-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S+knsk/6oMPfea5nXhbqXtmPWL0iW7yuFovO8iXxKf++wo1G4gch5HcIk/oI7GRs ckSOeDT+qZoLAElmeVCYNQ== 0000912057-97-017496.txt : 19970515 0000912057-97-017496.hdr.sgml : 19970515 ACCESSION NUMBER: 0000912057-97-017496 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALTRIS SOFTWARE INC CENTRAL INDEX KEY: 0000813747 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 953634089 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15935 FILM NUMBER: 97603983 BUSINESS ADDRESS: STREET 1: 9339 CARROLL PARK DR CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6196253000 MAIL ADDRESS: STREET 1: ALPHAREL INC /CA/ STREET 2: 9339 CARROLL PARK DR CITY: SAN DIEGO STATE: CA ZIP: 92121 FORMER COMPANY: FORMER CONFORMED NAME: ALPHAREL INC /CA/ DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1997 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-15935 ALTRIS SOFTWARE, INC. ______________________________________________________ (Exact name of registrant as specified in its charter) CALIFORNIA 95-3634089 _______________________________ ___________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9339 CARROLL PARK DRIVE, SAN DIEGO, CA 92121 _____________________________________________________ (Address of principal executive offices and zip code) (619) 625-3000 ___________________________________________________ (Registrants telephone number, including area code) 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 X NO ----- ----- Number of shares of Common Stock outstanding at April 25, 1997: 9,578,870 Number of Sequentially Numbered Pages: 14 Exhibit Index at Page 13 ALTRIS SOFTWARE, INC. _____________________ INDEX _____ Page Number ----------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheet 3 Consolidated Statement of Operations 4 Consolidated Statement of Cash Flows 5 Notes to the Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION 11 2 ALTRIS SOFTWARE, INC. PART I. FINANCIAL INFORMATION CONSOLIDATED BALANCE SHEET ______________________________ March 31, December 31, 1997 1996 ------------ ------------ (unaudited) ASSETS Current assets: Cash and cash equivalents $ 1,440,000 $ 2,200,000 Short term investments -- 90,000 Receivables, net 10,882,000 9,752,000 Inventory, net 447,000 443,000 Other current assets 878,000 641,000 ------------ ------------ Total current assets 13,647,000 13,126,000 Property and equipment, net 2,075,000 2,156,000 Computer software, net 2,485,000 2,252,000 Goodwill, net 4,759,000 4,972,000 Other assets 455,000 385,000 ------------ ------------ $ 23,421,000 $ 22,891,000 ------------ ------------ ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,723,000 2,614,000 Accrued liabilities 1,802,000 1,643,000 Notes payable 1,019,000 710,000 Deferred revenue 851,000 1,188,000 ------------ ------------ Total current liabilities 6,395,000 6,155,000 Long term notes payable 1,383,000 1,203,000 Other long term liabilities 312,000 763,000 ------------ ------------ Total liabilities 8,090,000 8,121,000 ------------ ------------ Commitments Shareholders' equity: Common stock, no par value, 20,000,000 shares authorized; 9,573,444 and 9,559,944 issued and outstanding, respectively 61,630,000 61,583,000 Foreign currency translation adjustment 92,000 112,000 Accumulated deficit (46,391,000) (46,925,000) ------------ ------------ Total shareholders' equity 15,331,000 14,770,000 ------------ ------------ $ 23,421,000 $ 22,891,000 ------------ ------------ ------------ ------------ See accompanying notes to the consolidated financial statements. 3 ALTRIS SOFTWARE, INC. CONSOLIDATED STATEMENT OF OPERATIONS ____________________________________ (Unaudited) For the three months ended March 31, ------------------------ 1997 1996 ---------- ---------- Revenues $6,615,000 $6,061,000 Cost of revenues 2,871,000 2,513,000 ---------- ---------- Gross profit 3,744,000 3,548,000 ---------- ---------- Operating expenses: Research and development 812,000 907,000 Marketing and sales 1,640,000 1,253,000 General and administrative 729,000 711,000 ---------- ---------- Total operating expenses 3,181,000 2,871,000 ---------- ---------- Income from operations 563,000 677,000 Interest and other income 22,000 26,000 Interest and other expense (51,000) (26,000) ---------- ---------- Income before income taxes 534,000 677,000 Provision for income taxes -- -- ---------- ---------- Net income $ 534,000 $ 677,000 ---------- ---------- ---------- ---------- Net income per share $ .06 $ .07 ---------- ---------- ---------- ---------- Weighted average shares outstanding 9,647,000 9,407,000 See accompanying notes to the consolidated financial statements. 