References to the "Company," "our," "us" or "we" in this section refer to CCNB1
prior to the Business Combination. The following discussion and analysis of the
Company's financial condition and results of operations for the year ended
December 31, 2020 should be read in conjunction with the financial statements
and the notes thereto contained elsewhere in this Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
This "Management's Discussion and Analysis of Financial Condition and Results of
Operations" has been amended and restated to give effect to the restatement of
our financial statements, as more fully described in Note 3 to our financial
statements entitled "Restatement of Financial Statements". For further detail
regarding the restatement, see "Explanatory Note" and "Item 9A. Controls and
Procedures."
In this Amendment to the Annual Report on Form 10-K of CC Neuberger Principal
Holdings I (the "Company") for the period ended December 31, 2020, we are
restating the audited financial statements as of December 31, 2020, and restated
unaudited interim financial statements included in the 2020 Form 10-K as of June
30, 2020 and September 30, 2020 and for the (i) three months ended June 30,
2020, (ii) period from January 14, 2020 (inception) through June 30, 2020, (iii)
three months ended September 30, 2020 and (iv) period from January 14, 2020
(inception) through September 30, 2020 and (collectively, the "Affected
Periods").
We have re-evaluated CCNB1's application of ASC 480-10-S99-3A to CCNB1's
accounting classification of the outstanding Class A ordinary shares, par value
$0.0001 per share, issued as part of the units sold in CCNB1's initial public
offering on April 28, 2020. Historically, a portion of the Class A ordinary
shares were classified as permanent equity to maintain shareholders' equity
greater than $5 million on the basis that CCNB1 would not redeem its Class A
ordinary shares in an amount that would cause its net tangible assets to be less
than $5,000,001, as described in its amended and restated certificate of
incorporation (the "Charter"). Pursuant to such reevaluation, our management
determined that the Class A ordinary shares include certain provisions that
require classification of all of the Class A ordinary shares as temporary equity
regardless of the net tangible assets redemption limitation contained in the
Charter. Effective with these financial statements, we also clarified that the
definition of net tangible assets includes both permanent equity and redeemable
equity. In addition, in connection with the change in presentation of the Class
A ordinary shares, we determined to restate the earnings per share calculation
to allocate income and losses shares pro rata between the two classes of shares.
This presentation contemplates the Business Combination in which both classes of
shares share pro rate in the income and losses of CCNB1.
Therefore, our management and the Audit Committee concluded that our previously
issued (i) audited financial statements as previously revised in the 2020 Form
10-K, (ii) unaudited interim financial statements as previously revised in the
2020 Form 10-K; (iii) unaudited interim financial statements included in CCNB1's
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020 and
(iv) unaudited interim financial statements included in CCNB1's Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 2020 should be
restated to report all Class A ordinary shares as temporary equity and should no
longer be relied upon. As such, the Company will restate all financial
statements for the Affected Periods in this Form 10-K/A and for the audited
financial statements included in the 2020 Form 10-K/A.
The restatement does not have an impact on CCNB1's cash position and cash held
in the Trust Account.
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Our management has concluded that in light of the classification error described
above, a material weakness exists in CCNB1's internal control over financial
reporting and that the disclosure controls and procedures were not effective.
In connection with the restatement, our management reassessed the effectiveness
of CCNB1's disclosure controls and procedures for the periods affected by the
restatement. As a result of that reassessment, we determined that CCNB1's
disclosure controls and procedures for such periods were not effective with
respect to the internal controls around the proper accounting and classification
of complex financial instruments. For more information, see Part II, Item 9A,
Controls and Procedures included in this Annual Report on Form 10-K/A.
We have not amended CCNB1's previously filed Quarterly Reports on Form 10-Q for
the period affected by the restatement as the financial information that has
been previously filed or otherwise reported for these periods is superseded by
the information in the 2020 Form 10-K, and the financial statements and related
financial information contained in such previously filed reports should no
longer be relied upon.
The restatement is more fully described in Note 3 and Note 11 of the notes to
the financial statements included herein.
Overview
We were incorporated as a blank check company incorporated on January 14, 2020
(inception) as a Cayman Islands exempted company for the purpose of effecting a
merger, share exchange, asset acquisition, share purchase, reorganization or
similar business combination with one or more businesses that we have not yet
identified ("Business Combination"). Although we are not limited to a particular
industry or geographic region for purposes of consummating a Business
Combination, we intend to focus in the financial, technology and business
services sectors. Our sponsor is CC Neuberger Principal Holdings I Sponsor LLC,
a Delaware limited liability company ("Sponsor").
