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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X][ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ][X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or 240.14a-12
CirTran Corporation
- --------------------------------------------------------------------------------...............................................................................
(Name of Registrant as Specified in Charter)
- --------------------------------------------------------------------------------...............................................................................
(Name of Person(s) Filing Proxy Statement If Other Than The Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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.___________________________No.
3) Filing Party:
_________________________________________________________
4) Date Filed:
___________________________________________________________
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CirTran Corporation
4125 South 6000 West
West Valley City, Utah 84128
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 2007
To the Shareholders:
Notice is hereby given that a Special Meeting of the Shareholders of
CirTran Corporation (the "Company") will be held at the Company's headquarters,
located at 4125 South 6000 West, West Valley City, Utah 84128, on Monday, April
30, 2007, at 10:00 a.m., M.D.S.T., for the following purpose, which is discussed
in the following pages and which are made part of this Notice:
1. To consider and act upon a proposed amendment to the Company's
articles of incorporation that increases the authorized
capital of the Company to include 1,500,000,000 shares of
common stock and effectuates a 1.2 shares for one share
forward stock split; and
2. To consider and act upon any other matters that properly may
come before the meeting or any adjournment thereof.
The Company's Board of Directors has fixed the close of business on
Friday, March 16, 2007, as the record date (the "Record Date") for the
determination of shareholders having the right to notice of, and to vote at, the
Special Meeting of Shareholders and any adjournment thereof. A list of such
shareholders will be available for examination by a shareholder for any purpose
germane to the meeting during ordinary business hours at the offices of the
Company at 4125 South 6000 West, West Valley City, Utah, 84128, during the ten
business days prior to the meeting.
You are requested to date, sign and return the enclosed proxy which is
solicited by the Board of Directors of the Company and will be voted as
indicated in the accompanying proxy statement and proxy. Your vote is important.
Please sign and date the enclosed Proxy and return it promptly, either in the
enclosed return envelope or by facsimile to (801) 277-3147, whether or not you
expect to attend the meeting. The giving of your proxy as requested hereby will
not affect your right to vote in person should you decide to attend the Special
Meeting. The return envelope requires no postage if mailed in the United States.
If mailed elsewhere, foreign postage must be affixed. Your proxy is revocable at
any time before the meeting.
By Order of the Board of Directors,
/s/ Iehab Hawatmeh
West Valley City, Utah
__________ __, 2007 Iehab Hawatmeh,
President and Director
CirTran Corporation
4125 South 6000 West
West Valley City, Utah 84128
(801) 963-5112
--------------------------------
PROXY STATEMENT
--------------------------------
SPECIAL MEETING OF SHAREHOLDERS
The enclosed proxy is solicited by the Board of Directors of CirTran Corporation
("CirTran" or the "Company") for use in voting at the SpecialApril 29, 2008
Dear Fellow Shareholder:
You are cordially invited to attend our Annual Meeting of Shareholders (the "Special Meeting")
to be held at the Company's headquarters,
locatedoffices of our affiliate, Global Marketing Alliance, LLC, 3135
South 1300 East, Salt Lake City, Utah on June 18, 2008 at 11:00 a.m., Mountain
Daylight Time.
The business to be conducted at the Annual Meeting is explained in the
accompanying Notice of Annual Meeting of Shareholders and Proxy Statement. At
the Annual Meeting, we will also discuss our results for the past year.
Whether or not you attend the Annual Meeting, it is important that your
shares be represented and voted at the Annual Meeting. Please complete, sign,
and date your proxy card today and return it in the envelope provided. If you
decide to attend the Annual Meeting and you are a registered shareholder, you
will be able to vote in person, even if you have previously submitted your
proxy.
Thank you for your continued support.
Sincerely,
Iehab Hawatmeh,
Chief Executive Officer and
Chairman of the Board of Directors
Salt Lake City, Utah
April 29, 2008
2
CirTran Corporation
4125 South 6000 West
West Valley City, Utah 84128
(801) 963-5112
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 2008
------------------------
The 2008 Annual Meeting of Shareholders (the "Meeting") of CirTran Corporation
(the "Company") will be held at the offices of our affiliate, Global Marketing
Alliance, LLC, 3135 South 1300 East, Salt Lake City, Utah on Monday, April
30, 2007,Wednesday, June 18,
2008 at 10:11:00 a.m., M.D.T.,Mountain Daylight Time. The purposes of the Meeting are to:
o Elect two directors to serve for one year each, until the next
Annual Meeting of Shareholders and until a successor is elected
and shall qualify;
o Approve the 2006 Stock Plan
o Approve the 2008 Stock Plan
o Ratify the Board of Directors' selection of Hansen Barnett &
Maxwell, P.C. as the Independent Registered Public Accounting Firm
and Auditor of the Company for the year ending December 31, 2008;
and
o Transact such other business as may properly come before the
meeting or at any postponement or adjournment thereof,
for the purposes set forth in the attached notice. When proxies are properly
dated, executed and returned, the shares they represent will be votedthereof.
Only CirTran shareholders of record at the
Special Meeting in accordance with the instructions of the shareholder
completing the proxy. If a signed proxy is returned but no specific instructions
are given, the shares will be voted (i) FOR approval of a proposed amendment to
the Company's articles of incorporation that would increase the authorized
capital of the Company to include 1,500,000,000 shares of common stock and the
1.2 shares for one share forward stock split. A shareholder giving a proxy has
the power to revoke it at any time prior to its exercise by voting in person at
the Special Meeting, by giving written notice to the Company's Secretary prior
to the Special Meeting or by giving a later dated proxy.
The presence at the meeting, in person or by proxy, of shareholders holding in
the aggregate a majority of the outstanding shares of the Company's common stock
entitled to vote shall constitute a quorum for the transaction of business. Each
share present at the meeting in person or by proxy is entitled to one vote on
each matter presented at the meeting. A majority of votes properly cast upon any
question presented for consideration and shareholder action at the meeting shall
decide the question. Abstentions and broker non-votes will count for purposes of
establishing a quorum, but will not count as votes cast for any questions and
accordingly will have no effect. Votes cast by shareholders who attend and vote
in person or by proxy at the Special Meeting will be counted by inspectors to be
appointed by the Company. (The Company anticipates that the inspectors will be
employees, attorneys or agents of the Company.)
The close of business on Friday, March 16, 2007, has been fixed asApril 21, 2008,
have the record
date (the "Record Date") for determining the shareholders entitledright to receive notice of, and to vote at, the SpecialMeeting and any
adjournment thereof.
The items of business, including the nominees for director, are more fully
described in the Proxy Statement accompanying this Notice of Annual Meeting.
Each share shall be entitled to one vote on
all matters. AsYOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, YOU ARE
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE ENCLOSED STAMPED ENVELOPE.
By Order of the Record Date there were _________________ sharesBoard of Directors,
Iehab Hawatmeh,
Chief Executive Officer and
Chairman of the Company's Class A common stock outstandingBoard of Directors
Salt Lake City, Utah
April 29, 2008
3
CirTran Corporation
ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
TABLE OF CONTENTS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS AND PROXY STATEMENT 1
QUESTIONS AND ANSWERS ABOUT THE MEETING 5
PROPOSAL #1: ELECTION OF DIRECTORS 8
PROPOSAL #2: APPROVAL OF THE 2006 STOCK PLAN 9
PROPOSAL #3: APPROVAL OF THE 2008 STOCK PLAN 12
PROPOSAL #4: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM AND AUDITOR 13
- -- Policy on Pre-Approval of Audit and entitled to vote, held by
________ holders of record. For a descriptionPermissible Non-Audit Services 13
- -- Independence 13
- -- Financial Statements and Reports 13
PRINCIPAL ACCOUNTANT FEES AND SERVICES 14
CORPORATE GOVERNANCE 14
- -- Director Independence 14
- -- Shareholder Communications with Directors 14
- -- Committees of the principal holdersBoard of such
stock, see "SECURITYDirectors 14
- -- Code of Ethics 15
EXECUTIVE OFFICERS 15
- -- Indemnification of Officers and Directors 15
EXECUTIVE COMPENSATION 16
- -- Compensation Discussion and Analysis 16
- -- Compensation Objectives 16
- -- Base Salary 17
- -- Performance bonus and commissions 17
- -- Stock options and awards 17
- -- Employee benefits 17
- -- Other de minimis benefits 17
SUMMARY COMPENSATION TABLE 18
- -- Narrative Disclosure to Summary Compensation Table 19
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS 20
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 21
DIRECTOR COMPENSATION 22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT"
below.MANAGEMENT 23
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT 23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 24
OTHER MATTERS 28
ANNUAL REPORT 28
FURTHER INFORMATION 28
4
CirTran Corporation
4125 South 6000 West
West Valley City, Utah 84128
(801) 963-5112
-------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 18, 2008
-------------------------
This Proxy Statement and the enclosed Proxyproxy card are being furnished to shareholders
on or about ___________ __, 2007.
--------------------------------
-2-
PROPOSAL 1 - AMENDMENT OF ARTICLES OF INCORPORATION
Asin
connection with the solicitation of January 1, 2007,proxies by 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
"Board") of CirTran Corporation (the "Company," "CirTran," "we," "us") from the
adoptionholders of the
amendment (the "Amendment") to the Articles of Incorporation, and has
recommended the Amendment to the shareholders for their approval and adoption.
If approved by the shareholders of the Company at the Special Meeting,
the new first paragraph of Article IV of the Certificate of Incorporation, as
amended, would 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 shallCompany to be subdividedvoted at the rate2008 Annual
Meeting of 1.20 shares for one shareShareholders (the "Forward Split""Meeting") withoutto be held at 11:00 a.m. Mountain
Daylight Time at the necessity of any further action on the partoffices 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 SplitCompany's affiliate, Global Marketing
Alliance, LLC, 3135 South 1300 East, Salt Lake City, Utah (the "Existing Common") into new certificates
representing the appropriate number of shares of common stock
resulting from the subdivision ("New Common""Meeting").
Except for this change, the amendment would not affect any other
provisionDistribution of the Articles of Incorporation. The text of the proposed amendment
to amend Article IV to the Articles of Incorporation is attached to this Proxy Statement and the accompanying proxy card is
scheduled to begin on or about April 29, 2008.
The enclosed proxy is solicited by the Board.
QUESTIONS AND ANSWERS ABOUT THE MEETING
Why did I receive this Proxy Statement?
We have sent you the Notice of Annual Meeting of Shareholders, this
Proxy Statement, and the enclosed proxy or voting instruction card because the
CirTran Board of Directors is soliciting your proxy to vote at CirTran's Annual
Meeting on June 18, 2008. This Proxy Statement contains information about
matters to be voted on at the Meeting.
Who is entitled to vote?
The Board has designated April 21, 2008 as Exhibit 1 and is incorporated herein by reference.
Backgroundthe record date for the
Meeting. You may vote if you owned common stock as of the Proposed Amendment
Increase in Authorized Capital
------------------------------
Asclose of January 1, 2007, webusiness on
April 21, 2008. On April 21, 2008, there were authorized, pursuant to our Articles of
Incorporation, as amended to date, to issue up to 750,000,0001,163,490,266 shares of our common
stock and therethat were 655,716,326 shares of the Company's Common Stock
issuedoutstanding and outstanding. Additionally, as of the Record Date, the Company had the
following obligations to reserve or issue shares of its common stock:
-3-
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 lessvote 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 perMeeting.
How many votes do I have?
Each 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
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").
-4-
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
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.
-5-
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 pricesyou own at the timeclose of such conversion or
exercise were the following amounts:
Shares Issuable Total Shares
Upon Conversion Issuable in
Shares Issuable Upon of $3,000,000 Connection with
Conversion of Principal Amount Conversion of
$2,650,000 Principal of Convertible Aggregate Principal
Hypothetical Amount of Convertible Debentures by Amount of
Conversion Debenture by Highgate Cornell Capital Convertible
Price House Funds, Ltd. Partners Debentures
- ------------ --------------------- ---------------- -------------------
$0.01 265,000,000 300,000,000 565,000,000
- ------------ --------------------- ---------------- -------------------
$0.02 132,500,000 150,000,000 282,500,000
- ------------ --------------------- ---------------- -------------------
$0.03 88,333,333 100,000,000 183,333,333
- ------------ --------------------- ---------------- -------------------
$0.04 66,250,000 75,000,000 141,250,000
- ------------ --------------------- ---------------- -------------------
$0.05 53,000,000 60,000,000 113,000,000
- ------------ --------------------- ---------------- -------------------
$0.10 26,500,000 30,000,000 56,500,000
- ------------ --------------------- ---------------- -------------------
Given the formula for calculating the sharestrading on
April 21, 2008 entitles you 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.
-6-
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, Cornellone vote.
What am I voting on?
You will be ablevoting on proposals to:
o Elect two directors to convertserve for one year each, until the Cornell
Debentures pursuant to its terms, which could result innext
Meeting of Shareholders or until a successor is elected and shall
qualify;
o Approve 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
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
-7-
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.
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:
-8-
------------------------------- ---------------------------------
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 Proxy 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 capitalPlan of the Company that was adopted by the
Board in January 2007;
o Approve the 2008 Stock Plan of the Company that was adopted by the
Board in January 2008;
o Ratify the Audit Committee's selection of Hansen Barnett &
Maxwell, P.C. as the Company's independent registered public
accountant for fiscal year 2008; and
o Consider and act upon such other business as may properly come
before the meeting or at any postponement or adjournment thereof.
