10K PartII Results of Operations.
Without comment.
We had product sales of $16.2 million and gross profit of $5.6 million, representing a gross margin of 34.2% in 2022 compared to product sales of $20.0 million and gross profit of $8.6 million, representing a gross margin of 43.0% in 2021. Our net product sales decreased by $3.8 million or 19% in 2022 when compared to 2021. The decline is primarily due to lower retail sales in our retail channel, mostly resulting from reduced sales to independent natural product retailers and FDM accounts. The total number of units sold during the year ended December 31, 2022 decreased by 22% compared to the year ended December 31, 2021, partially offset by higher sales prices of 3% in the second half of 2022. Our revenue in 2022 was negatively impacted by supply chain challenges with certain contract manufacturers. In addition, 36% of our net revenue for the year ended December 31, 2022 was from new products launched since May 2021.
Cost of goods sold consists primarily of raw materials, packaging, manufacturing overhead (including payroll, employee benefits, stock-based compensation, facilities, depreciation, supplies and quality assurance costs), merchant card fees and shipping. Cost of goods sold in 2022 increased as a percentage of revenue compared to 2021, mostly due to higher product costs, partially offset by warehouse and production cost savings. The gross profit decrease of $3.1 million or 36% to $5.6 million in 2022 was mostly driven by the decline in product sales. Gross margins decreased from 43.0% in 2021 to 34.2% in 2022. The decrease is primarily due to higher overhead cost and associated volume deleverage and increased production cost.
General and administrative ("G&A") expense decreased by $10.0 million compared to 2021, of which $3.8 million was due to lower impairment charges in 2022 compared to 2021. In 2022, we recorded an intangible asset impairment charge of $1.2 million compared to a goodwill and intangible asset impairment charge of $5.0 million in 2021. In addition, G&A expense in 2022 decreased as a result of the recognition of the employee retention credit of $2.5 million, offset by the impact of the lease modification of $0.7 million in 2021. The remaining decrease of $4.4 million is a result of our ongoing efforts to reduce our overall cost structure. We were able to reduce our expenses for rent, legal, professional services, insurance, payroll, depreciation and stock-based compensation.
Adjusted EBITDA is not presented in accordance with, or as an alternative to, GAAP financial measures and may be different from non-GAAP measures used by other companies. We encourage investors to review the GAAP financial measures included in this Annual Report, including our financial statements, to aid in their analysis and understanding of our performance and in making comparisons.
Bearish
AI