The registration statement for our Initial Public Offering was declared
effective on April 23, 2020. On April 28, 2020, we consummated its IPO of
41,400,000 Units, including 5,400,000 additional Units to cover over-allotments,
at $10.00 per Unit, generating gross proceeds of $414.0 million, and incurring
offering costs of approximately $24.5 million, inclusive of approximately $14.5
million in deferred underwriting commissions and approximately $0.9 million in
deferred legal fees. Each Unit consists of one Class A ordinary share and
one-third of one redeemable warrant. Each whole warrant will entitle the holder
to purchase one Class A ordinary share at an exercise price of $11.50 per share,
subject to adjustment.
Simultaneously with the closing of the IPO, we consummated the Private Placement
of 10,280,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant in a private placement to the Sponsor, generating gross
proceeds of approximately $10.3 million.
Upon the closing of the IPO and the Private Placement, $414.0 million ($10.00
per Unit) of the net proceeds of the Initial Public Offering and certain of the
proceeds of the Private Placement were placed in the Trust Account and invested
in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act which invest only in direct U.S. government
treasury obligations, as determined by us, until the earlier of: (i) the
completion of a Business Combination and (ii) the distribution of the Trust
Account as described below. Our management has broad discretion with respect to
the specific application of the net proceeds of the Initial Public Offering and
the Private Placement, although substantially all of the net proceeds are
intended to be applied toward identifying and consummating an initial Business
Combination.
If we had been unable to complete a Business Combination within 24 months from
the closing of the IPO, or April 28, 2022 (the "Combination Period"), we would
(i) cease all operations except for the purpose of winding up, (ii) as promptly
as reasonably possible but not more than 10 business days thereafter, redeem the
Public Shares, at a per-share price, payable in cash, equal to the aggregate
amount then on deposit in the Trust Account, including interest (less up to
$100,000 of interest to pay dissolution expenses and net of taxes paid or
payable), divided by the number of then outstanding Public Shares, which
redemption will completely extinguish Public Shareholders' rights as
shareholders (including the right to receive further liquidation distributions,
if any) and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining shareholders and our board of
directors, liquidate and dissolve, subject in the case of clauses (ii) and
(iii), to our obligations under Cayman
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Islands law to provide for claims of creditors and in all cases subject to the
other requirements of applicable law. Our amended and restated memorandum and
articles of association provide that, if we wind up for any other reason prior
to the consummation of the initial Business Combination, we will follow the
foregoing procedures with respect to the liquidation of the Trust Account as
promptly as reasonably possible but not more than 10 business days thereafter,
subject to applicable Cayman Islands law.
Consummated Business Combination
On February 4, 2021, the Company domesticated into a Delaware corporation and
consummated the Business Combination. See "Explanatory Note".
Results of Operations
Our entire activity since inception through December 31, 2020 related to our
formation, the preparation for the IPO, and since the closing of the IPO, the
search for a prospective initial Business Combination. We have neither engaged
in any operations nor generated any revenues to date. We will not generate any
operating revenues until after completion of our initial Business Combination.
We will generate nonoperating income in the form of interest income on cash and
cash equivalents. We expect to incur increased expenses as a result of being a
public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses.
For the period from January 14, 2020 (inception) through December 31, 2020, we
had net loss of approximately $71.3 million, which consisted of a $37.9 million
loss from the change in the fair value of the derivative liabilities, a $28.1
million loss from the change in fair value of the Forward Purchase Agreement,
initial offering costs of $1.4 million and $3.9 million in general and
administrative costs, offset by approximately $50,000 in net gain earned on
investments held in the Trust Account.
Liquidity and Capital Resources
As of December 31, 2020, we had approximately $455,000 in our operating bank
account and a working capital deficit of approximately $2.7 million.
Our liquidity needs through December 31, 2020 were satisfied through receipt of
a $25,000 capital contribution from our Sponsor in exchange for the issuance of
the Founder Shares to our Sponsor, loans from our Sponsor of approximately
$125,000 under a promissory note (the "Note") to cover for offering costs in
connection with the Initial Public Offering, and the proceeds from the
consummation of the Private Placement not held in the Trust Account. We repaid
the Note on May 29, 2020. In addition, in order to finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor, or certain of our officers and directors may, but are not obligated to,
provide us Working Capital Loans. As of December 31, 2020, there were no amounts
outstanding under any Working Capital Loan.
