S-1/A: CirTran Seeks $10M Equity Line Amidst Mounting Losses

CirTran Corporation files S-1/A to register up to 1.73 million shares for resale by YA II PN, Ltd. under a $10 million standby equity purchase agreement, as the company continues to report significant losses and a going concern warning.

Summary

• CirTran Corporation filed an S-1/A to register up to 1,731,509 shares of common stock for resale by YA II PN, Ltd.
• This registration is in connection with a Standby Equity Purchase Agreement (SEPA) dated December 22, 2025, allowing CirTran to sell up to $10,000,000 of common stock to YA II PN, Ltd. over a 24-month period.
• CirTran will not receive proceeds from the resale by the Selling Stockholder, but may receive up to $10 million in aggregate gross proceeds from direct sales to the Selling Stockholder.
• 50% of any proceeds received from sales to the Selling Stockholder must be used to repay indebtedness to Tekfine, LLC.
• The company reported a net loss of $2.6 million for the year ended December 31, 2024, and a net loss of $1,138,064 for the nine months ended September 30, 2025.
• Accumulated deficit was $61.4 million as of December 31, 2024, and $62.8 million as of September 30, 2025.
• The company has a working capital deficiency of $21,839,245 as of December 31, 2024, and $22,897,132 as of September 30, 2025.
• Auditors have issued a going concern qualification for the financial statements, raising substantial doubt about the company's ability to continue operations.
• The company's common stock is listed on the OTCID Market under the symbol CIRX, with a closing price of $0.043 per share on January 2, 2026.
• The offering could result in substantial dilution to existing stockholders, with the registered shares representing approximately 26% of outstanding common stock after issuance.

Sentiment

Score: 2

Explanation: The company faces severe financial distress, evidenced by persistent net losses, a substantial accumulated deficit, and a significant working capital deficiency, leading to a going concern qualification from auditors. All assets are encumbered, and the primary capital raise mechanism (SEPA) carries high dilution risk for existing shareholders. While there was a recent quarterly sales increase and SG&A reduction, these are minor against the backdrop of overall financial instability and long-term operational challenges.

Positives

• Secured a potential funding source of up to $10,000,000 through a Standby Equity Purchase Agreement (SEPA) with YA II PN, Ltd.
• Net loss from continuing operations decreased by $455,064 for the three months ended September 30, 2025, compared to the same period in 2024 ($406,208 vs. $861,272).
• Net loss from continuing operations decreased by $650,654 for the nine months ended September 30, 2025, compared to the same period in 2024 ($1,048,292 vs. $1,698,946).
• Net sales increased by $192,422 (75.1%) for the three months ended September 30, 2025, compared to the same period in 2024 ($448,492 vs. $256,070), driven by higher sales in the vapor product line.
• Selling, general, and administrative expenses decreased by $17,019 (7.8%) for the three months ended September 30, 2025, and by $59,940 (10%) for the nine months ended September 30, 2025, due to reduced marketing and promotions spending.
• Recognized a gain on forgiveness of debt of $5,690 for the three months ended September 30, 2025, and $10,831 for the nine months ended September 30, 2025.
• The company has a diversified expertise in manufacturing, marketing, distribution, and technology services for consumer products, with a footprint in over 50 international markets.
• The company has an exclusive manufacturing and distribution agreement with GloBrands, LLC for HUSTLER-branded products (condoms, electronic tobacco products, cigars, energy drinks, water beverages).
• Tekfine, LLC, a major secured creditor, has agreed to refrain from selling its converted shares during the term of the Purchase Agreement.

