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Item 8. Financial Statements and Supplementary Data

2023-04-18 compared with 2022-04-15 · 704 added, 2 removed, 2 unchanged (100% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

consolidated financial statements, including the Report of Independent Registered Public Accounting Firm on our consolidated financial

statements, are included beginning on page F-1 after this report, which are incorporated herein by reference.

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021

Notes to the Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Shareholders of Cirtran Corporation

on the Financial Statements

have audited the accompanying consolidated balance sheets of Cirtran Corporation (“the Company”) as of December 31, 2022

and 2021, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in

the two-year period ended December 31, 2022, and the related notes (collectively referred to as the financial statements).

In our opinion,

the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and

2021 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity

with accounting principles generally accepted in the United States of America.

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note

3 to the financial statements, the Company has a working capital deficiency, a net loss from continuing operations, and an accumulated

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

plans in regard to these matters are also described in Note 3.

The financial statements do not include any adjustments that might result

from the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated

or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

of Investments (Impairment)– Refer to Note 2 to the financial statements

of the Critical Audit Matter

Company holds one investment that is accounted for as an equity investment without a readily determinable fair value.

Adjustments to

the cost of the investment is based on significant judgment regarding appropriate valuation and is highly subjective;

therefore, we assessed

this as a critical audit matter.

the Critical Audit Matter Was Addressed in the Audit

audit procedures related to evaluating the Company’s accounting for the valuation of investment included the following, among others:

inquiries with management of the investee, confirming the balance of the Company’s investment.

the investee’s financial position and the relevance and reliability of the data obtained

from investee.

the accuracy and completeness of underlying information provided by management.

have served as the Company’s auditor since 2020.

Spokane, Washington

April 17, 2023

BALANCE SHEETS

on inventory - related party

receivable, net of allowance for doubtful accounts of $ 39,438

current assets

in securities at cost

and equipment, net of accumulated depreciation

AND STOCKHOLDERS’ DEFICIT

liability, current

Related-party

advances payable

advances payable - related parties

payroll and compensation expense

interest, current portion

debenture, current portion, net of discounts

payable, current portion

payable to stockholders

from discontinued operations

current liabilities:

Deferred tax liability

payable, net of current portion

debenture, net of current portion, net of discount

and contingencies

Stockholders’

stock, par value $ 0.001 ;

100,000,000 shares

4,945,417 shares

issued and outstanding

paid-in capital

( 79,305,551 )

( 77,803,460 )

stockholders’ deficit

( 42,067,045 )

( 40,564,954 )

liabilities and stockholders’ deficit

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

STATEMENTS OF OPERATIONS

the Years Ended December 31,

general and administrative expenses

operating expenses

income from operations

income (expense)

on forgiveness of debt

on write off of accounts payable

(loss) on derivative valuation

other (expense) income

loss from continuing operations

( 1,297,737 )

income from discontinued operations

(loss) income before income tax

$ ( 1,451,203 )

Net (loss) income

$ ( 1,502,092 )

loss from continuing operations per common share, basic

loss from continuing operations per common share, diluted

(loss) income from discontinued operations per common share, basic

(loss) income from discontinued operations per common share, diluted

(loss) income per share, basic

(loss) income per share, diluted

Basic weighted average common shares outstanding

weighted average common shares outstanding

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

STATEMENTS OF STOCKHOLDERS’ DEFICIT

THE YEARS ENDED DECEMBER 31, 2022 AND 2021

Additional Paid-in

Total stockholders’

Balance, December 31, 2020

$ ( 77,929,672 )

$ ( 40,698,101 )

Stock option expense

Common stock issued for conversion of accrued interest

Balance, December 31, 2021

( 77,803,460 )

( 40,564,954 )

( 1,502,091 )

Balance, December 31, 2022

$ ( 79,305,551 )

$ ( 42,067,045 )

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

STATEMENTS OF CASH FLOWS

For the Years Ended December 31,

Cash flows from operating activities

Net (loss) income

$ ( 1,502,091 )

Adjustments to reconcile net income to net cash (used) provided by operating activities:

Loss (income) from discontinued operations

Depreciation expense

Loss on derivative valuation

Debt discount amortization

Stock option expense

Gain on forgiveness of debt

Gain on write off of accounts payable

Amortization of right-of-use asset to rent expense

Changes in operating assets and liabilities:

Deposits on inventory

Deposits on inventory - related party

Accounts receivable

Other current assets

Accounts payable

Accrued liabilities

Payments for lease liability

Accrued payroll and compensation

Accrued interest

Accrued tax liability

Net cash provided by operating activities

Cash flows from investing activities:

Purchase of equipment

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from related-party loans

Repayments of related-party loans

Repayments of loans payable

Net Cash used in financing activities

Net change in cash

Cash, beginning of year

Cash, end of year

Supplemental disclosure of cash flow information:

Cash paid for interest

Cash paid for income taxes

Supplemental disclosure of noncash investing activities:

Common stock issued for conversion of accrued interest

accompanying notes are an integral part of these financial statements.

