Elevai Labs Inc

Previous wording

This quarterly report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements.

Current wording

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s registration statement on Form S-1 filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website atwww.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Previous wording

Comparison of the three months ended March 31, 2024.

Current wording

Comparison of the six months ended June 30, 2024.

Previous wording

Professional fees for the three months ended March 31, 2024, was $179,922, compared to $137,797 for the three months ended March 31, 2023, an increase of $42,125. Professional fees comprise of legal, audit and accounting services. The increase during 2024 is primarily due to an increase in audit, legal and accounting services as the company is now listed on the NASDAQ exchange.

Current wording

Professional fees for the six months ended June 30, 2024, was $338,065, compared to $306,730 for the six months ended June 30, 2023, an increase of $31,335. Professional fees comprise of legal, audit and accounting services. The increase during the six months ended June 30, 2024, is primarily due to an increase in audit, legal and accounting services as the company is now listed on the Nasdaq exchange.

Previous wording

Investor relations for the three months ended March 31, 2024, was $98,245, compared to $38,298 for the three months ended March 31, 2024. The increase in investor relations spending is consistent with the Company’s growth strategy, which includes promotion to current and potential investors as the company is listed on the NASDAQ exchange.

Current wording

Investor relations for the six months ended June 30, 2024, was $104,622, compared to $75,720 for the six months ended June 30, 2024. The increase in investor relations spending is consistent with the Company’s growth strategy, which includes promotion to current and potential investors as the company is listed on the Nasdaq exchange.

Previous wording

Revenue for the three months ended March 31, 2024, was $614,563 as compared to $142,820 for the three months March 31, 2023, an increase of $471,743.

Current wording

Revenue for the three months ended June 30, 2024, was $605,529 as compared to $316,530 for the three months June 30, 2023, an increase of $288,999.

Previous wording

During the three months ended March 31, 2024, and 2023, the Company sold 2,954 and 474 bottles of Enfinity, respectively, an increase of 2,480 bottles or 523%. In addition, the Company sold 566 (eight packs) of Empower tubes in 2024, compared to 176 (eight packs) of Empower tubes during 2023, and an increase of 390 (eight packs) or 222%. The increase in sales volumes is primarily due to enhanced market acceptance, continued growth in the number of US accounts, onboarding of international distributors, and repeat business from current customers and distributors.

Current wording

During the three months ended June 30, 2023, and 2022, the Company sold 3,030 and 1,607 bottles of Enfinity, respectively, an increase of 2,556 bottles or 539%. In addition, the Company sold 378 (eight packs) of Empower tubes in 2024, compared to 310 (eight packs) of Empower tubes during 2023, and an increase of 68 (eight packs) or 22%. The increase in sales volumes is primarily due to enhanced market acceptance, continued growth in the number of US accounts, onboarding of international distributors, and repeat business from current customers and distributors.

Previous wording

Gross profit for the three months ended March 31, 2024, was $445,652 as compared to $98,387 for the three months ended March 31, 2023, an increase of $347,265. This represents an overall gross margin percentage of 73% for three months ended March 31, 2024, compared to 69% in 2023. The overall increase in gross margin percentage is primarily due to the Company selling Enfinity at a higher gross margin due to less commissions paid to salespersons compared to overall sales. Additionally, the cost to produce each unit of Enfinity decreased as the company saw gross margin improvements due to operational efficiencies gained and securing better volume pricing with some of its key suppliers.

Current wording

Gross profit for the three months ended June 30, 2024, was $439,254 as compared to $208,350 for the three months ended June 30, 2023, an increase of $230,904. This represents an overall gross margin percentage of 73% for three months ended June 30, 2024, compared to 66% in 2023. The overall increase in gross margin percentage is primarily due to the Company selling Enfinity at a higher gross margin due to less commissions paid to salespersons compared to overall sales. Additionally, the cost to produce each unit of Enfinity decreased as the company saw gross margin improvements due to operational efficiencies gained and securing better volume pricing with some of its key suppliers.

