Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
⌧
No
☐
Aggregate market value of the voting stock held by non-affiliates: $1,403,780 as of June 30, 2016, based on the reported sales price of such stock of $140 on July 30, 2013. The voting stock held by non-affiliates on June 30, 2016 consisted of 10,027 shares of common stock. The registrant has used the reported sales price of the stock on July 30, 2013 to calculate the aggregate market value of the voting stock held by non-affiliates as of June 30, 2016 because there has been no trading in our stock since July 30, 2013.
Applicable Only to Registrants Involved in Bankruptcy Proceedings During the Preceding Five Years:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes
☐
No
☐
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. As of May 12, 2017, there were 12,032,400 shares of common stock, par value $0.0001, issued and outstanding.
Documents Incorporated by Reference
List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to rule 424(b) or (c) of the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).
None.
J.E.M. Capital, Inc.
PART I
This Annual Report on Form 10-K contains forward-looking statements. These statements may relate to, but are not limited to, expectations of potential target businesses and future operating results or financial performance, as well as assumptions relating to the foregoing. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "intend," "potential," "might," "would," "continue" or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
There may be events in the future that we are not able to accurately predict or control and that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we do not plan to publicly update or revise any forward-looking statements contained in this Annual Report on Form 10-K after we file it, whether as a result of any new information, future events or otherwise. 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.
As used herein, except as otherwise indicated by context, references to "we,", "us," "our," or the "Company" refer to JEM Capital Inc.
Corporate History
We were incorporated on September 14, 2011 in Delaware as "Eco Planet Corp." On October 21, 2013, we effected a 1-for-200 reverse stock split of our common stock, $0.0001 par value per share (the "Common Stock"), and changed our name to "Zosano, Inc." On October 31, 2013, we entered into a Stock Purchase Agreement with Zosano Pharma Corporation (formerly known as ZP Holdings, Inc.) pursuant to which we issued and sold 10,016,973 shares of Common Stock (the "Shares") to Zosano Pharma Corporation. As a result of our issuance and sale of the Shares to Zosano Pharma Corporation, a change in control of the Company occurred and Zosano Pharma Corporation became the owner of 99.9% of our outstanding Common Stock.
On November 14, 2016, Zosano Phama Corporation entered into Stock Purchase Agreements with eighteen (18) foreign investors (the "New Shareholders"), pursuant to which Zosano Pharma Corporation sold an aggregate of 10,016,973 shares of common stock of Zosano, Inc. (the "Company"), or approximately 99.9% of the issued and outstanding common stock of the Company, to the New Shareholders. As a result of the transaction, the New Shareholders acquired approximately 99.9% of the total votes entitled to be cast at any meeting of shareholders, giving them voting control of the Company. The New Shareholders obtained the funds for the purchase of the Company's common stock in the transaction from each of their available cash on hand.
On December 15, 2016, we filed Articles of Amendment to its Amended Articles of Incorporation (the "Articles of Amendment") with the Secretary of State of Delaware effecting a name change of the Company to J.E.M. Capital, Inc. (the "Corporate Action"). The Corporate Action and the Amended Articles became effective on March 15, 2017, following compliance with notification requirements of the Financial Industry Regulatory Authority. The new CUSIP number for the Company's common stock is 46619V107. On March 14, 2017, the Financial Industry Regulatory Authority (FINRA) approved the Corporate Action. The Company's stock is quoted on the OTCQB under the ticker symbol ZOSN, but beginning March 15, 2017, the Company's common stock will begin trading under the symbol JEMC.
On January 5, 2017, we entered into a Share Exchange Agreement with Essential Elements Limited, a British Virgin Islands company ("ESEL"), and Leung Chi Wah Earnest, the principal shareholder of ESEL, pursuant to which the Company issued an aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued and outstanding common stock of the Company, to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL owns all of the issued and outstanding shares of J.E.M. Capital Limited, a company organized under the laws of Hong Kong ("JEM Capital"). ESEL and JEM Capital currently have no operations, but include the corporate structure that the Company believes necessary for the acquisition of assets in Hong Kong and China. ESEL has incurred material expenses setting up such structure.