TO CONSOLIDATED FINANCIAL STATEMENTS

1 — ORGANIZATION AND NATURE OF OPERATIONS

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.

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.

2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Presentation

consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States

of America (“U.S.

of Consolidation

consolidated financial statements include the accounts of the company and our wholly owned subsidiaries:

CirTran Products Corp., LBC

Products, Inc., and CirTran Asia, Inc.

Intercompany accounts and transactions have been eliminated in consolidation.

preparing the financial statements in accordance with US GAAP, management is required to make estimates and assumptions that affect the

reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements,

and the reported amounts of revenues and expenses during the reported periods.

Actual results could differ from those estimates.

Concentrations

of Credit Risk

maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits.

We continually monitor

our banking relationships and consequently have not experienced any losses in our accounts.

At times, such deposits may exceed the Federal

Deposit Insurance Corporation insurable limit.

consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

There were no cash

equivalents for the years ended December 31, 2022 or 2021.

and Equipment

and equipment are stated at cost less accumulated depreciation and amortization.

Depreciation of property and equipment is calculated

using the straight-line method over the estimated useful lives of the assets, which ranges from three to ten years.

Leasehold improvements

are amortized over the lesser of the remaining term of the lease or the estimated useful life of the asset.

Expenditures for repairs

and maintenance are expensed as incurred.

Gains or losses on dispositions of property and equipment are included in operating results.

follow Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue

from Contracts with Customers , for revenue recognition.

Adoption of ASC 606 did not have a significant impact on our financial statements.

We generate revenue by providing product design services and through the sales of tangible product.

We recognize revenue upon transfer

of control of promised products or services to customers in an amount that reflects the consideration expected to be received in exchange

for those products or services.

We determine the transaction price associated with each deliverable based on the unique contract with

the customer, which is a stand-alone contract that we retain the right to accept or reject.

Revenue is recognized net of allowances for

returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.

the years ended December 31, 2022 and 2021, we recognized revenue of $ 60,067 and $ 60,500 , respectively, related to the performance obligations

under product development service agreements with customers.

These contracts are long term in nature and revenue is recognized at certain

milestone intervals upon our delivery and customer acceptance of work product related to those milestones:

namely, product design, packaging,

branding display, and prototypes.

There were no costs to obtain the contracts identified, and therefore, no asset has been recorded for

customer acquisition costs.

We have not recognized impairment losses related to the receivables from these contracts during the years

ended December 31, 2022 and 2021.

Additionally,

we recognized revenues of $ 1,659,291 and $ 2,862,769 during the years ended December 31, 2022 and 2021, respectively, related to the delivery

of product to our customers.

Each delivery is based on the unique contract with the customer, which is a stand-alone contract that we

retain the right to accept or reject.

Upon acceptance, we oblige delivery of such product to the customer at an agreed-upon place, time,

We recognize revenue under the unique contract upon fulfillment of our performance obligations therein, typically limited

to the delivery of product.

Accounts Receivable

Revenues that have been recognized but not yet

received are recorded as accounts receivable.

Losses on receivables will be recognized when it is more likely than not that

a receivable will not be collected.

An allowance for estimated uncollectible amounts will be recognized to reduce the amount

receivable to its net realizable value when needed.

As of December 31, 2022, the Company recorded an allowance for doubtful accounts of

February 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842), which superseded guidance

in ASC 840, Leases , which we adopted for the year ended December 31, 2019, under the modified retrospective transition approach

by applying the new standard to all leases existing at the date of initial application.

We account for short-term leases, those lasting

fewer than 12 months, using the practical expedient as outlined in the guidance, which does not include recording such leases on the

balance sheet.

adoption of the standard resulted in recording right-of-use (“ROU”) assets and operating lease liabilities of $22,291 as

of December 31, 2021.

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future

minimum lease payments over the lease term at commencement date.

