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SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[ ] Definitive Information Statement
CirTran Corporation
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(Name of Registrant as Specified in Charter)
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(Name of Person(s) Filing Proxy Statement If Other Than The Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
____________________________________________________________________
2) Aggregate number of securities to which transaction applies:
____________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
____________________________________________________________________
4) Proposed maximum aggregate value of transaction:
____________________________________________________________________
5) Total fee paid:
____________________________________________________________________
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form of Schedule and the date of its filing.
1) Amount Previously Paid:_______________________________________
2) Form, Schedule or Registration Statement No___________________
3) Filing Party:_________________________________________________
4) Date Filed:___________________________________________________
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CirTran Corporation
4125 South 6000 West
West Valley City, Utah 84128
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
Information Statement pursuant to
Section 14(c) of the Securities Exchange Act of 1934
February ___, 2007
To the Shareholders:
The purpose of this Information Statement is to is to inform the
holders of record, as of the close of business on February 5, 2007 (the "Record
Date"), of shares of common stock, par value $0.001 per share (the "Common
Stock") of CirTran Corporation, a Nevada corporation ("CirTran" or the
"Company"), that the holders of 52.61% of our capital stock as of the Record
Date have given written consent as of January 1, 2007, to approve the amendment
of our articles of incorporation to increase our authorized capital to include
1,500,000,000 shares of our common stock.
We encourage you to read the attached Information Statement carefully, including
the exhibits, for further information regarding these actions. In accordance
with Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), the approval of the action described herein by the
holders of a majority of the voting power of the Company will be deemed ratified
and effective at a date that is at least 20 days after the date this Information
Statement has been mailed or furnished to our stockholders. This Information
Statement is first being mailed or furnished to stockholders on or about
[February __], 2007.
THIS IS NOT A NOTICE OF A MEETING OF STOCKHOLDERS AND NO STOCKHOLDERS' MEETING
WILL BE HELD TO CONSIDER THE MATTERS DESCRIBED HEREIN. This Information
Statement is being furnished to you solely for the purpose of informing
stockholders of the matters described herein in compliance with Regulation 14C
of the Exchange Act.
By Order of the Board of Directors,
/s/ Iehab Hawatmeh
Salt Lake City, Utah
February__, 2007 Iehab Hawatmeh,
President and Director
CirTran Corporation
4125 South 6000 West
West Valley City, Utah 84128
(801) 963-5112
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INFORMATION STATEMENT
---------------------------------
This Information Statement is being provided to the Shareholders of CirTran
Corporation ("CirTran" or the "Company"), in connection with our prior receipt
of approval by written consent, in lieu of a meeting of shareholders, to approve
an amendment to our Articles of Incorporation to increase our authorized capital
to include 1,500,000,000 shares of our common stock, $0.001 par value per share.
ACTIONS BY BOARD OF DIRECTORS AND CONSENTING STOCKHOLDERS
General
The Company will pay all costs associated with the distribution of this
Information Statement, including the costs of printing and mailing. The Company
will only deliver one Information Statement to multiple stockholders sharing an
address unless the Company has received contrary instructions from one or more
of the stockholders. The Company will promptly deliver a separate copy of this
Information Statement and future stockholder communication documents to any
stockholder at a shared address to which a single copy of this Information
Statement was delivered, or deliver a single copy of this Information Statement
and future stockholder communication documents to any stockholder or holders
sharing an address to which multiple copies are now delivered, upon written or
oral request to the following address:
4125 South 6000 West
West Valley City, Utah 84128
(801) 963-5112
Stockholders may also address future requests regarding delivery of information
statements and/or annual reports by contacting the Company at the address listed
above.
Information on Consenting Stockholders
Pursuant to the Company's Bylaws and the Nevada Revised Statutes, the amendment
to our Articles of Incorporation (the "Amendment") must be approved by the vote
of the holders of shares representing a majority of the voting power of the
common stock. The Company's Articles of Incorporation do not authorize
cumulative voting. As of the Record Date, the Company had 750,000,000 authorized
shares of capital stock, of which ______________ were issued and outstanding.
The consenting stockholders, who consist of 35 current stockholders of the
Company, are collectively the record and beneficial owners of 344,945,599
shares, which represented 52.61% of the 655,716,326 issued and outstanding
shares of the Company's outstanding capital stock as of January 1, 2007.
Pursuant to Chapter 78.325 of the Nevada Revised Statutes, the consenting
stockholders voted in favor of the actions described by written consent, dated
as of January 1, 2007. The actions taken by the Company's Board of Directors and
the consenting stockholders will become effective on [March ___], 2007, twenty
business days from the mailing of this Information Statement to the stockholders
of record on the Record Date. No consideration was paid to the consenting
stockholders to obtain their written consent to these actions.
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DISSENTERS' RIGHTS OF APPRAISAL
No action was taken in connection with the proposal by the Company's Board of
Directors or the consenting stockholders for which Nevada law, our Articles of
Incorporation or our Bylaws provide a right of a stockholder to dissent and
obtain appraisal of or payment for such stockholder's shares.
VOTING SECURITIES
As of the Record Date, we had __________________ shares of Common Stock issued
and outstanding, which is the only class of voting securities that would be
entitled to vote at a stockholders' meeting if one were to be held. Each share
of Common Stock is entitled to one vote.
RECORD DATE
The close of business on Monday, [February 5], 2007, was fixed as the record
date for determining the shareholders entitled to notice of the action taken by
shareholder resolution. As of the record date there were _________________
shares of the Company's common stock outstanding and entitled to vote, held by
________ holders of record. For a description of the principal holders of such
stock, see "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT"
below.
This Information Statement and the enclosed Proxy are being furnished to
shareholders on or about February ___, 2007. Under applicable law, shareholder
approval of the increase in authorized capital will become effective on March
___, 2007, which is at least twenty days after the date this Information
Statement is first sent to shareholders.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. WE ARE NOT ASKING YOU FOR YOUR SIGNATURE TO ANY WRITTEN CONSENT
RESOLUTIONS OF SHAREHOLDERS. YOU ARE REQUESTED NOT TO SEND US ANY DOCUMENT
IN RESPONSE TO THIS MAILING.
-3-
INCREASE IN AUTHORIZED CAPITAL
As of January 1, 2007, the first paragraph of Article IV of the
Company's Articles of Incorporation, as amended to date, read:
"FOUR: The aggregate number of shares which this Corporation
shall have authority to issue is 750,000,000 Common Shares
having a par value of $0.001 per share. Each share of stock
shall entitle the holder thereof to one (1) vote on each
matter submitted to a vote at a meeting of the shareholders.
All stock of the Corporation shall be of the same class and
shall have the same rights and preferences. The capital stock
of the Corporation shall be issued as fully paid, and the
private property of the shareholders shall not be liable for
the debts, obligations or liabilities of the Corporation.
Fully paid stock of this Corporation shall not be liable to
any further call of assessment. On May 19, 2000, the
shareholders of the Corporation approved a one for three
thousand (3,000) reverse stock split of the issued and
outstanding shares of the Corporation.
The Company's Board of Directors has approved the adoption of, and has
received the approval from the holders of 52.61% of the Company's issued and
outstanding common stock as of the January 1, 2007, to adopt, an amendment to
Article Four of the Company's certificate of incorporation that would increase
the number of shares of common stock that the Company is authorized to issue
from 750,000,000 shares to 1,500,000,000 shares. The new first paragraph of
Article IV of the Certificate of Incorporation, as amended, will read as
follows:
ARTICLE IV
CAPITALIZATION
The aggregate number of shares which this Corporation shall
have authority to issue is 1,500,000,000 Common Shares having
a par value of $0.001 per share. Each share of stock shall
entitle the holder thereof to one (1) vote on each matter
submitted to a vote at a meeting of the shareholders. All
stock of the Corporation shall be of the same class and shall
have the same rights and preferences. The capital stock of the
Corporation shall be issued as fully paid, and the private
property of the shareholders shall not be liable for the
debts, obligations or liabilities of the Corporation. Fully
paid stock of this Corporation shall not be liable to any
further call of assessment. Effective as of the time at which
this Certificate of Amendment to Articles of Incorporation
(the "Amended Articles") becomes effective (the "Effective
Date"), all outstanding shares of common stock of the
Corporation automatically shall be subdivided at the rate of
1.20 shares for one share (the "Forward Split") without the
necessity of any further action on the part of the holders
thereof or the Corporation, provided, however, that the
Corporation shall, through its transfer agent and as
necessary, exchange certificates representing common stock
outstanding immediately prior to the Effective Date of the
Forward Split (the "Existing Common") into new certificates
representing the appropriate number of shares of common stock
resulting from the subdivision ("New Common").
Except for this change, the amendment would not affect any other
provision of the Articles of Incorporation. The text of the proposed amendment
to amend Article IV to the Articles of Incorporation is attached to this
Information Statement as Exhibit 1 and is incorporated herein by reference.
