CROSS COUNTRY HEALTHCARE INC MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

The purpose of the following Management's Discussion and Analysis (MD&A) is to
help facilitate the understanding of significant factors influencing the
quarterly operating results, financial condition, and cash flows of the Company.
Additionally, MD&A also conveys our current expectations of the potential impact
of known trends, events, or uncertainties that may impact future results. MD&A
is provided as a supplement to, and should be read in conjunction with, our 2021
Form 10-K (including Part I, Item 1A, "Risk Factors"), our financial statements
and the accompanying notes to our financial statements, as well as the Risk
Factors contained herein.

Business Overview


We provide total talent management services, including strategic workforce
solutions, contingent staffing, permanent placement, and consultative services
for healthcare customers across the continuum of care, by recruiting and placing
highly qualified healthcare professionals in virtually every specialty and area
of expertise. In addition to clinical roles such as school nurses, speech
language, and behavioral therapists, we place non-clinical professionals such as
teachers, substitute teachers, and other education specialties at educational
facilities across the nation. Our diverse customer base includes both public and
private acute care and non-acute care hospitals, outpatient clinics, ambulatory
care facilities, single- and multi-specialty physician practices, rehabilitation
facilities, Program of All-Inclusive Care for the Elderly (PACE) programs,
urgent care centers, local

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and national healthcare systems, managed care providers, public and charter
schools, correctional facilities, government facilities, pharmacies, and many
other healthcare providers. Through our national staffing teams, we offer our
workforce solutions and place clinicians on travel and per diem assignments,
local short-term contracts, and permanent positions.

Our workforce solutions include managed service programs (MSPs), recruitment
process outsourcing (RPO), project management, and other outsourcing and
consultative services as described in Item 1. "Business" in our 2021 Form 10-K.
By utilizing the solutions we offer, customers are able to better plan their
personnel needs, optimize their talent acquisition and management processes,
strategically flex and balance their workforce, have access to quality
healthcare personnel, and provide continuity of care for improved patient
outcomes. We have a history of investing in diversity, equality, and inclusion
as a key component of the organization's overall corporate social responsibility
program, closely aligned with our core values to create a better future for our
people, communities, and our stockholders.

The operating results of our business segments are regularly reviewed by the chief operating decision maker.


?  Nurse and Allied Staffing - Nurse and Allied Staffing represented
approximately 97% of our total revenue in the first quarter of 2022. The Nurse
and Allied Staffing segment provides workforce solutions and traditional
staffing, including temporary and permanent placement of travel nurses and
allied professionals, as well as per diem and contract nurses and allied
personnel. We also provide clinical and non-clinical professionals on short-term
and long-term assignments to clients such as local and national healthcare
plans, managed care providers, public and charter schools, correctional
facilities, skilled nursing facilities, and other non-acute settings. In
addition, Nurse and Allied Staffing provides retained search services for
healthcare professionals, as well as contingent search and recruitment process
outsourcing services. We provide flexible workforce solutions to our healthcare
customers through diversified offerings designed to meet their unique needs,
including: MSP, RPO, and consulting services.

? Physician StaffingPhysician Staffing represents approximately 3% of our total revenue in the first quarter of 2022. Physician Staffing provides physicians in many registered physicians, as well as well as certified physicians, nurse practitioners, and assistants as independent contractors on temporary assignments throughout the United States.

Summary of Operations


For the quarter ended March 31, 2022, revenue from services increased 140%
year-over-year to $788.7 million, due to continued growth in both our Nurse and
Allied Staffing and our Physician Staffing segments. The majority of this growth
was driven by an increasing number of professionals on assignment. Revenue
increased 23% sequentially, with a relatively small impact coming from bill
rates. As a result of our investment in people and technology, we expanded the
number of professionals on assignment, with a majority due solely to organic
growth, thereby significantly improving our operating leverage. Throughout the
pandemic, we worked collaboratively with clients on adjusting bill rates in
order to adapt to the rapidly changing market conditions. Net income
attributable to common stockholders in the first quarter of 2022 was $62.0
million, as compared to $19.4 million in the prior year.

