PMGC Holdings Inc. 10-Q

Item 1. Financial Statements Elevai Labs Inc. Condensed Consolidated Balance Sheets As of September 30, 2023, and December 31, 2022 (Unaudited - Expressed in United States dollar) As of: September 30, 2023 December 31, 2022 ASSETS Current Assets Cash $ 476,855 $ 1,154,901 Receivables, net 8,382 12,854 Prepaids and deposits 292,058 153,422 Inventory, net 499,309 230,145 Total Current Assets 1,276,604 1,551,322 Deposits 10,773 10,773 Property and equipment, net 55,989 53,535 Operating lease right-of-use asset 239,623 276,553 TOTAL ASSETS $ 1,582,989 $ 1,892,183 LIABILITIES Current Liabilities Accounts payable and accrued liabilities $ 705,628 $ 256,325 Customer deposits 54,853 10,172 Due to related parties 222,675 142,704 Derivative liabilities 519,509 68,455 Current portion of operating lease liability 140,910 110,616 Total Current Liabilities 1,643,575 588,272 Operating lease liability 103,309 172,601 TOTAL LIABILIITES $ 1,746,884 $ 760,873 EQUITY (DEFICIT) Series seed 1 preferred stock, $ 0.0001 par value, 213,730 shares authorized; 213,730 shares issued and outstanding as of September 30, 2023 and December 31, 2022 21 21 Series seed 2 preferred stock, $ 0.0001 par value, 3,635,252 shares authorized; 3,635,252 shares issued and outstanding as of September 30, 2023 and December 31, 2022 364 364 Series A preferred stock, $ 0.0001 par value, 2,982,003 shares authorized; 1,861,799 shares issued and outstanding as of September 30, 2023 and December 31, 2022 186 186 Common stock, $ 0.0001 par value, 300,000,000 shares authorized; 10,118,834 and 9,568,475 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively 1,012 957 Additional paid-in capital 5,699,623 3,852,044 Accumulated other comprehensive income 873 111 Accumulated deficit ( 5,865,974 ) ( 2,722,373 ) TOTAL EQUITY(DEFICIT) ( 163,895 ) 1,131,310 TOTAL LIABILITIES AND EQUITY $ 1,582,989 $ 1,892,183 1 Elevai Labs Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss For the three and nine months ended September 30, 2023 and 2022 (Unaudited – Expressed in United States dollar) Three months ended September 30, 2023 Three months ended September 30, 2022 Nine months ended September 30, 2023 Nine months ended September 30, 2022 Revenue $ 554,654 432,122 1,014,004 627,379 Cost of sales 188,509 194,428 341,122 273,480 Gross profit $ 366,145 237,694 672,882 353,899 Expenses Depreciation 2,439 1,630 7,824 3,325 Marketing and promotion 99,709 73,273 316,436 134,762 Consulting fees 82,781 109,443 316,468 248,163 Office and administrative 664,922 312,297 1,628,931 639,714 Professional fees 143,654 49,706 450,384 94,865 Investor relations 9,100 18,430 84,820 32,216 Research and development 86,374 89,325 303,769 167,888 Foreign exchange loss (gain) ( 3,113 ) ( 465 ) ( 480 ) 1,392 Travel and entertainment 65,830 55,892 250,000 148,495 Total Expenses $ 1,151,696 709,531 3,358,152 1,470,820 Net loss before other income (expense) $ ( 785,551 ) ( 471,837 ) ( 2,685,270 ) ( 1,116,921 ) Other income (expense) Loss on sale of equipment - - - ( 1,546 ) Interest income 25 3,159 5,481 3,245 Interest expense ( 5,713 ) ( 646 ) ( 12,758 ) ( 2,628 ) Change in fair value of derivative liabilities 8,192 ( 29,761 ) ( 451,054 ) ( 29,761 ) Net loss $ ( 783,047 ) ( 499,085 ) ( 3,143,601 ) ( 1,147,611 ) Other comprehensive income (loss) Currency translation adjustment 387 ( 226 ) 762 16 Net loss and comprehensive loss $ ( 782,660 ) ( 499,311 ) ( 3,142,839 ) ( 1,147,595 ) Basic and diluted loss per share $ ( 0.078 ) $ ( 0.052 ) $ ( 0.318 ) $ ( 0.120 ) Weighted average shares outstanding 10,023,002 9,526,808 9,900,744 9,526,808 2 Elevai Labs Inc. Condensed Consolidated Statements of Changes in Equity For the nine months ended September 30, 2023 and 2022 (Unaudited – Expressed in thousands of United States Dollars, except for share amount) 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, 2022 213,730 21 3,635,252 364 - - 9,526,808 952 1,371,194 ( 922,105 ) 202 450,628 Conversion of promissory notes - - - - 231,828 23 - - 130,860 - - 130,883 Private placement - - - - 1,551,703 155 - - 2,056,036 - - 2,056,191 Obligation to issue Series A shares - - - - - - - - 35,000 - - 35,000 Share-based compensation - - - - - - - - 94,099 - - 94,099 Net loss for the period - - - - - - - - - ( 1,147,611 ) - ( 1,147,611 ) Currency translation adjustment - - - - - - - - - - 16 16 Balance, September 30, 2022 213,730 21 3,635,252 364 1,783,531 178 9,526,808 952 3,687,189 ( 2,069,716 ) 218 1,619,206 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 - - - - - - 487,859 49 1,463,537 - - 1,463,586 Exercise of stock options - - - - - - 62,500 6 37,494 - - 37,500 Share-based compensation - - - - - - - - 346,548 - - 346,548 Net loss for the period - - - - - - - - - ( 3,143,601 ) - ( 3,143,601 ) Currency translation adjustment - - - - - - - - - - 762 762 Balance, September 30, 2023 213,730 21 3,635,252 364 1,861,799 186 10,118,834 1,012 5,699,623 ( 5,865,974 ) 873 ( 163,895 ) 3 Elevai Labs Inc. Condensed Consolidated Statements of Changes in Equity For the three months ended September 30, 2023 and 2022 (Unaudited – Expressed in thousands of United States Dollars, except for share amount) 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, June 30, 2022 213,730 21 3,635,252 364 - - 9,526,808 952 1,714,664 ( 1,570,631 ) 444 145,814 Conversion on promissory notes 231,828 23 130,860 - - 130,883 Private placement - - - - 1,551,703 155 - - 1,796,318 - - 1,796,473 Share issuance cost - - - - - - - - ( 25,242 ) - - ( 25,242 ) Series A preferred shares subscription - - - - - - - - 35,000 - - 35,000 Share-based compensation - - - - - - - - 35,589 - - 35,589 Net loss for the period - - - - - - - - - ( 499,085 ) - ( 499,085 ) Currency translation adjustment - - - - - - - - - - ( 226 ) ( 226 ) Balance, September 30, 2022 213,730 21 3,635,252 364 1,783,531 178 9,526,808 952 3,687,189 ( 2,069,716 ) 218 1,619,206 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 Conversion of promissory note - - - - - - - - - - - - Private placement - - - - - - 129,998 13 389,984 - - 389,997 Share-based compensation - - - - - - - - 161,480 - - 161,480 Net loss for the period - - - - - - - - - ( 783,047 ) - ( 783,047 ) Currency translation adjustment - - - - - - - - - - 387 387 Balance, September 30, 2023 213,730 21 3,635,252 364 1,861,799 186 10,118,834 1,012 5,699,623 ( 5,865,974 ) 873 ( 163,895 ) The accompanying notes are an integral part of these condensed consolidated financial statements 4 Elevai Labs Inc. Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2023 and 2022 (Unaudited – Expressed in thousands of United States Dollars, except for share amount) September 30, 2023 September 30, 2022 Operating activities Net loss $ ( 3,143,601 ) $ ( 1,147,611 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 8,737 3,898 Accrued Interest - 2,614 Share-based compensation 346,548 94,099 Straight-line rent expense ( 2,068 ) 7,354 Change in fair value of derivative liabilities 451,054 29,761 Loss on sale of equipment - 1,546 Changes in non-cash working capital: Receivables 4,507 ( 13,811 ) Prepaid expenses and deposits ( 138,636 ) ( 127,612 ) Inventory ( 269,164 ) ( 19,870 ) Accounts payable and accrued liabilities 449,281 ( 5,832 ) Customer deposits 44,681 5,992 Due to related parties 80,000 90,000 Cash flows used in operating activities ( 2,168,661 ) $ ( 1,079,472 ) Investing activities Purchase of equipment ( 11,191 ) ( 36,927 ) Proceeds from sale of equipment 3,500 Cash flows used in investing activities $ ( 11,191 ) $ ( 33,427 ) Financing activities Proceeds from issuance of common stock and warrants 1,463,585 2,056,191 Exercise of stock options 37,500 - Obligation to issue shares - 35,000 Proceeds from convertible debenture - 183,970 Cash flows provided by financing activities 1,501,085 $ 2,275,161 Effect of exchange rate changes on cash 721 ( 1,104 ) Change in cash ( 678,046 ) 1,161,158 Cash, beginning of period 1,154,901 411,858 Cash, ending of period 476,855 $ 1,573,016 Supplemental cash flow information: Cash paid for interest $ 4,898 $ - Cash paid for taxes - - Non-cash Investing and Financing transactions: $ - $ - 5 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) 1. 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 subsidiary, Elevai Research Inc. (“Elevai Research”), 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 November 20, 2023 Elevai Labs Inc. announced the pricing of its initial public offering. The initial public offering consisted of 1,500,000 shares of common stock at a public offering price of $ 4.00 per share, for total gross proceeds of $ 6,000,000 before deducting underwriting discounts and offering expenses. The shares of common stock were approved for listing on the Nasdaq Capital Market and commenced trading on November 21, 2023, under the ticker symbol "ELAB". The initial public offering closed on November 24, 2023. 2. 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 September 30, 2023 and December 31, 2022, the Company had a net working capital deficit of $ 366,971 , and a positive working capital $ 963,050 , respectively, and has an accumulated deficit of $ 5,865,974 and $ 2,722,373 , respectively. In addition, as of September 30, 2023, the Company has a total equity deficit of $ 163,895 . Furthermore, for the nine months ended September 30, 2023 and 2022, the Company incurred a net loss of $ 3,143,601 and $ 1,147,611 respectively and used $ 2,168,661 and $ 1,079,472 , 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. In addition, in February 2023, the Company filed its preliminary initial registration (S-1 Form) with the SEC pursuant to its goal of completing an initial public offering (“IPO”). The Company plans to use funds raised in a successful IPO to accelerate new product development, inventory production, increasing its sales force and expanding into new markets. The outbreak of the coronavirus, also known as “COVID-19”, has spread across the globe and is impacting worldwide economic activity. Conditions surrounding the coronavirus continue to rapidly evolve and government authorities have implemented emergency measures to mitigate the spread of the virus. The outbreak and the related mitigation measures may have an adverse impact on global economic conditions as well as on the Company’s business activities. The extent to which the coronavirus may impact the Company’s business activities will depend on future developments, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions taken in the USA and Canada and other countries to contain and treat the disease. These events are highly uncertain and as such, the Company cannot determine their financial impact at this time. While certain restrictions are presently in the process of being relaxed, it is unclear when the world will return to the previous normal, if ever. This may adversely impact the expected implementation of the Company’s plans moving forward. 6 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) 3. 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, 2022 and 2021. The results of operations for the nine months ended September 30, 2023, are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2023. Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of Elevai, and its 100 % owned subsidiary, Elevai Research. 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 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). 7 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) New Accounting Standards Recently Adopted Accounting Standards In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including 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. 