4 ALTRIS SOFTWARE, INC. CONSOLIDATED STATEMENT OF CASH FLOWS ____________________________________ (Unaudited) For the three months ended March 31, -------------------------- 1997 1996 ----------- ----------- Cash flow from operating activities: Net income $ 534,000 $ 677,000 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 599,000 605,000 Loss on sale of short term investment 5,000 -- Changes in assets and liabilities: Receivables, net (1,130,000) (1,390,000) Inventory, net (4,000) 25,000 Other assets (313,000) 76,000 Accounts payable 109,000 125,000 Accrued liabilities 159,000 (1,454,000) Deferred revenue (337,000) (423,000) Other long term liabilities (451,000) (123,000) ----------- ----------- Net cash used in operating activities (829,000) (1,882,000) ----------- ----------- Cash flows from investing activities: Sale of short term investment 85,000 180,000 Purchases of property and equipment (122,000) (192,000) Purchases of software (39,000) (15,000) Computer software capitalized (371,000) (226,000) ----------- ----------- Net cash used in investing activities (447,000) (253,000) ----------- ----------- Cash flows from financing activities: Principal payment under cash advanced by a bank related to former Optigraphics shareholder notes payable -- (1,634,000) Repayments under notes payable (174,000) (40,000) Net borrowings under revolving loan and bank agreements 663,000 -- Proceeds from exercise of stock options 47,000 210,000 ----------- ----------- Net cash provided by (used in) financing activities 536,000 (1,464,000) ----------- ----------- Effect of exchange rate changes on cash (20,000) 17,000 ----------- ----------- Net decrease in cash and cash equivalents (760,000) (3,582,000) Cash and cash equivalents at beginning of period 2,200,000 4,656,000 ----------- ----------- Cash and cash equivalents at end of period $ 1,440,000 $ 1,074,000 ----------- ----------- Supplemental cash flow information: Interest paid $ 44,000 $ 25,000 ----------- ----------- Schedule of non-cash financing activity: Conversion of Series B Preferred Stock to common stock $ -- $ 3,306,000 ----------- ----------- Conversion of note payable to common stock $ -- $ 1,000,000 ----------- ----------- See accompanying notes to the consolidated financial statements. 5 ALTRIS SOFTWARE, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ______________________________________________ (Unaudited) NOTE 1 - BASIS OF PRESENTATION The accompanying consolidated balance sheet of Altris Software, Inc. (the "Company") as of March 31, 1997 and the consolidated statement of operations and of cash flows for the three month periods ended March 31, 1997 and 1996 are unaudited. The consolidated financial statements and related notes have been prepared in accordance with generally accepted accounting principles applicable to interim periods. In the opinion of management, the consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the consolidated financial position, operating results and cash flows for the periods presented. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. NOTE 2 - NET INCOME PER SHARE Net income per share is computed on the basis of weighted average shares and common stock equivalent shares outstanding for each period presented, if dilutive. In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share," which establishes standards for computing and presenting earnings per share ("EPS"). SFAS No. 128 will be adopted by the Company as required for the interim period and fiscal year ending December 31, 1997. Upon adoption of SFAS No. 128, the Company will present basic EPS as well as diluted EPS in the period of adoption and restate all prior-period EPS data presented for comparative purposes. Basic EPS will be computed by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding. Diluted EPS will be computed similar to basic EPS except that the weighted average number of shares of common stock outstanding will be increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. The pro forma EPS calculations based upon SFAS No. 128 are indicated below: For the three months ended March 31, ------------------------ 1997 1996 ---------- ---------- BASIC EARNINGS PER COMMON SHARE Net income per share $ .06 $ .07 ---------- ---------- Weighted average shares 9,565,000 9,027,000 DILUTED EARNINGS PER COMMON SHARE Net income per share $ .06 $ .07 ---------- ---------- Weighted average shares 9,647,000 9,407,000 NOTE 3 - INVENTORY Inventory consists of parts, supplies, and subassemblies and is stated at the lower of cost or market value. Cost is determined using the first-in, first-out (FIFO) method. As of March 31, 1997 and December 31, 1996, the Company's reserve against excess quantities totaled $557,000 and $552,000, respectively. 