================================================================================

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

                                  FORM 10-QSB/A
                                (Amendment No. 1)

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

         For the quarterly period ended September 30, 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 November
14, 2006: 656,795,424.

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 September 30, 2006, (unaudited) and
         December 31, 2005                                                    3

         Statements of Operations for the Three Months and
         Nine Months ended September 30, 2006, (unaudited) and
         2005 (unaudited)                                                     4

         Statements of Cash Flows for the Nine Months ended
         September 30, 2006, (unaudited) and 2005 (unaudited)                 5

         Notes to Condensed Consolidated Financial Statements
         (unaudited)                                                          7

Item 2.  Management's Discussion and Analysis or Plan of Operation           23

Item 3.  Controls and Procedures                                             44

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings                                                   46

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds         49

Item 5.  Other Information                                                   50

Item 6   Exhibits                                                            52

Signatures                                                                   55






                                       2
<PAGE>


                      CIRTRAN CORPORATION AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

                                                  September 30,     December 31,
                                                           2006             2005
--------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents                          $    717,357    $  1,427,865
Trade accounts receivable, net of allowance
   for doubtful accounts of $2,617 and
   $158,374, respectively                             2,233,651       3,358,981
Inventory, Net of reserve of $751,296 and
   $751,296, respectively                             1,783,446       2,271,604
Prepaid Deposits                                         50,000         142,188
Other                                                   223,252         252,941
--------------------------------------------------------------------------------
   Total Current Assets                               5,007,706       7,453,579

Property and Equipment, Net                           2,714,205       2,686,737

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

Intellectual Property                                 2,610,163               -

Long Term Receivable                                  1,705,000               -

Deposits                                                217,751         100,000

Other                                                   364,303         361,581
--------------------------------------------------------------------------------

Total Assets                                       $ 12,919,128    $ 10,901,897
================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities
Accounts payable                                   $  1,021,576    $  1,239,519
Accrued liabilities                                     720,183       1,222,018
Deferred revenue                                        600,192         119,945
Derivative liability                                  6,122,705       4,910,303
Convertible debenture                                         -         996,252
Current maturities of long-term notes payable                 -          12,610
Notes payable to stockholders                         2,442,997          95,806
--------------------------------------------------------------------------------
   Total Current Liabilities                         10,907,653       8,596,453

Long-Term Notes Payable, Less Current Maturities      1,443,925       1,037,390
--------------------------------------------------------------------------------

   Total Liabilities                                 12,351,578       9,633,843
--------------------------------------------------------------------------------

Commitments and Contingencies

Stockholders' Equity
Common stock, par value $0.001; authorized
   750,000,000 shares; issued and outstanding
   shares: 651,667,219 and 583,368,569                  651,662         583,364
Additional paid-in capital                           23,155,802      20,012,000
Accumulated deficit                                 (23,239,914)    (19,327,310)
--------------------------------------------------------------------------------
   Total Stockholders' Equity                           567,550       1,268,054
--------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity         $ 12,919,128    $ 10,901,897
================================================================================

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


                                       3
<PAGE>

<TABLE>
<CAPTION>
                                     CIRTRAN CORPORATION AND SUBSIDIARIES
                          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                                                For the Three Months Ended       For the Nine Months Ended
                                                        September 30,                   September 30,
                                                ---------------------------     ------------------------------
                                                     2006            2005           2006            2005
--------------------------------------------------------------------------------------------------------------
<S>                                             <C>             <C>             <C>             <C>
Net Sales                                       $  3,044,853    $  4,291,762    $  7,007,118    $ 11,521,411
Cost of Sales                                     (2,307,237)     (2,620,109)     (4,529,641)     (6,962,380)
--------------------------------------------------------------------------------------------------------------

   Gross Profit                                      737,616       1,671,653       2,477,477       4,559,031
--------------------------------------------------------------------------------------------------------------

Operating Expenses
 Selling, general and administrative expenses      1,062,570       1,036,565       3,826,899       3,565,707
 Non-cash employee compensation expense                    -               -          65,616          69,000
--------------------------------------------------------------------------------------------------------------
   Total Operating Expenses                        1,062,570       1,036,565       3,892,515       3,634,707
--------------------------------------------------------------------------------------------------------------

     Income (Loss) From Operations                  (324,954)        635,088      (1,415,038)        924,324
--------------------------------------------------------------------------------------------------------------

Other Income (Expense)
 Interest                                           (693,494)       (149,732)     (2,330,309)       (412,530)
 Other, net                                                -            (362)              -            (217)
 Gain on forgiveness of debt                               -          90,048           6,930         327,966
 Gain on derivative valuation                     (1,961,840)              -        (174,187)              -
--------------------------------------------------------------------------------------------------------------
   Total Other Expense, Net                       (2,655,334)        (60,046)     (2,497,566)        (84,781)
--------------------------------------------------------------------------------------------------------------

Net Income (Loss)                               $ (2,980,288)   $    575,042    $ (3,912,604)   $    839,543
--------------------------------------------------------------------------------------------------------------