We are a shell company as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"). As a shell company, we have no operations and assets. Our current business plan is to identify a privately held operating company, which is profitable or, in management's view, has growth potential, irrespective of the industry in which it is engaged, desiring to become a publicly held company with access to U.S. capital markets by merging with us through a reverse merger or acquisition. We can give no assurances that we will be successful in finding or acquiring a desirable business opportunity, given the limited resources that are expected to be available to us for implementation of our business plan. Furthermore, we can give no assurances that any business combination, if one occurs, will be on terms that are favorable to our current stockholders or us. Our principal office is located at 21/F., One Harbour Square, 181 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong and our telephone number is (852) 3705-2610.
Business Overview
On October 31, 2013, we underwent a change of control and implemented a business plan to seek and identify a privately held operating company desiring to become a publicly held company by merging with us through a reverse merger or acquisition. Our strategy is to identify a privately held operating company, which is profitable or, in management's view, has growth potential, irrespective of the industry in which it is engaged, desiring to become a publicly held company with access to U.S. capital markets by merging with us through a reverse merger or acquisition. However, we do not intend to combine with a company that may be deemed an investment company subject to the Investment Company Act of 1940. Private companies wishing to have their securities publicly quoted may seek to merge or effect another form of business combination with a shell company with a significant stockholder base. As a result of the merger or other business combination, the stockholders of the private company would hold a majority of the issued and outstanding shares of the shell company, which will likely cause substantially dilution to our current shareholder base. Typically, the directors and officers of the private company become the directors and officers of the shell company. Often the name of the private company becomes the name of the shell company.
From October 31, 2013 to November 14, 2016, we have no capital and must depend on Zosano Pharma Corporation, the holder of 99.9% of our outstanding voting securities, to provide us with the necessary funds to implement our business plan. As the result of sales of shares to New Shareholders on November 14, 2016, we must depend on the New Shareholders to provide us with the necessary funds to implement our business plan. We continue to evaluate business opportunities that we may pursue, but we have not reached any definitive agreement or understanding with any person concerning a merger or other business combination.
From January 5, 2017, Earnest Leung appointed Chief Executive Officer and Chairperson of the Board, will be primarily responsible for evaluating business combination opportunities. We believe that business opportunities may come to our attention from various sources, professional advisors such as attorneys and accountants, securities broker-dealers, venture capitalists, members of the financial community, and others who may present unsolicited proposals. We have no plan, understanding, agreements, or commitments with any individual for such person to act as a finder of opportunities for us.
We can give no assurances that we will be successful in finding or acquiring a desirable business opportunity, given the limited resources that are expected to be available to us for implementation of our business plan. Furthermore, we can give no assurances that any business combination, if one occurs, will be on terms that are favorable to our current stockholders or us.
We do not propose to restrict our search for a business combination candidate to any particular geographical area or industry, and, therefore, we are unable to predict the nature of our future business operations. Our management's discretion in the selection of business opportunities is unrestricted, subject to the availability of such opportunities, economic conditions and other factors.
Any entity that has an interest in being acquired by, or merging into us, is expected to be an entity that desires to become a public company and establish a public trading market for its securities. In connection with such a merger or acquisition, it is anticipated that an amount of common stock constituting control of us would be issued by us.
Evaluation and Selection of Business Opportunities
Certain types of business acquisition transactions may be completed without requiring us to first submit the transaction to our stockholders for their approval. If the proposed transaction is structured in such a fashion, our stockholders will not be provided with financial or other information relating to the candidate prior to the completion of the transaction.
If the structure of a proposed business combination or business acquisition transaction requires the approval of our stockholders, and we are a company required to file reports under the Exchange Act, then we will be required to provide our stockholders with information as applicable under Regulations 14A and 14C under the Exchange Act. Currently, however, we are not required to file reports under the Exchange Act.