5
How do I vote?
You can vote in the following ways:
o By Mail: If you are a holder of record, you can vote by marking,
dating and signing your proxy card and returning it by mail in the
enclosed postage-paid, addressed envelope. If you hold your shares
in street name, please complete and mail the voting instruction
card that you will receive from your broker or bank.
o At the Meeting: If you are planning to attend the Meeting and wish
to vote your shares in person, we will give you a ballot at the
meeting. If your shares are held in street name, you need to bring
an account statement or letter from your broker, bank or other
nominee, indicating that you are the beneficial owner of the
shares on April 21, 2008, the record date for voting. Even if you
plan to be increased pursuantpresent at the meeting, we encourage you to a
shareholder-approved amendmentcomplete
and mail the enclosed card in advance of the meeting to vote your
shares by proxy.
What if I return my proxy or voting instruction card but do not mark it to show
how I am voting?
Your shares will be voted according to the certificate of incorporation.
Asinstructions you have
indicated on your proxy or voting instruction card. You can specify whether your
shares should be voted for all, some, or none of the datenominees for director. You
can also specify whether you approve, disapprove, or abstain from the other
proposals. If no direction is indicated, your shares will be voted FOR the
election of this Proxy 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 sharesboth 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
shareholdernominees for director, FOR approval of the proposed amendment.
Depending upon the consideration per share received by the Company for
any subsequent issuance of Common2006 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 issuancePlan, FOR approval of the additional2008 Stock Plan, and FOR the ratification of the
selection of Hansen Barnett & Maxwell, P.C. as our independent public
accountant.
May I revoke my proxy or change my vote after I return my proxy card or voting
instruction card?
You may revoke your proxy or change your vote at any time before it is
exercised in one of three ways:
o Notify our Corporate Secretary in writing before the Meeting that
you are revoking your proxy;
o Submit another proxy card (or voting instruction card if you hold
your shares in street name) with a later date; or
o Vote in person at the Meeting on June 18, 2008.
What does it mean if I receive more than one proxy or voting instruction card?
It means that you have multiple accounts at the transfer agent and/or
with banks and stockbrokers. Please vote all of Common Stock mayyour shares by returning all
proxy and voting instruction cards you receive.
What constitutes a quorum?
A quorum must be viewed as havingpresent to properly convene the effect of discouraging an
unsolicited attempt by anotherMeeting. The presence,
in person or entity to acquire controlby proxy, 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.
Forward Stock Split
-------------------
The Amendment, if approved by the shareholders of the Company, would
also 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").
-9-
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 and to effectuate the stock split has been
approved by Company's Board of Directors and recommended to the Company's
shareholders for approval and adoption at the Special Meeting. If at the Special
Meeting shareholders holding sufficient shares to authorize such Amendment vote
to approve and adopt the Amendment, the Company anticipates that it will file,
within one business day of such approval, the Articles of Amendment with the
Nevada Secretary of State. The Articles of Amendment will become effective upon
filing the Articles of Amendment with the Nevada Secretary of State. We
anticipate that we will file the Articles of Amendment on May 1, 2007, which is
the day following the Special Meeting.
The shareholders of record of the Company's common stock as of May 10,
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 May 10, 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. Asoutstanding shares
that are entitled to vote at the Meeting constitutes a quorum. You will be
considered part of the Record Date, there were ___________quorum if you return a signed and dated proxy or voting
instruction card or if you attend the Meeting. Abstentions and broker non-votes
will be counted as shares present at the meeting for purposes of determining
whether a quorum exists, but not as shares cast for any proposal. Because
abstentions and broker non-votes are not treated as shares cast, they would have
no impact on any of the proposals.
What vote is required in order to approve each proposal?
The required vote is as follows:
Election of Directors: The election of the nominees for director
requires the affirmative vote of a plurality of the shares cast at the
Meeting. This means that the nominees receiving the greatest number of
votes in favor of their election will be elected, even if they receive
less than a majority of such votes. If you do not want to vote your
shares for a particular nominee, you may so indicate in the space
provided on the proxy card or on the voting instruction card. In the
unanticipated event that any of the nominees is unable or declines to
6
serve, the proxy holder will have the discretion to vote the proxy for
another person, as shall be designated by the Board to replace the
nominee, or, in lieu thereof, the Board may reduce the number of
directors. Although abstentions are counted as shares present and
entitled to be voted, abstentions will have no effect on the election
of directors. Broker non-votes, if any, will not have any effect on the
result of the vote.
Approval of the 2006 Stock Plan and the 2008 Stock Plan: The proposals
for the approval of the 2006 Stock Plan and the 2008 Stock Plan
requires the affirmative vote of a majority of the shares present or
represented by proxy at the Meeting and entitled to vote. In
determining whether these proposals received the requisite number of
affirmative votes, abstentions will have the same effect as votes
against the proposals. Broker non-votes, if any, will not have any
effect on the result of the vote.
Ratification of the Selection of Independent Registered Public
Accountant: Ratification of the selection of Hansen Barnett & Maxwell,
P.C. as our independent registered public accountant requires the
affirmative vote of a majority of the shares cast at the Meeting. If
the shareholders do not ratify the appointment of Hansen Barnett &
Maxwell, P.C., the Audit Committee of the Board may, but is not
required to, reconsider such appointment. In determining whether this
proposal received the requisite number of affirmative votes,
abstentions will be counted and will have the same effect as a vote
against the proposal. Broker non-votes, if any, will not have any
effect on the result of the vote.
What is the Board's recommendation?
The Board's recommendations are set forth together with a description
of the proposals in this Proxy Statement. In summary, the Board recommends that
you vote:
FOR election of the two directors named in this Proxy Statement to
serve until the Annual Meeting of Shareholders in 2009 and until their
successors are duly elected and qualified;
FOR approval of the 2006 Stock Plan;
FOR approval of the 2008 Stock Plan; and
FOR the appointment of Hansen Barnett & Maxwell, P.C. as the
Independent Registered Public Accounting Firm and Auditor of the
Company and the authorization of the Board to fix the remuneration of
the Independent Registered Public Accounting Firm and Auditor.
How will voting on any other business be conducted?
We do not know of any business or proposals to be considered at the
Meeting other than those that are described in this Proxy Statement. If any
other business is proposed and we decide to allow it to be presented at the
Meeting, the proxies that we receive from our shareholders give the proxy
holders the authority to vote on that matter according to their best judgment.
Who will count the votes?
Representatives of the Company will tabulate the votes that are
received prior to the Meeting and will act as the inspectors of election and
will tabulate the votes, if any, that are cast in person at the Meeting.
Who pays to prepare, mail, and solicit the proxies?
We will pay all of the costs of soliciting these proxies. We will ask
banks, brokers, and other nominees and fiduciaries to forward the proxy
materials to the beneficial owners of our common stock issued and outstanding. If we receive approval fromto obtain the
holdersauthority of a majorityexecuted proxies. We will reimburse them for their reasonable
expenses. In addition to the use of the mail, proxies may be solicited by our
outstanding shares, that will constitute the approval of holders of
sufficient shares to adopt the amendment to our Articles of Incorporation to
increase our authorized capital and effectuate the stock split.
-10-
INFORMATION ABOUT CIRTRAN CORPORATION
The following sets forth the names, ages and positions of ourofficers, directors, and officers andother employees by telephone or by personal
solicitation. We will not pay additional compensation to these individuals in
connection with their solicitation of proxies.
7
How do I submit a shareholder proposal for next year's Annual Meeting?
Any shareholder who intends to present a proposal at the officers2009 Annual
Meeting of our operating subsidiaries,Shareholders must deliver such proposal to the Corporate Secretary,
c/o CirTran Corporation, (Utah) and4125 South 6000 West, West Valley City, Utah 84128, not
later than November 15, 2008, if the proposal is submitted for inclusion in our
proxy materials for that meeting pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934.
What do I need for admission to the Meeting?
You may attend the Meeting only if you are a shareholder of record or a
beneficial owner as of April 21, 2008, the record date, or you hold a valid
proxy for the Meeting. You should be prepared to present photo identification
for admittance. If you are a shareholder of record, your name will be verified
against the list of shareholders of record prior to your being admitted to the
Meeting. If you hold your shares in street name, you should provide proof of
beneficial ownership on the record date, such as a brokerage account statement
showing that you owned CirTran Asia, alongcommon stock as of the record date, a copy of the
voting instruction card provided by your broker, bank, or other nominee, or
other similar evidence of ownership as of the record date. If you do not provide
photo identification or comply with their datesthe other procedures outlined above upon
request, you will not be admitted to the Meeting.
Who should I call if I have questions?
If you have questions about the proposals or the Meeting, you may call
David Harmon, Chief Financial Officer, at (801) 963-5112. You may also send an
e-mail to investors@cirtran.com.
PROPOSAL #1
ELECTION OF DIRECTORS
Our Bylaws provide that the shareholders or the Board shall determine
the number of service in such capacities.
Name Age Positionsdirectors from time to time, but that there shall be no less than
three directors. The Board has set the number of directors at three. The Board
currently consists of three members: Iehab J. Hawatmeh, 39Fadi Nora, and Donald L.
Buehner. Two of the current directors are nominees for re-election at the
Meeting.
Following the preparation of this Proxy Statement but prior to its
filing, Mr. Buehner announced that he would retire from our Board of Directors
following the Annual Meeting. As such, the two remaining directors, Messrs.
Hawatmeh and Nora, are presented for shareholder vote. Additionally, Messrs.
Hawatmeh and Nora have begun a search for an additional director, and anticipate
that a new member of our Board of Directors will be appointed, pursuant to our
Bylaws, as soon as a qualified candidate is identified and agrees to serve.
Each director who is elected at the Meeting will hold office until the
Company's Annual Meeting in 2009, until a successor is elected and qualified, or
until the director resigns, is removed, or becomes disqualified. The Board has
no reason to believe that any of the nominees for director will be unwilling or
unable to serve, if elected. If due to unforeseen circumstances a nominee should
become unavailable for election, the Board may either reduce the number of
directors or may substitute another person for that nominee, in which event your
shares will be voted for that other person.
The following information is furnished with respect to the Board's
nominees for election as directors of the Company, including the nominee's
position with the Company, tenure as director and age as of April 15, 2008.
Stock ownership information is shown under the heading "Security Ownership of
Certain Beneficial Owners and Management" and is based upon information
furnished by the respective individuals.
Name and Position with the Company Director
Place of Residence and Principal Occupation Age Since
- --------------------------------------------------------------------------------
Iehab Hawatmeh............ President, Chief Executive 41 2000
West Valley, Utah Officer, Chief
Financial Officer, SecretaryDirector
Fadi Nora................. Director, Businessman 47 2007
Mission Viejo, California
8
Set forth below is information regarding each of the above named
individuals, including a description of his positions and offices with the
Company, a description of his principal occupation and business experience
during at least the last five years and directorships presently held by him in
other companies. Biographical information regarding Mr. Buehner can be found
below on page 15.
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 2006Nominees
The nominees to the Board in 2008 are Iehab J. Hawatmeh MBA
Chairman, President & CEO
Mr.and Fadi Nora.
Each of these nominees currently serves as a member of our Board. The following
information is furnished with respect to these nominees:
Iehab J. Hawatmeh founded CirTran Corporationour predecessor company in 1993 and has been
itsour Chairman, President and CEO since its inception.July 2000. 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 forminghis involvement with the Company, Mr. Hawatmeh was the Processing
Engineering Manager for Tandy Corporation overseeing thethat company's entire contract
manufacturing printed circuit board assembly division. In addition, Mr.
Hawatmehhe was
responsible for developing and implementing Tandy's facility Quality Control and
Processing Plan model which is used by CirTran today.model. Mr. Hawatmeh received hisa Master's of Business
Administration from University of Phoenix and hisa 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
Mr. SalibaFadi Nora is responsible for sales and marketing activities worldwide and is
responsible for overseeing all worldwide business development strategies for the
Company. Mr. Salibaa self-employed investment consultant. He was elected to the Boardformerly a
director of Directors in 2001. From 1997 -
2001 he was President and CEO of Saliba Corp.ANAHOP, Inc., a privately held contractingprivate financing company, and was a consultant for
several projects and investment opportunities, including CirTran Corporation,
NFE records, Focus Media Group, and other projects. He has been a member of our
Board since February 2007. Prior to his affiliation with ANAHOP, Mr. Nora worked
with Prudential Insurance services and its affiliated securities brokerage firm
he founded. From 1995-1997 he was an Associate with Morgan Stanley. From 1992 -
1995 he was Vice President ofPru-Bach, as District Sales and Marketing for SNJ Industries.Manager. Mr. Saliba
holdsNora received a Bachelors DegreeB.S. in Business
Administration from St. Joseph University, Beirut, Lebanon, in 1982, and an MBA
- - Masters of Management from the Azusa Pacific University School of Business in
1997. He also received a Masters Degreedegree in Financefinancial planning from La Salle University and has completed an Advanced Graduate Program
in Engineering and Management at the University of
California Berkeley.
-11-at Los Angeles.