Basic loss per common share                          $     -          $    -          $    -          $    -
--------------------------------------------------------------------------------------------------------------
Diluted loss per common share                        $     -          $    -          $    -          $    -
--------------------------------------------------------------------------------------------------------------












The accompanying notes are an integral part of these financial statements


                                                      4
</TABLE>
<PAGE>


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

For the Nine Months Ended September 30,                     2006          2005
--------------------------------------------------------------------------------

Cash flows from operating activities
Net income (loss)                                    $(3,912,604)   $   839,543
Adjustments to reconcile net loss to net
 cash used in operating activities:
    Depreciation and amortization                        353,793        253,701
    Accretion expense                                  1,924,996              -
    Provision for doubtful accounts                     (155,757)          (276)
    Amortization of loan premium to interest expense           -         84,409
    Amortization of beneficial conversion feature              -         59,040
    Gain on forgiveness of debt                           (6,930)      (327,966)
    Non-cash employee compensation expense                57,756              -
    Loan costs and interest paid from loan proceeds            -         67,168
    Deferred offering costs expensed                           -         68,000
    Options exercised in lieu of board compensation            -         69,000
    Options issued to attorneys and consultants for
     services                                             59,851        109,728
    Change in valuation of derivative                    174,187              -
 Changes in assets and liabilities:
      Trade accounts receivable                       (1,079,913)    (3,686,267)
      Other receivables                                        -        (58,494)
      Prepaid Deposits                                   142,188              -
      Inventories                                        864,158          5,169
      Prepaid expenses and other assets                 (259,946)      (244,764)
      Accounts payable                                  (198,967)     1,110,172
      Accrued liabilities                                 45,281        396,441
      Deferred revenue                                   480,247              -
      Intangibles                                       (120,000)             -
--------------------------------------------------------------------------------

      Total adjustments                                2,280,944     (2,094,939)
--------------------------------------------------------------------------------

 Net cash used in operating activities                (1,631,660)    (1,255,396)
--------------------------------------------------------------------------------

Cash flows from investing activities
Cash acquired with PFE acquisition                             -         39,331
Net change in deposits                                         -       (100,000)
Intangibles purchased with cash                         (556,163)             -
ABS assets acquired with cash                         (1,125,000)             -
Cash issued on LOC                                       (40,000)             -
Purchase of property and equipment                      (262,100)      (253,196)
--------------------------------------------------------------------------------

 Net cash used in investing activities                (1,983,263)      (313,865)
--------------------------------------------------------------------------------

Cash flows from financing activities
Proceeds from notes payable to stockholders                    -          4,414
Proceeds from notes payable                            1,500,000      1,732,067
Principal payments on notes payable                      (26,155)             -
Proceeds from notes payable to related parties           110,837         95,586
Payment on notes payable to related parties             (206,643)             -
Proceeds from stock issued in private placement        1,500,000              -
Proceeds from exercise of options and warrants to
  purchase common stock                                        -         33,000
Exercise of options issued to attorneys and
  consultants for services                                26,376            450
--------------------------------------------------------------------------------

 Net cash provided by financing activities             2,904,415      1,865,517
--------------------------------------------------------------------------------

Net increase (decrease) in cash and cash equivalents    (710,508)       296,256

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

Cash and cash equivalents at end of period           $   717,357    $   377,357
--------------------------------------------------------------------------------

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 Nine Months Ended September 30,                        2006         2005
--------------------------------------------------------------------------------
Supplemental disclosure of cash flow information

Cash paid during the period for interest                 $  119,552   $  112,706

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
Issuance of stock and options for settlement of
  litigation                                                464,187      411,402
Reclassification accounts receivable to notes
  receivable                                              1,665,000            -
Stock issued for settlement of notes payable and
  accrued interest                                          130,000      234,500
ABS assets acquired in exchange for guaranteed
  payment and reduction of claim                          1,185,000            -
Warrants issued with derivative liability features          955,520            -
Options granted and exercised in partial settlement
  of payable                                                 18,974            -
Stock options exercised for settlement of notes
  payable to stockholders                                         -       23,000
Loan fees incurred as part of convertible debenture               -      250,765
Beneficial conversion feature on convertible debenture            -      441,176
Common Stock issued for partial conversion of
  Convertible Debenture                                   1,910,477            -
Convertible debenture proceeds used to settle
  notes payable outstanding                                       -    2,265,000








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 nine months
ended September 30, 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 its 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.

In March of 2006, the Company formed Diverse Media Group Corporation  ("DMG"), a
wholly  owned  subsidiary  to  provide  services  to  the  direct  response  and
entertainment industries.

Stock-Based  Compensation -- Effective  January 1, 2006, the Company adopted the
provisions of Statement of Financial  Accounting Standards No. 123R, Share Based
Payment  ("SFAS 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.