Background of the Proposed Amendment
Increase in Authorized Capital
------------------------------
As of January 1, 2007, we were authorized, pursuant to our Articles of
Incorporation, as amended to date, to issue up to 750,000,000 shares of our
common stock, and there were 655,716,326 shares of the Company's Common Stock
issued and outstanding. Additionally, as of the Record Date, the Company had the
following obligations to reserve or issue shares of its common stock:
-4-
The Highgate Convertible Debenture Transaction
On May 26, 2005, we entered into a securities purchase agreement (the
"Purchase Agreement") with Highgate House Funds, Ltd., a Cayman Island exempted
company ("Highgate"), relating to the issuance by us of a 5% Secured Convertible
Debenture, due December 31, 2007, in the aggregate principal amount of
$3,750,000 (the "Highgate Debenture").
In connection with the purchase of the Highgate Debenture, we used $2,265,000 to
repay two promissory notes to Cornell Capital Partners, LP ("Cornell"), one in
the amount of $1,700,000, and the other in the amount of $565,000. Highgate and
Cornell have the same general partner, Yorkville Advisors, but have different
portfolio managers.
We also paid a commitment fee of $240,765, a structuring fee of $10,000 to
Highgate, and legal fees of $5,668. As such, of the total purchase amount of
$3,750,000, the net proceeds to us were $1,228,567, which we received following
the closing of the issuance of the Highgate Debenture. We used these proceeds
for general corporate and working capital purposes.
The Highgate Debenture bears interest at a rate of 5%. Highgate is entitled to
convert, at its option, all or part of the principal amount owing under the
Highgate Debenture into shares of our common stock at a conversion price equal
to the lesser of (a) $0.10 per share, or (b) an amount equal to the lowest
closing bid price of the Common Stock as listed on the OTC Bulletin Board, as
quoted by Bloomberg L.P. for the twenty (20) trading days immediately preceding
the conversion date. Except as otherwise set forth in the Highgate Debenture,
Highgate's right to convert principal amounts owing under the Highgate Debenture
into shares of our common stock is limited as follows:
1. Highgate may convert up to $250,000 worth of the principal
amount plus accrued interest of the Highgate Debenture in any
consecutive 30-day period when the market price of our stock
is $0.10 per share or less at the time of conversion;
2. Highgate may convert up to $500,000 worth of the principal
amount plus accrued interest of the Highgate Debenture in any
consecutive 30-day period when the price of our stock is
greater than $0.10 per share at the time of conversion,
provided, however, that Highgate may convert in excess of the
foregoing amounts if we and Highgate mutually agree; and
3. Upon the occurrence of an event of default (as defined in the
Highgate Debenture), Highgate may, in its sole discretion,
accelerate full repayment of all debentures outstanding and
accrued interest thereon or may, notwithstanding any
limitations contained in the Highgate Debenture and/or the
Purchase Agreement, convert the Highgate Debenture and accrued
interest thereon into shares of our common stock pursuant to
the Highgate Debenture.
Pursuant to the Highgate Debenture, interest is to be paid at the time of
maturity or conversion. We may, at our option, pay accrued interest in cash or
in shares of common stock. If paid in stock, the conversion price shall be the
closing bid price of the common stock on either (i) the date the interest
payment is due; or (ii) if the interest payment is not made when due, the date
on which the interest payment is made.
As noted above, assuming a hypothetical conversion of the $2,650,000
remaining as of January 29, 2007, at a hypothetical conversion price of $0.02
per share, we would need to issue 132,500,000 shares of our common stock to
Highgate. Please note that if the conversion price changes, the number of shares
issuable on conversion also changes. We have included a table below with
examples of the number of shares issuable at various conversion prices.
The 2005 Cornell Convertible Debenture Transaction
On December 30, 2005, we entered into a securities purchase agreement
(the "Cornell Purchase Agreement") with Cornell Capital Partners, a Delaware
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limited partnership ("Cornell Capital"), relating to the issuance by us of a 5%
Secured Convertible Debenture, due July 30, 2008, in the aggregate principal
amount of $1,500,000 (the "Cornell Debenture").
We also paid a commitment fee of $120,000, and a structuring fee of
$10,000 to Cornell Capital. As such, of the total purchase amount of $1,500,000,
the net proceeds to us were $1,370,000.
The Cornell Debenture bears interest at a rate of 5%. Cornell Capital
is entitled to convert, at its option, all or part of the principal amount owing
under the Debenture into shares of the Company's common stock at a conversion
price equal one hundred percent (100%) of the lowest closing bid price of the
Common Stock as listed on the OTC Bulletin Board, as quoted by Bloomberg L.P.
for the twenty (20) trading days immediately preceding the Conversion Date,
subject to certain restrictions and limitations set forth in the Cornell
Debenture.
Under the terms of the Cornell Debenture, except upon an event of
default as defined in the Cornell Debenture, Cornell Capital may not convert the
Cornell Debenture for a number of shares of common stock in excess of that
number of shares of common stock which, upon giving effect to such conversion,
would cause the aggregate number of shares of Common Stock beneficially owned by
Cornell Capital and its affiliates to exceed 4.99% of the outstanding shares of
the common stock following such conversion.
Pursuant to the Cornell Debenture, interest is to be paid at the time
of maturity or conversion. We may, at our option, pay accrued interest in cash
or in shares of our common stock. If paid in stock, the conversion price shall
be the closing bid price of the common stock on either (i) the date the interest
payment is due; or (ii) if the interest payment is not made when due, the date
on which the interest payment is made.
In connection with the Cornell Purchase Agreement, we also agreed to
grant to Cornell Capital warrants (the "Cornell Warrants") to purchase up to an
additional 10,000,000 shares of our common stock. The Cornell Warrants have an
exercise price of $0.09 per share, and expire three years from the date of
issuance. The Cornell Warrants also provide for cashless exercise if at the time
of exercise there is not an effective registration statement or if an event of
default has occurred.
As noted above, assuming a hypothetical conversion of the $1,500,000
remaining as of January 29, 2007, at a hypothetical conversion price of $0.02
per share, we would need to issue 75,000,000 shares of our common stock to
Cornell. Please note that if the conversion price changes, the number of shares
issuable on conversion also changes. We have included a table below with
examples of the number of shares issuable at various conversion prices.
The 2006 Cornell Convertible Debenture Transaction
On August 23, 2006, we entered into a securities purchase agreement
(the "2006 Cornell Purchase Agreement") with Cornell relating to the issuance by
us of another 5% Secured Convertible Debenture, due April 23, 2009, in the
aggregate principal amount of $1,500,000 (the "2006 Cornell Debenture").
We also paid a commitment fee of $120,000, and a structuring fee of
$15,000 to Cornell. As such, of the total purchase amount of $1,500,000, the net
proceeds to us were $1,365,000.
The 2006 Cornell Debenture bears interest at a rate of 5%. Cornell is
entitled to convert, at its option, all or part of the principal amount owing
under the 2006 Cornell Debenture into shares of the Company's common stock at a
conversion price equal one hundred percent (100%) of the lowest closing bid
price of the Common Stock as listed on the OTC Bulletin Board, as quoted by
Bloomberg L.P. for the twenty (20) trading days immediately preceding the
Conversion Date, subject to certain restrictions and limitations set forth in
the 2006 Cornell Debenture.
Under the terms of the 2006 Cornell Debenture, except upon an event of
default as defined in the 2006 Cornell Debenture, Cornell may not convert the
Cornell Debenture for a number of shares of common stock in excess of that
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number of shares of common stock which, upon giving effect to such conversion,
would cause the aggregate number of shares of Common Stock beneficially owned by
Cornell and its affiliates to exceed 4.99% of the outstanding shares of the
common stock following such conversion.
Pursuant to the 2006 Cornell Debenture, interest is to be paid at the
time of maturity or conversion. We may, at our option, pay accrued interest in
cash or in shares of our common stock. If paid in stock, the conversion price
shall be the closing bid price of the common stock on either (i) the date the
interest payment is due; or (ii) if the interest payment is not made when due,
the date on which the interest payment is made.
In connection with the 2006 Cornell Purchase Agreement, we also agreed
to grant to Cornell warrants (the "2006 Cornell Warrants") to purchase up to an
additional 15,000,000 shares of our common stock. The 2006 Cornell Warrants have
an exercise price of $0.06 per share, and expire three years from the date of
issuance. The 2006 Cornell Warrants also provide for cashless exercise if at the
time of exercise there is not an effective registration statement or if an event
of default has occurred.
As noted above, assuming a hypothetical conversion of the $1,500,000
remaining under the 2006 Cornell Debenture, as of January 29, 2007, at a
hypothetical conversion price of $0.02 per share, we would need to issue
75,000,000 shares of our common stock to Cornell. Please note that if the
conversion price changes, the number of shares issuable on conversion also
changes. The Cornell Debenture (issued in December 2005) and the 2006 Cornell
Debenture are referred to collectively as the "Cornell Debentures."