For the second quarter of 2022, average travel bill rates are anticipated to
experience a low double-digit decline sequentially. While demand has retreated
from the peak of the first quarter, the growing supply and demand imbalance is
still supporting higher rates. We expect continued sequential growth in
headcount and professionals on assignment across all lines of business. Looking
beyond the second quarter, we anticipate further market share gains despite
potential headwinds from changing bill rates or demand from certain specialties.
We remain committed to investing in our people and our tech enabled digital
platform by doubling our IT project budget for 2022, versus 2021.

On March 21, 2022, we amended the ABL Credit Agreement (Loan Agreement) (Fifth
Amendment), which increased the current aggregate committed size of the ABL from
$150.0 million to $300.0 million and extended the credit facility for an
additional five years.

For the three months ended March 31, 2022, cash flow used in operating
activities was $29.0 million, with net borrowings of $42.3 million on our
senior-secured asset-based credit facility (ABL), and an increase in working
capital stemming from the strong sequential growth in our business. As of March
31, 2022, we had $1.2 million of cash and cash equivalents, with a principal
balance of $173.9 million outstanding on our term loan. Borrowing base
availability under the ABL was $300.0 million, with $51.5 million of borrowings
drawn under our ABL, and $17.5 million of undrawn letters of credit outstanding,
leaving $231.0 million of excess availability.

See Results of Operations, Segment Results, and Liquidity and Capital Resources sections that follow for further information.

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Operating Metrics


We evaluate our financial condition by tracking operating metrics and financial
results specific to each of our segments. Key operating metrics include hours
worked, days filled, number of contract personnel on a full-time equivalent
(FTE) basis, revenue per FTE, and revenue per day filled. Other operating
metrics include number of open orders, candidate applications, contract
bookings, length of assignment, bill and pay rates, and renewal and fill rates,
number of active searches, and number of placements. These operating metrics are
representative of trends that assist management in evaluating business
performance. Due to the timing of our business process and other factors,
certain of these operating metrics may not necessarily correlate to the reported
U.S. GAAP results for the periods presented. Some of the segment financial
results analyzed include revenue, operating expenses, and contribution income.
In addition, we monitor cash flow, as well as operating and leverage ratios, to
help us assess our liquidity needs.
Business Segment                           Business Measurement
Nurse and Allied Staffing                  FTEs represent the average number of Nurse and
                                           Allied Staffing contract personnel on a full-time
                                           equivalent basis.
                                           Average revenue per FTE per day is calculated by
                                           dividing the Nurse and Allied Staffing revenue,
                                           excluding permanent placement, per FTE by the number
                                           of days worked in the respective periods.
Physician Staffing                         Days filled is calculated by dividing the total
                                           hours invoiced during the period, including an
                                           estimate for the impact of accrued revenue, by eight
                                           hours.
                                           Revenue per day filled is calculated by dividing
                                           revenue as reported by days filled for the period
                                           presented.



Results of Operations

The following table summarizes, for the periods indicated, selected condensed
consolidated statements of operations data expressed as a percentage of revenue.
Our historical results of operations are not necessarily indicative of future
operating results.
                                                        Three Months Ended
                                                            March 31,
                                                        2022              2021
Revenue from services                                       100.0  %     100.0  %
Direct operating expenses                                    77.8         78.3
Selling, general and administrative expenses                  9.7         14.1
Bad debt expense                                              0.3          0.1
Depreciation and amortization                                 0.4          0.7

Restructuring costs                                           0.1          0.4

Impairment charges                                            0.2            -
Income from operations                                       11.5          6.4
Interest expense                                              0.4          0.2

Income before income taxes                                   11.1          6.2
Income tax expense                                            3.2          0.3

Net income attributable to common stockholders                7.9  %       5.9  %




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Comparison of Results for the Three Months Ended March 31, 2022 compared to the Three Months Ended March 31, 2021

                                                                             Three Months Ended March 31,
                                                                                              Increase               Increase
                                                                                             (Decrease)             (Decrease)
                                                         2022               2021                 $                      %
                                                                                (Amounts in thousands)
Revenue from services                                $ 788,732          $ 329,241          $   459,491                    139.6  %
Direct operating expenses                              613,938            257,776              356,162                    138.2  %
Selling, general and administrative expenses            76,813             46,327               30,486                     65.8  %
Bad debt expense                                         2,369                504                1,865                    370.0  %
Depreciation and amortization                            2,719              2,253                  466                     20.7  %