The analysis of business opportunities will be undertaken by or under the supervision of Earnest Leung, our Chief Executive Officer. In analyzing potential merger candidates, our management will consider, among other things, the following factors:
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·
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potential for future earnings and appreciation of value of securities;
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·
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perception of how any particular business opportunity will be received by the investment community and by our stockholders;
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·
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ability, following the business combination, to qualify securities for listing on a national securities exchange;
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·
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historical results of operation;
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·
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liquidity and availability of capital resources;
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·
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competitive position as compared to other companies of similar size and experience within the industry segment as well as within the industry as a whole;
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·
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strength and diversity of existing management or management prospects that are scheduled for recruitment;
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·
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amount of debt and contingent liabilities; and
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·
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the products and/or services and marketing concepts of the target company.
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No single factor will control the selection of a business opportunity. Our management will attempt to analyze all factors appropriate to each opportunity and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Because of our limited capital available for investigation, we may not discover or adequately evaluate adverse facts about the business opportunity to be acquired. Although we expect to analyze specific proposals and select a business opportunity in the near future, we are unable to predict when we may consummate a business transaction.
Before making a decision to participate in a business transaction, we will generally request that we be provided with written materials regarding the business opportunity containing as much relevant information as possible, including, but not limited to, a description of products, services and company history; management resumes; financial information; available projections, with related assumptions upon which they are based; an explanation of proprietary products and services; evidence of existing patents, trademarks, or service marks, or rights thereto; present and proposed forms of compensation to management; a description of transactions between such company and its affiliates during the relevant periods; a description of present and required facilities; an analysis of risks and competitive conditions; a financial plan of operation and estimated capital requirements; audited financial statements, or if audited financial statements are not available, unaudited financial statements, together with reasonable assurance that audited financial statements would be able to be produced in order to file a Current Report on Form 8-K to be filed with the Securities and Exchange Commission ("SEC") upon consummation of the business combination.
We believe that various types of potential candidates might find a business combination with us to be attractive. These include candidates desiring to create a public market for their securities in order to enhance liquidity for current stockholders, candidates which have long-term plans for raising capital through public sale of securities and believe that the prior existence of a public market for their securities would be beneficial, and candidates who plan to acquire additional assets through issuance of securities rather than for cash and believe that the development of a public market for their securities will be of assistance in that process. Companies which have a need for an immediate cash infusion are not likely to find a potential business combination with us to be a prudent business transaction alternative.
Employees
Currently we have three employees including executive officers. We rely exclusively on the expertise of executive officers. Our management expects to use consultants, attorneys and accountants as necessary. The need for employees and their availability will be addressed in connection with the decision on whether or not to acquire or participate in specific business opportunities.
Available Information
Historically we have filed periodic reports under the Exchange Act. Our Quarterly Reports, Annual Reports, and other filings can be obtained from the SEC's Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. You may also obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission at
http://www.sec.gov
.
ITEM 1A – RISK FACTORS
As a smaller reporting company, this Item is not applicable to us.
ITEM 1B – UNRESOLVED STAFF COMMENTS
None
.
Currently we maintain a mailing address at Hong Kong at 21/F., One Harbour Square, 181 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong and our telephone number at this address is (852) 3705-2610. Other than this mailing address, we do not maintain any other office facilities, and do not anticipate the need for maintaining any office facilities at any time in the foreseeable future. We do not pay any rent or other fees for the use of the mailing address. Our management does not believe we will establish a separate office until we have completed a business acquisition transaction. It is not possible to predict what arrangements will actually be made with respect to future office facilities.
ITEM 3 ‑ LEGAL PROCEEDINGS
We are not a party to or otherwise involved in any pending legal proceedings.
ITEM 4 – MINE SAFETY DISCLOSURES
Not applicable.
J.E.M. CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
1.
Summary of Significant Accounting Policies
Nature of Operations
J.E.M. Capital Inc. (the "Company") has limited operations. The Company was incorporated under the laws of the State of Delaware on September 14, 2011.
