UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-41875

ELEVAI LABS INC.

(Exact name of registrant as specified in its charter)

Delaware		85-1399981
(State of incorporation)		(I.R.S. Employer Identification No.)

Graydon Bensler

120 Newport Center Drive, Suite 250

Newport Beach, CA 92660

(Address of principal executive office) (Zip code)

(866) 794-4940

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		ELAB		The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 14, 2024, there were 20,192,114 shares of our common stock, par value $0.0001 per share, issued and outstanding.

Elevai Labs Inc.Quarterly Report on Form 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosure About Market Risk	34

Item 4.	Controls and Procedures	34

PART II – OTHER INFORMATION		35

Item 1.	Legal Proceedings	35

Item 1A.	Risk Factors	35

Item 2.	Recent Sales of Unregistered Securities; Use of Proceeds and Issuer Purchases of Equity Securities	35

Item 3.	Defaults Upon Senior Securities	35

Item 4.	Mine Safety Disclosures	35

Item 5.	Other Information	35

Item 6.	Exhibits	36

SIGNATURES		37

Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Quarterly Report”) of Elevai Labs Inc. (“we,” “us,” “our,” “Elevai” and the “Company”) contains statements that constitute “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Any statements that are not statements of historical facts may be deemed to be forward-looking statements. These statements appear in several different places in this Quarterly Report and, in some cases, can be identified by words such as “anticipates,” “estimates,” “projects,” “expects,” “contemplates,” “intends,” “believes,” “plans,” “may,” “will” or their negatives or other comparable words, although not all forward-looking statements contain these identifying words. Forward-looking statements in this Quarterly Report may include, but are not limited to, statements and/or information related to: our financial performance and projections; our business prospects and opportunities; our business strategy and future operations; the projection of timing and delivery of products in the future; projected costs; expected production capacity; expectations regarding demand and acceptance of our products; estimated costs of research and development to develop new pipeline products; trends in the market in which we operate; the plans and objectives of management; our liquidity and capital requirements, including cash flows and uses of cash; trends relating to our industry; plans relating to our current products; and plans and intentions to regain compliance with the listing requirements of The Nasdaq Stock Market LLC (“Nasdaq”), including, among other things, through the implementation of a reverse stock split.

We have based these forward-looking statements on our current expectations about future events on information that is available as of the date of this Quarterly Report, and any forward-looking statements made by us speak only as of the date on which they are made. While we believe these expectations are reasonable, such forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control. Our actual future results may differ materially from those discussed or implied in our forward-looking statements for various reasons, including, our ability to change the direction of the Company; our ability to keep pace with new technology and changing market needs; our capital needs, and the competitive environment of our business. Additional Factors that could contribute to such differences include, but are not limited to:

●

general economic and business conditions, including changes in interest rates;

●

prices of other competitive products, costs associated with research and development of our products and other economic conditions;

●

the effect of an outbreak of disease or similar public health threat, such as any future outbreak of COVID-19 on the Company’s business (natural phenomena, including the lingering effects of the COVID-19 pandemic);

●

the impact of political unrest, natural disasters or other crises, terrorist acts, acts of war and/or military operations, and our ability to maintain or broaden our business relationships and develop new relationships with strategic alliances, suppliers, customers, distributors or otherwise;

●

breaches in data security, failure of information security systems, cyber-attacks or other security or privacy-related incidents affecting us or our suppliers;

●

the ability of our information technology systems or information security systems to operate effectively;

●

actions by government authorities, including changes in government regulation;

●

uncertainties associated with legal proceedings;

●

changes in the size of the medical aesthetics, cosmetics and biotechnology market;

●

future decisions by management in response to changing conditions;

●

the Company’s ability to execute prospective business plans;

●

misjudgments in the course of preparing forward-looking statements;

●

the Company’s ability to raise sufficient funds to carry out its proposed business plan;

●

inability to keep up with advances in medical aesthetics and biotechnology;

●

inability to design, develop, market and sell new medical aesthetics and biotech products that address additional market opportunities to generate revenue and positive cash flows;

●

dependency on certain key personnel and any inability to retain and attract qualified personnel;

●

inability to succeed in establishing, maintaining and strengthening the Elevai brand;

●

our expectations regarding our ability to obtain, maintain, protect, defend and enforce our intellectual property rights and operate without infringing, misappropriating, or otherwise violating the intellectual property rights of others;

●

disruption of supply or shortage of raw materials;

●

the unavailability, reduction or elimination of government and economic incentives;

●

failure to manage future growth effectively; and

●

the other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission (“SEC”), including but not limited to those described under “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K as amended for the year ended December 31, 2023, filed with the SEC on March 29, 2024 (the “Form 10-K”).

