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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)

/X/  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended March 31, 2006

OR

/ /  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 or  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934.

     For the transition period from ________ to ________.


                         Commission file number 0-26059

                               CIRTRAN CORPORATION
                               -------------------
             (Exact name of registrant as specified in its charter)


             Nevada                                    68-0121636
  -------------------------------          -----------------------------------
  (State or other jurisdiction of          (I.R.S. Employer Identification No)
  incorporation or organization)

       4125 South 6000 West
      West Valley City, Utah                             84128
----------------------------------------             --------------
(Address of Principal Executive Offices)               (Zip Code)

(801) 963-5112
(Registrant's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  proceeding  12 months and (2) has been subject to such filing  requirements
for the past 90 days. Yes  X  No
                          ---    ---

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.     Yes  X  No
                                ---     ---

The number of shares outstanding of the registrant's  common stock as of May 18,
2006: 618,068,117.


Transitional Small Business Disclosure Format (check one): Yes     No   X
                                                               ---     ---



                                       1
<PAGE>


Table of Contents
-----------------


                                                                            Page
PART I - FINANCIAL INFORMATION

Item 1.    Condensed Consolidated Financial Statements

           Balance Sheets as of March 31, 2006, (unaudited) and               3
           December 31, 2005

           Statements of Operations for the Three Months ended                4
           March 31, 2006, (unaudited) and 2005 (unaudited)

           Statements of Cash Flows for the Three Months ended                5
           March 31, 2006, (unaudited) and 2005 (unaudited)

           Notes to Condensed Consolidated Financial Statements               7
           (unaudited)

Item 2.    Management's Discussion and Analysis of or Plan of Operation      17

Item 3.    Evaluation of Controls and Procedures                             31

PART II - OTHER INFORMATION

Item 1.    Legal Proceedings                                                 33

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds       35

Item 5.    Other Information                                                 35

Item 6     Exhibits                                                          37

Signatures                                                                   38











                                       2
<PAGE>


                      CIRTRAN CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (UNAUDITED)

                                                     March 31,      December 31,
                                                       2006             2005
--------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents                          $    443,637    $  1,427,865
Trade accounts receivable, net of allowance
 for doubtful accounts of $158,374 and
 $158,374, respectively                               3,019,960       3,358,981
Inventory, Net of reserve of $751,296 and
 $751,296, respectively                               2,203,537       2,271,604
Prepaid Deposits                                              -         142,188
Other                                                   108,976         252,941
--------------------------------------------------------------------------------
    Total Current Assets                              5,776,110       7,453,579

Property and Equipment, Net                           2,778,692       2,686,737

Investment in Securities, at Cost                       300,000         300,000

Other Assets, Net                                       691,417         361,581

Deposits                                                129,283         100,000
--------------------------------------------------------------------------------

Total Assets                                       $  9,675,502    $ 10,901,897
--------------------------------------------------------------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
Accounts payable                                   $    528,963    $  1,239,519
Accrued liabilities                                     551,049       1,222,018
Deferred revenue                                         33,625         119,945
Derivative liability                                  3,136,160       4,910,303
Convertible Debenture                                         -         996,252
Current maturities of long-term notes payable         1,225,785          12,610
Notes payable to stockholders                                 -          95,806
--------------------------------------------------------------------------------
    Total Current Liabilities                         5,475,582       8,596,453
--------------------------------------------------------------------------------

Long-Term Notes Payable, Less Current Maturities      1,033,989       1,037,390
--------------------------------------------------------------------------------

Commitments and Contingencies

Stockholders' Equity (Deficit)
Common stock, par value $0.001; authorized
 750,000,000 shares; issued and outstanding
 shares: 616,562,117 and 583,368,569 at March
 31, 2006 and December 31, 2005, respectively           616,558         583,364
Additional paid-in capital                           22,154,684      20,012,000
Accumulated deficit                                 (19,605,311)    (19,327,310)
--------------------------------------------------------------------------------
    Total Stockholders' Equity (Deficit)              3,165,931       1,268,054
--------------------------------------------------------------------------------
Total Liabilities and Stockholders'
 Equity (Deficit)                                  $  9,675,502    $ 10,901,897
--------------------------------------------------------------------------------


   The accompanying notes are an integral part of these financial statements.


                                       3
<PAGE>


                      CIRTRAN CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

For the Three Months Ended March 31,                 2006              2005
--------------------------------------------------------------------------------

Net Sales                                        $   1,737,824    $   2,920,465
Cost of Sales                                         (990,370)      (1,949,773)
--------------------------------------------------------------------------------

    Gross Profit                                       747,454          970,692
--------------------------------------------------------------------------------

Operating Expenses
    Selling, general and administrative expenses       837,520          959,891
    Non-cash employee compensation expense                   -           69,000
--------------------------------------------------------------------------------
    Total Operating Expenses                           837,520        1,028,891
--------------------------------------------------------------------------------

      Loss From Operations                             (90,066)         (58,199)
--------------------------------------------------------------------------------

Other Income (Expense)
    Interest                                        (1,086,253)        (143,770)
    Other, net                                               -              241
    Gain on forgiveness of debt                          4,670                -
    Gain on derivative valuation                       893,651                -
--------------------------------------------------------------------------------
    Total Other Expense, Net                          (187,932)        (143,529)
--------------------------------------------------------------------------------

Net Loss                                         $    (277,998)   $    (201,728)
--------------------------------------------------------------------------------

Basic and diluted loss per common share          $       (0.00)   $       (0.00)
--------------------------------------------------------------------------------
Basic and diluted weighted-average
    common shares outstanding                      558,748,729      488,490,792
--------------------------------------------------------------------------------







   The accompanying notes are an integral part of these financial statements.


                                       4
<PAGE>


                      CIRTRAN CORPORATION AND SUBSIDIARIES
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

For the Three Months Ended March 31,                     2006           2005
--------------------------------------------------------------------------------

Cash flows from operating activities
Net loss                                             $  (277,998)   $  (201,728)
Adjustments to reconcile net loss to net
 cash used in operating activities:
  Depreciation and amortization                          114,939         73,660
  Accretion expense                                      965,512              -
  Provision for doubtful accounts                              -            417
  Amortization of loan premium to
   interest expense                                            -         11,057
  Non-cash compensation expense                                -         69,000
  Loan costs and fees in lieu of interest
   on notes payable                                            -         61,500
  Options issued to attorneys and consultants
   for services                                                -         21,526
  Gain on derivative valuation                          (893,651)
  Accrued Interest Expense                                61,586              -
 Changes in assets and liabilities:
    Trade accounts receivable                            366,021       (119,299)
    Prepaid Deposits                                     142,188              -
    Inventories                                           68,067       (148,087)
    Prepaid expenses and other assets                   (255,318)        (1,836)
    Accounts payable                                    (710,556)      (108,800)
    Accrued liabilities                                 (214,368)       (43,111)
    Deferred revenue                                     (86,320)             -
--------------------------------------------------------------------------------

    Total adjustments                                   (441,900)      (183,973)
--------------------------------------------------------------------------------

 Net cash used in operating activities                  (719,898)      (385,701)
--------------------------------------------------------------------------------

Cash flows from investing activities
Cash aquired with PFE acquisition                              -         39,331
Purchase of property and equipment                      (166,730)      (230,771)
--------------------------------------------------------------------------------

 Net cash used in investing activities                  (166,730)      (191,440)
--------------------------------------------------------------------------------

Cash flows from financing activities
Proceeds from notes payable to stockholders                    -          4,414
Payments on notes payable to stockholders                (95,806)             -
Proceeds from notes payable, net of cash
 paid for offering costs                                       -        503,500
Principal payments on notes payable                       (1,994)             -
Proceeds from notes payable to related parties                 -         95,586
Proceeds from exercise of options and warrants
 to purchase common stock                                      -         33,000
Exercise of options issued to attorneys and
 consultants for services                                    200            150
--------------------------------------------------------------------------------

 Net cash provided by financing activities               (97,600)       636,650
--------------------------------------------------------------------------------

Net increase in cash and cash equivalents               (984,228)        59,509

Cash and cash equivalents at beginning of year         1,427,865         81,101
--------------------------------------------------------------------------------

Cash and cash equivalents at end of period           $   443,637    $   140,610
--------------------------------------------------------------------------------


   The accompanying notes are an integral part of these financial statements.


                                       5
<PAGE>


                      CIRTRAN CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                   (CONTINUED)

For the Three Months Ended March 31,                      2006          2005
--------------------------------------------------------------------------------
Supplemental disclosure of cash flow information

Cash paid during the period for interest               $   22,765    $         -

Noncash investing and financing activities

Acquisition of PFE Properties, LLC for
 stock and assumption of note payable                  $        -    $ 1,868,974
Common stock issued for settlement of
 note payable and accrued interest                              -      2,148,913
Deposit applied to purchase of property
 and equipment                                                  -        100,000
Common stock issued for accrued liabilities               464,187        411,402
Stock options exercised for settlement of
 accrued interest and accrued compensation                 81,000         59,000
Stock options exercised for settlement of
 notes payable to stockholders                                  -         23,000
Common stock issued for partial conversion
 of convertible debenture and derivative liability      1,630,491              -

























   The accompanying notes are an integral part of these financial statements.


                                       6
<PAGE>


                      CIRTRAN CORPORATION AND SUBSIDIARIES

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Condensed   Financial   Statements  --  The  accompanying   unaudited  condensed
consolidated  financial  statements include the accounts of CirTran  Corporation
and its subsidiaries (the "Company").  These financial  statements are condensed
and, therefore,  do not include all disclosures  normally required by accounting
principles generally accepted in the United States of America.  These statements
should be read in conjunction  with the Company's  annual  financial  statements
included in the  Company's  Annual  Report on Form 10-KSB.  In  particular,  the
Company's  significant  accounting  principles  were  presented as Note 1 to the
consolidated  financial  statements  in that  Annual  Report.  In the opinion of
management, all adjustments necessary for a fair presentation have been included
in the accompanying  condensed  consolidated financial statements and consist of
only normal recurring  adjustments.  The results of operations  presented in the
accompanying  condensed  consolidated  financial statements for the three months
ended March 31, 2006, are not necessarily  indicative of the results that may be
expected for the full year ending December 31, 2006.

Principles of Consolidation -- The consolidated financial statements include the
accounts of CirTran  Corporation,  and it's wholly  owned  subsidiaries,  Racore
Technology Corporation,  CirTran-Asia Inc, CirTran Products, Inc., Diverse Media
Group  Corporation  and  PFE  Properties,   LLC.  All  significant  intercompany
transactions have been eliminated in consolidation.


Stock-Based  Compensation -- Effective  January 1, 2006, the Company adopted the
provisions  of Statement of Accounting  Standards No. 123R,  Share Based Payment
("FAS 123R") for its one stock-based  compensation  plan. The Company previously
accounted  for this plan under the  recognition  and  measurement  principles of
Accounting  Standards No. 25,  Accounting  for Stock Issued to Employees,  ("APB
25") and related interpretations and disclosure requirements established by SFAS
No. 123, Accounting for Stock-Based Compensation ("SFAS 123") as amended by SFAS
No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure.

Under APB 25, no compensation expense was recorded in earnings for the Company's
stock-based  options granted under its compensation plans. The pro forma effects
on net income and  earnings per share for the options and awards  granted  under
the  plans  were  instead  disclosed  in a note  to the  consolidated  financial
statements.  Under SFAS 123R, all  stock-based  compensation  is measured at the
grant date, based on the fair value of the option or award, and is recognized as
an expense in earnings over the  requisite  service  period,  which is typically
through the date the options vest.

The Company adopted SFAS 123R using the modified  prospective method. Under this
method, for all stock-based options and awards, granted prior to January 1, 2006
that remain outstanding as of that date, compensation cost is recognized for the
unvested  portion  over  the  remaining  requisite  service  period,  using  the
grant-date fair value measured under the original provisions of SFAS 123 for pro
forma and disclosure purposes. No such options were outstanding as of January 1,
2006.

The Company utilized the Black-Scholes  model for calculating the fair value pro
forma disclosures  under SFAS 123 and will continue to use this model,  which is
an acceptable valuation approach under SFAS 123R. The following table summarizes


                                       7
<PAGE>


the  Black-Scholes   option-pricing   model  assumptions  used  to  compute  the
weighted-average fair value of stock options granted during the periods below:

                                                   Three Months Ended
                                                        March 31,
                                                    2006        2005
                                                  --------    --------
Expected dividend yield                             N/A*             -
Risk free interest rate                             N/A*          3.76%
Expected volatility                                 N/A*           282%
Expected life                                       N/A*      $   0.16
Weighted average fair value per share               N/A*      $   0.02

* Not applicable as there were no options granted during the period

No options  were  granted  for the three  months  ended  March 31,  2006 and all
previously issued options were fully vested prior to January 1, 2006. Therefore,
there were no compensation  costs relating to stock-based  compensation  for the
three months ended March 31, 2006,  including  the effects from adoption of SFAS
123R, which would have previously been presented in a pro forma  disclosure,  as
discussed above.