We will vote your shares as you specify in your proxy card. If you
sign, date, and return your proxy card but do not specify how you want your
shares voted, we will vote them FOR the election of each of the director
nominees who are listed above.
RECOMMENDATION - The Board recommends a vote FOR each director nominee.
PROPOSAL #2
APPROVAL OF THE 2006 STOCK PLAN
In January 2007, the Board adopted the Cirtran Corporation 2006 Stock
Plan (the "2006 Stock Plan"), which provides for the reservation of 50,000,000
shares of common stock of the Company for grants to employees, consultants and
advisors of the Company. In 2007, our shareholders approved a 1.2 for 1 forward
split of the Company's common stock; this action caused an adjustment to the
aggregate number of shares authorized for issuance under the 2006 Stock Plan
from 50,000,000 to 60,000,000 shares. The 2006 Stock Plan and the 2008 Stock
Plan contain substantially identical terms and conditions.
The Company has adopted five stock option plans since 2002. As of
December 31, 2007, no options remained outstanding from the three plans adopted
through 2004.
2006 and 2008 Stock Plan Descriptions
The 2006 Stock Plan was adopted by the Board in January 2007. Both the
2006 and 2008 Stock Plans provide for grants to employees, officers, directors
and consultants of both non-qualified (or non-statutory) stock options ("NSO")
and "incentive stock options" ("ISO") within the meaning of Section 422 of the
9
In June 2002 Mr. Saliba filedInternal Revenue Code of 1986, as amended (the "Code"). The plans also provide
for personal bankruptcythe grant of certain stock purchase rights, which are subject to a purchase
agreement between the Company and the recipient. The purpose of each plan is to
enable the Company to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to such
persons, and to promote the success of our business.
The Board determines the persons to whom options are granted, the
option price, the number of shares to be covered by each option, the period of
each option, the times at which options may be exercised and whether the option
is an incentive or non-statutory option. The exercise price may not be less than
the fair market value of the Company's common stock on the date of grant. The
term of stock options will be determined by the Committee, but may not exceed
ten years from the date of grant, provided that the term of an ISO granted to a
ten percent holder may not exceed five years from the date of grant. No employee
may be granted options or stock purchase rights under the either plan for more
than an aggregate of 6,000,000 shares in any given fiscal year. We do not
receive any monetary consideration upon the granting of options. Options are
exercisable in accordance with the terms of an option agreement entered into at
the time of grant.
The Board may also award our shares of common stock under the plans as
stock purchase rights. The Board determines the persons to receive awards, the
number of shares to be awarded and the time of the award. Shares received
pursuant to a stock purchase right are subject to the terms, conditions and
restrictions determined by the Board at the time the award is made, as evidenced
by a restricted stock purchase agreement.
During 2007, the Company granted awards to purchase 56,800,000 shares
of common stock under the 2006 Stock Plan. Option awards are generally granted
with an exercise price equal to the market price of the Company's stock at the
date of grant, most granted in the U.S. Bankruptcy
Courtpast have vested immediately, and most have
had four-year contractual terms. The Board has granted awards for 22,960,000
shares of common stock under the 2008 Stock Plan as of the date of this Proxy
Statement.
The plans are administered by the Board, which designates from time to
time the individuals to whom awards are made under the plans, the amount of any
such award and the price and other terms and conditions of any such award. Each
of the plans is to continue in Los Angeles, California,effect until the date which is ten years from the
date of its adoption by the Board, subject to earlier termination by the Board.
The Board may suspend or terminate a plan at any time; provided that no such
amendment, alteration, suspension, discontinuation or termination may be made
without shareholder approval if such shareholder approval is necessary to comply
with any tax, securities or regulatory law or requirement; provided, further,
that the Board may not reduce the exercise price of outstanding options and
stock appreciation rights by amending the terms of such options and stock
appreciation rights or by canceling such stock option in exchange for cash or
the grant of a new award without first obtaining approval from the Company's
shareholders. The Board has the authority to interpret the plans, determine the
terms and conditions of incentive awards and make all other determinations
necessary and/or advisable for the administration of the plans.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split or other change in corporate
structure affecting the Company's common stock, an equitable substitution or
proportionate adjustment will be made in (i) the aggregate number of shares of
common stock reserved for issuance under the plans and the maximum number of
shares of common stock that may be granted to any participant in any calendar
year, (ii) the kind, number and exercise (grant) price of shares of common stock
subject to outstanding stock options and stock appreciation rights, and (iii)
the kind, number and purchase price of shares of common stock subject to
outstanding awards to maintain the same estimated fair value of the award before
and after such event. In connection with any event described in this paragraph,
the Board may provide for the cancellation of any outstanding awards and payment
in cash or other property therefor.
Unless otherwise provided in an incentive award agreement, if, within
twenty-four (24) months following a "change in control," a participant's
employment or service with the Company or any of its affiliates or any successor
is terminated by the Company other than for "cause," then (i) all outstanding
time-based vesting of incentive awards granted to the participant will vest in
full, and if applicable, become fully and immediately exercisable and (ii) all
outstanding performance-based vesting awards granted to the participant will
immediately vest as if target performance has been achieved and, if applicable,
become fully and immediately exercisable.
Section 162(m) of the Code generally provides that publicly held
companies may not yetdeduct compensation paid to certain top executive officers to
the extent such compensation exceeds $1 million per officer in any year.
However, pursuant to regulations issued by the Treasury Department, certain
limited exceptions to Section 162(m) apply with respect to "performance-based
compensation."
10
Federal Income Tax Consequences of Stock Options
The following discussion is for general information only and is based
on the Federal income tax laws now in effect, which are subject to change,
possibly retroactively. This summary does not discuss all aspects of Federal
income taxation which may be important to individual participants. Moreover,
this summary does not address specific state, local or foreign tax consequences.
This summary assumes that the common stock acquired under the plans will be held
as a "capital asset" (generally, property held for investment) under the Code.
Nonqualified Stock Options
A participant will generally not be subject to Federal income taxation
upon the grant of an NSO. Rather, at the time of exercise of an NSO, the
participant will recognize ordinary income for Federal income tax purposes in an
amount equal to the excess of the fair market value of the shares purchased over
the option price. The Company will generally be entitled to a tax deduction at
such time and in the same amount that the participant recognizes ordinary
income.
If shares of common stock acquired upon exercise of an NSO (or upon
untimely exercise of an ISO) are later sold or exchanged, then the difference
between the sales price and the fair market value of the common stock on the
date that ordinary income was recognized with respect thereto will generally be
taxable as capital gain or loss.
Incentive Stock Options
A participant will generally not be subject to Federal income taxation
upon the grant of an ISO or upon its timely exercise. Exercise of an ISO will be
timely if made during its term and if the participant remains an employee of the
Company or of any parent or subsidiary of the Company at all times during the
period beginning on the date of grant of the ISO and ending on the date three
months before the date of exercise (or one year before the date of exercise in
the case of a disabled employee). Exercise of an ISO will also be timely if made
by the legal representative of a participant who dies (i) while in the employ of
the Company or of any parent or subsidiary of the Company or (ii) within three
months after termination of employment (or one year in the case of a disabled
employee). The tax consequences of an untimely exercise of an ISO will be
determined in accordance with the rules applicable to NSOs.
If shares of common stock acquired pursuant to a timely exercised ISO
are later disposed of, the participant will, except as noted below with respect
to a "disqualifying disposition," recognize a capital gain or loss equal to the
difference between the amount realized upon such sale and the option price.
Under these circumstances, the Company will not be entitled to any deduction for
Federal income tax purposes in connection with either the exercise of the ISO or
the sale of the common stock by the participant.
If, however, a participant disposes of shares of common stock acquired
pursuant to the exercise of an ISO prior to the expiration of two years from the
date of grant of the ISO or within one year from the date the common stock is
transferred to the participant upon exercise (a "disqualifying disposition"),
generally (i) the participant will realize ordinary income at the time of the
disposition in an amount equal to the excess, if any, of the fair market value
of the common stock at the time of exercise (or, if less, the amount realized on
such disqualifying disposition) over the option exercise price, and (ii) any
additional gain recognized by the participant will be subject to tax as capital
gain. In such case, the Company may claim a deduction for Federal income tax
purposes at the time of such disqualifying disposition for the amount taxable to
the participant as ordinary income.
The amount by which the fair market value of the common stock on the
exercise date of an ISO exceeds the option price will be an item of adjustment
for purposes of the "alternative minimum tax" imposed by Code Section 55.
11
Capital Gain or Loss
Net capital gain (i.e., generally, capital gain in excess of capital
losses) recognized by a participant upon the sale of shares of common stock held
for more than twelve months will generally be subject to tax at a rate not to
exceed 15%. Net capital gain recognized from the sale of shares of common stock
held for twelve months or less will be subject to tax at ordinary income rates.
Approval of the 2006 Stock Plan requires the affirmative vote of the
holders of a majority of the shares of common stock present in person or
represented by proxy and entitled to vote at the Meeting. For purposes of the
vote on the 2006 Stock Plan, abstentions will have the same effect as votes
against the proposal. Broker non-votes, if any, will not have any effect on the
result of the vote. Unless instructed to the contrary in the proxy, the shares
represented by proxies will be voted FOR the proposal to approve the 2006 Stock
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE 2006 STOCK PLAN
PROPOSAL #3
APPROVAL OF THE 2008 STOCK PLAN
In January 2008, the Board adopted the Cirtran Corporation 2008 Stock
Plan (the "2008 Stock Plan"), which provides for the reservation of 60,000,000
shares of common stock of the Company for grants to employees, consultants and
advisors of the Company. The 2006 Stock Plan and the 2008 Stock Plan contain
substantially identical terms and conditions. Please refer to the description of
the two plans beginning on page 9 of this Proxy Statement.
New Plan Benefits
Certain awards have been discharged. The
bankruptcy was unrelatedmade under the 2008 Stock Plan as summarized
in the following table:
Number of Dollar Number of
Shares Value of Shares of
Dollar Value Subject to Mr. Saliba's involvement in CirTran.Restricted Restricted
Name and of Options Options Stock Stock
Position ($) (1) (#) ($) (#)
- --------------------------------------------------------------------------------
Iehab J. Hawatmeh,
President and Chief
Executive Officer - - - -
- --------------------------------------------------------------------------------
Shaher Hawatmeh,
Chief Operating
Officer Mr.- - - -
- --------------------------------------------------------------------------------
David L. Harmon,
Chief Financial
Officer 27,987 3,000,000 - -
- --------------------------------------------------------------------------------
(1) The amounts in this column reflect the dollar amount recognized
for financial statement reporting purposes, excluding the effect
of estimated forfeitures, for the fiscal year ending December 31,
2008 in accordance with SFAS No. 123(R). Assumptions used in the
calculation of these amounts will be included in footnotes to the
Company's audited financial statements for the year ending
December 31, 2008, to be included in the Company's Annual Report
on Form 10-K filed with the Securities and Exchange Commission
next year.
Approval of the 2008 Stock Plan requires the affirmative vote of the
holders of a majority of the shares of common stock present in person or
represented by proxy and entitled to vote at the Meeting. For purposes of the
vote on the 2008 Stock Plan, abstentions will have the same effect as votes
against the proposal. Broker non-votes, if any, will not have any effect on the
result of the vote. Unless instructed to the contrary in the proxy, the shares
represented by proxies will be voted FOR the proposal to approve the 2008 Stock
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE 2008 STOCK PLAN
12
PROPOSAL #4 - RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUDITOR
The Board has appointed and recommended the accounting firm of Hansen
Barnett & Maxwell, P.C. as the Independent Registered Public Accounting Firm and
Auditor of the Company and its subsidiaries for the fiscal year ending December
31, 2008.
Hansen Barnett & Maxwell, P.C. audited the Company's financial
statements for the fiscal years ended December 31, 2007 and 2006.
A representative of Hansen Barnett & Maxwell, P.C., is expected to be
present at the Meeting and to have an opportunity to make a statement if they
desire to do so. The Hansen Barnett & Maxwell, P.C. representative is also
expected to be available to respond to appropriate questions at the Meeting.
If the shareholders fail to ratify the appointment of Hansen Barnett &
Maxwell, P.C., the Board may reconsider its appointment.
RECOMMENDATION - THE BOARD RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF HANSEN BARNETT & MAXWELL, P.C. AS CIRTRAN'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AND AUDITOR FOR 2008.
Policy on Pre-Approval of Audit and Permissible Non-Audit Services
The Board pre-approves any engagement of Hansen Barnett & Maxwell, P.C.
and has the ultimate authority and responsibility to select, evaluate and where
appropriate, replace the independent registered public accountants and nominate
an independent registered public accounting firm for shareholder approval. While
ratification of the selection of the independent registered public accounting
firm by the shareholders is not required and is not binding upon the Board or
the Company, in the event of a negative vote on such ratification, the Board
might choose to reconsider its selection.
Prior to the performance of any services, the Board approves all audit
and non-audit services to be provided by the Company's independent registered
public accountant and the fees to be paid therefor. Although the Sarbanes-Oxley
Act of 2002 permits the audit committee of the Board to pre-approve some types
or categories of services to be provided by the independent registered public
accountants, as the Company does not currently have an audit committee, it is
the current practice of the Board to specifically approve all services provided
by the independent registered public accountants in advance, rather than to
pre-approve any type of service. In connection with this practice, the Board has
considered whether the provision of non-audit services is compatible with
maintaining Hansen Barnett & Maxwell, P.C.'s independence.