Acquisition and integration-related costs                   40                  -                   40                    100.0  %
Restructuring costs                                        480              1,238                 (758)                   (61.2) %

Impairment charges                                       1,741                149                1,592                          NM
Income from operations                                  90,632             20,994               69,638                    331.7  %
Interest expense                                         3,521                671                2,850                    424.7  %

Other income, net                                           (8)               (37)                  29                     78.4  %
Income before income taxes                              87,119             20,360               66,759                    327.9  %
Income tax expense                                      25,136                912               24,224                          NM

Net income attributable to common stockholders $61,983 $19,448 $42,535

                    218.7  %


NM - Not meaningful

Revenue from services

Revenue from services increased 139.6% to $788.7 million for the three months
ended March 31, 2022, as compared to $329.2 million for the three months ended
March 31, 2021, due to strong performance in both our Nurse and Allied and
Physician Staffing segments, both resulting from an increase in volume, and
higher bill rates in Nurse and Allied. The increase in bill rates is a result of
the continued high level of demand for our services due to the overall tight
supply for clinicians and professionals. See further discussion in Segment
Results.

Direct operating expenses


Direct operating expenses are comprised primarily of field employee compensation
and independent contractor expenses, housing expenses, travel expenses, and
related insurance expenses. Direct operating expenses increased $356.2 million,
or 138.2%, to $613.9 million for the three months ended March 31, 2022, as
compared to $257.8 million for the three months ended March 31, 2021, as a
result of revenue increases. As a percentage of total revenue, direct operating
expenses decreased to 77.8% compared to 78.3% in the prior year period.

Selling, general and administrative expenses


Selling, general and administrative expenses increased 65.8% to $76.8 million
for the three months ended March 31, 2022, as compared to $46.3 million for the
three months ended March 31, 2021, primarily due to increases in compensation
and benefit expense, as well as marketing and consulting expense and computer
subscription fees, partially offset by decreases in legal expenses. As
a percentage of total revenue, selling, general and administrative expenses
decreased to 9.7% for the three months ended March 31, 2022, as compared to
14.1% for the three months ended March 31, 2021.

Depreciation and amortization expense


Depreciation and amortization expense for the three months ended March 31, 2022
was $2.7 million, as compared to $2.3 million for the three months ended
March 31, 2021. The increase is primarily due to the additional amortization of
other intangible assets from the Workforce Solutions Group (WSG) acquisition.
See Note 7 - Goodwill, Trade Names, and Other Intangible Assets to our condensed
consolidated financial statements. As a percentage of revenue, depreciation and
amortization expense was 0.4% for the three months ended March 31, 2022 and 0.7%
for the three months ended March 31, 2021.

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Restructuring costs


Restructuring costs for the three months ended March 31, 2022 were primarily
comprised of ongoing lease costs related to the Company's strategic reduction of
its real estate footprint and totaled $0.5 million. Restructuring costs for the
three months ended March 31, 2021 were primarily comprised of employee
termination costs and ongoing lease costs related to office closures.

Impairment charges


Non-cash impairment charges totaled $1.7 million for the three months ended
March 31, 2022 and related to real estate restructuring activities. For the
three months ended March 31, 2021, non-cash impairment charges related to the
write-off of a discontinued software development project. See Note 7 - Goodwill,
Trade Names, and Other Intangible Assets and Note 9 - Leases to our condensed
consolidated financial statements.

Interest expense


Interest expense was $3.5 million for the three months ended March 31, 2022, as
compared to $0.7 million for the three months ended March 31, 2021, due to
higher average borrowings and a higher effective interest rate. The effective
interest rate on our borrowings was 6.4% and 2.9% for the three months ended
March 31, 2022 and 2021, respectively.