Upon the closing of the IPO and the Private Placement, $414.0 million of the net
proceeds of the Initial Public Offering and certain of the proceeds of the
Private Placement were placed in the Trust Account and invested in money market
funds meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act which invest only in direct U.S. government treasury
obligations, as determined by us, until the earlier of: (i) the completion of a
Business Combination and (ii) the distribution of the Trust Account as described
below. The investments in money market funds held in Trust Account are generally
convertible to cash within the Trust Account on a same-day basis.
Management continues to evaluate the impact of the COVID-19 pandemic on the
industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company's financial position and/or its
results of its operations, the specific impact is not readily determinable as of
the date of these financial statements. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
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Related Party Transactions
Founder Shares
On January 16, 2020, we issued 2,875,000 Class B ordinary shares to our Sponsor
(the "Founder Shares") in exchange for a payment of $25,000 for offering costs
made by our Sponsor on behalf of our company. On March 6, 2020, we effected a
share capitalization resulting in our Sponsor holding an aggregate of 13,625,000
founder shares. On March 6, 2020, our Sponsor transferred 50,000 Founder Shares
to each of Keith W. Abell and Eva F. Huston, our independent director nominees.
On April 23, 2020, we effected a share capitalization resulting in an aggregate
of 15,350,000 Founder Shares issued and outstanding. As of December 31, 2020,
our Sponsor owned an aggregate of 15,250,000 Class B ordinary shares and the
independent directors, collectively, owned an aggregate of 100,000 Class B
ordinary shares. All shares and the associated amounts have been retroactively
restated to reflect the aforementioned share capitalization. On April 24, 2020,
the underwriters exercised their 15% over-allotment option in full; thus, the
Founder Shares were no longer subject to forfeiture.
The initial shareholders have agreed not to transfer, assign or sell any of
their Founder Shares until the earlier to occur of: (i) one year after the
completion of the initial Business Combination or (ii) the date on which we
complete a liquidation, merger, share exchange or other similar transaction
after the initial Business Combination that results in all of the shareholders
having the right to exchange their Class A ordinary shares for cash, securities
or other property. Any permitted transferees will be subject to the same
restrictions and other agreements of the initial shareholders with respect to
any Founder Shares. Notwithstanding the foregoing, if the closing price of the
Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for
share splits, share capitalizations, reorganizations, recapitalizations and the
like) for any 20 trading days within any 30-trading day period commencing at
least 150 days after the initial Business Combination, the Founder Shares will
be released from the lock-up.
Related Party Loans
On January 16, 2020, our Sponsor agreed to loan us up to $300,000 to be used for
the payment of costs related to the Initial Public Offering pursuant to the
Note. The Note is non-interest bearing, unsecured and due upon the closing of
the Initial Public Offering. We borrowed approximately $125,000 under the Note.
On May 29, 2020, we repaid the Note to the Sponsor in full.
In addition, in order to finance transaction costs in connection with a Business
Combination, our Sponsor or an affiliate of our Sponsor, or certain of our
officers and directors may, but are not obligated to, loan us funds as may be
required ("Working Capital Loans"). If we complete a Business Combination, we
would repay the Working Capital Loans out of the proceeds of the Trust Account
released to us. Otherwise, the Working Capital Loans would be repaid only out of
funds held outside the Trust Account. In the event that a Business Combination
does not close, we may use a portion of proceeds held outside the Trust Account
to repay the Working Capital Loans but no proceeds held in the Trust Account
would be used to repay the Working Capital Loans. Except for the foregoing, the
terms of such Working Capital Loans, if any, have not been determined and no
written agreements exist with respect to such loans. The Working Capital Loans
would either be repaid upon consummation of a Business Combination, without
interest, or, at the lender's discretion, up to $2.5 million of such Working
Capital Loans may be convertible into warrants of the post Business Combination
entity at a price of $1.00 per warrant. The warrants would be identical to the
Private Placement Warrants. We did not have any borrowings under the Working
Capital Loans as of December 31, 2020.
