For the three months ended March 31, 2023 and 2022, cost of revenues was $1,116,415 and $122,918, respectively, representing an increase of $993,497 or 808%. The increase was primarily due to $908,377 of costs incurred to procure customized finished goods and component materials for a new product line, increased labor costs of $48,309, and an increase of $31,878 in depreciation expense due to revenue generating equipment placed in service during the period. The gross margin percentage was 37% and 39% for the three months ended March 31, 2023 and 2022, respectively.
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, 2023 and 2022, R&D expenses were $1,388,215 and $721,347, respectively, representing an increase of $666,868 or 92%. The increase during 2023 was comprised primarily of $546,845 related to planned increases in headcount in order to build future capacity, and $94,824 related to R&D initiatives designed to build future revenue growth.
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 cash and 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, 2023 and 2022, selling, general and administrative expenses were $5,515,891 and $3,534,923, respectively, representing an increase of $1,980,968, or 56%. The increase is primarily due to an increase in labor costs of $922,642, consulting fees of $371,659, and marketing and advertising expenses of $527,407, partially offset by a decrease of $322,767 in stock-based compensation.
Other Income (Expense)
For the three months ended March 31, 2023 and 2022, other income (expense) was ($342,143) and $42,134, respectively, representing a decrease of $384,277, or 912%. The change is primarily attributable to an additional $246,320 for amortization of debt discount in connection with the Prepaid Advance, an additional $159,931 for interest recorded in connection with Prepaid Advance, partially offset by a $21,068 change in fair value of accrued issuable equity.
Liquidity and Capital Resources
As of March 31, 2023 and December 2022, we had cash balances of $7,186,034 and $10,333,563, respectively, and working capital of $414,334 and $6,055,477, respectively.
For the three months ended March 31, 2023 and 2022, cash used in operating activities was $4,759,039 and $4,574,490, respectively. Our cash used in operations for the three months ended March 31, 2023 was primarily attributable to our net loss of $6,602,861, adjusted for non-cash expenses in the aggregate amount of $1,414,023, as well as $429,799 of net cash generated by changes in the levels of operating assets and liabilities. 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.
For the three months ended March 31, 2023 and 2022, cash used in investing activities was $358,490 and $248,889, respectively. Cash used in investing activities during the three months ended March 31, 2023 included $298,490 related to purchases of property and equipment and $60,000 for the acquisition of intangible assets. 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.
For the three months ended March 31, 2023 and 2022, cash provided by financing activities was $1,970,000 and $92,754, respectively. Cash provided by financing activities during the three months ended March 31, 2023 was due to proceeds from the prepaid advance liability of $2,000,000 less issuance costs on the prepaid advance liability of $30,000. Cash provided by financing activities during the