The following table  illustrates the effect on net income and earnings per share
as if the Company had applied the fair-value  recognition provisions of SFAS 123
to all of its stock-based  compensation  awards for periods prior to adoption of
SFAS 123R:

   Three Months Ended March 31,                                      2005
   -------------------------------------------------------------------------
   Net loss, as reported                                          $(201,728)
   Add:  Stock-based  employee compensation expense
       included in net loss                                          69,000
   Deduct:  Total stock-based employee compensation
       expense determined under fair value based method
       for all awards                                              (138,248)
   -------------------------------------------------------------------------
   Pro forma net loss                                             $(270,976)
   -------------------------------------------------------------------------
   Basic and diluted loss per common share as reported            $   (0.00)
   -------------------------------------------------------------------------
   Basic and diluted loss per common share pro forma              $   (0.00)
   -------------------------------------------------------------------------

Patents -- Legal fees and other  direct costs  incurred in obtaining  patents in
the  United  States  and other  countries  are  capitalized.  Patents  costs are
amortized  over the estimated  useful life of the patent.  During the year ended
December 31,  2005,  the Company  capitalized  $35,799 in patent  related  legal
costs.  Amortization  expense was $1,279 during the three months ended March 31,
2006.

The realization of patents and other long-lived assets is evaluated periodically
when  events or  circumstances  indicate a  possible  inability  to recover  the
carrying amount. An impairment loss is recognized for the excess of the carrying
amount  over the fair value of the asset or the group of  assets.  Fair value is
determined  based on expected  discounted  net future cash flows.  The  analysis
necessarily involves significant management judgment to evaluate the capacity of
an asset to perform within projections. As required, an evaluation of impairment
was made on the patents as of March 31, 2006. No  indicators of impairment  were
noted.


                                       8
<PAGE>


NOTE 2 - REALIZATION OF ASSETS

The  accompanying  consolidated  financial  statements  have  been  prepared  in
conformity with accounting principles generally accepted in the United States of
America,  which contemplate  continuation of the Company as a going concern. The
Company  had net loss of $277,998  for the three  months  ended March 31,  2006,
compared to a net loss of $527,708 for the year ended  December 31, 2005.  As of
March 31, 2006, and December 31, 2005, the Company had an accumulated deficit of
$19,605,311 and $19,327,310,  respectively,  and a total stockholders' equity of
$3,165,931 and $1,268,054,  respectively. The Company also had a working capital
(deficit) of $300,528 and  $(1,142,874)  as of March 31, 2006,  and December 31,
2005, respectively. In addition, the Company used, rather than provided, cash in
its  operations in the amounts of $719,698 and  $1,751,744  for the three months
ended March 31, 2006, and the year ended December 31, 2005, respectively.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going concern.

In view of the matters described in the preceding paragraphs,  recoverability of
a  major  portion  of the  recorded  asset  amounts  shown  in the  accompanying
consolidated  balance  sheets is  dependent  upon  continued  operations  of the
Company,  which in turn is  dependent  upon the  Company's  ability  to meet its
financing  requirements  on a continuing  basis,  to maintain or replace present
financing,  to acquire additional capital from investors,  and to succeed in its
future  operations.  The  financial  statements  do not include any  adjustments
relating to the  recoverability  and classification of recorded asset amounts or
amounts and  classification  of liabilities  that might be necessary  should the
Company be unable to continue in existence.

NOTE 3 - RELATED PARTY TRANSACTIONS

Notes Payable to Stockholders  -- During December 2005 a stockholder  loaned the
Company  $95,806  which was  recorded as a notes  payable to  stockholders.  The
proceeds of this loan were used to fund on going  operations of the Company.  In
January  2006,  the Company made a payment to the  stockholder  which repaid the
entire balance ($95,806) of the loan.

NOTE 4 - COMMITMENTS AND CONTINGENCIES

Settlement of Litigation -- During January 2002,  the Company  settled a lawsuit
that had alleged a breach of facilities sublease agreement involving  facilities
located in  Colorado.  The  Company's  liability  in this action was  originally
estimated to range up to $2.5  million.  The Company had filed a counter suit in
the same court for an amount exceeding $500,000 for missing equipment.
Effective  January 18, 2002,  the Company  entered  into a settlement  agreement
which  required the Company to pay the  plaintiff  the sum of $250,000.  Of this
amount,  $25,000 was paid upon  execution  of the  settlement,  and the balance,
together  with  interest  at 8% per  annum,  was  payable by July 18,  2002.  As
security for payment of the balance,  the Company  executed and delivered to the
plaintiff a Confession  of Judgment and also issued  3,000,000  shares of common
stock,  which were held in escrow and were treated as treasury stock recorded at
no cost.  The fair  value of the  3,000,000  shares  was less than the  carrying
amount of the note payable.  Because 75 percent of the balance had not been paid
by May 18,  2002,  the  Company  was  required  to  prepare  and  file  with the
Securities & Exchange Commission,  at its own expense, a registration  statement
with respect to the escrowed shares.

As of December 31, 2005, the Company was in default of its obligations under the
settlement  agreement and the total payment due  thereunder had not been made. A
registration statement with respect to the escrowed shares was not filed and the
Company did not replace the escrowed shares with registered, free-trading shares
as per the terms of the agreement.  The plaintiff filed a Confession of Judgment
and proceeded  with  execution  thereon.  The shares in escrow were released and
issued as partial settlement of $92,969 on the note payable outstanding.


                                       9
<PAGE>


In  connection  with a separate  sublease  agreement  of these  facilities,  the
Company  received a settlement from the sublessee during May 2002, in the amount
of  $152,500,  which was recorded as other  income.  The Company did not receive
cash from this  settlement,  but certain  obligations  of the Company  were paid
directly.  $109,125  of  the  principal  balance  of  the  note  related  to the
settlement  mentioned  above was paid.  Also,  $7,000 was paid to the  Company's
legal counsel as a retainer for future services.  The remaining $36,375 was paid
to the above mentioned plaintiff as a settlement of rent expense.

During  September 2002, the plaintiff filed a claim that the $109,125 portion of
the payment was to be applied as additional rent expense rather than a principal
payment on the note payable.  The Company  estimated that the probability of the
$109,125 being  considered  additional  rent expense was remote and disputed the
claim.

On January 26, 2006, a settlement was reached  related to the leased  facilities
in Colorado. The Company settled the remaining claim for $200,000 cash.

During 2003 and 2004, an investment firm filed suits in the U.S.  District Court
for the District of Utah seeking  payment of a commission  consisting  of common
stock valued at 1,750,000  for allegedly  introducing  the Company to the Equity
Line  Investor  (See Note 10). The case was  previously  dismissed in a New York
court.

On February 24, 2006, the Company  entered into a settlement  agreement with the
investment  firm. The Company issued 4,000,000 shares of restricted stock with a
fair value of $0.044 per share.  Warrants were also issued to purchase 7,000,000
shares of the Company's  common stock with an exercise  price of $0.05 cents per
share and a life of 5 years.  The warrants  were valued using the  Black-Scholes
pricing model at $288,186.  Total consideration for the settlement was valued at
$464,186.

Litigation - Various  vendors  have  notified the Company that they believe they
have claims  against the Company  totaling  $18,810.  None of these vendors have
filed  lawsuits in relation to these  claims.  The Company has accrued for these
claims, and they are included in accounts payable.

In addition,  various  vendors have  notified the Company that they believe they
have claims against the Company  totaling  $164,802.  The Company has determined
the probability of realizing any loss on these claims is remote. The Company has
made no accrual for these claims and is currently in the process of  negotiating
the dismissal of these claims with the various vendors.

Registration  Rights - In May 2005, in connection with the Company's issuance of
a convertible  debenture (discussed below), the Company granted to the debenture
holder registration rights, pursuant to which the Company agreed to file, within
120  days of the  closing  of the  purchase  of the  debenture,  a  registration
statement  to  register  the  resale  of shares of the  Company's  common  stock
issuable upon  conversion of the  debenture.  The company also agreed to use its
best efforts to have the registration  statement  declared  effective within 270
days after filing the registration statement. The Company agreed to register the
resale of up to  100,000,000  shares,  and to keep such  registration  statement
effective until all of the shares issuable upon conversion of the debenture have
been sold. The Company filed the  registration  statement on September 23, 2005.
As of  March  31,  2006,  the  registration  statement  had  not  been  declared
effective.

In December  2005,  in connection  with the Company's  issuance of a convertible
debenture  (discussed  below),  the  Company  granted  to the  debenture  holder
registration  rights,  pursuant to which the Company agreed to file,  within 120
days of the closing of the purchase of the debenture,  a registration  statement


                                       10
<PAGE>


to register the resale of shares of the  Company's  common stock  issuable  upon
conversion of the debenture.  The company also agreed to use its best efforts to
have the registration  statement declared effective within 270 days after filing
the registration  statement.  The Company agreed to register the resale of up to
32,608,696  shares  and  10,000,000  warrants,  and to  keep  such  registration
statement  effective  until all of the shares  issuable  upon  conversion of the
debenture have been sold.

In connection  with the settlement  agreement with the investment firm discussed
above in this Note,  the Company agreed to register the resale by the investment
firm of shares issued or issuable to it in connection with the settlement.

Accrued Payroll Tax Liabilities -- The Utah State Tax Commission entered into an
agreement  to allow the Company to pay the tax  liability  owing to the State of
Utah in equal monthly installments of $4,000. Through December 2005, the Company
had made the required payments.

In January 2006,  the Utah State Tax  Commission  reduced the remaining  accrued
payroll  taxes,  penalties and interest due on prior period payroll taxes to the
amount of $98,316. The balance was paid in full.

Manufacturing  Agreement  -- On June  10,  2004,  the  Company  entered  into an
exclusive  manufacturing  agreement with certain Developers.  Under the terms of
the agreement,  the Company,  through its wholly-owned subsidiary  CirTran-Asia,
has the  exclusive  right  to  manufacture  certain  products  developed  by the
Developers or any of their  affiliates.  The Developers will continue to provide
marketing and consulting  services  related to the products under the agreement.
Should the Developers  terminate the agreement early,  they must pay the Company
$150,000.  Revenue is recognized when products are shipped.  Title passes to the
customer or independent sales representative at the time of shipment.

In  connection  with this  agreement  the  Company  agreed to issue  options  to
purchase 1,500,000 shares common stock to the Developers upon the sale, shipment
and payment for 200,000  units of a fitness  product.  In addition,  the Company
agreed to issue  options  to  purchase  300,000  shares  of common  stock to the
Developers  for each  multiple of 100,000  units of the fitness  product sold in
excess of the initial 200,000 units within  twenty-four  months of the agreement
(June 2004).  The options will be  exercisable  at $0.06 per share,  vest on the
grant date and expire one year after issuance. As of March 31, 2006, the Company
had sold,  shipped  and  received  payment  for,  257,577  units of the  fitness
product.  In January 2005, the Company issued 1,500,000  options under the terms
of the  agreement.  During the three  months  ended  March 31,  2006 the options
expired.

In connection  with the above  manufacturing  agreement,  the Company  agreed to
issue various  options to purchase shares of common stock to the Developers upon
the  sale,  shipment,  and  payment  of  certain  quantities  of the  additional
products.  In  addition,  the  Company  agreed to issue  additional  options  to
purchase  common  stock to the  developers  for each  multiple  of units sold in
excess  of  the  initial  units  within  the  first  twenty-four  months  of the
agreements.  The  schedule of units and  potential  options  that will be issued
follows:



                                       11
<PAGE>


                               Options      Each Multiple of   Options for Each
              Initial        for Initial      Units above         Multiple
Product        Units         Units Sold      Initial Units        of Units
--------------------------------------------------------------------------------
   1          500,000          500,000          200,000           200,000
   2           25,000          500,000           15,000           100,000
   3          100,000          500,000           50,000           100,000
   4          300,000        1,000,000          100,000           200,000
   5          200,000          250,000          100,000           100,000
   6          200,000          500,000          100,000           100,000

As of March 31, 2006, the Company had not sold, shipped and received payment for
enough  units to  require  the  issuance  of options  related to the  additional
products  under these  agreements.  Because the  Developers  must provide future
services  for the options to vest,  the  options  are  treated as  unissued  for
accounting  purposes.  The cost of these  options  will be  recognized  when the
options are earned.

NOTE 5 - MORTGAGE NOTE PAYABLE

In conjunction  with the acquisition of PFE, the Company assumed a mortgage note
payable for  $1,050,000,  which is secured by the land and the building that was
acquired as part of the PFE  acquisition.  The note bears  interest at 12.5% per
annum and is  collateralized  by the land and  building.  Interest only payments
were made  through  January  2006.  Starting in  February  2006,  principal  and
interest payments were required based on a twenty-year amortization of the note.
The entire  balance of  principal  and unpaid  interest  will be due in December
2008.

NOTE 6 - CONVERTIBLE DEBENTURES

Highgate - On May 26, 2005, the Company  entered into an agreement with Highgate
to issue to  Highgate  a  $3,750,000,  5%  Secured  Convertible  Debenture  (the
"Debenture").  The  Debenture is due December  2007 and is secured by all of the
Company's property.

Accrued  interest is payable at the time of maturity or conversion.  The Company
may,  at its  option,  elect to pay  accrued  interest  in cash or shares of the
Company's  common stock.  If paid in stock,  the  conversion  price shall be the
closing bid price of the common stock on either the date the interest payment is
due or the date on which the  interest  payment is made.  The balance of accrued
interest  owed at March 31,  2006,  and  December  31,  2005,  was  $152,349 and
$111,986, respectively.