Independence
Hansen Barnett & Maxwell, P.C. has advised us that it has no direct or
indirect financial interest in the Company or in any of its subsidiaries and
that it has had, during the last three years, no connection with the Company or
any of its subsidiaries, other than as independent auditors or in connection
with certain other activities, as described below.
Financial Statements and Reports
The financial statements of the Company for the year ended December 31,
2007, and the report of the independent auditors will be presented at the
Meeting and is included with this Proxy Statement.
13
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees for Fiscal 2006 and 2007
The aggregate fees billed to the Company by Hansen Barnett & Maxwell,
P.C., the Company's Independent Registered Public Accounting Firm and Auditor,
for the fiscal years ended December 31, 2006 and 2007 are as follows:
2007 2006
--------- ---------
Audit Fees (1)................................. $ 105,123 $ 107,539
Audit-Related Fees............................. -- --
Tax Fees (2)................................... $ 10,322 $ 5,535
All Other Fees................................. -- --
- ---------------------------
(1) Audit Fees consist of the audit of our annual financial statements
included in the Company's Annual Report on Form 10-K for its 2006
and 2007 fiscal years and Annual Report to Shareholders, review of
interim financial statements and services that are normally
provided by the independent auditors in connection with statutory
and regulatory filings or engagements for those fiscal years.
(2) Tax Fees consist of fees for tax consultation and tax compliance
services.
The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining the independence of Hansen Barnett &
Maxwell, P.C., and has concluded that the provision of such services is
compatible with maintaining the independence of the Company's auditors.
Representatives of Hansen Barnett & Maxwell, P.C. will be present at
the Meeting, will be available to respond to questions and may make a statement
if they so desire.
CORPORATE GOVERNANCE
The Board is elected by and is accountable to the shareholders of the
Company. The Board establishes policy and provides strategic direction,
oversight, and control of the Company. The Board met five times during 2007. All
directors attended at least 75% of the meetings.
Director Independence
As of the date of this Proxy Statement, the Company's common stock is
traded on the OTC Bulletin Board (the "Bulletin Board"). The Bulletin Board does
not impose standards relating to director independence, or provide definitions
of independence. The Company presently has no fully independent directors.
Shareholder Communications with Directors
If the Company receives correspondence from a shareholder that is
addressed to the Board, we forward it to every director or to the individual
director to whom it is addressed. Shareholders who wish to communicate with the
directors may do so by sending their correspondence to the director or directors
at the Company's headquarters at 4125 South 6000 West, West Valley City, Utah
84128.
Directors are encouraged by the Company to attend the Meeting if their
schedules permit.
Committees of the Board of Directors
At this time, the Company does not have separately-designated Audit,
Compensation, Governance or Nominating Committees. The Company's full Board acts
in these capacities. The Board has determined that the Company does not have at
present an audit committee financial expert as defined under Securities and
Exchange Commission rules.
14
As of the date of this report, there have been no changes to the
procedures by which security holders may recommend nominees to our Board of
Directors.
Code of Ethics
The Company expects that all of its directors, officers and employees
will maintain a high level of integrity in their dealings with and on behalf of
the Company and will act in the best interests of the Company. The Company has
adopted a Code of Business Conduct and Ethics ("Code of Ethics") which provides
principles of conduct and ethics for the Company's directors, officers and
employees. This Code of Ethics complies with the requirements of the
Sarbanes-Oxley Act of 2002. This Code of Ethics is available on the Company's
website at www.cirtran.com under "Investor Relations--Corporate Governance" and
is also available in print to any stockholder who requests a copy by writing to
our corporate secretary at 4125 South 6000 West, West Valley City, Utah 84128.
EXECUTIVE OFFICERS
The following table sets forth the names, ages, and positions of the
executive officers of CirTran and its operating subsidiaries (hereinafter the
"Named Executive Officers") at December 31, 2007, and as of the date of this
Proxy Statement were as follows:
Name Age Positions
- --------------------------------------------------------------------------------
Iehab J. Hawatmeh 41 President, Chief Executive Officer,
and Chairman of the Board of Directors
Company
Shaher Hawatmeh 42 Chief Operating Officer since June 2004
David L. Harmon 51 Chief Financial Officer since November
2007; Secretary since January 2008
Biographical information for our directors is included in the
discussion beginning on page 9 concerning the nominees for director. The
following information is provided regarding our other Named Executive Officers,
as well as Donald L. Buehner, who is currently serving as a member of our Board
of Directors, but who has announced his intention to retire from the Board
following the Annual Meeting of Shareholders.
Shaher Hawatmeh, Chief Operating Officer, joined the Companyour predecessor
company in 1993 as its Controller shortly after its founding. Today,He has served in
his present capacity since June 2004. Mr. Hawatmeh directly oversees all daily
manufacturing production, customer service, budgeting and forecasting for the
Company. Following the companiesCompany's acquisition of Pro Cable Manufacturing in 1996,
Mr. Hawatmeh directly managed the entire Company, supervising all operations for
approximately two years and successfully oversawoverseeing 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 hisa Master's of Business Administration with
an emphasis in Finance from the University of Phoenix and hisa 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 becameis
the Presidentbrother 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,President, CEO 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. FerroneChairman, Iehab Hawatmeh.
David L. Harmon became our Chief Financial Officer in November 2007.
Prior to joining the Company,CirTran, Mr. Ferrone had headed his own accounting firm,
Ferrone & Associates, whichHarmon served as SEC manager for Investools Inc.
From 1990 to 2006, he establishedheld controller, treasurer and CFO positions with UCN,
Inc., Traco Manufacturing, Inc., and Gentner Communications Corporation. He also
spent nine years with two C.P.A. firms in the 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.area. Mr. Ferrone had also served as vice
president and chief financial officer for BSD Medical Corporation after he
started his career withHarmon
earned a regional CPA firm in Salt Lake City. Mr. Ferrone has a
B.S. degree in Accounting from the University of Utah, where heUtah.
Donald L. Buehner has been an entrepreneur and a leader of several
businesses since the 1960s, particularly in the lighting industry. He started
Traco Ltd., a Canadian manufacturer of appliance materials for recreational
vehicles, and until recently served as chairman of LiteTouch, Inc., a
manufacturer and distributor of residential and commercial lighting control
systems. He is also studied forcurrently the owner of DB Finance, a Masterfinance company that
discounts commercial paper, provides factoring services, and acquires and leases
commercial properties. As noted above, Mr. Buehner is presently serving as a
member 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. He has indicated that he intends to
retire from the Board of Directors hasfollowing the Annual Meeting of Shareholders.
Indemnification of Officers and Directors
Our Bylaws provide, among other things, that our officers or directors
are not personally liable to us or to our stockholders for damages for breach of
fiduciary duty as an officer or director, except for damages for breach of such
duty resulting from (a) acts or omissions which involve intentional misconduct,
fraud, or a knowing violation of law, or (b) the unlawful payment of dividends.
15
Our Bylaws also authorize us to indemnify our officers and directors under
certain circumstances. We anticipate we will enter into indemnification
agreements with each of our executive officers and directors pursuant to which
we will agree to indemnify each such person for all expenses and liabilities
incurred by such person in connection with any civil or criminal action brought
against such person by reason of their being an officer or director of the
Company. In order to be entitled to such indemnification, such person must have
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interests of the Company and, with respect to criminal actions, such
person must have had no reasonable cause to believe that his conduct was
unlawful.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
We are required to provide information regarding the compensation
program in place for our Chief Executive Officer, Chief Financial Officer, and
the three other most highly-compensated executive officers. We have also
voluntarily elected to include information concerning additional executive
officers. In this Proxy Statement, we refer to our CEO, CFO, and the other
highly-compensated executive officers named herein as our "Named Executive
Officers." This section includes information regarding, among other things, the
overall objectives of our compensation program and each element of compensation
that we provide to these and other executives of the Company. This section
should be read in conjunction with the detailed tables and narrative
descriptions contained in this Proxy Statement.
As of the date of this Proxy Statement, the Company did not have a
compensation committee; the Company's Board was responsible for determining the
Company's compensation policies.
Compensation Objectives
The Company's compensation program encompasses several factors to
determine the compensation of the Named Executive Officers. The following are
the main objectives of the compensation program for the Named Executive
Officers:
o Retain qualified officers
o Provide overall corporate direction for the officers and also to
provide direction that is specific to the officers' respective
areas of authority. The level of compensation amongst the officer
group, in relation to one another, is also considered in order to
maintain a high level of satisfaction within the leadership group.
We consider the relationship that the officers maintain to be one
of the most important elements of the leadership group.
o Provide a performance incentive
o Reward the officers in the following areas:
o Achievement of specific goals, budgets, and objectives;
o Professional education and development;
o Creativity, innovative ideas, and analysis of new programs and
projects;
o New program implementation;
o Results-oriented determination and organization;
o Positive and supportive direction for company personnel; and
o Community involvement.
As of the date of this Proxy Statement, there were four principal
elements of Named Executive Officer compensation. The Board determines the
portion of compensation allocated to each element for each individual Named
Executive Officer. The discussions of compensation practices and policies are of
historical practices and policies. Our Board is expected to continue these
policies and practices, but will reevaluate the practices and policies as it
considers advisable.
16
The primary elements of the compensation program include:
o Base salary;
o Performance bonus and commissions;
o Stock options and stock awards
o Employee benefits in the form of:
o Health and dental insurance;
o Life insurance;
o Paid parking and auto reimbursement; and
o Other de minimis benefits.
Base salary
Base salary is intended to provide competitive compensation for job
performance and to attract and retain qualified individuals. The base salary
level is determined by considering several factors inherent in the market place
such as: the size of the company; the prevailing salary levels for the
particular office or position; prevailing salary levels in a given geographic
locale; and the qualifications and experience of the officer.
Performance bonus and commissions
Bonuses are in large part based on company performance. An earnings
before interest, taxes, depreciation, and amortization ("EBITDA") formula and
sales growth are the determining factors used to calculate the performance bonus
for the Chief Executive Officer and Chief Operating Officer. These two officers
are also paid a commission based on a percentage that sales revenue increases as
compared to the prior year. In addition, the Chief Executive Officer and Chief
Operating Officer are eligible to receive a bonus equal to a certain percentage
of, respectively, the value of an acquisition, and the amount of investment
proceeds, that the Company doesachieves during the preceding year attributable
solely to their specific efforts. The Chief Financial Officer receives a
performance bonus based on performance, as determined by the Board, in addition
to any bonus required under an employment contract. Policy decisions to waive or
modify performance goals have not havebeen a significant factor to date.
Stock options and stock awards
Stock ownership is provided to enable Named Executive Officers and
directors to participate in the success of the Company. The direct or potential
ownership of stock will also provide the incentive to expand the involvement of
the Named Executive Officer to include, and therefore be mindful of, the
perspective of stockholders of the Company.
Employee benefits
Several of the employee benefits for the Named Executive Officers are
selected to provide security for the Named Executive Officers. Most notably,
insurance coverage for health, life, and liability are intended to provide a
level of protection to that will enable the Named Executive Officers to function
without having the distraction of having to manage undue risk. The health
insurance also provides access to preventative medical care which will help the
officers function at a high energy level, manage job related stress, and
contribute to the overall well being, all of which contribute to an audit
committeeenhanced job
performance.
Other de minimis benefits
Other de minimis employee benefits such as cell phones, parking, and
auto usage reimbursements are directly related to job functions but contain a
personal use element which is considered to be a goodwill gesture that
contributes to enhanced job performance.
As discussed above, the Board determines the portion of compensation
allocated to each element for each individual Named Executive Officer. As a
general rule, salary is competitively based, while giving consideration to
employee retention, qualifications, performance, and general market conditions.
Typically, stock options are based on the current market value of the option and
how that will contribute to the overall compensation of the Named Executive
Officer. Consideration is also given to the fact that the option has the
potential for an appreciated future value. As such, the future value may be the
most significant factor of the option, but it is also more difficult to quantify
as a benefit to the Named Executive Officer.
17
Accordingly, in determining the compensation program for the Company,
as well as setting the compensation for each Named Executive Officer, the Board
attempts o attract the interest of the Named Executive Officer within in the
constraints of a compensation package that is fair and equitable to all parties
involved.
The following table summarizes all compensation paid to the Named
Executive Officers in each of the last two fiscal years.
