UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________ to _______________
Commission
File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | None | None |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller
reporting company | ||
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 19, 2026, there were shares of common stock, $ par value, outstanding.
TABLE OF CONTENTS
| 2 |
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CIRTRAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2026 | December 31, 2025 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Inventory | ||||||||
| Deposits on inventory | ||||||||
| Deposits on inventory - related party | ||||||||
| Accounts receivable, net | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Investment in securities at cost | ||||||||
| Property and equipment, net of accumulated depreciation | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Liabilities for product returns and credits | ||||||||
| Short-term advances payable | ||||||||
| Short-term advances payable - related parties | ||||||||
| Accrued liabilities | ||||||||
| Accrued payroll and compensation expense | ||||||||
| Accrued interest, current portion | ||||||||
| Convertible debenture, current portion, net of discounts | ||||||||
| Note payable, current portion | ||||||||
| Note payable to stockholders | ||||||||
| Derivative liabilities | ||||||||
| Liabilities from discontinued operations | ||||||||
| Total current liabilities: | ||||||||
| Note payable, net of current portion | ||||||||
| Convertible debenture, net of current portion, net of discount | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ deficit: | ||||||||
| Common stock, par value $; shares authorized; shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
CIRTRAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Employee costs | ||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on forgiveness of debt | ||||||||||||||||
| Gain (loss) on derivative valuation | ( | ) | ( | ) | ||||||||||||
| Other income | ||||||||||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) from discontinued operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Net income (loss) before income tax | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax | ( | ) | ||||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Net loss from continuing operations per common share, basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Net income (loss) from discontinued operations per common share, basic and diluted | $ | ) | $ | ) | $ | $ | ) | |||||||||
| Net income (loss)per common share, basic and diluted | $ | ) | $ | ) | $ | $ | ) | |||||||||
| Basic and diluted weighted average common shares outstanding | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
CIRTRAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
| Common Stock | Additional Paid-in | Accumulated | Total stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | deficit | ||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net income | — | |||||||||||||||||||
| Balance, March 31, 2026 | ( | ) | ( | ) | ||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Total stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | deficit | ||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance, March 31, 2025 | ( | ) | ( | ) | ||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
CIRTRAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used by operating activities: | ||||||||
| (Income) loss from discontinued operations | ( | ) | ||||||
| Depreciation expense | ||||||||
| Gain on derivative valuation | ( | ) | ( | ) | ||||
| Debt discount amortization | ||||||||
| Gain on forgiveness of debt | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Inventory | ( | ) | ||||||
| Deposits on inventory | ||||||||
| Deposits on inventory - related party | ( | ) | ||||||
| Accounts receivable | ( | ) | ||||||
| Other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Liabilities for product returns and credits | ( | ) | ||||||
| Accrued liabilities | ( | ) | ( | ) | ||||
| Accrued payroll and compensation | ||||||||
| Accrued interest | ||||||||
| Short-term advances payable | ( | ) | ||||||
| Net cash provided (used) by operating activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Bank overdraft | ( | ) | ||||||
| Proceeds from related-party loans | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
CIRTRAN CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2026
NOTE 1 — ORGANIZATION AND NATURE OF OPERATIONS
In 1987, CirTran Corporation was incorporated in Nevada under the name Vermillion Ventures, Inc., for the purpose of acquiring other operating corporate entities. We were largely inactive until July 1, 2000, when our wholly owned subsidiary, CirTran Corporation (Utah), acquired substantially all the assets and certain liabilities of Circuit Technology, Inc., founded by our president, Iehab Hawatmeh.
We, together with our majority-owned subsidiaries, manufacture, distribute, and sell condoms, electronic tobacco products, cigars, energy drinks, water beverages, and related merchandise, all using the HUSTLER® brand name. Since entering our 2019 five-year manufacturing and distribution agreement with an unrelated party, our efforts have been devoted to phase one of our development of all HUSTLER®-branded products, which led us to generating revenue during 2020 for the first time in several years. Business continued to thrive in the States and some international countries, expanding across borders and reaching new markets. Despite challenges, The Company adapted and flourished, driven by great brand and product categories. This growth was not only boosted by the domestic economy but also established a global presence, solidifying the foundation for future success.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Our unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These financial statements and the notes attached hereto should be read in conjunction with the financial statements and notes included in our Form 10-K for the fiscal year ended December 31, 2025. In the opinion of our management, all adjustments, including normal recurring adjustments necessary to present fairly our financial position, as of June 30, 2026, and the results of our operations and cash flows for the six months then ended have been included. The results of operations for the interim period are not necessarily indicative of the results for the full year ending December 31, 2026.