At any  time,  Highgate  may elect to  convert  principal  amounts  owing on the
Debenture into shares of the Company's  common stock at a conversion price equal
to the lesser of $0.10 per share,  or an amount equal to the lowest  closing bid
price of the  Company's  common stock for the twenty  trading  days  immediately
preceding the conversion  date. The Company has the right to redeem a portion or
the entire  Debenture then  outstanding  by paying 105% of the principal  amount
redeemed plus accrued interest thereon.

Highgate's  right to convert  principal  amounts  into  shares of the  Company's
common stock is limited as follows:

         (i)      Highgate  may  convert up to $250,000  worth of the  principal
                  amount  plus  accrued   interest  of  the   Debenture  in  any
                  consecutive  30-day  period  when  the  market  price  of  the


                                       12
<PAGE>


                  Company's  stock  is  $0.10  per  share or less at the time of
                  conversion;
         (ii)     Highgate  may  convert up to $500,000  worth of the  principal
                  amount  plus  accrued   interest  of  the   Debenture  in  any
                  consecutive  30-day  period  when the  price of the  Company's
                  stock  is  greater  than  $0.10  per  share  at  the  time  of
                  conversion;  provided,  however,  that Highgate may convert in
                  excess of the  foregoing  amounts if the Company and  Highgate
                  mutually agree; and
         (iii)    Upon the  occurrence of an event of default,  Highgate may, in
                  its  sole   discretion,   accelerate  full  repayment  of  all
                  debentures  outstanding  and accrued  interest  thereon or may
                  convert the  Debentures  and  accrued  interest  thereon  into
                  shares of the Company's common stock.


Except in the event of default,  Highgate  may not convert the  Debenture  for a
number of shares  that would  result in  Highgate  owning more than 4.99% of the
Company's outstanding common stock.

In connection with the issuance of the Highgate  Debenture,  the Company granted
Highgate registration rights related to the issuance of the debenture. (See Note
4.)

The Company  determined that the features of the Debenture fell under derivative
accounting  treatment.  As of March 31, 2006 the carrying value of the Debenture
was  $1,068,604.  The carrying value will be accreted each quarter over the life
of the Debenture until the carrying value equals the  unconverted  face value of
$3,000,000 (see below).  The fair value of the derivative  liability as of March
31, 2006 was $1,767,254.

In  connection  with the issuance of the  Debenture,  $2,265,000 of the proceeds
were paid to Cornell to repay promissory  notes.  Fees of $256,433 were withheld
from the proceeds,  were  capitalized,  and are being amortized over the life of
the note. As such, of the total Debenture of $3,750,000, the net proceeds to the
Company  were  $1,228,567.  The  proceeds  were used for general  corporate  and
working capital purposes, at the Company's discretion.

In January 2006,  Highgate converted $750,000 of its convertible  debenture into
24,193,548  shares of the Company's  common stock at a conversion rate of $0.031
per share,  which was the lower of $0.10 or 100% of the lowest closing bid price
of  the  Company's  commons  stock  over  the  20  trading  days  preceding  the
conversion.

Cornell - On December 30,  2005,  the Company  entered  into an  agreement  with
Cornell Capital Partners, L.P. ("Cornell") to issue to Cornell a $1,500,000,  5%
Secured Convertible Debenture (the "Cornell  Debenture").  The Cornell Debenture
is due July 30, 2008,  and is secured by all the Company's  property,  junior to
the Highgate security interest.

Accrued  interest is payable at the time of maturity or conversion.  The Company
may,  at its  option,  elect to pay  accrued  interest  in cash or shares of the
Company's  common stock.  If paid in stock,  the  conversion  price shall be the
closing bid price of the common stock on either the date the interest payment is
due or the date on which the  interest  payment is made.  The balance of accrued
interest  owed at March 31,  2006 and  December  31,  2005 was $18,082 and zero,
respectively.

At any time, Cornell may elect to convert principal amounts owing on the Cornell
Debenture into shares of the Company's  common stock at a conversion price equal
to an amount equal to the lowest closing bid price of the Company's common stock
for the twenty  trading days  immediately  preceding the  conversion  date.  The
Company has the right to redeem a portion or the entire  Cornell  Debenture then


                                       13
<PAGE>


outstanding  by  paying  105% of the  principal  amount  redeemed  plus  accrued
interest thereon.

Cornell's right to convert principal amounts into shares of the Company's common
stock is limited as follows:

         (i)      Cornell  may  convert up to  $250,000  worth of the  principal
                  amount plus accrued  interest of the Cornell  Debenture in any
                  consecutive  30-day  period  when  the  market  price  of  the
                  Company's  stock  is  $0.10  per  share or less at the time of
                  conversion;
         (ii)     Cornell  may  convert up to  $500,000  worth of the  principal
                  amount plus accrued  interest of the Cornell  Debenture in any
                  consecutive  30-day  period  when the  price of the  Company's
                  stock  is  greater  than  $0.10  per  share  at  the  time  of
                  conversion;  provided,  however,  that  Cornell may convert in
                  excess of the  foregoing  amounts if the  Company  and Cornell
                  mutually agree; and
         (iii)    Upon the  occurrence of an event of default,  Cornell  Capital
                  Partners,  LP may,  in its sole  discretion,  accelerate  full
                  repayment of the debenture  outstanding  and accrued  interest
                  thereon or may convert  the  Debenture  and  accrued  interest
                  thereon into shares of the Company's common stock.


Except in the event of default,  Cornell  may not convert the Cornell  Debenture
for a number of shares  that would  result in Cornell  owning more than 4.99% of
the Company's outstanding common stock.

The Cornell Debenture was issued with 10,000,000 warrants with an exercise price
of $0.09 per share that vest immediately and have a three year life.

In connection  with the issuance of the Cornell  Debenture,  the Company granted
Cornell registration rights related to the issuance of the Cornell Debenture and
warrants. (See Note 4.)

The  Company  determined  that the  features on the  Cornell  Debenture  and the
associated warrants fell under derivative accounting treatment.  As of March 31,
2006 the carrying  value of the Cornell  Debenture  was  $143,160.  The carrying
value will be accreted each quarter over the life of the Cornell Debenture until
the carrying  value equals the face value of  $1,500,000.  The fair value of the
derivative liability as of March 31, 2006 was $1,368,906.

In connection with the issuance of the Cornell Debenture,  fees of $130,000 were
withheld from the proceeds,  capitalized, and will be amortized over the life of
the Cornell  Debenture.  As such, of the total Cornell  Debenture of $1,500,000,
the net proceeds to the Company were  $1,370,000.  The proceeds will be used for
general corporate and working capital purposes, at the Company's discretion.

As of March 31, 2006,  Cornell had not  converted  any of the Cornell  Debenture
into shares of the Company's common stock.

NOTE 7 - STOCKHOLDERS' EQUITY

Common Stock  Issuances  -- During the three  months  ended March 31, 2006,  the
Company  issued  4,000,000  shares of common stock as a settlement of litigation
with an investment firm. (See Note 4.)


                                       14
<PAGE>


During the three  months ended March 31,  2006,  the Company  issued to Highgate
24,193,548  shares of restricted common stock in connection with a conversion by
Highgate of $750,000  principal amount of the convertible  debenture.  (See Note
6.)

NOTE 8 - STOCK OPTIONS AND WARRANTS

Non-Employee  Options - During the three months ended March 31, 2006,  2,000,000
of previously issued options were exercised by counsel for proceeds of $200.

Employee Options - During the three month period ended March 31, 2006, 3,000,000
options were exercised for accrued compensation and employee advances of $54,000
and $27,000 respectively.

Developer  Options - During  2005,  the  Company  granted  options  to  purchase
1,500,000  shares of common stock to developers at exercise  prices of $0.06 per
share.  The options were all one-year  options and vested on the dates  granted.
Two of the developers  were employees and together were issued  1,000,000 of the
options.  The exercise  price equaled the fair value of the common shares at the
time these options were granted;  therefore, the options had no intrinsic value.
The fair value of these options of $42,052 was estimated using the Black-Scholes
option  pricing  model with the following  assumptions:  risk free interest rate
ranging of 4.00%,  dividend  yield of 0.0%,  volatility  of 302%,  and  expected
average life of .5 years.  These options  expired  during the three months ended
March 31, 2006.

The remaining 500,000 developer options were issued to a non-employee  under the
terms described above.  Because the developer was a non-employee,  cost of goods
sold of $21,526 was  recorded  for the fair value of options  issued  during the
year ended December 31, 2005. These options were valued using the  Black-Scholes
option  pricing  model with the following  assumptions:  risk free interest rate
ranging of 4.00%,  dividend  yield of 0.0%,  volatility  of 302%,  and  expected
average  life of .5 years.  None of these  options were  exercised  during 2005.
These options expired during the three months ended March 31, 2006.

A summary of the stock  option  activity  for the three  months  ended March 31,
2006, is as follows:

                                                          Weighted Average
                                            Shares         Exercise Price
                                          ----------      ----------------
Outstanding at December 31, 2005          16,750,500          $   0.02
Granted                                            -          $      -
Exercised                                 (5,000,000)         $   0.02
Cancelled                                 (1,500,000)         $   0.06
                                          ----------
Outstanding at March 31, 2006             10,250,500          $   0.03
                                          ==========

Excercisable at March 31, 2006            10,250,500          $   0.03
                                          ==========

NOTE 9 -SEGMENT INFORMATION

Segment  information  has  been  prepared  in  accordance  with  SFAS  No.  131,
"Disclosure  About  Segments  of an  Enterprise  and Related  Information."  The
Company  has  three  reportable   segments:   electronics   assembly,   Ethernet
technology,  and  contract  manufacturing.   The  electronics  assembly  segment
manufactures and assembles circuit boards and electronic  component cables.  The
Ethernet  technology  segment  designs  and  manufactures  Ethernet  cards.  The
contract manufacturing segment manufactures,  either directly or through foreign
subcontractors, certain products under an exclusive manufacturing agreement. The
accounting  policies of the segments are consistent  with those described in the
summary of significant accounting policies. The Company evaluates performance of


                                       15
<PAGE>


each  segment  based on  earnings  or loss  from  operations.  Selected  segment
information is as follows:

<TABLE>
<CAPTION>
                                Electronics    Ethernet      Contract
                                  Assembly    Technology   Manufacturing     Total
-------------------------------------------------------------------------------------
<S>                            <C>            <C>          <C>            <C>
     March 31, 2006

Sales to external customers    $   774,359   $    22,226    $   941,239   $ 1,737,824
Intersegment sales                       -             -              -             -
Segment income (loss)              (30,057)      (58,108)      (189,833)     (277,998)
Segment assets                   4,529,176       192,756      4,953,570     9,675,502
Depreciation and amortization       82,912           210         31,817       114,939

     March 31, 2005

Sales to external customers    $   773,013   $    22,608    $ 2,124,844   $ 2,920,465
Intersegment sales                       -             -              -             -
Segment loss                      (372,197)      (66,739)       237,208      (201,728)
Segment assets                   4,591,074       216,838      1,800,585     6,608,497
Depreciation and amortization       50,399           594         22,667        73,660

</TABLE>

                                                              March 31,
                                                     ---------------------------
            Sales                                       2006             2005
--------------------------------------------------------------------------------

Total sales for reportable segments                  $1,737,824       $2,920,465
Elimination of intersegment sales                             -                -
--------------------------------------------------------------------------------

Consolidated net sales                               $1,737,824       $2,920,465
--------------------------------------------------------------------------------

                                                              March 31,
                                                     ---------------------------
         Total Assets                                   2006             2005
--------------------------------------------------------------------------------

Total assets for reportable segments                 $9,675,502       $6,608,497
Adjustment for intersegment amounts                           -                -

Consolidated total assets                            $9,675,502       $6,608,497
--------------------------------------------------------------------------------


NOTE 10 - SUBSEQUENT EVENTS

Stock Options - During April 2006,  counsel for the Company exercised options to
purchase  1,500,000 shares of common stock with an exercise price of $0.0001 per
share.


                                       16
<PAGE>


ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

This discussion should be read in conjunction with  Managements'  Discussion and
Analysis of Financial Condition and Results of Operations included in our Annual
Report on Form 10-KSB for the year ended December 31, 2005.

Overview

We  provide a mixture  of high and  medium  size  volume  turnkey  manufacturing
services   using   surface   mount   technology,   ball-grid   array   assembly,
pin-through-hole  and custom  injection  molded cabling for leading  electronics
OEMs in the communications,  networking,  peripherals,  gaming, law enforcement,
consumer products,  telecommunications,  automotive,  medical, and semiconductor
industries.   Our  services   include   pre-manufacturing,   manufacturing   and
post-manufacturing   services.   Through  our  subsidiary,   Racore   Technology
Corporation, we design and manufacture Ethernet technology products. Our goal is
to offer customers the significant  competitive  advantages that can be obtained
from  manufacture   outsourcing,   such  as  access  to  advanced  manufacturing
technologies, shortened product time-to-market, reduced cost of production, more
effective  asset  utilization,  improved  inventory  management,  and  increased
purchasing power.

During  2004,  we  established  a new  division,  CirTran-Asia,  Inc,  which has
contributed to a large portion of the increase in revenue since that time.  This
division is an Asian-based,  wholly owned subsidiary of CirTran  Corporation and
provides a myriad of  manufacturing  services to the direct  response and retail
consumer  markets.  Our  experience  and  expertise  in  manufacturing   enables
CirTran-Asia to enter a project at any phase:  engineering  and design,  product
development  and  prototyping,   tooling,  and  high-volume  manufacturing.   We
anticipate that  CirTran-Asia  will pursue  manufacturing  relationships  beyond
printed  circuit board  assemblies,  cables,  harnesses  and  injection  molding
systems by establishing complete "box-build" or "turn-key"  relationships in the
electronics,  retail, and direct consumer markets.  This strategic move into the
Asian  market  has  helped  to  elevate  CirTran  to an  international  contract
manufacturer  status for multiple products in a wide variety of industries,  and
has, in short order, allow us to target large-scale contracts.