                                       7
<PAGE>


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

                                                          Nine Months Ended
                                                            September 30,
                                                      -------------------------
                                                         2006           2005
                                                      ----------     ----------
Expected dividend yield                                        -              -
Risk free interest rate                                    4.95%          3.91%
Expected volatility                                         243%           276%
Expected life                                         0.10 years     0.13 years
Weighted average fair value per share                     $ 0.02         $ 0.02

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


All  previously  issued  options  were  fully  vested  prior to January 1, 2006.
Therefore, there were no compensation costs relating to stock-based compensation
from previous  periods  including the effects from adoption of SFAS 123R.  There
were 4,000,000  employee  options granted during the nine months ended September
30,  2006,  that  resulted  in $29,590 in  compensation  costs  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        Nine Months
                                                  Ended              Ended
                                              September 30,      September 30,
                                                  2005               2005
--------------------------------------------------------------------------------
Net loss, as reported                          $ 575,042          $ 839,543
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          (47,850)          (271,456)
--------------------------------------------------------------------------------
Pro forma net loss                             $ 527,192          $ 637,087
--------------------------------------------------------------------------------
                                               $ 380,871          $ 109,895

Basic and diluted loss per common share
 as reported                                   $   (0.00)         $   (0.00)
--------------------------------------------------------------------------------

Basic and diluted loss per common share
 pro forma                                     $   (0.00)         $   (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 $11,511 during the nine months ended September
30, 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


                                       8
<PAGE>


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 September  30, 2006.  No  indicators of impairment
were noted.

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 a net loss of  $3,912,604  for the nine months ended  September  30,
2006,  compared to a net loss of $527,708 for the year ended  December 31, 2005.
As of September 30, 2006,  and December 31, 2005, the Company had an accumulated
deficit of $23,239,914 and $19,327,310,  respectively, and a total stockholders'
equity of $567,544 and $1,268,054,  respectively. The Company also had a working
capital  deficit of $5,899,947  and  $1,142,874  as of September  30, 2006,  and
December 31, 2005,  respectively.  In addition,  the Company  used,  rather than
provided, cash in its operations in the amounts of $1,631,660 and $1,751,744 for
the nine months ended  September 30, 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 - BASIC AND DILUTED NET INCOME (LOSS) PER SHARe

In accordance  with SFAS No. 128,  "Earnings per Share," the following  presents
the computation of basic and diluted net income (loss) per share:

<TABLE>
<CAPTION>
                                              Three Months Ended               Nine Months Ended
                                                 September 30,                   September 30,
                                         ---------------------------------------------------------------
                                               2006            2005            2006            2005
---------------------------------------------------------------------------------------------------------
<S>                                      <C>              <C>             <C>              <C>
Basic and diluted net income (loss)
  available to common shareholders       $  (2,980,291)   $     575,042   $  (3,912,604)   $     839,543
---------------------------------------------------------------------------------------------------------

Basic weighted-average common
  shares outstanding                       576,101,903      545,535,235

Effect of convertible debenture                      -      125,000,000               -      125,000,000

Effect of dilutive stock options                     -        4,370,619               -        5,057,565
---------------------------------------------------------------------------------------------------------

Diluted weighted-average common
  shares outstanding                                 -      705,472,522               -      675,592,800
---------------------------------------------------------------------------------------------------------

Basic income (loss) per common share     $           -    $          -    $          -     $          -
---------------------------------------------------------------------------------------------------------

Diluted income (loss) per common share   $           -    $          -    $          -     $          -
---------------------------------------------------------------------------------------------------------
</TABLE>

Those were  approximately  10,750,000  options and  warrants  outstanding  as of
September   30,  2006  that  were  not   included  as  their   effect  would  be
anti-dilutive.


                                        9
<PAGE>


NOTE 4 - Asset Purchase Agreement

During 2005,  the Company had various  manufacturing  agreements  with  Advanced
Beauty Solutions,  LLC ("ABS"), an unrelated party,  relating to the manufacture
of two beauty products. In early October 2005, the Company was notified that ABS
had defaulted on its obligation to its financing  company.  Following the notice
of ABS's default,  the Company  terminated the agreements for the products based
on the default. In January 2006,  following efforts to resolve the disputes with
ABS, the Company  filed a lawsuit  against  ABS,  bringing  numerous  claims and
seeking damages from ABS. Later in January 2006, ABS filed a voluntary  petition
for relief under Chapter 11 of the United States Bankruptcy Code.

On June 6, 2006,  the Company and ABS entered into an asset  purchase  agreement
whereby the Company  purchased  certain  assets of ABS. This asset  purchase was
approved  by  the  bankruptcy  court.  Under  the  terms  of the  agreement  the
consideration  paid by the Company  consisted of a $1,125,000  cash  payment,  a
reduction  of the  Company's  allowed  claim  against ABS of  $750,000,  and the
obligation  to pay ABS a  royalty  equal  to $3.00  per unit  sold of one of the
beauty products. As part of the royalty agreement the Company guaranteed royalty
payments  of at least  $435,000  over a two year  period.  This  amount has been
recorded as a note payable.  The maximum royalty  obligation is $4,135,000.  The
difference  between the guaranteed  royalty  obligation and the maximum  royalty
obligation  has  been  determined  to be  contingent  consideration  and will be
recorded at such time that those royalties are earned.