We have included a table below with examples of the number of shares
issuable at various conversion prices.
Highgate and Cornell have the same general partner, Yorkville Advisors,
but have different portfolio managers. Additionally, the escrow agent appointed
in connection with the purchase and sale of both the Cornell debenture
transactions and the Highgate debenture transaction is David Gonzalez, who is an
officer of Cornell.
A chart showing the number of shares issuable upon hypothetical
conversions of the Highgate Debenture and the Cornell Debentures at particular
conversion prices is as follows:
Holders of CirTran common stock are subject to the risk of additional and
substantial dilution to their interests as a result of the issuances of common
stock in connection with the Convertible Debentures.
The following table describes the number of shares of common stock that would be
issuable, assuming that the full principal amount of the Cornell Debentures and
the Highgate Debentures (collectively, the "Convertible Debentures"), excluding
any interest accrued, was converted into shares of our common stock,
irrespective of the availability of registered shares and any conversion
limitations contained in the Convertible Debentures, and further assuming that
the applicable conversion or exercise prices at the time of such conversion or
exercise were the following amounts:
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Shares Issuable Upon
Hypothetical Conversion of Shares Issuable Upon Total Shares Issuable
Conversion $2,650,000 Principal Conversion of in Connection with
Price Amount of $3,000,000 Principal Conversion of
Convertible Debenture Amount of Convertible Aggregate Principal
by Debentures by Amount of
Highgate House Funds, Ltd. Cornell Capital Partners Convertible Debentures
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$0.01 265,000,000 300,000,000 565,000,000
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$0.02 132,500,000 150,000,000 282,500,000
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$0.03 88,333,333 100,000,000 183,333,333
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$0.04 66,250,000 75,000,000 141,250,000
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$0.05 53,000,000 60,000,000 113,000,000
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$0.10 26,500,000 30,000,000 56,500,000
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Given the formula for calculating the shares to be issued in connection with
conversions of the Convertible Debentures, there effectively is no limitation on
the number of shares of common stock which may be issued in connection with
conversions of the Convertible Debentures, except for the number of shares
registered under prospectuses and related registration statements. As such,
holders of our common stock may experience substantial dilution of their
interests to the extent that Highgate and/or Cornell converts amounts under the
Convertible Debentures.
Although we have entered into an agreement with Cornell wherein Cornell agreed
that it would not convert any of the principal or interest on the Cornell
Debentures or exercise any of the Warrants granted to Cornell until we had taken
the steps necessary to increase our authorized capital, if we are successful in
increasing our authorized capital, Cornell will be able to convert the Cornell
Debentures pursuant to its terms, which could result in the dilution described
above.
ANAHOP Private Placement Transactions
On May 24, 2006, we closed a private placement of shares of our common
stock and warrants (the "May Private Offering"). Pursuant to a securities
purchase agreement (the "Agreement"), we sold Fourteen Million, Two Hundred
Eighty-five Thousand, Seven Hundred Fifteen (14,285,715) shares of our Common
Stock (the "Shares") to ANAHOP, Inc., a California corporation ("ANAHOP"). The
consideration paid for the Shares was One Million Dollars ($1,000,000). There
were no underwriting discounts. In addition to the Shares, we issued warrants
(the "May Warrants") to designees of ANAHOP as follows:
- A warrant to purchase up to 10,000,000 shares, with an
exercise price of $0.15 per share, exercisable upon the date
of issuance, to Albert Hagar.
- A warrant to purchase up to 5,000,000 shares, with an exercise
price of $0.15 per share, exercisable upon the date of
issuance, to Fadi Nora.
- A warrant to purchase up to 5,000,000 shares, with an exercise
price of $0.25 per share, exercisable upon the date of
issuance, to Fadi Nora.
- A warrant to purchase up to 10,000,000 shares, with an
exercise price of $0.50 per share, to Albert Hagar.
The May Warrants have exercise prices ranging from $0.15 to $0.50 as noted
above, and are exercisable as of the date of issuance and through and including
the date which is five years following the date on which our Common Stock is
listed for trading on either the Nasdaq Small Cap Market, the Nasdaq Capital
Market, the American Stock Exchange, or the New York Stock Exchange (the
"Expiration Date").
On June 30, 2006, we closed a second private placement of shares of our
common stock and warrants (the "June Private Offering"). Pursuant to a
securities purchase agreement (the "June Agreement"), the Company agreed to sell
Twenty-Eight Million, Five Hundred Seventy-One Thousand, Four Hundred
Twenty-Eight (28,571,428) shares of its Common Stock (the "June Shares") to
ANAHOP. The total consideration to be paid for the Shares will be Two Million
Dollars ($2,000,000) if all tranches of the sale close.
Pursuant to the Agreement, ANAHOP agreed to pay Three Hundred Thousand
Dollars ($300,000) at the time of closing, and an additional Two Hundred
Thousand Dollars ($200,000) within 30 days of the closing. (The payments of
$300,000 and $200,000 are referred to collectively as the "First Tranche
Payment.") Upon the receipt of the First Tranche Payment, we agreed to issue a
certificate or certificates to the Purchaser representing 7,142,857 of the
Shares. The 7,142,857 shares were issued in July 2006.
The remaining $1,500,000 is to be paid by ANAHOP as follows:
(i) No later than thirty calendar days following the date
on which any class of our capital stock is first
listed for trading on either the Nasdaq Small Cap
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Market, the Nasdaq Capital Market, the American Stock
Exchange, or the New York Stock Exchange, ANAHOP
agreed to pay an additional $500,000 to us; and
(ii) No later than sixty calendar days following the date
on which any class of our capital stock is first
listed for trading on either the Nasdaq Small Cap
Market, the Nasdaq Capital Market, the American Stock
Exchange, or the New York Stock Exchange, ANAHOP
agreed to pay an additional $1,000,000 to us. (The
payments of $500,000 and $1,000,000 are referred to
collectively as the "Second Tranche Payment.")
Upon receipt by us of the Second Tranche Payment, we agreed to
issue a certificate or certificates to ANAHOP representing the remaining
21,428,571 Shares. Additionally, once we have received the Second Tranche
Payment, we agreed to issue warrants (the "June Warrants") to designees of the
Purchaser as follows:
- A warrant to purchase up to 20,000,000 shares, with
an exercise price of $0.15 per share, exercisable
upon the date of issuance, to Albert Hagar.
- A warrant to purchase up to 10,000,000 shares, with
an exercise price of $0.15 per share, to Fadi Nora.
- A warrant to purchase up to 10,000,000 shares, with
an exercise price of $0.25 per share, exercisable
upon the date of issuance, to Fadi Nora.
- A warrant to purchase up to 23,000,000 shares, with
an exercise price of $0.50 per share, exercisable
upon the date of issuance, to Albert Hagar.
The June Warrants have exercise prices ranging from $0.15 to $0.50 as
noted above, and are exercisable as of the date of issuance and through and
including the later of (1) the fifth anniversary of the date of the June Warrant
or (2) the fifth anniversary of the date on which our Common Stock is first
listed for trading on either the Nasdaq Small Cap Market, the Nasdaq Capital
Market, the American Stock Exchange, or the New York Stock Exchange (the
"Expiration Date").
Warrants
The 110,000,000 Warrants which the Company had outstanding as of the
Record Date, consisted of:
- 30,000,000 May Warrants issued in connection with the May
Private Offering;
- 63,000,000 June Warrants issued in connection with the June
Private Offering;
- 10,000,000 Warrants issued to Cornell in connection with the
Cornell Debenture; and
- 7,000,000 Warrants held by other holders.
There is no guarantee that any or all of these warrants will be
exercised, or that we will be required to issue any shares of common stock in
connection with these warrants. However, until such time as the warrants listed
above have expired, we will continue to reserve shares for issuance in
connection with the warrants.
Options
We also have outstanding options to purchase up to 11,250,500 shares of
our common stock, held by various holders. As with the warrants, there is no
guarantee that any or all of these options will be exercised, or that we will be
required to issue any shares of common stock in connection with these options.
However, until such time as these options have expired, we will continue to
reserve shares for issuance in connection with the options.
-9-
We do not have any lock-down or other agreements with the option
holders regarding the non-exercise of these options.
In summary, and assuming a hypothetical conversion of the Convertible
Debentures at the market price as of the Record Date, which was approximately
[$0.02], the Company has the obligation or anticipation of issuing the following
shares:
------------------------------ ------------------------------
Convertible Debentures 282,500,000
------------------------------ ------------------------------
Warrants 110,000,000
------------------------------ ------------------------------
ANAHOP Second Tranche Shares 21,428,571
------------------------------ ------------------------------
Options 11,250,000
------------------------------ ------------------------------
------------------------------ ------------------------------
TOTAL 425,178,571
------------------------------ ------------------------------
In light of the Company's current authorized capital, and in light of
the share obligations listed in the table above, Management believes that the
proposed amendment to increase the Company's authorized capital would benefit
the Company by:
- enabling the Company to meet its obligations set forth above;
- allowing the Board of Directors to issue additional equity
securities to raise additional capital;
- allowing the Board of Directors to pursue strategic investment
and technology partners;
- allowing the Board of Directors to facilitate possible future
acquisitions; and
- allowing the Company to provide stock-related employee
benefits.
