beginning of year

 

98,121

 

38,943

 

Cash and cash equivalents, end of year

 

$

126,955

 

$

67,131

 

Supplemental disclosures:-

 

Interest paid

 

$

53,895

 

$

32,314

 

Income tax paid

 

-

 

-

 

Non-cash investing and financial transactions:-

 

Cancellation of shares

 

-

 

3

 

Capitalization of advances from shareholders

 

7

 

$

121,133

 

$

8,848,710

 

Capitalization of loans from related persons

 

7

 

289,578

 

-

 

Stock compensation expenses

 

7

 

122,100

 

-

 

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

 

 
7
 
Table of Contents

    

TGS International Ltd.

Notes to Consolidated Financial Statements

September 30, 2019 and 2018

(Unaudited)

 

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 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 September 30, 2019 and the date of this report, the Company owns three mining rights in Mongolia (Mining license numbers: MV-016819, MV-017305 and MV-009918). During the nine-month period ended September 30, 2019, the Company did not commence regular mining operations due to the limitation of explosive factories trading to the public in Mongolia. Therefore, the Company has alternative arrangements of the manpower used for setting up the infrastructure at the mine sites in preparation for the exploratory work later so as to minimize the impact of insufficient explosives encountered in the period.

 

Reverse merger

 

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

 

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

 

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

 

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

 

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

 

Basis of Presentation

 

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

 

Going Concern

 

These financial statements have been prepared on a going concern basis. The Company has incurred an operating loss of $1,455,077 for the nine months ended September 30, 2019 and as of that date, the Company’s current liabilities exceeded its current assets by $1,595,404 which raises substantial doubt about the Company’s ability to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since the Company is currently in the development and trial-production stage, it is still in the capital investing period. The Company’s business forecast indicates that the Company will have positive cash inflow after the commencement of formal production. Management believes the Company will have sufficient working capital to meet its financing requirements based on the financial support of shareholders and upon their experience and their assessment of the Company’s projected performance, production ability and product market. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

 

 
8
 
Table of Contents

  

TGS International Ltd.

Notes to Consolidated Financial Statements

September 30, 2019 and 2018

(Unaudited)

 

Recent changes in accounting standards

 

Recently Adopted

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), which amends existing accounting standards for leases. The ASU requires lessees to recognize most leases on their balance sheet as a lease liability with a corresponding right-of-use asset. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. The criteria for evaluating are similar to those applied in current lease accounting.

 

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

 

Not Yet Adopted

 

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

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The objective of ASU 2018-13 is to improve the effectiveness of disclosures in the notes to the financial statements by removing, modifying, and adding certain fair value disclosure requirements to facilitate clear communication of the information required by generally accepted accounting principles. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 with early adoption permitted upon issuance of this ASU. The Company is currently evaluating the impact this guidance will have on the Company’s consolidated financial statements.

 

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

 

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.

 

 
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TGS International Ltd.

Notes to Consolidated Financial Statements

September 30, 2019 and 2018

(Unaudited)

 

NOTE 3 – LEASING ARRANGEMENT

 

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

 

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

 

Balance Sheet as of September 30, 2019

 

(In United States dollars)

 

Assets

 

 

 

Right-of-use assets

 

 

229,125

 

 

 

 

 

 

Liabilities

 

 

 

 

Current portion of operating lease liabilities

 

 

193,772

 

Long-term portion of operating lease liabilities

 

 

44,404

 

 

 

 

 

 

Total lease liabilities

 

 

238,176

 

 

Maturity Analysis of Lease Liabilities:

 

(In United States dollars)

 

December 31, 2019

 

 

58,726

 

December 31, 2020

 

 

216,761

 

December 31, 2021

 

 

4,209

 

December 31, 2022

 

 

-

 

December 31, 2023

 

 

-

 

Thereafter

 

 

-

 

Total lease payments, undiscounted

 

 

279,696

 