The  assets  acquired  include   inventory,   an  infomercial,   trademarks  and
copyrights.  The Company has allocated the purchase  price to these assets based
on the relative fair value of the assets as estimated by the Company.

NOTE 5 - RELATED PARTY TRANSACTIONS

Notes Payable to  Stockholders -- During June 2006, the President of the Company
loaned the Company a net amount of $110,837 which was recorded as a note payable
to a  stockholder.  In August 2006,  the Company made a payment to the President
which repaid the entire balance $110,837 of the loan.

During  December 2005,  the President of the Company loaned the Company  $95,806
which was recorded as a note payable to a stockholder. 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 President  which repaid the entire balance $95,806
of the loan.

NOTE 6 - 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


                                       10
<PAGE>


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.

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. 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 to Highgate House Funds, LTD.  ("Highgate")  (discussed
below), the Company granted to Highgate  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


                                       11
<PAGE>


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. On August 11, 2006, the registration  statement
was declared effective.

In December  2005,  in connection  with the Company's  issuance of a convertible
debenture to Cornell Capital Partners, L.P. ("Cornell Capital") (discussed below
in Note 8), 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  subsequently  entered into an agreement with Cornell to
extend the filing date of the  registration  statement to October 30, 2006. [The
agreement was subsequently amended to extend the filing date of the registration
to December  31,  2006.] The Company also agreed to use its best efforts to have
the registration  statement  declared effective within 270 days after filing the
registration statement.

In August 2006, in connection with the Company's issuance of another convertible
debenture to Cornell  Capital,  the Company entered into an amended and restated
registration  rights  agreement  with  Cornell  Capital,  which  superseded  the
registration  rights  agreement  from the December 2005  debenture  transaction.
Pursuant to the amended  registration  rights  agreement,  the Company agreed to
file a registration  statement to register the resale of shares of the Company's
common stock issuable upon conversion of both debentures.  The Company agreed to
file the  registration  statement  by  October  30,  2006.  [The  agreement  was
subsequently  amended to extend the filing date of the  registration to December
31,  2006.]  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. As of November 14, 2006 no such registration statement
had been filed.

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.

Diverse  Talent Group  Transaction - On May 26, 2006,  our  subsidiary,  Diverse
Media Group ("DMG") entered into an assignment and exclusive  services agreement
with  Diverse  Talent  Group,   Inc.,  an  unrelated  party,  ("DT  Group")  and
Christopher  Nassif  ("Nassif" and together with DT Group,  "DT").  The Services
Agreement was made  effective as of April 1, 2006 (the  "Effective  Date").  The
term of the Services Agreement is for five years, and expires on March 31, 2011.

Pursuant  to the  Services  Agreement,  DMG and DT  entered  into  an  exclusive
operations  relationship  whereby  DMG agreed to  outsource  its  talent  agency
operations to DT and to provide financing to DT to assist in DT's growth.  Under
the  Services  Agreement,  DMG and DT  created a  relationship  whereby DT would
operate exclusively under the DMG business structure.

At the time of signing the Services Agreement, DMG paid to DT an initial payment
of $50,000  for the right to use the name  "Diverse",  the right to obtain  DT's
services on an exclusive basis, all accounts receivable and contracts receivable
of DT Group as of the Effective  Date and the assignment by DT of certain talent
contracts. This has been classified as an intangible asset and will be amortized
over the five year term of the agreement.


                                       12
<PAGE>


As  future  compensation  for  services  provided,  DMG  agreed  to  pay to DT a
percentage of the gross profits for the talent contracts entered into between DT
and its clients.  The percentage ranges from 62.5% to 85%, depending on the type
of talent  contract and the amount of gross  compensation  paid under the talent
contract.

In connection  with the Services  Agreement,  Nassif  entered into an employment
agreement (the "Employment  Agreement") with DMG. Nassif's continued  employment
with DMG is an express condition of the Services Agreement. Under the Employment
Agreement,  DMG agreed to cause to be issued to DT options  (the  "Options")  to
purchase a total of 2,500,000  shares of the  Company's  common  stock,  with an
exercise price of $0.045 per share.  The Options will expire five years from the
date of grant if not exercised  prior to that date. The Options vest as follows:
500,000 on the date of grant, and an additional 500,000 on each of the next four
anniversaries of the Effective Date,  subject to Nassif's  continued  employment
with DMG.

The Company estimated the fair value of these options of $27,691 using the Black
Scholes  model with the following  assumption:  risk fee interest rate of 4.95%,
estimated  future  volatility of 244% and a dividend  yield of 0.00. The Company
recognized $7,560 of the total fair value as compensation expense in the current
period.