CirTran has established a dedicated  satellite office for CirTran-Asia,  and has
retained Mr.  Charles Ho to lead the new  division.  Having proven the value and
reliability of its core products,  CirTran Corporation has chosen to expand into
previously untapped product lines.

On December 2, 2005,  we announced  that we had formed a new  division,  CirTran
Products, which will offer products for sale at retail. The new division will be
run from our new Los Angeles  office,  with Trevor  Saliba,  our executive  vice
president for  worldwide  business  development,  working to develop  sales.  We
anticipate that consumer products built by our CirTran Asia subsidiary,  as well
as other products which we plan to acquire, will be available for retail sale in
2006.

On March 21, 2006, we announced  that we had formed a new  subsidiary to provide
end-to-end services to the direct response and entertainment industries. The new
division  will  provide  product  marketing,   production,   media  funding  and
merchandise  manufacturing  services.  Forming this new division was a necessary
step to maximize product  manufacturing  opportunities for CirTran's proprietary
products and to provide  marketing  services for  individual  entrepreneurs  and
inventors.  The new division  will be  headquartered  in  CirTran's  Los Angeles
(Century  City)  offices  and be  headed  by Mr.  Saliba.  We are  presently  in
development  of  proprietary  programs to be  launched in the product  marketing
division,  production services and media funding divisions. We are also in final


                                       17
<PAGE>


discussions  on two  projects  for our  merchandising  division.  We continue to
pursue  opportunities  in the direct  response  and  entertainment  division  to
maximize manufacturing and business opportunities

           Fitness Products

In  early  June  2004,  the  Company  entered  into an  exclusive  manufacturing
agreement  with  certain  Developers,  including  Charles Ho, the  President  of
CirTran-Asia.   Under  the  terms  of  the  agreement,   CirTran,   through  its
wholly-owned  subsidiary  CirTran-Asia,  has the exclusive  right to manufacture
certain  products  developed  by the  Developers  or any  of  their  affiliates.
Pursuant to the  agreement,  we could enter into  addendum  agreements  with the
developers with respect to particular  products to be produced and manufactured.
The agreement  was to be for an initial term of 36 months,  and may be continued
after  that on a  month-to-month  basis  unless  terminated  by either  party by
providing written notice.

On June 7, 2004, we announced that CirTran-Asia had received an initial purchase
order on May 26, 2004,  from  International  Edge relating to the manufacture of
80,000 abdominal  fitness  machines.  This order was the first order placed with
CirTran-Asia under the exclusive manufacturing agreement.  Subsequently, on June
14, 2004, we received  another  order for 80,000 units of the abdominal  fitness
machines,  which  was  announced  on June 16,  2004,  through a  separate  press
release.  The Company  received  many orders  subsequent  to these first orders.
Since these announcements,  CirTran-Asia has manufactured, shipped, and received
payments of approximately $5,546,000. On August 13, 2004, we also announced that
on August 11, 2004 we had received new orders for Wal-Mart.  The Company shipped
to Wal-Mart  the  complete  order of  abdominal  fitness  machines  and received
payments of approximately  $400,000  through the date of this Report.  The units
were distributed to Wal-Mart stores throughout Canada.

On September 9, 2004, we announced that on September 6, 2004,  CirTran-Asia  had
been awarded the rights to manufacture  the Ab Trainer Club Pro, a new abdominal
fitness  machine,  for  Tristar  Products,   under  an  exclusive  manufacturing
agreement.  This new product is another type of abdominal fitness machine. Since
this  announcement,  and  through  the  date of this  Report,  CirTran-Asia  had
manufactured and shipped units, and received payments of approximately $42,000.

On September 10, 2004, we announced that on September 7, 2004,  CirTran-Asia had
been  awarded  the  rights  to  manufacture  the  AbRoller,  another  type of an
abdominal   fitness   machine,   for  Tristar   Products,   under  an  exclusive
manufacturing agreement.  Since this announcement,  and through the date of this
Report,  CirTran-Asia had manufactured and shipped units, and received  payments
of approximately $1,700,000.

On September  14, 2004,  we  announced  that on September 7, 2004,  we had begun
manufacturing  the  Instant  Abs  product,  another  type of  abdominal  fitness
machine, for Tristar Products, under an exclusive manufacturing agreement. Since
this  announcement,  and  through  the  date of this  Report,  CirTran-Asia  had
manufactured,   and  shipped  units,  and  received  payments  of  approximately
$640,000.

On September 30, 2004, we announced that on September 23, 2004, CirTran-Asia had
been awarded the rights to  manufacture  the Denise Austin  Pilates  product,  a
pilates fitness machine, for Tristar Products,  under an exclusive manufacturing
agreement.  Since  this  announcement,  and  through  the  date of this  Report,
CirTran-Asia  had  manufactured  and shipped  units,  and  received  payments of
approximately $85,000.


                                       18
<PAGE>


On April 28, 2005,  CirTran-Asia  announced  that it has been awarded a contract
(the "April 2005 Agreement") from Guthy - Renker  Corporation  ("GRC") to be the
exclusive  manufacturer of a new fitness machine (the "Fitness Product") for the
sold-on-TV direct response industry.  Pursuant to the April 2005 Agreement,  GRC
agreed to purchase all of its  requirements  of the Fitness  Product  during the
term of the April 2005  Agreement,  which is defined as running from the signing
of the agreement  through the time when the Fitness Product is not being sold in
quantity.  Since  signing  the April 2005  Agreement,  we have  received  orders
totaling approximately $1,370,000.  Since these announcements,  CirTran-Asia has
manufactured and shipped orders and has received  $1,033,000 as payment for such
shipments.

           New Product

On August 11, 2004, we announced  that  CirTran-Asia  received a purchase  order
from Emson in New York,  on August 10,  2004  relating to the  manufacture  of a
household   cooking   appliance   for  hot  dogs  and   sausages.   Since  these
announcements,   and  through  the  date  of  this  Report,   CirTran-Asia   had
manufactured  and  shipped  units,   and  received   payments  of  approximately
$1,630,000.

On October 1, 2004, we entered into an agreement  with  Transactional  Marketing
Partners,  Inc. ("TMP"), for consulting services.  Pursuant to the agreement, we
engaged TMP to provide  strategic  planning and for introduction of new business
to us. Under the agreement,  we agreed to pay to TMP a fee of ten percent of the
net proceeds received by us from business brought to us by TMP. The fee is to be
paid within 15 calendar days  following the end of the month in which we receive
the net proceeds. Additionally, we agreed to pay $7,500 during each of the first
six months of the term of the  agreement,  with such payments being viewed as an
advance against the fee to be earned.  The advance  payments are not refundable,
but will be deducted  from fees earned by TMP. The agreement had an initial term
of six months,  beginning October 1, 2004, and could automatically  extended for
successive  six-month  periods unless either party gives written notice at least
30 days prior to the  expiration  of the term of the agreement of its intent not
to renew. Additionally,  we may terminate the agreement at any time by giving 30
days'  written  notice.  In March  2006,  the parties  have agreed to  six-month
extensions through September 2006. The parties will evaluate the relationship at
that  time and  decide  if  there  needs to be  another  extension.  To date the
relationship  has proven  successful,  resulting in multiple  new  manufacturing
relationships.

On January 19,  2005,  CirTran  Corporation  signed an  Exclusive  Manufacturing
Agreement with Advanced Beauty Solutions L.L.C.  ("ABS"),  a company relating to
the manufacture of a hair product in California.  In early October 2005, we were
notified that ABS had defaulted on its obligation to its financing  company.  We
have has stopped  shipping under credit and are in the process of exercising our
rights permitted by the agreements.

On July 7, 2005,  CirTran  Corporation  signed another  Exclusive  Manufacturing
Agreement  with ABS,  relating  to the  manufacture  of a hair dryer  product in
California.  We had  already  begun  shipment  on  previous  contracts  and were
projecting to begin early in 2006.

In October  2005,  following  the notice of ABS's  default,  we  terminated  the
agreement for both  products  based on the default.  In January 2006,  following
efforts to resolve the disputes  with ABS, the Company  filed a lawsuit  against
ABS, claiming breach of contract,  interference with contractual  relationships,
unjust enrichment, and fraud, and seeking damages from ABS.

With  respect to the flat iron  products,  through  October  2005,  CirTran  had
shipped  directly to ABS  approximately  $4,746,000  worth of the  product,  and
CirTran  had  received  from  ABS or its  finance  company  a  total  amount  of
approximately  $788,000. In November 2005, we repossessed from ABS approximately
$2,341,000  worth of the products in the United States,  as we were permitted to


                                       19
<PAGE>


do pursuant to the  agreement.  As of May 18, 2006,  we had a balance  remaining
unpaid from ABS of approximately $2,350,000 for the flat iron product.

Since  November  2005,  we have been pursuing our rights under the agreement and
have been offering the flat iron product for sale  directly to ABS's  customers.
In doing so, we sold to ABS's  international  customers  directly  approximately
$426,000  worth of the flat iron product.  The  shipments  have all been paid in
full. These products shipped were not part of the repossessed inventory.

On January 24, 2006, ABS filed a voluntary  petition for relief under chapter 11
of the United States  Bankruptcy Code in the United States  Bankruptcy Court for
the  Central   District  of  California,   San  Fernando  Valley  Division  (the
"Bankruptcy  Court"),  Case No. SV 06-10076  GM. On January 30,  2006, a hearing
("Hearing")  was held to consider the Emergency  Motion for Order  Approving the
Settlement  and Compromise of the Disputed  Secured Claims of Inventory  Capital
Group,  Inc.  ("ICG"),  and Media Funding  Corporation  ("MFC") (the "Settlement
Motion") filed by ABS. The continued  Hearing on the Settlement  Motion was held
on February 16, 2006,  at which time the  settlement  was  modified.  Prior to a
separate  hearing  held on March  24,  2006,  on ABS's  Motion  for  Order:  (1)
Approving Sale and Assignment of Substantially All Assets of the Estate Free and
Clear of Liens; (2) Approving  Assumption and Assignment of Leases and Executory
Contracts  Included in the Sale and Rejection of Leases and Executory  Contracts
Not Included in the Sale; and (3) Granting  Related Relief (the "Sale  Motion"),
the  settlement  was  further  modified.   The  modifications  to  the  proposed
settlement  were read into the  Bankruptcy  Court's record at the Hearing on the
Settlement  Motion and the March 24, 2006 hearing on the Sale Motion  ("Proposed
Modifications").  Written notice of the Proposed  Modifications  was provided to
creditors  and parties in interests on March 27, 2006,  and the  Declaration  of
James  C.  Bastian,   Jr.,   attesting   that  no  objections  to  the  Proposed
Modifications have been received by ABS, was filed with the Bankruptcy Court. As
of May 18, 2006,  an order  approving the  settlement  and the sale had not been
entered by the bankruptcy  court.

Subject to and conditioned upon the approval of the settlement by the Bankruptcy
Court  and  Bankruptcy  Court  approval  of  and  consummation  of the  sale  of
substantially  all of ABS's  assets to the Company  pursuant to the Sale Motion,
the Company  shall have an allowed  claim against the ABS's estate in the amount
of  $2,350,000,  of  which  $750,000  shall  be  credited  to  the  purchase  of
substantially  all of ABS's assets.  Under the settlement,  the Company shall be
allowed to  participate as a general  unsecured  creditor of ABS's estate in the
amount of $1,600,000 on a pari passu basis with the $2,100,000 general unsecured
claim of certain  insiders  of ABS and  subject to the prior  payment of certain
secured,  priority,  and  non-insider  claims  in the  amount  of  approximately
$1,507,011.  Subject to final negotiation and execution of a definitive purchase
agreement and Bankruptcy Court Approval of the sale, CirTran  Corporation agreed
to purchase substantially all of ABS's assets in exchange for (i) a cash payment
in the amount of $1,125,000,  (ii) a reduction of CirTran's allowed claim in the
Bankruptcy  Case by $750,000,  (iii) the assumption of any assumed  liabilities,
and (iv) the obligation to pay ABS a royalty equal to $3.00 per True Ceramic Pro
flat iron unit sold by ABS (the "Royalty  Obligation").  The Royalty  Obligation
shall be capped at $4,135,000.  To the extent the amounts paid to ABS on account
of the Royalty  Obligation equal less than $435,000 on the 2 year anniversary of
the Closing,  then, within 30 days of such anniversary,  the Company,  agreed to
pay ABS an amount equal to $435,000  less the royalty  payments made to date. As
part of the settlement,  the Company agreed to exchange  general  releases with,
among  others,  ABS,  Jason Dodo (the manager of ABS),  Inventory  Capital Group
("ICG"),  and Media Funding Corporation  ("MFC"). The settlement also resolves a
related  dispute with ICG in which ICG will assign  $65,000 of its secured claim
against ABS to the Company.


                                       20
<PAGE>


With  respect to the hair dryers,  as of May 18,  2006,  we had not received any
orders or shipped any products, either to ABS or its customers.

