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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission File Number: 001-38266

 

SPERO THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

46-4590683

 

 

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

675 Massachusetts Avenue, 14th Floor

Cambridge, Massachusetts

02139

 

 

(Address of principal executive offices)

(Zip Code)

 

(857) 242-1600

(Registrant’s telephone number, including area code)

 

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, $0.001 par value per share

SPRO

The Nasdaq Global Select Market

 

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. 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

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 No

As of November 5, 2021, the registrant had 32,323,617 shares of common stock, $0.001 par value per share, outstanding.

 

 


Forward-Looking STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

the initiation, timing, design, progress and results of, including interim data from, our preclinical studies and clinical trials, and our research and development programs;
the timing and outcome of the New Drug Application approval process for tebipenem HBr;
our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;
our ability to advance product candidates into, and successfully complete, clinical trials;
the timing or likelihood of regulatory filings and approvals;
the direct and indirect impact of the pandemic caused by an outbreak of a new strain of coronavirus, or COVID-19, on our business and operations, including manufacturing, research and development costs, clinical trials, regulatory processes and employee expenses;
the commercialization of our product candidates, if approved;
the pricing, coverage and reimbursement of our product candidates, if approved;
the implementation of our business model and strategic plans for our business and product candidates;
the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates;
our ability to enter into strategic arrangements and/or collaborations and the potential benefits of such arrangements;
our estimates regarding expenses, capital requirements and needs for additional financing;
our ability to continue as a going concern;
our financial performance;
developments relating to our competitors and our industry; and
other risks and uncertainties, including those listed under Part II, Item 1A. “Risk Factors”.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business, and the markets for certain diseases, including data regarding the estimated size of those markets, and the incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources.

i


Risk Factor Summary

We are providing the following summary of the risk factors contained in this Quarterly Report on Form 10-Q to enhance the readability and accessibility of our risk factor disclosures. We encourage you to carefully review the full risk factors contained in this Quarterly Report on Form 10-Q in their entirety for additional information regarding the material factors that make an investment in our securities speculative or risky. These risks and uncertainties include, but are not limited to, the following:

The outbreak of the novel strain of coronavirus, SARS-CoV-2, which causes COVID-19 and its variants, could adversely impact our business, including our preclinical studies and clinical trials.
Our Revenue Interest Financing Agreement with certain entities managed by HealthCare Royalty Management, LLC (HCR) could limit cash flow available for our operations and expose us to risks that could adversely affect our business, financial condition and results of operations.
We have not generated any revenue from the sale of our products, have a history of losses and expect to incur substantial future losses. The report of our auditor on our consolidated financial statements expresses substantial doubt about our ability to continue as a going concern; if we are unable to obtain additional capital, we may not be able to continue our operations on the scope or scale as currently conducted, and that could have a material adverse effect on our business, results of operations and financial condition.
We expect that we will need substantial additional funding. If we are unable to raise capital when needed, or do not receive payment under our government awards, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.
We are heavily dependent on the success of tebipenem HBr, which is still under development, and our ability to develop, obtain marketing approval for and successfully commercialize tebipenem HBr. If we are unable to develop, obtain marketing approval for and successfully commercialize tebipenem HBr, or if we experience significant delays in doing so, our business could be materially harmed.
If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the United States Food and Drug Administration, or FDA, or comparable foreign regulatory authorities or do not otherwise produce favorable results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of such product candidates.
To support our accelerated clinical development strategy for tebipenem HBr, we are relying, in part, on clinical data from two exploratory Phase 2 clinical trials conducted by Meiji (ME1211) and Global Pharma (L-084 04) in Japan, which were not conducted in accordance with FDA guidance for clinical trials in patients with cUTI. To the extent that these clinical trial design differences limit our use of the clinical data, our proposed clinical trial plan for tebipenem HBr with the FDA could be materially delayed and we may incur material additional costs.
Preliminary or interim data from our clinical studies that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.
Serious adverse events or undesirable side effects or other unexpected properties of tebipenem HBr or any other product candidate may be identified during development or after approval that could delay, prevent or cause the withdrawal of regulatory approval, limit the commercial potential, or result in significant negative consequences following marketing approval.
Even if a product candidate does obtain regulatory approval, it may never achieve the market acceptance by physicians, patients, hospitals, third-party payors and others in the medical community that is necessary for commercial success and the market opportunity may be smaller than we estimate.
If we are unable to establish sales, marketing and distribution capabilities or enter into sales, marketing and distribution agreements with third parties, we may not be successful in commercializing tebipenem HBr or any other product candidate if such product candidate is approved.
We face substantial competition from other pharmaceutical and biotechnology companies and our operating results may suffer if we fail to compete effectively.
We expect to depend on collaborations with third parties for the development and commercialization of some of our product candidates. Our prospects with respect to those product candidates will depend in part on the success of those collaborations.