DMG also agreed in the  Services  Agreement  to provide  financing to DT, in the
form of a non-interest-bearing  capital line of credit (the "Capital Line"), not
to exceed $200,000,  pursuant to a loan agreement (the "Loan Agreement"). DT may
make  weekly  draws  not to  exceed  $20,000  on terms as set  forth in the Loan
Agreement.  As of September  30, 2006, DT had drawn $40,000 on the Capital Line,
which is included in long term receivables.

In  connection  with the Loan  Agreement,  DT and DMG  entered  into a  security
agreement  (the  "Security  Agreement"),  pursuant  to which DT granted to DMG a
security  interest the "Security  Interest") in all of the personal  property of
DT, including  inventory,  accounts,  equipment,  general  intangibles,  deposit
accounts,  and  other  items  listed in the  Security  Agreement.  The  Security
Interest secures DT's obligations to DMG under the Capital Line.

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


                                       13
<PAGE>


(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 August  18,  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 nine months ended  September 30, 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:

                                Options       Each Multiple of     Options for
              Initial         for Initial       Units above       Each 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 September 30, 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 7 - 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 8 - 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 September  30, 2006,  and December 31, 2005,  was $227,966 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


                                       14
<PAGE>


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. (See Note
6.)

The Company  determined that the features of the Debenture fell under derivative
accounting  treatment.  As of  September  30,  2006  the  carrying  value of the
Debenture was $1,544,347.  The carrying value will be accreted each quarter over
the life of the Debenture until the carrying value equals the  unconverted  face
value of $2,850,000 (see below).  The fair value of the derivative  liability as
of September 30, 2006 was $2,221,058.

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 common stock over the 20 trading days preceding the conversion.

In September 2006, Highgate converted $150,000 of its convertible debenture into
8,051,530  shares of the Company's common stock at a conversion rate of $0.01863
per share,  which was the lower of $0.10 or 100% of the lowest closing bid price
of the Company's common stock over the 20 trading days preceding the conversion.


                                       15
<PAGE>


In  November  2006,  Highgate  converted  $100,000  of accrued  interest  of its
convertible  debenture into 5,128,205  shares of the Company's common stock at a
conversion rate of $0.019 per share, which was the lower of $0.10 or 100% of the
lowest closing bid price of the Company's  common 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 September 30, 2006 and December 31, 2005 was $55,890 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.

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 6.)


                                       16
<PAGE>


The  Company  determined  that the  features on the  Cornell  Debenture  and the
associated warrants fell under derivative accounting treatment.  As of September
30, 2006 the carrying value of the Cornell Debenture was $434,252.  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 relating to the Cornell debenture,  excluding the warrants,
as of  September  30, 2006 was  $1,342,864.  The fair value of the  warrants was
$80,452 as of September 30, 2006.

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 September 30, 2006, Cornell had not converted any of the Cornell Debenture
into shares of the Company's common stock.

Cornell - On August 23,  2006,  the  Company  entered  into  another  securities
purchase agreement (the "Purchase Agreement") with Cornell, relating to the sale
by the Company of a 5% Secured Convertible Debenture, due April 23, 2009, in the
aggregate principal amount of $1,500,000 (the "August Debenture").

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 September 30, 2006 was $7,603.

The Company also paid a  commitment  fee of $120,000  and a  structuring  fee of
$15,000 to Cornell. As such, of the total purchase amount of $1,500,000, the net
proceeds to the Company were  $1,365,000.  The Company  used these  proceeds for
general corporate and working capital purposes,  in its discretion.  The Company
did not use any of the proceeds of the sale of the August Debenture to repay any
of the Highgate Debenture or the prior Cornell Debenture.

Cornell is  entitled to convert,  at its  option,  all or part of the  principal
amount  owing under the August  Debenture  into shares of the  Company's  common
stock at a  conversion  price  equal one  hundred  percent  (100%) of the lowest
closing bid price of the Common  Stock as listed on the OTC Bulletin  Board,  as
quoted by Bloomberg L.P. for the twenty (20) trading days immediately  preceding
the  Conversion  Date  Except as  otherwise  set forth in the August  Debenture,
Cornell's right to convert  principal  amounts owing under the August  Debenture
into shares of the Company's common stock is limited as follows:

         (i)      Cornell  may  convert up to  $500,000  worth of the  principal
                  amount plus  accrued  interest of the August  Debenture in any
                  consecutive  30-day  period  when the  price of the  Company's
                  stock is $0.03 per share or less at the time of conversion;

         (ii)     Cornell may convert  any amount of the  principal  amount plus
                  accrued  interest of the August  Debenture in any  consecutive
                  30-day period when the price of the Company's stock is greater
                  than $0.03 per share at the time of conversion; and

         (iii)    Upon the  occurrence of an Event of Default (as defined in the
                  Debenture),  Cornell may, in its sole  discretion,  accelerate
                  full  repayment  of all  debentures  outstanding  and  accrued
                  interest  thereon  or  may,  notwithstanding  any  limitations
                  contained  in  the  August   Debenture   and/or  the  Purchase
                  Agreement,  convert  all  debentures  outstanding  and accrued
                  interest  thereon in to shares of the  Company's  Common Stock
                  pursuant to the August Debenture.