Although management has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There is no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such forward-looking statements. Accordingly, readers should not place undue reliance on forward-looking statements. These cautionary remarks expressly qualify, in their entirety, all forward-looking statements attributable to our Company or persons acting on our Company’s behalf. We do not undertake to update any forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such statements, except as, and to the extent required by, applicable securities laws.

iii

PART I - FINANCIAL INFORMATION

Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Condensed Consolidated Financial Statements of

For the quarterly periods ended June 30, 2024, and 2023

(Unaudited - Expressed in United States Dollars)

Elevai Labs Inc.

Condensed Consolidated Balance Sheets

(Unaudited - Expressed in United States dollar)

As of:	June 30, 2024			December 31, 2023

ASSETS
Current Assets
Cash	$	100,034		$	3,326,851
Receivables, net		29,070			36,161
Prepaids and deposits		923,444			1,060,765
Inventory, net		978,548			495,667
Total Current Assets		2,031,096			4,919,444

Deposit		10,773			10,773
Property and equipment, net		55,751			53,119
Intangibles, net		2,845,066			-
Operating lease right-of-use asset		137,535			206,582
TOTAL ASSETS	$	5,080,221		$	5,189,918

LIABILITIES
Current Liabilities
Accounts payable and accrued liabilities	$	1,181,441		$	669,375
Customer deposits		24,314			36,693
Due to related parties		173,648			77,127
Current portion of consideration payable		348,403			-
Current portion of lease liability		140,063			145,000
Derivative liabilities		67,355			369,158
Total Current Liabilities		1,935,224			1,297,353

Consideration payable		505,361			-
Operating lease liability		-			65,489
TOTAL LIABILIITES	$	2,440,585		$	1,362,842

Commitments and Contingencies

EQUITY
Common stock, $0.0001 par value, 300,000,000 shares authorized; 18,892,115 and 17,329,615 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively		1,889			1,733
Additional paid-in capital		12,470,136			10,849,031
Accumulated other comprehensive income		1,242			202
Accumulated deficit		(9,833,631	)		(7,023,890	)
TOTAL EQUITY		2,639,636			3,827,076

TOTAL LIABILITIES AND EQUITY	$	5,080,221		$	5,189,918

The accompanying notes are an integral part of these condensed consolidated financial statements.

Elevai Labs Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

For the Three & Six months ended June 30, 2024, and 2023

(Unaudited - Expressed in United States dollar)

	Three months ended June 30, 2024			Three months ended June 30, 2023			Six months ended June 30, 2024			Six months ended June 30, 2023

Revenue	$	605,529			316,530			1,220,092			459,350
Cost of sales		166,275			108,180			335,186			152,613
Gross profit	$	439,254			208,350			884,906			306,737

Expenses
Depreciation and amortization		2,709			2,888			5,093			5,385
Marketing and promotion		721,489			114,051			1,114,527			216,727
Consulting fees		185,443			149,723			581,569			233,687
Office and administrative		663,956			529,950			1,542,564			964,009
Professional fees		158,143			168,933			338,065			306,730
Investor relations		6,377			37,452			104,622			75,720
Research and development		52,385			133,654			173,526			217,395
Foreign exchange (gain) loss		244			2,374			785			2,633
Travel and entertainment		57,121			122,655			116,229			184,170
Total Expenses	$	1,847,867			1,261,680			3,976,980			2,206,456

Net loss before other income (expense)	$	(1,408,613	)		(1,053,330	)		(3,092,074	)		(1,899,719	)

Other income (expense)
Change in fair value of derivative liabilities		26,864			(222,468	)		301,803			(459,246	)
Interest expense		(30,806	)		(4,409	)		(54,343	)		(7,045	)
Interest income		64			349			150			5,456
Other income		-			-			34,723			-
Net loss	$	(1,412,491	)		(1,279,858	)		(2,809,741	)		(2,360,554	)

Other comprehensive income (loss)
Currency translation adjustment		(141	)		262			1,040			375
Total comprehensive loss	$	(1,412,632	)		(1,279,596	)		(2,808,701	)		(2,360,179	)

Basic and diluted loss per share	$	(0.08	)		(0.128	)		(0.158	)		(0.240	)
Weighted average shares outstanding		18,298,572			9,976,725			17,814,093			9,838,599

The accompanying notes are an integral part of these condensed consolidated financial statements.