ii


We contract with third parties for the manufacture of preclinical and clinical supplies of our product candidates and expect to continue to do so in connection with any future commercialization and for any future clinical trials and commercialization of our other product candidates and potential product candidates. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.
Our use of government funding for certain of our programs adds complexity to our research and commercialization efforts with respect to those programs and may impose requirements that increase the costs of commercialization and production of product candidates developed under those government-funded programs.
If we are unable to obtain and maintain sufficient patent protection for our technology or our product candidates, or if the scope of the patent protection is not sufficiently broad, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and product candidates may be adversely affected.
We have registered trademarks and pending trademark applications. Failure to enforce our registered marks or secure registration of our pending trademark applications could adversely affect our business.
If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize tebipenem HBr or our other product candidates, and our ability to generate revenue will be materially impaired.

 

 

iii


Spero Therapeutics, Inc.

Table of Contents

 

 

 

 

Page

 

 

PART I – FINANCIAL INFORMATION

 

Item 1.

 

Financial Statements (Unaudited)

5

 

 

Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

5

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020

6

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020

7

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020

8

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

10

Item 2.

 

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

31

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

43

Item 4.

 

Controls and Procedures

43

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

Item 1A.

 

Risk Factors

44

Item 6.

 

Exhibits

82

 

 

 

 

Signatures

84

 

 

 

iv


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

SPERO THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

112,859

 

 

$

85,209

 

Marketable securities

 

 

10,558

 

 

 

41,697

 

Other receivables

 

 

2,242

 

 

 

5,330

 

Tax incentive receivable, current

 

 

342

 

 

 

846

 

Prepaid expenses and other current assets

 

 

5,768

 

 

 

6,063

 

Total current assets

 

 

131,769

 

 

 

139,145

 

Property and equipment, net

 

 

1,214

 

 

 

1,669

 

Tax incentive receivable

 

 

-

 

 

 

311

 

Operating lease right of use assets

 

 

6,496

 

 

 

7,114

 

Other assets

 

 

5,212

 

 

 

5,212

 

Total assets

 

$

144,691

 

 

$

153,451

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,161

 

 

$

1,155

 

Accrued expenses and other current liabilities

 

 

11,356

 

 

 

12,241

 

Operating lease liabilities

 

 

1,042

 

 

 

947

 

Deferred revenue, current

 

 

1,699

 

 

 

-

 

Total current liabilities

 

 

17,258

 

 

 

14,343

 

Non-current operating lease liabilities

 

 

6,191

 

 

 

6,891

 

Deferred revenue, non-current

 

 

9,199

 

 

 

-

 

Other long-term liabilities

 

 

148

 

 

 

177

 

Total liabilities

 

 

32,796

 

 

 

21,411

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized, 3,218,152 shares issued and outstanding as of September 30, 2021 and 3,218,287 shares issued and outstanding as of December 31, 2020

 

 

3

 

 

 

3

 

Common stock, $0.001 par value; 120,000,000 shares authorized as of September 30, 2021 and 60,000,000 shares authorized as of December 31, 2020; 32,220,351 shares issued and outstanding as of September 30, 2021 and 29,260,247 shares issued and outstanding as of December 31, 2020