As of the date of the Information Statement, the Company's primary
source of financing has been private sales of Common Stock or other equity
securities, such as the prior equity line of credit and the ANAHOP private
transaction, as well as debt securities convertible into Common Stock, such as
the current Convertible Debentures. To facilitate additional similar financing
transactions, the authorized capital of the Company will need to be increased
pursuant to a shareholder-approved amendment to the certificate of
incorporation.
As of the date of this Information Statement, and other than the
Company's existing obligations and commitments to reserve and issue shares as
described herein, the Company did not have any plans, arrangements, commitments,
or understandings for the issuance of additional shares of the common stock
which are proposed to be authorized. Nevertheless, the Board of Directors
believes that the increase in the Company's authorized capital is necessary both
to meet the Company's present commitments, and to facilitate additional future
financing transactions should they become necessary.
For these reasons, the Company's Board of Directors has sought
shareholder approval of the proposed amendment.
Depending upon the consideration per share received by the Company for
any subsequent issuance of Common Stock, such issuance could have a dilutive
effect on those shareholders who previously paid a higher consideration per
share for their stock. Also, future issuances of Common Stock will increase the
number of outstanding shares, thereby decreasing the percentage ownership in the
Company (for voting, distributions and all other purposes) represented by
existing shares of Common Stock. The availability for issuance of the additional
shares of Common Stock may be viewed as having the effect of discouraging an
unsolicited attempt by another person or entity to acquire control of the
Company. Although the Board of Directors has no present intention of doing so,
the Company's authorized but unissued Common Stock could be issued in one or
more transactions that would make a takeover of the Company more difficult or
costly, and therefore less likely. The Company is not aware of any person or
entity who is seeking to acquire control of the Company. Holders of Common Stock
do not have any preemptive rights to acquire any additional securities issued by
the Company.
-10-
Forward Stock Split
-------------------
The Company also received shareholder approval to effectuate a forward
stock split (the "Stock Split") on a ratio of 1.20 new shares (the "New Shares")
for each one share of the Company's common stock (the "Old Shares").
The Board of Directors has determined that it will be advantageous to
the Company to have additional shares available and issued to the Company's
current shareholders. Additionally, The Board has determined that share
liquidity could be enhanced by having additional shares held by the Company's
shareholders. Moreover, the Company feels that the Stock Split likely would be
beneficial to the Company's shareholders.
EFFECTIVE DATE
The amendment to our Articles of Incorporation, as amended to date, to
increase in our authorized capital from 750,000,000 shares of common stock to
1,500,000,000 shares of common stock, has been approved by shareholders holding
sufficient shares to authorize such amendment. The Articles of Amendment will
become effective upon filing the Articles of Amendment with the Nevada Secretary
of State. Under federal securities laws, we cannot file the Articles of
Amendment until at least 20 days after mailing this Information Statement. We
anticipate that we will file the Articles of Amendment on March __, 2007, which
is at least twenty days following our mailing of this Information Statement to
our shareholders of record as of February 5, 2007, the Record Date.
The shareholders of record of the Company's common stock as of March
___, 2007, will receive the benefit of the Stock Split. As soon as practicable
after the Effective Date of the Articles of Amendment, the Company's
stockholders as of March ___, 2007, will be notified that the Stock Split has
been effected. The Company expects that its transfer agent, Interwest Transfer
Company, will act as exchange agent for purposes of implementing the exchange of
stock certificates. Holders of Old Shares will be asked to surrender to the
exchange agent certificates representing Old Shares in exchange for certificates
representing New Shares in accordance with the procedures to be set forth in the
letter of transmittal the Company sends to its stockholders. No new certificates
will be issued to a stockholder until such stockholder has surrendered such
stockholder's outstanding certificate(s), together with the properly completed
and executed letter of transmittal, to the exchange agent. Any Old Shares
submitted for transfer, whether pursuant to a sale, other disposition or
otherwise, will automatically be exchanged for New Shares. STOCKHOLDERS SHOULD
NOT DESTROY ANY STOCK CERTIFICATES AND SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL
REQUESTED TO DO SO.
NO DISSENTERS' OR APPRAISAL RIGHTS
There is no provision in the Nevada Revised Statutes or in our Articles
of Incorporation, as amended to date, which provides our stockholders with
dissenters' rights or appraisal rights to demand payment in cash for their
shares of common stock in connection with the implementation of the proposal to
amend our Articles of Incorporation to increase our authorized capital stock or
to effectuate the Stock Split.
CONSENT REQUIRED
Pursuant to Sections 78.207 and 78.390 of the Nevada Revised Statutes,
we may amend our Articles of Incorporation and increase our authorized capital
upon the approval by the holders of a majority of the voting power of our common
stock. As of January 1, 2007, there were 655,716,326, shares of our common stock
issued and outstanding. We received approval from the holders of an aggregate of
344,945,599 shares of our common stock, or 52.61% of our issued and outstanding
common stock as of January 1, 2007. As such, we received the approval of holders
of sufficient shares to adopt the amendment to our Articles of Incorporation to
increase our authorized capital.
-11-
Pursuant to Section 78.320 of the Nevada Revised Statutes, we were
entitled to take this action by written consent of our shareholders rather than
through holding an annual or special meeting of shareholders. Pursuant to that
section and to the federal securities laws, we are required to provide you
notice of the corporate action taken prior to its effectiveness, as discussed
above under the heading "Effective Date."
WE ARE NOT ASKING YOU FOR A PROXY
AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
INFORMATION ABOUT CIRTRAN CORPORATION
The following sets forth the names, ages and positions of our directors and
officers and the officers of our operating subsidiaries, CirTran Corporation
(Utah) and CirTran Asia, along with their dates of service in such capacities.
Name Age Positions
Iehab J. Hawatmeh 39 President, Chief Executive Officer,
Chief Financial Officer, Secretary and
Director of CirTran Corporation;
President of CirTran Corporation
(Utah).
Served since July 2000.
Trevor Saliba 32 Director since June 2001. Senior
Vice-President, Sales and Marketing.
Served since January 2002.
Shaher Hawatmeh 41 Chief Operating Officer
Served since June 2004
Charles Ho 51 President, CirTran-Asia
Served since June 2004
Richard T. Ferrone 58 Chief Financial Officer
Served since May 2006
Iehab J. Hawatmeh, MBA
Chairman, President & CEO
Mr. Iehab Hawatmeh founded CirTran Corporation in 1993 and has been its
Chairman, President and CEO since its inception. Mr. Hawatmeh oversees all daily
operation including financial, technical, operational and sales functions for
the Company. Under Mr. Hawatmeh's direction, the Company has seen its annual
sales exceed $20 million, its employment exceed 360 and completed two strategic
acquisitions. Prior to forming the Company, Mr. Hawatmeh was the Processing
Engineering Manager for Tandy Corporation overseeing the company's entire
contract manufacturing printed circuit board assembly division. In addition, Mr.
Hawatmeh was responsible for developing and implementing Tandy's facility
Quality Control and Processing Plan model which is used by CirTran today. Mr.
Hawatmeh received his Master's of Business Administration from University of
Phoenix and his Bachelor's of Science in Electrical and Computer Engineering
from Brigham Young University. Iehab and Shaher Hawatmeh are brothers.
Trevor M. Saliba, MS
Senior Vice President,
Worldwide Business Development
-12-
Mr. Saliba is responsible for sales and marketing activities worldwide and is
responsible for overseeing all worldwide business development strategies for the
Company. Mr. Saliba was elected to the Board of Directors in 2001. From 1997 -
2001 he was President and CEO of Saliba Corp., a privately held contracting firm
he founded. From 1995-1997 he was an Associate with Morgan Stanley. From 1992 -
1995 he was Vice President of Sales and Marketing for SNJ Industries. Mr. Saliba
holds a Bachelors Degree in Business Administration and a Masters Degree in
Finance from La Salle University and has completed an Advanced Graduate Program
in Engineering and Management at the University of California, Berkeley.
In June 2002 Mr. Saliba filed for personal bankruptcy in the U.S. Bankruptcy
Court in Los Angeles, California, which has not yet been discharged. The
bankruptcy was unrelated to Mr. Saliba's involvement in CirTran.
Shaher Hawatmeh
Chief Operating Officer
Mr. Shaher Hawatmeh joined the Company in 1993 as its Controller shortly after
its founding. Today, Mr. Hawatmeh directly oversees all daily manufacturing
production, customer service, budgeting and forecasting for the Company.