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. 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. 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. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued or made available for issuance. The Company does not expect the standard to have a significant impact on its consolidated financial statements. 8 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) 4. Receivables As of September 30, 2023 and December 31 2022, receivables consisted of the following: September 30, 2023 December 31, 2022 Trade receivable $ 5,692 $ 4,180 Sales taxes receivable 2,690 8,674 $ 8,382 $ 12,854 The Company records sales taxes receivable for recoverable sales taxes paid on eligible purchases in its Canadian subsidiary. As at September 30, 2023, and December 31, 2022, the Company recorded a provision for doubtful accounts of $ nil and $ nil , respectively. 5. Prepaids and Deposits As of September 30, 2023 and December 31, 2022, prepaid and deposits consisted of the following: September 30, 2023 December 31, 2022 Prepaid expenses $ 44,278 $ 89,819 Deposits 21,613 24,376 Deferred share issuance and listing expense 236,940 50,000 $ 302,831 $ 164,195 Prepaids and deposits - current 292,058 153,422 Deposits- non-current 10,773 10,773 As of September 30, 2023 and December 31, 2022, the security deposit on the Company’s long-term lease in the amount of $ 10,773 is classified as a non-current deposit on the balance sheet. 6. Inventory As of September 30, 2023 and December 31 2022, inventory consisted of the following: September 30, 2023 December 31, 2022 Raw materials $ 257,243 $ 81,133 Work in progress 143,166 116,984 Finished goods 98,900 32,028 $ 499,309 $ 230,145 Cost of inventory recognized as expense in cost of sales for the nine months ended September 30, 2023 and 2022, totaled $ 193,805 and $ 233,728 , respectively. In addition, the cost of inventory relating to samples given out and expensed in marketing and promotion for the nine months ended September 30, 2023 and 2022 totaled $ 96,184 and $ 29,437 , respectively. As at September 30, 2023, and December 31, 2022, the Company recorded an allowance for inventory of $ nil and $ nil , respectively. 9 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) 7. Property and equipment Equipment Furniture and Fixtures Computers Total Cost Balance, December 31, 2021 $ 32,482 $ - $ - $ 32,482 Additions 24,222 8,365 2,940 35,527 Disposal ( 6,188 ) - - ( 6,188 ) Foreign currency translation - - ( 181 ) ( 181 ) Balance, December 31, 2022 $ 50,516 $ 8,365 $ 2,759 $ 61,640 Additions 2,658 8,533 - 11,191 Foreign currency translation - - ( 7 ) ( 7 ) Balance, September 30, 2023 $ 53,174 $ 16,898 $ 2,752 $ 72,895 Accumulated depreciation Balance, December 31, 2021 $ 2,757 $ - $ - $ 2,757 Depreciation 5,437 548 527 6,512 Disposal ( 1,142 ) - - ( 1,142 ) Foreign currency translation - - ( 22 ) ( 22 ) Balance, December 31, 2022 $ 7,052 $ 548 $ 505 $ 8,105 Depreciation 6,510 1,811 416 8,737 Foreign currency translation - - ( 6 ) ( 6 ) Balance, September 30, 2023 $ 13,562 $ 2,359 $ 914 $ 16,836 Net book value December 31, 2022 $ 43,464 $ 7,817 $ 2,254 $ 53,535 September 30, 2023 $ 39,612 $ 14,540 $ 1,838 $ 55,989 During the nine months ended September 30, 2023 and 2022, the Company capitalized depreciation of $ 914 and $ 880 , respectively as part of the production of inventory. 8. Operating lease On June 1, 2022, the Company entered into a noncancelable operating lease that includes two property location, one which is being used as the Company’s office and the other as its lab for research and development and the production of inventory. The lease had a commencement date of June 1, 2022 and expires on May 31, 2025, after which the term will continue on a month-to-month basis. On July 3 rd , 2023, the Company amended the terms of the previously entered lease agreement to lease additional office space from the lessor. Rent increased from $ 10,773 to $ 13,477 per month commencing July 1, 2023, through May 31, 2025. The lease amendment required a remeasurement of the lease liability which resulted in an increase of $ 47,986 to the lease liability and an equal increase in the right of use asset as of July 1, 2023. The Company recognized a total lease cost related to its noncancelable operating lease of $ 103,000 and $ 42,173 , for the nine months ended September 30, 2023 and June 30, 2022, respectively. The lease cost has been allocated as follows based on the square footage of each property location. September 30, 2023 September 30, 2022 Office space, recorded in office and administration $ 74,641 $ 29,569 Lab space, recorded in research and development 23,705 10,473 Lab space, capitalized to production of inventory 4,655 2,131 $ 103,000 $ 42,173 10 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) As of September 30, 2023 and December 31, 2022, the Company recorded a security deposit of $ 10,773 . (Note 5) Future minimum lease payments under the Company’s operating lease that has an initial noncancelable lease term in excess of one year at September 30, 2023 are as follows: As of September 30, 2023 Total 2023 $ 40,430 2024 161,721 2025 67,374 Thereafter - 269,535 Less: Imputed interest ( 25,316 ) Operating lease liability 244,219 Operating lease lability – current 140,910 Operating lease lability – non-current $ 103,309 The Company used a discount rate of 11.50 % upon the remeasurement of the lease liability on July 1, 2023, compared to an original discount rate of 8 % on lease commencement, as its incremental cost of borrowing and the remaining lease term as of September 30, 2023, is 1.67 years (December 31, 2022 – 2.42 years). 