CIRTRAN CORP 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 0 5525 ) F-2 Consolidated Balance Sheets as of December 31, 2023 and 2022 F-3 Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022 F-4 Consolidated Statements of Stockholders’ Deficit for the Years Ended December 31, 2023 and 2022 F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 F-6 Notes to the Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of CirTran Corporation Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of CirTran Corporation (“the Company”) as of December 31, 2023 and 2022, 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, 2023, 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, 2023 and 2022 and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Going Concern The 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 an accumulated deficit, net losses, and negative cash flows from operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s 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. Basis for Opinion These 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. We 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. The Company 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. Our 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. Critical Audit Matters Critical audit matters 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. We determined that there were no critical audit matters. Fruci & Associates II, PLLC – PCAOB ID #05525 We have served as the Company’s auditor since 2020. Spokane, Washington April 19, 2024 F- 2 CIRTRAN CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 2023 December 31, 2022 ASSETS Current assets: Cash $ — $ 18,081 Inventory 815,612 816,014 Deposits on inventory 26,983 40,440 Deposits on inventory - related party 224,411 417,633 Deposits on inventory Accounts receivable, net of allowance for doubtful accounts of $ 0 and $ 39,438 , respectively 21,536 62,873 Other current assets 441,095 328,468 Total current assets 1,529,637 1,683,509 Investment in securities at cost 300,000 300,000 Right-of-use asset — — Property and equipment, net of accumulated depreciation 18,925 15,018 Total assets $ 1,848,562 $ 1,998,527 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 625,848 $ 2,323,917 Liabilities for product returns and credits 8,701 — Related-party payable — 13,740 Accounts payable Related party Short-term advances payable 172,966 58,366 Short-term advances payable - related parties 21,882 21,882 Short-term advances payable Accrued liabilities 2,889,389 2,079,252 Accrued payroll and compensation expense 5,067,213 4,794,836 Accrued interest, current portion 5,758,603 5,214,530 Convertible debenture, current portion, net of discounts 264,284 264,284 Note payable, current portion 90,000 90,000 Note payable to stockholders 151,833 182,129 Note payable Derivative liability 1,296,937 1,004,837 Liabilities from discontinued operations 4,511,075 25,342,601 Total current liabilities: 20,858,731 41,390,374 Deferred tax liability 55,946 50,888 Note payable, net of current portion 634,636 656,000 Convertible debenture, net of current portion, net of discount 2,077,934 1,968,310 Total liabilities 23,627,247 44,065,572 Commitments and contingencies — — Stockholders’ deficit: Common stock, par value $ 0.001 ; 100,000,000 shares authorized; 4,945,417 shares issued and outstanding 4,945 4,945 Additional paid-in capital 37,233,561 37,233,561 Accumulated deficit ( 59,017,191 ) ( 79,305,551 ) Total stockholders’ deficit ( 21,778,685 ) ( 42,067,045 ) Total liabilities and stockholders’ deficit $ 1,848,562 $ 1,998,527 The accompanying notes are an integral part of these consolidated financial statements. F- 3 CIRTRAN CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS 2023 2022 For the Years Ended December 31, 2023 2022 Net sales $ 1,616,148 $ 1,719,358 Cost of sales 609,651 696,548 Gross profit 1,006,497 1,022,810 Operating expenses Employee costs 511,519 541,090 Selling, general and administrative expenses 509,895 1,004,003 Total operating expenses 1,021,414 1,545,093 Income (loss) from operations ( 14,917 ) ( 522,283 ) Other income (expense) Interest expense ( 768,899 ) ( 709,414 ) Gain on settlement of debt 194,709 — Gain on forgiveness of debt 328,384 — Loss on derivative valuation ( 292,100 ) ( 66,040 ) Other income 1,124 — Total other expense ( 536,782 ) ( 775,454 ) Net loss from continuing operations ( 551,699 ) ( 1,297,737 ) Gain (loss) from discontinued operations 20,831,526 ( 153,466 ) Net (loss) income before income tax 20,279,827 ( 1,451,203 ) Income tax benefit (expense) 8,533 ( 50,888 ) Net (loss) income $ 20,288,360 $ ( 1,502,091 ) Net loss from continuing operations per common share, basic and diluted $ ( 0.11 ) $ ( 0.27 ) Net loss from discontinued operations per common share, basic and diluted $ 4.21 $ ( 0.03 ) Net loss per common share, basic and diluted $ 4.10 $ ( 0.30 ) Basic and diluted weighted average common shares outstanding 4,945,417 4,945,417 The accompanying notes are an integral part of these consolidated financial