SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Our unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). These financial statements and the notes attached hereto should be read in conjunction with the financial statements and notes included in our Form 10-K for the fiscal year ended December 31, 2021. In the opinion of our management, all adjustments, including normal recurring adjustments necessary to present fairly our financial position, as of September 30, 2022, and the results of our operations and cash flows for the nine months then ended have been included. The results of operations for the interim period are not necessarily indicative of the results for the full year ending December 31, 2022. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the estimated useful lives of property and equipment. Actual results could differ from those estimates. Principles of Consolidation The consolidated financial statements include the accounts of the company and our wholly owned subsidiaries: CirTran Products Corp., LBC Products, Inc., and CirTran Asia, Inc. All intercompany accounts and transactions have been eliminated in consolidation Revenue Recognition We follow Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers During the nine months ended September 30, 2022 and 2021, we recognized revenue of $ 402,723 30,000 175,319 0 Additionally, we recognized revenue of $ 1,292,984 2,281,529 301,699 961,074 Leases In February 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-02, Leases Leases The adoption of the standard resulted in recording right-of-use (“ROU”) assets and operating lease liabilities of $ 22,291 We have one lease in effect requiring minimum monthly payments of $ 2,500 5 The lease was renewed on October 19, 2022, on a month to months basis, with payments remaining at $ 2,500 Investment in Securities Our cost-method investment consists of an investment in a private digital multi-media technology company that totaled $ 300,000 20 Inventories Inventories are stated at the lower of average cost or net realizable value. Cost on manufactured inventories includes labor, material, and overhead. Overhead cost is based on indirect costs allocated to cost of sales, work-in-process inventory, and finished goods inventory. Indirect overhead costs have been charged to cost of sales or capitalized as inventory, based on management’s estimate of the benefit of indirect manufacturing costs to the manufacturing process. When there is evidence that the inventory’s value is less than original cost, the inventory is reduced to market value. We determine market value on current resale amounts and whether technological obsolescence exists. We will seek agreements with manufacturing customers that require them to purchase their inventory items in the event they cancel their business with us. From time to time, we will place deposits on inventory to be delivered in the future. These deposits are carried as a separate balance sheet component and totaled $ 45,280 272,597 11,639 87,042 Inventory balances consisted of the following: SCHEDULE OF INVENTORY September 30, 2022 December 31, 2021 Finished goods $ 699,124 $ 501,929 Raw materials 28,577 36,032 Total $ 727,701 $ 537,961 Fair Value of Financial Instruments ASC 820-10-15, Fair Value Measurement-Overall-Scope and Scope Exceptions Level 1 Level 2 Level 3 Accounts payable and related-party payables have fair values that approximate the carrying value due to the short-term nature of these instruments. Derivative liabilities are measured using level 3 inputs. SCHEDULE OF FINANCIAL ASSETS AND LIABILITIES CARRIED AT FAIR VALUED MEASURED ON RECURRING BASIS Total Fair Quoted Significant Significant Derivative liabilities $ 973,902 $ - $ - $ 973,902 Total Fair Quoted Significant Significant Derivative liabilities $ 938,794 $ - $ - $ 938,794 Loss per Share Basic loss per share is calculated by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding during each period. Diluted loss per share is similarly calculated, except that the weighted-average number of common shares outstanding would include common shares that may be issued subject to existing rights with dilutive potential when applicable. There were 106,038,406 141,554,300 Recently Issued Accounting Pronouncements We have implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on our financial statements unless otherwise disclosed, and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations. |