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Non-Equity Nonqualified
Incentive Deferred
Plan Compen- All Other
Stock Option Compen- sation Compen-
Name and Principal Salary Bonus Awards Awards sation Earnings sation Total
Position Year $ $ $ $ (2) $ $ $ (3) $
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
- ----------------------------------------------------------------------------------------------------------------------------------
Iehab J. Hawatmeh,
President and Chief 2006 225,000 57,807 - - - - - 282,807
Executive Officer 2007 295,000 11,338 - 103,531 - - 20,603 430,472
Shaher Hawatmeh,
Chief Operating 2006 150,000 7,790 - - - - - 157,790
Officer 2007 210,000 2,268 - 82,825 - - 20,603 315,696
David L. Harmon,
Chief Financial
Officer (1) 2007 13,462 2,083 - - - - - 15,545
Richard Ferrone,
Chief Financial 2006 73,845 21,000 - - - - - 94,845
Officer (1) 2007 113,462 21,000 - 30,364 - - - 164,826
Trevor Saliba,
Chief Marketing 2006 120,000 18,755 - - - - - 138,755
Officer (1) 2007 87,358 5,057 - 40,285 - - 329,462 462,162
Charles Ho,
President, 2006 - 407,397 - - - - - 407,397
CirTran-Asia (1) 2007 - 289,346 - - - - - 289,346
(1) Mr. Harmon's employment commenced on November 26, 2007. Mr.
Ferrone's employment commenced on May 10, 2006, and terminated on
October 22, 2007. Mr. Saliba's employment terminated on June 14,
2007. Mr. Ho's employment commenced on June 15, 2004, and
terminated at the three-year conclusion of his employment contract
on June 15, 2007. Mr. Ho has continued working with the Company as
an independent consultant.
(2) The amounts in this column reflect the dollar amount recognized
for financial expert as defined understatement reporting purposes, excluding the effect
of estimated forfeitures, for the fiscal years ended December 31,
2006 and 2007, in accordance with SFAS No. 123(R). Assumptions
used in the calculation of these amounts are included in Note 18
to the Company's audited financial statements for the years ended
December 31, 2006 and 2007, included in the Company's Annual
Report on Form 10-KSB filed with the Securities and Exchange
Commission rules.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During June 2006on April 15, 2008. Amounts for Iehab J. Hawatmeh and
Shaher Hawatmeh each include amounts related to two separate
grants of options, one at the presidentbeginning and one at the end of
2007. The former grant was intended to relate to services to be
rendered during 2007, and the Company loaned the Company a net
amount of $110,837 whichlatter was recorded as a note payableintended to the lender.
During December 2005 the president of the Company loaned the Company
$95,806 which was recorded as a note payablerelate to
the lender. The proceeds of this
loan were usedservices 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,be rendered during 2008.
18
(3) Amounts for Mr. Iehab Hawatmeh had loaned us a totaland Shaher Hawatmeh include $9,000
each for car allowance, and $11,603 each for payments of $1,390,125.medical
insurance premiums. The loansamount for Mr. Saliba includes $101,462 in
commissions, and $228,000 in severance payments. Amounts paid to
other officers for 2007, and all amounts for 2006, were demand loans, bore interest at 10% per annum and were
unsecured. Effective January 14, 2002,less than
$10,000.
Narrative Disclosure to Summary Compensation Table
Employment Agreements
On July 1, 2004, we entered into four substantially
identical agreementsan employment agreement with existing shareholdersour
President and CEO, Iehab Hawatmeh, with an effective date of June 26, 2004 for a
term of five years, automatic renewal on a year-to-year basis, base salary of
$225,000, bonus of 5% of earnings before interest, taxes, depreciation, and
amortization, payable quarterly, as well as any other bonus approved by the
Board, and health insurance coverage, cell phone, car allowance, life insurance,
and director and officer liability insurance. Mr. Hawatmeh's employment could be
terminated for cause, or upon death or disability; a severance penalty applied
in the event of termination without cause, in an amount equal to five full years
of the then-current annual base compensation, half upon termination and half one
year later, together with a continuation of insurance benefits for a period of
five years. On January 1, 2007, an amendment to the employment agreement became
effective. The amended agreement is for a term of five years and renews
automatically on a year-to year basis, provides for base salary of $295,000,
plus a quarterly bonus of 5% of earnings before interest, taxes, depreciation,
and amortization, as well as an annual bonus payable as soon as practicable
after completion of the audit of the Company's annual financial statements equal
to 0.5% of gross sales for the most recent fiscal prior year which exceed 120%
of gross sales for the previous fiscal year, plus an additional bonus of 1% of
the net purchase price of any acquisitions that are generated by the executive,
and any other bonus approved by the Board. The amended agreement also provides
for a grant of options to purchase 5,000,000 shares of the Company's common
stock in accordance with the terms of the Company's Stock Option Plan, with
terms and an exercise price at the fair market value of the Company's common
stock on the date of grant. The amended agreement provides for benefits
including health insurance coverage, car allowance, and life insurance.
On July 1, 2004, we also entered into an employment agreement, dated
effective June 26, 2004, with Shaher Hawatmeh, to act as Chief Operating
Officer. Mr. Hawatmeh is the brother of our President and CEO, Iehab Hawatmeh.
The original agreement was for a term of three years, renewing automatically on
a year-to-year basis, 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 approved by the Board, and provided for
health insurance coverage, cell phone, life insurance, and D&O insurance.
Employment could be terminated for cause, or upon death or disability. In the
event of termination without cause, a severance payment in an amount equal to
one years' salary was to be paid. The agreement also contained prohibitions
against competition for a period of one year from the date of termination and
prohibitions against solicitation of our employees or customers, or inducing
anyone to cease doing business with us for a period of two years after
termination. On January 1, 2007, an amendment to the employment agreement became
effective, providing for a term of five years, automatic renewal on a year-to
year basis, base salary of $210,000, a quarterly bonus of 2.5% of earnings
before interest, taxes, depreciation, and amortization, an annual bonus of 0.1%
of gross sales which exceed 120% of gross sales for the previous year, and a
bonus of 5% of all gross investments made into the Company that are directly
generated and arranged by Mr. Hawatmeh. The amended agreement also provides for
a grant of options to purchase 4,000,000 shares of the Company's common stock in
accordance with the terms of the Company's Stock Option Plan, with terms and an
exercise price at the fair market value of the Company's common stock on the
date of grant. The amended agreement also provides for health insurance
coverage, car allowance and life insurance.
On November 26, 2007, we entered into an agreement with David L. Harmon
pursuant to which we issued an
-12-
aggregateagreed to pay him a base salary of 43,321,186$175,000. Mr. Harmon is
also entitled to receive a bonus of $25,000 per year, payable in four equal
installments. Under the agreement, Mr. Harmon will also be granted options to
purchase 3,000,000 shares of restrictedthe Company's common stock ateach year, and will be
given benefits including health insurance coverage and life insurance. In the
event of termination without cause, a price of $0.075
per share for $500,000severance payment equal to one years'
salary is payable. Amounts in cash and the cancellation of $2,749,090 principal
amount oftable reflect compensation paid to Mr. Harmon
since the date his employment commenced.
19
On June 14, 2007, we entered into a severance agreement with Mr. Trevor
Saliba, 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. Pursuantformer Chief Marketing Officer, whereby he was to the Saliba
agreements, the trusts were issued a total of 26,654,520receive 4,000,000
shares of common stock in exchangethe Company, twelve month's salary and health
insurance benefits, and an assigned five percent portion of our residual
interest in the profits and losses of our partially-owned subsidiary, After Bev
Group Inc. In addition, we agreed to settle other various amounts, including
those relating to de minimis employee benefits, previously owing to and from Mr.
Saliba. See note (3) to the Summary Compensation Table, above.
On June 15, 2004, our subsidiary, CirTran-Asia, entered into an
employment agreement with Charles Ho to act as President of CirTran-Asia for $500,000 casha
term of three years, which term ended on June 15, 2007. The parties did not
renew the agreement, and Mr. Ho continues working for us as an independent
consultant on a project-by-project basis. The agreement also included options to
purchase common stock of the Company for each additional product that Mr. Ho
procured pursuant to the agreement between CirTran - Asia, Inc. and Michael
Casey Enterprises, LTD., as provided for in the acquisition agreement. Under the
employment agreement, CirTran - Asia, Inc. did not provide benefits to Mr. Ho,
and his employment could be terminated for cause, or upon death or disability.
When the agreement expired, Mr. Ho was obligated not compete with us for a
period of one year from the date of termination. 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.
Equity Compensation Plans
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth information about securities that may be
issued under the Company's equity compensation plans as of the date of this
Proxy Statement.
Number of
Securities
Remaining
Number of available for
securities to future issuance
be issued Weighted- under equity
upon average exercise compensation
exercise of price of plans
outstanding outstanding (excluding
options, options, securities
warrants warrants reflected in
and rights and rights column (a))
(a) (b) (c)
----------------------------------------------------------
Equity compensation
plans approved by
shareholders None None None
Equity compensation
plans not approved
by shareholders 56,160,000 $0.014 40,240,000
Total 56,160,000 $0.014 40,240,000
20
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table summarizes information regarding options and other
equity awards exercised and the cancellation of $1,499,090 of debt. We
used the $500,000 cash from the sale of the shares for working capital. As a
result of this transaction, the percentage of our common stockawards owned by the Saliba Private Annuity TrustNamed Executive Officers
that vested during fiscal year 2007.
Option Awards Stock Awards
------------------------------------------------------------------- -----------------------------------------
Equity
Incentive
Market Equity Plan
Number Value Incentive Awards:
Equity of of Plan Market or
Incentive Shares Shares Awards: Payout
Plan or or Number of Value of
Awards: Units Units Unearned Unearned
Number of Number of Number of of of Shares, Shares,
Securities Securities Securities Stock Stock Units, or Units, or
Underlying Underlying Underlying That That Other Other
Unexercised Unexercised Unexercised Have Have Rights Rights
Options Options Unearned Option Option Not Not That Have That Have
(#) (#) Options Exercise Expiration Vested Vested Not Vested Not Vested
Name Exercisable Unexercisable (#) Price ($) Date (#) ($) (#) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
- ------------------------------------------------------------------------------------------------------------------------------------
Iehab J. Hawatmeh, 6,000,000 - - $0.013 01-18-12 - - - -
President and Chief 6,000,000 - - $0.012 11-21-12 - - - -
Executive Officer
Shaher Hawatmeh, 4,800,000 - - $0.013 01-18-12 - - - -
Chief Operating 4,800,000 - - $0.012 11-21-12 - - - -
Officer
David L. Harmon, - - - - - - - - -
Chief Financial
Officer
Richard Ferrone, - - - - - - - - -
Chief Financial
Officer
Trevor Saliba, - - - - - - - - -
Chief Marketing
Officer
Charles Ho, - - - - - - - - -
President,
CirTran-Asia
21
DIRECTOR COMPENSATION
The table below summarizes 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 payablecompensation paid 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
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).
-13-
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
amountsDirectors 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 $2,050,000
of principal and accrued interest in return for the Company's issuing 51,250,000
shares of our restricted common stock to certain shareholders of Abacas. No
registration rights were granted.
As of January 29, 2007, no further loans had been made to the Company
from Abacas.
Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires our officers and
directors, and persons who beneficially own more than 10% of a registered class
of our equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Officers, directors and greater
than 10% shareholders are required by regulation of the Securities and Exchange
Commission to furnish us with copies of all Section 16(a) forms which they file.
Based solely on its review of the copies of such forms furnished to us during the fiscal year ended December 31, 2005, we are aware2007.
Change in
Pension Value
and
Nonqualified
Fees Deferred
Earned or Non-Equity Compensation
Paid in Stock Option Incentive Earnings All Other
Cash Awards Awards Plan ($) Compensation Total
Name ($) ($) ($) (3) Compensation ($) (4) ($)
(a) (b) (c) (d) ($) (e) (f) (g) (h)
- ----------------------------------------------------------------------------------------------------------------------
Iehab Hawatmeh (1) - - - - - - -
Trevor Saliba (1) - - - - - - -
Fadi Nora (2) 15,000 - 41,413 - - 800,750 857,163
Donald L. Buehner (2) 5,000 - 21,170 - - 136,664 162,834
- ----------------
(1) Iehab Hawatmeh, and Trevor Saliba through June 14, 2007, also
served as executive officers of the Company during 2007. They
received compensation for their services as executive officers,
set forth above in the Summary Compensation Table. They did not
receive any additional compensation for their services as
directors of the Company.
(2) Mr. Nora was appointed to the Board on February 1, 2007. Mr.
Buehner was appointed to the Board on October 1, 2007. As noted
above, Mr. Buehner has announced his intention to retire from the
Board of Directors following untimely
filings:
Iehab Hawatmeh, Raed Hawatmeh, Trevor Salibathe the Annual Meeting of
Shareholders.
(3) The amounts in this column reflect the dollar amount recognized
for financial statement reporting purposes, excluding the effect
of estimated forfeitures, for the fiscal year ended December 31,
2007, in accordance with SFAS No. 123(R). Assumptions used in the
calculation of these amounts are included in Note 18 to the
Company's audited financial statements for the year ended December
31, 2007, included in the Company's Annual Report on Form 10-KSB
filed with the Securities and Shaher Hawatmeh all filed
untimely Forms 5.
-14-Exchange Commission on April 15,
2008
(4) Mr. Buehner - Prior to becoming a Director later in 2007, Mr.
Buehner purchased our Salt Lake City facility in a sale/leaseback
transaction. The amount in column (g) comprises monthly rent
payments on the building of $17,083 per month over a period of
eight months.
Mr. Nora - Amounts in column (g) paid to Mr. Nora comprise the
following: $10,000 in consulting fees; $345,750 in fees earned in
connection with the sale to other investors of portions of the
Company's membership interest in After Bev Group, LLC; and
$445,000 representing Mr. Nora's share of the proceeds from the
sale of portions of the Company's membership interest in AfterBev,
part of which the Company had previously assigned to Mr. Nora.