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.
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.
As
of June 30, 2026 and December 31, 2025, one customer represented
| 7 |
Operating Segments
Operating
segments are components of an entity for which discrete financial information is available and regularly reviewed by the Company’s
Chief Operating Decision Maker (“CODM”) in assessing segment performance, allocating resources and making operating decisions.
The Company’s CODM is its Chief Executive Officer. The CODM evaluates the Company’s operating segments using financial information
that includes revenues, operating expenses and operating results. The Company has identified
Cash Equivalents
We
consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were
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 six months ended June 30, 2026 and 2025, we recognized revenue of $
Additionally,
we recognized revenues of $
Accounts Receivable
Revenues that have been recognized but not yet received are recorded as accounts receivable. The Company estimates credit losses based on the Current Expected Credit Losses (“CECL”) model in accordance with ASC 326. The allowance for credit losses is based on a variety of factors, including historical loss experience, current conditions, and reasonable and supportable forecasts of future economic conditions.
Upon adoption of ASU 2025-05 in the year ended December 31, 2025, the Company elected the practical expedient to estimate expected credit losses based on actual uncollected accounts. Under this approach, the Company recognizes credit losses as receivables are deemed uncollectible rather than applying more complex forward-looking modeling. The Company applied this guidance prospectively, and the adoption did not have a material impact on the Company’s consolidated financial statements. The election of this practical expedient simplifies the estimation process by reducing the level of judgment and complexity required in applying the CECL model.
As
of June 30, 2026 and December 31, 2025, the Company has recorded an allowance for doubtful accounts of $
| 8 |
Investment in Securities
Our
cost-method investment consists of an investment in a private digital multi-media technology company that totaled $
Inventories
Inventories are stated at the lower of average cost or net realizable value.
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 $ (non-related-party) and $
For most of the 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 on a per-unit basis as sold.
Inventory balances consisted of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Finished goods | $ | $ | ||||||
| Raw materials | ||||||||
| Total | $ | $ | ||||||
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.
| 9 |
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.
| Total Fair Value at June 30, 2026 | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
| Total Fair Value at December 31, 2025 | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | |||||||||||||
| Derivative liabilities | $ | $ | $ | $ | ||||||||||||
Basic earnings (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per common share is computed by giving effect to all potentially dilutive common shares outstanding during the period, including shares issuable upon the conversion of convertible debt and the exercise of stock options and warrants, using the applicable methods prescribed by ASC 260, Earnings Per Share.
Potential common shares are excluded from the computation of diluted earnings (loss) per share when their effect would be antidilutive. Accordingly, for periods in which the Company reports a net loss, potentially dilutive securities are excluded from diluted loss per share because their inclusion would reduce the reported loss per share.
There were approximately and potentially issuable shares from the conversions of convertible debentures outstanding as of June 30, 2026 and 2025, respectively. 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. For the six months ended June 30, 2025, the Company incurred net losses; therefore, basic and diluted loss per share are the same because the effect of all potentially dilutive securities was antidilutive. For the six months ended June 30, 2026, the Company reported net income and evaluated its outstanding potentially dilutive securities in determining diluted earnings per share. Securities whose inclusion would have been antidilutive were excluded from the calculation of diluted earnings per share.
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 June 30, 2026 and December 31, 2025, 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.
| 10 |
NOTE 3 — GOING CONCERN
The
accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going
concern. As of June 30, 2026, the Company had cash of $
Management’s plans to address these conditions include continuing to increase revenues, reduce operating costs, obtain additional advances from related parties, and seek additional financing through debt or equity transactions as needed to support ongoing operations. The Company’s ability to continue as a going concern is dependent upon its ability to generate sufficient cash flows from operations and obtain additional financing when required. There can be no assurance that the Company will be successful in these efforts or that additional financing will be available on acceptable terms, if at all.
The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.
