CIRX 10-Q Quarter ended March 31, 2025

NOTE 1 — ORGANIZATION AND NATURE OF OPERATIONS

In 1987, CirTran Corporation was incorporated in Nevada under the name Vermillion Ventures, Inc., for the purpose of acquiring other operating corporate entities. We were largely inactive until July 1, 2000, when our wholly owned subsidiary, CirTran Corporation (Utah), acquired substantially all the assets and certain liabilities of Circuit Technology, Inc., founded by our president, Iehab Hawatmeh.

We, together with our majority-owned subsidiaries, manufacture, distribute, and sell condoms, electronic tobacco products, cigars, energy drinks, water beverages, and related merchandise, all using the HUSTLER® brand name. Since entering our 2019 five-year manufacturing and distribution agreement with an unrelated party, our efforts have been devoted to phase one of our development of all HUSTLER®-branded products, which led us to generating revenue during 2020 for the first time in several years. Business continued to thrive in the States and some international countries, expanding across borders and reaching new markets. Despite challenges, The Company adapted and flourished, driven by great brand and product categories. This growth was not only boosted by the domestic economy but also established a global presence, solidifying the foundation for future success.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 3 — GOING CONCERN

The accompanying unaudited consolidated financial statements have been prepared in conformity with US GAAP, which considers our continuation as a going concern. We had a working capital deficiency of $ 21,968,497 , as of March 31, 2025, and a net loss from continuing operations of $ 108,272 for the three months ended March 31, 2025. As of March 31, 2025, we had an accumulated deficit of $ 61,799,503 . These conditions raise substantial doubt about our ability to continue as a going concern.

Our ability to continue as a going concern is dependent upon our ability to successfully accomplish our business plan and eventually attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that may be necessary if we are unable to continue as a going concern.

In the coming year, our foreseeable cash requirements will relate to the development of business operations and associated expenses. We may experience a cash shortfall and be required to raise additional capital.

Historically, we have mainly relied upon shareholder loans and advances to finance operations and growth. Management may raise additional capital by retaining net earnings, if any, or through future public or private offerings of our stock or loans from private investors, although we cannot assure that we will be able to obtain such financing. Our failure to do so could have a material and adverse effect upon our shareholders and us.

NOTE 4 — PROPERTY AND EQUIPMENT

We incur certain costs associated with the design and development of molds and dies for our contract-manufacturing segment. These costs are held as deposits on the balance sheet until the molds or dies are finished and ready for use. At that point, the costs are included as part of production equipment in property and equipment and are amortized over their useful lives. We hold title to all molds and dies used in the manufacture of products.

We recorded $ 501 and $ 1,228 of depreciation expense during the three months ended March 31, 2025 and 2024.

NOTE 5 — RELATED PARTY TRANSACTIONS

In 2007, we issued a 10 % promissory note to a family member of our president in exchange for $ 300,000 . The note was due on demand after May 2008. There were no repayments made during the periods presented. At March 31, 2025 and December 31, 2024, the principal amount owing on the note was $ 151,833 and $ 151,833 , respectively. No demand for payment has been made.

On March 31, 2008, we issued to this same family member, along with two other company shareholders, promissory notes totaling $ 315,000 ($ 105,000 each). Under the terms of these three $ 105,000 notes, we received total proceeds of $ 300,000 and agreed to repay the amount received plus a 5 % borrowing fee. The notes were due April 30, 2008, after which they were due on demand, with interest accruing at 12 % per annum. We made no payments towards the outstanding notes during the periods presented. The principal balance owing on the notes as of March 31, 2025 and December 31, 2024, was $ 72,466 and $ 72,466 , respectively. No demand for payment has been made.

There were $ 19,952 and $ 21,882 of short-term advances due to related parties as of March 31, 2025 and December 31, 2024, respectively.

As of March 31, 2025 and December 31, 2024, we owed our president a total of $ 433,379 and $ 433,379 , respectively, in unsecured advances. The advances and short-term bridge loans were approved by our board of directors under a 5 % borrowing fee. The borrowing fees were waived by our president on these loans. These amounts are included in our liabilities from discontinued operations.

