Palayan Resources, Inc. - Quarter Report: 2019 December (Form 10-Q)

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act.) [X] Yes [   ] No

The number of shares of the Registrant’s common stock, par value $.001 per share, outstanding as of February 18, 2020 was 30,000,000.

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Item 1. Financial Statements 

Palayan Resources Inc.

December 31, 2019

(unaudited)

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Palayan Resources Inc.

Condensed Balance Sheets

(Expressed in U.S. dollars)

(The accompanying notes are an integral part of these condensed financial statements)

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Palayan Resources Inc.

Condensed Statements of Operations

(Expressed in U.S. dollars)

(unaudited)

(The accompanying notes are an integral part of these condensed financial statements)

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Palayan Resources Inc.

Condensed Statement of Stockholders’ Deficit

(Expressed in U.S. dollars)

(unaudited)

(The accompanying notes are an integral part of these condensed financial statements)

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Palayan Resources Inc.

Condensed Statements of Cash Flows

(Expressed in U.S. dollars)

(unaudited)

(The accompanying notes are an integral part of these condensed financial statements)

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Palayan Resources Inc.

Notes to Financial Statements

December 31, 2019

(unaudited)

1. Nature of Operations and Continuance of Business 

Palayan Resources Inc. (the “Company”) was incorporated in the State of Nevada on July 26, 2013 and as a mineral exploration and production company engaged in the exploration, acquisition, and development of mineral properties. The Company’s plan of action over the next twelve months is to raise capital.

Going Concern

These condensed financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As of December 31, 2019, the Company has generated no revenues to date, a working capital deficit of $197,879 and an accumulated deficit of $230,922. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company’s plan of action over the next twelve months is to raise capital.

2. Summary of Significant Accounting Policies 

a)Basis of Presentation 

These condensed financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in US dollars. The Company’s fiscal year-end is March 31.

b)Use of Estimates 

The preparation of these condensed financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

c)Interim Condensed Financial Statements 

These interim condensed unaudited financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.

d)Basic and Diluted Net Loss per Share  

The Company computes net income (loss) per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. As of December 31, and March 31, 2019, the Company had no potentially dilutive shares.

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Palayan Resources Inc.

Notes to Financial Statements

December 31, 2019

(unaudited)

2. Summary of Significant Accounting Policies (continued) 

a)Recent Accounting Pronouncements 

The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

3. Mineral Property 

The company defaulted on payments pursuant to the Gold Exploration Management, Inc. (GEM), “Assignment and Assumption Agreement” signed on May 23, 2019, on August 31, 2019, as of September 1, 2019 the project was no longer a viable venture for the company to pursue.

4. Related Party Transactions  

a)As at December 31, 2019, the Company owed $154,425 (March 31, 2019 - $144,175) to the former President and Director of the Company. The amount owing is unsecured, non-interest bearing, and due on demand. 

b)As at December 31, 2019, the Company owed $27,655 (March 31, 2019 - $nil) to the President of the Company. The amount is unsecured, non-interest bearing, and due on demand. During the three months ended December 31, 2019, the Company incurred consulting fees of $12,000 (2018 - $nil) to the President of the Company. 

5. Loan Payable 

As at December 31, 2019, the Company had a loan payable of $5,000 to a non-related party. The loan is secured by a promissory note, bears interest at 10% and is due on demand. As at December 31, 2019, the Company owed $316 (March 31, 2019 - $nil) of accrued interest.

6. Convertible Notes, Related Party 

b)On December 13, 2019, the company issued a Convertible Promissory Notes due to Irvine America MB Management, LLC, a related party, in the amount of $939. The note has an annual interest rate of 10% and is due on March 12, 2020. The note has a conversion feature wherein the noteholder can convert the principal and interest of the note for shares of common stock at $0.001 per share. Due to the fact that the trading price of the Company’s stock was greater than the stated conversion rate of this note on the date of issuance, a total discount of $939 for the beneficial conversion was recorded against the note and will be amortized against interest expense through the life of the note. As of December 31, 2019, interest expense of $188 was recorded as part of the amortization of the beneficial conversion feature of this note. 

c)Both Notes have a Conversion Feature Upon Equity Financing by the Company, Section 4.(a) of the Note(s), in an amount of not less than $100,000, that the then outstanding principal amount of these Note(s) and all accrued but unpaid interest thereon shall, at the option of Holder, be convertible, at the closing and on the same terms and conditions of the Equity Financing, into shares of the Equity Securities at a conversion price equal to the Equity Security Conversion Price upon surrender to the Company of this Note at the principal offices of the Company at the closing of the Equity Financing.  