Less short-term lease payments

 

 

(28,811)

Less amount of lease payment representing interest

 

 

(12,709)

Total present value of lease payments

 

 

238,176

 

Less: Current portion of operating leases liabilities

 

 

(193,772)

Non-current operating leases liabilities

 

 

44,404

 

 

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

 

(In United States dollars)

 

December 31, 2019

 

 

243,100

 

December 31, 2020

 

 

229,500

 

December 31, 2021

 

 

30,000

 

December 31, 2022

 

 

30,000

 

December 31, 2023

 

 

30,000

 

Thereafter

 

 

30,000

 

 

 

 

592,600

 

 

Other information related to leases is as follows:

 

September 30, 2019

 

Total lease liabilities

 

$238,176

 

Cash paid for amounts included in the measurement of lease liabilities within operating cash flows

 

$137,654

 

Weighted average remaining lease term (years)

 

 

1.22

 

Weighted average discount rate

 

 

11%

 

 
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TGS International Ltd.

Notes to Consolidated Financial Statements

September 30, 2019 and 2018

(Unaudited)

 

NOTE 4 — OTHER PAYABLES

 

(In United States dollars)

 

 

 

September 30,

2019

 

 

December 31,

2018

 

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Tax and social insurance payable

 

$10,639

 

 

$9,384

 

Contract liabilities

 

 

421,365

 

 

 

215,359

 

Temporary receipts

 

 

604,971

 

 

 

-

 

Other payables

 

 

244,296

 

 

 

12,424

 

 

 

 

 

 

 

 

 

 

 

 

$1,281,271

 

 

$237,167

 

 

NOTE 5 – SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES

 

(a)

Loans from related persons

 

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

 

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

 

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

 

(b)

Interest expenses paid to related persons

 

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

 

(c)

Amounts due to shareholders

 

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

 

(d)

Amount due to a director

 

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

 

 
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TGS International Ltd.

Notes to Consolidated Financial Statements

September 30, 2019 and 2018

(Unaudited)

 

NOTE 6 — NET LOSS PER SHARE

 

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

 

 

 

Three months ended

September 30,

 

 

Nine months ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share – basic and diluted

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(596,618)

 

$(34,312)

 

$(1,455,077)

 

$(705,243)

Weighted-average number of common stock outstanding – basic and diluted

 

 

14,616,755

 

 

 

4,717,787

 

 

 

14,468,536

 

 

 

1,590,401

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (Note)

 

$(0.04)

 

$(0.01)

 

$(0.10)

 

$(0.44)

 

Note: During the three and nine months ended September 30, 2019, 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 7 — CAPITAL STOCK

 

In the nine-months period ended September 30, 2019, the Company issued second subscription package (the “Second Subscription Package”) of up to $825,000, consisting of 330,000 common stock 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 also issued to the placement agent 33,000 common stock at a price of $3.70 per common stock for the services rendered (equivalent to $122,100). On May 15, 2019, the Company issued 88,018 common stock at a price of $3.29 per share to settle the loans from related persons of HK$2 million and interest expenses (equivalent to $289,578).

 

On August 30, 2019, a convertible bond agreement was entered into between the Company, a subsidiary of the Company, Arcus Mining Holdings Limited, and a third party investor. On September 29, 2019, the convertible bond was matured and was settled by issuing 34,722 common stock at a price of $3.70 per share representing loans of HK$1 million and interest expenses of HK$2,083, in total of HK$1,002,083 (equivalent to $128,471).

 

On September 29, 2019, the Company issued 33,096 common stock at a price of $3.66 per share to settle the amount due to a shareholder of HK$944,832 (equivalent to $121,133).

 

NOTE 8 — WARRANT EQUITY

 

On November 21, 2018 (“Issuance Date”), the Company issued a subscription package (the “Subscription Package”) of up to $52,500, consisting of 150,000 common stock and 50,000 warrants exercisable at $1.00 (the “Warrants”) to purchase common stock within three years from the Issuance Date, 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. 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 Company has no plans to consummate a fundamental transaction and does not believe a fundamental transaction is likely to occur during the remaining term of the outstanding warrants.