On October 31, 2013, the Company entered into a Stock Purchase Agreement (the "Purchase Agreement") with Zosano Pharma Corporation, formerly known as ZP Holdings, Inc., a Delaware corporation (Zosano Pharma), pursuant to which the Company issued and sold to Zosano Pharma 10,016,973 shares of the Company common stock, $0.0001 par value, for an aggregate cash purchase price of $365,000. As a result of the issuance and sale of the Company's common stock to Zosano Pharma pursuant to the Purchase Agreement, a change in control of the Company occurred (in which Zosano Pharma acquired control of the Company). Immediately following the change in control transaction, 10,027,000 shares of the Company's Common Stock were issued and outstanding. The 10,016,973 shares of common stock issued and sold to Zosano Pharma pursuant to the Purchase Agreement represent approximately 99.9% of the Company's issued and outstanding common stock.
On November 14, 2016, Zosano Phama entered into Stock Purchase Agreements with eighteen (18) foreign investors (the "New Shareholders"), pursuant to which Zosano Pharma sold an aggregate of 10,016,973 shares of common stock of Zosano, Inc. or approximately 99.9% of the issued and outstanding common stock of the Company, to the New Shareholders.
On January 5, 2017, the Company entered into a Share Exchange Agreement (the "Agreement") with Essential Elements Limited, a British Virgin Islands company ("ESEL"), and Leung Chi Wah Earnest, the principal shareholder of ESEL, pursuant to which the Company issued an aggregate of 2,005,400 shares of common stock, or approximately 17% of the issued and outstanding common stock of the Company, to Mr. Leung in exchange for 100% of the issued and outstanding shares of ESEL. ESEL owns all of the issued and outstanding shares of J.E.M. Capital Limited, a company organized under the laws of Hong Kong ("JEM Capital").
ESEL and JEM Capital currently have no operations, but include the corporate structure that the Company believes necessary for the acquisition of assets in Hong Kong and China. ESEL has incurred material expenses setting up such structure.
Risks and Uncertainties
The Company's activities are subject to significant risks and uncertainties, including failure to identify a privately held operating company desiring to merge with the Company, failure to complete a reverse merger transaction, and inability to secure funding to continue as a going concern. (See Note 2 regarding going concern discussion.)
Basis of Presentation and Use of Estimates
The Company's financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Certain other expense balances on the statements of operations and comprehensive income (loss) have been reclassified to conform to the current period presentation. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ materially from those estimates.
J.E.M. CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
Revenue
The Company has yet to generate revenue from operations.
Net Loss per Common Share
Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of shares of common stock outstanding during the period. Fully diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no dilutive financial instruments issued or outstanding for the years ended December 31, 2016 and 2015.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740,
Accounting for Income Taxes
, which requires that the Company recognize deferred tax liabilities and deferred tax assets based on the differences between financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years the differences are expected to reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax asset will be realized. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.
Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax assets. Any change in the valuation allowance will be included in income in the year of the change in estimate.
Recent Accounting Pronouncements
In August 2014, the FASB issued ASU 2014-15,
Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern
. This standard sets forth management's responsibility to evaluate, each reporting period, whether there is substantial doubt about the Company's ability to continue as a going concern, and if so, to provide related disclosures. The standard is effective for annual reporting periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15, 2016, which will be effective for the Company for the quarter ending December 31, 2017. The Company is assessing the impact, if any, of implementing this guidance on its evaluation of going concern.
In October 2016, the FASB issued ASU 2016-17 "Consolidation (Topic 810): Interests held through Related Parties that are under Common Control", to amend the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (VIE) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The amendments are effective for fiscal years and interim periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently assessing the impact of ASU 2016-17 on its consolidated financial position, results of operations and cash flows.
In January 2017, the FASB issued ASU 2017-01 "Business Combinations (Topic 805): Clarifying the Definition of a Business", to clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments are effective for fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the impact of ASU 2017-01 on its consolidated financial position, results of operations and cash flows.
2.
Going Concern
The accompanying financial statements have been prepared in conformity with U.S. GAAP, which contemplate continuation of the Company as a going concern. The Company has not established any source of revenues to cover its operating costs, and as such, has incurred an operating loss since inception. Further, as of December 31, 2016, the cash resources of the Company were insufficient to continue to conduct its normal business operations. These and other factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
J.E.M. CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
3.