9. Accounts payable and accrued liabilities As of September 30, 2023 and December 31, 2022, accounts payable and accrued liabilities consisted of the following: September 30, 2023 December 31, 2022 Accounts payable $ 573,054 $ 222,461 Accrued liabilities 132,574 33,864 $ 705,628 $ 256,325 As of September 30, 2023 and December 31, 2022, accounts payable and accrued liabilities include $ 22,212 and $ 11,621 , respectively that is due to related parties in the ordinary course of business. 10. Notes payable In April and May 2022, the Company issued promissory notes to five investors (including two related parties of the Company) for a total amount of $ 183,970 . The promissory notes carried simple interest at a rate of 8 % per annum. On July 15 2022, the promissory notes and accrued interest of $ 2,614 , converted into the Series A financing round in accordance with the original terms of the agreements. The conversion price was set at $ 0.80 ( 60 % of the Series A preferred shares financing round price) and as a result the noteholders received 231,828 Series A preferred shares. In addition, the conversion terms contained a 100 % warrant coverage ratio resulting in the note holders receiving 231,828 common stock purchase warrants with an exercise price of $ 2.01 ( 150 % of the Series A financing round price). 11. Derivative liabilities We analyzed the common stock purchase warrants issued as partial settlement of the promissory notes payable on July 15, 2022 (Note 10), against the requirements of ASC 480, Distinguishing Liabilities from Equity, and determined that the warrants should be classified as financial liabilities since the terms allows for a cashless net share settlement at the option of the holder. ASC 815, Derivatives and Hedging, requires that the warrants be accounted for as derivative liabilities with initial and subsequent measurement at fair value with changes in fair value recorded as other income (expense). 11 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) A continuity of the Company’s common stock purchase derivative liability warrants is as follows: Derivative liabilities December 31, 2021 $ - Addition of new derivatives recognized as partial settlement of promissory notes 55,701 Change in fair value of derivative liabilities 12,754 Outstanding, December 31, 2022 $ 68,455 Change in fair value of derivative liabilities 451,054 Outstanding, September 30, 2023 $ 519,509 We determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes Option Pricing Model to calculate the fair value as of initial recognition and subsequent reporting period. The Black-Scholes Option Pricing Model requires six basic data inputs: the exercise or strike price, expected time to expiration or exercise, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The following assumptions were used in the Black-Scholes option pricing model: September 30, 2023 December 31, 2022 July 15, 2022 Risk-free interest rate 4.80 % 4.73 % 3.12 % Expected life 1 3.58 years 0.75 years 0.6 years Expected dividend rate 0.00 % 0.00 % 0.00 % Expected volatility 100 % 100 % 100.00 % As of September 30, 2023, the following derivative liability warrants were outstanding: Outstanding Expiry date 1 Weighted average exercise price ($) 75,840 April 27, 2027 2.01 63,037 April 27, 2027 2.01 80,388 April 27, 2027 2.01 12,563 April 27, 2027 2.01 231,828 2.01 As of December 31, 2022, the following derivative liability warrants were outstanding: Outstanding Expiry date 1 Weighted average exercise price ($) 75,840 April 27, 2027 2.01 63,037 May 9, 2027 2.01 80,388 May 24, 2027 2.01 12,563 May 25, 2027 2.01 231,828 2.01 As of September 30, 2023 and December 31, 2022, the weighted average life of derivative liability warrants outstanding was 3.58 and 4.36 years, respectively. 1 On April 28, 2023, the Company amended the warrant agreements for the 231,828 derivative liability warrants outstanding. The amendment removed the clause to automatically convert warrants to shares on IPO date and all warrants were given an expiry date of April 27, 2027 . This led to an increase in the expected life input in the Black-Scholes model as of September 30, 2023 compared to the December 31, 2022, when the Company used the expected IPO date to calculate the expected life of the warrants. 12 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) 12. Equity Common Stock Authorized As of September 30, 2023 and December 31, 2022, the Company had 300,000,000 and 19,000,000 common stock authorized, respectively, each having a par value of $ 0.0001 . Issued and outstanding As of September 30, 2023, and December 31, 2022, the Company had 10,118,834 and 9,568,475 shares issued and outstanding, respectively. Transactions during the nine months ended September 30, 2023 On January 6, 2023, the Company issued 62,500 common stock upon the exercise of 62,500 stock options with an exercise price of $ 0.60 per common stock for $ 37,500 , of which $ 6 was recognized in common stock and the remaining $ 37,494 in additional paid-in capital. On March 2, 2023, the Company issued 250,000 common stock and 250,000 common stock purchase warrants for $ 750,000 , of which $ 25 was recognized in common stock and the remaining $ 749,975 in additional paid-in capital. These warrants are accounted for as equity warrants. On April 14, 2023, the Company issued 97,681 common stock, of which $ 10 was recognized in common stock and the remaining $ 293,579 in additional paid-in capital. On May 15, 2023, the Company issued 10,000 common stock, of which $ 1 was recognized in common stock and the remaining $ 29,999 was recognized in additional paid-in capital. On August 25, 2023, the Company issued 46,666 common stock, of which $ 5 was recognized in common stock and the remaining $ 139,995 was recognized in additional paid-in capital. On September 13, 2023, the Company issued 83,882 common stock and 99,998 common stock purchase warrants, of which $ 8 was recognized in the common stock and the remaining $ 249,996 was recognized in additional paid-in capital. These warrants are accounted for as equity warrants. Transactions during the nine months ended September 30, 2022. There was no common stock transactions during the nine months ended September 30, 2022. Preferred Stock Authorized As of September 30, 2023 and December 31, 2022, the Company had 213,730 stock of Series Seed 1 preferred stock authorized, each having a par value of $ 0.0001 per stock. As of September 30, 2023 and December 31, 2022, the Company had 3,635,252 stock of Series Seed 2 preferred stock authorized, each having a par value of $ 0.0001 per stock. As of September 30, 2023 and December 31, 2022, the Company had 2,982,003 stock of Series A preferred stock authorized, each having a par value of $ 0.0001 per stock. 