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Palayan Resources Inc.

Notes to Financial Statements

December 31, 2019

(unaudited)

7.Subsequent Events 

On February 3, 2020 the company received DTC approval and started trading on OTCMarkets as a current information Pink Sheet.

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

FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our 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 those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Liquidity and Capital Resources

Our capital commitments for the coming 12 months consist of administrative expenses, expenses associated with the completion of our planned exploration program and costs of distribution of the securities being registered in this report. Including this exploration work and other costs, we estimate that we will have to incur the following expenses during the next 12 months:

⁽¹⁾Budget Items are listed in order of priority. 

⁽²⁾Includes $16,600 for accounting and auditing.  

Since our initial share issuances, our company has been unable to raise additional cash forcing it to rely in the future upon cash advances from its directors to meet current and future liabilities over the next few months. Based on our cash on hand of approximately $1,054 as at December 31, 2019, we will be required to raise additional funds to execute a plan of operations going forward. We have no commitment from anyone to contribute funds to the Company. If we are unable to raise sufficient funds to execute a plan of operation, we intend to scale back our operations commensurately with the funds available to us. In that regard, we will prioritize expenditures to (in order of priority): We intend to raise the capital that we require through the private placement of our securities. However, we have not received any financing commitments and there is no guarantee that we will be successful in so doing.

We have no plant or significant equipment to sell, nor are we going to buy any plant or significant equipment during the next 12 months. We do not intend to hire any employees at this time.

There is no historical financial information about us upon which to base an evaluation of our performance as an exploration corporation. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources.

We have no assurance that financing will be available to us on acceptable terms. If financing is not available on satisfactory terms, we may be unable to commence, continue, develop or expand our exploration activities. Even if available, equity financing could result in additional dilution to existing shareholder.

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Results of Operations

Revenues

From our inception on July 26, 2013 (date of inception) to December 31, 2019, we did not generate any revenues.

Expenses

Three months ended December 31, 2019 and 2018

During the three months ended December 31, 2019, we incurred operating expenses of $17,243 compared to $4,677 during the three months ended December 31, 2018. We incurred $3,500 in accounting fees, $1,743 for business licensing and $12,000 in consulting fees to our President and Director for services rendered, the Company incurred $830 in additional transfer agent and filing fees for its second quarter filing.

Net Loss

During the three months ended December 31, 2019, we incurred a net loss of $18,329 compared to a net loss of $4,677 for the three months ended December 31, 2018. In addition to operating expense, the Company incurred $1,086 of interest expense for a $5,000 loan payable which is unsecured, bears interest at 10% per annum, and is due on demand, and on two new Convertible Promissory Notes bearing interest at 10% per annum. For the three months ended December 31, 2019 and 2018, the Company incurred a loss per share of $nil.

Liquidity and Capital Resources

At December 31, 2019, the Company had cash and total assets of $1,054 compared with cash and total assets of $2,111 at March 31, 2019. Overall, there was no material change in cash or total assets during the period as the Company had minimal transactions and, due to the lack of sufficient cash funding in the Company, the majority of operating expenses incurred were unpaid as of December 31, 2019.

At December 31, 2019, the Company had liabilities of $198,933 compared to liabilities of $150,359 at March 31, 2019. The increase in liabilities is due to $154 of accrued interest, a $931 increase in Notes payable for two new Convertible Promissory Notes, each bears interest at 10% per annum, and $32,500 for the 9 month total of Consulting fees increase in amounts due to related parties for unpaid consulting fees to the President and Director of the Company.