Following the companies acquisition of Pro Cable Manufacturing in 1996, Mr.
Hawatmeh directly managed the entire Company, supervising all operations for
approximately two years and successfully oversaw the integration of this new
division into the Company. Prior to joining CirTran, Mr. Hawatmeh worked for the
Utah State Tax Commission. Mr. Hawatmeh earned his Master's of Business
Administration with an emphasis in Finance from the University of Phoenix and
his Bachelor's of Science in Business Administration and a Minor in Accounting.
Iehab and Shaher Hawatmeh are brothers.
Charles Ho
President, CirTran-Asia
Mr. Ho, who became the President of our CirTran-Asia division on June 15, 2004,
served for six years as the chairman of Meicer Semiconductor Co., Ltd., one of
the leading semiconductor manufacturers located in China, and was a co-founder
of two of the leading design and manufacturing firms of DVD and CD players: Lead
Data Co., Ltd., and Media Group. Mr. Ho has served as CEO for Uking System Inc.
since 1986 and is still holds that position. Mr. Ho has a Master of Business
Administration Degree from the University of South Australia and Bachelor of
Science degree in Industrial Design from National Taipei University of
Technology.
Richard T. Ferrone
Chief Financial Officer
Prior to joining the Company, Mr. Ferrone had headed his own accounting firm,
Ferrone & Associates, which he established in Salt Lake City in 1994.
Previously, he was vice president and CFO for then-publicly-held GCI Industries,
Inc./Golf Card International for seven years, and served as CFO of Huntsman,
Christensen Real Estate & Development Co. Mr. Ferrone had also served as vice
president and chief financial officer for BSD Medical Corporation after he
started his career with a regional CPA firm in Salt Lake City. Mr. Ferrone has a
B.S. in Accounting from the University of Utah, where he also studied for a
Master of Professional Accountancy with a tax emphasis.
At this time, the Company does not have an audit committee. The Company's Board
of Directors acts as the Company's audit committee. Similarly, the Company's
Board of Directors has determined that the Company does not have an audit
committee financial expert as defined under Securities and Exchange Commission
rules.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During June 2006 the president of the Company loaned the Company a net
amount of $110,837 which was recorded as a note payable to the lender.
During December 2005 the president of the Company loaned the Company
$95,806 which was recorded as a note payable to the lender. The proceeds of this
-13-
loan were used to fund on going operations of the Company. In January 2006, the
Company made a payment to the lender which repaid the entire balance ($95,806)
of the loan.
As of December 31, 2001, Iehab Hawatmeh had loaned us a total of
$1,390,125. The loans were demand loans, bore interest at 10% per annum and were
unsecured. Effective January 14, 2002, we entered into four substantially
identical agreements with existing shareholders pursuant to which we issued an
aggregate of 43,321,186 shares of restricted common stock at a price of $0.075
per share for $500,000 in cash and the cancellation of $2,749,090 principal
amount of our debt. Two of these agreements were with the Saliba Private Annuity
Trust, one of our principal shareholders, and a related entity, the Saliba
Living Trust. The Saliba trusts are also principals of Abacas Ventures, Inc.,
which entity purchased our line of credit in May 2000. Pursuant to the Saliba
agreements, the trusts were issued a total of 26,654,520 shares of common stock
in exchange for $500,000 cash and the cancellation of $1,499,090 of debt. We
used the $500,000 cash from the sale of the shares for working capital. As a
result of this transaction, the percentage of our common stock owned by the
Saliba Private Annuity Trust and the Saliba Living Trust increased from
approximately 6.73% to approximately 17.76%. Mr. Trevor Saliba, one of our
directors and officers, is a passive beneficiary of the Saliba Private Annuity
Trust. Pursuant to the other two agreements made in January 2002, we issued an
aggregate of 16,666,666 shares of restricted common stock at a price of $0.075
per share in exchange for the cancellation of $1,250,000 of notes payable by two
shareholders, Mr. Iehab Hawatmeh (our president, a director and our principal
shareholder) and Mr. Rajai Hawatmeh. Of these shares, 15,333,333 were issued to
Iehab Hawatmeh in exchange for the cancellation of $1,150,000 in debt. As a
result of this transaction, the percentage of our common stock owned by Mr.
Hawatmeh increased from 19.9% to approximately 22.18%.
In February 2000, prior to its acquisition of Vermillion Ventures,
Inc., a public company, Circuit Technology, Inc., while still a private entity,
redeemed 680,145 shares (as presently constituted) of common stock held by Raed
Hawatmeh, who was a director of Circuit Technology, Inc. at that time, in
exchange for $80,000 of expenses paid on behalf of the director. No other stated
or unstated rights, privileges, or agreements existed in conjunction with this
redemption. This transaction was consistent with other transactions where shares
were offered for cash.
In 1999, Circuit entered into an agreement with Cogent Capital Corp.,
or "Cogent," a financial consulting firm, whereby Cogent agreed to assist and
provide consulting services to Circuit in connection with a possible merger or
acquisition. Pursuant to the terms of this agreement, we issued 800,000
(pre-forward split) restricted shares (12,000,000 post-forward split shares) of
our common stock to Cogent in July 2000 in connection with our acquisition of
the assets and certain liabilities of Circuit. The principal of Cogent was
appointed a director of Circuit after entering into the financial consulting
agreement and resigned as a director prior to the acquisition of Circuit by
Vermillion Ventures, Inc. on July 1, 2000.
Also, as of December 31, 2004 the company owed I&R Properties, LLC, the
previous owner of our principal office and manufacturing facility for unpaid
accrued rent and accrued interest. The Company settled with owed I&R Properties,
LLC., on accrued rent and interest of $400,000 by issuing 10,000,000 shares of
unregistered common stock in March 2005.
Management believed at the time of each of these transactions and
continues to believe that each of these transactions were as fair to the Company
as could have been made with unaffiliated third parties.
Abacas Ventures
An explanation of the relationship between CirTran and Abacas Ventures,
Inc., is as follows:
Two trusts, the Saliba Living Trust and the Saliba Private Annuity
Trust (collectively, the "Saliba Trusts"), were investors in Circuit Technology,
a Utah corporation and predecessor entity of the Company. The trustees of the
trusts are Tom and Betty Saliba, and Tom Saliba, respectively. (Tom Saliba is
the nephew of the grandfather of Trevor Saliba, one of the directors of
CirTran.) In July 2000, CirTran Corporation merged with Circuit Technology.
Through that merger, the Saliba Trusts became shareholders of CirTran. The
Saliba Trusts are also two of the shareholders of an entity named Abacas
Ventures, Inc. ("Abacas"). At the time of the merger, CirTran was in default on
-14-
several of its obligations, including an obligation to Imperial Bank. The Saliba
Trusts, through Abacas, purchased the bank's claim against CirTran to protect
their investment in CirTran. Since that time, Abacas has continued to settle
debts of CirTran to improve Abacas's position and to take advantage of certain
discounts that creditors of CirTran offered to settle their claims. On two
occasions, the Abacas shareholders have agreed to convert outstanding debt owed
by CirTran to Abacas into shares of CirTran common stock (discussed below).
Abacas continues to work with the company to settle claims by creditors against
CirTran, and, on occasion, to provide funding. There can be no assurance that
Abacus will agree to convert its existing debt, or any debt it acquires in the
future, into shares of CirTran, or that conversions will occur at a price and on
terms that are favorable to CirTran. If Abacus and CirTran cannot agree on
acceptable conversion terms, Abacus may demand payment of some or all of the
debt. If CirTran does not have sufficient cash or credit facilities to pay the
amount then due and owing by CirTran to Abacus, Abacus may exercise its rights
as a senior secured lender and commence foreclosure or other proceedings against
the assets of CirTran. Such actions by Abacus could have a material adverse
effect upon CirTran and its ability to continue in business.
In January, 2002, the Company entered into an agreement with Abacas
under which the Company issued an aggregate of 19,987,853 shares of common stock
to four of Abacas's shareholders in exchange for cancellation by Abacas of an
aggregate amount of $1,499,090 in senior debt owed to the creditors by the
Company. The shares were issued with an exchange price of $0.075 per share, for
the aggregate amount of $1,500,000.
In December, 2002, the Company entered into an agreement with Abacas
under which the Company issued an aggregate of 30,000,000 shares of common stock
to four of Abacas's shareholders in exchange for cancellation by Abacas of an
aggregate amount of $1,500,000 in senior debt owed to the creditors by the
Company. The shares were issued with an exchange price of $0.05 per share, for
the aggregate amount of $1,500,000.
During 2002, the Company entered into a verbal bridge loan agreement
with Abacas. This agreement allows the Company to request funds from Abacas to
finance the build-up of inventory relating to specific sales. The loan bears
interest at 24% and is payable on demand. There are no required monthly
payments. During the years ended December 31, 2004 and 2003, the Company was
advanced $3,128,281 and $350,000, respectively, and made cash payments of
$3,025,149 and $875,000, respectively.