Elevai Labs Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three & Six months ended June 30, 2024, and 2023

(Unaudited - Expressed in United States dollars)

	Series seed 1 preferred stock				Series seed 2 preferred stock				Series A preferred stock				Common Stock				Additional						Accumulated other
	Number of shares		Amount		Number of shares		Amount		Number of shares		Amount		Number of shares		Amount		paid-in capital			Accumulated deficit			comprehensive income			Total
	#		$		#		$		#		$		#		$		$			$			$			$

Balance, April 1, 2023		213,730		21		3,635,252		364		1,861,799		186		9,880,975		988		4,714,674			(3,803,069	)		224			913,388
Private placement		-		-		-		-		-		-		107,861		11		323,578			-			-			323,589
Share-based compensation		-		-		-		-		-		-		-		-		109,907			-			-			109,907
Net loss for the period		-		-		-		-		-		-		-		-		-			(1,279,858	)		-			(1,279,858	)
Currency translation adjustment		-		-		-		-		-		-		-		-		-			-			262			262
Balance, June 30, 2023		213,730		21		3,635,252		364		1,861,799		186		9,988,836		999		5,148,159			(5,082,927	)		486			67,288

Balance, April 1, 2024		-		-		-		-		-		-		17,329,615		1,733		10,904,370			(8,421,140	)		1,383			2,486,346
Issued for acquisition of intangible assets		-		-		-		-		-		-		1,562,500		156		772,247			-			-			772,403
Obligation to issue stock for acquisition of intangible assets		-		-		-		-		-		-		-		-		838,374			-			-			838,374
Share-based compensation		-		-		-		-		-		-		-		-		(44,855	)		-			-			(44,855	)
Net loss for the period		-		-		-		-		-		-		-		-					(1,412,491	)		-			(1,412,491	)
Currency translation adjustment		-		-		-		-		-		-		-		-		-			-			(141	)		(141	)
Balance, June 30, 2024		-		-		-		-		-		-		18,892,115		1,889		12,470,136			(9,833,631	)		1,242			2,639,636

The accompanying notes are an integral part of these condensed consolidated financial statements.

Elevai Labs Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three & Six months ended June 30, 2024, and 2023

(Unaudited - Expressed in United States dollars)

	Series seed 1 preferred stock				Series seed 2 preferred stock				Series A preferred stock				Common Stock				Additional					Accumulated other
	Number of shares		Amount		Number of shares		Amount		Number of shares		Amount		Number of shares		Amount		paid-in capital		Accumulated deficit			comprehensive income		Total
	#		$		#		$		#		$		#		$		$		$			$		$

Balance, January 1, 2023		213,730		21		3,635,252		364		1,861,799		186		9,568,475		957		3,852,044		(2,722,373	)		111		1,131,310
Private placement		-		-		-		-		-		-		357,861		36		1,073,553		-			-		1,073,589
Exercise of stock options		-		-		-		-		-		-		62,500		6		37,494		-			-		37,500
Share-based compensation		-		-		-		-		-		-		-		-		185,068		-			-		185,068
Net loss for the period		-		-		-		-		-		-		-		-		-		(2,360,554	)		-		(2,360,554	)
Currency translation adjustment		-		-		-		-		-		-		-		-		-		-			375		375
Balance, June 30, 2023		213,730		21		3,635,252		364		1,861,799		186		9,988,836		999		5,148,159		(5,082,927	)		486		67,288

Balance, January 1, 2024		-		-		-		-		-		-		17,329,615		1,733		10,849,031		(7,023,890	)		202		3,827,076
Issued for acquisition of intangible assets														1,562,500		156		772,247		-			-		772,403
Obligation to issue stock for acquisition of intangible assets		-		-		-		-		-		-		-		-		838,374		-			-		838,374
Share-based compensation		-		-		-		-		-		-		-		-		10,484		-			-		10,484
Net loss for the period		-		-		-		-		-		-		-		-		-		(2,809,741	)		-		(2,809,741	)
Currency translation adjustment		-		-		-		-		-		-		-		-		-		-			1,040		1,040
Balance, June 30, 2024		-		-		-		-		-		-		18,892,115		1,889		12,470,136		(9,833,631	)		1,242		2,639,636

The accompanying notes are an integral part of these condensed consolidated financial statements.

Elevai Labs Inc.