General and Administrative Expenses
The Company has been engaged in activities related to the setup and formation of the company. The following summarizes the type of expenses incurred:
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Year Ended December 31,
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2016
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2015
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General and administrative expense:
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Professional fees
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$
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31,548
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$
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27,550
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|
Filing fees
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2,740
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|
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2,795
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Franchise tax expense
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1,231
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|
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2,274
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Total general and administrative expense
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$
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35,519
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|
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$
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32,619
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4.
Stockholders' Equity
Preferred Stock
In September 2013, the Company adopted an amended and restated certificate of incorporation by which the Company is authorized to issue 5,000,000 shares of preferred stock with a $0.0001 par value. As of December 31, 2016, there were no shares of preferred stock issued or outstanding.
Common Stock, Stock Split and Dividend
In September 2013, the Company adopted an amended and restated certificate of incorporation by which the Company is authorized to issue 195,000,000 shares of common stock with a $0.0001 par value, which amended and restated certificate of incorporation went effective on October 21, 2013.
In anticipation of the acquisition of the Company's common stock by Zosano Pharma and on October 21, 2013, the Company completed a 1-for-200 reverse stock split. As a result, existing stockholders held an aggregate of 10,027 shares on a post-split basis. All share and per share amounts have been retroactively restated for the effect of this split.
On October 31, 2013, the Company issued 10,016,973 shares of common stock to Zosano Pharma in exchange for an aggregate cash purchase price of $365,000. Concurrently with the receipt of the proceeds from the sale of its common stock to Zosano Pharma, the Company declared a dividend of the purchase price to its stockholders of record immediately prior to the closing of the purchase transaction.
As of December 31, 2016 and 2015, 10,027,000 shares of common stock were issued and outstanding.
As of December 31, 2016 and 2015, the Company did not have any dilutive securities, such as stock options, warrants, and rights, issued or outstanding.
J.E.M. CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
5.
Income Taxes
The Company is subject to taxation in the United States and, for the years ended December 31, 2016 and 2015, state jurisdictions.
As of December 31, 2016, the Company had available federal income tax net operating loss carryforwards of approximately $164,800 and state net operating loss carryforwards of approximately $
103,471
. As of December 31, 2015, the Company had available federal income tax net operating loss carryforwards of approximately $129,281 and state net operating loss carryforwards of approximately $67,952. If not utilized, the federal income tax net operating loss carryforwards will begin to expire in 2031 and state net operating loss carryforwards will begin to expire in 2033.
A reconciliation of the effective income tax rate to the federal rate is as follows:
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December 31,
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2016
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|
2015
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Federal income tax rate
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34.00%
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34.00%
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State income tax rate
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5.85%
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5.85%
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Change in valuation allowance
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-39.85%
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-39.85%
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0%
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0%
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Significant components of the Company's deferred tax assets as of December 31, 2016 and 2015 are summarized in the table below. A valuation allowance of $56,032 and $43,956 for the years ended December 31, 2016 and 2015, respectively, has been established to offset the deferred tax assets as realization of such assets is uncertain.
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December 31,
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2016
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2015
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Deferred tax assets:
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Net operating loss carryforwards
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$
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56,032
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$
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43,956
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Total deferred tax assets
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56,032
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|
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43,956
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Less: Valuation allowance
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(56,032
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)
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(43,956
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)
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Net deferred tax assets
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$
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-
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$
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-
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The Company did not identify any material uncertain tax positions.
The Company's policy is to recognize interest and/or penalties related to income tax matters as a component of income tax expense. As of December 31, 2016 and 2015, the Company had not recognized any interest or penalties on its financial statements.
J.E.M. CAPITAL INC.
NOTES TO FINANCIAL STATEMENTS
6. Related Party Transactions
The Company operated rent-free in the same facility as Zosano Pharma, its parent company, for the year ended December 31, 2015 and period from January to November 2016.
For the year ended December 31, 2015 and for the period from January to November 2016, all of the Company's expenses were paid by Zosano Pharma in order to continue as a going concern. Started from December 2016, the Company's expenses was paid from the proceeds of director's loan.