22
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the number and percentageownership of
the 655,716,326Company's common stock by each person who, to the knowledge of the Company,
is the beneficial owner of more than 5% of the outstanding shares of our common
stock, which, according to the information
supplied to us, were beneficially owned, as of January 1, 2007, byor who is (i) each person who is currently a director, (ii) each executive officer,Named
Executive Officer, (iii) all current directors and executive officersNamed Executive Officers as a
group as of April 29, 2008.
Amount and
(iv) each person who, to
our knowledge, is thenature of
beneficial Percent
(1) Title of class (2) Name of beneficial owner ownership of more than 5%class
- --------------------------------------------------------------------------------
Common Stock Iehab J. Hawatmeh (1) 145,060,960 12.3%
Shaher Hawatmeh (2) 9,600,000 0.8%
David L. Harmon (3) 3,000,000 0.3%
Fadi Nora (4) 78,719,360 6.7%
Donald L. Buehner (5) 4,725,000 0.4%
All Officers and Directors 241,105,320 20.2%
as a Group
(5 persons)
- -------------------
(1) Includes options to purchase up to 12,000,000 shares that can be
exercised anytime at exercise prices ranging between $0.012 to
$0.013 per share.
(2) Options to purchase up to 9,600,000 shares that can be exercised
anytime at exercise prices ranging between $0.012 to $0.013 per
share.
(3) An option to purchase up to 3,000,000 shares that can be exercised
anytime at an exercise price of our outstanding common
stock.
Except as otherwise indicated, the$0.014 per share.
(4) Includes 2,599,500 shares beneficially owned by Mr. Nora's spouse.
Also includes options to purchase up to 4,800,000 shares that can
be exercised anytime at exercise prices ranging between $0.012 to
$0.013 per share.
(5) Includes an option to purchase up to 2,400,000 shares that can be
exercised anytime at an exercise price of $0.012 per share.
The persons named in the table have sole or shared 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,above, based on
the information each of them has given to us, have sole or shared investment and
voting power with respect to their shares, except where community property laws
may apply.
- ------------------------------------- ------------------- ---------- ----------
Common PercentCOMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of Namethe Securities Exchange Act of 1934 requires CirTran's
officers, directors, and Address Relationship Shares Class
- ------------------------------------- ------------------- ---------- ----------
Saliba Private Annuity Trust (1) 5% 75,698,990 11.54%
115 S. Valley Street Shareholder
Burbank, CA 91505
- ------------------------------------- ------------------- ---------- ----------persons who beneficially own more than 10% of the
23
Company's common stock to file reports of ownership and changes in ownership
with the SEC. Officers, directors, and greater-than-ten-percent shareholders are
also required by the SEC to furnish us with copies of all Section 16(a) forms
that they file.
Based solely upon a review of these forms that were furnished to the
Company, and based on representations made by certain persons who were subject
to this obligation that such filings were not required to be made, the Company
believes that all reports that were required to be filed by these individuals
and persons under Section 16(a) were filed on time in fiscal year 2007, except
for: Iehab J. Hawatmeh Director, 60,000,000 9.15%
4125 South 6000 West Officer
West Valley City, Utah 84128 & 5% Shareholder
- ------------------------------------- ------------------- ---------- ----------
Raedwho filed late three Forms 4; Fadi Nora who filed late
one Form 3 and two Forms 4; and Donald L. Buehner who filed late one Form 3 and
two Forms 4. In addition, Iehab J. Hawatmeh, (3) Former Director 24,000,000 3.63%
10989 Bluffside Drive
Studio City, CA 91604
- ------------------------------------- ------------------- ---------- ----------Shaher Hawatmeh, and Trevor Saliba
(2) Director 9,000,000 1.37%
13848 Valleyheart Drive
Sherman Oaks, CA 91423
- ------------------------------------- ------------------- ---------- ----------
Charles Ho Officerfailed to file reports of 0 0.00%
4125 South 6000 West Subsidiary
West Valley City, Utah 84128 of 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
- ------------------------------------- ------------------- ---------- ----------
All Officerstransactions occuring in prior periods. However, these
individuals subsequently reported all transactions related to the late and Directors asany
missing forms under Section 16(a) on a Group 70,000,000 10.68%
(4 persons)
- ------------------------------------- ------------------- ---------- ----------
- -------------------
-15-
(1) Includes 13,189,620 shares held byForm 5, filed during 2008.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Play Beverages, LLC
During 2006, Playboy Enterprises International, Inc. ("Playboy")
entered into a licensing agreement with Play Beverages, LLC ("PlayBev"), then an
unrelated Delaware limited liability company, whereby PlayBev agreed to
internationally market and distribute a new energy drink carrying the Saliba Living Trust. Thomas L.
SalibaPlayboy
name and Betty R. Saliba arerelated "Rabbit Head" logo symbol. In May 2007, PlayBev entered into an
exclusive agreement with us to arrange for the trustees of The Saliba Living Trustmanufacture, marketing and
Thomas L. Saliba is the sole trustee of The Saliba Private Annuity Trust. These
persons control the voting and investment decisionsdistribution of the shares held byenergy drinks, other Playboy-licensed beverages, and related
merchandise through various distribution channels throughout the respective trusts. Mr. Thomas L. Saliba is a nephewworld.
In an effort to finance the initial development and marketing of the
grandfathernew drink, we and other investors formed After Bev Group LLC ("AfterBev"), a
California limited liability company and partially-owned, consolidated
subsidiary of Mr.
Trevor Saliba,the Company. We contributed our expertise in exchange for an
initial 84 percent membership interest in AfterBev. The other initial AfterBev
members contributed $500,000 in exchange for the remaining 16 percent. We
borrowed an additional $250,000 from an individual, and AfterBev contributed the
total $750,000 to PlayBev in exchange for a 51 percent interest in PlayBev's
cash distributions. We recorded this $750,000 amount as an investment in
PlayBev. PlayBev then remitted these funds to Playboy as part of a guaranteed
royalty prepayment. Along with the membership interest granted to us, PlayBev
agreed to appoint Iehab J. Hawatmeh, our president, and Fadi Nora, one of our
directors, to two of PlayBev's three executive management positions. In
addition, during 2007, Mr. Hawatmeh and officers. Mr. Trevor SalibaNora personally purchased membership
interests from other PlayBev members which aggregated 11.1 percent. Despite the
combined 62.1 percent interest owned by Mr. Hawatmeh, Mr. Nora, and the Company,
and the resultant ability to partially influence PlayBev, the operating
agreement for PlayBev requires that various major operating and organizational
decisions be agreed to by members owning at least 75 percent of the membership
interests. The other members of PlayBev are not affiliated with us. Accordingly,
while PlayBev is onea related party, we cannot unilaterally control significant
operating decisions of five passive beneficiaries of Saliba Private Annuity TrustPlayBev, and have not accounted for PlayBev's operations
as if it was a consolidated subsidiary.
PlayBev has no control
over its operations or management. Mr. Saliba disclaims beneficial control overoperations; therefore, under the shares indicated.
(2) Includes optionsterms of the exclusive
manufacturing and distribution agreement we were appointed the master
manufacturer and distributor of the beverages and other products that PlayBev
licensed from Playboy. In so doing, we assumed all the risk of collecting
amounts owed from customers, and contracting with vendors for manufacturing and
marketing activities. We also agreed to purchase uppay PlayBev a royalty equal to 1,000,000 shares each that can be
exercised anytimeour gross
profits from collected beverage sales, less 20 percent of our related cost of
goods sold, and 6 percent of our collected gross sales. During 2007, we incurred
$93,104 in royalty expenses due to PlayBev 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
PLEASE NOTE: In 2006, the SEC revised its disclosure requirements
relating to compensation of directors and named executive officers. Small
Business Issuers are requiredDecember 31, 2007.
We also agreed to provide the information under the new
disclosure formatservices to PlayBev for 2006, but are not required to conform the disclosure for
prior years to the new format. The following information consistsinitial development,
marketing, and promotion of the new format disclosurebeverage. These services are to be billed to
PlayBev and recorded as an account receivable from PlayBev. We agreed to carry
up to a maximum of $1,000,000 as a receivable due from PlayBev in connection
with these billed services, to be repaid by PlayBev out of the royalties due
PlayBev from our distribution sales as described in the preceding paragraph.
Amounts billed to PlayBev for 2006,marketing and development services amounted to
$1,532,071 during 2007, and were included in revenues for purposesour marketing and
media segment. After netting this amount due from PlayBev with amounts due to
PlayBev for royalties, the amount owed to us was $1,438,967 at December 31,
2007.
24
On March 19, 2008, we agreed to increase the receivable maximum under
our agreement with PlayBev from $1,000,000 to $3,000,000, and to begin charging
interest at a rate of providing information7 percent per annum.
After Bev Group, LLC
Following AfterBev's organization in May 2007, we entered into
consulting agreements with Mr. Nora and an unrelated individual who had loaned
us $250,000 when we invested in PlayBev. The agreements provided that we assign
to our
shareholders,each of Mr. Nora and the prior format disclosure for prior years.
Compensation Discussion and Analysis
The following is a discussionother individual approximately one-third of the
Company's programshare in future AfterBev cash distributions, in exchange for compensationtheir
assistance in the initial AfterBev organization and planning, along with their
continued assistance in subsequent beverage development and distribution
activities. The agreements also provided that if and when we sold a portion of
its named executive officers and directors. Asour membership interest in AfterBev, these individuals would each be owed their
proportional assigned share distributions in the proceeds of such sales. The
actual payment of the date of this Report,distributions depended on the Company did not have a compensation committee, and as such, the Company's
Board of Directors were responsible for determining the Company's compensation
program.
Compensation Program Objectives
The Company's compensation program is designed to encompass several
factors in determining the compensationuse of the Company's named executive
officers. The following aresale proceeds. If
we were to use the main objectivesproceeds to help finance beverage development and marketing
activities, the payment of the compensation program for
the Company's named executive officers:
- Retain qualified officers.
- Provide overall corporate direction for the officers and also
to provide direction that is specific to officer's respective
areas of authority. The level of compensation amongst the
officer group, in relation to one another, is also considered
in order to maintain a high level of satisfaction within the
leadership group. We consider the relationship that the
officers maintaindistributions was to be onedeferred, pending collections
from customers once beverage product sales eventually commenced. Otherwise, the
proportional assigned share distributions were due to the two individuals.
Throughout 2007, as energy drink development and marketing activities
progressed, we raised additional funds by selling portions of the most important elementsour membership
interest in AfterBev to other investors, some of the leadership group.
- Providewhom were our stockholders or
other affiliates. In some cases, we sold a performance incentive for the officers.
The Company's compensation program is designed to reward the officers
in the following areas:
- achievement of specific goals;
- professional education and development;
- creativity in the form of innovative ideas and analysis for
new programs and projects;
- new program implementation;
- attainment of company goals, budgets, and objectives;
- results oriented determination and organization;
- positive and supportive direction for company personnel; and
- community involvement.
As of the date of this Report, there were four principal elements of
named executive officer compensation. The Board of Directors determines the
-16-
portion of compensation allocatedour membership interest,
including voting rights. In other cases, we sold merely a portion of our share
of future AfterBev profits and losses. By December 31, 2007, we had raised a
total of $3,663,000 from such sales; we also owed one investor $75,000 for
returning a portion of an interest. We retained a 14 percent interest in
AfterBev's profits and losses, but also retained 52 percent of all voting rights
in AfterBev. We recorded the receipt of these net funds as $1,015,710 in
increases to each element for each individual named
executive officer. The discussions of compensation practicesour existing minority interest in AfterBev, and policies are of
historical practices and policies. Our Board of Directors is expected$2,572,290 in
amounts owing as distributable proceeds payable to continue these policies and practices, but will reevaluate the practices and
policies as it considers advisable.
The elements of the compensation program include:
- Base salary;
- Performance bonus and commissions;
- Stock options and stock awards
- Employee benefits in the form of:
- health and dental insurance;
- life insurance;
- paid parking and auto reimbursement; and
- Other de minimis benefits.
Base salary
Base salary is intended to provide competitive compensation for job
performance and to attract and retain qualified named executive officers. The
base salary level is determined by considering several factors inherent in the
market place such as: the size of the company; the prevailing salary levels for
the particular office or position; prevailing salary levels in a given
geographic locale;Mr. Nora and the qualifications and experienceother
individual to whom we had assigned interests of the named executive
officer.
Performance bonus and commissions
Bonuses are in large part based on company performance. An EBITDA
formula is the sole determining factor used to calculate the performance bonus
for the Chief Executive Officer and Chief Operating Officer.
The Marketing Officer receives a performance bonus based on the EBITDA
formula and also a commission based on a percentageour original share of sales revenue.
The Chief Financial Officer receives a performance bonus based on
performance, as determined by the Board of Directors, at minimumAfterBev.
Of this amount, that has
been established as part of an employment contract.
Policy decisions to waive or modify performance goals have not been a
significant factor to date in that there have not been contractual changes made
other than the normal renewal or updating of contracts as would be expected as
part of an annual review.