Previous wording

Research and development expenses for the three months ended March 31, 2024, were $103,194 compared to $83,741 for the three months ended March 31, 2023, an increase of $19,453. Research and Development related to the Company’s Enfinity, Empower and development of new products for the Company. The increase in R&D is mainly driven by the company continuously testing new products and looking for ways to improve its formulation efficiency. During both the three months ended March 31, 2024 and 2023, the Company’s lab staff worked on increasing the efficiency and refining the production process.

Current wording

Research and development expenses for the three months ended June 30, 2024, were $52,385 compared to $133,654 for the three months ended June 30, 2023, a decrease of $81,269. Research and Development related to the Company’s Enfinity, Empower and development of new products for the Company. The decrease in R&D is mainly driven by the company performing more tests on new products to improve formulation efficiency in the three months ended June 30, 2023. During both the three months ended June 30, 2024, and 2023, the Company’s lab staff worked on increasing the efficiency and refining the production process.

Previous wording

Marketing and promotion expenses for the three months ended March 31, 2024, were $393,038 compared to $102,676 for the three months ended March 31, 2023, an increase of $290,362. During the three months ended March 31, 2024, the Company increased its marketing and promotion efforts to drive sales and support the Company’s existing customers, which included giving out product samples with a cost of $48,989 (three months ended March 31, 2023 - $21,068), and attending and sponsoring industry conferences.

Current wording

Marketing and promotion expenses for the three months ended June 30, 2024, were $721,489 compared to $114,051 for the three months ended June 30, 2023, an increase of $607,428. During the three months ended June 30, 2024, the Company increased its marketing and promotion efforts to drive sales and support the Company’s existing customers, which included giving out product samples with a cost of $43,918 (three months ended June 30, 2023 - $43,650), and attending and sponsoring industry conferences.

Previous wording

Office and administrative expenses for the three months ended March 31, 2024, were $878,608, compared to $434,059 for the three months ended March 31, 2023, an increase of $444,549. The increase is mainly the result of salaries and wages of $556,772 and office rent of $34,193 incurred during the three months ended March 31, 2024, compared to $284,660 and $25,916 in the three months ended March 31, 2023, a combined increase of $280,389. Additionally, the increase is a result on insurance costs of $117,400 during the three months ended March 31, 2024, compared to $16,189 in the three months ended March 31, 2023. The Company increased its headcount and moved into a larger office location to accommodate the commercialization of its products and growth in operations in July 2023. The company also was required to purchase director and officer insurance in the current period as the Company was now publicly traded. During the three months ended March 31, 2024, office and administrative expenses also include share-based compensation of $53,929, compared to $71,902 in the three ended March 31, 2023, a decrease of $17,973. The decrease is due to a director resigning on February 29, 2024, resulting in the forfeiture of 58,333 options.

Current wording

Office and administrative expenses for the three months ended June 30, 2024, were $663,956, compared to $529,950 for the three months ended June 30, 2023, an increase of $134,006. The increase is mainly the result of salaries and wages of $487,693 and office rent of $35,472 incurred during the three months ended June 30, 2024, compared to $272,620 and $28,862 in the three months ended June 30, 2023, a combined increase of $221,683. Additionally, the increase is a result on insurance costs of $117,401 during the three months ended June 30, 2024, compared to $19,251 in the three months ended June 30, 2023. The Company increased its headcount and moved into a larger office location to accommodate the commercialization of its products and growth in operations in July 2023. The company also was required to purchase director and officer insurance in the current period as the Company was now publicly traded. During the three months ended June 30, 2024, office and administrative expenses also include share-based compensation of $(46,054), compared to $106,834 in the three ended June 30, 2023. The decrease is due to a director resigning on February 29, 2024, the termination of chief marketing officer and chief commercial officer and the termination of three other employees in June 2024. This resulted in the forfeiture of 208,272 options, as well as resulting in the reversal of the share-based compensation.