Forward Purchase Agreement
In connection with the consummation of the Initial Public Offering, we entered
into the Forward Purchase Agreement with Neuberger Berman Opportunistic Capital
Solutions Master Fund LP ("NBOKS"), a member of our Sponsor, which provides for
the purchase of up to $200,000,000 of units, with each unit consisting of one
Class A ordinary share (the "Forward Purchase Shares") and one-fourth of one
warrant to purchase one Class A ordinary share at $11.50 per share (the "Forward
Purchase Warrants"), for a purchase price of $10.00 per unit, in a private
placement to occur concurrently with the closing of the initial Business
Combination. The Forward Purchase Agreement allows NBOKS to be excused from its
purchase obligation in connection with a specific business
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combination if NBOKS does not have sufficient committed capital allocated to the
Forward Purchase Agreement to fulfill its funding obligations under such Forward
Purchase Agreement in respect of such business combination. Prior to an initial
Business Combination, NBOKS intends to raise additional committed capital such
that the condition described in the preceding sentence is met, but there can be
no assurance that additional capital will be available. The obligations under
the Forward Purchase Agreement do not depend on whether any Class A ordinary
shares are redeemed by the public shareholders. The Forward Purchase Shares and
Forward Purchase Warrants will be issued only in connection with the closing of
the initial Business Combination. The proceeds from the sale of Forward Purchase
Shares may be used as part of the consideration to the sellers in the initial
Business Combination, expenses in connection with the initial Business
Combination or for working capital in the post-transaction company.
Contractual Obligations
Registration and Shareholder Rights
The holders of the Founder Shares, Private Placement Warrants and warrants that
may be issued upon conversion of Working Capital Loans (and any Class A ordinary
shares issuable upon the exercise of the Private Placement Warrants and warrants
that may be issued upon conversion of Working Capital Loans) will be entitled to
registration rights pursuant to a registration and shareholder rights agreement.
The holders of these securities are entitled to make up to three demands,
excluding short form demands, that we register such securities. In addition, the
holders have certain "piggy-back" registration rights with respect to
registration statements filed subsequent to the completion of the initial
Business Combination. However, the registration and shareholder rights agreement
provides that we will not permit any registration statement filed under the
Securities Act to become effective until termination of the applicable lock-up
period. We will bear the expenses incurred in connection with the filing of any
such registration statements.
Pursuant to the Forward Purchase Agreement, we have agreed to use our reasonable
best efforts (i) to file within 30 days after the closing of a Business
Combination a registration statement with the SEC for a secondary offering of
the Forward Purchase Shares and the Forward Purchase Warrants (and underlying
Class A ordinary shares), (ii) to cause such registration statement to be
declared effective promptly thereafter but in no event later than sixty (60)
days after the initial filing, (iii) to maintain the effectiveness of such
registration statement until the earliest of (A) the date on which NBOKS or its
assignees cease to hold the securities covered thereby and (B) the date all of
the securities covered thereby can be sold publicly without restriction or
limitation under Rule 144 under the Securities Act and (iv) after such
registration statement is declared effective, cause us to conduct firm
commitment underwritten offerings, subject to certain limitations. In addition,
the Forward Purchase Agreement provides that these holders will have certain
"piggy-back" registration rights to include their securities in other
registration statements filed by the Company.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the final
prospectus to purchase up to 5,400,000 additional Units at the Initial Public
Offering price less the underwriting discounts and commissions. On April 24,
2020, the underwriters fully exercised their over-allotment option.
The underwriters were entitled to an underwriting discount of $0.20 per unit, or
approximately $8.3 million, paid upon the closing of the Initial Public
Offering. In addition, the underwriters will be entitled to a deferred
underwriting commission of $0.35 per unit, or approximately $14.5 million. The
deferred fee will become payable to the underwriters from the amounts held in
the Trust Account solely in the event that we complete a Business Combination,
subject to the terms of the underwriting agreement.
Deferred Legal Fees
We obtained legal advisory services from two legal counsel firms in connection
with the Initial Public Offering and agreed to pay their fees upon the
consummation of the initial Business Combination. As of December 31, 2020, we
recorded approximately $0.9 million in deferred legal fees in connection with
such agreements in the accompanying balance sheet.
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Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our financial statements, which have been prepared in
accordance with U.S. GAAP. The preparation of our financial statements requires
us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and the disclosure of contingent assets and
liabilities in our financial statements. On an ongoing basis, we evaluate our
estimates and judgments, including those related to fair value of financial
instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The company has identified
the following as its critical accounting policies:
Investments Held in Trust Account
The Company's portfolio of investments is comprised solely of U.S. government
securities, within the meaning set forth in Section 2(a)(16) of the Investment
Company Act, with a maturity of 185 days or less, or investments in money market
funds that invest in U.S. government securities, or a combination thereof. The
Company's investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the balance sheet at fair value
at the end of each reporting period. Gains and losses resulting from the change
in fair value of these securities is included in net gain on investments held in
Trust Account in the accompanying statement of operations. The estimated fair
values of investments held in the Trust Account are determined using available
market information, other than for investments in open-ended money market funds
with published daily net asset values ("NAV"), in which case the Company uses
NAV as a practical expedient to fair value. The NAV on these investments is
typically held constant at $1.00 per unit.
