Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the financial condition and results of operations of CS Diagnostics Corp. (the “Company”) should be read in conjunction with the Company’s financial statements and related notes included elsewhere in this Annual Report or Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. The Company’s actual results may differ materially from those anticipated in these forward-looking statements due to a variety of factors, including those discussed under “Risk Factors.”
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited consolidated financial statements and the related notes included elsewhere in this Annual Report or Form 10-K. Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and reflect our current corporate structure and organization as if such structure had been in place throughout all periods presented.
This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by the forward-looking statements. Such factors include, among others, the risks described under “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K and elsewhere herein. Except as required by law, we undertake no obligation to revise or update any forward-looking statements to reflect events or circumstances occurring after the date of this report.
Results of Operations
For the fiscal year ended December 31, 2025, the Company reported total revenue of $204,000, compared to $110,911 for the year ended December 31, 2024 and approximately $126,040 for the year ended December 31, 2023. The Company generated the increase in 2025 revenue primarily from a related-party Affiliate Revenue Agreement (the “ARA”).
Under the ARA, the Company receives fixed monthly contributions from affiliated entities of $17,000, or $204,000 on an annualized basis. This arrangement materially affected the Company’s reported revenue and net income for 2025. The Company entered into the ARA as a related-party, non-arm’s length transaction to support operations during its pre-commercialization phase. Accordingly, this revenue does not reflect revenue from third-party customers or the Company’s core business operations and may not be indicative of future operating performance.
The Company incurred operating expenses of $132,781 for the year ended December 31, 2025, compared to $110,150 for the year ended December 31, 2024. The Company attributes the increase primarily to higher general and administrative expenses associated with corporate activities, regulatory efforts, and public company compliance requirements. The Company expects operating expenses to increase as it continues regulatory and commercialization activities; however, the timing and magnitude of such increases remain uncertain.
The Company reported net income of $71,219 for the year ended December 31, 2025, compared to net income of $761 for 2024 and a net loss of approximately $22,000 for 2023. The Company attributes the increase in net income for 2025 primarily to related-party revenue under the ARA. This revenue represents a non-operational factor that may not recur, particularly if the ARA is modified or terminated.
Financial Condition
As of December 31, 2025, the Company reported total assets of $499,485,555, compared to $499,400,501 as of December 31, 2024. Intangible assets comprised substantially all of the Company’s asset base, totaling approximately $499.4 million, and consists primarily of intellectual property acquired in prior transactions. These assets are non-cash in nature and their recoverability depends on the Company’s ability to achieve future commercialization or otherwise realize value.
The Company reported current assets of $85,555 as of December 31, 2025, compared to $501 as of December 31, 2024. The increase resulted primarily from higher cash balances and undeposited funds. Cash totaled $6,813 at December 31, 2025. This cash balance is limited and may not be sufficient to support ongoing operations.
The Company reported total liabilities of $15,262 as of December 31, 2025, compared to $1,428 as of December 31, 2024. The increase resulted primarily from higher accounts payable. The Company does not have material long-term debt and continues to operate with limited leverage.
Liquidity and Capital Resources
The Company’s liquidity remains constrained. As of December 31, 2025, the Company reported cash of $6,813 and net cash used in operating activities of $6,312, despite reporting net income. The Company attributes the negative operating cash flow primarily to changes in working capital, including timing-related increases in certain current asset balances.
The Company’s internal sources of liquidity consist of cash on hand and any funds received under existing arrangements. As of the reporting date, the Company has not established a recurring source of cash flows from operations.
The Company’s external sources of liquidity include related-party funding arrangements, including the ARA, as well as potential equity financings and strategic partnerships. The ARA provides fixed monthly contributions and represents a significant source of liquidity; however, any party may terminate the agreement upon 30 days’ notice, which creates uncertainty regarding its continuation.
The Company is not aware of any unused credit facilities or committed external financing arrangements. As a result, the Company’s ability to meet its obligations depends on continued support from affiliates and the Company’s ability to obtain additional financing.
Several known trends and uncertainties are reasonably likely to materially affect the Company’s liquidity and financial condition, including the potential termination or modification of the ARA, the absence of revenue from product-based operations, and expected increases in operating costs associated with regulatory and commercialization activities.
