A Look at Palayan Resources’ Risk Factors

Palayan Resources (PLYN) is an exploration stage company, which engages in the acquisition and development of mineral properties. The company aims to create a portfolio of companies that is profitable.

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On July 9, Palayan said it become aware of at least two ‘stock promotion’ schemes of its shares that were run between June 29 and July 1 by two independent stock promoters who had no affiliation to Palayan.

Denouncing these stock promotion activities, the company cautioned all investors to carefully scrutinize all investments and disregard any unauthorized information about the company. In such a scenario, it bodes well for investors to consider the potential risks and rewards associated with the company’s stock.

Let’s take a look at the company’s financial performance and what has changed in its key risk factors that investors should know.

Palayan Resources Risk Factors

According to the new Tipranks Risk Factors tool, Palayan’s main risk category is Finance & Corporate, which accounts for 57% of the total 14 risks identified. The next two major risk factor contributors are Legal & Regulatory, and Production at 21% and 14%, respectively. Since March, the company has added one new risk factor and changed one.

Under the Finance & Corporate category, the company acknowledges that it does not have independent directors, which may lead to faulty corporate governance. Its directors and officers take all the decisions related to corporate governance, including executive compensation, accounting overview, and related party transactions. They may also have full control over issues that need the approval of the board of directors.

This may lead to conflicts of interest and prevent separation of executive duties from those who need the board’s approval, which, in turn, may lead to ineffective disclosure and accounting controls.

Under the Legal & Regulatory category, the company highlights that the sales practice requirements of the Financial Industry Regulatory Authority (FINRA) make it difficult for broker-dealers to recommend Palayan stock to their customers. This can have an adverse impact on Palayan’s shares.

Financial Performance

Being an exploration stage company, Palayan does not yet generate any revenue. In fiscal 2021, the company’s operating expenses jumped to $441.6 thousand from $68.9 thousand in fiscal 2020 on the back of expenses related to the issuance of preferred stock, higher legal and accounting fees, and higher compensation. Consequently, Palayan’s net loss widened to $460.5 thousand in fiscal 2021 from $73.2 thousand a year ago.

For fiscal 2022, Palayan expects to incur total expenses of $1.04 million. Approximately 60% of this amount is earmarked for potential investment in companies. (See Palayan Resources stock chart on TipRanks)

Bottom Line

The Finance and Corporate risk factor’s sector average is 35%, compared to Palayan’s 57%. Shares are down 22.5% over the past month.