13 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) Issued and outstanding As of September 30, 2023 and December 31, 2022, the Company had 213,730 Series Seed 1 preferred stock issued and outstanding. As of September 30, 2023 and December 31, 2022, the Company had 3,635,252 Series Seed 2 preferred stock issued and outstanding. As of September 30, 2023 and December 31, 2022, the Company had 1,861,799 Series A preferred stock issued and outstanding. Transactions during the nine-month ended September 30, 2023. There was no preferred stock transactions during the nine months ended September 30, 2023 Transactions during the nine-month ended September 30, 2022. On July 15, 2022, the Company closed the first tranche of its Series A Financing and issued 1,090,029 Series A preferred shares for gross proceeds of $ 1,462,146 , of which $ 109 was recognized in preferred stock and the remaining $ 1,462,037 in additional paid-in capital. In addition, the Company issued 231,828 Series A preferred shares and 231,828 common stock purchase warrants upon conversion of $ 186,584 of promissory notes and accrued interest, of which $ 23 was recognized in preferred stock, $ 55,701 as derivative liabilities at fair value, and the remaining $ 130,860 in additional paid-in capital. On July 27, 2022, the Company closed the second tranche of its Series A Financing and issued 349,790 Series A preferred shares for gross proceeds of $ 469,207 , of which $ 35 was recognized in preferred stock and the remaining $ 469,172 in additional paid-in capital. On August 4, 2022, the Company closed the third tranche of its Series A Financing and issued 111,884 Series A preferred shares for gross proceeds of $ 150,080 , of which $ 11 was recognized in preferred stock and the remaining $ 150,069 in additional paid-in capital . Equity Warrants Transactions during the nine-month ended September 30, 2023. On March 2, 2023, the Company issued 250,000 common stock and 250,000 common stock purchase warrants. Each warrant is exercisable at $ 3.00 per common stock. The warrants shall be exercisable, in whole or in part at the issue date but such exercisability shall cease upon the date of the Company’s IPO and listing of its common shares on the Nasdaq Capital Market or other Trading Market and shall continue to be exercisable in whole or in part immediately after the Lock-up Period but no later than the Warrant Expiration Date or Accelerated Warrant Expiration Date (the “Exercise Period”). In the event of the Company’s initial public offering and listing of shares of its common stock on a Trading Market, the Company shall notify the holder at least fifteen (15) calendar days prior to the consummation of such IPO. “Trading Market” shall mean a “national securities exchange” that has registered with the SEC under Section 6 of the Securities Exchange Act of 1934. The Expiration Date shall be the earlier of (i) three years and one hundred eighty (180) days from the issue date (the “Warrant Expiration Date”) or (ii) upon the Company’s reasonable judgment and written notice to the purchaser, of the Company’s option to accelerate the Warrant Expiration Date whereby upon purchaser’s receipt of the Company’s written notice of acceleration during the Exercise Period, the Purchaser’s option to exercise any number of warrants shall occur no later than fourteen (14) days following the receipt of the written notice of acceleration (the “Accelerated Warrant Expiration Date”). For the avoidance of doubt, it shall be reasonable for the Company to accelerate the Expiration Date of this warrant to coincide with transactions including, but not limited to (i) a change of control including but not limited to the voluntary or involuntary sale, assignment, transfer or other disposition, or transfer by operation of law, of more than 50 % of any direct or indirect equity interest of the Company; or (ii) a subsequent capital financing other than the IPO consisting of but not limited to an offer or proposal for, or indication of interest in, the issuance of debt or the capital stock of the Company. 14 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) On September 13, 2023, the Company issued 83,332 common stock and 99,998 common stock purchase warrants. Each warrant is exercisable at $ 3.00 per common stock. The Warrants shall be exercisable, in whole or in part immediately upon issuance, but such exercisability shall cease upon the date of the Company’s initial public offering (the “IPO”) and listing of its Common Shares on the Nasdaq Capital Market or other Trading Market (as defined herein) and will only become exercisable after the expiration of one hundred eighty (180) days following the Company’s initial public offering (the “Lock-up Period”). The expiration date shall be three years and one hundred eighty (180) days following the issuance of the Warrant Shares. Transactions during the nine months ended September 30, 2022. There was no equity warrant activity