Management plans to address liquidity constraints through equity financings, strategic partnerships, and the development of revenue-generating operations. However, the Company may not obtain such financing on acceptable terms, or at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
Capital Resources
As of December 31, 2025, the Company’s capital resources consist primarily of stockholders’ equity and support from related parties. The Company does not have material debt financing and does not utilize off-balance sheet financing arrangements.
The Company’s cash requirements consist primarily of general and administrative expenses, regulatory activities, and public company compliance obligations. The Company may also incur additional expenditures related to regulatory processes and potential commercialization activities; however, the timing and magnitude of such expenditures remain uncertain.
The Company expects to fund its capital requirements through equity financings, support from related parties, and, to a lesser extent, potential strategic arrangements. The Company may seek debt financing; however, due to its limited operating history and lack of cash flows from operations, such financing may not be available on acceptable terms, or at all. As a result, the Company expects to rely primarily on equity financing, which may result in dilution to existing stockholders.
The Company does not have material commitments for capital expenditures as of December 31, 2025. The Company may require additional capital to support future activities, including regulatory and commercialization efforts, although no assurance can be provided as to the timing or extent of such requirements. The Company is not aware of any trends that are reasonably likely to improve its access to capital, and its cost of capital may increase due to its early-stage status and liquidity position.
Material Changes in Financial Condition
During the period from 2023 through 2025, the Company experienced material changes in its financial condition.
The Company recognized approximately $499.4 million in intangible assets, which materially increased total assets and stockholders’ equity but did not increase liquidity. These assets consist primarily of intellectual property and their value depends on the Company’s ability to achieve future commercialization or otherwise realize economic benefit.
In 2025, the Company entered into an ARA with related parties, which resulted in fixed monthly contributions totaling $204,000 for the year. This arrangement materially affected the Company’s reported revenue and net income. The Company entered into this agreement as a related-party transaction, and it may be terminated upon short notice. As a result, this revenue may not be indicative of future performance or sustainable operating results.
The Company also recorded changes in working capital accounts, including increases in certain current assets and accounts payable, reflecting timing differences in cash receipts and disbursements. Despite reporting net income, the Company generated negative cash flow from operations, which reflects the limited relationship between reported earnings and cash flows during the period.
Market Position and Strategy
The Company operates in the medical device and oncology support market, which involves significant regulatory requirements, the need for clinical validation, and competition from established industry participants.
As of December 31, 2025, the Company has not generated revenue from product sales and does not have a measurable market share. Existing competitors have FDA-approved products, established clinical data, physician relationships, and distribution capabilities.
The Company’s strategy focuses on obtaining required regulatory approvals, pursuing commercialization of its product candidates, and utilizing strategic arrangements to support market entry. The Company expects to rely on third-party relationships to facilitate certain commercial functions rather than developing a fully integrated infrastructure; however, the timing and extent of such activities remain uncertain.
Outlook
The Company’s future performance will depend on its ability to obtain regulatory approvals, generate revenue from product-based activities, secure additional financing, and achieve market acceptance. Although the Company reported net income for 2025, such results were primarily attributable to related-party contributions and are not indicative of results from operations. Accordingly, these results should not be relied upon as an indication of future operating performance.
Critical Accounting Estimates
The preparation of the Company’s financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts. Certain estimates are considered critical because they involve significant uncertainty and could materially impact financial condition and results of operations.
The Company’s most significant critical accounting estimate relates to the valuation and recoverability of its intangible assets, which totaled approximately $499.4 million as of December 31, 2025. These assets are highly sensitive to assumptions regarding future revenue generation, regulatory approvals, and market adoption. Because the Company has not yet generated product-based revenue, the valuation of these assets involves significant uncertainty. A material change in assumptions could result in substantial impairment charges.
Revenue recognition under the ARA also represents a critical accounting estimate. Management has determined that monthly contributions from affiliates should be recognized as revenue in accordance with ASC 606. This determination involves judgment regarding the nature of the arrangement, the absence of traditional performance obligations, and the classification of payments as revenue rather than capital contributions. Because the arrangement is a related-party transaction and non-arm’s length, changes in accounting treatment or termination of the agreement could materially affect reported revenue.
These estimates are evaluated on an ongoing basis; however, actual results may differ materially, and such differences could have a significant impact on the Company’s financial condition and results of operations.