Condensed Consolidated Statements of Cash Flows

For the Six months ended June 30, 2024, and 2023

(Unaudited - Expressed in United States dollars)

	June 30, 2024			June 30, 2023
Operating activities
Net loss	$	(2,809,741	)	$	(2,360,554	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		45,960			5,825
Share-based compensation		10,484			185,068
Straight-line rent expense		(1,379	)		(1,378	)
Change in fair value of derivative liabilities		(301,803	)		459,246
Non-cash interest expense		42,312			-
R&D costs for intangible assets		39,483			-

Changes in operating assets and liabilities:
Receivables		6,958			(21,480	)
Prepaid expenses and deposits		137,295			(183,518	)
Inventory		(482,881	)		(247,718	)
Accounts payable and accrued liabilities		210,111			375,053
Customer deposits		(12,379	)		75,194
Due to related parties		50,306			60,000
Cash flows used in operating activities	$	(3,104,757	)	$	(1,654,262	)

Investing activities
Purchase of equipment		(9,160	)		(11,191	)
Purchase of intangible assets		(112,320	)		-
Cash flows used in investing activities	$	(121,480	)	$	(11,191	)

Financing activities
Exercise of stock options		-			37,500
Proceeds from issuance of common stock and warrants		-			1,073,589
Cash flows provided by financing activities	$	-		$	1,111,089

Effect of exchange rate changes on cash		(580	)		728

Decrease in cash		(3,226,817	)		(553,636	)
Cash, beginning of period		3,326,851			1,154,901
Cash, ending of period	$	100,034		$	601,265

Supplemental cash flow information:
Cash paid for interest	$	11,104		$	4,898
Cash paid for taxes		-			-
Non-cash Investing and Financing transactions:
Common stock issued and issuable on acquisition of intangible asset	$	772,247		$	-
Obligation to issue stock for acquisition of intangible assets	$	838,374		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

Elevai Labs Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited - Expressed in United States dollars)

Organization and nature of operations

Elevai Labs Inc. (“Elevai”) was incorporated under the laws of the State of Delaware on June 9, 2020. Elevai and its 100% owned subsidiaries, Elevai Research Inc, Elevai Skincare Inc., and Elevai BioSciences Inc., are collectively referred to in these unaudited condensed consolidated financial statements as “the Company”.

The Company is a skincare development company engaged in the design, manufacture, and marketing of skincare products in the skincare industry. The Company’s principal activities are developing and manufacturing skincare products.

On April 29, 2024, Elevai Skincare Inc. (“Skincare”) and Elevai BioSciences Inc. (“BioSciences”) were incorporated under the laws of the state of Delaware. Elevai is the sole shareholder of Skincare and BioSciences. The purpose of Skincare is to operate the Company’s existing business. While the purpose of BioSciences is to hold and develop the Company’s intellectual property. Effective May 1, 2024, Elevai transferred its operating assets and liabilities relating to its skincare business to Skincare in exchange for common shares of Skincare.

Going Concern

These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders and the ability of the Company to obtain necessary equity financing to continue operations, and ultimately the attainment of profitable operations.

As of June 30, 2024, and December 31, 2023, the Company had a net working capital of $95,872 and $3,622,091, respectively, and has an accumulated deficit of $9,833,631 and $7,023,890, respectively. Furthermore, for the six months ended June 30, 2024, and 2023, the Company incurred a net loss of $2,809,741 and $2,360,554, respectively and used $3,104,757 and $1,654,262, respectively of cash flows for operating activities. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The assessment of whether the going concern assumption is appropriate requires management to take into account all available information about the future, which is at least, but not limited to, 12 months from the date the financial statements are issued. The Company is aware that material uncertainties related to events or conditions may cast substantial doubt upon the Company’s ability to continue as a going concern.

Management’s plans that alleviate substantial doubt about the Company’s ability to continue as a going concern include raising additional debt or equity financing. Although the Company has been successful in raising funds in the past, and expects to do so in the future, there are no guarantees that it will be able to raise funds as anticipated.

Summary of Significant Accounting Policies

Basis of Presentation

These unaudited condensed consolidated financial statements have been prepared in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and are expressed in United States dollars. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, we have included all adjustments considered necessary for a fair presentation and such adjustments are of a normal recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the years ended December 31, 2023, and 2022. The results of operations for the six months ended June 30, 2024, are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2024.