NOTE 4 — PROPERTY AND EQUIPMENT
We incur certain costs associated with the design and development of molds and dies for our contract-manufacturing operations. 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:
| June 30, 2026 | December 31, 2025 | Useful Life (years) | ||||||||
| Furniture and office equipment | $ | $ | ||||||||
| Total | ||||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||
| Property and equipment, net | $ | $ | ||||||||
We
recorded $
NOTE 5 — RELATED PARTY TRANSACTIONS
In
2007, we issued a
On
March 31, 2008, we issued to this same family member, along with two other company shareholders, promissory notes totaling $
There
were $
| 11 |
As
of June 30, 2026 and December 31, 2025, we owed our president a total of $
Total
inventory purchases from the related parties were $
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:
| June 30, 2026 | December 31, 2025 | |||||||
| Tax liabilities | $ | $ | ||||||
| Accrued Royalty - Globrands LLC | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
Other
accrued liabilities as of June 30, 2026 and December 31, 2025, include a non-interest-bearing payable totaling $
Accrued payroll and compensation liabilities consist of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Director fees | $ | $ | ||||||
| Bonus expenses | ||||||||
| Commissions | ||||||||
| Consulting | ||||||||
| Administrative payroll | ||||||||
| Total | $ | $ | ||||||
| 12 |
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.
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 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
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:
| June 30, 2026 | December 31, 2025 | |||||||
| Note payable to former service provider for past due account payable (current) | $ | $ | ||||||
| Note payable for settlement of debt | ||||||||
| Small Business Administration loan | ||||||||
| Total | $ | $ | ||||||
There
is $
| 13 |
NOTE 9 — CONVERTIBLE DEBENTURES
Convertible debentures consisted of the following:
| June 30, 2026 | December 31, 2025 | |||||||
| Convertible debenture, | $ | $ | ||||||
| Convertible debenture, | ||||||||
| Convertible debenture, | ||||||||
| Convertible debenture, | ||||||||
| Convertible debenture, | ||||||||
| Subtotal | $ | $ | ||||||
| Less: discounts | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Long-term portion | $ | $ | ||||||
The
convertible debentures and accrued interest are convertible into shares of our common stock at the lower of $
On November 26, 2025, the Company and the lender entered into a Forbearance and Standstill Agreement, extending the maturity dates on all debentures to April 30, 2027.
As
of June 30, 2026 and December 31, 2025, we had accrued interest on the convertible debentures totaling $
NOTE 10 — DERIVATIVE LIABILITIES
As
discussed in Note 9—Convertible Debentures, we have entered into five separate agreements to borrow a total of $
| June 30, 2026 | December 31, 2025 | |||||||
| Volatility | % | % | ||||||
| Risk-free rates | % | % | ||||||
| Stock price | $ | |||||||
| Remaining life | ||||||||
A summary of the activity of the derivative liability for these notes is as follows:
| Balance at December 31, 2024 | $ | |||
| Derivative gain due to mark to market adjustment | ( | ) | ||
| Balance at December 31, 2025 | ||||
| Derivative gain due to mark to market adjustment | ( | ) | ||
| Balance at June 30, 2026 | $ |
The
fair values of the derivative instruments are measured each quarter, which resulted in a gain of $
| 14 |
Stock Incentive Plans
As of June 30, 2026 and 2025, we had unrecognized compensation related to outstanding options that have not yet vested at year-end that would be recognized in subsequent periods.
Number of Options | Weighted Average Exercise Price | Average Remaining Life | ||||||||||
| Outstanding, December 31, 2024 | $ | |||||||||||
| Issued | $ | — | — | |||||||||
| Cancelled | ( | ) | $ | — | — | |||||||
| Exercised | $ | — | — | |||||||||
| Outstanding, December 31, 2025 | $ | |||||||||||
| Issued | $ | — | — | |||||||||
| Cancelled | ( | ) | $ | — | — | |||||||
| Exercised | $ | — | — | |||||||||
| Exercisable, June 30, 2026 | $ | |||||||||||
NOTE 12 — SEGMENTS
The
Company has
The following table details revenue and operating expenses, for the Company’s reportable segments for the six months ended June 30, 2026.