During the year ended December 31, 2004, Abacas completed negotiations
with several vendors of the Company, whereby Abacas purchased various past due
amounts for goods and services provided by vendors, as well as notes payable
(see Note 6). The total of these obligations was $1,263,713. The Company has
recorded this transaction as a $1,263,713 non-cash increase to the note payable
owed to Abacas, pursuant to the terms of the Abacas agreement.
The total principal amount owed to Abacas between the note payable and
the bridge loan was $1,530,587 and $163,742 as of December 31, 2004 and 2003,
respectively. The total accrued interest owed to Abacas between the note payable
and the bridge loan was $430,828 and $230,484 as of December 31, 2004 and 2003,
respectively, and is included in accrued liabilities.
In March 2005, the shareholders of Abacas agreed to cancel $2,050,000
of principal and accrued interest in return for the Company's issuing 51,250,000
shares of our restricted common stock to certain shareholders of Abacas. No
registration rights were granted.
As of January 29, 2007, no further loans had been made to the Company
from Abacas.
Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires our officers and
directors, and persons who beneficially own more than 10% of a registered class
of our equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater
than 10% shareholders are required by regulation of the Securities and Exchange
Commission to furnish us with copies of all Section 16(a) forms which they file.
Based solely on its review of the copies of such forms furnished to us during
the fiscal year ended December 31, 2005, we are aware of the following untimely
filings:
-15-
Iehab Hawatmeh, Raed Hawatmeh, Trevor Saliba and Shaher Hawatmeh all filed
untimely Forms 5.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of the 655,716,326
outstanding shares of our common stock which, according to the information
supplied to us, were beneficially owned, as of January 1, 2007, by (i) each
person who is currently a director, (ii) each executive officer, (iii) all
current directors and executive officers as a group and (iv) each person who, to
our knowledge, is the beneficial owner of more than 5% of our outstanding common
stock.
Except as otherwise indicated, the persons named in the table have sole voting
and dispositive power with respect to all shares beneficially owned, subject to
community property laws where applicable. Beneficial ownership is determined
according to the rules of the Securities and Exchange Commission, and generally
means that person has beneficial ownership of a security if he or she possesses
sole or shared voting or investment power over that security. Each director,
officer, or 5% or more shareholder, as the case may be, has furnished us
information with respect to beneficial ownership. Except as otherwise indicated,
we believe that the beneficial owners of the common stock listed below, based on
the information each of them has given to us, have sole investment and voting
power with respect to their shares, except where community property laws may
apply.
--------------------------------------------------------------------------------
Percent of
Name and Address Relationship Common Shares Class
--------------------------------------------------------------------------------
Saliba Private Annuity Trust (1) 5% 75,698,990 11.54%
115 S. Valley Street Shareholder
Burbank, CA 91505
--------------------------------------------------------------------------------
Iehab J. Hawatmeh Director, 60,000,000 9.15%
4125 South 6000 West Officer
West Valley City, Utah 84128 & 5% Shareholder
--------------------------------------------------------------------------------
Raed Hawatmeh (3) Former Director 24,000,000 3.63%
10989 Bluffside Drive
Studio City, CA 91604
--------------------------------------------------------------------------------
Trevor Saliba (2) Director 9,000,000 1.37%
13848 Valleyheart Drive
Sherman Oaks, CA 91423
--------------------------------------------------------------------------------
Charles Ho Officer of 0 0.00%
4125 South 6000 West Subsidiary of
West Valley City, Utah 84128 Company
--------------------------------------------------------------------------------
Shaher Hawatmeh Chief Operating 1,000,000 0.15%
4125 South 6000 West Officer
West Valley City, Utah 84128
--------------------------------------------------------------------------------
Richard T. Ferrone Chief Financial 0 0.00%
4125 South 6000 West Officer
West Valley City, Utah 84128
--------------------------------------------------------------------------------
-16-
--------------------------------------------------------------------------------
All Officers and Directors
as a Group 70,000,000 10.68%
(4 persons)
--------------------------------------------------------------------------------
-------------------
(1) Includes 13,189,620 shares held by the Saliba Living Trust. Thomas L.
Saliba and Betty R. Saliba are the trustees of The Saliba Living Trust and
Thomas L. Saliba is the sole trustee of The Saliba Private Annuity Trust. These
persons control the voting and investment decisions of the shares held by the
respective trusts. Mr. Thomas L. Saliba is a nephew of the grandfather of Mr.
Trevor Saliba, one of our directors and officers. Mr. Trevor Saliba is one of
five passive beneficiaries of Saliba Private Annuity Trust and has no control
over its operations or management. Mr. Saliba disclaims beneficial control over
the shares indicated.
(2) Includes options to purchase up to 1,000,000 shares each that can be
exercised anytime at exercise prices of $0.027 per share.
(3) Includes options to purchase up to 6,250,000 shares that can be exercised
anytime at exercise prices of $0.02 - $0.03 per share. Raed Hawatmeh resigned
from the Company's Board of Directors on May 10, 2006.
BOARD OF DIRECTORS MEETINGS, COMMITTEES AND DIRECTOR COMPENSATION
The Company does not have standing audit, nominating, or compensation
committees. Those functions are performed by the board of directors.
Please note: On February 1, 2007, Fadi Nora was appointed to the
Company's Board of Directors.
The following table sets forth certain information regarding the annual and
long-term compensation for services to us in all capacities for the prior fiscal
years ended December 31, 2005, 2004, 2003 and 2002, of those persons who were
either (i) the chief executive officer during the last completed fiscal year or
(ii) one of the other four most highly compensated executive officers as of the
end of the last completed fiscal year. The individuals named below received no
other compensation of any type, other than as set out below, during the fiscal
years indicated.
--------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation Awards
------------------- -----------------------------
Restricted
Bonus/ Stock Stock
Name and Salary Commission Awards Options All Other
Principal Position Year ($) ($) ($) (#) Compensation
--------------------------------------------------------------------------------------------------------------
Iehab J. Hawatmeh 2005 225,000 114,219 6,000,000 -
President, Secretary, 2004 200,000 - - 3,500,000 -
Treasurer and Director 2003 175,000 - - 6,500,000 -
2002 175,000 - - 1,850,000
--------------------------------------------------------------------------------------------------------------
Trevor M. Saliba 2005 120,000 31,895 5,000,000 -
Sr. Vice President and 2004 108,000 - - 4,250,000 -
Director of CirTran 2003 127,000 - - 3,000,000 -
Corporation 2002 118,000 - - 500,000
--------------------------------------------------------------------------------------------------------------
Raed S. Hawatmeh 2005 - - - 4,000,000 -
Director of CirTran 2004 - - - 2,500,000 -
Corporation 2003 - - - 3,000,000 -
2002 - - - 500,000 -
--------------------------------------------------------------------------------------------------------------
-17-
--------------------------------------------------------------------------------------------------------------
Shaher Hawatmeh 2005 150,000 30,000 - 2,000,000 -
Chief Operating Officer 2004 140,000 - - 4,700,000 -
2003 130,000 - - 8,400,000 -
2002 130,000 - - 2,500,000 -
--------------------------------------------------------------------------------------------------------------
Charles Ho 2005 460,126 500,000 -
President of CirTran Asia 2004 - 157,389 - - -
2003 - - - - -
2002 - - - - -
--------------------------------------------------------------------------------------------------------------
Option/SAR Grants in the Year Ended December 31, 2005
--------------- ------------ --------------- ---------------- ---------------
Number of
Securities % of Total
Underlying Options Granted
Options/SARs to Employees in Exercise or Base
Name Granted (#) Fiscal Year Price ($/Sh) Expiration Date
--------------- ------------ --------------- ---------------- ---------------
Iehab Hawatmeh 6,000,000 30.00% $0.022 - $0.027 Jan - Dec 2010
--------------- ------------ --------------- ---------------- ---------------
Trevor Saliba 5,000,000 25.00% $0.022 - $0.027 Jan - Dec 2010
--------------- ------------ --------------- ---------------- ---------------
Raed Hawatmeh 4,000,000 20.00% $0.022 - $0.027 Jan - Dec 2010
--------------- ------------ --------------- ---------------- ---------------
Shaher Hawatmeh 2,000,000 10.00% $0.023 - $0.027 Jan - Dec 2010
--------------- ------------ --------------- ---------------- ---------------
Charles Ho 500,000 2.00% $0.06 Jan 2006
--------------- ------------ --------------- ---------------- ---------------
Option/SAR Grants in the Year Ended December 31, 2004
--------------- ------------ --------------- ---------------- ---------------
Number of
Securities % of Total
Underlying Options Granted
Options/SARs to Employees in Exercise or Base
Name Granted (#) Fiscal Year Price ($/Sh) Expiration Date
--------------- ------------ --------------- ---------------- ---------------
Iehab Hawatmeh 3,500,000 14.58% $0.015 - $0.03 Jan - Dec 2009
--------------- ------------ --------------- ---------------- ---------------
Trevor Saliba 4,250,000 17.71% $0.015 - $0.03 Jan - Dec 2009
--------------- ------------ --------------- ---------------- ---------------
Raed Hawatmeh 3,500,000 14.58% $0.015 - $0.03 Jan - Dec 2009
--------------- ------------ --------------- ---------------- ---------------