Elevai Labs Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited - Expressed in United States dollars)

Principles of Consolidation

The unaudited condensed consolidated financial statements include the account of Elevai, and its 100% owned subsidiaries, Elevai Research, Skincare, and Bio Sciences. All intercompany accounts, transactions and profits were eliminated in the unaudited condensed consolidated financial statements.

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to revenue recognition, the collectability of receivables, valuation of inventory, fair value of derivative liabilities and stock options, useful lives and recoverability of long-lived assets, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgements about the carrying value of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from those estimates. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the unaudited condensed consolidated financial statements in the period they are determined.

Foreign Currency Translation

The Company’s functional and reporting currency is the U.S. dollar. The functional currency of Elevai Research is the Canadian dollar. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets, liabilities, and items recorded in income arising from transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

The accounts of Elevai Research are translated to U.S. dollars using the current rate method. Accordingly, assets and liabilities are translated into U.S. dollars at the period-end exchange rate while revenues and expenses are translated at the average exchange rates during the period. Related exchange gains and losses are included in a separate component of stockholders’ equity as accumulated other comprehensive income (loss).

Intangible Asset

In accordance with ASC 350 “Intangibles—Goodwill and Other”, intangible assets are recorded at cost less accumulated amortization. They are depreciated using the straight-line method over their estimated useful lives, which reflect the period over which economic benefits are expected to be realized. In accordance with ASC 730 “Research and development costs”, an acquired in-process researched and development (“IPR&D”) intangible asset with an alternative future use is capitalized, in accordance with ASC 350 and amortized over its useful life. Although IPR&D assets are likely to be finite-lived, amortization does not begin until the research and development projects are completed. In accordance with the IPR&D asset purchase agreement, the Company is required to meet development milestones starting with the initiation of a pre-clinical IND-enabling study within 2 years of the acquisition date, and ending with obtaining marketing approval from the FDA within 9 years of the acquisition date. Management assesses impairment indicators at each reporting period end. The estimated useful lives of intangible assets are generally as follows:

License #1	10-year straight-line
License #2	IPR&D project not yet complete

Elevai Labs Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited - Expressed in United States dollars)

New Accounting Standards

Recently Adopted Accounting Standards

In March 2022, the FASB issued ASU 2022-02, ASC Subtopic 326 “Credit Losses”: Troubled Debt Restructurings and Vintage Disclosures. Since the issuance of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Board has provided resources to monitor and assist stakeholders with the implementation of Topic 326. Post-Implementation Review (PIR) activities have included forming a Credit Losses Transition Resource Group, conducting outreach with stakeholders of all types, developing educational materials and staff question-and-answer guidance, conducting educational workshops, and performing an archival review of financial reports. ASU No. 2022-02 is effective for annual and interim periods beginning after December 15, 2022. The adoption of this standard did not have a significant impact on the Company’s unaudited condensed consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, ASC Subtopic 820 “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions”. The FASB is issuing this Update (1) to clarify the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, (2) to amend a related illustrative example, and (3) to introduce new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820.

Stakeholders asserted that the language in the illustrative example resulted in diversity in practice on whether the effects of a contractual restriction that prohibits the sale of an equity security should be considered in measuring that equity security’s fair value. Some stakeholders apply a discount to the price of an equity security subject to a contractual sale restriction, whereas other stakeholders consider the application of a discount to be inappropriate under the principles of Topic 820.

For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. The adoption of this standard did not have a significant impact on the Company’s unaudited condensed consolidated financial statements.

Recently Issued Accounting Standards

The Company assesses the adoption impacts of recently issued, but not yet effective, accounting standards by the Financial Accounting Standards Board on the Company’s unaudited condensed consolidated financial statements.

There are no recently issued accounting standards which may have effect on the Company’s unaudited condensed consolidated financial statements

Elevai Labs Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited - Expressed in United States dollars)

Receivables

As of June 30, 2024, receivables consisted of the following:

	June 30, 2024		December 31, 2023
Trade receivable	$	20,709	$	33,089
Sales taxes receivable		8,361		3,072
	$	29,070	$	36,161

The Company records sales taxes receivable for recoverable sales taxes paid on eligible purchases in its Canadian subsidiary. As at June 30, 2024, and December 31, 2023, the Company recorded a provision for credit losses of $nil and $nil, respectively.