| Tobacco Products | All other Products | Total | ||||||||||
| Revenue: | ||||||||||||
| Net sales | $ | $ | $ | |||||||||
| Cost of sales | ||||||||||||
| Gross profit | ||||||||||||
| Operating expenses: | ||||||||||||
| Employee costs | ||||||||||||
| Selling, general and administrative expenses | ||||||||||||
| Total operating expenses | ||||||||||||
| Income from operations | ||||||||||||
| Other income (expense): | ||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||
| Gain on forgiveness of debt | ||||||||||||
| Gain on derivative valuation | ||||||||||||
| Total other expense | ( | ) | ( | ) | ||||||||
| Net income (loss) from continuing operations | ( | ) | ( | ) | ||||||||
| Income from discontinued operations | ||||||||||||
| Net Income before income tax | ||||||||||||
| Income tax | ||||||||||||
| Net Income | $ | $ | $ | |||||||||
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The following table details revenue, operating expenses, and assets for the Company’s reportable segments for the six months ended June 30, 2025.
| Tobacco Products | All other Products | Total | ||||||||||
| Revenue: | ||||||||||||
| Net sales | $ | $ | $ | |||||||||
| Cost of sales | ||||||||||||
| Gross profit | ||||||||||||
| Operating expenses: | ||||||||||||
| Employee costs | ||||||||||||
| Selling, general and administrative expenses | ||||||||||||
| Total operating expenses | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||
| Gain on forgiveness of debt | ||||||||||||
| Gain on derivative valuation | ||||||||||||
| Other income | ||||||||||||
| Total other expense | ( | ) | ( | ) | ||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ||||||
| Loss from discontinued operations | ( | ) | ( | ) | ||||||||
| Income tax | ( | ) | ( | ) | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
NOTE 13 — INCOME TAXES
The Company’s deferred tax assets consist primarily of net operating loss carryforwards and other temporary differences. Management evaluates the realizability of deferred tax assets each reporting period and concludes that it is more likely than not that such assets will not be realized; accordingly, a valuation allowance is maintained against the full amount of deferred tax assets.
At
June 30, 2026, the Company had federal net operating loss carryforwards of approximately $
The Company accounts for uncertain tax positions in accordance with ASC 740. As of June 30, 2026, the Company had no unrecognized tax benefits and no accrued interest or penalties related to uncertain tax positions. The Company’s tax returns remain subject to examination by taxing authorities for open tax years.
NOTE 14 — DISCONTINUED OPERATIONS
On 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 June 30, 2026 and December 31, 2025. Additionally, the revenues and costs associated with this business are displayed as income (loss) from discontinued operations.
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Total assets and liabilities included in discontinued operations were as follows:
| June 30, 2026 | December 31, 2025 | |||||||
| Assets from Discontinued Operations: | ||||||||
| Cash | $ | $ | ||||||
| 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 | ||||||||
| Short-term advances payable | ||||||||
| Total liabilities from discontinued operations | $ | $ | ||||||
Net income (loss) from discontinued operations for the six months ended June 30, 2026 and 2025, were comprised of the following components:
| Six Months ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Other expense: | ||||||||
| Interest expense | $ | ( | ) | $ | ( | ) | ||
| Gain on write off of time barred debt | ||||||||
| Net income (loss) from discontinued operations | $ | $ | ( | ) | ||||
NOTE 15 — SUBSEQUENT EVENTS
Management evaluated subsequent events in accordance with ASC 855, Subsequent Events, through the date the unaudited condensed consolidated financial statements were issued and determined that there were no material subsequent events requiring recognition or disclosure.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our condensed consolidated unaudited financial statements and notes to our unaudited financial statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors discussed elsewhere in this report.
Overview
Based on our diversified expertise in manufacturing, marketing, distribution, and technology services in a wide variety of consumer products, including tobacco products, medical devices, and beverages, around the world, we have an innovative and consumer-focused approach to brand portfolio management, resting on a strong understanding of consumers domestically, and we have established a footprint in more than 50 key, international markets.
Since 2021, we continue under our 2019 five-year manufacturing and distribution agreement with an unrelated party to manufacture, distribute, and sell condoms, electronic tobacco products, cigars, energy drinks, water beverages, and related merchandise, all using the HUSTLER® brand name.