Negatives

• The company has a history of losses from operations, with a net loss of $2.6 million for the year ended December 31, 2024, and $1,138,064 for the nine months ended September 30, 2025.
• An accumulated deficit of $61.4 million as of December 31, 2024, and $62.8 million as of September 30, 2025.
• A significant working capital deficiency of $21,839,245 as of December 31, 2024, and $22,897,132 as of September 30, 2025.
• The auditors' report contains a qualification about the company's ability to continue as a going concern.
• All assets are encumbered to secure approximately $4.0 million in indebtedness and accrued interest on secured convertible debentures.
• The company may be deemed insolvent and could face liquidation.
• The issuance of additional equity securities under the SEPA will dilute the interest of existing stockholders.
• The company will not receive any proceeds from the resale of shares by the Selling Stockholder.
• Net sales for the year ended December 31, 2024, decreased by $319,352 (19.8%) to $1,296,796 compared to $1,616,148 in 2023.
• Gross profit decreased to $838,638 in 2024 from $1,006,497 in 2023.
• Selling, general, and administrative expenses increased by $363,675 (71.3%) in 2024 compared to 2023.
• Total other expense for the year ended December 31, 2024, was $1,996,615, including $790,589 in interest expense and a $1,161,498 loss on derivative valuation.
• The company has substantial secured indebtedness, which will likely impair its ability to obtain capital from external sources.
• The company does not have adequate authorized but unissued shares to satisfy its obligations if all instruments eligible to convert to common stock are exercised.
• The company does not intend to pay cash dividends in the foreseeable future.
• The company has outstanding promissory notes to a family member of the president and other shareholders totaling $151,833 and $72,466, respectively, due on demand.
• The company owes its CEO $433,379 in unsecured advances (included in discontinued operations liabilities) and $7,059 for short-term advances.
• The company has a history of delinquent payroll taxes, interest, and penalties with the IRS.
• The company lost a $6.6 million judgment to Playboy Enterprises, Inc. in 2016, which was affirmed on appeal in 2018, though the company recognized a gain from discontinued operations of $18,878,359 in 2023 due to the judgment being time-barred.
• The company's common stock is a 'penny stock,' which imposes restrictions on resales and may limit liquidity.
• The Board of Directors has determined that all current members are not independent directors.
• Two officers failed to report options earned and options that expired during the fiscal year ended December 31, 2024, under Section 16(a) compliance.

Risks

• The company may be deemed insolvent, unable to meet obligations, with liabilities exceeding assets, potentially leading to involuntary bankruptcy and liquidation. Secured creditors could seize all assets, leaving nothing for other creditors or stockholders.
• The auditors' report for the most recent fiscal year (and previous years) contains a qualification about the company's ability to continue as a going concern due to net losses and accumulated deficit.
• All assets are encumbered to secure approximately $4.0 million in indebtedness and accrued interest on secured convertible debentures, which could lead to termination of activities if the company defaults. This impairs ability to obtain new capital.
• International business operations, with the bulk of sales outside the U.S., are susceptible to adverse effects from changes in tariffs and governmental actions impacting trade.
• Distribution of tobacco products carries risks of increased regulation, sales restrictions, and litigation due to associated health risks.
• The company requires substantial additional funds for product commercialization and contract manufacturing plans, which may be difficult to obtain due to its precarious financial condition and secured indebtedness.
• Future sales of equity or other securities to raise capital may dilute existing stockholders' interests or subordinate their rights. The SEPA itself poses substantial dilution risk.
• Any substantial increase in business activities will require skilled management of growth, including integrating new employees, forming strategic alliances, and commercializing products, which could be adversely affected if not managed effectively.
• The company's common stock is subject to penny stock regulations, which impose additional sales practice requirements on broker-dealers, potentially limiting liquidity and adversely affecting resale ability.
• Performance substantially depends on the continued services of Iehab J. Hawatmeh (President, CEO, Chairman), and his loss would have a substantial adverse effect.
• The company does not intend to pay cash dividends in the foreseeable future, retaining earnings for growth and debt repayment.
• Sales of shares by the Selling Stockholder or other registered shares could cause the market price of common stock to decline and be highly volatile.
• The company's ability to issue shares to the Selling Stockholder under the Purchase Agreement is subject to conditions precedent, which may not be met.
• To receive the full $10,000,000 from the SEPA, the company may need to file additional registration statements, which could cause further substantial dilution.
• The company faces risks from cybersecurity threats that, if realized, are reasonably likely to materially affect operations, business strategy, results of operations, or financial condition.