During the three months ended December 31, 2019, the Company did not have any equity or capital transactions.

Cash Flows

Cash from Operating Activities

During the nine months ended December 31, 2019, we used cash of $8,982 for operating activities compared to $26,982 during the nine months ended December 31, 2018. The decrease in cash used for operating activities is primarily due to costs incurred for DTC eligibility of $9,500 during the three months ended December 31, 2018.

Cash from Investing Activities

During the nine months ended December 31, 2019 and 2018, we did not have any investing activities.

Cash from Financing Activities

During the nine months ended December 31, 2019, we received $5,000 of funding from a loan payable which is unsecured, bears interest at 10% per annum, and is due on demand. During the nine months ended December 31, 2019, we received $2,925 in cash and $114 of expenses paid in behalf of the Company from Irvine America MB Management, LLC, a related party, in the form of two Convertible Promissory Notes, the first note dated November 29, 2019 for $2,100 and the second note dated December 13, 2019 was for $825 in cash and $114 in expense paid, each note bears interest at 10% per annum, and are due February 26, 2020 and March 13, 2020 respectively. The Notes are convertible into the common stock of the company During the nine months ended December 31, 2019, the Company received $17,500 from the former President and Director. The amounts owed to the former President and Director of the Company is unsecured, non-interest bearing, and due on demand.

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Trends

We are in the pre-exploration stage, have not generated any revenue and have no prospects of generating any revenue in the foreseeable future. We are unaware of any known trends, events or uncertainties that have had, or are reasonably likely to have, a material impact on our business or income, either in the long term of short term, other than as described in this section or in “Risk Factors”.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

Inflation

The effect of inflation on our revenues and operating results has not been significant.

Critical Accounting Policies

Set forth below are certain of our important accounting policies. For a full explanation of these and other of our important accounting policies, see Note 2 to Notes to the Financial Statements below.

Our financial statements are presented in United States dollars and are prepared using the accrual method of accounting which conforms to US GAAP.

Going Concern

The Company’s financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has generated no revenues to date, has a working capital deficit of $197,879, and an accumulated deficit of $230,922. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability to raise equity or debt financing, and the attainment of profitable operations from the Company's future business. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company’s plan of action over the next twelve months is to raise capital.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods presented. We are required to make judgments and estimates about the effect of matters that are inherently uncertain. Although, we believe our judgments and estimates are appropriate, actual future results may be different; if different assumptions or conditions were to prevail, the results could be materially different from our reported results.

Long-Lived assets, such as property and equipment and purchased intangibles with finite lives (subject to amortization), are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable in accordance with A 360 “Property, Plant, and Equipment”. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.

Recoverability of assets is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by an asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized as the amount by which the carrying amount exceeds the estimated fair value of the asset. The estimated fair value is determined using a discounted cash flow analysis. Any impairment in value is recognized as an expense in the period when the impairment occurs.

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Recent Accounting Pronouncements

We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our financial position, future operations or cash flows

Item 3. Quantitative and Qualitative Disclosure about Market Risk 

None

Item 4. Controls and Procedures 

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the evaluation, both the Principal Executive Officer and the Principal Financial Officer concluded that our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, were not effective as of December 31, 2019.

Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Securities Act of 1934) that materially affected, or is reasonably likely to materially affect, such internal control over financial reporting during the quarter ended December 31, 2019.

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Part II — OTHER INFORMATION

Item 1. Legal Proceedings 

None.

Item 1A. Risk Factors 

In addition to other information set forth in this report, you should carefully consider the risk factors described in our Registration Statement on Form S-1, which was declared effective on November 12, 2014. Those factors could materially affect our business, financial condition or future results. In addition, risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a materially adverse effect on our business, financial condition and/or operating results.

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

None.

Item 3. Defaults Upon Senior Securities 

None.

Item 4. (Removed and reserved) 

Item 5. Other Information 

None.

Item 6. Exhibits 

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURES

Pursuant to the requirements 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.

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