PALAYAN RESOURCES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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 in our Form 10-K filed with the SEC on July 12, 2021.

Going Concern Considerations

Our financial statements are presented in United States dollars and are prepared using the accrual method of accounting which conforms to US GAAP, which contemplate continuation of our Company as a going concern.

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. The impact on our Company is not currently determinable, but management continues to monitor the situation.

We have generated no revenues to date and have an accumulated deficit of $930,066 as of December 31, 2021. The continuation of our Company as a going concern is dependent upon the continued financial support from our shareholders, our ability to raise equity or debt financing, and the attainment of profitable operations from our Company's future business. These factors raise substantial doubt regarding our 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 we be unable to continue as a going concern.

Our 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.

Derivative Financial Instruments

We account for convertible debt with conversion features representing embedded derivative liabilities in accordance with ASC 815, Derivatives and Hedging. ASC 815-15-25-1 requires that embedded derivative instruments be bifurcated and assessed on their issuance date and measured at their fair value for accounting purposes. In determining the appropriate fair value, we use the Black-Scholes option valuation method, resulting in a reduction of the initial carrying amount of the notes as unamortized debt discount. The unamortized discount is amortized over the term of each note using the effective interest method.

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The fair value of derivative instruments is recorded and shown separately under liabilities. Changes in the fair value of derivative liabilities are recorded in the consolidated statement of operations under non-operating income (expense).

We evaluate each of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For stock-based derivative financial instruments, we use a weighted average Black-Scholes-Merton option-pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether net-cash settlement of the derivative instrument could be required within twelve months of the balance sheet date.

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.

RESULTS OF OPERATIONS

We have limited operational history. From our inception on July 26, 2013 to December 31, 2021, we did not generate any revenues.

Three Months Ended December 31, 2021 Compared to Three Months Ended December 31, 2020

Operating Expenses

During the three months ended December 31, 2021, we incurred operating expenses of $60,010 compared to $201,980 in the previous year. The 2020 period includes a $150,000 expense related to the issuance of Series A Preferred Stock to our CEO and Director as described in Note 5 to the accompanying financial statements.

Other Income and Expense

Interest expense increased $1,628 on higher levels of debt. In the 2021 period, we reported derivative income of $35,747 compared to derivative expense of $53,746 in the 2020 period, all in relation to our Mambagone debt as explained in Note 7 to the accompanying financial statements. Debt discount amortization in the 2021 period of $41,914 was also related to our Mambagone indebtedness. In the 2021 period, we also reported a gain on extinguishment of debt of $14,000.

Net Loss

Our net loss for the three months ended December 31, 2021 of $58,050 ($0.00 per share) compares to a net loss of $259,971 ($0.01 per share) in the previous year.

Nine Months Ended December 31, 2021 Compared to Nine Months Ended December 31, 2020

Operating Expenses

During the nine months ended December 31, 2021, we incurred operating expenses of $202,607 compared to $376,300 in the previous year. The 2020 period includes a $150,000 expense related to the issuance of Series A Preferred Stock to our CEO and Director as described in Note 5 to the accompanying financial statements. The 2020 period also contains a $31,000 expense related to the rescinded SMG-Gold transaction as described in Note 3 to the accompanying financial statements. In the 2021 period, professional fees were higher than in 2020 by $18,284.

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Other Income and Expense

Interest expense increased $9,553 on higher levels of debt. In the 2021 period, we reported derivative income of $112,651 compared to derivative expense of $53,746 in the 2020 period, all in relation to our Mambagone debt as explained in Note 7 to the accompanying financial statements. Debt discount amortization in the 2021 period of $124,510 was also related to our Mambagone indebtedness. In the 2021 period, we also reported a gain on extinguishment of debt of $14,000.

Net Loss

Our net loss for the nine months ended December 31, 2021 of $218,124 ($0.01 per share) compares to a net loss of $438,150 ($0.01 per share) in the previous year.

LIQUIDITY AND CAPITAL RESOURCES

Since inception we have raised capital through debt financing, advances from related parties and private placements of our common stock. As described in Note 1 to the accompanying financial statements, on December 9, 2021 we executed an MOU with a Singapore based holding company whose subsidiaries are engaged principally in foreign exchange remittance services. Under the MOU, our Company is proposing to acquire 100% of the Singapore based company for a purchase price of $80,000,000, consisting of common and preferred stock totaling $70,000,000 and subordinated debt of $10,000,000. The proposed acquisition is subject to due diligence customary to transactions of this type. There can be no assurance that a definitive agreement between the parties to the transaction can be reached.

Notwithstanding what may happen with our proposed acquisition, our capital commitments for the coming 12 months consist of administrative expenses, expenses associated with investment in companies, and costs of distribution of our securities. We estimate that we will have to incur the following expenses during the next 12 months:

                                                              Estimated
                                               Estimated      Expenses
               Description                Completion Date (1)    ($)

Legal and accounting fees and expenses(2) 12 months 95,000 Investor relations and capital raising 12 months 125,000 General and administrative expenses

            12 months       207,000
Transfer Agent and Edgar Services              12 months       18,000
Investment in companies                        12 months       600,000
Total                                                         1,045,000




  (1) Budget Items are listed in order of priority.
  (2) Includes $45,000 for accounting and auditing.

Since our initial share issuances, our company has been unable to raise additional capital forcing us to rely on debt financing and cash advances from related parties to meet current and future liabilities over the foreseeable future. Based on our cash on hand of $582 as of December 31, 2021, we will be required to raise additional funds to execute our current plan of operation. If we are unable to raise sufficient funds to execute our 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): (i) maintain our mineral exploration license; and (ii) to conduct our planned exploration activities. We intend to raise the capital that we require through the private placement of our securities or through loans. 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 presently intend to hire any employees.

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CASH FLOWS



Operating Activities

During the nine months ended December 31, 2021, we used cash of $98,307 for operating activities compared to $222,539 during the same period in 2020. The decrease in cash used was mainly attributable to the decrease of $211,399 in our net loss offset to some extent by the following changes in non-cash items:

1. In the 2020 period, we had non-cash items for shares issued as an acquisition

deposit and shares issued for services totaling $167,388 compared to $5,581 in

the 2021 period.

2. In the 2021 period we had derivative income of $112,651 compared to derivative

expense of $53,746 in 2020.

3. In the 2021 period we recorded debt discount amortization of $124,510 versus

zero in 2020.

4. In the 2021 period we recorded a gain on extinguishment of debt of $14,000.

In 2021 there was also a change in accounts payable, accrued liabilities and due to related parties totaling $116,095, a significant part of which relates to shares issued in settlement of debt discussed in Notes 5 and 8 to the accompanying financial statements.

Investing Activities

There were no investing activities in the 2021 period. During the nine months ended December 31, 2020 we had capital expenditures of $1,123.

Financing Activities

There were no financing activities in the 2021 period. During the nine months ended December 31, 2020, we received $5,000 from the sale of 10,000 shares of our common stock and $240,600 in proceeds from the issuance of notes payable.

Trends

Other than potential impacts of Covid-19, 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 or short term, other than as described in this section or our in Item 1A of our Form 10-K (Risk Factors) filed July 12, 2021.

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.

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