Shaher Hawatmeh 4,700,000 19.58% $0.01 - $0.03 Jan - Dec 2009
--------------- ------------ --------------- ---------------- ---------------
Aggregated Option/SAR Exercises in the Year Ended December 31, 2005 and December
31, 2004 Option/SAR Values
--------------- --------------- ------------ --------------- ----------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
at FY End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
--------------- --------------- ------------ --------------- ----------------
Iehab Hawatmeh 8,000,000 $198,000 - $ -
--------------- --------------- ------------ --------------- ----------------
Trevor Saliba 4,000,000 $100,000 3,000,000/0 $ 71,000/0
--------------- --------------- ------------ --------------- ----------------
Raed Hawatmeh 3,000,000 $ 73,000 5,250,000/0 $123,500/0
--------------- --------------- ------------ --------------- ----------------
Shaher Hawatmeh 1,000,000 $ 23,000 2,000,000/0 -
--------------- --------------- ------------ --------------- ----------------
Charles Ho - - 500,000/0 -
--------------- --------------- ------------ --------------- ----------------
-18-
Aggregated Option/SAR Exercises in the Year Ended December 31, 2005 and December
31, 2004 Option/SAR Values
--------------- --------------- ------------ --------------- ----------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
at FY End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
--------------- --------------- ------------ --------------- ----------------
Iehab Hawatmeh 1,500,000 $ 33,750 - $ -
--------------- --------------- ------------ --------------- ----------------
Trevor Saliba 2,250,000 $ 56,250 - $ -
--------------- --------------- ------------ --------------- ----------------
Raed Hawatmeh 750,000 $ 11,250 2,250,000/0 $ 52,500/0
--------------- --------------- ------------ --------------- ----------------
Shaher Hawatmeh 3,700,000 $ 56,000 1,000,000/0 $ -
--------------- --------------- ------------ --------------- ----------------
Options issuable in connection with Manufacturing Agreement -- On June 10, 2004,
we entered into an exclusive manufacturing agreement with certain Developers,
including Charles Ho, the President of CirTran-Asia. Under the terms of the
agreement, we, through our wholly owned subsidiary CirTran-Asia, have the
exclusive right to manufacture certain products developed by the Developers or
any of their affiliates. In connection with this agreement, we identified seven
products, in connection with which we agreed to issue options to purchase shares
common stock to the Developers upon the sale, shipment and payment for specified
amounts of units of a the identified products, as set forth below. The options
will be exercisable at $0.06 per share, vest on the grant date and expire one
year after issuance. The schedule of units and potential options that will be
issued follows:
--------------------- ------- ----------- ------------- ------------- -------------
Options
Options for Each Issued
Initial Multiple of Options for Through
Initial Units Units Above Each Multiple January 29,
Product Units Sold(1) Initial Units of Units 2007
--------------------- ------- ----------- ------------- ------------- -------------
Ab King Pro 500,000 500,000 100,000 100,000 1,500,000 (3)
--------------------- ------- ----------- ------------- ------------- -------------
Ab Roller 500,000 500,000 200,000 100,000 ________
--------------------- ------- ----------- ------------- ------------- -------------
Ab Trainer Club Pro 25,000 500,000 15,000 100,000 ________
--------------------- ------- ----------- ------------- ------------- -------------
Instant Abs 100,000 500,000 50,000 100,000 ________
--------------------- ------- ----------- ------------- ------------- -------------
Hot Dog Express (2) 300,000 1,000,000 100,000 200,000 ________
--------------------- ------- ----------- ------------- ------------- -------------
Condiment Caddy 200,000 250,000 100,000 100,000 ________
--------------------- ------- ----------- ------------- ------------- -------------
Denise Austin Pilates 200,000 500,000 100,000 100,000 ________
--------------------- ------- ----------- ------------- ------------- -------------
(1) Except as set forth in Notes (2) and (3), the options set forth in this
table are issuable to Charles Ho, President of our subsidiary CirTran-Asia.
(2) Of the options for initial units sold for this product, Mr. Ho, President of
CirTran-Asia, is entitled to receive 700,000, with the remaining 300,000 going
to the other developer. For each multiple of units above the initial units, Mr.
Ho and the other developer are each entitled to receive an additional 100,000
options, for an aggregate of 200,000 options.
(3) Of the options issued in connection with this product, Mr. Ho received
500,000, and two other developers each received 500,000 options. All of these
options expired of their terms in January 2006.
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As of January 29, 2007, we had issued a total of 1,500,000 options pursuant to
the agreement relating to the Ab King Pro, but had not received sufficient
orders or shipped sufficient quantities of the other products listed in the
table to trigger the issuance of additional options. Of the 1,500,000 options
issued, Mr. Ho received 500,000 options. The 1,500,000 options were issued with
an exercise price of $0.06 per share, and all 1,500,000 options expired in
January 2006 pursuant to their terms.
During 2004, Mr. Ho received approximately $157,400 in commissions in connection
with the manufacturing agreement. During 2005, Mr. Ho received approximately
$460,200 in commissions in connection with the manufacturing agreement. During
2006, Mr. Ho received approximately $328,000 in commissions in connection with
the manufacturing agreement.
Mr. Ho's commissions are calculated by predetermined percentages from
manufacturing agreements and/or appendixes. Most of the commissions are
calculated using the sales price less freight and cost of sales to the factory,
that amount is then multiplied by the contract percentage, per unit for each
product, after the payment has been received.
Employment Agreements
On July 1, 2004, CirTran Corporation entered into an employment agreement with
Iehab Hawatmeh, dated as of June 26, 2004. The agreement, which is for a term of
five years and renews automatically on a year-to year basis, provides for a base
salary of $225,000, plus a bonus of 5% of our earnings before interest, taxes,
depreciation, and amortization, payable quarterly, as well as any other bonus
our board of directors may approve. Under the Agreement, Mr. Hawatmeh agreed to
serve as our Chief Executive Officer and President and to perform such other
duties as delegated by our board of directors. The agreement provides for
benefits including health insurance coverage, cell phone, car allowance, life
insurance, and D&O insurance. Under the Agreement, Mr. Hawatmeh's employment may
be terminated for cause, or upon his death or disability. In the event that Mr.
Hawatmeh is terminated without cause, we are obligated to pay him, as a
severance payment, an amount equal to five full years of his then-current annual
base compensation, half upon such termination and half one year later, together
with a continuation of insurance benefits for a period of five years.
Additionally, on July 1, 2004, CirTran Corporation entered into an employment
agreement with Trevor Saliba, dated as of June 26, 2004. The agreement, which is
for a term of three years and renews automatically on a year-to year basis,
provides for a base salary of $120,000, plus a bonus of 1% of our gross sales
generated directly by Mr. Saliba, a bonus of 5% of all gross investments made
into CirTran which are directly generated and arranged by Mr. Saliba, a bonus of
1% of the net purchase price of any acquisitions completed by us which are
directly generated and arranged by Mr. Saliba (payable in CirTran common stock),
as well as any other bonus our board of directors may approve. Under the
Agreement, Mr. Saliba agreed to serve as our Executive Vice President of Sales
and Marketing, and to perform such other duties as delegated by our board of
directors. The agreement provides for benefits including health insurance
coverage, cell phone, car allowance, life insurance, and D&O insurance. Under
the Agreement, Mr. Saliba's employment may be terminated for cause, or upon his
death or disability. In the event that Mr. Saliba is terminated without cause,
we are obligated to pay him, as a severance payment, an amount equal to one
years' salary. If the Agreement expires of its terms or is terminated for any
reason, Mr. Saliba may not compete with us for a period of one year from the
date of termination of the agreement. Mr. Saliba also agreed not to solicit our
employees or customers, or attempt to induce anyone to cease doing business with
us for a period of two years after the termination of the agreement.
On July 1, 2004, we also entered into an employment agreement, dated as of June
26, 2004, with Shaher Hawatmeh, the brother of Iehab Hawatmeh. The agreement,
which is for a term of three years and renews automatically on a year-to year
basis, provides for a base salary of $150,000, plus a bonus of 1% of our
earnings before interest, taxes, depreciation, and amortization, payable
quarterly, as well as any other bonus our board of directors may approve. Under
the Agreement, Mr. Shaher Hawatmeh agreed to serve as our Chief Operating
Officer, and to perform such other duties as delegated by our board of
directors. The agreement provides for benefits including health insurance
coverage, cell phone, life insurance, and D&O insurance. Under the Agreement,
Mr. Shaher Hawatmeh's employment may be terminated for cause, or upon his death
-20-
or disability. In the event that Mr. Shaher Hawatmeh is terminated without
cause, we are obligated to pay him, as a severance payment, an amount equal to
one years' salary. If the Agreement expires of its terms or is terminated for
any reason, Mr. Shaher Hawatmeh may not compete with us for a period of one year
from the date of termination of the agreement. Mr. Shaher Hawatmeh also agreed
not to solicit our employees or customers, or attempt to induce anyone to cease
doing business with us for a period of two years after the termination of the
agreement.