statements. F- 4 CIRTRAN CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 Shares Amount Capital Deficit deficit Common Stock Additional Paid-in Accumulated Total stockholders’ Shares Amount Capital Deficit deficit Balance, December 31, 2021 4,945,417 $ 4,945 $ 37,233,561 $ ( 77,803,460 ) $ ( 40,564,954 ) Net loss — — — ( 1,502,091 ) ( 1,502,091 ) Balance, December 31, 2022 4,945,417 4,945 37,233,561 ( 79,305,551 ) ( 42,067,045 ) Balance 4,945,417 4,945 37,233,561 ( 79,305,551 ) ( 42,067,045 ) Net income — — — 20,288,360 20,288,360 Net income (loss) — — — 20,288,360 20,288,360 Balance, December 31, 2023 4,945,417 $ 4,945 $ 37,233,561 $ ( 59,017,191 ) $ ( 21,778,685 ) Balance 4,945,417 $ 4,945 $ 37,233,561 $ ( 59,017,191 ) $ ( 21,778,685 ) The accompanying notes are an integral part of these consolidated financial statements. F- 5 CIRTRAN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS 2023 2022 For the Years Ended December 31, 2023 2022 Cash flows from operating activities Net income (loss) $ 20,288,360 $ ( 1,502,091 ) Adjustments to reconcile net income to net cash (used) provided by operating activities: (Gain) loss from discontinued operations ( 20,831,526 ) 153,466 Depreciation expense 4,507 3,881 Loss on derivative valuation 292,100 66,040 Debt discount amortization 109,624 91,689 Gain on settlement of debt ( 194,709 ) — Gain on forgiveness of debt ( 328,384 ) — Amortization of right-of-use asset to rent expense — 22,291 Changes in operating assets and liabilities: Inventory 402 ( 278,053 ) Deposits on inventory 13,457 ( 28,801 ) Deposits on inventory - related party 193,222 ( 330,591 ) Accounts receivable 41,337 149,371 Other current assets ( 112,627 ) ( 60,648 ) Accounts payable ( 1,188,715 ) 399,949 Liabilities for product returns and credits 8,701 — Accrued liabilities 810,136 644,758 Payments for lease liability — ( 22,291 ) Accrued payroll and compensation 272,377 465,133 Accrued interest 544,073 334,313 Accrued tax liability 5,058 50,888 Net cash (used) provided by operating activities ( 72,607 ) 159,304 Cash flows from investing activities: Purchase of property and equipment ( 8,414 ) — Net Cash used in investing activities ( 8,414 ) — Cash flows from financing activities: Repayments of loans payable ( 4,182 ) — Proceeds from related-party loans 114,600 8,137 Repayments of related-party loans ( 47,478 ) ( 154,832 ) Net Cash provided by (used in) financing activities 62,940 ( 146,695 ) Net change in cash ( 18,081 ) 12,609 Cash, beginning of year 18,081 5,472 Cash, end of year $ — $ 18,081 Supplemental disclosure of cash flow information: Cash paid for interest $ — $ — Cash paid for income taxes $ — $ — The accompanying notes are an integral part of these financial statements. F- 6 CIRTRAN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2023 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. NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Use of Estimates The preparation of 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 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. Significant estimates include the estimated useful lives of property and equipment. Actual results could differ from those estimates. Principles of Consolidation The 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. Use of Estimates In 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 We 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. Cash Equivalents We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of December 31, 2023 and 2022. F- 7 Revenue Recognition We 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. During the years ended December 31, 2023 and 2022, we recognized revenue of $ 410,000 and $ 60,067 , 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, 2023 and 2022. Additionally, we recognized revenues of $ 1,206,148 and $ 1,659,291 during the years ended December 31, 2023 and 2022, respectively, related to the delivery of products 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, and price. We recognize revenue under the unique contract upon fulfillment of our performance obligations therein, typically limited to the delivery of product. The Company also recognizes revenue from advanced royalty payments per the terms in its Manufacturing and Distribution Agreement with one of its distributors. The royalty to be received is calculated based on 8 % of gross sales, with an annual minimum royalty paid upfront per calendar year for the term of the contract. There is a non-refundable $ 350,000 Minimum Royalty for FY 2023. The Company recognizes the minimum royalty and corresponding expense at the time of receipt. 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 December 31, 2023 and 2022, the Company has recorded an allowance for doubtful accounts of $ 0 and $ 39,438 , respectively. Investment in Securities Our cost-method investment consists of an investment in a private digital multi-media technology company that totaled $ 300,000 at December 31, 2023 and 2022. 