Results of Operations for the Three Months Ended June 30, 2026, Compared to the Three Months Ended June 30, 2025
Sales and Cost of Sales
During the three months ended June 30, 2026 and 2025, we had net sales of $1,171,666 and $168,435, respectively, an increase of $1,003,231 or 595.6%. We had cost of sales of $552,642 and $83,493, respectively, and gross profit of $619,024 and $84,942, respectively. Revenues are derived from the design, manufacture, and delivery of certain licensed products in accordance with our GloBrands-HUSTLER® distribution agreement. We had higher revenue in the current period due to increased demand for our vapor products.
Operating Expenses
During the three months ended June 30, 2026 and 2025, employee costs were $128,567 and $122,546, respectively, an increase of only $6,021 or 4.9%.
During the three months ended June 30, 2026 and 2025, selling, general, and administrative expenses (“SG&A”) were $329,829 and $155,654, respectively, an increase of $174,175 or 111.9%. The increase in SG&A expenses was the result of increased promotional activities to support higher sales.
Other Expense
Total other expense during the three months ended June 30, 2026 was $256,145 compared to $331,231 in the prior period. In the current period we had $214,734 of interest expense and a loss of $41,411 on derivative valuation. In the prior period we had $203,387 of interest expense, a loss of $127,850 on derivative valuation and other income of $6.
Net Loss
Our net loss from continuing operations for the three months ended June 30, 2026, was $95,517 compared to $524,489 for the three months ended June 30, 2025, a decrease in our net loss from continuing operations of $428,972 or 81.8%. Our net loss decreased in the current period because of our income from operations of $160,628 in the current period compared to a loss from operations of $193,258 in the prior period.
For the three months ended June 30, 2026 and 2025, we recognized a loss from discontinued operations of $12,407 and $38,261, respectively, of interest expense.
Results of Operations for the Six Months Ended June 30, 2026, Compared to the Six Months Ended June 30, 2025
Sales and Cost of Sales
During the six months ended June 30, 2026 and 2025, we had net sales of $2,333,019 and $629,251, respectively, an increase of $1,703,768 or 270.8%. We had cost of sales of $1,250,613 and $274,015, respectively, and gross profit of $1,082,406 and $355,236, respectively. Revenues are derived from the design, manufacture, and delivery of certain licensed products in accordance with our GloBrands-HUSTLER® distribution agreement. We had higher revenue in the current period due to increased demand for our vapor products.
Operating Expenses
During the six months ended June 30, 2026 and 2025, employee costs were $258,587 and $251,454 respectively, an increase of only $7,133 or 2.8%.
During the six months ended June 30, 2026 and 2025, selling, general, and administrative expenses (“SG&A”) were $627,069 and $340,313, respectively, an increase of $286,756 or 84.3%. The increase in SG&A expenses period over period was the result of increased promotional activities to support higher sales.
Other Expense
Total other expense during the six months ended June 30, 2026 was $358,004 compared to $396,230 in the prior period. In the current period we had $426,540 of interest expense, a gain of $63,025 on derivative valuation and a gain on forgiveness of debt of $5,511. In the prior period we had $405,761 of interest expense, a gain of $4,384 on derivative valuation and a gain on forgiveness of debt of $5,141.
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Net Loss
Our net loss from continuing operations for the six months ended June 30, 2026, was $161,254 compared to $632,761 for the six months ended June 30, 2025, a decrease in our net loss from continuing operations of $471,507. Our net loss decreased in the current period as a result of our income from operations of $196,750 compared to a loss from operations of $236,531 in the prior period.
For the six months ended June 30, 2026, we recognized a gain from discontinued operations of $2,274,031 due to the extinguishment of time barred debt $2,324,279 partially offset by $50,248 of interest expense.
For the six months ended June 30, 2025, we recognized a loss from discontinued operations of $76,102 due to interest expense.
Liquidity and Capital Resources
We have had a history of losses from operations, as our expenses have been greater than our revenue. Our accumulated deficit was approximately $60.2 million at June 30, 2026. As of June 30, 2026, we had current assets of $2.4 million and current liabilities of approximately $22.6 million, resulting in a working capital deficit of approximately $20.2 million at June 30, 2026.
Operating Activities
During the six months ended June 30, 2026, net cash provided by operating activities was $124,586, compared with net cash used in operating activities of $627,088 during the six months ended June 30, 2025. The improvement was primarily attributable to improved operating results and changes in working capital.