As the lease does not provide an implicit rate, we use our incremental

borrowing rate based on information available at the commencement date in determining the present value of future payments.

The operating

lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred.

Lease terms may

include options to extend or terminate the lease when it is reasonably certain we will exercise that option.

Although considered, we

determined it was appropriate to exclude future renewal terms from the capitalization of our operating lease.

had one lease in effect requiring minimum monthly payments of $ 2,500 through October 2022.

We have determined the appropriate discount

rate to be 5 % based on our other borrowings secured by assets.

lease was renewed on October 19, 2022, on a month to months basis, with payments remaining at $ 2,500 a month.

in Securities

cost-method investment consists of an investment in a private digital multi-media technology company that totaled $ 300,000 at December

31, 2022 and 2021.

Because we owned less than 20 % of that company’s stock as of each date, and no significant influence or control

exists, the investment is accounted for using the cost method.

We evaluated the investment for impairment and determined there was none

during the periods presented.

of Long-Lived Assets

review our long-lived assets, including intangibles, for impairment when events or changes in circumstances indicate that the carrying

value of an asset may not be recoverable.

At each balance sheet date, we evaluate whether events and circumstances have occurred that

indicate possible impairment.

We use an estimate of future undiscounted net cash flows from the related asset or group of assets over

their remaining life in measuring whether the assets are recoverable.

We did no t record expenses for the impairment of long-lived assets

during the years ended December 31, 2022 or 2021.

are stated at the lower of average cost or net realizable value.

Cost on manufactured inventories includes labor, material, and overhead.

Overhead cost is based on indirect costs allocated to cost of sales, work-in-process inventory, and finished goods inventory.

overhead costs have been charged to cost of sales or capitalized as inventory, based on management’s estimate of the benefit of

indirect manufacturing costs to the manufacturing process.

there is evidence that the inventory’s value is less than original cost, the inventory is reduced to market value.

market value on current resale amounts and whether technological obsolescence exists.

We will seek agreements with manufacturing customers

that require them to purchase their inventory items in the event they cancel their business with us.

time to time, we will place deposits on inventory to be delivered in the future.

These deposits are carried as a separate balance sheet

component and totaled $ 40,440 (non-related-party) and $ 417,633 (related-party) as of December 31, 2022, and $ 11,639 (non-related-party)

and $ 87,042 (related-party) as of December 31, 2021.

most of tobacco related products, the Company pays in advance for Federal Excise Taxes and State Excise Taxes prior to receiving product.

The Company accrues those taxes on its balance sheet and expenses them per-unit basis as sold.

balances consisted of the following:

SCHEDULE OF INVENTORY

December 31, 2022

December 31, 2021

Finished goods

Raw materials

have outstanding stock options to directors and employees, which are described more fully in Note 13–Stock Options and Warrants.

We account for our stock options in accordance with ASC 718-10, Accounting for Stock Issued to Employees , and ASU 2018-07, Improvements

to Nonemployee Share-Based Payment Accounting , as updated, which requires the recognition of the cost of employee services received

in exchanged for an award of equity instruments in the financial statements and is measured based on the grant date fair value of the

ASC 718-10 also requires the stock option compensation expense to be recognized over the period during which an employee is required

to provide service in exchange for the award (typically the vesting period).

There was no impact to our methodology for accounting for

equity-based compensation as a result of adopting ASC 718-10 and ASU 2018-07.

Value of Financial Instruments

820-10-15, Fair Value Measurement-Overall-Scope and Scope Exceptions , defines fair value, thereby eliminating inconsistencies

in guidance found in various prior accounting pronouncements, and increases disclosures surrounding fair value calculations.

ASC 820-10-15

establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations.

three levels of inputs are defined as follows:

1 —Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

2 —Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the

asset or liability, such as quoted prices for similar assets or liabilities in active markets;

quoted prices for identical assets or

liabilities in markets with insufficient volume or infrequent transactions (less active markets);

or model-derived valuations in which

significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

3 —Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant

to the measurement of the fair value of the assets or liabilities.

payable and related-party payables have fair values that approximate the carrying value due to the short-term nature of these instruments.

Derivative liabilities are measured using level 3 inputs.

SCHEDULE OF FINANCIAL ASSETS AND LIABILITIES CARRIED AT FAIR VALUED MEASURED ON RECURRING BASIS

Total Fair Value at December 31, 2022

Quoted prices in active markets

Significant other observable inputs (Level 2)

Derivative liabilities

Total Fair Value at December 31, 2021

Quoted prices in active markets (Level 1)

Significant other observable inputs (Level 2)

Significant unobservable inputs (Level 3)

Derivative liabilities

loss per share is calculated by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding

during each period.