On December  28,  2005,  we signed an  Exclusive  Manufacturing  Agreement  (the
"Agreement") with Arrowhead Industries, Inc. ("Arrowhead"), pursuant to which we
will become the exclusive  manufacturer of a tool for assisting with the removal
of door hinges called the "Hinge Helper" (the  "Product").  Under the Agreement,
Arrowhead  agreed to buy the Product  exclusively  from us for the period of the
Agreement,  which is three years.  The Product will be  manufactured by us or by
sub-manufacturers selected by us.

The Agreement provides that Arrowhead will own all right, title, and interest in
the Product, and will sell and market the Product under its trademarks,  service
marks, or trade names.

On January 9, 2006, we issued a press release which  referred,  in the title, to
the Agreement as a "$22 Million Exclusive  Manufacturing  Agreement." The dollar
amount referenced  relates to the potential amount of income or revenue which we
may receive over the anticipated life of the Agreement.

CirTran  announced  on January 9, 2006,  that  Arrowhead  Industries,  Inc.,  of
Windermere,  Florida,  had awarded us an exclusive  contract to manufacture  its
patented Hinge Helper (TM)  do-it-yourself  utility tool for the home. The Hinge
Helper  will  be  manufactured  by  CirTran-Asia,   the  Company's   China-based
subsidiary.  The exclusive  manufacturing  contract for the product is for three
years.  Arrowhead  has filmed a Hinge Helper  infomercial  for TV with an airing
date scheduled for late April.

The  Hinge  Helper is a unique  hand  tool  designed  and  developed  for use by
household  customers as well as tradesmen.  Recognized by the U.S. Patent Office
(#6,308,390  B1),  its  trademark  and  patent  are owned by and  registered  to
Arrowhead.  The specific  advantage of the Hinge Helper is its  ease-of-use  and
simplistic  design. It can be applied to any residential hinge on wood, metal or
composite  doors,  and is  being  manufactured  with  highly-durable  materials,
enabling it to carry a lifetime guarantee.

The contract is for three years,  and Arrowhead  agreed to purchase a minimum of
ten million units of the Product (the "Minimum Quantity"),  subject to the terms
and  conditions  of the  Agreement.  Arrowhead  and  CirTran  have agreed on the
Minimum  Quantity  in good faith,  although  the  parties  acknowledged  that in
certain  circumstances  described  in  the  agreement,   the  agreement  may  be
terminated prior to the sale of the entire Minimum Quantity. Arrowhead agreed to
submit  purchase orders for the Product from time to time in accordance with the
terms  of the  agreement.  Arrowhead  agreed  to pay  CirTran  for  the  Product
purchased at the prices  ranging from $2.95 to $1.90 per unit,  depending on the
cumulative  number of units of Product  which have been  purchased by Arrowhead.
Arrowhead  will also be entitled to a rebate equal to 10% of the purchase  Price
paid for Product in the previous Tier.  Rebates will be payable only in the form
of a credit memo against future purchases.  Rebate credit memos will not be paid
in cash and may not be applied against outstanding  balances.  We will calculate
eligibility for the Rebate as soon as practicable following the end of the month
in which a new Tier is entered.

We have  produced hand made  samples,  which have been sent to Arrowhead.  These
were approved and we are awaiting final approval for the production samples that
were  supplied  at the end of  March  2006.  Once  the  production  samples  are
approved, we will start production according to the release schedule that should
be provided by Arrowhead  shortly  thereafter.  As of May 18, 2006,  the product
samples have been approved. Arrowhead had released and the Company shipped 1,500
units to test media. We are awaiting final production releases.


                                       21
<PAGE>


Electronics Business and Lines of Products

On June 10, 2005,  we  announced  that Racore  Technology  Inc.,  ("Racore"),  a
subsidiary of CirTran  Corporation,  received a purchase order from the New York
Fire  Department,  an established  city public  department on the east coast for
fiber optic Ethernet network adapters. Since this announcement,  the product has
been  manufactured  and shipped,  and a payment of $9,000 has been received.  We
continue to market and solicit  orders on the Racore  product  line from various
commercial and public agency clients.

On June 23, 2005, we announced that CirTran Corporation entered the "sold-on-TV"
market  by having  its  CirTran-Asia  subsidiary  build  consumers'  electronics
products  in  China,  and  is  now  bringing  business  to  the  United  States,
refurbishing  popular skill-stop slot machines from Japan for home amusement use
in the United  States.  We continue to receive the imported  machines  from Rock
Bottom  Slots,  perform  the  conversion  and  refurbishment  services  and ship
directly to the customer.

On June 24,  2005,  we  announced  that  Racore  received a purchase  order from
Lockheed-Martin,  a well-known aerospace  manufacturing  company for fiber optic
token-ring  network adapters.  Direct sales of new and repeat business from this
company have totaled more than $30,000.  Since this announcement the product has
been manufactured and shipped, and payment has been received.  As of the date of
this Report,  we have  shipped an  additional  $45,000  worth of product to this
company.

On July 22, 2005, we announced  that Racore  received a purchase  order from the
United  States  Air Force for  OptiCORE  network  interface  cards.  Since  this
announcement,  the product has been  manufactured  and shipped,  and payments of
$15,000 have been received.

On August 1, 2005, we announced that Racore  received a purchase order for fiber
optics  products  from  Cherokee City  Appraisal  District,  another city public
department  located in the southern  United  States for fiber optic PCI Ethernet
network  interface cards with VF-45  connectors.  Since this  announcement,  the
product  has been  manufactured  and  shipped,  and a payment of $1,030 has been
received.

On August 4, 2005, we announced that Racore  received a purchase order from Walt
Disney World, a well-known amusement park in the southeastern United States, for
more than $21,000 worth of network interface cards. Since this announcement, the
product has been manufactured and shipped, and payment has been received.

On August 9, 2005,  we announced  that CirTran  Corporation  completed the first
phase of the redevelopment of the next-generation SafetyNet(TM) RadioBridge(TM).
Since this  announcement,  the Company has completed working on the second phase
of the contract. On March 14, 2006, we announced that we had received a $250,000
order to build and  deliver  the  first  production  run of the next  generation
SafetyNet(TM)  RadioBridge(TM)  which we redesigned at the request and on behalf
of Aegis  Assessments,  Inc.,  a  Scottsdale,  Arizona-based  homeland  security
contractor.  We delivered the new, redesigned units and received payment in full
from Aegis in April 2006.

On  September  13, 2005,  we  announced  that Racore had been named an "approved
vendor" by the City of New York. Racore began its current business  relationship
with the City of New York in April when it received a request for an  evaluation
unit of the Racore  M8190A  Fiber  Optic Fast  Ethernet  Network  Adapters  with
Volition Patch Cords. Racore  subsequently  received an order placed through one
of its  value-added  resellers.  Since this  announcement,  the product has been
manufactured and shipped, and a payment of $4,500 has been received.


                                       22
<PAGE>


On October  11,  2005,  we  announced  that  CirTran  Corporation  was opening a
satellite  office in Los  Angeles  in  accordance  with the  Company's  internal
expansion program.  The new 2,500-square foot office will be located on the 17th
floor at 1875 Century Park East in the Century City  Entertainment  and Business
District of Los  Angeles.  Scheduled to open in late  November,  the office will
serve as headquarters for CirTran's business  development and strategic planning
activities for the Company's multiple business divisions including  electronics,
consumer products, direct response/retail and "as sold-on-TV" products.  Current
plans call for  CirTran  to open  additional  satellite  offices in New York and
London in 2006.  Since this  announcement,  we have leased  office  space in Los
Angeles, California.

On December 2, 2005,  we announced  that we had formed a new  division,  CirTran
Products, which will offer products for sale at retail. The new division will be
run from our new Los Angeles  office,  with Trevor  Saliba,  our executive  vice
president for  worldwide  business  development,  working to develop  sales.  We
anticipate that consumer products built by our CirTran Asia subsidiary,  as well
as other products which we plan to acquire, will be available for retail sale in
2006

CirTran Products was established to pursue manufacturing relationships on both a
contracted and proprietary basis in the consumer products industry.  Proprietary
products will be product lines where the intellectual property (logo, trade name
etc.) are owned by  CirTran  Products  as well as  exclusively  manufactured  by
CirTran  Corporation.  The marketing efforts may also be managed  exclusively by
CirTran, or CirTran may choose to engage third party consultants or partner with
an independent  marketing firm. CirTran Products also intends to pursue contract
manufacturing  relationships in the consumer products industry which can include
product lines including:  home/garden,  kitchen,  health/beauty,  toys, licensed
merchandise  and apparel for film,  television,  sports and other  entertainment
properties.  Licensed  merchandise  and  apparel can be defined as any item that
bears the image of,  likeness,  or logo of a product sold or  advertised  to the
public.   Licensed  merchandise  and  apparel  are  sold  and  marketed  in  the
entertainment (film and television) and sports (sports  franchises)  industries.
As of May 18, 2006, we have  concentrated our product  development  efforts into
three areas, home/kitchen appliances,  beauty products and licensed merchandise.
We anticipate  that these products will be introduced  into the market under one
uniform  brand  name or  under  separate  trademarked  names  owned  by  CirTran
Products.

Recent Developments

On March  21,  2006,  the  Company  issued a press  release  "CirTran  Forms New
Division  to  Serve  Direct  Response  and  Entertainment  Industries."  The new
division will concentrate its efforts on product  marketing,  production,  media
funding  and   merchandise   manufacturing   services   working  as  a  complete
vertically-integrated  platform that can augment our  manufacturing  services in
the direct response industry.  Our experience in this industry over the past two
years  has  taught  us that  there is a need for a single  source  solution.  In
addition,  we feel it  will  help us  capture  additional  business  that  might
otherwise had been lost at the manufacturing level allowing us to participate in
all additional areas.

On  April  18,  2006,  we  announced  that  we had  joined  forces  with  former
heavyweight  champion  Evander  Holyfield  to market and promote  "The Real Deal
Grill(TM),"  a new  electric  indoor/outdoor  cooking  product to be sold via TV
infomercials.   We  arranged  with  the  former  champion's  company,  Holyfield
Management,  Inc.,  of Georgia,  for his  services to promote the product and to
film a series  of TV  infomercials  featuring  Mr.  Holyfield  and The Real Deal
Grill,  which are scheduled to be filmed in Florida in May 2006.  Mr.  Holyfield
will receive a talent fee for all units sold.


                                       23
<PAGE>


On April 19, 2006, we announced that we had signed an agreement relating to "The
Real Deal Grill(TM) (the "Grill"),  which will initially be sold on TV worldwide
and endorsed by Evander Holyfield,  the four-time heavyweight boxing champion of
the world. The agreement was signed with Harrington  Business  Development (HBD)
of St.  Petersburg,  Florida,  giving  HBD the rights to market the Grill in the
Americas and Japan (the  "Territory").  Under the contract,  HBD will  initially
market the Grill on TV through  infomercials in the U.S., Canada,  South America
and Japan,  which will be filmed in Florida featuring Mr.  Holyfield.  Under the
terms of the  contract,  we have paid  one-half  of the costs of  producing  the
initial infomercial,  in the amount of $37,500.  Under the contract, HBD granted
to us the  right to use the raw  footage,  including  audio and  video,  for the
initial  infomercial to produce  infomercials  or other  advertisements  for the
Grill for use solely outside of the Territory. The agreement has an initial term
of 3 years  and may be  renewed.  HBD is part  of  Reliant  International  Media
Corporation  ("Reliant"),  a full-service  direct  response  company  founded by
industry  pioneers and leaders Tim and Kevin  Harrington.  The Harringtons,  who
have been in the direct response industry since the early 1980's,  have produced
long and short form infomercials for products in numerous categories, which have
been seen on TV around the world.

As of May 18, 2006, we had not received any purchase  orders for the Grill,  the
infomercial had not been filmed,  and we had not begun  manufacturing the Grill.
Once we receive the initial  purchase  order,  we anticipate  that we will begin
manufacturing, although there can be no guarantee that HBD or Reliant will place
any  orders  or that we will  receive  the  maximum  amount  possible  under the
agreement,  announced as $30 million,  which assumed that HBD would purchase $30
million worth of the Grill.

On May 1, 2006, we announced  that CirTran  Corporation  had received a purchase
order  from  Hill Air  Force  Base in  Utah,  adding  to its list of  government
contracts and assignments.  We anticipate that work will begin during the second
quarter of 2006, both on-site at Hill AFB and at our manufacturing facility. The
purchase order includes creating new custom cables and interfaces,  refurbishing
existing   underground   cables,  and  upgrading  various  rack  assemblies  and
connectors.  In its initial phase, the order is worth  approximately  $15,000 to
CirTran.

On May 11, 2006, we announced that we had appointed Richard T. Ferrone,  C.P.A.,
as our chief financial officer. Prior to joining CirTran, Mr. Ferrone had headed
his own accounting firm, Ferrone & Associates, which he established in Salt Lake
City in 1994.  Previously,  he was vice president and CFO for then-publicly-held
GCI Industries, Inc. /Golf Card International for seven years, and served as CFO
of Huntsman,  Christensen  Real Estate &  Development  Co. Mr.  Ferrone had also
served as vice president and chief financial officer for BSD Medical Corporation
(AMEX:  BSM) after beginning his career with a regional  accounting firm in Salt
Lake City.  Mr.  Ferrone has a B.S. in Accounting  from the  University of Utah,
where  he also  studied  for a Master  of  Professional  Accountancy  with a tax
emphasis.