Income tax expense


Income tax expense totaled $25.1 million for the three months ended March 31,
2022, compared to $0.9 million for the three months ended March 31, 2021. The
effective tax rate for the first quarter of 2022 was primarily impacted by
federal and state taxes. Income tax expense for the three months ended March 31,
2021 was primarily impacted by international and state taxes as a result of the
valuation allowance on substantially all of our domestic deferred tax assets.
See Note 14 - Income Taxes to our condensed consolidated financial statements.





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Segment Results

Information on operating segments and a reconciliation to income from operations for the periods indicated are as follows:

                                                   Three Months Ended
                                                        March 31,
                                                   2022              2021
                                                 (amounts in thousands)
Revenue from services:
Nurse and Allied Staffing                   $    765,580          $ 313,008
Physician Staffing                                23,152             16,233
                                            $    788,732          $ 329,241

Contribution income:
Nurse and Allied Staffing                   $    110,101          $  37,417
Physician Staffing                                 1,765              1,428
                                                 111,866             38,845

Corporate overhead                                16,254             14,211
Depreciation and amortization                      2,719              2,253

Acquisition and integration-related costs             40                  -
Restructuring costs                                  480              1,238

Impairment charges                                 1,741                149
Income from operations                      $     90,632          $  20,994


See Note 12 – Segment Data to our condensed financial statements.


Certain statistical data for our business segments for the periods indicated are
as follows:
                                                    Three Months Ended
                                              March 31,             March 31,                                  Percent
                                                 2022                 2021                Change                Change

Nurse and Allied Staffing statistical
data:
FTEs                                           13,454                  6,614               6,840                   103.4  %

Average Nurse and Allied Staffing revenue
per FTE per day                            $      628             $      522                 106                    20.3  %

Physician Staffing statistical data:
Days filled                                    13,068                  9,469               3,599                    38.0  %
Revenue per day filled                     $    1,772             $    1,714                  58                     3.4  %


See definition of Business Measurements under the Operating Metrics section of our MD&A.

Segment Comparison – Three Months Ended March 31, 2022 compared to the Three Months Ended March 31, 2021


Nurse and Allied Staffing

Revenue increased $452.6 million, or 144.6%, to $765.6 million for the three
months ended March 31, 2022, compared to $313.0 million for the three months
ended March 31, 2021, through strong performance driven by volume increases and
higher bill rates.

Contribution income increased $72.7 million, or 194.3%, to $110.1 million for
the three months ended March 31, 2022, compared to $37.4 million for the three
months ended March 31, 2021, driven by increased revenue. As a percentage of
segment revenue, contribution income margin was 14.4% for the three months ended
March 31, 2022, compared to 12.0% for the three months ended March 31, 2021.

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The average number of FTEs on contract during the three months ended March 31,
2022 increased 103.4% from the three months ended March 31, 2021, primarily due
to headcount growth in travel nurse and allied, as well as additional headcount
resulting from the WSG acquisition. The average revenue per FTE per day
increased 20.3%, due to the increase in the average bill rates.

Physician Staffing

Revenue increased $7.0 millionor 42.6%, to $23.2 million for the three months ended March 31, 2022compared to $16.2 million for the three months ended
March 31, 2021preeminent due to an increase in volume in both primary care physicians and certified registered nurse anesthetists.

Contribution income was $1.8 million for the three months ended March 31, 2022compared to $1.4 million for the three months ended March 31, 2021. As a percentage of segment revenue, contribution income was 7.6% for the three months ended March 31, 2022compared to 8.8% for the three months ended
March 31, 2021driven by higher revenue, partially offset by higher direct costs.

Total days filled for the three months ended March 31, 2022 were 13.068, as compared with 9,469 in the prior year. Revenue per day filled was $1,772 as compared with $1,714 in the prior year due to a shift in the mix of business.

Corporate Overhead


Corporate overhead includes unallocated executive leadership and other
centralized corporate functional support costs such as finance, IT, legal, human
resources, and marketing, as well as public company expenses and corporate-wide
projects. Corporate overhead increased to $16.3 million for the three months
ended March 31, 2022, from $14.2 million for the three months ended March 31,
2021, primarily due to increases in compensation and benefit expense, as well as
equity compensation expense, and IT and consulting expense, partially offset by
decreases in legal and accounting expense. As a percentage of consolidated
revenue, corporate overhead was 2.1% for the three months ended March 31, 2022
and 4.3% for the three months ended March 31, 2021.