 

 

32

 

 

 

29

 

Additional paid-in capital

 

 

450,085

 

 

 

409,722

 

Accumulated deficit

 

 

(338,223

)

 

 

(277,707

)

Accumulated other comprehensive gain (loss)

 

 

(2

)

 

 

(7

)

Total stockholders' equity

 

 

111,895

 

 

 

132,040

 

Total liabilities and stockholders' equity

 

$

144,691

 

 

$

153,451

 

 

 

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

5


SPERO THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Grant revenue

 

$

2,356

 

 

$

3,957

 

 

$

12,698

 

 

$

7,165

 

Collaboration revenue

 

 

708

 

 

 

38

 

 

 

2,814

 

 

 

258

 

Total revenues

 

 

3,064

 

 

 

3,995

 

 

 

15,512

 

 

 

7,423

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

14,436

 

 

 

17,706

 

 

 

47,301

 

 

 

53,798

 

General and administrative

 

 

11,152

 

 

 

5,309

 

 

 

28,680

 

 

 

13,942

 

Total operating expenses

 

 

25,588

 

 

 

23,015

 

 

 

75,981

 

 

 

67,740

 

Loss from operations

 

 

(22,524

)

 

 

(19,020

)

 

 

(60,469

)

 

 

(60,317

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

90

 

 

 

29

 

 

 

270

 

 

 

352

 

Other income (expense), net

 

 

(87

)

 

 

55

 

 

 

(317

)

 

 

270

 

Total other income (expense), net

 

 

3

 

 

 

84

 

 

 

(47

)

 

 

622

 

Net loss

 

$

(22,521

)

 

$

(18,936

)

 

$

(60,516

)

 

$

(59,695

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.70

)

 

$

(0.86

)

 

$

(1.99

)

 

$

(2.91

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic and diluted:

 

 

32,132,500

 

 

 

21,933,922

 

 

 

30,417,305

 

 

 

20,712,720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(22,521

)

 

 

(18,936

)

 

 

(60,516

)

 

 

(59,695

)

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on marketable securities

 

 

 

 

 

(14

)

 

 

5

 

 

 

(15

)

Net unrealized gains (losses) on securities

 

 

 

 

 

(14

)

 

 

5

 

 

 

(15

)

Total comprehensive loss

 

$

(22,521

)

 

$

(18,950

)

 

$

(60,511

)

 

$

(59,710

)

 

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

6


SPERO THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(60,516

)

 

$

(59,695

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

455

 

 

 

570

 

Non-cash lease cost

 

 

611

 

 

 

386

 

Share-based compensation

 

 

6,502

 

 

 

3,523

 

Unrealized foreign currency transaction (gain) loss

 

 

17

 

 

 

(235

)

Accretion of discount on marketable securities

 

 

197

 

 

 

(57

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Other receivables

 

 

3,088

 

 

 

686

 

Prepaid expenses and other current assets

 

 

2,758

 

 

 

(2,474

)

Tax incentive receivables

 

 

797

 

 

 

(238

)

Other assets

 

 

7

 

 

 

(1,890

)

Accounts payable

 

 

2,007

 

 

 

(1,656

)

Accrued expenses and other current liabilities

 

 

(3,185

)

 

 

(8,204

)

Deferred revenue, current and non-current

 

 

10,898

 

 

 

 

Other long-term liabilities

 

 

(29

)

 

 

(63

)

Operating lease liability

 

 

(605

)

 

 

(142

)

Net cash used in operating activities

 

 

(36,998

)

 

 

(69,489

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities

 

 

(13,601

)

 

 

(3,995

)

Proceeds from maturities of marketable securities

 

 

44,548

 

 

 

54,350

 

Purchases of property and equipment

 

 

 

 

 

(145

)

Net cash provided by (used in) investing activities

 

 

30,947

 

 

 