On April 12, 2006,  we  announced  that we had settled all major  litigation  in
which we were a defendant.  These  litigation  matters had been described in our
previous SEC filings and were settled for less than the original  claims against
us. We were able to settle these cases with a total cash outlay of only $200,000
after originally having exposure of up to $4.25 million.  We settled with Howard
Salamon, a financial consultant who originally sued us for $1.75 million through
the  issuance  of 4 million  restricted  shares  and a warrant  to  purchase  an
additional 7 million shares  exercisable at $.05 per share.  We also settled our
dispute with  Sunborne XII, LLC, a Colorado  limited  liability  company and the
owner of a building  in Colorado  Springs,  Colorado,  to which we expanded  our
operations in the late 1990s, for $200,000 in cash.  Sunborne's claim originally
ranged up to $2.5 million.  Both  settlements were reached in February 2006. Our
subsidiary,  CirTran  Asia,  will  continue to proceed  with its action  against
International Edge, Inc., Michael Casey Enterprises,  Inc., Michael Casey, David
Hayek, and HIPMG, Inc., as discussed below under "Legal Proceedings."


                                       24
<PAGE>


Significant Accounting Policies

Financial  Reporting  Release  No.  60,  which  was  recently  released  by  the
Securities  and  Exchange  Commission,  requires  all  companies  to  include  a
discussion of critical accounting policies or methods used in the preparation of
financial statements.  Note 1 of the Notes to the Financial Statements contained
in our  Annual  Report on form  10-KSB  includes  a summary  of the  significant
accounting  policies  and  methods  used  in the  preparation  of our  Financial
Statements.  The  following  is a  brief  discussion  of  the  more  significant
accounting policies and methods used by us.

Our discussion and analysis of our financial condition and results of operations
is based upon our consolidated financial statements, which have been prepared in
accordance with accounting  principles  generally accepted in the United States.
These  principles  require us to make  estimates and  judgments  that affect the
reported  amounts of assets,  liabilities,  revenues and  expenses,  and related
disclosure  of  contingent  assets and  liabilities.  We base our  estimates  on
historical  experience and on various other  assumptions that are believed to be
reasonable under the circumstances. Estimated amounts may differ under different
assumptions or conditions, and actual results could differ from the estimates.

Revenue Recognition

Revenue is recognized when products are shipped. Title passes to the customer or
independent sales representative at the time of shipment.  Returns for defective
items  are  repaired  and  sent  back to the  customer.  Historically,  expenses
experienced with such returns have not been significant and have been recognized
as incurred.

Inventories

Inventories  are  stated at the lower of  average  cost or market  value.  Costs
include  labor,  material,  and  overhead  costs.  Overhead  costs  are based on
indirect costs allocated  among 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. The Company determines market value on
current  resale  amounts  and whether  technological  obsolescence  exists.  The
Company has  agreements  with most of its customers that require the customer to
purchase  inventory  items  related  to their  contracts  in the event  that the
contracts  are  cancelled.  The market value of related  inventory is based upon
those    agreements.

The Company typically orders inventory on a customer-by-customer basis. In doing
so the Company  enters into binding  agreements  that the customer will purchase
any excess  inventory  after all orders  are  complete.  Almost 80% of the total
inventory is secured by these agreements.

Related Party Transactions

Certain transactions involving Abacas Ventures, Inc., the Saliba Private Annuity
Trust and the Saliba  Living  Trust are regarded as related  party  transactions
under FAS 57. Disclosure concerning these transactions is set out in this Item 2
under "Liquidity and Capital Resources - Liquidity and Financing  Arrangements,"
and in "Item 5 - Other Information."


                                       25
<PAGE>


Results of Operations - Comparison of Periods ended March 31, 2006 and 2005

           Sales and Cost of Sales

Net sales  decreased to  $1,737,824  for the three months period ended March 31,
2006, as compared to $2,920,465  during the same period in 2005,  for a decrease
of 40.5%.  This decrease was attributed to the loss of sales in the CirTran Asia
division due to legal issues with the Ab King Pro and ABS (See comments in legal
section).  Cost of sales decreased by 48.2%, to $990,370 during the three months
period ended March 31, 2006, from $1,949,773 during the same period in 2005. The
decrease in cost of sales is directly due to the decrease in revenue.  Our gross
profit  margin for the three months period ended March 31, 2006,  was 43.0%,  up
from 33.2% for the same period in 2005. The majority of the increase is due to a
considerable  decrease in CirTran-Asia  sales which have more favorable  margins
compared  to  the  electronics   assembly  and  Ethernet   technology   business
operations. The sales in these divisions have remained consistent.

           Inventory

We  use  just-in-time  manufacturing,  which  is  a  production  technique  that
minimizes work-in-process inventory and manufacturing cycle time, while enabling
us to deliver  products to customers in the quantities and time frame  required.
This  manufacturing  technique requires us to maintain an inventory of component
parts to meet customer orders.  Inventory at March 31, 2006, was $2,203,537,  as
compared to  $2,271,604  at December  31,  2005.  The  decrease in  inventory is
nominal.

           Selling, General and Administrative Expenses

During  the  three   months  ended  March  31,   2006,   selling,   general  and
administrative  expenses  were $837,520  versus  $959,891 for the same period in
2005,  a 12.7%  decrease.  The decrease in selling,  general and  administrative
expenses is nominal.

           Interest Expense

Interest  expense for three  months  ended March 31,  2006,  was  $1,086,253  as
compared to $143,770  for the same  period in 2005,  an increase of 655.5%.  The
increase  is  primarily  due  to the  derivative  treatment  of the  convertible
debenture, discussed below.

As a result of the above  factors,  we have net loss of $277,998 for the quarter
ended March 31, 2006,  as compared to $201,728  for the quarter  ended March 31,
2005. This net loss is attributed to a substantial decrease in sales.

Liquidity and Capital Resources

Our expenses are currently  greater than our revenues.  We have had a history of
losses  preceeding this quarter,  and our  accumulated  deficit has increased to
$19,605,311 at March 31, 2006, compared to $19,327,310 at December 31, 2005. Our
net loss for the  quarter  ending  March 31,  2006,  was  $277,998,  compared to
$201,728 for the quarter ended March 31, 2005. Our current  assets  exceeded our
current  liabilities  by  $300,528  as  of  March  31,  2006,  and  our  current
liabilities  exceeded our current  assets by $1,142,874 as of December 31, 2005.
The change was mostly  attributable  to settlements  of notes  payable.  For the
three  months  ended March 31, 2006 and 2005,  we had  negative  cash flows from
operations of $719,698 and $385,701 respectively.


                                       26
<PAGE>


           Cash

We had cash on hand of $443,637 at March 31, 2006,  and  $1,427,865  at December
31, 2005.

Net cash used in  operating  activities  was $719,698 for the three months ended
March 31, 2006. Cash received from customers of $2,076,845 was not sufficient to
offset  cash paid to  vendors,  suppliers,  and  employees  of  $2,128,964.  The
non-cash  charges  were  for  depreciation  and  amortization  of  $114,939  and
accretion expense of $965,512.  Because the Company has negative cash flows from
operations,  it must rely on sources of cash other than customers to support its
operations.  It is anticipated  that various methods of equity financing will be
required to support operations until cash flows from operations are positive.

Net cash used in  investing  activities  during the three months ended March 31,
2006, consisted of equipment and furniture purchases of $166,730.

Net cash used by financing  activities was $97,600 during the three months ended
March 31,  2006 and was  primarily  related  to  payments  on notes  payable  to
stockholders of $95,806.

           Accounts Receivable

At March 31,  2006,  we had  receivables  of  $3,019,960,  net of a reserve  for
doubtful  accounts of $158,374,  as compared to $3,358,981 at December 31, 2005,
net of a reserve of $158,374.

This decrease was primarily attributed to decreased sales in the last two months
of the first  quarter as  compared  to the last two months in 2005.  Receivables
include the unpaid balance from ABS. (See ABS history beginning on page 19). The
Company has implemented an aggressive  process to collect past due accounts over
the  past  two  years.   Individual  accounts  are  continually   monitored  for
collectibilty.  As part of monitoring individual customer accounts,  the Company
evaluates  the  adequacy  of its  allowance  for  doubtful  accounts.  Since the
implementation of the new collection process, very few accounts have been deemed
uncollectible.

           Accounts Payable

Accounts  payable were  $528,963 at March 31, 2006, as compared to $1,239,519 at
December 31, 2005. The decrease is related to a drop in sales and paying vendors
in a timely manner.

           Liquidity and Financing Arrangements

We have a history of  substantial  losses from  operations and using rather than
providing cash in operations. We had an accumulated deficit of $19,605,311 and a
total  stockholders'  equity of  $3,165,931  at March 31, 2006.  As of March 31,
2006, our monthly operating costs and interest  expenses averaged  approximately
$640,000 per month.

In conjunction with our efforts to improve our results of operations,  discussed
above, we are also actively seeking  infusions of capital from investors.  It is
unlikely that we will be able,  in our current  financial  condition,  to obtain
additional  debt  financing;  and if we did acquire more debt,  we would have to
devote  additional  cash  flow to  paying  the debt and  securing  the debt with
assets.  We may  therefore  have  to  rely  on  equity  financing  to  meet  our
anticipated capital needs. There can be no assurances that we will be successful
in obtaining such capital. If we issue additional shares for debt and/or equity,
this will  dilute  the value of our  common  stock  and  existing  shareholders'
positions.


                                       27
<PAGE>


Convertible Debentures

Highgate - On May 26, 2005, the Company  entered into an agreement with Highgate
to issue to  Highgate  a  $3,750,000,  5%  Secured  Convertible  Debenture  (the
"Debenture").  The  Debenture is due December  2007 and is secured by all of the
Company's property.

Accrued  interest is payable at the time of maturity or conversion.  The Company
may,  at its  option,  elect to pay  accrued  interest  in cash or shares of the
Company's  common stock.  If paid in stock,  the  conversion  price shall be the
closing bid price of the common stock on either the date the interest payment is
due or the date on which the  interest  payment is made.  The balance of accrued
interest  owed at March  31,  2006 and  December  31,  2005,  was  $152,349  and
$111,986, respectively.

At any  time,  Highgate  may elect to  convert  principal  amounts  owing on the
Debenture into shares of the Company's  common stock at a conversion price equal
to the lesser of $0.10 per share,  or an amount equal to the lowest  closing bid
price of the  Company's  common stock for the twenty  trading  days  immediately
preceding the conversion  date. The Company has the right to redeem a portion or
the entire  Debenture then  outstanding  by paying 105% of the principal  amount
redeemed plus accrued interest thereon.

Highgate's  right to convert  principal  amounts  into  shares of the  Company's
common stock is limited as follows:

         (i)      Highgate  may  convert up to $250,000  worth of the  principal
                  amount  plus  accrued   interest  of  the   Debenture  in  any
                  consecutive  30-day  period  when  the  market  price  of  the
                  Company's  stock  is  $0.10  per  share or less at the time of
                  conversion;
         (ii)     Highgate  may  convert up to $500,000  worth of the  principal
                  amount  plus  accrued   interest  of  the   Debenture  in  any
                  consecutive  30-day  period  when the  price of the  Company's
                  stock  is  greater  than  $0.10  per  share  at  the  time  of
                  conversion;  provided,  however,  that Highgate may convert in
                  excess of the  foregoing  amounts if the Company and  Highgate
                  mutually agree; and
         (iii)    Upon the  occurrence of an event of default,  Highgate may, in
                  its  sole   discretion,   accelerate  full  repayment  of  all
                  debentures  outstanding  and accrued  interest  thereon or may
                  convert the  Debentures  and  accrued  interest  thereon  into
                  shares of the Company's common stock.


Except in the event of default,  Highgate  may not convert the  Debenture  for a
number of shares  that would  result in  Highgate  owning more than 4.99% of the
Company's outstanding common stock.

In connection with the issuance of the Highgate  Debenture,  the Company granted
Highgate registration rights related to the issuance of the debenture.

The Company  determined that the features of the Debenture fell under derivative
accounting  treatment.  As of March 31, 2006 the carrying value of the Debenture
was  $1,068,604.  The carrying value will be accreted each quarter over the life
of the Debenture until the carrying value equals the  unconverted  face value of
$3,000,000.  The fair value of the derivative liability as of March 31, 2006 was
$1,767,254.

In  connection  with the issuance of the  Debenture,  $2,265,000 of the proceeds
were paid to Cornell to repay promissory  notes.  Fees of $256,433 were withheld
from the proceeds,  were  capitalized,  and are being amortized over the life of
the note. As such, of the total Debenture of $3,750,000, the net proceeds to the


                                       28
<PAGE>


Company  were  $1,228,567.  The  proceeds  were used for general  corporate  and
working capital purposes, at the Company's discretion.

In January 2006,  Highgate converted $750,000 of its convertible  debenture into
24,193,548  shares of the Company's  common stock at a conversion rate of $0.031
per share,  which was the lower of $0.10 or 100% of the lowest closing bid price
of  the  Company's  commons  stock  over  the  20  trading  days  preceding  the
conversion.

Cornell - On December 30,  2005,  the Company  entered  into an  agreement  with
Cornell Capital Partners, L.P. ("Cornell") to issue to Cornell a $1,500,000,  5%
Secured Convertible Debenture (the "Cornell  Debenture").  The Cornell Debenture
is due July 30, 2008,  and is secured by all the Company's  property,  junior to
the Highgate security interest.