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. Inventories Inventories 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. Indirect 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. F- 8 When there is evidence that the inventory’s value is less than original cost, the inventory is reduced to market value. We determine 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. From 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 total $ 26,983 (non-related-party) and $ 224,411 (related-party) as of December 31, 2023 and $ 40,440 (non-related-party) and $ 417,633 (related-party) as of December 31, 2022. On 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. Inventory balances consisted of the following: SCHEDULE OF INVENTORY December 31, 2023 December 31, 2022 Finished goods $ 772,589 $ 787,671 Raw materials 43,023 28,343 Total $ 815,612 $ 816,014 Fair Value of Financial Instruments ASC 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. The three levels of inputs are defined as follows: Level 1 —Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. Level 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. Level 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. Accounts 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, 2023 Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs(Level 3) Derivative liabilities $ 1,296,937 $ — $ — $ 1,296,937 Total Fair Value at December 31, 2022 Quoted prices in active markets (Level 1) Significant other observable inputs (Level 2) Significant unobservable inputs (Level 3) Derivative liabilities $ 1,004,837 $ — $ — $ 1,004,837 F- 9 Loss per Share Basic 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 approximately 216,834,000 and 106,623,280 potentially issuable shares from the conversions of convertible debentures outstanding that were excluded in dilutive outstanding shares for the years ended December 31, 2023 and 2022, respectively, due to the anti-dilutive effect these would have on net loss per share. 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. Income Taxes Income 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. A valuation 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. Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely to be realized upon settlement. A liability 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, 2023 and 2022, no liability for unrecognized tax benefits was required to be reported. Recently Issued Accounting Pronouncements The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of the change to its Consolidated Financial Statements and assures that there are proper controls in place to ascertain that the Company’s Consolidated Financial Statements properly reflect the change. In August 2020, the FASB issued ASU 2020-06 , Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging , or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity , and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 expands existing income tax disclosures for rate reconciliations by requiring disclosure of certain specific categories and additional reconciling items that meet quantitative thresholds and expands disclosures for income taxes paid by requiring disaggregation by certain jurisdictions. ASU 2023-09 is effective for annual periods beginning after December 15, 2024; early adoption is permitted. The Company does note expect the updated guidance to have a material impact on its disclosures. In December 2023, the FASB issued ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets, which establishes accounting guidance for crypto assets meeting certain criteria. Bitcoin meets this criteria. The amendments require crypto assets meeting the criteria to be recognized at fair value with changes recognized in net income each reporting period. Upon adoption, a cumulative-effect adjustment is made to the opening balance of retained earnings as of the beginning of the annual reporting period of adoption. ASU 2023-08 is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted. The Company elected to early adopt ASU 2023-08 for the year ended December 31, 2023. The updated guidance is not expected to have a material impact on the Company’s disclosures. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is intended to enhance reportable segment disclosures by requiring disclosures of significant segment expenses regularly provided to the CODM, requiring disclosure of the title and position of the CODM and explanation of how the reported measures of segment profit and loss are used by the CODM in assessing segment performance and allocation of resources. ASU 2023-07 is effective for the Company for annual periods beginning after December 31, 2023; early adoption is permitted. The updated guidance is not expected to have a material impact on the Company’s disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which was codified with its subsequent amendments as Accounting Standards Codification (“ASC”) Topic 326, Financial Instruments – Credit Losses (“ASC 326”). ASC 326 seeks to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments, including