                                       17
<PAGE>


Except in the event of default, Cornell may not convert the August Debenture for
a number of shares of common  stock that  would  cause the  aggregate  number of
shares of Common  Stock  beneficially  owned by Cornell  and its  affiliates  to
exceed  4.99% of the  outstanding  shares of the  common  stock  following  such
conversion.

In connection with the Purchase  Agreement,  the Company also agreed to grant to
Cornell  warrants (the  "Warrants")  to purchase up to an additional  15,000,000
shares of the  Company's  common stock.  The Warrants have an exercise  price of
$0.06 per share, and expire three years from the date of issuance.  The Warrants
also  provide for cashless  exercise if at the time of exercise  there is not an
effective registration statement or if an event of default has occurred.

In connection  with the issuance of the August  Debenture,  the Company  granted
Cornell  registration rights related to the issuance of the August Debenture and
warrants. (See Note 6.)

The  Company  determined  that the  features  on the  August  Debenture  and the
associated warrants fell under derivative accounting treatment.  As of September
30, 2006 the carrying value of the August  Debenture was $449,478.  The carrying
value  will be  accreted  each  quarter  over  the  life of the  Cornell  August
Debenture until the carrying value equals the face value of $1,500,000. The fair
value of the derivative  liability  relating to the August Debenture,  excluding
the  warrants,  as of September 30, 2006 was  $1,626,859.  The fair value of the
warrants was $168,192 as of September 30, 2006.

In  connection  with the  Cornell  Debenture,  Cornell  agreed that it could not
convert  any  amount of  principal  or  interest  of the  Cornell  Debenture  in
accordance  with the terms  and  conditions  of the  Lockdown  Agreement  by and
between the Company and Cornell July 20, 2006, until the Company has effectuated
an increase in its authorized capital.  The Company and Cornell also agreed that
in the  event  that  the  Company  had  not  effectuated  such  increase  in its
authorized  capital by October  30,  2006,  which was  subsequently  extended to
December 31, 2006, such failure would constitute an event of default on parallel
with  those  set  forth  in the  Purchase  Agreement  and  subject  to the  same
consequences as those listed in the Purchase Agreement.

In connection with the issuance of the August  Debenture,  fees of $135,000 were
withheld from the proceeds,  capitalized, and will be amortized over the life of
the August Debenture. As such, of the total August Debenture of $1,500,000,  the
net  proceeds to the Company  were  $1,365,000.  The  proceeds  will be used for
general corporate and working capital purposes, at the Company's discretion.

As of September 30, 2006,  Cornell had not converted any of the August Debenture
into shares of the Company's common stock.

NOTE 9 - STOCKHOLDERS' EQUITY

Common Stock  Issuances -- During the nine months ended  September 30, 2006, the
Company  issued  4,000,000  shares of common stock as a settlement of litigation
with an investment firm. (See Note 6.)

During the nine months ended  September  30, 2006,  the Company  issued  625,000
shares of common stock to the RCG Group for consulting services.

During the nine months ended  September 30, 2006, the Company issued to Highgate
32,245,078  shares of restricted common stock in connection with a conversion by
Highgate of $900,000  principal amount of the convertible  debenture.  (See Note
8.)

As discussed below the Company issued  3,500,000 and 6,500,000  shares of common
stock for the exercise of options by counsel and employees, respectively.

May 2006 Private  Offering - On May 24, 2006, the Company entered into a private
placement  agreement  whereby the Company sold  14,285,715  shares of its common


                                       18
<PAGE>


stock to ANAHOP, Inc. ("ANAHOP"), an unrelated party for $1,000,000. In addition
to the shares, the Company issued warrants to designees of Anahop as follows:

         -        A  warrant  to  purchase  up to  15,000,000  shares,  with  an
                  exercise price of $0.15 per share,  exercisable  upon the date
                  of issuance.
         -        A warrant to purchase up to 5,000,000 shares, with an exercise
                  price  of  $0.25  per  share,  exercisable  upon  the  date of
                  issuance.
         -        A  warrant  to  purchase  up to  10,000,000  shares,  with  an
                  exercise price of $0.50 per share.

The  warrants  are  exercisable  as of the  date of  issuance  and  through  and
including the date which is five years following the date on which the Company's
common  stock is listed for trading on either the Nasdaq  Small Cap Market,  the
Nasdaq  Capital  Market,  the  American  Stock  Exchange,  or the New York Stock
Exchange.

The Company determined that because it did not have sufficient authorized shares
of common stock to settle the exercise of the  30,000,000  warrants in shares of
its common stock the warrants should be recorded as a derivative  liability at a
fair value of $683,280.  The remaining  $44,400 was attributed to the 14,285,115
shares of common stock.

The fair value of the warrants at the date of issuance was determined  using the
Black Scholes model with the following  assumptions:  expected dividend yield of
zero, volatility of 159%, risk free interest rate of 4.93% and an estimated life
of 5 years.