Accrued  interest is payable at the time of maturity or conversion.  The Company
may,  at its  option,  elect to pay  accrued  interest  in cash or shares of the
Company's  common stock.  If paid in stock,  the  conversion  price shall be the
closing bid price of the common stock on either the date the interest payment is
due or the date on which the  interest  payment is made.  The balance of accrued
interest  owed at March 31, 2006 and December  31,  2005,  was $18,082 and zero,
respectively.

At any time, Cornell may elect to convert principal amounts owing on the Cornell
Debenture into shares of the Company's  common stock at a conversion price equal
to an amount equal to the lowest closing bid price of the Company's common stock
for the twenty  trading days  immediately  preceding the  conversion  date.  The
Company has the right to redeem a portion or the entire  Cornell  Debenture then
outstanding  by  paying  105% of the  principal  amount  redeemed  plus  accrued
interest thereon.

Cornell's right to convert principal amounts into shares of the Company's common
stock is limited as follows:

         (i)      Cornell  may  convert up to  $250,000  worth of the  principal
                  amount plus accrued  interest of the Cornell  Debenture in any
                  consecutive  30-day  period  when  the  market  price  of  the
                  Company's  stock  is  $0.10  per  share or less at the time of
                  conversion;
         (ii)     Cornell  may  convert up to  $500,000  worth of the  principal
                  amount plus accrued  interest of the Cornell  Debenture in any
                  consecutive  30-day  period  when the  price of the  Company's
                  stock  is  greater  than  $0.10  per  share  at  the  time  of
                  conversion;  provided,  however,  that  Cornell may convert in
                  excess of the  foregoing  amounts if the  Company  and Cornell
                  mutually agree; and
         (iii)    Upon the  occurrence of an event of default,  Cornell  Capital
                  Partners,  LP may,  in its sole  discretion,  accelerate  full
                  repayment of the debenture  outstanding  and accrued  interest
                  thereon or may convert  the  Debenture  and  accrued  interest
                  thereon into shares of the Company's common stock.


Except in the event of default,  Cornell  may not convert the Cornell  Debenture
for a number of shares  that would  result in Cornell  owning more than 4.99% of
the Company's outstanding common stock.

The Cornell Debenture was issued with 10,000,000 warrants with an exercise price
of $0.09 per share that vest immediately and have a three year life.


                                       29
<PAGE>


In connection  with the issuance of the Cornell  Debenture,  the Company granted
Cornell registration rights related to the issuance of the Cornell Debenture and
warrants.

The  Company  determined  that the  features on the  Cornell  Debenture  and the
associated warrants fell under derivative accounting treatment.  As of March 31,
2006 the carrying  value of the Cornell  Debenture  was  $143,160.  The carrying
value will be accreted each quarter over the life of the Cornell Debenture until
the carrying  value equals the face value of  $1,500,000.  The fair value of the
derivative liability as of March 31, 2006 was $$1,368,906.

In connection with the issuance of the Cornell Debenture,  fees of $130,000 were
withheld from the proceeds,  capitalized, and will be amortized over the life of
the Cornell  Debenture.  As such, of the total Cornell  Debenture of $1,500,000,
the net proceeds to the Company were  $1,370,000.  The proceeds will be used for
general corporate and working capital purposes, at the Company's discretion

As of March 31, 2006,  Cornell had not  converted  any of the Cornell  Debenture
into shares of the Company's common stock.

Forward-looking statements

Certain of the  statements  contained in this Report (other than the  historical
financial  data and other  statements  of historical  fact) are  forward-looking
statements.  These statements  include,  but are not limited to our expectations
with respect to the  development of a new offices or divisions;  the achievement
of certain  revenue goals;  the receipt of new business and  contracts;  and our
intentions  with respect to financing our  operations in the future.  Additional
forward-looking  statements  may be found in the "Risk  Factors"  Section of our
Annual Report on Form 10-KSB,  together with  accompanying  explanations  of the
potential risks  associated with such  statements.  You are encouraged to review
the "Risk Factors" Section of our Annual Report.

Forward-looking  statements made in this Quarterly  Report,  are made based upon
management's good faith expectations and beliefs concerning future  developments
and their  potential  effect upon the Company.  There can be no  assurance  that
future  developments will be in accordance with such  expectations,  or that the
effect  of  future   developments  on  CirTran  will  be  those  anticipated  by
management.  Forward-looking  statements  may be  identified by the use of words
such as  "believe,"  "expect,"  "plans,"  "strategy,"  "prospects,"  "estimate,"
"project,"  "anticipate,"  "intends"  and  other  words of  similar  meaning  in
connection with a discussion of future operating or financial performance.

You  are  cautioned  not to  place  undue  reliance  on  these  forward  looking
statements,  which are current only as of the date of this  Report.  We disclaim
any intention or obligation to update or revise any forward-looking  statements,
whether  as a result of new  information,  future  events,  or  otherwise.  Many
important   factors  could  cause  actual  results  to  differ  materially  from
management's expectations,  including those listed in the "Risk Factors" Section
of our Annual  Report  for the year  ended  December  31,  2005,  as well as the
following:

         *        unpredictable difficulties or delays in the development of new
                  products and technologies;

         *        changes in U.S. or international economic conditions,  such as
                  inflation,  interest rate fluctuations,  foreign exchange rate
                  fluctuations or recessions in CirTran's markets;


                                       30
<PAGE>


         *        pricing  changes to our  supplies  or products or those of our
                  competitors,  and other  competitive  pressures on pricing and
                  sales;

         *        difficulties   in  obtaining  or  retaining  the   management,
                  engineering,  and other human  resource  competencies  that we
                  need to achieve our business objectives;

         *        collection of customer balances due on account;

         *        the  impact  on  CirTran  or a  subsidiary  from the loss of a
                  significant customer or a few customers;

         *        risks  generally  relating  to our  international  operations,
                  including governmental, regulatory or political changes;

         *        transactions  or other events  affecting the need for,  timing
                  and extent of our capital expenditures; and

         *        the extent to which we reduce outstanding debt.

Item 3.    Evaluation of Disclosure Controls and Procedures

Evaluation  of  Disclosure  Controls  and  Procedures.  We  maintain  disclosure
controls  and  procedures  designed  to ensure that  information  required to be
disclosed in our reports  filed under the  Securities  Exchange Act of 1934,  as
amended (the Exchange  Act), is recorded,  processed,  summarized,  and reported
within the required time periods,  and that such  information is accumulated and
communicated to our management,  including our Chief Executive Officer,  who was
also our Chief Financial Officer, as appropriate,  to allow for timely decisions
regarding  disclosure.  On May 15, 2006,  the Company  entered into an agreement
with Richard T. Ferrone,  CPA,  whereby Mr. Ferrone  became the Chief  Financial
Officer of the Company. (See discussion below)

As disclosed in our Annual Report on Form 10-KSB for the year ended December 31,
2005,  as required by Rule  13a-15(b)  under the  Exchange  Act, we conducted an
evaluation, under the supervision of our Chief Executive Officer/Chief Financial
Officer,  of the  effectiveness of our disclosure  controls and procedures as of
December 31, 2005. In our evaluation, we identified deficiencies that existed in
the design or operation of our internal control over financial reporting that we
and our independent registered public accounting firm considered to be "material
weaknesses." A material  weakness is a significant  deficiency or combination of
significant  deficiencies  that results in more than a remote  likelihood that a
material misstatement of the annual or interim financial information will not be
prevented or detected.

Based  on the  matters  identified  above,  our  Chief  Executive  Officer/Chief
Financial Officer concluded that our disclosure controls and procedures were not
effective. These deficiencies have been disclosed to our Board of Directors.

The  deficiencies  in our internal  control  over  financial  reporting  related
primarily  to the  failure to  properly  measure  and  disclose  equity and debt
transactions.  The deficiencies were detected in the evaluation  process and the
transactions  have been  appropriately  recorded and disclosed in this Quarterly
Report on Form 10-QSB.  We are in the process of improving our internal  control
over  financial  reporting in an effort to resolve  these  deficiencies  through
improved supervision and training of our accounting staff, but additional effort
is needed to fully remedy these deficiencies.  Our management and directors will
continue to work with our new CFO, our  auditors and outside  advisors to ensure
that our controls and procedures are adequate and effective.


                                       31
<PAGE>


In an effort to resolve the deficiencies in internal  control,  mentioned above,
the  Company,   in  concurrence  with  the   recommendation  of  our  registered
independent  public  accounting  firm,  embarked upon an executive  search for a
qualified  candidate to fill the position of chief financial  officer (CFO). The
Company  successfully  concluded  the  executive  search on May 15, 2006 when it
signed a three year contract with Richard T. Ferrone, CPA, as the new CFO of the
Company.  The  addition  of  an  experienced  financial  executive  is  a  major
achievement  in  addressing  and  resolving  the  deficiencies  in our financial
controls and also  provides the Company with the capacity to develop and advance
the overall financial capabilities of the Company.

Quarterly Evaluation of Disclosure Controls and Procedures.  Our Chief Executive
Officer/Chief  Financial  Officer,  after  evaluating the  effectiveness  of the
Company's  "disclosure  controls and  procedures"  (as defined in the Securities
Exchange Act of 1934 (Exchange Act) Rules  13a-15(e) or 15d-15(e)) as of the end
of the  period  covered  by  this  quarterly  report,  has  concluded  that  our
disclosure  controls and  procedures  were not  effective to provide  reasonable
assurance  that  information  required to be disclosed  in our reports  filed or
submitted  under  the  Exchange  Act is  recorded,  processed,  summarized,  and
reported within the applicable time periods.

Changes in Internal Control over Financial Reporting.  As noted above, we are in
the process of improving  our internal  control over  financial  reporting in an
effort to resolve these deficiencies  through improved  supervision and training
of our  accounting  staff.  Additionally,  we have  recently  hired a new  Chief
Financial  Officer.  However,  additional effort is needed to fully remedy these
deficiencies.  Our  management  and directors will continue to work with our new
CFO,  our  auditors  and  outside  advisors  to  ensure  that our  controls  and
procedures are adequate and effective.

Limitations on  Effectiveness  of Controls.  A system of controls,  however well
designed and operated, can provide only reasonable, and not absolute,  assurance
that the system  will meet its  objectives.  The  design of a control  system is
based,  in part,  upon the benefits of the control system relative to its costs.
Control systems can be  circumvented by the individual acts of some persons,  by
collusion of two or more people,  or by management  override of the control.  In
addition,  over  time,  controls  may  become  inadequate  because of changes in
conditions,  or the degree of  compliance  with the policies or  procedures  may
deteriorate. In addition, the design of any control system is based in part upon
assumptions about the likelihood of future events.

While our disclosure  controls and procedures provide reasonable  assurance that
the appropriate  information will be available on a timely basis, this assurance
is subject to  limitations  inherent in any control  system,  no matter how well
designed and administered.

Section 404 Assessment.  Section 404 of the  Sarbanes-Oxley Act of 2002 requires
management's  annual  review and  evaluation  of our internal  controls,  and an
attestation of the effectiveness of these controls by our independent registered
public accountants  beginning with our Form 10-KSB for the fiscal year ending on
December  31,  2007.  We  plan  to  dedicate  significant  resources,  including
management time and effort,  and to incur  substantial  costs in connection with
our Section 404  assessment.  The  evaluation  of our internal  controls will be
conducted under the direction of our senior management. We will continue to work
to improve our controls and  procedures,  and to educate and train our employees
on our  existing  controls  and  procedures  in  connection  with our efforts to
maintain an effective controls infrastructure at our Company.

PART II. OTHER INFORMATION

Item 1.    Legal Proceedings


                                       32
<PAGE>


In November 2003, the Company  entered into an agreement with the Utah State Tax
Commission  to allow the Company to pay  certain  accrued  tax  liabilities  for
delinquent payroll taxes, including interest and penalties,  incurred by CirTran
Corporation owing to the State of Utah in equal monthly  installments over a two
year period.  Under the  agreement,  the Company would make monthly  payments of
$4,000  per  month  through  November  2005 to pay the tax  liability  only.  We
completed the payment of the taxes owing in November 2005, and subsequently paid
off the agreed-upon interest and penalties in January 2006.

We also assumed certain liabilities of Circuit  Technology,  Inc., in connection
with our transactions  with that entity in the year 2000, and as a result we are
defendant in a number of legal actions involving nonpayment of vendors for goods
and services  rendered.  We have  accrued  these  payables  and have  negotiated
settlements  with respect to some of the  liabilities,  including those detailed
below, and are currently  negotiating  settlements with other vendors. As of May
18, 2006, the only remaining  liability of Circuit  Technology is C/S Utilities,
discussed below.

C/S  Utilities  notified the Company that (as  successor to Circuit  Technology,
Inc.) it  believes  it has a claim  against the Company in the amount of $32,472
regarding utilities services. The claim was assigned to BC Services, Inc., which
obtained a judgment  against  Circuit  Technology,  Inc., for $37,966 in El Paso
County, Colorado,  District Court on February 13, 2003. The Company is reviewing
its records in an effort to confirm the validity of the claims and is evaluating
its options.