 

In the nine-months period ended September 30, 2019, the Company issued Second Subscription Package of up to $825,000, consisting of 330,000 common stock 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 private placement, which was completed on November 21, 2018, forfeited their rights to exercise the 25,000 warrant at $1.00 due to their own accord.

 

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

 

Grant date

 

Warrants Outstanding

 

 

Fair Value per Share

 

 

Fair

Value $

 

November 2018

 

 

50,000

 

 

$0.07

 

 

$3,490

 

January 2019

 

 

17,000

 

 

 

2.11

 

 

 

35,833

 

February 2019

 

 

10,000

 

 

 

2.11

 

 

 

21,078

 

March 2019

 

 

9,000

 

 

 

2.11

 

 

 

18,970

 

April 2019

 

 

30,000

 

 

 

2.11

 

 

 

63,234

 

Less: warrants forfeited

 

 

(50,000)

 

 

(0.07)

 

 

(3,490)

As at September 30, 2019

 

 

66,000

 

 

 

 

 

 

$139,115

 

 

NOTE 9 — SUBSEQUENT EVENTS

 

Subsequent to the period ended September 30, 2019, there were two convertible bond agreements entered into between the Company, a subsidiary of the Company, Arcus Mining Holdings Limited, and third party investors.

 

On October 25, 2019, a convertible bond agreement was signed including a HK$2 million loan bearing interest of 2.5% per annum for one month. The convertible bond will be matured on November 27, 2019 with a conversion price of $3.60 per share.

 

On November 4, 2019, a convertible bond agreement was signed including a HK$1 million loan bearing interest of 2.5% per annum for one month. The convertible bond will be matured on December 3, 2019 with a conversion price of $3.60 per share.

 

 
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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 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 and Arcus entered into a Share Exchange Agreement, dated September 14, 2018, with 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. During 2015 to 2017, we were setting up infrastructure at Mine B and appointed SRK Consulting China Limited for resource exploration for Mine A and Mine B. The trial production at Mine B started in 2018 and has been ongoing since that time.

 

Due to unexpected internal accidents, the only two explosive factories in Mongolia have been suspended from April until mid-August 2019. Although they have resumed operation then, they are still yet to start their trading activities with the public. We, therefore, have arranged the explosives to be used in infrastructure processes in preparation for the exploratory work later so as to minimize the impact on our work. Thus, there is no output in the third quarter of 2019.

 

We expect to put hold on the exploratory work at both Mine A and Mine B from late November 2019 to mid-March 2020, the winter break. Our strategic partners, HMMB LLC and Xin Guoji Company Limited, have promised to speed up the exploratory work so as to maximize the outputs before the winter break. Since there is a lack of explosive, we have requested the workers to work on setting up the infrastructure at our mines in preparation for the exploratory work later. Therefore, the related expenses have increased significantly in the third quarter of 2019. Some output is expected in the fourth quarter of 2019.

 

The strategic cooperation with Yantai Fulin Mining Machinery Co., Ltd regarding the construction of a refinery at Mine B has still been in progress since mid-April 2019 and is on target. We expect to get the construction completed before the winter break. In the meantime, the power supply upgrade at Mine B has been in progress simultaneously so as to support the use of the refinery once it can be put into use.

 

On August 30, 2019, a convertible bond agreement was entered into between the Company, a subsidiary of the Company, Arcus Mining Holdings Limited, and a third party investor. On September 29, 2019, the convertible bond was matured and was settled by issuing 34,722 common stock at a price of $3.70 representing loans of HK$1 million and interest expenses of HK$2,083, in total of HK$1,002,083 (equivalent to $128,471).