On June 15, 2004, our subsidiary, CirTran-Asia, entered into an employment
agreement with Charles Ho. The agreement, which is for a term of three years and
renews automatically on a year-to year basis, provides that for each additional
product that Mr. Ho procures pursuant to the agreement between CirTran-Asia and
Michael Casey Enterprises, LTD., Mr. Ho shall be entitled to receive such
compensation as provided for in that agreement in the form of options to
purchase shares of CirTran common stock. Under the Agreement, CirTran-Asia will
not provided benefits to Mr. Ho., and his employment may be terminated for
cause, or upon his death or disability. If the Agreement expires of its terms or
is terminated for any reason, Mr. Ho may not compete with us for a period of one
year from the date of termination of the agreement. Mr. Ho also agreed not to
solicit our employees or customers, or attempt to induce anyone to cease doing
business with us for a period of two years after the termination of the
agreement.
In May 2006, we entered into a a three-year employment contract with Richard
Ferrone to serve as the Chief Financial Officer of the Company to perform those
duties delegated by the Board of Directors and the President of the Company and
all other duties consistent with such description. The term of his employment
started on May 15, 2006, and will continue for three years thereafter, unless
sooner terminated by either party as provided in the agreement. Thereafter, the
agreement will be automatically renewed on a year-to-year basis after the
expiration of the initial or any subsequent term of the Agreement unless
terminated by either party as provided in the agreement. Mr. Ferrone will
receive, commencing on May 15, 2006, a base salary of $120,000.00 per year. The
base salary shall be reviewed by the Board annually and may be increased as
determined by the Board. The Board's determination of salary will be based
primarily on Mr. Ferrone's ability to meet, and to cause the Company to meet,
annually established goals. He is also entitled to a bonus of $30,000 per year,
payable in quarterly increments. In addition, he may be granted options to
purchase shares of the Company's common stock as determined from time to time by
the Board or the Committee established pursuant to the Company's Stock Option
Plan.
Recent Developments
Entry into Amendment Agreements
On January 12, 2007, CirTran Corporation (the "Company"), entered into
two agreements with Cornell Capital Partners, LP ("Cornell"), both of which
amended prior agreements with Cornell.
The Company entered into an Amendment Number 2 to Amended and Restated
Investor Registration Rights Agreement ("Amendment No. 2") with Cornell, which
amended an Amended and Restated Investor Registration Rights Agreement dated as
of August 23, 2006, as amended October 30, 2006. The purpose of Amendment No. 2
was to extend the filing deadline for a registration statement to be filed by
the Company to register the resale by Cornell of shares of the Company's common
stock issuable to Cornell upon conversion of a convertible debenture in the
aggregate principal amount of $1,500,000 (the "August Debenture") issued to
Cornell in August 2006. The new filing deadline for the registration statement
is June 1, 2007.
The Company also entered into an Amendment Number 4 to Investor
Registration Rights Agreement ("Amendment No. 4") with Cornell, which amended an
Investor Registration Rights Agreement dated as of December 30, 2005, as most
recently amended October 30, 2006. The purpose of Amendment No. 4 was to extend
the filing deadline for a registration statement to be filed by the Company to
register the resale by Cornell of shares of the Company's common stock issuable
to Cornell upon conversion of a convertible debenture in the aggregate principal
amount of $1,500,000 (the "December Debenture") issued to Cornell in December
2005. The new filing deadline for the registration statement is June 1, 2007.
-21-
Entry into Exclusive Manufacturing and Supply Agreement
On November 30, 2006, CirTran Corporation (the "Company"), entered into
an Exclusive Manufacturing and Supply Agreement (the "Agreement") with Evolve
Projects, LLC ("Evolve"), an Ohio-based limited liability company.
The term of the Agreement (the "Term") is for five years from
execution, and may be continued on a month-to-month basis thereafter. The
Agreement relates to the manufacturing and production of a new fitness product
(the "Product"). Under the Agreement, Evolve committed to minimum orders of at
least 20,000 units during the first year of the Term, at least 30,000 units
during the second year of the Term, and at least 40,000 units during the third
year of the Term. During the Term, Evolve agreed to purchase all of its
requirements for the Product on an exclusive basis from the Company.
The Product is designed to strengthen and rehabilitate the lower back
and adjacent areas of the body. Under the terms of the Agreement, Evolve will
own all right, title, and interest in and to the Product, and will market the
Product under its own trademarks, service marks, symbols or trade names.
On December 5, 2006, the Company announced that it had received the
first purchase order from Evolve for more than $54,000 of the Product. The
Product will be manufactured in China by the Company's Asia-based subsidiary,
CirTran Asia, and the Company anticipates that the Products will ship under this
first purchase order to the United States during January 2007. Once Evolve has
approved the first production run of the Product, the Company and Evolve will
confirm the price per unit.
New Director
As noted above, on February 1, 2007, Fadi Nora was appointed as a
director of the Company.
ANNUAL REPORT
Copies of the Company's Annual Report on Form 10-KSB (including
financial statements and financial statement schedules) for the year ended
December 31, 2005, filed with the Securities and Exchange Commission may be
obtained without charge by writing to the Company - Attention: Richard Ferrone,
4125 South 6000 West, West Valley City, Utah 84128. A request for a copy of the
Company's Annual Report on Form 10-KSB must set forth a good-faith
representation that the requesting party was either a holder of record or a
beneficial owner of common stock of the Company on February 5, 2007. Exhibits to
the Form 10-K, if any, will be mailed upon similar request and payment of
specified fees to cover the costs of copying and mailing such materials.
---------------------------------------
By Order of the Board of Directors
/s/ Iehab Hawatmeh
Iehab Hawatmeh
President and Director
Salt Lake City, Utah
February ___, 2007
-22-
EXHIBIT 1
ARTICLES OF AMENDMENT FOR ARTICLES OF INCORPORATION
-23-
CERTIFICATE OF AMENDMENT
Certificate of Amendment to Articles of Incorporation
-----------------------------------------------------
For Nevada Profit Corporations
------------------------------
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
-Remit in Duplicate-
1. Name of Corporation: CirTran Corporation.
2. The articles have been amended as follows (provide article numbers, if
available):
The Articles of Incorporation are to be amended by striking out the
first paragraph of Article IV, as amended to date, in its entirety, and
inserting a new first paragraph of Article IV reading as follows:
ARTICLE IV
CAPITALIZATION
The aggregate number of shares which this Corporation shall
have authority to issue is 1,500,000,000 Common Shares having
a par value of $0.001 per share. Each share of stock shall
entitle the holder thereof to one (1) vote on each matter
submitted to a vote at a meeting of the shareholders. All
stock of the Corporation shall be of the same class and shall
have the same rights and preferences. The capital stock of the
Corporation shall be issued as fully paid, and the private
property of the shareholders shall not be liable for the
debts, obligations or liabilities of the Corporation. Fully
paid stock of this Corporation shall not be liable to any
further call of assessment. Effective as of the time at which
this Certificate of Amendment to Articles of Incorporation
(the "Amended Articles") becomes effective (the "Effective
Date"), all outstanding shares of common stock of the
Corporation automatically shall be subdivided at the rate of
1.20 shares for one share (the "Forward Split") without the
necessity of any further action on the part of the holders
thereof or the Corporation, provided, however, that the
Corporation shall, through its transfer agent and as
necessary, exchange certificates representing common stock
outstanding immediately prior to the Effective Date of the
Forward Split (the "Existing Common") into new certificates
representing the appropriate number of shares of common stock
resulting from the subdivision ("New Common").
3. The vote by which the stockholders holding shares in the corporation
entitling them to exercise at least a majority of the voting power, or such
greater proportion of the voting power as ay be required in the case of a vote
by classes or series, or as may be required by the provisions of the articles of
incorporation have voted in favor of the amendment is:________________________.*
4. Signatures (Required):
---------------------------------- ------------------------------------------
President or Vice President and Secretary or Asst. Secretary
*If any proposed amendment would alter or change any preference or relative or
other right given to any class or series of outstanding shares, then the
amendment must be approved by the vote, in addition to the affirmative vote
otherwise required, of the holders of shares representing a majority of the
voting power of each class or series affected by the amendment regardless of
limitations or restrictions on the voting power thereof.
IMPORTANT: Failure to include any of the above information and remit the proper
fees may cause this filing to be rejected.
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