The accompanying condensed consolidated financial statements of LivaNova as of, and for the three months ended March 31, 2022, have been prepared in accordance with U.S. GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The accompanying condensed consolidated balance sheet of LivaNova at December 31, 2021 has been derived from audited financial statements contained in our 2021 Form 10-K, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments considered necessary for a fair statement of the operating results of LivaNova and its subsidiaries, for the three months ended March 31, 2022, and are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The financial information presented herein should be read in conjunction with the audited consolidated financial statements and notes thereto accompanying our 2021 Form 10-K.

The COVID-19 pandemic (“COVID-19”) has caused and may continue to cause unpredictable demand for our products. Throughout the pandemic, healthcare customers have diverted medical resources and priorities towards the treatment of COVID-19, and public health bodies have delayed elective procedures, which has negatively impacted the usage of our products. Further, some people have avoided seeking treatment for non-COVID-19 procedures, and hospitals and clinics have experienced staffing shortages, which has negatively impacted the demand for our products. While the recent recovery of global cardiopulmonary procedures has resulted in stronger demand for our Cardiopulmonary products, our Neuromodulation and Advanced Circulatory Support businesses continue to experience ongoing COVID-19 related headwinds. We are monitoring the potential for various strains of the virus to cause a resumption of high levels of infection and hospitalization that, in turn, may affect the demand for our products.

Certain conditions improved during 2021, but we continue to experience COVID-19 related headwinds. Like many companies, for example, we are experiencing supply chain delays and interruptions, labor shortages, inflationary pressures and logistical issues in the wake of COVID-19. Though, to date, our supply of raw materials and the production and distribution of finished products have not been materially affected, demand and low capacity worldwide have caused longer lead times and put price pressure on key raw materials. Moreover, freight and labor costs at our manufacturing facilities have increased in the wake of inflation globally. The Company continues to respond to such challenges, and while we have business continuity plans in place, the impact of the ongoing challenges we are experiencing, along with their potential escalation, may adversely affect our business and the recoverability of our tangible and intangible assets. The future impact of pandemic-related developments remains uncertain.

In February 2022, Russia launched an invasion in Ukraine which caused us to assess our ability to sell in the market due to international sanctions, to consider the potential impact of raw material sourced from the region, and to determine whether we are able to transact in a compliant fashion. Although the region represented 1% of our total net sales for 2021, the Russian invasion of Ukraine has increased economic uncertainties, and a significant escalation or continuation of the conflict could have a material, global impact on our operating results. In addition, our Russian employees and local subsidiary are subject to evolving laws and regulations imposed by the Russian authorities in response to international sanctions.

During the fourth quarter of 2021, the Company identified and corrected an error related to foreign currency exchange rates utilized to calculate inventory and cost of sales for the years ended December 31, 2017 through 2020 and the nine months ended September 30, 2021. Using the guidance in ASC Topic 250, Accounting Changes and Error Corrections, ASC Topic 250-S99-1, Assessing Materiality, and ASC Topic 250-S99-2, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated whether our previously issued consolidated financial statements were materially misstated due to these errors. Based upon our evaluation of both quantitative and qualitative factors, we believe that the effects of these errors were not material individually or in the aggregate to any previously reported quarterly or annual period. Accordingly, we have revised our previously issued financial statements as shown below (in thousands):


	Three Months Ended March 31, 2021
	As Previously Reported		Adjustments		As Revised
Cost of sales - exclusive of amortization	$	79,216	$	1,275	$	80,491
Operating loss	(4,423)		(1,275)		(5,698)
Loss before tax	(26,802)		(1,275)		(28,077)
Income tax expense	2,856		(212)		2,644
Net loss	(29,698)		(1,063)		(30,761)




Basic and diluted loss per share	$	(0.61)	$	(0.02)	$	(0.63)


	As Previously Reported				Adjustments				As Revised
	Accumulated Deficit		Total Stockholders’ Equity		Accumulated Deficit		Total Stockholders’ Equity		Accumulated Deficit		Total Stockholders’ Equity
March 31, 2021	$	(782,100)	$	1,065,757	$	(10,627)	$	(10,627)	$	(792,727)	$	1,055,130


	Three Months Ended March 31, 2021
	As Previously Reported		Adjustments		As Revised
Net loss	$	(29,698)	$	(1,063)	$	(30,761)
Deferred tax expense (benefit)	37		(212)		(175)
Changes in operating assets and liabilities:
Inventories	(2,900)		1,275		(1,625)
Net cash used in operating activities	19,480		—		19,480

We have reclassified certain prior period amounts on the condensed consolidated statements of income (loss), the condensed consolidated balance sheets and the condensed consolidated statements of cash flows for comparative purposes. These reclassifications did not have a material effect on our financial condition, results of operations or cash flows. The prior period reclassifications on the condensed consolidated statements of income (loss) are summarized and presented below (in thousands):


	Three Months Ended March 31, 2021
	As Revised		Reclassifications		Current Presentation
Net sales	$	247,603	$	—	$	247,603
Cost of sales	80,491		3,704		84,195
Product remediation	68		(68)		—
Gross profit	167,044		(3,636)		163,408
Operating expenses:
Selling, general and administrative	112,618		3,063		115,681
Research and development	44,625		—		44,625
Merger and integration expenses	630		(630)		—
Restructuring expenses	6,092		(6,092)		—
Revaluation of disposal group	(966)		966		—
Amortization of intangibles	6,699		(6,699)		—
Litigation provision, net	3,044		(3,044)		—
Other operating expenses	—		8,800		8,800
Operating loss	(5,698)		—		(5,698)
Interest income	(74)		74		—
Interest expense	(15,936)		—		(15,936)
Foreign exchange and other gains/(losses)	(6,369)		(74)		(6,443)
Loss before tax	$	(28,077)	$	—	$	(28,077)

Our significant accounting policies are detailed below and in “Note 2. Basis of Presentation, Use of Accounting Estimates and Significant Accounting Policies” and “Note 3. Revenue Recognition” of our 2021 Form 10-K.

The Company classifies cash that is not available for use in its operations as restricted cash within current assets on the condensed consolidated balance sheet. As of March 31, 2022, our restricted cash balance totaled $313.6 million and was comprised of cash deposits with Barclays held as collateral for a first demand bank guarantee of €270.0 million (approximately $299.5 million as of March 31, 2022) to obtain the suspension of the Court of Appeal of Milan judgment for the payment of damages in connection with the SNIA litigation until review of such judgment by the Italian Supreme Court (the “SNIA Litigation Guarantee”). As security for the SNIA Litigation Guarantee, LivaNova is required to grant cash collateral to Barclays in US dollars in an amount equal to the USD equivalent of 105% of the amount of the SNIA Litigation Guarantee calibrated on a biweekly basis. For additional information regarding the SNIA litigation, please refer to “Note 7. Commitments and Contingencies.”