 

Subsequently, there were two convertible bond agreements entered into between the Company, a subsidiary of the Company, Arcus Mining Holdings Limited, and third party investors. On October 25, 2019, a convertible bond agreement was signed including a HK$2 million loan bearing interest of 2.5% per annum for one month. The convertible bond will be matured on November 27, 2019 with a conversion price of $3.60 per share. On November 4, 2019, a convertible bond agreement was signed including a HK$1 million loan bearing interest of 2.5% per annum for one month. The convertible bond will be matured on December 3, 2019 with a conversion price of $3.60 per share.

 

 
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Results of Operations

 

Comparison of the Three and Nine Months Ended September 30, 2019 and 2018

 

Sales

 

In the three and nine months ended September 30, 2019, we did not have sales revenue as our Company did not commence regular mining operations due to the delay in the application of working visas for the Chinese workers in the second quarter of 2019 and the limitation of explosive factories trading to the public in Mongolia in the third quarter of 2019. In the three and nine months ended September 30, 2018, trial production was performed and sales revenue of $434,728 was generated.

 

Cost of sales

 

Cost of sales included raw material costs, mining overhead, including depreciation expenses and transportation. Additionally, cost of sales included product packaging cost, the cost of tooling and damages.

 

Our total cost of sales increased significantly from $278,556 for the first nine months in 2018 to $466,169, for the first nine months of 2019. The percentage of such increase was approximately 67% as a result of more infrastructure processes were carried out in preparation for the exploratory work later and the expansion of fluorspar production line.

 

For the three months ended September 30, the total cost of sales increased significantly from $141,065 in 2018 to $321,263 in 2019. The result of such increase is similar to the first nine months as discussed above.

 

Gross loss

 

Since the delay in the application of working visas for the Chinese workers and insufficient explosives for exploratory works due to the limitation of explosive factories trading to the public in Mongolia was taken place in the first nine months in 2019, no revenue was generated to cover our cost of sales, which resulted in a gross loss. For the first nine months in 2018, trial production was performed and some revenue was generated to cover our cost of sales which resulted gross profit in the period.

 

Administrative expenses

 

Administrative expenses include salaries and benefits, consulting, audit, tax, legal, insurance, rent and utilities, and other general operating expenses.

 

Administrative expenses increased slightly from $885,533 for the first nine months in 2018 to $920,069 for the first nine months in 2019. The percentage of such increase was approximately 4% as a result of commission expenses related to private placement in 2019.

 

For the three months ended September 30, the total administrative expenses decreased from $354,027 in 2018 to $256,294 in 2019. The result of decrease was due to consultancy fee related to reverse merger in the three months ended September 2018, but no such expenses incurred in the three months ended September 30, 2019.

 

Other income

 

Other income decreased significantly from $77,133 for the first nine months in 2018 to $691 for the first nine months in 2019. The percentage of such reduction was approximately 99% as a result of a waiver of consultancy fee in the first nine months in 2018.

 

For the three months ended September 30, other income decreased from $48,369 in 2018 to $25 in 2019. The result of such decrease is similar to the first nine months as discussed above.

 

Interest expenses

 

Interest expenses mainly include related parties loans interest and lease interest.

 

Interest expenses significantly increased from $53,015 for the first nine months in 2018 to $69,530 for the first nine months in 2019. The increase was approximately 31% as a result of related parties loans of HK$4 million granted in May 2018 and the amount of lease payment representing interest.

 

For the three months ended September 30, the interest expenses decreased from $22,317 in 2018 to $19,086 in 2019. The percentage of such decrease was approximately 14% as a result of the partial repayment of related parties loans.

 

 
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Net loss

 

As a result of the factors described above, we had a net loss of $1,455,077 for the nine months ended September 30, 2019 as compared to $705,243 for the nine months ended September 30, 2018, and a net loss of $596,618 for the three months ended September 30, 2019 as compared to $34,312 for the three months ended September 30, 2018. The net loss for the nine months and three months ended September 30, 2019 is under our management expectation since our mine is still under trial production.