Future Outlook

The company expects to access external capital resources in the future to fund any new projects, potentially through the sale of equity or other securities. Management anticipates continuing to rely on part-time and contract workers to minimize fixed overhead as activities increase. Offshore contract manufacturing is expected to play an increased role as resources become available. The company does not anticipate declaring any cash dividends in the foreseeable future, intending to retain future earnings for growth and development.

Management Comments

• "Management believes that the regulatory climate for tobacco products has stabilized, but we can not assure that there will not be additional sales restrictions or litigation which may damage our business."
• "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."
• "Our issuance of additional shares for equity or for conversion of debt could dilute the value of our common stock and existing stockholders positions."
• "We believe that the facilities described above are generally in good condition, well maintained, and suitable and adequate for our current needs and that, if required, suitable space would be available to us on similar terms."
• "We believe we are in substantial compliance with all relevant regulations applicable to our business and operations."

Industry Context

The company operates in the international manufacturing, distribution, and marketing of licensed consumer products, including tobacco products and beverages, under the HUSTLER brand. The contract manufacturing industry, where the company also operates, is large and diverse, with a trend towards outsourcing by OEMs and retailers for efficiency. The tobacco industry faces ongoing regulatory scrutiny and health-related litigation risks. The company's strategy of leveraging global distribution and manufacturing relationships, particularly in Asia, aligns with broader trends in global supply chains and cost optimization.

Comparison to Industry Standards

• The company mentions its past relationship with Playboy Enterprises, Inc. for a discontinued energy drink, which resulted in a significant legal judgment against it, indicating challenges in brand licensing partnerships.
• The company's reliance on contract manufacturing and global sourcing (e.g., Central America, Thailand, Vietnam, China) is a common industry practice for cost efficiency and scalability, but no specific benchmarks or comparable companies are provided in the filing to assess its performance against industry standards.

Corporate Governance

Legal Proceedings

• Playboy Enterprises, Inc. Litigation: An affiliate, Play Beverages, LLC, and CirTran Beverage Corp. were subject to a $6.6 million judgment in October 2016, affirmed on appeal in September 2018. However, as of December 31, 2023, the company recognized a gain of $18,878,359 from discontinued operations because legal representation indicated the judgment could no longer be enforced after seven years.
• Delinquent Payroll Taxes, Interest, and Penalties: In November 2004, the IRS accepted an offer in compromise for $500,000. In June 2013, the company entered a partial installment agreement for $768,526 in unpaid 2009 payroll taxes. The collection statute of limitation expired on October 6, 2020, and the company wrote off $512,520 as time-barred debt in 2023. The company is in communication with the IRS regarding the statute of limitations.
• Various Vendor/Service Provider Claims: Various vendors and service providers have asserted legal claims in previous years. These creditors are generally not actively seeking collection, and the company believes the probability of loss is remote, intending to compromise and settle at a deep discount.

Related Party Transactions

• Promissory Note to Family Member of President (2007): A 10% promissory note for $300,000 was issued to a family member of the president, due on demand after May 2008. Principal owing was $151,833 at December 31, 2024, and September 30, 2025. No repayments made.
• Promissory Notes to Family Member and Shareholders (2008): Three promissory notes totaling $315,000 ($105,000 each) were issued to the same family member and two other shareholders on March 31, 2008. Total proceeds received were $300,000 plus a 5% borrowing fee. Due on demand after April 30, 2008, with 12% interest. Principal owing was $72,466 at December 31, 2024, and September 30, 2025. No payments made.
• Unsecured Advances from President: The company owed its president $433,379 in unsecured advances as of December 31, 2024, and September 30, 2025. These were approved by the board with a 5% borrowing fee, which was waived by the president. These amounts are included in liabilities from discontinued operations.
• Short-term Advances to CEO: The company owed the CEO $7,059 for short-term, non-interest-bearing advances due on demand as of December 31, 2024, and September 30, 2025.
• Deposits with Related-Party Inventory Supplier: Net decrease in deposits of $223,774 in 2024 and $1,081,548 for the nine months ended September 30, 2025, with a related-party inventory supplier controlled by the CEO. Transactions were at a 2% markup over cost. Total inventory purchases from this related party were $1,168,930 in 2024 and $669,044 for the nine months ended September 30, 2025.
• Employment Agreement with Iehab Hawatmeh: Grants options to purchase 6,000 shares annually, provides health insurance, cell phone, car allowance, life insurance, D&O liability insurance, and incentive compensation (quarterly bonus of 5% of EBITDA, 1% of net purchase price of acquisitions, 1% of gross sales). Cash amounts over $120,000/year are accrued and not paid until secured convertible debenture is paid or converted.