50,210

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from the issuance of common stock, net of commissions

 

 

5,357

 

 

 

9,163

 

Proceeds from the issuance of common stock related to Rights Offering

 

 

 

 

 

9,416

 

Proceeds from the issuance of common stock related to the Underwritten Public Offering

 

 

 

 

 

44,979

 

Proceeds from issuance of Series C Preferred Stock related to Rights Offering

 

 

 

 

 

20,583

 

Proceeds from issuance of Series D Preferred Shares related to the Underwritten Public Offering

 

 

 

 

 

30,221

 

Proceeds from the issuance of common stock related to the Pfizer Purchase Agreement

 

 

27,537

 

 

 

 

Payment of offering and financing costs

 

 

(411

)

 

 

(580

)

Proceeds from stock option exercises

 

 

1,218

 

 

 

1,009

 

Net cash provided by financing activities

 

 

33,701

 

 

 

114,791

 

Net increase (decrease) in cash and cash equivalents

 

 

27,650

 

 

 

95,512

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

85,209

 

 

 

29,730

 

Cash, cash equivalents and restricted cash at end of period

 

$

112,859

 

 

$

125,242

 

Supplemental disclosure of non-cash activities:

 

 

 

 

 

 

Offering and financing costs in accounts payable and accruals

 

$

2,300

 

 

$

389

 

Right of use assets and lease obligations recorded upon commencement of new lease

 

$

 

 

$

2,626

 

 

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

 

7


SPERO THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

 

 

Series A, B, C and D

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Accumulated

 

 

Total

 

 

Convertible Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Other Comprehensive

 

 

Stockholders'

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balances at June 30, 2021

 

3,218,152

 

 

 

3

 

 

 

29,699,147

 

 

 

30

 

 

 

405,923

 

 

 

(315,702

)

 

 

(2

)

 

 

90,252

 

Issuance of common stock upon the exercise of stock options

 

 

 

 

 

 

 

88,856

 

 

 

 

 

 

826

 

 

 

 

 

 

 

 

 

826

 

Issuance of common stock, net of issuance costs

 

 

 

 

 

 

 

70,000

 

 

 

 

 

 

1,105

 

 

 

 

 

 

 

 

 

1,105

 

Issuance of common stock under Pfizer Purchase Agreement, net of financing costs of $0.1 million

 

 

 

 

 

 

 

2,362,348

 

 

 

2

 

 

 

39,901

 

 

 

 

 

 

 

 

 

39,903

 

Share-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

2,330

 

 

 

 

 

 

 

 

 

2,330

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,521

)

 

 

 

 

 

(22,521

)

Balances at September 30, 2021

 

3,218,152

 

 

 

3

 

 

 

32,220,351

 

 

 

32

 

 

 

450,085

 

 

 

(338,223

)

 

 

(2

)

 

 

111,895

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A, B, C and D

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Accumulated

 

 

Spero Therapeutics, Inc.

 

 

Convertible Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Other Comprehensive

 

 

Stockholders'

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balances at December 31, 2020

 

3,218,287

 

 

 

3

 

 

 

29,260,247

 

 

 

29

 

 

 

409,722

 

 

 

(277,707

)

 

 

(7

)

 

 

132,040

 

Issuance of common stock upon the exercise of stock options

 

 

 

 

 

 

 

135,571

 

 

 

 

 

 

1,218

 

 

 

 

 

 

 

 

 

1,218

 

Issuance of common stock, net of issuance costs

 

 

 

 

 

 

 

327,185

 

 

 

1

 

 

 

5,356

 

 

 

 

 

 

 

 

 

5,357

 

Issuance of common stock under Pfizer Purchase Agreement, net of premium of $12.5 million and net of financing costs of $0.2 million

 

 

 

 

 

 

 

2,362,348

 

 

 

2

 

 

 

27,287

 

 

 

 

 

 

 

 

 

27,289

 

Conversion of convertible preferred stock to common stock

 

(135

)

 

 

 

 

 

135,000