As of March 31, 2025 and December 31, 2024, the Company owes the CEO $ 7,059 for short term advances to the Company. The advances are non-interest bearing and due on demand.

During the three months ended March 31, 2025, we had a net decrease in deposits with a related-party inventory supplier totaling $ 450,558 , resulting in a credit balance of $ 449,921 , which is disclosed as Short-term advances payable - related parties. The related party is an entity controlled by our chief executive officer. All transactions were at a 2 % markup over the related-party’s cost paid for inventory in arm’s-length transactions. Total inventory purchases from the related party were $ 231,151 and $ 251,788 during the three months ended March 31, 2025 and 2024, respectively.

NOTE 6 — OTHER ACCRUED LIABILITIES

Accrued tax liabilities consist of delinquent payroll taxes, interest, and penalties owed by us to the Internal Revenue Service (“IRS”) and other tax entities.

Other accrued liabilities as of March 31, 2025 and December 31, 2024, include a non-interest-bearing payable totaling $ 45,000 and $ 45,000 , respectively, that is due on demand and customer deposits totaling $ 1,634,537 and $ 1,730,213 , respectively.

NOTE 7 — COMMITMENTS AND CONTINGENCIES

Litigation and Claims

Various vendors, service providers, and others have asserted legal claims in previous years. These creditors generally are not actively seeking collection of amounts due to them, and we have determined that the probability of realizing any loss on these claims is remote and will seek to compromise and settle at a deep discount any of such claims that are asserted for collection. These amounts are included in our current liabilities, except where we believe collection or enforcement of the judgments is barred by the applicable statute of limitations, in which case the liabilities have been eliminated. We have not accrued any liability for claims or judgments that we have determined to be barred by the applicable statute of limitations, which generally is eight years for judgments in Utah.

Playboy Enterprises, Inc.

Our affiliate, Play Beverages, LLC, filed suit against Playboy Enterprises, Inc., in Cook County, Illinois, Circuit Court in October 2012 asserting numerous claims, including breach of contract and tortious interference. Playboy responded with a counterclaim of breach of contract and trademark infringement. After proceedings in October 2016, the court awarded a judgment of $ 6.6 million to Playboy against Play Beverages and CirTran Beverage Corp., our subsidiary. The court denied our motion for a new trial and awarded Playboy treble patent infringement damages and attorney’s fees. We filed a notice of appeal in July 2017 and again in March 2018. Playboy has initiated collection efforts but has recovered no funds. In September 2018, the appellate court affirmed the judgment of the circuit court. The balance due related to this judgment, has been included in liabilities in discontinued operations. As of December 31, 2023, the Company received legal representation that the judgement can no longer be enforced after seven years, as a result, the Company has recognized a gain from discontinued operations of $ 18,878,359 of time barred debt previously included in liabilities from discontinued operations.

Delinquent Payroll Taxes, Interest, and Penalties

In November 2004, the IRS accepted our amended offer in compromise (the “Offer”) to settle delinquent payroll taxes, interest, and penalties, which required us to pay $ 500,000 , remain current in our payment of taxes for five years , and forego claiming any net operating losses for the years 2001 through 2015 or until we paid taxes on future profits in an amount equal to the taxes of $ 1,455,767 waived by the Offer. In June 2013, we entered into a partial installment agreement to pay $ 768,526 in unpaid 2009 payroll taxes, which required us to pay the IRS 5 % of cash deposits. The monthly payments were to continue until the account balances were paid in full or until the collection statute of limitation expired on October 6, 2020. We are currently in communication with the IRS regarding the statute of limitations on this settlement and appropriate next steps. During the year ended December 31, 2023, the Company wrote off $ 512,520 as time barred debt. The amounts of $ 5,164 and $ 5,164 were due as March 31, 2025 and December 31, 2024, respectively.