trade receivables, and other commitments to extend credit held by a reporting entity at each reporting date. The amendments require an entity to replace the incurred loss impairment methodology in other GAAP with a methodology that reflects current expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The updated guidance is effective for the Company for annual reporting periods beginning after December 15, 2022, and early adoption is permitted. The updated guidance is not expected to have a material impact on the Company’s disclosures. NOTE 3 — GOING CONCERN The 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 $ 19,329,094 as of December 31, 2023, and a net loss from continuing operations of $ 543,166 for the year ended December 31, 2023. As of December 31, 2023, we had an accumulated deficit of $ 59,017,191 . 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 unaudited 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 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. F- 10 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. Property and equipment and estimated service lives consist of the following: SCHEDULE OF PROPERTY AND EQUIPMENT AND ESTIMATED SERVICE LIVES December 31, 2023 December 31, 2022 Useful Life (years) Furniture and office equipment $ 12,212 $ 3,798 5 - 10 Vehicles 18,672 18,672 3 - 7 Total 30,884 22,470 Less: accumulated depreciation ( 11,959 ) ( 7,452 ) Property and equipment, net $ 18,925 $ 15,018 We recorded $ 4,508 and $ 3,881 of depreciation expense during the years ended December 31, 2023 and 2022. 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 December 31, 2023 and 2022, 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 December 31, 2023 and 2022, was $ 72,466 and $ 72,466 , respectively. No demand for payment has been made. There were $ 21,882 and $ 21,882 of short-term advances due to related parties as of December 31, 2023 and 2022, respectively. We 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 price of $ 0.10 . Mr. Hawatmeh held outstanding options to purchase 30,000 shares of common stock as of December 31, 2023. See Note 13–Stock Options and Warrants. As of December 31, 2023 and 2022, 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 December 31, 2023 and 2022, we owed a total of $ 0 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 date. During the year ended December 31, 2023, we had a net decrease in deposits with a related-party inventory supplier totaling $ 193,222 . 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 $ 837,618 and $ 341,734 during the periods ended December 31, 2023 and 2022, respectively. F- 11 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. Accrued liabilities consist of the following: SCHEDULE OF ACCRUED LIABILITIES December 31, 2023 December 31, 2022 Tax liabilities $ 37,228 $ 548,811 Accrued Royalty - Globrands LLC 1,092,915 — Other 1,759,246 1,530,441 Total $ 2,889,389 $ 2,079,252 Other accrued liabilities as of December 31, 2023 and 2022, include a non-interest-bearing payable totaling $ 45,000 and $ 45,000 , respectively, that is due on demand and customer deposits totaling $ 1,735,109 and $ 1,437,361 , respectively. Accrued payroll and compensation liabilities consist of the following: SCHEDULE OF ACCRUED PAYROLL AND COMPENSATION LIABILITIES December 31, 2023 December 31, 2022 Director fees $ 135,000 $ 135,000 Bonus expenses 121,858 121,858 Commissions 2,148 2,148 Consulting 438,822 500,322 Administrative payroll 4,369,385 4,035,508 Total $ 5,067,213 $ 4,794,836 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. F- 12 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 $ 517,684 were due as December 31, 2023 and 2022, 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 $ 345,000 and $ 345,000 was accrued during the period ended December 31, 2023 and 2022, respectively. We 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 year. 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 Notes payable consisted of the following: SCHEDULE OF NOTES PAYABLE December 31, 2023 December 31, 2022 Note payable to former service provider for past due account payable (current) $ 90,000 $ 90,000 Note payable for settlement of debt (long-term) 500,000 500,000 Small Business Administration loan 134,636 143,000 Total $ 724,636 $ 733,000 There is $ 366,626 and $ 313,764 of accrued interest due on these notes as of December 31, 2023 and 2022, respectively. F- 13 NOTE 9 — CONVERTIBLE DEBENTURES Convertible debentures consisted of the following: SCHEDULE OF CONVERTIBLE DEBENTURES December 31, 2023 December 31, 2022 Convertible debenture, 5 % stated interest rate, secured by all our assets, due on May 30, 2022 $ 200,000 $ 200,000 Convertible debenture, 5 % stated interest rate, secured by all our assets, due on February 8, 2022 25,000 25,000 Convertible debenture, 5 % stated interest rate, secured by all our assets, due on May 30, 2022 25,000 25,000 Convertible debenture, 5 % stated interest rate, secured by all our assets, due on December 8, 2022 25,000 25,000 Convertible