Previous wording

Consulting fees for the three months ended March 31, 2024, were $396,126, compared to $83,964 for the three months ended March 31, 2023, an increase of $312,162. During the three months ended March 31, 2024, and 2023, the Company incurred consulting fees in relation to recruitment, strategic introductions, business advisory, international relations, and strategy. In addition, the Company received services from a number of parties (including companies controlled by related parties and CFO) in a consulting capacity. The increase in consulting fees is consistent with the increase in operations.

Current wording

Consulting fees for the three months ended June 30, 2024, were $185,443, compared to $149,723 for the three months ended June 30, 2023, an increase of $35,720. During the three months ended June 30, 2024, and 2023, the Company incurred consulting fees in relation to recruitment, strategic introductions, business advisory, international relations, and strategy. In addition, the Company received services from a number of parties (including companies controlled by related parties and Chief Financial Officer) in a consulting capacity. The increase in consulting fees is consistent with the increase in operations.

Previous wording

Travel and entertainment for the three months ended March 31, 2024, was $59,108, compared to $61,515 for the three months ended March 31, 2023, a decrease of $2,407. Travel and entertainment expenses are related primarily to costs incurred during the attendance of industry trade shows and conferences.

Current wording

Travel and entertainment for the three months ended June 30, 2024, was $ 57,121, compared to $122,655 for the three months ended June 30, 2023, a decrease of $65,534. Travel and entertainment expenses are related primarily to costs incurred during the attendance of industry trade shows and conferences. The decrease relates to less conferences and trade shows visited by staff of the Company in the three months ended June 30, 2024.

Previous wording

As of March 31, 2024, and December 31, 2023, the Company had a net working capital of $1,918,631 and $3,622,091, respectively, and has an accumulated deficit of $8,421,140 and $7,023,890, respectively. Furthermore, for the three months ended March 31, 2024, and 2023, the Company incurred a net loss of $1,397,280 and $1,080,696, respectively and used $2,324,068 and $885,506, respectively of cash flows for operating activities. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The accompanying 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.

Current wording

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. The accompanying 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.

Previous wording

Our principal liquidity requirements are for working capital, capital expenditure, research and development and inventory production. We fund our liquidity requirements primarily through cash on hand, cash flows from operations, and the issuance of common and preferred stock. As of March 31, 2024, we had cash of $943,797, with $3,326,851 as of December 31, 2023.

Current wording

Our principal liquidity requirements are for working capital, capital expenditure, research and development and inventory production. We fund our liquidity requirements primarily through cash on hand, cash flows from operations and the issuance of common and preferred stock. As of June 30, 2024, we had cash of $100,034, with $3,326,851 as of December 31, 2023.

Previous wording

For the three months ended March 31, 2024, net cash flows used in operating activities was $2,324,068 compared to $885,506 used during the three months ended March 31, 2023, respectively, primarily due to net loss and timing of settlement of assets and liabilities.

Current wording

For the six months ended June 30, 2024, net cash flows used in operating activities was $3,104,757 compared to $1,654,262 used during the six months ended June 30, 2024, respectively, primarily due to net loss and timing of settlement of assets and liabilities.

Previous wording

During the three months ended March 31, 2024, and 2023, we used $59,190 and $11,191, respectively, in investing activities primarily related to the purchase of equipment for our lab space to be used on the production of inventory and research and development. In the three months ended March 31, 2024, the company paid $50,000 for an intangible asset relating to the purchase of a license to produce stem cells.

Current wording

During the six months ended June 30, 2024, and 2023, we used $121,480 and $11,191, respectively, in investing activities primarily related to the purchase of equipment for our lab space to be used on the production of inventory and research and development. In the six months ended June 30, 2024, the Company paid $112,320 for an intangible asset relating to the purchase of a license to produce stem cells.