Transactions with Related Parties

See Note 15 – Related Party Transactions to our condensed financial statements.

Liquidity and Capital Resources


At March 31, 2022, we reported $1.2 million in cash and cash equivalents, $173.9
million of term loan outstanding, at par, and $51.5 million of borrowings drawn
under our ABL. Working capital increased by $100.6 million to $409.1 million as
of March 31, 2022, compared to $308.5 million as of December 31, 2021, primarily
due to strong sequential growth, partially offset by the timing of
disbursements. As of March 31, 2022, our days' sales outstanding, net of amounts
owed to subcontractors, was 62 days, up 6 days year-over-year and 4 days since
the beginning of the current year, primarily due to the timing of revenue
recognized throughout the quarter given the monthly sequential growth through
the first quarter. As of March 31, 2022, we do not have any off-balance sheet
arrangements.

Our operating cash flow constitutes our primary source of liquidity and,
historically, has been sufficient to fund our working capital, capital
expenditures, internal business expansion, and debt service. This includes our
commitments, both short-term and long-term, of interest expense on our debt and
operating lease commitments, as well as any settlements on uncertain tax
positions, and future principal payments on our term loan and our ABL credit
facility. We expect to meet our future needs from a combination of cash on hand,
operating cash flows, and funds available through the ABL. See debt discussion
which follows.

We have an effective "shelf" registration statement on Form S-3 on file with the
SEC that enables us, in one or more offerings, to sell up to an aggregate of
5,000,000 shares of common stock. Although we do not have any current plans to
use the shelf registration statement, the proceeds from any offering could be
used for working capital and other general corporate purposes, or to fund
acquisitions of businesses, products, and technologies.

Net cash used in operating activities was $29.0 million in the three months ended March 31, 2022compared to $24.9 million in the three months ended
March 31, 2021preeminent due to the investment in net working capital associated with the continued revenue growth in our business, which resulted in a $186.7 million increase in receivables since the start of the year.

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Net cash used in investing activities was $2.1 million in the three months ended
March 31, 2022, compared to $1.2 million in the three months ended March 31,
2021. Net cash used in both periods was for capital expenditures, primarily
related to multiple IT projects. Expenditures in the three months ended March
31, 2022 also included computer replacements, and in the three months ended
March 31, 2021 also included the build-out of our corporate office.
Net cash provided by financing activities during the three months ended
March 31, 2022 was $31.3 million, compared to $38.0 million during the three
months ended March 31, 2021. During the three months ended March 31, 2022, we
reported net borrowings of $41.9 million on our debt, and used cash to pay $2.4
million on our note payable, $5.0 million for income taxes on share-based
compensation, $3.1 million in debt issuance costs, and an immaterial amount for
other financing activities. During the three months ended March 31, 2021, we
reported net borrowings of $42.6 million on our ABL, and used cash to pay $2.4
million on our note payable, $2.0 million for income taxes on share-based
compensation, and an immaterial amount for other financing activities.

Debt

2021 Term Loan Credit Agreement



As more fully described in Note 8 - Debt to our condensed consolidated financial
statements, on June 8, 2021, we entered into a Term Loan Credit Agreement (Term
Loan Agreement), which provides for a six-year second lien subordinated term
loan in the amount of $100.0 million (term loan). The term loan has an interest
rate of one-month LIBOR plus 5.75% per annum, subject to a 0.75% LIBOR floor.
The term loan was used to pay the cash consideration, as well as any costs,
fees, and expenses in connection with the WSG acquisition (see Note 4 -
Acquisitions to our condensed consolidated financial statements), with the
remainder used to pay down a portion of the asset-based credit facility.

The borrowings under the Term Loan Agreement generally bear interest at a
variable rate based on either LIBOR or Base Rate (as defined in the Term Loan
Agreement) and are subject to mandatory prepayments of principal payable in
quarterly installments, commencing on September 30, 2021, with each installment
being in the aggregate principal amount of $0.3 million (subject to adjustment
as a result of prepayments) provided that, to the extent not previously paid,
the aggregate unpaid principal balance would be due and payable on the maturity
date. The Term Loan Agreement contains various restrictions and covenants
applicable to the Company and its subsidiaries, including a covenant to maintain
a minimum net leverage ratio. The Company was in compliance with this covenant
as of March 31, 2022. Obligations under the Term Loan Agreement are secured by
substantially all the assets of the borrowers and guarantors under the Term Loan
Agreement, subject to customary exceptions.