Prepaids and Deposits

As of June 30, 2024, and December 31, 2023, prepaid and deposits consisted of the following:

	June 30, 2024		December 31, 2023
Prepaid expenses	$	888,129	$	957,645
Deposits		46,088		113,893
	$	934,217	$	1,071,538

Prepaids and deposits - current		923,444		1,060,765
Deposits- non-current		10,773		10,773

As of June 30, 2024, and December 31, 2023, the security deposit on the Company’s long-term lease in the amount of $10,773 and $10,773, respectively, is classified as a non-current deposit on the balance sheet.

Inventory

As of June 30, 2024, and December 31, 2023, inventory consisted of the following:

	June 30, 2024		December 31, 2023
Raw materials	$	474,124	$	279,514
Work in progress		290,080		147,906
Finished goods		214,344		68,247
	$	978,548	$	495,667

Cost of inventory recognized as expense in cost of sales for the six months ended June 30, 2024, and 2023, totaled $152,559 and $73,896, respectively. In addition, the cost of inventory relating to samples given out and expensed in marketing and promotion for the six months ended June 30, 2024, and 2023, totaled $92,907 and $64,718, respectively. As of June 30, 2024, and December 31, 2023, the Company recorded an allowance for inventory of $nil and $nil, respectively.

Elevai Labs Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited - Expressed in United States dollars)

Property and Equipment

	Equipment		Furniture and Fixtures		Computers			Total
Cost
Balance, December 31, 2022	$	50,516	$	8,365	$	2,759		$	61,640
Additions		2,658		8,533		-			11,191
Disposal									-
Foreign currency translation						61			61
Balance, December 31, 2023	$	53,174	$	16,898	$	2,820		$	72,892
Additions		9,160		-		-			9,160
Foreign currency translation		-		-		(87	)		(87	)
Balance, June 30, 2024	$	62,334	$	16,898	$	2,733		$	81,965

Accumulated depreciation
Balance, December 31, 2022	$	7,052	$	548	$	505		$	8,105
Depreciation		8,680		2,414		555			11,649
Foreign currency translation						19			19
Balance, December 31, 2023	$	15,732	$	2,962	$	1,079		$	19,773
Depreciation		4,994		1,207		276			6,478
Foreign currency translation		-		-		(36	)		(36	)
Balance, June 30, 2024	$	20,727	$	4,169	$	1,318		$	26,214

Net book value
December 31, 2023	$	37,442	$	13,936	$	1,741		$	53,119
June 30, 2024	$	41,607	$	12,729	$	1,415		$	55,751

During the six months ended June 30, 2024, and 2023, the Company capitalized depreciation of $1,384 and $440, respectively as part of the production of inventory.

Intangible assets

On January 15, 2024, the Company entered into a license agreement with a Biotechnology company to use their proprietary technology and process to assist in formulating stem cells (“License #1”). The term of the license is 10 years and has a purchase price of $1,000,000. The payments structure for License #1 is as follows:

	a)	$50,000 payable upon executing the license (paid)

	b)	$350,000 payable on July 15, 2024 (Note 17)

	c)	$600,000 payable on completion of technology transfer or two years from January 15, 2024, whichever comes first.

The cost of License #1 will be measured at $861,452, which is the fair value of the consideration payable on initial recognition, determined by discounting the future payments using a market interest rate of 11.75%.

On April 30, 2024, the Company entered into an exclusive license agreement with a pharmaceutical company granting the Company rights to develop, manufacture, and commercialize licensed products (“License #2”). The Company has classified License #2 as an IPR&D asset resulting in only the acquisition costs plus any transaction costs to be capitalized upon acquisition. The research and development project associated with License #2 is not yet complete and as a result the Company has not yet determined the useful life of the IPR&D asset.

Elevai Labs Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited - Expressed in United States dollars)

The Company paid consideration of $400,000 and 950,000 common shares with a value of $492,850 to the pharmaceutical company. The shares issued to the pharmaceutical company are unregistered and subject to trading restrictions for six months from the issue date resulting in a fair value discount adjustment of $173,100 on the value of the common shares issued to the pharmaceutical company. The Company incurred transaction costs of $12,320 in legal fees and $1,117,771 in common shares paid to a consultant who assisted in acquiring License #2. The common shares to be issued to the consultant will be unregistered and subject to trading restrictions for a 1-year period from the issue date of the first tranche resulting in a fair value discount adjustment of $599,863 on the value of the common shares issued to the consultant. The fair value adjustments were calculated using the Black-Scholes Option Pricing Model

The Black-Scholes Option Pricing Model requires six basic data

SEC Form 10-Q filed by Elevai Labs Inc.