The Company granted piggyback  registration rights for the shares underlying the
warrants, effective only after the warrants have been exercised. The Company did
not grant any  registration  rights  with  respect to the  14,285,715  shares of
common stock.

June 2006 Private Offering - On June 30, 2006, the Company entered into a second
private  placement  agreement  whereby,  the Company  agreed to sell  28,571,428
shares of its common stock to ANAHOP. The total consideration to be paid for the
Shares will be $2,000,000 if all tranches of the sale close.

Pursuant to the Agreement, ANAHOP agreed to pay $300,000 at the time of closing,
and an  additional  $200,000  within 30 days of the  closing.  The  payments  of
$300,000  and  $200,000  are  referred  to  collectively  as the "First  Tranche
Payment." The First Tranche  Payments have been  received,  $300,000 on June 30,
2006 and $200,000 on July 27,  2006..  The Company  issued  7,142,857  shares of
common stock upon receipt of the First Tranche Payment.

The remaining $1,500,000 is to be paid by ANAHOP as follows:
         (i)      No later than thirty calendar days following the date on which
                  any class of the  company  capital  stock is first  listed for
                  trading  on either  the Nasdaq  Small Cap  Market,  the Nasdaq
                  Capital Market,  the American Stock Exchange,  or the New York
                  Stock Exchange,  ANAHOP agreed to pay an additional  $500,000;
                  and
         (ii)     No later than sixty  calendar days following the date on which
                  any class of the  company  capital  stock is first  listed for
                  trading on the above listed  markets,  ANAHOP agreed to pay an
                  additional   $1,000,000.   (The   payments  of  $500,000   and
                  $1,000,000 are referred to collectively as the "Second Tranche
                  Payment.")

Upon receipt of the Second Tranche  Payment,  the Company agreed to issue ANAHOP
21,428,571  shares of common stock and to issue  warrants to designees of ANAHOP
as follows:


                                       19
<PAGE>


         -        A  warrant  to  purchase  up to  30,000,000  shares,  with  an
                  exercise price of $0.15 per share,  exercisable  upon the date
                  of issuance.
         -        A  warrant  to  purchase  up to  10,000,000  shares,  with  an
                  exercise price of $0.25 per share,  exercisable  upon the date
                  of issuance.
         -        A  warrant  to  purchase  up to  23,000,000  shares,  with  an
                  exercise price of $0.50 per share,  exercisable  upon the date
                  of issuance.

The  Warrants  are  exercisable  as of the  date of  issuance  and  through  and
including the later of the fifth  anniversary  of the date of the warrant or the
fifth  anniversary  of the date on which  the  Company's  common  stock is first
listed for  trading on either the Nasdaq  Small Cap Market,  the Nasdaq  Capital
Market, the American Stock Exchange, or the New York Stock.

The Company granted piggyback  registration rights for the shares underlying the
warrants, effective only after the warrants have been exercised. The Company did
not grant any registration rights with respect to the common shares issued or to
be issued in connection with the June 2006 private offering.

Lockdown  Agreements  - On July 20,  2006,  the Company  entered into a lockdown
agreement with ANAHOP,  (the "ANAHOP  Agreement"),  Albert Hagar, and Fadi Nora,
and related to the May and June private placement  transactions discussed above.
Albert  Hagar and Fadi Nora  were the  designees  to whom  ANAHOP  assigned  the
30,000,000  warrants.  Pursuant to the ANAHOP  Agreement,  Hagar and Nora agreed
that they would not  exercise any of the warrants  they  received in  connection
with the May or June  private  offerings  until the  Company had taken the steps
necessary to increase its authorized capital.  Additionally,  ANAHOP agreed that
it would not make the Second  Tranche  Payment to  purchase  the Second  Tranche
Shares  until we had  taken the  steps  necessary  to  increase  our  authorized
capital. As such, under the ANAHOP Agreement,  the Company was able to lock down
21,428,571  shares  (the  "Second  Tranche   Shares"),   and  93,000,000  shares
underlying  the  warrants  issued to Hagar and Nora in the May and June  private
placements.

NOTE 10 - 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.
During the six months  ended  June 30,  2006,  an  additional  1,500,000  issued
options  were  granted to and  exercised  by counsel for  proceeds  of $150.  No
non-employee options were issued in the 3rd quarter of 2006.

Employee  Options - During the nine  month  period  ended  September  30,  2006,
6,500,000 options were exercised for accrued  compensation and employee advances
of $64,000 and $71,000 respectively.

During the nine months ended  September 30, 2006, the Company granted options to
purchase  4,000,000  shares of common  stock to  employees.  2,500,000  of these
options were discussed in Note 6. The remaining  1,500,000  options were granted
with an  exercise  price  of $0.03  per  share,  a five  year  life  and  vested
immediately.  The fair value of the 1,500,000  options was $22,030 as determined
by the Black Scholes model.

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


                                       20
<PAGE>


ranging of 4.00%,  dividend  yield of 0.0%,  volatility  of 302%,  and  expected
average life of .5 years. These options expired in January 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 January, 2006.