On November 18, 2021, we amended the Term Loan Agreement (Term Loan First
Amendment), which provided the Company an incremental term loan in an aggregate
amount equal to $75.0 million. Additionally, the Term Loan First Amendment
increased the aggregate amount of all increases (as defined in the Term Loan
Agreement) to be no greater than $115.0 million. The borrowings will be used
primarily to fund organic growth. Commencing on December 31, 2021, installments
of the mandatory prepayments will be in the aggregate principal amount of $0.4
million. All other terms, conditions, covenants, and pricing of the Term Loan
Agreement remain the same.

2019 Loan Agreement

Effective October 25, 2019, our prior senior credit facility entered into in
August 2017 was replaced by a $120.0 million Loan Agreement, which provides for
a five-year senior secured revolving credit facility. On June 30, 2020, we
amended the Loan Agreement (First Amendment), which increased the current
aggregate committed size of the ABL from $120.0 million to $130.0 million. All
other terms, conditions, covenants, and pricing of the Loan Agreement remained
the same. On March 8, 2021, we amended the Loan Agreement (Second Amendment),
which increased the current aggregate committed size of the ABL from
$130.0 million to $150.0 million, increased certain borrowing base sub-limits,
and decreased both the cash dominion event and financial reporting triggers. On
June 8, 2021, we amended the Loan Agreement (Third Amendment), which permits the
incurrence of indebtedness and grant of security as set forth in the Loan
Agreement and in accordance with the Intercreditor Agreement, and provides
mechanics relating to a transition away from LIBOR as a benchmark interest rate
to a replacement alternative benchmark rate or mechanism for loans made in U.S.
dollars. On November 18, 2021, we amended the Loan Agreement (Fourth Amendment),
whereby the permitted indebtedness (as defined in the Loan Agreement) was
increased to $175.0 million. On March 21, 2022, we amended the Loan Agreement
(Fifth Amendment), which increased the current aggregate committed size of the
ABL from $150.0 million to $300.0 million, extended the credit facility for an
additional five years, increased certain borrowing base sub-limits, and provided
the option for all or a portion of the borrowings to bear interest at a rate
based on the Secured Overnight Financing Rate (SOFR) or Base Rate, at the
election of the borrowers, plus an


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applicable margin.


As of March 31, 2022, the interest rate spreads and fees under the Loan
Agreement were based on SOFR plus 1.85% for the revolving portion of the
borrowing base. The Base Rate (as defined by the Loan Agreement) margin would
have been 0.75% for the revolving portion. The SOFR and Base Rate margins are
subject to monthly pricing adjustments, pursuant to a pricing matrix based on
the Company's excess availability under the revolving credit facility. In
addition, the facility is subject to an unused line fee, letter of credit fees,
and an administrative fee. The Loan Agreement contains various restrictions and
covenants, including a covenant to maintain a minimum fixed charge coverage
ratio. We were in compliance with the fixed charge coverage ratio covenant as of
March 31, 2022. Borrowing base availability under the ABL was was $300.0 million
at March 31, 2022, with $51.5 million of borrowings drawn as well as
$17.5 million of letters of credit outstanding, leaving $231.0 million of excess
availability.

Note Payable

The third and final installment of the subordinated promissory note payable,
made in connection with the Mediscan acquisition, was paid in the amount of
$2.6 million, including interest, in the first quarter of 2022. See Note 4 -
Acquisitions to our condensed consolidated financial statements.

See Note 8 – Debt to our condensed financial statements.

Stockholders’ Equity

See Note 11 – Stockholders’ Equity to our condensed financial statements.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates remain consistent with those reported in our 2021 Form 10-K.

Recent Accounting Pronouncements

See Note 16 – Recent Accounting Pronouncements to our condensed financial statements.



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