during the nine months ended September 30, 2022. As of September 30, 2023, the following equity warrants were outstanding: Outstanding Expiry date Weighted average exercise price ($) 250,000 August 28, 2026 3.00 99,998 March 12, 2027 3.00 349,998 3.00 As of December 31, 2022, there were no equity warrants outstanding. As of September 30, 2023, and December 31, 2022, the weighted average life of equity warrants outstanding was 3.07 and Nil years , respectively. Stock Options The Company has a stock option plan included in the Company’s 2020 Equity Incentive Plan (the “Plan”) where the Board of Directors or any of its committees can grant Incentive Stock Options, Nonstatutory Stock Options, and Restricted Stock. The aggregate number of shares allocated and made available for issuance pursuant to stock options granted under the Plan shall not exceed 1,734,188 shares. The plan shall remain in effect until it is terminated by the Board of Directors. 15 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) Transactions during the nine-month ended September 30, 2023. On February 1, 2023, the Company granted 10,000 stock options with a contractual life of ten years and an exercise price of $ 5.00 per common stock. These stock options were valued at $ 10,767 using the Black-Scholes Option Pricing Model. The options vest 25 % on the first anniversary of the grant date and the remaining 75 % vest evenly over 36 months thereafter. From May 12, 2023 to June 30, 2023, the Company granted 222,500 stock options (includes 80,000 each to two of its newly appointed independent directors) with a contractual life of ten years and an exercise price of $ 5.00 per common stock. These stock options were valued at $ 584,787 using the Black-Scholes Option Pricing Model. The options vest 25 % on the first vesting date and the remaining 75 % vest evenly over 36 months thereafter. On June 30, 2023, the Company cancelled and reissued 80,000 options previously issued to an advisor of the Company upon their appointment as a director effective June 1, 2023. The cancelled and re-issued options had the same exercise price of $ 5.00 per common stock and the same vesting terms and expiry date, and as such the cancellation and reissuance had no impact on the Company’s consolidated financial statements. On July 1, 2023, the Company granted 1,500 stock options with a contractual life of ten years and an exercise price of $ 5.00 per common stock. These stock options were valued at $ 3,940 using the Black-Scholes Option Pricing Model. The options vest 25 % on the first vesting date and the remaining 75 % vest evenly over 36 months thereafter. Transactions during the nine months ended September 30, 2022. On April 25, 2022, the Company granted 45,000 stock options with a contractual life of ten years and an exercise price of $ 0.60 per common stock. These stock options were valued at $ 11,617 using the Black-Scholes Option Pricing Model. The options vest 25 % on the first anniversary of the grant date and the remaining 75 % vest evenly over 36 months thereafter. On June 1, 2022, the Company granted 16,000 stock options with a contractual life of ten years and an exercise price of $ 1.34 per common stock. These stock options were valued at $ 19,393 using the Black-Scholes Option Pricing Model. The options vest 25 % on the first anniversary of the grant date and the remaining 75 % vest evenly over 36 months thereafter. From July 1, 2022 to September 30, 2022, the Company granted 226,000 stock options a contractual life of ten years and an exercise price of $ 1.34 per common stock. These stock options were valued at $ 273,981 using the Black-Scholes Option Pricing Model. The options vest 25 % on the first vesting date and the remaining 75 % vest evenly over 36 months thereafter. 16 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) The following assumptions were used in the Black-Scholes option pricing model during the nine months ended September 30, 2023, and year ended December 31, 2022: September 30, 2023 December 31, 2022 Risk-free interest rate 3.39 - 3.86 % 2.81 % - 4.07 % Expected life 10 years 10 years Expected dividend rate 0.00 % 0.00 % Expected volatility 100 % 100 % Forfeiture rate 0.00 % 0.00 % The continuity of stock options for the period ended September 30, 2023 and year ended December 31, 2022 is summarized below: Number of stock options Weighted average exercise price Outstanding, December 31, 2021 1,133,334 $ 0.60 Granted 412,000 2.19 Forfeited ( 137,500 ) 0.60 Exercised ( 41,667 ) 0.60 Outstanding, December 31, 2022 1,366,167 1.08 Granted 234,000 5.00 Exercised ( 62,500 ) 0.60 Outstanding, September 30, 2023 1,537,667 1.70 As of September 30, 2023, the following options were outstanding, entitling the holders thereof the right to purchase one common stock for each option held as follows: Outstanding Vested Expiry date Weighted average exercise price ($) 841,667 561,117 February 8, 2031 0.60 50,000 33,340 February 27, 2031 0.60 45,000 15,938 April 25, 2032 0.60 16,000 5,000 June 1, 2032 1.34 110,000 32,083 July 1, 2032 1.34 100,000 27,083 August 8, 2032 1.34 16,000 4,000 September 30, 2032 1.34 80,000 20,000 September 30, 2032 5.00 10,000 - October 15, 2032 1.34 10,000 - November 1, 2032 1.34 5,000 - November 1, 2032 5.00 20,000 - December 12, 2032 5.00 10,000 - February 1, 2033 5.00 50,000 - April 16, 2033 5.00 80,000 - May 1, 2033 5.00 80,000 - January 25, 2033 5.00 10,000 - June 27, 2033 5.00 2,500 - July 10, 2033 5.00 1,500 - July 1, 2033 5.00 1,537,667 698,561 1.70 As of September 30, 2023, the weighted average life of stock options outstanding was 8.09 years (December 31, 2022 – 8.58 years). 