Previous wording

During the three months ended March 31, 2024, we had cash flow provided by financing activities of $Nil compared to cash flow provided by financing activities of $787,500 in the three months ended March 31, 2023. During the three months ended March 31, 2023, the Company raised $750,000 through the issuance of common stock and common stock purchase warrants, and another $37,500 upon the exercise of stock options in exchange for common stock.

Current wording

During the six months ended June 30, 2024, we had cash flow provided by financing activities of $nil compared to cash flow provided by financing activities of $1,111,089 in the six months ended June 30, 2023. During the six months ended June 30, 2023, the Company raised $1,073,589 through the issuance of common stock and common stock purchase warrants, and another $37,500 upon the exercise of stock options in exchange for common stock.

Previous wording

The Company is responsible for providing the products to customers. As a result, the Company is considered the Principal when providing products to customers. As the Company collects payment at the time of the customer order, its contracts do not have a significant financing component. Customers are entitled to replacement or full refund of any damaged or defective product, after the return of the damaged or defective product to the Company. There were no significant returns or refunds during the three months ended March 31, 2024, and 2023.

Current wording

The Company is responsible for providing the products to customers. As a result, the Company is considered the Principal when providing products to customers. As the Company collects payment at the time of the customer order, its contracts do not have a significant financing component. Customers are entitled to replacement or full refund of any damaged or defective product, after the return of the damaged or defective product to the Company. There were no significant returns or refunds during the six months ended June 30, 2024, and 2023.

Previous wording

The accounts of Eleva 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).

Current wording

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).

Previous wording

During the three months ended March 31, 2024, and 2023, the Company recorded $55,339 and $75,161, respectively, in share-based compensation expense, of which $53,929 and $1,410, and $71,901 and $3,260, respectively is included in office and administration and research and development, respectively.

Current wording

During the six months ended June 30, 2024, and 2023, the Company recorded $10,484 and $185,068, respectively, in share-based compensation expense, of which $7,875 and $2,609, and $178,735 and $6,333, respectively is included in office and administration and research and development, respectively.

Previous wording

Determining the appropriate fair value model and the related assumptions requires judgment. During the three months ended March 31, 2024, and year ended December 31, 2023, the fair value of each option grant was estimated using a Black-Scholes option-pricing model.

Current wording

Determining the appropriate fair value model and the related assumptions requires judgment. During the six months ended June 30, 2024, and year ended December 31, 2023, the fair value of each option grant was estimated using a Black-Scholes option-pricing model.

Previous wording

For the three months ended March 31, 2024, the Company recorded 11% of its revenue from its largest customer. The Company’s largest customer, representing $67,500 of revenue, relates to sales to a distributor during the period. During the three months ended March 31, 2023, the Company recorded 18% of its revenue from its largest customer. The Company’s largest customer, representing $25,500 of revenue, relates to a distributor agreement.

Current wording

For the six months ended June 30, 2024, the Company recorded 10% of its revenue from its largest customer. The Company’s largest customer, representing $120,000 of revenue, relates to sales to a distributor during the period. During the six months ended June 30, 2023, the Company recorded 16% of its revenue from its largest customer. The Company’s largest customer, representing $73,548 of revenue, relates to a distributor agreement.

Previous wording

During the three months ended March 31 ,2024, and 2023, the Company had 3 key suppliers that represented approximately 66% and 3 key suppliers that represented approximately 70%, respectively of the cost incurred in the purchase and production of inventory. The table below represents a breakdown of each supplier as a percentage of the cost incurred (Suppliers are shown from largest to smallest and does not necessarily represent the same suppliers period over period):

Current wording

During the six months ended June 30, 2024, and 2023, the Company had 3 key suppliers that represented approximately 66% and 3 key suppliers that represented approximately 65%, respectively, of the cost incurred in the purchase and production of inventory. The table below represents a breakdown of each supplier as a percentage of the cost incurred (Suppliers are shown from largest to smallest and does not necessarily represent the same suppliers period over period):