Stock options and stock awards
Stock ownership is provided to enable named executive officers and
directors to participate in the success of the Company. The direct or potential
ownership of stock will also provide the incentive to expand the involvement of
the named executive officer to include, and therefore be mindful of, the
perspective of stockholders of the Company.
Employee benefits
Several of the employee benefits for the named executive officers are
selected to provide security for the named executive officers. Most notably,
insurance coverage for health, life, and liability are intended to provide a
level of protection to that will enable the named executive officers to function
without having the distraction of having to manage undue risk. The health
insurance also provides access to preventative medical care which will help the
named executive officers function at a high energy level, to manage job related
stress, and contribute to the overall well being of the named executive
officers, allMr. Nora was owed $1,192,290, of which contribute to an enhanced job performance.
-17-
Other de minimis benefits
Other de minimis employee benefits such as cell phones, parking, and
auto usage reimbursements are directly related to job functions but contain a
personal use element which is considered to be a goodwill gesture that
contributes to enhanced job performance.
As discussed above, the Board of Directors determines the portion of
compensation allocated to each element for each individual named executive
officer. As a general rule, salary is competitively based while giving
consideration to employee retention, qualifications, performance, and general
market conditions. Typically, stock options are based on the current market
value of the option and how that will contribute to the overall compensation of
the named executive officer. Consideration is also given to the fact that the
option has the potential for an appreciated future value. As such, the future
value may be the most significant factor of the option, but it is also more
difficult to quantify as a benefit to the named executive officer.
Accordingly, in determining the compensation program for the Company,
as well as setting the compensation for each named executive officer, the Board
of Directors attempts to attract the interest of the named executive officer
within in the constraints of a compensation package that is fair and equitable
to all parties involved.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------------
Change in
Pension Value
and
Bonus Nonqualified
Name and Or Non-Equity Deferred
Principal Commission Stock Option Incentive Plan Compensation All Other
Position Year Salary (C) Awards Grants Compensation Earnings Compensation Total
$ $ $
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
- ------------------------------------------------------------------------------------------------------------------------------------
Iehab Hawatmeh,
President and
Chief Executive
Officer 2006 225,000 57,807 -0- -0- -0- -0- -0- 282,807
- ------------------------------------------------------------------------------------------------------------------------------------
Richard Ferrone
Chief Financial
Officer 2006 73,845 21,000 -0- -0- -0- -0- -0- 94,845
- ------------------------------------------------------------------------------------------------------------------------------------
Trevor Saliba,
Chief Marketing
Officer 2006 120,000 18,755 -0- -0- -0- -0- -0- 138,755
- ------------------------------------------------------------------------------------------------------------------------------------
Shaher Hawatmeh,
Chief Operating
Officer 2006 150,000 7,790 -0- -0- -0- -0- -0- 157,790
- ------------------------------------------------------------------------------------------------------------------------------------
Charles Ho
President
CirTran Asia 2006 -0- 407,397(C) -0- -0- -0- -0- -0- 407,397
- ------------------------------------------------------------------------------------------------------------------------------------
(1) For each of the individuals listed in the table above, "All Other
Compensation" would include perquisites including cellular phones, automobile
reimbursement, parking reimbursement, life insurance, and health and dental
-18-
insurance. However, the aggregate value of all such perquisite compensation is
less than $10,000 for each of the individuals named in the table above.
Additionally, the Company believes that each of the elements of perquisite
compensation listed are integrally and directly related to the performance of
the executive duties of the individuals listed above, although certain of the
elements (including cellular phone use and automobile reimbursement) may have a
personal benefit component as well.
Narrative Disclosure to Summary Compensation Table.
--------------------------------------------------
Employment Agreements
On July 1, 2004, CirTran Corporation$445,000 was paid,
leaving $747,290 owing at December 31, 2007.
Global Marketing Alliance
We entered into an employment
agreement with Iehab Hawatmeh, datedGlobal Marketing Alliance ("GMA"), a
Utah limited liability company and certain of its affiliates, and hired GMA's
owner 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.
In May 2006, we entered into 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 $40,000 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.
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
-19-
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
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 provide 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.
OUTSTANDING EQUITY AWARDS AT FISCAL 2006 YEAR-END
- ------------------------------------------------------------------------------------------------------------------------------------
Option Awards Stock Awards
- --------------- ---------------------------------------------------------------- --------------------------------------------------
Name Number of Number of Equity Option Option Number of Market Value Equity Equity
Securities Securities Incentive Plan Exercise Expiration Shares or of Shares or Incentive Incentive
Underlying Underlying Awards: Number Price ($) Date Units of Units of Plan Awards: Plan Awards:
Unexercised Unexercised of Securities Stock That Stock That Number of Market or
Options (#) Options Underlying Have Not Have Not Unearned Payout Value
Exercisable (#) Unexercised Vested (#) Vested ($) Shares, of Unearned
Unexercisable Unearned Units, or Shares,
Options Other Rights Units, or
(#) That Have Other Rights
Not Vested That Have
(#) Not Vested
($)
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
- --------------- ----------- ------------- -------------- --------- ---------- --------- ------------ ----------- ------------
Iehab Hawatmeh, -0- -0- -0- N/A N/A -0- -0- -0- -0-
CEO
- --------------- ----------- ------------- -------------- --------- ---------- --------- ------------ ----------- ------------
Richard -0- -0- -0- N/A N/A -0- -0- -0- -0-
Ferrone, CFO
- --------------- ----------- ------------- -------------- --------- ---------- --------- ------------ ----------- ------------
Trevor Saliba, -0- -0- -0- N/A N/A -0- -0- -0- -0-
CMO
- --------------- ----------- ------------- -------------- --------- ---------- --------- ------------ ----------- ------------
Shaher -0- -0- -0- N/A N/A -0- -0- -0- -0-
Hawatmeh, COO
- --------------- ----------- ------------- -------------- --------- ---------- --------- ------------ ----------- ------------
Charles Ho, -0- -0- -0- N/A N/A -0- -0- -0- -0-
President
CirTran Asia
- --------------- ----------- ------------- -------------- --------- ---------- --------- ------------ ----------- ------------
-20-
(1) Two Officers of the company exercised shares of stock that had
been awarded from to them from the 2004 Stock Option Program. Trevor Saliba,
Chief Marketing Officer, exercised a total of 3,000,000 shares, and Shaher
Hawatmeh, Chief Operating Officer, exercised a total of 2,000,000 shares during
2006.
DIRECTOR COMPENSATION
For Fiscal Year Ended 2006
- --------------- ---------------- -------------- --------------- ---------------- ----------------- -------------- -----------------
Name Fees Earned or Stock Awards Option Awards Non-Equity Change in All Other Total
Paid in Cash ($) ($) Incentive Plan Pension Value Compensation ($)
($) Compensation and Nonqualified ($)
($) Deferred
Compensation
Earnings
($)
(a) (b) (c) (d) (e) (f) (g) (h)
- --------------- ---------------- -------------- --------------- ---------------- ----------------- -------------- -----------------
Iehab Hawatmeh -0- -0- -0- -0- -0- -0- -0-
(Note 1)
- --------------- ---------------- -------------- --------------- ---------------- ----------------- -------------- -----------------
Trevor Saliba -0- -0- -0- -0- -0- -0- -0-
(Note 1)
- --------------- ---------------- -------------- --------------- ---------------- ----------------- -------------- -----------------
Raed Hawatmeh -0- -0- -0- -0- -0- -0- -0-
(Note 2)
- --------------- ---------------- -------------- --------------- ---------------- ----------------- -------------- -----------------
(1) Iehab Hawatmeh and Trevor Saliba also served as executive officers of
the Company during the fiscal year ended December 31, 2006. They received
compensation for their services as executive officers, set forth above in the
Summary Compensation Table. They did not receive any additional compensation for
their services as directors of the Company.
(2) Mr. Raed Hawatmeh resigned as a director of the Company on May 10,
2006. During his term of service in 2006, he did not receive any compensation
for his services as director of the Company.
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.
PRIOR YEARS EXECUTIVE COMPENSATION INFORMATION
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.
-21-
- --------------------------------------------------------------------------------------------------------------
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 -
- --------------------------------------------------------------------------------------------------------------
Shaher Hawatmeh 2005 150,000 30,000 - 2,000,000 -
Chief Operating Officer 2004 140,000 - - 4,700,000 -
2003 120,000 - - 8,400,000 -
2002 120,000 - - 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% $0.06 Jan 2006
- --------------- ------------ --------------- ---------------- ---------------
-22-
Option/SAR Grants in the Year Ended December 31, 2004
- --------------- ------------ --------------- ---------------- ---------------
Number of
Securities % of Total
Underlying Options Granted
Options/SARs to Employees in Exercise or Base
Name Granted (#) Fiscal Year Price ($/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 - $0.03 Jan - Dec 2009
- --------------- ------------ --------------- ---------------- ---------------
Aggregated Option/SAR Exercises in the Year Ended December 31, 2005 and December
31, 2004 Option/SAR Values
- --------------- --------------- ------------ --------------- ----------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
at FY End (#) FY-End ($Online Corp. ("CTO")
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 -
- --------------- --------------- ------------ --------------- ----------------
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 throughoutsource to GMA the online marketing and
sales activities associated with our wholly owned subsidiary CirTran-Asia, haveCTO products. In return, we provide
bookkeeping and management consulting services to GMA, and pay GMA a fee equal
to five percent of CTO's net sales. In addition, GMA assigned to us all of its
web-hosting and training contracts effective as of January 1, 2007, along with
the exclusive rightrevenue earned thereon, and we also assumed the related contractual
performance obligations.
Other transactions involving Officers, Directors, and Stockholders
Don L. Buehner was appointed to manufacture certain products developed by the Developers or
anyour Board of their affiliates. In connection with this agreement,Directors as of October 1,
2007. For services to be rendered in 2008, we identified seven
products, in connection with which we agreed to issue optionsgranted Mr. Buehner an option
during 2007 to purchase 2,400,000 shares of our common stockstock. Prior to his
appointment as a director, Mr. Buehner bought the building housing our principal
executive offices in Salt Lake City in a sale/leaseback transaction. The term of
the lease is for 10 years, with an option to extend the lease for up to three
additional five-year terms. We pay Mr. Buehner a monthly lease payment of
$17,083, which is subject to annual adjustments in relation to the Developers uponConsumer
Price Index. Lease payments during 2007 to Mr. Buehner totaled $136,664. We
believe that the sale, shipmentamount charged and payment for specified
amountspayable to Mr. Buehner under the lease is
reasonable and in line with local market conditions. As discussed above, Mr.
Buehner has announced his intention to resign from our Board of unitsDirectors
following the Annual Meeting of Shareholders.
In February 2007, we appointed Fadi Nora to our Board of Directors.
Prior to his appointment with us, Mr. Nora was also an investor in the Company
(see the discussion below related to ANAHOP). For services rendered in 2007 and
to be rendered in 2008, we granted Mr. Nora options during 2007 to purchase a
the identified products, as set forth below. The options
-23-
will be exercisable at $0.06 per share, vest on the grant date and expire one
year after issuance. The scheduletotal 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, President4,800,000 shares of our subsidiary CirTran-Asia.
(2) Of the options for initial units sold for this product,common stock. In addition, Mr. Ho,
President of CirTran-Asia,Nora is entitled to
receive 700,000, witha quarterly bonus equal to 0.5 percent of any gross sales earned by us directly
through his efforts. Mr. Nora also is entitled to a bonus equal to five percent
of the remaining
300,000 goingamount of any investment proceeds received by us that are directly
generated and arranged by him if the following conditions are satisfied: (i) his
sole involvement in the process of obtaining the investment proceeds is our
introduction to the other developer. For each multiple of units abovepotential investor, but that he does not participate in 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.
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
ordersrecommendation, structuring, negotiation, documentation, or shipped sufficient quantitiesselling of the
other products listed ininvestment, (ii) neither we nor the tableinvestor are otherwise obligated 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 pursuantpay any
25
commissions, finders fees, or similar compensation to their terms.
During 2004, Mr. Ho received approximately $157,400 in commissionsany agent, broker, dealer,
underwriter, or finder in connection with the manufacturing agreement.investment, and (iii) the Board in
its sole discretion determines that the investment qualifies for this bonus, and
that the bonus may be paid with respect to the investment. During 2005,2007, Mr. HoNora
received approximately
$460,200$345,750 in commissionscompensation associated with sales of portions of our
interest in connectionAfterBev.
In May 2007, we issued a 10 percent promissory note to a family member
of Iehab J. Hawatmeh in exchange for $300,000. The note is due on demand after
one year. During 2007, along with interest we repaid principal of $61,109.
During 2007, Mr. Hawatmeh advanced us $30,000; this obligation was
repaid prior to the manufacturing agreement.end of the year. 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. MostHawatmeh advanced us a net
$110,837, all of the commissions are
calculated using the sales price less freight and cost of sales to the factory,
that amount is then multipliedwhich had been repaid by the contract percentage, per unit for each
product, afterend of 2006. At the payment has been received.
-24-
Recent Developments
Entry into Amendment Agreements
On January 12, 2007, CirTran Corporation (the "Company"), entered into
two agreements with Cornell Capital Partners, LP ("Cornell"), bothend of 2005,
Mr. Hawatmeh had advanced us $95,806, all 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,was repaid in January 2006.