debenture, 5 % stated interest rate, secured by all our assets, due on April 30, 2027 2,390,528 2,390,528 Subtotal $ 2,665,528 $ 2,665,528 Less: discounts ( 323,310 ) ( 432,934 ) Total $ 2,342,218 $ 2,232,594 Less: current portion ( 264,284 ) ( 264,284 ) Long-term portion $ 2,077,934 $ 1,968,310 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 December 31, 2023 and 2022, we had accrued interest on the convertible debentures totaling $ 1,921,590 and $ 1,788,318 , 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 December 31, 2023, using the following assumptions: SCHEDULE OF DERIVATIVE LIABILITIES AT FAIR VALUE Volatility 119.8 % - 127.6 % Risk-free rates 4.60 % - 4.79 % Stock price $ 0.023 Remaining life 0.25 - 3.33 years The fair values of the derivative instruments are measured each quarter, which resulted in a loss of $ 292,100 and $ 66,040 during the year ended December 31, 2023 and 2022, respectively. As of December 31, 2023 and December 31, 2022, the fair market value of the derivatives aggregated $ 1,296,937 and $ 1,004,837 , respectively. F- 14 NOTE 11 — INCOME TAXES We 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. The U.S. federal income tax rate of 21 % is being used. We have not taken a tax position that, if challenged, would have a material effect on the financial statements for the years ended December 31, 2023 and 2022, 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. All our tax returns remain open. As of December 31, 2023 and 2022, we had net operating loss carryforwards for tax reporting purposes of approximately $ 3.8 million and $ 21.4 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, 2022, 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. As of December 31, 2023, we recognized a tax benefit of $ 8,533 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 2023 2022 Deferred Tax Assets: NOL Carryover $ 1,177,300 $ 5,461,800 Less valuation allowance ( 1,177,300 ) ( 5,461,800 ) Net deferred tax assets $ — $ — The 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, 2023 and 2022 due to the following: SCHEDULE OF RECONCILIATION OF INCOME TAXES COMPUTED AT STATUTORY RATE 2023 2022 Book income (loss) $ 4,260,600 $ ( 315,400 ) Change in payroll accruals 57,200 74,200 Allowance for doubtful accounts ( 8,300 ) 8,300 Amortization of debt discount 23,000 19,255 Change in derivative liability 61,300 13,868 Valuation allowance ( 4,393,800 ) 199,777 Income tax expense $ — $ — NOTE 12 — STOCK OPTIONS AND WARRANTS Stock Incentive Plans During the year ended December 31, 2023, 8,000 options previously granted to employees expired. During the same period we granted those same employees 8,000 new options to purchase shares of common stock. The value of the options is nominal; therefore there is no current impact to the financial statements. F- 15 As of December 31, 2023 and 2022, 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 December 31, 2023 and 2022, there were 40,000 options issued and vested with a weighted average exercise price of $ 0.03 and a weighted average remaining life of 1.68 years. Outstanding options as of December 31, 2023, consisted of: SCHEDULE OF STOCK OPTIONS OUTSTANDING Exercise Price Count Average Exercise Remaining Life Exercisable $ 0.01 32,000 0.01 2.48 32,000 $ 0.10 8,000 0.10 4.75 8,000 Total 40,000 0.03 2.94 40,000 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 December 31, 2023 and 2022. Additionally, the revenues and costs associated with this business are displayed as losses from discontinued operations. As of December 31, 2023, the Company received legal representation that the judgement related to Play Beverages, LLC, (Note 7) can no longer be enforced after seven years, as a result, the Company has recognized a gain from discontinued operations of $ 18,873,932 of time barred debt previously included in liabilities from discontinued operations. Total assets and liabilities included in discontinued operations were as follows: SCHEDULE OF DISCONTINUED OPERATIONS December 31, 2023 December 31, 2022 Assets from Discontinued Operations: Cash $ — $ — Total assets from discontinued operations $ — $ — Liabilities from Discontinued Operations: Accounts payable $ 283,818 $ 18,338,848 Accrued liabilities 58,184 589,380 Accrued interest 1,636,624 1,483,157 Accrued payroll and compensation expense 122,864 131,108 Current maturities of long-term debt 239,085 239,085 Related-party payable — 1,776,250 Short-term advances payable 2,170,500 2,784,773 Total liabilities from discontinued operations $ 4,511,075 $ 25,342,601 Net gain (loss) from discontinued operations for the years ended December 31, 2023 and 2022, were comprised of the following components: 2023 2022 Years ended December 31, 2023 2022 Other income (expense): Gain on settlement 18,878,359 — Gain on Forgiveness of Debt 2,106,633 — Interest expense ( 153,466 ) ( 153,466 ) Net gain (loss) from discontinued operations $ 20,831,526 $ ( 153,466 ) F- 16 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. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.