17 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) During the nine months ended September 30, 2023 and 2022, the Company recorded $ 346,549 and $ 94,099 , respectively, in share-based compensation expense, of which $ 337,551 and $ 8,998 , and $ 90,271 and $ 3,828 , respectively is included in office and administration and research and development, respectively. 13. Related Party Transactions Related parties consist of the following individuals and corporations: ● Braeden Lichti, Chairman and former President, significant shareholder through BWL Investments Ltd. Resigned as President effective October 11, 2022. ● Jordan Plews, CEO and Director, significant shareholder through JP Bio Consulting LLC ● Graydon Bensler, CFO and Director ● Yi Guo, Former Director, resigned effective September 29, 2022 ● Tim Sayed, Chief Medical Officer ● Brenda Buechler, Chief Marketing Officer ● Christoph Kraneiss, Chief Commercial Officer ● Jeffrey Parry, Director (appointed June 1, 2023) ● Julie Daley, Director (appointed June 1, 2023) ● Crystal Muilenburg, Director (appointed June 1, 2023) ● GB Capital Ltd., controlled by Graydon Bensler ● JP Bio Consulting LLC, significant shareholder and controlled by Jordan Plews ● BWL Investments Ltd., significant shareholder and controlled by Braeden Lichti ● Northstrive Companies Inc., controlled by Braeden Lichti Key management personnel include those persons having authority and responsibility for planning, directing, and controlling the activities of the Company as a whole. The Company has determined that key management personnel consist of members of the Company’s Board of Directors, corporate officers, and individuals with more than 10 % control. The remuneration of directors and key management personnel is as follows: Three months ended September 31, 2023 Three months ended September 30, 2022 Nine months ended September 31, 2023 Nine months ended September 30, 2022 Consulting fees $ 51,250 $ 51,250 $ 153,750 $ 147,998 Salaries 159,874 63,784 476,126 252,879 Share-based compensation 124,994 29,860 247,348 80,259 $ 336,118 $ 144,894 $ 877,224 $ 481,136 During the nine months ended September 30, 2023, the Company incurred consulting fees of $ 63,750 (September 30, 2022 - $ 57,998 ) to GB Capital Ltd., a company controlled by Graydon Bensler, CFO and Director. In addition, the Company incurred consulting fees of $ 90,000 (September 30, 2022 - $ 90,000 ) to Northstrive Companies Inc., a company controlled by the Company’s Chairman and former President. 18 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) Jordan Plews, CEO and Director, earned a Salary of $ 168,050 and $ 171,721 , respectively during the nine months period ended September 30, 2023 and 2022 (includes employer taxes of $ 18,050 and $ 11,720 , respectively). Brenda Buechler, Chief Marketing Officer, earned a Salary of $ 159,950 and $ 56,803 , respectively during the nine month periods ended September 30, 2023 and 2022 (includes employer taxes of $ 17,446 and $ 4,303 respectively). Christoph Kraneiss, Chief Commercial Officer, earned a Salary of $ 148,131 and $ 24,354 , respectively during the nine month periods ended September 30, 2023 and 2022 (includes employer taxes of $ 13,131 and $ 1,854 , respectively). On February 9, 2021, the Company granted 800,000 stock options to four related parties ( 200,000 stock options each) with a contractual life of ten years and exercise price of $ 0.60 per share of common stock. These stock options were valued at $ 203,972 using the Black-Scholes Option Pricing Model. The options vest 25 % on the first anniversary of the grant date and the remaining 75 % vest evenly over 36 months thereafter. On June 1, 2023, the Company granted 160,000 stock options to directors of the company ( 80,000 stock options each) with a contractual life of ten years and exercise price of $ 5.00 per share of common stock. These stock options were valued at $ 420,521 using the Black-Scholes Option Pricing Model. The options vest 25 % on the first anniversary of the grant date and the remaining 75 % vest evenly over 36 months thereafter. On June 1, 2023, the Company cancelled and re-issued 80,000 stock options to a director of the company with a contractual life of ten years and exercise price of $ 5.00 per share of common stock. The cancelled and re-issued options had the same exercise price of $ 5.00 per common stock and the same vesting terms and expiry date, and as such the cancellation and reissuance is not expected to impact on the Company’s consolidated financial statements. (Note 12). Details of the fair value of the options granted to each individual and the related expense recorded for the nine month periods ended September 30, 2023 and 2022 are as follow: Nine months ended September 30, 2023 Nine months ended September 30, 2022 Grant date fair value of stock options Braeden Lichti, Former Chairman and President $ 5,398 $ 11,571 $ 50,993 Graydon Bensler, CFO and Director 5,398 11,571 50,993 Jordan Plews, CEO and Director 5,398 11,571 50,993 Tim Sayed, Chief Medical Officer 5,398 11.571 50,993 Jeffrey Parry, Director 21,177 - 107,669 Julie Daley, Director 56,022 - 210,245 Crystal Muilenburg, Director 46,725 - 210,245 $ 145,516 $ 46,284 $ 732,131 19 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) On July 20, 2021, the Company granted 200,000 stock options to a related party, Yi Guo, former Director, with a contractual life of ten years and exercise price of $ 0.60 per share of common stock. These stock options were valued at $ 51,014 using the Black-Scholes Option Pricing Model. The options vest 25 % on the first anniversary of the grant date and the remaining 75 % vest evenly over 36 months thereafter. On October 17, 2022, Yi Guo resigned from the board of directors of the Company and as a result, 137,500 unvested options were forfeited. The remaining 62,500 vested option remain exercisable for 3 months after the resignation. On January 6, 2023, Yi Guo exercised the