Transactions involving ANAHOP, Inc.
In May 2006, as amended October 30, 2006. The purpose of Amendment No. 2
was to extend the filing deadline forwe closed a registration statement to be filed by
the Company to register the resale by Cornellprivate placement of shares of the Company's
common stock issuableand warrants (the "May Private Offering"). Pursuant to Cornell upon conversiona securities
purchase agreement we issued 14,285,715 shares of common stock (the "May
Shares") to ANAHOP, Inc. ("ANAHOP"), a convertible debentureCalifornia company partially owned by
Fadi Nora. The consideration paid for the May Shares was $1,000,000. In addition
to the Shares, the Company issued warrants (the "Warrants") to designees of
ANAHOP to purchase up to an additional 36,000,000 shares of common stock. Of
this amount, Mr. Nora was designated to receive Warrants to purchase 10,000,000
shares of common stock.
In June 2006, the Company closed a second private placement of shares
of its common stock and warrants (the "June Private Offering"). Pursuant to a
securities purchase agreement (the "Agreement"), the Company agreed to issue up
to 28,571,428 shares of common stock (the "June Shares") to ANAHOP. The total
consideration to be paid for the June Shares will be $2,000,000 if all tranches
of the sale close.
Pursuant to the Agreement, ANAHOP agreed to pay $500,000 (the "First
Tranche Payment"). Upon the receipt of the First Tranche Payment, the Company
agreed to issue a certificate or certificates to the Purchaser representing
7,142,857 of the June Shares.
The remaining $1,500,000 is to be paid by the ANAHOP as follows:
(i) No later than thirty calendar days following the date on which any
class of the Company's 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 $500,000 to
the Company; and
(ii) No later than sixty calendar days following the date on which any
class of the Company's 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
the Company. (The payments of $500,000 and $1,000,000 are referred to
collectively as the "Second Tranche Payment.")
Upon receipt by the Company of the Second Tranche Payment, the Company
agreed to issue a certificate or certificates to ANAHOP representing the
remaining 21,428,571 June Shares.
Additionally, once the Company has received the Second Tranche Payment,
the Company agreed to issue warrants to designees of ANAHOP to purchase up to an
additional 63,000,000 shares.
On April 11, 2008, Mr. Nora disassociated himself from the other
principals of ANAHOP, and as part of the asset settlement, relinquished
ownership of 12,857,144 shares of CirTran Corporation common stock and all of
the warrants previously assigned to him.
Transactions involving Abacas Ventures, Inc.
Two trusts, the Saliba Living Trust and the Saliba Private Annuity
Trust (collectively, the "Saliba Trusts"), were investors in Circuit Technology,
our predecessor entity. 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 our former directors.) In July 2000, we merged with Circuit
26
Technology. Through that merger, the Saliba Trusts became our shareholders. The
Saliba Trusts were also two of the shareholders of an entity named Abacas
Ventures, Inc. ("Abacas"). At the time of the 2000 merger, we were in default on
several of our obligations, including an obligation to Imperial Bank. The Saliba
Trusts, through Abacas, purchased the bank's claim against us to protect their
investment. Subsequently, Abacas continued to settle our debts in order to
improve their position, and to take advantage of certain discounts that our
creditors offered in order to settle creditor claims. On two occasions, the
Abacas shareholders agreed to convert outstanding debt owed by us to Abacas into
shares of our common stock (discussed below). Abacas continued to work with us
to settle claims by creditors, and to provide us with funding.
In 2002, we entered into an agreement with Abacas under which we issued
an aggregate of 19,987,853 shares of common stock to four of Abacas's
shareholders in exchange for cancellation by Abacas of $1,499,090 in senior debt
owed by us to our the creditors. The shares were issued with an exchange price
of $0.075 per share, for an aggregate amount of $1,500,000. We also entered into
another agreement with Abacas in which we 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 our creditors. The shares were issued with an exchange price of $0.05 per
share, for an aggregate amount of $1,500,000.
During 2002, we also entered into a bridge loan agreement with Abacas.
This agreement allowed us to request funds from Abacas to finance the build-up
of inventory relating to specific sales. The loan charged interest of 24 percent
and was payable on demand. There were no required monthly payments. During the
years ended December 31, 2004 and 2003, we received draws of $3,128,281 and
$350,000, respectively, and made cash payments of $3,025,149 and $875,000,
respectively.
During 2004, Abacas completed negotiations with several of our vendors
whereby Abacas purchased various past-due amounts for goods and services, as
well as notes payable. The total of these obligations was $1,263,713.
The total principal amount owed to Abacas pursuant to 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 in relation to
these agreements was $430,828 and $230,484 as of December 31, 2004 and 2003,
respectively, and was included in accrued liabilities at the time.
In 2005, the shareholders of Abacas agreed to cancel $2,050,000 of
principal and accrued interest in return for our issuing 51,250,000 shares of
our restricted common stock to Abacas shareholders. Subsequently we have
borrowed no further amounts or issued any more shares of common stock.
As of December 31, 2001, Iehab J. Hawatmeh had loaned us a total of
$1,390,125. The loans were demand loans, bore interest at 10 percent 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 $1,500,000 (the "August Debenture")our debt. Two of these agreements were with the
Saliba Trusts. The Saliba Trusts are also principals of Abacas Ventures, Inc.,
which entity purchased our line of credit in May 2000 (see above). Pursuant to
the Saliba agreements, the Saliba 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 Trusts increased from approximately 7 percent to
approximately 18 percent. Mr. Trevor Saliba, one of our former 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. Hawatmeh, and Rajai Hawatmeh, his cousin. Of these shares,
15,333,333 were issued to CornellIehab J. Hawatmeh in August 2006. The new filing deadlineexchange for the registration statementcancellation of
$1,150,000 in debt.
27
OTHER MATTERS
Shareholder Proposals
As of the date of this Proxy Statement, the Board does not intend to
present, and has not been informed that any other person intends to present, any
matter for action at the Meeting, other than as set forth herein and in the
Notice of Meeting. If any other matter properly comes before the meeting, it is
June 1, 2007.intended that the holders of proxies will act in accordance with their best
judgment on these matters.
Solicitation of Proxies
The accompanying proxy is solicited on behalf of the Board. In addition
to the solicitation of proxies by mail, certain of the officers and employees of
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 towithout extra compensation, may solicit proxies personally or by
telephone and, if deemed necessary, third party solicitation agents may be
filedengaged by the Company to registersolicit proxies by means of telephone, facsimile or
telegram, although no such third party has been engaged by the resale by CornellCompany, as of
the date hereof.
Shareholders who currently receive multiple copies of the proxy
statement (and related documents) at their address and would like to request
"householding" of their communications should contact their broker or, if a
shareholder is a registered holder of shares of common stock, he or she should
submit a written request to the Company's transfer agent for its common stock,
issuableInterwest Stock Transfer, 1981 East 4800 South, Suite # 100, Salt Lake City,
Utah 84117. Shareholders who are now "householding" their communications, but
who wish to Cornell upon conversion of a convertible debenturereceive separate proxy statements (and related documents) in the
aggregate principal
amount of $1,500,000 (the "December Debenture") issued to Cornell in December
2005. The new filing deadline forfuture may also notify the registration statement is June 1, 2007.
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 termtransfer agent. We will promptly deliver, upon
written or oral request, a separate copy of the Agreement (the "Term") is for five years from
execution, and may be continued onproxy statement (and related
documents) at a month-to-month basis thereafter. The
Agreement relatesshared address to the manufacturing and production ofwhich 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 Norasingle copy was appointed as a
director of the Company.
-25-
delivered.
ANNUAL REPORT
CopiesWe will mail a copy of the Company's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2007, as filed with the SEC, to each
shareholder of record at April 21, 2008. The report on Form 10-KSB is not deemed
a part of the proxy soliciting material for the Meeting. The contents and
sending of this Proxy Statement have been approved by the Board.
FURTHER INFORMATION
Additional copies of the Company's Annual Report on Form 10-KSB for the
year ended December 31, 2007 (including financial statements and financial
statement schedules) for the year ended
December 31, 2005,that has been filed with the Securities and Exchange
Commission may be obtained without charge by writing to the Company -CirTran, Attention:
Richard Ferrone,Investor Relations, 4125 South 6000 West, West Valley City, Utah 84128. A request for a copyThe
reports and other filings of CirTran, including this Proxy Statement, also may
be obtained from 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 March 16, 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.
----------------------------SEC's on-line database, located at www.sec.gov.
By Order of the Board of Directors,
/s/ Iehab Hawatmeh,
Iehab Hawatmeh
PresidentChief Executive Officer and
Director
West Valley City, Utah
_________ ___, 2007
-26-
EXHIBIT 1
ARTICLES OF AMENDMENT FOR ARTICLES OF INCORPORATION
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 meetingChairman of the shareholders. All
stockBoard 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.
-27-Directors
Date: April 29, 2008
28
EXHIBIT 2
FORM OFCIRTRAN CORPORATION
PROXY
CirTran Corporation
THIS PROXY IS SOLICITED ON BEHALF OFBY THE BOARD OF DIRECTORS OF THE CORPORATION
FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 18, 2008
The undersigned shareholder of CirTran Corporation (the "Company") hereby
appoints Iehab Hawatmeh, Chairman of the Board of Directors, or, failing him,
Fadi Nora, Director or instead of any of the foregoing, ___________________, as
Proxy,proxy of the undersigned with full power of substitution to attend, vote and
hereby authorizes him to representotherwise act for and vote, as designated
below, all shareson behalf of Common Stock of the Company held of record by the undersigned at the Specialabove-noted Annual
Meeting of Shareholders to be held at the the
Company's headquarters, located at 4125 South 6000 West, West Valley City, Utah
84128 on Monday, April 30, 2007, at 10:00 a.m., M.D.T., or at any adjournment
thereof.
1. To consider and act upon a proposed amendment to the Company's articles
of incorporation that would increase the authorized capital of the Company and any adjournment thereof (the
"Meeting") to include 1,500,000,000 shares of Common Stock, par value
$.001 per share,the same extent and effectuate a 1.2 shares for 1 share forward stock
split.
FOR AGAINST ABSTAIN
/ / / / / /
2. In his discretion,with the Proxysame powers as if the undersigned was
present at the Meeting, and the person named is authorizedspecifically directed to vote upon suchas
indicated herein. The undersigned hereby undertakes to ratify and confirm all
the said proxy may do by virtue hereof, and hereby revokes any proxy previously
given in respect of the Meeting. Without limiting the general authorization and
power hereby given, all of the common shares registered in the name of the
undersigned are to be voted as follows:
FOR WITHHOLD FOR ALL
1. Election of Directors ALL AS TO ALL EXCEPT
INSTRUCTIONS: IF YOU MARK THE "FOR
ALL EXCEPT" CATEGORY, INDICATE |_| |_| |_|
THE NOMINEE(S) AS TO WHICH YOU DESIRE
TO WITHHOLD AUTHORITY BY STRIKING A
LINE THROUGH SUCH NOMINEE(S) NAME IN
THE LIST BELOW:
Iehab J. Hawatmeh
Fadi Nora
FOR WITHHOLD
2. Approval of 2006 Stock Plan VOTE
To approve the adoption of the 2006
Stock Plan and awards made since |_| |_|
adoption
3. Approval of 2008 Stock Plan FOR WITHHOLD
VOTE
To approve the adoption of the 2008
Stock Plan and awards made since
adoption |_| |_|
4. Appointment of Auditor FOR WITHHOLD
VOTE
To appoint Hansen Barnett & Maxwell,
P.C. as the Independent Registered
Public Accounting Firm and Auditor |_| |_|
of the Company and to authorize the
Board of Directors to fix the
Independent Registered Public
Accounting Firm and Auditor's
remuneration.
Signature Signature of joint holder, if any
------------------------ ----------
Date
---------------------------------------
Please sign exactly as the shares are issued. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other business asauthorized officer. If a
partnership, please sign in partnership name by authorized person.
- ---------------------------
29
NOTES:
1. If no choice is specified, the proxy will be VOTED FOR items 1, 2, 3 and
4.
2. Shareholders are entitled to vote at the Meeting either in person or by
proxy. A proxy must be dated and signed by the shareholder or his or her
attorney duly authorized in writing or, if the shareholder is a
corporation, by an officer or attorney thereof duly authorized. The
signature should agree with the name on this proxy. If the proxy is not
dated in the above space, it will be deemed to bear the date on which it
was mailed by the Company.
3. Each shareholder has the right to appoint a person to represent the
shareholder at the Meeting other than the persons specified above. Such
right may be exercised by inserting in the space provided the name of the
person to be appointed, who need not be a shareholder of the Company.
4. This proxy confers authority for the above-named persons to vote in their
discretion with respect to amendments or variations to the matters
identified in the notice of meeting which accompanied this proxy and with
respect to other matters which may properly come before the Special Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1 AND IN THE PROXIES' DISCRETION FOR PROPOSAL 2.
Please sign and date this proxy where shown below and return it promptly:
Date: , 2007
-----------------------------
Signed:
SIGNATURE(S)
-----------------------------------------------------------------
PLEASE SIGN ABOVE EXACTLY AS THE SHARES ARE ISSUED. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
-28-30
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