Diluted loss per share is similarly calculated, except that the weighted-average number of common shares outstanding

would include common shares that may be issued subject to existing rights with dilutive potential when applicable.

There were 106,623,280

potentially issuable shares from the conversions of convertible debentures outstanding that were excluded in dilutive outstanding shares

for the year ended December 31, 2022, due to the anti-dilutive effect these would have on net loss per share.

There were 144,264,247

such shares issuable as of December 31, 2021.

We do not currently have adequate authorized but unissued shares to satisfy our obligations

should all instruments eligible to convert to common stock be exercised.

We are not currently contemplating an increase in our authorized

shares but may do so in the future.

taxes are provided for the tax effects of the transactions reported in the financial statements and consist of taxes currently due plus

deferred taxes related primarily to tax net operating loss carryforwards.

The deferred tax assets and liabilities represent the future

tax return consequences of these differences, which will either be taxable or deductible when assets and liabilities are recovered or

settled, as well as operating loss carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to

apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred

tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

allowance is established against deferred tax assets when in the judgment of management, it is more likely than not that such deferred

tax assets will not become available.

Because the judgment about the level of future taxable income is dependent to a great extent on

matters that may, at least in part, be beyond our control, it is at least reasonably possible that management’s judgment about

the need for a valuation allowance for deferred taxes could change in the near term.

benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities.

amount recognized is measured as the largest amount of benefit that is greater than 50% likely to be realized upon settlement.

for “unrecognized tax benefits” is recorded for any tax benefits claimed in our tax returns that do not meet these recognition

and measurement standards.

As of December 31, 2022 and 2021, no liability for unrecognized tax benefits was required to be reported.

Issued Accounting Pronouncements

have implemented all new accounting pronouncements that are in effect.

These pronouncements did not have any material impact on our financial

statements unless otherwise disclosed, and we do not believe that there are any other new accounting pronouncements that have been issued

that might have a material impact on our financial position or results of operations.

3 — GOING CONCERN

accompanying consolidated financial statements have been prepared in conformity with US GAAP, which contemplates our continuation as a

going concern.

We had a working capital deficiency of $ 39,757,752 as of December 31, 2022, and a net loss from continuing operations

of $ 1,502,091 for the year ended December 31, 2022.

As of December 31, 2022, we had an accumulated deficit of $ 79,305,551 .

These conditions

raise substantial doubt about our ability to continue as a going concern.

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 financial statements do not include any adjustments that may be necessary if we are unable to

continue as a going concern.

the coming year, our foreseeable cash requirements will relate to development of business operations and associated expenses.

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.

4 — PROPERTY AND EQUIPMENT

incur certain costs associated with the design and development of molds and dies for our contract-manufacturing segment.

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.

and equipment and estimated service lives consist of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT AND ESTIMATED SERVICE LIVES

December 31, 2022

December 31, 2021

Useful Life (years)

Furniture and office equipment

accumulated depreciation

Property and equipment, net

recorded $ 3,881 and $ 3,198 of depreciation expense during the years ended December 31, 2022 and 2021.

5 — RELATED-PARTY TRANSACTIONS

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

There were no repayments made during the periods presented.

At December 31, 2022 and 2021, the principal amount owing on the

note was $ 151,833 and $ 151,833 , respectively.

No demand for payment has been made.

March 31, 2008, we issued to this same family member, along with two other company shareholders, promissory notes totaling $ 315,000 ($ 105,000

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 December

31, 2022 and 2021, was $ 72,466 and $ 72,466 , respectively.

No demand for payment has been made.

the year ended December 31, 2022, we made repayments to related parties of $ 154,832 had other noncash reductions of $ 422,315 .

the year ended December 31, 2021, we made repayments to related parties of $ 396,797 and had other noncash reductions of $ 82,018 .

were $ 21,882 and $ 21,882 of short-term advances due to related parties as of December 31, 2022 and 2021.

have agreed to issue stock options to Iehab Hawatmeh, our president, as compensation for services provided as our chief executive officer.

The terms of his employment agreement require us to grant options to purchase 6,000 shares of our stock each year, with an exercise $ 0.10 .

We issued options to purchase 6,000 and 6,000 shares of common stock during the years ended December 31, 2022 and 2021, respectively.