We (as successor to Circuit  Technology,  Inc.) were a defendant in an action in
El  Paso  County,   Colorado  District  Court,  brought  by  Sunborne  XII,  LLC
("Sunborne"),  a Colorado  limited  liability  company,  for alleged breach of a
sublease agreement  involving  facilities located in Colorado.  Our liability in
this  action  was  originally  estimated  to  range up to $2.5  million,  and we
subsequently  filed a counter  suit in the same  court  against  Sunborne  in an
amount exceeding $500,000 for missing  equipment.  Following several attempts to
settle the  claims,  we  entered  into a  settlement  agreement  with  Sunborne,
pursuant  to which we paid a total  of  $200,000  in  settlement  of all  claims
subsequent to year end. The action has been dismissed with prejudice.

CirTran Asia v. Mindstorm Civil No.  050902290,  Third Judicial  District Court,
Salt Lake County,  State of Utah. In February,  2005,  CirTran Asia brought suit
against Mindstorm Technologies, LLC, for nonpayment for goods provided. On April
22, 2005,  the  defendant  filed its answer and  counterclaim,  following  which
defendant's  counsel  withdrew  from   representation.   CirTran  Asia  notified
defendant  that under  governing  rules it was  required  to  appoint  successor
counsel.  The  defendant  failed to do so,  and failed to  prosecute  its claim.
CirTran  Asia  moved for  default  judgment,  which was  granted.  CirTran  Asia
submitted a proposed order of default  judgment in the amount of $288,529 to the
court in September 2005, which has been signed.

CirTran Asia v. Robinson,  Civil No.  050915272,  Third Judicial District Court,
Salt Lake County,  State of Utah. On August 30, 2005,  CirTran Asia brought suit
against Glenn Robinson,  one of the principals of Mindstorm  Technologies,  LLC,
for nonpayment for goods provided. Mr. Robinson filed an answer and subsequently
filed for personal bankruptcy. CirTran Asia is reviewing its options and intends
to  vigorously  pursue this  action.  On March 30,  2006,  CirTran  Asia filed a
complaint  against Mr.  Robinson under Section 523 of the U.S.  Bankruptcy  Code
seeking a determination  that any debts owed by Mr. Robinson to CirTran Asia are
excepted  from any  discharge  granted to Mr.  Robinson.  As of the date of this
Report, the case was proceeding in discovery.

CirTran Asia, et al. v.  International  Edge, et al.,  Civil No. 2:05 CV 413BSJ,
U.S.  District  Court,  District of Utah. On May 11, 2005,  CirTran Asia,  UKING
System Industry Co., Ltd., and Charles Ho filed suit against International Edge,
Inc.,  Michael Casey  Enterprises,  Inc., Michael Casey, David Hayek, and HIPMG,


                                       33
<PAGE>


Inc., for breach of contract,  breach of the implied  covenant of good faith and
fair dealing, interference with economic relationships, and fraud in relation to
certain   licensing   issues  relating  to  the  Ab  King  Pro.  The  defendants
counterclaimed,  alleging  breach of  contract,  fraud,  defamation  and related
claims,  all  related  to the Ab King  Pro,  seeking  damages  in the  amount of
$10,000,000.  CirTran  Asia and the other  plaintiffs  filed  their reply to the
counterclaim,  disputing all of the allegations and claims.  International  Edge
filed a motion to dismiss for lack of jurisdiction,  which was pending as of the
date of this report. Sales from this product in the year ended December 31, 2004
were  approximately  $3,510,000,  and in the year ended December 31, 2005,  were
approximately $960,000. CirTran Asia intends to vigorously pursue this action.

CirTran  Corporation vs. Advanced Beauty  Solutions,  LLC, and Jason Dodo, Civil
No. 060900332,  Third Judicial District Court, Salt Lake County,  State of Utah.
On January 9, 2006,  CirTran  Corporation  brought suit against  Advanced Beauty
Solutions ("ABS") and Jason Dodo, asserting claims including breach of contract,
breach of the implied covenant of good faith and fair dealing, interference with
economic relations, fraud and unjust enrichment.

On January 24, 2006, ABS filed a voluntary  petition for relief under chapter 11
of the United States  Bankruptcy Code in the United States  Bankruptcy Court for
the  Central   District  of  California,   San  Fernando  Valley  Division  (the
"Bankruptcy  Court"),  Case No. SV 06-10076  GM. On January 30,  2006, a hearing
("Hearing")  was held to consider the Emergency  Motion for Order  Approving the
Settlement  and Compromise of the Disputed  Secured Claims of Inventory  Capital
Group,  Inc.  ("ICG"),  and Media Funding  Corporation  ("MFC") (the "Settlement
Motion") filed by ABS. The continued  Hearing on the Settlement  Motion was held
on February 16, 2006,  at which time the  settlement  was  modified.  Prior to a
separate  hearing  held on March  24,  2006,  on ABS's  Motion  for  Order:  (1)
Approving Sale and Assignment of Substantially All Assets of the Estate Free and
Clear of Liens; (2) Approving  Assumption and Assignment of Leases and Executory
Contracts  Included in the Sale and Rejection of Leases and Executory  Contracts
Not Included in the Sale; and (3) Granting  Related Relief (the "Sale  Motion"),
the  settlement  was  further  modified.   The  modifications  to  the  proposed
settlement  were read into the  Bankruptcy  Court's record at the Hearing on the
Settlement  Motion and the March 24, 2006 hearing on the Sale Motion  ("Proposed
Modifications").  Written notice of the Proposed  Modifications  was provided to
creditors  and parties in interests on March 27, 2006,  and the  Declaration  of
James  C.  Bastian,   Jr.,   attesting   that  no  objections  to  the  Proposed
Modifications have been received by ABS, was filed with the Bankruptcy Court. As
of May 18, 2006,  an order  approving the  settlement  and the sale had not been
entered by the bankruptcy  court.

Subject to and conditioned upon the approval of the settlement by the Bankruptcy
Court  and  Bankruptcy  Court  approval  of  and  consummation  of the  sale  of
substantially  all of ABS's  assets to the Company  pursuant to the Sale Motion,
the Company  shall have an allowed  claim against the ABS's estate in the amount
of  $2,350,000,  of  which  $750,000  shall  be  credited  to  the  purchase  of
substantially  all of ABS's assets.  Under the settlement,  the Company shall be
allowed to  participate as a general  unsecured  creditor of ABS's estate in the
amount of $1,600,000 on a pari passu basis with the $2,100,000 general unsecured
claim of certain  insiders  of ABS and  subject to the prior  payment of certain
secured,  priority,  and  non-insider  claims  in the  amount  of  approximately
$1,507,011.  Subject to final negotiation and execution of a definitive purchase
agreement and Bankruptcy Court Approval of the sale,  CirTran  Corporation shall
purchase substantially all of ABS's assets in exchange for (i) a cash payment in
the amount of  $1,125,000,  (ii) a reduction of CirTran's  allowed  claim in the
Bankruptcy  Case by $750,000,  (iii) the assumption of any assumed  liabilities,
and (iv) the obligation to pay ABS a royalty equal to $3.00 per True Ceramic Pro
flat iron unit sold by ABS (the "Royalty  Obligation").  The Royalty  Obligation
shall be capped at $4,135,000.  To the extent the amounts paid to ABS on account


                                       34
<PAGE>


of the Royalty  Obligation equal less than $435,000 on the 2 year anniversary of
the Closing, then, within 30 days of such anniversary, the Company shall pay ABS
an amount equal to $435,000  less the royalty  payments made to date. As part of
the settlement,  the Company shall exchange general releases with, among others,
ABS, Jason Dodo (the manager of ABS), Inventory Capital Group ("ICG"), and Media
Funding Corporation ("MFC"). The settlement also resolves a related dispute with
ICG in which ICG will  assign  $65,000 of its secured  claim  against ABS to the
Company.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

In January 2006,  Highgate converted $750,000 of its convertible  debenture into
24,193,548 shares of the Company's  restricted common stock at a conversion rate
of $0.031 per share,  which was the lower of $0.10 or 100% of the lowest closing
bid price of the Company's  commons stock over the 20 trading days preceding the
conversion.

In February 2006, we issued 4,000,000 shares of our restricted  common stock and
a warrant to purchase an additional  7,000,000  shares with an exercise price of
$0.06 per share in settlement of litigation.

In each case the securities were issued in connection with private  transactions
with accredited investors pursuant to Section 4(2) of the Securities Act of 1933
and the regulations promulgated thereunder.

Item 5.    Other Information

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).
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.


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<PAGE>


In January,  2002, the Company entered into an agreement with Abacas under which
the Company issued an aggregate of 19,987,853  shares of common stock to four of
Abacas's  shareholders  in exchange for  cancellation  by Abacas of an aggregate
amount of $1,499,090  in senior debt owed to the  creditors by the Company.  The
shares were issued with an exchange price of $0.075 per share, for the aggregate
amount of $1,500,000.

In December, 2002, the Company entered into an agreement with Abacas under which
the Company issued an aggregate of 30,000,000  shares of common stock to four of
Abacas's  shareholders  in exchange for  cancellation  by Abacas of an aggregate
amount of $1,500,000  in senior debt owed to the  creditors by the Company.  The
shares were issued with an exchange price of $0.05 per share,  for the aggregate
amount of $1,500,000.

During  2002,  the Company  entered  into a verbal  bridge loan  agreement  with
Abacas.  This  agreement  allows the  Company to  request  funds from  Abacas to
finance the build-up of  inventory  relating to specific  sales.  The loan bears
interest  at 24%  and is  payable  on  demand.  There  are no  required  monthly
payments.  During the years ended  December  31, 2004 and 2003,  the Company was
advanced  $3,128,281  and  $350,000,  respectively,  and made cash  payments  of
$3,025,149 and $875,000, respectively.

During the year ended  December 31, 2004,  Abacas  completed  negotiations  with
several  vendors of the  Company,  whereby  Abacas  purchased  various  past due
amounts for goods and  services  provided by vendors,  as well as notes  payable
(see Note 6). The total of these  obligations  was  $1,263,713.  The Company has
recorded this transaction as a $1,263,713  non-cash increase to the note payable
owed to Abacas, pursuant to the terms of the Abacas agreement.

The total  principal  amount  owed to Abacas  between  the note  payable and the
bridge  loan was  $1,530,587  and  $163,742  as of  December  31, 2004 and 2003,
respectively. The total accrued interest owed to Abacas between the note payable
and the bridge loan was  $430,828 and $230,484 as of December 31, 2004 and 2003,
respectively, and is included in accrued liabilities.

In March  2005,  the  shareholders  of Abacas  agreed to  cancel  $2,050,000  of
principal and accrued  interest in return for the Company's  issuing  51,250,000
shares of our  restricted  common stock to certain  shareholders  of Abacas.  No
registration rights were granted.

As of May 18, 2006, no further loans had been made to the Company from Abacas.

As of December 31, 2001, Iehab Hawatmeh had loaned us a total of $1,390,125. The
loans were demand  loans,  bore  interest  at 10% per annum and were  unsecured.
Effective  January  14,  2002,  we  entered  into four  substantially  identical
agreements with existing  shareholders  pursuant to which we issued an aggregate
of 43,321,186  shares of restricted  common stock at a price of $0.075 per share
for $500,000 in cash and the cancellation of $2,749,090  principal amount of our
debt. Two of these agreements were with the Saliba Private Annuity Trust, one of
our principal  shareholders,  and a related entity, the Saliba Living Trust. The
Saliba  trusts  are also  principals  of Abacas  Ventures,  Inc.,  which  entity
purchased our line of credit in May 2000. Pursuant to the Saliba agreements, the
trusts were issued a total of 26,654,520  shares of common stock in exchange for
$500,000 cash and the  cancellation  of $1,499,090 of debt. We used the $500,000
cash  from the sale of the  shares  for  working  capital.  As a result  of this
transaction,  the  percentage  of our common  stock owned by the Saliba  Private
Annuity Trust and the Saliba Living Trust increased from approximately  6.73% to
approximately 17.76%. Mr. Trevor Saliba, one of our directors and officers, is a
passive  beneficiary of the Saliba Private Annuity Trust.  Pursuant to the other
two agreements made in January 2002, we issued an aggregate of 16,666,666 shares
of  restricted  common  stock at a price of $0.075 per share in exchange for the
cancellation  of  $1,250,000  of notes  payable by two  shareholders,  Mr. Iehab
Hawatmeh (our president, a director and our principal shareholder) and Mr. Rajai


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<PAGE>


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.

Item 6.    Exhibits

           Exhibits:

           10.1       Employment  Agreement  with  Richard  Ferrone  (previously
                      filed as an exhibit to a Current  Report on Form 8-K filed
                      with the Commission on May 15, 2006, and incorporated here
                      in by reference).
           10.2       Marketing   and   Distribution   Agree   between   CirTran
                      Corporation  and Harrington  Business  Development,  Inc.,
                      dated as of October 24, 2005.
           10.3       Amendment  to Marketing  and  Distribution  Agree  between
                      CirTran Corporation and Harrington  Business  Development,
                      Inc., dated as of March 31, 2006.
           31         Certification
           32         Certification  Pursuant  to 18  U.S.C.  Section  1350,  as
                      Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act
                      of 2002


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<PAGE>


                                   SIGNATURES

In accordance  with the Securities  Exchange Act of 1934, the registrant  caused
this  report to be  signed  on its  behalf  by the  undersigned  thereunto  duly
authorized.


                                          CIRTRAN CORPORATION

Date:   May 19, 2006                      By: /s/ Iehab J. Hawatmeh
                                          -------------------------------------
                                          Iehab J. Hawatmeh
                                          President and Chief Financial Officer
                                          (Principal Executive Officer,
                                          Principal Financial Officer)
































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