Research and Development
Research and development (“R&D”) includes expenses incurred in connection with the R&D of our CFV thermal management solution, high-areal-capacity battery electrodes, 3D engineering for a rechargeable battery and non-cash stock-based compensation expenses. Research and development expenses are charged to operations as incurred.
For the three months ended March 31, 2022 and 2021, R&D expenses were $721,347 and $122,983, respectively, representing an increase of $598,364 or 487%. The increase during 2022 was comprised primarily of $273,051 related to an increase in employee headcount spent on R&D and three new projects for automation, battery and drone design initiated in 2021, $168,443 related to software engineering services, $147,995 related to product development for high-areal capacity battery electrodes and 3D-engineering for solid state rechargeable batteries, $30,000 related to cell check design services, and $23,151 related to drone engineering services.
We expect that our R&D expenses will increase as we expand our future operations.
Selling, General and Administrative
Selling, general and administrative expenses consisted primarily of stock-based compensation, payroll taxes and other benefits, consulting fees, registration fees, office expenses, rent expense, directors and officers insurance, travel and entertainment, marketing and advertising, and filing fees.
For the three months ended March 31, 2022 and 2021, selling, general and administrative expenses were $3,534,923 and $1,492,811, respectively, an increase of $2,042,112, or 137%. The increase is primarily due to increases of approximately $854,243 for stock-based compensation issued to employees and consultants, $530,314 in labor costs as a result of 25 new hires during the last twelve months, $185,557 for consulting contractor services, $114,603 for NYSE registration fees, $110,888 for office expenses and supplies, $58,483 for rent expense due to the execution of a new operating lease agreement during the period, $28,654 for directors and officers insurance, $24,262 for travel and entertainment due to the lifting of COVID-19 dining and travel restrictions, $20,399 for expanded marketing and advertising expenses, and $14,049 for filing fees.
Other Income (Expense)
For the three months ended March 31, 2022 and 2021, other income (expense) was $42,134 and ($241,566), respectively, representing a change of $283,700 or 117%. The change is primarily attributable to the change in fair value of accrued issuable equity of $175,617 and the decrease in the amortization of debt discount recorded in connection with notes payable issued in 2020 of $108,124.
Liquidity and Capital Resources
As of March 31, 2022 and December 2021, we had cash balances of $10,132,676 and $14,863,301, respectively, and working capital of $9,975,086 and $13,302,935, respectively.
On May 13, 2022, the Company issued a $5,000,000 Promissory Note to an investor for gross proceeds of $4,750,000. On the same date, the Company entered into the SEPA which gives the Company the right, but not the obligation, to sell up to $50,000,000 of its shares of common stock to the same investor during the commitment period. See Financing Activities under Recent Developments above for additional details.
For the three months ended March 31, 2022 and 2021, cash used in operating activities was $4,574,490 and $1,663,385, respectively. Our cash used in operations for the three months ended March 31, 2022 was primarily attributable to our net loss of $4,136,555, adjusted for non-cash expenses in the aggregate amount of $1,436,127, as well as $1,874,062 of net cash used to fund changes in the levels of operating assets and liabilities. Our cash used in operations for the three months ended March 31, 2021 was primarily attributable to our net loss of $1,714,723, adjusted for non-cash expenses in the aggregate amount of $633,444, as well as $582,106 of net cash used to fund changes in the levels of operating assets and liabilities.
For the three months ended March 31, 2022 and 2021, cash used in investing activities was $248,889 and $0, respectively. Cash used in investing activities during the three months ended March 31, 2022 was related to deposits paid for equipment of $227,538 and purchases of property and equipment of $21,351.