There were options to purchase 6,000 shares of common stock that expired during each year ended December 31, 2022 and 2021.

held outstanding options to purchase 30,000 and 30,000 shares of common stock as of December 31, 2022 and 2021, respectively.

13–Stock Options and Warrants.

of December 31, 2022 and 2021, we owed our president a total of $ 433,379 and $ 433,379 , respectively, in unsecured 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.

of December 31, 2022 and 2021, we owed a total of $ 13,740 and $ 13,740 , respectively, to a related party through trade payables incurred

in the normal course of business.

These amounts are shown as a separate related-party payable on the balance sheet as of each reporting

the year ended December 31, 2022, we had a net increase in deposits with a related-party inventory supplier totaling $ 330,591 .

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 $ 341,734 and $ 1,186,645

during the years ended December 31, 2022 and 2021, respectively.

6 — OTHER ACCRUED LIABILITIES

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

and other tax entities.

liabilities consist of the following:

SCHEDULE OF ACCRUED LIABILITIES

December 31, 2022

December 31, 2021

Tax liabilities

accrued liabilities as of December 31, 2022 and 2021, include a non-interest-bearing payable totaling $ 45,000 and $ 45,000 , respectively,

that is due on demand and customer deposits totaling $ 1,437,361 and $ 718,535 , respectively.

payroll and compensation liabilities consist of the following:

SCHEDULE OF ACCRUED PAYROLL AND COMPENSATION LIABILITIES

December 31, 2022

December 31, 2021

Director fees

Bonus expenses

Administrative payroll

7 — COMMITMENTS AND CONTINGENCIES

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.

Enterprises, Inc.

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.

have accrued $ 17,205,599 as of December 31, 2022 and 2021, related to this judgment, which is included in liabilities in discontinued

Payroll Taxes, Interest, and Penalties

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.

Amounts of $ 517,684 and $ 525,238 were due as December 31, 2022 and 2021,

respectively.

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.

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.

$ 345,000 was accrued during the year ended December 31, 2022.

also have an oral agreement with our other director that requires us to issue options to purchase 2,000 shares of our common stock each

have entered into agreements requiring us to pay certain royalties for the manufacture and distribution of licensed products.

based on a percentage of sales and remitted quarterly and are included in cost of sales for financial reporting purposes.

8 — NOTES PAYABLE

payable consisted of the following:

SCHEDULE OF NOTES PAYABLE

December 31, 2022

December 31, 2021

Note payable to former service provider for past due account payable (current)

Note payable for settlement of debt (long-term)

Small Business Administration loan

was $ 300,165 and $ 252,665 of accrued interest due on these notes as of December 31, 2022 and 2021, respectively.

9 — CONVERTIBLE DEBENTURES

debentures consisted of the following:

SCHEDULE OF CONVERTIBLE DEBENTURES

December 31, 2022

December 31, 2021

Convertible debenture, 5 % stated interest rate, secured by all our assets, due on May 30,

Convertible debenture, 5 % stated interest rate, secured by all our assets, due on February 8, 2022

Convertible debenture, 5 % stated interest rate, secured by all our assets, due on May 30, 2022

Convertible debenture, 5 % stated interest rate, secured by all our assets, due on December 8, 2022

Convertible debenture, 5 % stated interest rate, secured by all our assets, due

on April 30, 2027

current portion

Long-term portion

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.

During the year ended December 31, 2021, the convertible debenture holder converted $ 6,750

of accrued but unpaid interest into 225,000 shares of our common stock.

of December 31, 2022 and 2021, we had accrued interest on the convertible debentures totaling $ 1,788,318 and $ 1,655,037 , respectively.

10 — DERIVATIVE LIABILITIES

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 December 31, 2022, using the following assumptions:

SCHEDULE OF DERIVATIVE LIABILITIES AT FAIR VALUE

118.5 % - 120.4

Risk-free rates

Remaining life

fair values of the derivative instruments are measured each quarter, which resulted in a loss of $ 66,040 and $ 1,655,037 during the years

ended December 31, 2022 and 2021, respectively.

As of December 31, 2022 and 2021, the fair market value of the derivatives aggregated

$ 1,004,837 and $ 938,794 , respectively.

11 – COMMON STOCK TRANSACTIONS

are authorized to issue up to 100,000,000 shares of $ 0.001 par value common stock.

the year ended December 31, 2021, we issued a total of 225,000 shares of common stock for the conversion of $ 6,750 of accrued interest.