Financing Activities
During the six months ended June 30, 2026, financing activities provided $23,962 of cash, compared to $631,423 of cash provided during the six months ended June 30, 2025. Cash provided in financing consisted mostly of related party loans.
Our Capital Resources and Anticipated Requirements
Our monthly operating costs are approximately $35,000 per month, excluding approximately $50,000 of accruing interest expense and capital expenditures. We continue to focus on generating revenue and reducing our monthly business expenses through cost reductions and operational streamlining. We have only recently begun to generate enough cash to sustain our day-to-day operations, and we expect to access external capital resources in the future to fund any new projects we may undertake. We cannot assure that we will be successful in obtaining such capital.
If we seek infusions of capital from investors, it is unlikely that we will be able to obtain additional debt financing. If we did incur additional debt, we would be required to devote additional cash flow to servicing the debt and securing the debt with assets.
Our issuance of additional shares for equity or for conversion of debt could dilute the value of our common stock and existing stockholders’ positions.
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Convertible Debentures and Note Payable
We currently have an outstanding amended, restated, and consolidated secured convertible debenture with Tekfine, LLC, an unrelated entity, to the extent not previously converted. The amended debenture had a total outstanding principal balance of $2.4 million, with accrued interest of approximately $2.2 million as of June 30, 2026. We also have four additional convertible debentures with Tekfine. On November 26, 2025, the Company and the lender entered into a Forbearance and Standstill Agreement, extending the maturity dates on all debentures to April 30, 2027.
The convertible debentures and accrued interest are convertible into shares of our common stock at the lower of $100 or $0.10 (depending on the instrument) or the lowest bid price for the 20 trading days prior to conversion.
As of June 30, 2026 and December 31, 2025, there is $1,424,661 and $1,400,699 of short-term advances due to related parties, respectively. The advances are due on demand and included in current liabilities. No demand for payment has been made.
Going Concern
The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of June 30, 2026, the Company had cash of approximately $158,000, a working capital deficit of approximately $20.3 million, and an accumulated deficit of approximately $60.2 million. In addition, the Company incurred a loss from continuing operations of approximately $161,000 for the six months ended June 30, 2026. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.
Management’s plans to address these conditions include continuing to increase revenues, reduce operating costs, obtain additional advances from related parties, and seek additional financing through debt or equity transactions as needed to support ongoing operations. The Company’s ability to continue as a going concern is dependent upon its ability to generate sufficient cash flows from operations and obtain additional financing when required. There can be no assurance that the Company will be successful in these efforts or that additional financing will be available on acceptable terms, if at all.
The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.
Critical Accounting Policies
We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. Refer to Note 2 – Summary of Significant Accounting Policies for discussion.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of June 30, 2026, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive and financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, management concluded that our disclosure controls and procedures were not effective as of June 30, 2026, to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the periods prescribed by U.S. Securities and Exchange Commission and that such information is accumulated and communicated to management, including our chief executive and financial officer, as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended June 30, 2026, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 5. OTHER INFORMATION
None.
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PART II—OTHER INFORMATION
ITEM 6. EXHIBITS
The following exhibits are filed as a part of this report:
| Exhibit Number* | Title of Document | Location | ||
| Item 31 | Rule 13a-14(a)/15d-14(a) Certifications | |||
| 31.01 | Certification of Principal Executive and Principal Financial Officer Pursuant to Rule 13a-14 | This filing. | ||
| Item 32 | Section 1350 Certifications | |||
| 32.01 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | This filing. | ||
| Item 101 | Interactive Data File | |||
| 101.INS | Inline XBRL Instance Document | This filing. | ||
| 101.SCH | Inline XBRL Taxonomy Extension Schema | This filing. | ||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase | This filing. | ||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase | This filing. | ||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase | This filing. | ||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase | This filing. | ||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | All exhibits are numbered with the number preceding the decimal indicating the applicable SEC reference number in Item 601 and the number following the decimal indicating the document’s sequence. |
| ** | The XBRL related information in Exhibit 101 will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and will not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as is expressly set forth by specific reference in such filing or document. |
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SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CIRTRAN CORPORATION | ||
| Dated: August 18, 2026 | By: | /s/ Iehab Hawatmeh |
| Iehab Hawatmeh, President | ||
| Principal Executive and Financial Officer | ||
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