Administrative expense decreased approximately $2.8 million, or 10.0%, during the year ended December 31, 2022, as compared to the prior year period. Administrative expense decreased during 2022 primarily due to equity compensation expense recognized at the time of our IPO for approximately $12.3 million, versus equity compensation expense of approximately $6.4 million during 2022. Excluding the impact of equity compensation expense, administrative expense increased approximately $3.4 million. This increase was primarily driven by expenses related to being a publicly owned company and other personnel related expenses incurred in support our of growth. Additionally, we incurred significant expenses in bringing our new manufacturing facility in Bolingbrook into full operation. We do not expect these costs to continue through at the same rate during 2023. Loss from Operations As a result of the foregoing, loss from operations decreased $14.7 million, or 27.7%, to $38.4 million for the year ended December 31, 2022, compared to a loss from operations of $53.1 million for the prior year period. Loss from operations as a percentage of sales was (27.1)% for the current period, compared to (63.2)% for the prior year period, primarily due to the decrease in equity compensation expense. Interest Expense Interest expense increased $2.1 million, or 38.3%, to $7.4 million during the year ended December 31, 2022, as compared to $5.4 million for the prior year period. The increase in interest expense during 2022, was primarily due to having more interest bearing debt during the year, as compared to the prior year period, as well as due to an increase in interest rates experienced in the middle of 2022. Other income Other income recognized during 2022 related entirely to certain government payments related to the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was granted to certain companies who did not decrease their workforce during the pandemic. Other income in 2021, related to the forgiveness of the payment protection programs loan as part of the CARES Act. Change in fair value of convertible debt The change in the fair value of our convertible debt of $8.9 million was related to the increase in fair value of our convertible notes issued during May 2021. The increase in fair value of the notes was mainly attributable to the decrease in the time to maturity of the notes, among other unobservable inputs used in the valuation. None of the increase in the value of the notes was attributable to instrument specific or Company credit risk. The notes were converted into Class A and Class B common stock in connection with our IPO, and as a result were no longer subject to fair value adjustments beyond 2021. Net Loss As a result of the foregoing, our net loss decreased $21.4 million, or 31.9%, to $45.7 million during the year ended December 31, 2022, compared to a net loss of $67.1 million for the prior year period. Liquidity and Capital Resources Our primary uses of cash are to fund working capital, operating expenses, promotional activities, debt service and capital expenditures related to our manufacturing facilities. Since our inception, we have dedicated substantially all of our resources to the commercialization of our products, the development of our brand and social media presence, and the growth of our operational infrastructure. Historically, we have financed our operations primarily through issuances of equity and debt securities and borrowings under our credit agreements and, to a lesser extent, through cash flows from our operations. 44
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