Employment Agreements

We engage Iehab Hawatmeh, our president and chief executive officer, through an employment agreement entered in August 2009 and amended in September 2017. In July 2017, Mr. Hawatmeh had resigned all positions with us to pursue other business activities, thereby effectively terminating the agreement. However, the amendment to his employment agreement in September 2017 reinstated Mr. Hawatmeh to his previous positions, with a salary in an amount to be determined. Among other things, the reinstated employment agreement: (a) grants options to purchase a minimum of 6,000 shares of our stock each year, with an exercise price equal to the market price of our common stock as of the grant date, for the maximum term allowed under our stock option plan; (b) provides for health insurance coverage, cell phone, car allowance, life insurance, and director and officer liability insurance, as well as any other bonus approved by our board; and (c) includes additional incentive compensation as follows: (i) a quarterly bonus equal to 5 % of our earnings before interest, taxes, depreciation, and amortization for the applicable quarter; (ii) bonuses equal to 1 % of the net purchase price of any acquisitions we complete that are directly generated and arranged by Mr. Hawatmeh; and (iii) an annual bonus (payable quarterly) equal to 1 % of our gross sales of all products, net of returns and allowances. On January 1, 2020, we resumed accruing wages for our chief executive officer. A total of $ 74,124 and $ 74,124 was accrued during the periods ended March 31, 2025 and December 31, 2024, respectively.

License Agreements

We have entered into agreements requiring us to pay certain royalties for the manufacture and distribution of licensed products. Fees are based on a percentage of sales and remitted quarterly and are included in cost of sales for financial reporting purposes.

NOTE 8 — NOTES PAYABLE

There is $ 413,830 and $ 402,906 of accrued interest due on these notes as of March 31, 2025 and December 31, 2024, respectively.

NOTE 9 — CONVERTIBLE DEBENTURES

The convertible debentures and accrued interest are convertible into shares of our common stock at the lower of $ 100 or the lowest bid price for the 20 trading days prior to conversion.

As of March 31, 2025 and December 31, 2024, we had accrued interest on the convertible debentures totaling $ 2,085,471 and $ 2,055,232 , respectively.

NOTE 10 — DERIVATIVE LIABILITIES

As discussed in Note 9—Convertible Debentures, we have entered into five separate agreements to borrow a total of $ 2,665,528 with the outstanding principal and interest being convertible at the holder’s option into common stock of the company at the lesser of $ 100 (notes one through four) or $0.10 (note five) or the lowest closing bid price in the prior 20 trading days. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in our balance sheet. We measure these instruments at their estimated fair value and recognize changes in their estimated fair value in results of operations during the period of change. We have estimated the fair value of these embedded derivatives for convertible debentures and associated warrants using a Monte Carlo simulation as of March 31, 2025, using the following assumptions:

The fair values of the derivative instruments are measured each quarter, which resulted in a gain of $ 132,234 and a loss of $ 248,454 during the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025 and December 31, 2024, the fair market value of the derivatives aggregated $ 2,326,201 and $ 2,458,435 , respectively.

NOTE 11 — STOCK OPTIONS AND WARRANTS

Stock Incentive Plans

As of March 31, 2025 and 2024, we had no unrecognized compensation related to outstanding options that have not yet vested at year-end that would be recognized in subsequent periods.

As of March 31, 2025 and December 31, 2024, there were 24,000 and 32,000 options, respectively, issued and vested with a weighted average exercise price of $ 0.01 . Outstanding options as of March 31, 2025, consisted of:

NOTE 12 — SEGMENTS

The Company uses ASC 280, Segment Reporting , in determining its reportable segments. The Company has two reportable segments based on sales: Tobacco products and all other sources of revenue. The guidance requires that segment disclosures present the measure(s) used by the Chief Operating Decision Maker (“CODM”) to decide how to allocate resources and for purposes of assessing such segments’ performance. The Company’s CODM is comprised of its executive management team who use revenue and expenses of the two reporting segments to assess the performance of the business of our reportable operating segments.

NOTE 13 — DISCONTINUED OPERATIONS

At October 21, 2016, we exited the beverage licensing and distribution business. The assets and liabilities associated with this business are displayed as assets and liabilities from discontinued operations as of March 31, 2025 and December 31, 2024. Additionally, the revenues and costs associated with this business are displayed as losses from discontinued operations.

NOTE 14 — SUBSEQUENT EVENTS

In accordance with SFAS 165 (ASC 855-10), management has performed an evaluation of subsequent events through the date that the unaudited consolidated financial statements were issued and has determined that it does not have any material subsequent events to disclose in these unaudited consolidated financial statements.