6 NOTE 4 - NOTES PAYABLE In October 1996 and September 1995, the Company entered into revolving loan and security agreements, each providing for borrowings of up to $1,000,000. The maximum credit available under one facility declines by $200,000 in September of each year beginning in 1996. The loan balance is payable in monthly installments of $16,667. At March 31, 1997, $717,000 was outstanding on this agreement. The loan balance for the other facility is payable in monthly installments. At March 31, 1997, $1,000,000 was outstanding on this agreement. Total borrowings under the revolving loan and security agreements are collateralized by the Company's assets and interest is calculated based on the 30-day Commercial Paper Rate plus 2.95% (8.64% at March 31, 1997). The revolving loan and security agreements contain certain restrictive covenants including maintaining a certain ratio of debt to tangible net worth. In September 1996, the Company's United Kingdom subsidiary renewed an overdraft facility with a bank with interest payable quarterly at 2.5% per annum over the bank's base rate (8.5% at March 31, 1997). The facility expires in August 1997 with any remaining balance due and payable. At March 31, 1997, $386,000 was outstanding and $103,000 was unused on the facility. Repayment of borrowings under the facility are secured by the Company's property and assets, and the Company has executed a guarantee of up to $500,000 in connection with the facility. At December 31, 1995, the Company had an outstanding payable for cash advanced by a bank which acted as paying agent for the notes due to former Optigraphics shareholders having a principal balance of $1,634,000 payable on demand. The notes, which had an original maturity of September 1995 and provided for interest payable quarterly at 6% per annum, were issued as part of the total consideration paid in connection with the acquisition of Optigraphics Corporation. The notes were paid in full in January 1996. At December 31, 1995, the Company had an outstanding convertible note in connection with the acquisition of Trimco having a principal balance of $1,000,000 payable at 7% per annum, due on September 27, 1996. The note was convertible into common stock at a rate of $8.00 per share, or an aggregate of 125,000 shares. The note was secured by a second-priority lien on the Company's assets, subject to the first-priority lien held by the lender in connection with the Company's existing revolving loan agreement. In February 1996, the note was converted into 125,000 shares of the Company's common stock, and no further obligations remain under the note. NOTE 5 - PREFERRED STOCK In April 1996, the Company issued 100,000 shares of its Series C Convertible Preferred Stock (the "Series C Preferred Stock") in an offshore private placement to a purchaser who is not a resident of the United States. In consideration for the issuance and sale of the Series C Preferred Stock, the Company received $2,000,000 in cash proceeds before expenses. In June 1996, 37,500 shares of Series C Preferred Stock were converted into 72,726 shares of common stock. In July 1996, the remaining 62,500 shares of Series C Preferred Stock plus accrued dividends were converted into 163,274 shares of common stock. In December 1995, the Company issued 172,500 shares of its Series B Convertible Preferred Stock (the "Series B Preferred Stock") for total proceeds of $3,450,000 before expenses. In February 1996, the 172,500 shares of Series B Preferred Stock were converted into 406,617 shares of common stock. 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED MARCH 31, 1996. Revenues Revenues for the three months ended March 31, 1997 were $6,615,000 as compared to $6,061,000 for the three months ended March 31, 1996. The 9% increase in revenues is primarily due to revenues generated by new software product and version releases. First quarter 1997 revenues consisted of $3,287,000 (50%) in new system revenues and $3,328,000 (50%) related to system enhancements, expansion and maintenance. This compares to first quarter 1996 revenue of $3,336,000 (55%) in new system revenues and $2,725,000 (45%) related to system enhancements, expansion and maintenance. New systems revenues were comparable to the prior year, while revenues from system enhancements, expansion and maintenance increased $603,000 (22%) due to the increase in sales of new software product and version releases to existing customers. A small number of customers have typically accounted for a large percentage of the Company's annual revenue. In the first quarter of 1997, no customer accounted for more than 10% of total revenue. During the first quarter of 1996, two customers accounted for 14% and 11% of total revenues. One consequence of this dependence has been that revenue can fluctuate significantly on a quarterly basis. The Company's reliance on relatively few customers could have a material adverse effect on the results of its operations on a quarterly basis. Additionally, a significant portion of the Company's revenues has historically been derived from the sale of systems to new customers. Gross Profit Gross profit as a percentage of revenues was 57% for the first quarter 1997 compared to 59% for the same period a year ago. The decrease in gross profit margin was due primarily to increased third party software costs for the first quarter of 1997 compared to the prior year. Software license revenue was $4,020,000 (61%) of total revenues in the first quarter 1997 compared to $3,462,000 (57%) of total revenues in the first quarter