remaining 62,500 options. The share-based compensation expense recorded for the nine months ended September 30, 2023 and 2022 relating to these stock options was $ Nil and $ 1,425 , respectively. During the second and third quarter of 2022, the Company granted 250,000 stock options to two related parties ( 150,000 stock options to Brenda Buechler, Chief Marketing Officer, and 100,000 options to Christoph Kraneiss, Chief Commercial Officer) with a contractual life of ten years and weighted average exercise price of $ 1.22 per share of common stock. These stock options were valued at $ 264,906 using the Black-Scholes Option Pricing Model. The options vest 25 % on the first anniversary of the grant date and the remaining 75 % vest evenly over 36 months thereafter. Details of the fair value granted to each individual and the related expense recorded for the nine months ended September 30, 2023 and 2022 is as follow: Nine months ended September 30, 2023 Nine months ended September 30, 2022 Grant date fair value of stock options Brenda Buechler, Chief Marketing Officer $ 53,008 $ 22,189 $ 143,679 Christoph Kraneiss, Chief Commercial Officer 48,824 10,362 121,227 $ 101,832 $ 32,551 $ 264,906 As of September 30, 2023 and December 31, 2022, the Company had $ 222,675 and $ 142,705 , respectively due to companies controlled by Braeden Lichti, of which $ 12,675 and $ 22,705 , respectively is unsecured, non-interest bearing and are due on demand. The remaining $ 210,000 and $ 120,000 , respectively due as of September 30, 2023 and December 31, 2022, is payable to Northstrive Companies Inc. for consulting services rendered by Braeden Lichti (the “Fees”). Payment of the Fees will be deferred until the earlier of either (a) the Company raising an aggregate of at least $ 2,000,000 of equity and/or debt investment from and after October 1, 2022, (b) the Company becomes listed on any established stock exchange or a national market system including without limitation the New York Stock Exchange, the Nasdaq Capital Market of The Nasdaq Stock Market, or (c) the Board determines that the Company has sufficient cash flows to support payment of the foregoing amounts of Fees due at the time of that determination. The Fees earned prior to March 31, 2023 shall be payable in cash payment or in the form of Series A preferred stock priced at $ 1.34138 per share (the “Original Series A Issue Price”) equal to the value of the Fees then due. While the Fees earned after April 1, 2023 shall be payable in cash payment or in the form of Series A preferred stock priced at $ 3 per share. As of September 30, 2023, accounts payable and accrued liabilities include $ 7,442 (December 31, 2022 - $ 7,165 ) in consulting fees payable to Graydon Bensler, CFO and Director, $ 7,831 (December 31, 2022 - $ 1,485 ) to companies controlled by Braeden Lichti, and $ 4,272 (December 31, 2022 - $ 2,971 ) to Jordan Plews, CEO and Director, for expenses incurred on behalf of the Company. 20 Elevai Labs Inc. Notes to the Condensed Consolidated Financial Statements (Unaudited – Expressed in thousands of United States Dollars) 14. Commitments and Contingencies There were no commitments as of September 30, 2023 and December 31, 2022 or during the periods then ended. The Company had an ongoing dispute with a vendor regarding unpaid invoices. The Company disputed the services claimed to have been rendered by the vendor. In May 2023, the Company and the vendor agreed to settle the matter, resulting in the Company agreeing to pay a final settlement of Cnd$ 12,500 (approximately $ 9,225 ), an amount that is significantly less than the unpaid invoices originally claimed by the vendor. The Company included the settlement amount in accrued liabilities as of December 31, 2022 and the amount was paid over to the vendor during the nine months ended September 30, 2023. 15. Concentrations Customers During the nine month period ended September 30, 2023, the Company recorded 14 % of its revenue from its largest customer. The Company’s largest customer relates to sales to a wholesaler during the period. During the nine months ended September 30, 2022, the Company recorded 55 % of its revenue from a single customer. The company’s largest customer relates to sales to a wholesaler during the period. As of September 30, 2023 and December 31, 2022, the Company had $ 49 and $ nil receivables due from this customer, respectfully, and $ nil and $ 5,992 , respectfully, in customer deposits were received from its largest customer. The Company expects its dependence on major customers to decrease over time as it enters into additional distributor agreements and builds out its sales team. Suppliers During the nine month period ended September 30, 2023 and 2022, the Company had 3 key suppliers that represented approximately 66 % and 72 %, 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): Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Supplier 1 26 % 46 % Supplier 2 23 % 14 % Supplier 2 17 % 12 % 66 % 72 % The Company continually evaluates the performance of its suppliers and the availability of alternatives to substitute or supplement its inventory production supply chain. The Company believes that a breakdown in supply from one of its key suppliers would be overcome in a short amount of time given the availability of alternatives. 16. Subsequent Events Management has evaluated events subsequent to the period ended September 30, 2023, up to December 11, 2023, and has identified the following transactions or other events that may require adjustment of and/or disclosure in the condensed consolidated financial statements. Initial Public Offering On November 21, 2023, the Company successfully completed its Initial Public Offering (IPO) and commenced trading on the NASDAQ Stock Market under the ticker symbol ELAB. 21