 

Liquidity and Capital Resources

 

Cash and cash equivalents are short-term, highly liquid investments with original maturities of three months or less. As of September 30, 2019 and December 31, 2018, the Company’s cash was $126,955 and $98,121, respectively. There were no cash equivalents.

 

Our liquidity needs 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 shareholders and the proceeds from issuance of common stock.

 

We expect to continue to make capital expenditures to keep pace with the expansion of the production and scale of operations of our mining sites, which we expect to fund in part with the proceeds of private placements of our securities in the future. We expect that the proceeds from the sale of our securities and our existing cash and cash equivalents 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 obtain financing, if at all or upon terms that will be acceptable to us.

 

Cash Flows

 

Net cash used in operating activities

 

Our net cash used in operating activities decreased to $541,245 for the first nine months of 2019 from $984,455 for the first nine months of 2018. This was mainly due to the net effect of the increase in net loss for the first nine months in 2019 compared to the first nine months in 2018, increase in other receivables of payment in advance to the infrastructure contractor and increase in other payables of temporary receipts regarding to the construction of the refinery during the period.

 

Net cash used in investing activities

 

Our net cash used in investing activities increased to $719,055 for the first nine months of 2019 from $101,301 for the first nine months of 2018. This was mainly due to acquisition of property, plant and equipment at mine site.

 

Net cash provided by financing activities

 

Our net cash provided by financing activities increased to $1,277,815 for the first nine months of 2019 from $1,096,659 for the first nine months of 2018. This was mainly the result of issuance of common stock and convertible bond in the first nine months of 2019.

 

 
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Future Financings

 

We anticipate continuing rely on related party loans 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, there 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, 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 $1,455,077 for the nine-month period ended September 30, 2019, and as of that date, the Company’s current liabilities exceeded its current assets by $1,595,404. Notwithstanding the operating loss incurred for the period ended September 30, 2019, the accompanying interim consolidated financial statements have been prepared on a going concern basis. Since the Company is currently in the development and trial-production stage, it is still in the capital investing period. The Company’s business forecast indicates that the Company will have positive cash inflow after the commencement of formal production. Management believes the Company will have sufficient working capital to meet its financing requirements based on the financial support of stockholders and upon their experience and their assessment of the Company’s projected performance, production ability and product market.

 

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 September 30, 2019.

 

Our management, 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), 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 president and 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.

 

 
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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 during the quarter ended September 30, 2019 that has materially affected or is reasonably likely to materially affect our internal controls over financial reporting. Management concluded that as of September 30, 2019, our Company’s internal control over financial reporting was effective.

 

 
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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

 

None.

 

Item 6. Exhibits

 

Exhibit

Number

 

Description

(31)

 

Rule 13a-14 (d)/15d-14(d) Certifications

31.1*

 

Section 302 Certification by the Principal Executive Officer

31.2*

 

Section 302 Certification by the Principal Financial Officer and Principal Accounting Officer

(32)

 

Section 1350 Certifications

32.1*

 

Section 906 Certification by the Principal Executive Officer

32.2*

 

Section 906 Certification by the Principal Financial Officer and Principal Accounting Officer

101*

 

Interactive Data File

101.INS

 

XBRL Instance Document

101.SCH

 

XBRL Taxonomy Extension Schema Document

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

_________

*Filed herewith. 

 

 
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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.

 

TGS International Ltd.

 

Date: November 8, 2019

By:

/s/ Tak Shing Eddie Wong

 

Tak Shing Eddie Wong

 

President, Chief Executive Officer and

Chairman of the Board of Directors,

 

(Principal Executive Officer)

 

 

Date: November 8, 2019

By:

/s/ Sai Kit Leung

 

Sai Kit Leung

 

Chief Financial Officer and Secretary

 

(Principal Financial and Accounting Officer)

 

 
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