of 1996. The higher margin of the software sales was offset partially by lower margin hardware sales which decreased to $568,000 in the first quarter 1997 from $681,000 in the first quarter of 1996. Service revenues, which include maintenance, training and consulting services, increased to $2,027,000 in the first quarter 1997 from $1,918,000 in the first quarter 1996. Software and services are sold at a significantly higher margin than third party products which are resold at a lower gross profit percentage in order for the Company to remain competitive in the marketplace for such third party products. Gross profit percentages can fluctuate quarterly based on the revenue mix of Company software, services and third party software or hardware. Operating Expenses Research and development expense for the three months ended March 31, 1997 was $812,000 versus $907,000 for the same period in the prior year. Research and development expense can vary year to year based on the amount of engineering service contract work required for customers versus purely internal development projects. It may also vary based on internal development projects in which technological feasibility and marketability of a product are established. These costs are capitalized as incurred and then amortized when the product is available for general release to customers. Technical expenses on customer-funded projects are included in cost of revenues, while expenses on internal projects are included in research and development expense. Technical expenses on customer-funded projects for the quarter were $704,000 versus $734,000 in the first quarter of 1996. Marketing and sales expense for the three months ended March 31, 1997 increased to $1,640,000 from $1,253,000 for the three months ended March 31, 1996. The increase is primarily attributable to additional marketing and promotional costs incurred in connection with the initial marketing of the new Altris EB-TM- product suite, the Company's next generation document management software, and efforts to increase name 8 recognition for the new "Altris" name. In addition, the increase is also attributable to additional sales and support personnel hired and costs associated therewith to support the Company's revenue growth. General and administrative expense was $729,000 for the three months ended March 31, 1997 as compared to $711,000 for the three months ended March 31, 1996. The increase in general and administrative expense was due primarily to costs associated with additional personnel being hired. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1997, the Company's cash and cash equivalents totaled $1,440,000 as compared to $2,200,000 at December 31, 1996, and its current ratio was 2.1 to 1. During the first quarter of 1997, cash provided by financing activities totaled $536,000 while cash used in operating and investing activities totaled $829,000 and $447,000, respectively. Cash provided by financing activities was primarily from borrowings under revolving loan and bank agreements totaling $663,000. During the first quarter of 1996, cash used in operating, investing and financing activities totaled $1,882,000, $253,000 and $1,464,000, respectively. On December 27, 1995, the Company acquired Trimco Group plc. The cash portion of the consideration paid to Trimco shareholders totaled $5,550,000. As part of the transaction, the Company also issued a convertible note due in September 1996, having a principal balance of $1,000,000 with interest payable at 7% per annum. In February 1996, the note was converted into 125,000 shares of the Company's common stock. In addition, in connection with the transaction, the Company assumed an accrued liability of $1,051,000 payable to certain Trimco employees, which the Company paid in full in January 1996. The Company believes that current working capital and funds generated from operations will be adequate to meet expected needs for working capital and capital expenditures over at least the next twelve months; however, in order to continue to expand the Company's market penetration with its next-generation product suite and to increase name recognition of the Company's new name, the Company intends to explore additional financing options. Net Operating Loss Tax Carryforwards As of December 31, 1996, the Company had a net operating loss carryforward ("NOL") for federal and state income tax purposes of $31,700,000 and $7,000,000, respectively. In addition, the Company generated but has not used research and investment tax credits for federal income tax purposes of approximately $500,000. Under the Internal Revenue Code of 1986, as amended (the "Code"), the Company generally would be entitled to reduce its future Federal income tax liabilities by carrying unused NOL forward for a period of 15 years to offset future taxable income earned, and by carrying unused tax credits forward for a period of 15 years to offset future income taxes. However, the Company's ability to utilize any