Derivative Liabilities
We have public and private placement warrants as well as warrants available
under the Forward Purchase Agreement. We classify as equity any equity-linked
contracts that (i) require physical settlement or net-share settlement or (ii)
give us a choice of net-cash settlement or settlement in our own shares
(physical settlement or net-share settlement). We classify as assets or
liabilities any equity-linked contracts that (i) require net-cash settlement
(including a requirement to net-cash settle the contract if an event occurs and
if that event is outside our control) or (ii) give the counterparty a choice of
net-cash settlement or settlement in shares (physical settlement or net-share
settlement).
For equity-linked contracts that are classified as liabilities, we record the
fair value of the equity-linked contracts at each balance sheet date and record
the change in the statements of operations as a (gain) loss on change in fair
value of derivative liabilities. Our public warrant liability is valued using a
binomial lattice pricing model. Our Private Placement Warrants are valued using
a binomial lattice pricing model when the warrants are subject to the make-whole
table, or otherwise are valued using a Black-Scholes pricing model. Our Forward
Purchase Agreement is valued utilizing observable market prices for public
shares and warrants, relative to the present value of contractual cash proceeds,
each adjusted for the probability of executing a successful business
combination. The assumptions used in preparing these models include estimates
such as volatility, contractual terms, discount rates, dividend rate, expiration
dates and risk-free rates.
The estimates used to calculate the fair value of our derivative liabilities
changes at each balance sheet date based on our stock price and other
assumptions described above. If our assumptions change or we experience
significant volatility in our stock price or interest rates, the fair value
calculated from one balance sheet period to the next could be materially
different.
Class A Ordinary Shares Subject to Possible Redemption
Class A ordinary shares subject to mandatory redemption (if any) are classified
as liability instruments and are measured at fair value. Conditionally
redeemable Class A ordinary shares (including Class A ordinary shares that
feature redemption rights that are either within the control of the holder or
subject to redemption upon the occurrence of uncertain events not solely within
the Company's control) are classified as temporary equity. At all
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other times, Class A ordinary shares are classified as shareholders' deficit.
Our Class A ordinary shares feature certain redemption rights that are
considered to be outside of our control and subject to the occurrence of
uncertain future events. Accordingly, as of December 31, 2020, 41,400,000 Class
A ordinary shares subject to possible redemption are presented as temporary
equity, outside of the shareholders' deficit section of the Company's balance
sheet.
Effective with the closing of the Initial Public Offering, the Company
recognized the accretion from initial book value to redemption amount, which,
resulted in charges against additional paid-in capital (to the extent available)
and accumulated deficit.
Net Income (Loss) Per Ordinary Share
We have two classes of shares: Class A ordinary shares and Class B ordinary
shares. Income and loss are shares pro rata between the two classes of shares.
Net income (loss) per ordinary share is computed by dividing net income (loss)
by the weighted-average number of ordinary shares outstanding during the period.
We have not considered the effect of the warrants sold in the Initial Public
Offering and the Private Placement to purchase an aggregate of 24,080,000 of our
Class A ordinary shares in the calculation of diluted net income (loss) per
share, because their exercise is contingent upon future events and their
inclusion would be antidilutive under the treasury stock method. As a result,
diluted net income (loss) per share is the same as basic net income (loss) per
share from January 14, 2020 (inception) through December 31, 2020. Accretion
associated with Class A ordinary shares subject to redemption is excluded from
earnings per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2020, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" under
the JOBS Act and are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We elected to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, our financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
As an "emerging growth company", we are not required to, among other things, (i)
provide an auditor's attestation report on our system of internal controls over
financial reporting pursuant to Section 404, (ii) provide all of the
compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act,
(iii) comply with any requirement that may be adopted by the PCAOB regarding
mandatory audit firm rotation or a supplement to the auditor's report providing
additional information about the audit and the financial statements (auditor
discussion and analysis), and (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and
performance and comparisons of the CEO's compensation to median employee
compensation. These exemptions will apply for a period of five years following
the completion of our initial public offering or until we are no longer an
"emerging growth company," whichever is earlier.
Financial Statements and Supplementary Data
Reference is made to Pages F-1 through F-32 comprising a portion of this Annual
Report in Form 10-K.
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