Stakeholder Impact

• Shareholders: Face significant dilution risk from the SEPA and potential future equity raises. Existing shares will represent a smaller percentage of total outstanding shares. Stock price volatility is a concern due to potential sales by the Selling Stockholder. No cash dividends are expected.
• Employees: The company relies on a mix of full-time (4) and part-time/contract workers (23). Continued losses and financial instability could impact job security or compensation. The CEO's compensation includes significant accrued amounts not yet paid.
• Creditors (Tekfine, LLC): Tekfine, a major secured creditor, will receive 50% of the proceeds from the SEPA, which could help reduce the company's substantial debt to them ($2.4 million principal + $2.1 million accrued interest as of Sep 30, 2025). Tekfine has agreed to a forbearance on selling converted notes. Other creditors face uncertainty due to the company's insolvency risk and encumbered assets.
• Customers/Suppliers: The company's going concern status and financial instability could impact its ability to maintain consistent supply chains or fulfill customer orders, though the company states it has established distribution and manufacturing relationships.

Next Steps

• File a further amendment to the registration statement to declare it effective.
• File the final form of the prospectus with the SEC.
• Upon effectiveness, the company has the right to direct the Selling Stockholder to purchase shares under the Purchase Agreement for 24 months.
• Continue efforts to develop product manufacturing relationships with foreign and domestic suppliers.
• Obtain tobacco import regulatory licenses and FDA 510(k) approval for condom manufacturing.
• Develop and refine energy drink and water formulations.
• Create marketing materials and establish distribution channels.
• Lease Las Vegas facilities for offices, showroom, and warehouse.
• Assemble a team of contract consultants and support staff.
• Design data gathering, reporting, and analytical systems.
• Seek additional capital from external sources to fund new projects.
• Potentially file additional registration statements to register more shares for resale under the SEPA to reach the full $10 million commitment.

Key Dates

Recommendation

The company is in severe financial distress, evidenced by a persistent history of significant net losses, a massive accumulated deficit ($62.8 million), and a critical working capital deficiency ($22.9 million). The auditor's 'going concern' qualification highlights the high risk of business failure. All company assets are encumbered by substantial secured debt. While the Standby Equity Purchase Agreement (SEPA) offers a potential capital infusion, it comes with explicit warnings of 'substantial dilution' and 'significant declines in stock price' for existing shareholders. The company's common stock is already a 'penny stock,' further limiting liquidity and investor interest. Despite some recent quarterly revenue growth in one segment and reduced SG&A, these positive operational trends are insufficient to offset the overwhelming financial instability and high risk of capital loss. The lack of independent directors and past Section 16(a) compliance issues also raise governance concerns. A seasoned investor would view this as a highly speculative investment with a very high probability of significant capital impairment.

Keywords

CirTran Corporation, CIRX, S-1/A, SEC filing, Standby Equity Purchase Agreement, SEPA, Equity financing, Dilution, Going concern, Net loss, Accumulated deficit, Working capital deficiency, Tobacco products, HUSTLER brand, Contract manufacturing, Consumer products, OTC Markets, Penny stock, Related party transactions, Convertible debentures, YA II PN, Ltd., Tekfine, LLC