NOL and credit carryforwards in future years may be restricted in the event the Company undergoes an "ownership change," generally defined as a more than 50 percentage point change of ownership by one or more statutorily defined "5-percent stockholders" of a corporation, as a result of future issuances or transfers of equity securities of the Company within a three-year testing period. In the event of an ownership change, the amount of NOL attributable to the period prior to the ownership change that may be used to offset taxable income in any year thereafter generally may not exceed the fair market value of the Company immediately before the ownership change (subject to certain adjustments) multiplied by the applicable long-term, tax-exempt rate announced by the Internal Revenue Service in effect for the date of the ownership change. A further limitation would apply to restrict the amount of credit carryforwards that might be used in any year after the ownership change. As a result of these limitations, in the event of an ownership change, the Company's ability to use its NOL and credit carryforwards in future years may be delayed and, to the extent the carryforward amounts cannot be fully utilized under these limitations within the carryforward periods, these carryforwards will be lost. Accordingly, the Company may be required to pay more Federal income taxes or to pay such taxes sooner than if the use of its NOL and credit carryforwards were not restricted. 9 Over the past three years the Company has issued equity securities in connection with the Trimco acquisition in December 1995, the Optigraphics acquisition in September 1993 and through traditional stock option grants to employees. Although there was no "ownership change" in 1996, this activity, combined with the liquidity available to stockholders, increases the potential for an "ownership change" for income tax purposes. In connection with the acquisition of Trimco, the Company acquired deferred tax assets of approximately $926,000. The Company has recorded a $626,000 valuation allowance, offsetting the deferred tax assets. Any future recognition of acquired tax benefits will be used first to reduce any remaining goodwill and other intangible assets related to the acquisition; once those assets are reduced to zero, the benefit will be included as a reduction of the Company's income tax provision. In connection with the acquisition of Optigraphics, the Company acquired Optigraphics' NOL of $9,500,000 for federal income tax purposes. As a result of the change in ownership of Optigraphics, $8,000,000 of the NOL is limited whereby the Company may only utilize approximately $500,000 annually to offset future taxable income of Optigraphics. The remaining portion of Optigraphics' NOL does not have any annual limitation. Inflation The Company believes that inflation has not had a material effect on its operations to date. Although the Company enters into fixed-price contracts, management does not believe that inflation will have a material impact on its operations for the foreseeable future, as the Company takes into account expected inflation in its contract proposals and is generally able to project its costs based on forecasted contract requirements. 10 PART II. OTHER INFORMATION ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K: (a) Exhibits - See Exhibit Index on Page 13. (b) There were no Reports on Form 8-K filed during the three months ended March 31, 1997. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ALTRIS SOFTWARE, INC. By: /s/ John W. Low -------------------------- John W. Low Chief Financial Officer Dated: May 14, 1997 ----------------------- 12 EXHIBIT INDEX Exhibit - ------- 11 Statement Re Computation of Net Income Per Share 13 EX-11 2 EX 11 EXHIBIT 11 ALTRIS SOFTWARE, INC. STATEMENT RE COMPUTATION OF NET INCOME PER SHARE ________________________________________________ (Unaudited) For the three months ended March 31, ------------------------ 1997 1996 ---------- ---------- Net income per consolidated financial statements $ 534,000 $ 677,000 Primary net income per share: Weighted average common shares 9,565,000 9,027,000 Common stock equivalents: Common stock options 82,000 380,000 ---------- ---------- Weighted average shares outstanding 9,647,000 9,407,000 ---------- ---------- Fully diluted net income per share: Weighted average common shares 9,565,000 9,027,000 Common stock equivalents: Common stock options 82,000 380,000 ---------- ---------- Weighted average shares outstanding 9,647,000 9,407,000 ---------- ---------- Net income per share: Primary $ .06 $ .07 ---------- ---------- ---------- ---------- Fully diluted $ .06 $ .07 ---------- ---------- ---------- ---------- 14 EX-27 3 EX 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 MAR-31-1997 1,440 0 10,882 0 447 13,647 7,381 5,306 23,421 6,395 0 0 0 61,630 (46,391) 23,421 6,615 6,615 2,871 2,871 812 0 (51) 534 0 534 0 0 0 534 .06 .06
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