12 — INCOME TAXES

did not provide any current or deferred U.S.

federal income tax provision or benefit for any of the periods presented because we have

experienced operating losses since inception.

When it is more likely than not that a tax asset cannot be realized through future income,

the company must allow for this future tax benefit.

We provided a full valuation allowance on the net deferred tax asset, consisting

of net operating loss carryforwards, because management has determined that it is more likely than not that we will not earn income sufficient

to realize the deferred tax assets during the carryforward period.

federal income tax rate of 21 % is being used.

have not taken a tax position that, if challenged, would have a material effect on the financial statements for the years ended December

31, 2022 and 2021, applicable under FASB ASC 740, Income Taxes .

We did not recognize any adjustment to the liability for an uncertain

tax position and, therefore, did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet.

our tax returns remain open.

of December 31, 2022 and 2021, we had net operating loss carryforwards for tax reporting purposes of approximately $ 21.4 million and

$ 20.2 million, respectively.

During the year ended December 31, 2019, we dissolved four subsidiaries that had total net operating loss

carryforwards of approximately $ 8.9 million, which were forfeited upon dissolution, reducing our deferred tax asset by approximately

$ 1.9 million.

In addition, the realization of tax benefits relating to net operating loss carryforwards is limited due to the settlement

related to amounts previously due to the IRS, as discussed in Note 6 – Other Accrued Liabilities.

As of December 31, 2023, we recognized an accrual for tax liability expense

of $ 50,888 for our LBC Products, Inc, subsidiary only.

LBC is not considered part of the consolidated company for tax purposes.

SCHEDULE OF NET DEFERRED TAX ASSETS

Deferred Tax Assets:

NOL Carryover

Less valuation allowance

( 1,274,300 )

( 1,244,300 )

Net deferred tax assets

income tax provision differs from the amount of income tax determined by applying the U.S.

federal income tax rate to pretax income from

continuing operations for the years ended December 31, 2022 and 2021 due to the following:

SCHEDULE OF RECONCILIATION OF INCOME TAXES COMPUTED AT STATUTORY RATE

Book income (loss)

$ ( 315,400 )

Change in payroll accruals

Allowance for doubtful accounts

Stock option expense

Amortization of debt discount

Change in derivative liability

Valuation allowance

Income tax expense

13 — STOCK OPTIONS AND WARRANTS

Incentive Plans

the years ended December 31, 2022 and 2021, we granted to employees 8,000 and 8,000 options to purchase shares of common stock.

8,000 options granted during the year ended December 31, 2022, were valued using the following assumptions:

estimated five -year term,

estimated volatility of 118.5 %, and a risk-free rate of 1.37 %.

8,000 options granted during the year ended December 31, 2021, were valued using the following assumptions:

estimated five -year term,

estimated volatility of 91 %, and a risk-free rate of 1.61 %.

of December 31, 2022 and 2021, we had no unrecognized compensation related to outstanding options that have not yet vested at year-end

that would be recognized in subsequent periods.

of December 31, 2022, there were 40,000 options issued and vested with a weighted average exercise price of $ 0.05 and a weighted average

remaining life of 2.93 years.

Outstanding options as of December 31, 2022, consisted of:

SCHEDULE OF STOCK OPTIONS OUTSTANDING

Exercise Price

Average Exercise

Remaining Life

14— DISCONTINUED OPERATIONS

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 December 31, 2022 and 2021, as a result.

Additionally, the

revenues and costs associated with this business are displayed as losses from discontinued operations for the years ended December 31,

2022 and 2021.

assets and liabilities included in discontinued operations were as follows:

SCHEDULE OF DISCONTINUED OPERATIONS

December 31, 2022

December 31, 2021

Assets from Discontinued Operations:

Total assets from discontinued operations

Liabilities from Discontinued Operations:

Accounts payable

Accrued liabilities

Accrued interest

Accrued payroll and compensation expense

Current maturities of long-term debt

Related-party payable

Short-term advances payable

Total liabilities from discontinued operations

(loss) income from discontinued operations for the years ended December 31, 2022 and 2021, were comprised of the following components:

Years ended December 31,

Other income (expense):

Interest expense

Gain on write off of accounts payable

Total other (expense) income

Net (loss) income from discontinued operations

$ ( 153,466 )

15 — SUBSEQUENT EVENTS

accordance with SFAS 165 (ASC 855-10), management has performed an evaluation of subsequent events through the date that the financial

statements were issued and has determined that it does not have any material subsequent events to disclose in these consolidated financial

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data