A summary of the stock option  activity for the nine months ended  September 30,
2006, is as follows:

                                                              Weighted Average
                                                  Shares       Exercise Price
                                               -----------    ----------------
Outstanding at December 31, 2005                16,750,500     $          0.02
Granted                                          5,500,000     $          0.03
Exercised                                      (10,000,000)    $          0.02
Expired                                         (1,500,000)    $          0.06
                                               -----------
Outstanding at September 30, 2006               10,250,500     $          0.03
                                               ===========

Excercisable at September 30, 2006              10,250,500     $          0.02
                                               ===========


NOTE 11 -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
each  segment  based on  earnings  or loss  from  operations.  Selected  segment
information is as follows:








                                       21
<PAGE>


<TABLE>
<CAPTION>

                                                                Contract
                                Electronics      Ethernet     Manufacturing
                                  Assembly      Technology     & Marketing       Total
------------------------------------------------------------------------------------------
<S>                             <C>            <C>             <C>             <C>
   September 30, 2006

Sales to external customers     $  1,932,088   $     29,977    $  5,045,053   $  7,007,118
Intersegment sales                    12,499              -               -         12,499
Segment income (loss)             (3,194,340)      (106,784)       (611,480)    (3,912,604)
Segment assets                     9,056,773        173,069       3,689,286     12,919,128
Depreciation and amortization        134,886            423          99,321        234,630

   September 30, 2005

Sales to external customers     $  2,355,655   $    110,886    $  9,054,870   $ 11,521,411
Intersegment sales                    39,613              -               -         39,613
Segment loss                        (897,947)      (157,307)      1,894,797        839,543
Segment assets                     4,286,743        202,626       6,163,292     10,652,661
Depreciation and amortization        166,420          1,633          85,648        253,701
</TABLE>

                                                         September 30,
                                                --------------------------------
             Sales                                  2006               2005
--------------------------------------------------------------------------------

Total sales for reportable segments             $  7,019,617       $ 11,561,024
Elimination of intersegment sales                    (12,499)           (39,613)
--------------------------------------------------------------------------------

Consolidated net sales                          $  7,007,118       $ 11,521,411
================================================================================

                                                         September 30,
                                                --------------------------------
          Total Assets                              2006               2005
--------------------------------------------------------------------------------

Total assets for reportable segments            $ 12,919,128       $ 10,652,661
Adjustment for intersegment amounts                        -                  -
--------------------------------------------------------------------------------

Consolidated total assets                       $ 12,919,128       $ 10,652,661
================================================================================


NOTE 12 - SUBSEQUENT EVENTS

In  November  2006,  Highgate  converted  $100,000  of accrued  interest  of its
convertible  debenture into 5,128,205  shares of the Company's common stock at a
conversion rate of $0.019 per share, which was the lower of $0.10 or 100% of the
lowest closing bid price of the Company's  common stock over the 20 trading days
preceding the conversion.




                                       22
<PAGE>


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

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 allowed us to target large-scale contracts.

CirTran Asia has  established a satellite  office in Shen Zhen,  China,  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.

The Company is currently under contract with two direct  marketing  companies to
supply them with True Ceramic Pro flat irons  ("TCP").  Since June 6, 2006,  the
date of the ABS bankruptcy settlement,  through the date of this Report, CirTran
Products received orders of approximately $1,300,000 for the TCP product.

On March 21, 2006,  we announced  that we had formed a new  subsidiary,  Diverse
Media  Group,  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 presently  preparing to launch various programs where


                                       23
<PAGE>


Diverse  Media  Group will  operate as the  marketer,  campaign  manager  and/or
distributor  in  various   product   categories   including   beauty   products,
entertainment products, software products, and fitness and consumer products.

On October 3, 2006,  CirTran announced they have engaged the services of The RCG
Group "RCG" to assist in certain  financial  relations/corporate  communications
and other consulting services.  RCG is being retained to specifically assist the
Company in developing and executing an effective  financial  relations/corporate
communications  strategy.  The  primary  objective  of such  program  will be to
position  CirTran to secure and then  maintain a listing on the  American  Stock
Exchange or NASDAQ markets as soon as is reasonably possible.  Additionally, RCG
has been  retained  to further  assist the  Company  in its  endeavor  to secure
meaningful  public,  trading market  sponsorship from professional  investors as
well as certain members of the institutional investment community.

         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. 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 $76,000.

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 $2,000,000.

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


                                       24
<PAGE>


manufactured,   and  shipped  units,  and  received  payments  of  approximately
$750,000.

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.

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  $1,400,000 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
$1,850,000.

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  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.


                                       25
<PAGE>


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
do pursuant to the agreement.

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
$430,000  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


                                       26
<PAGE>


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.

The Company is currently under contract with two direct  marketing  companies to
supply them with True Ceramic Pro flat irons (TCP). Since June 6, 2006, the date
of the ABS bankruptcy settlement, through the date
of this Report, CirTran Products received orders of approximately $1,300,000 for
the TCP product.

With  respect to the hair dryers,  as of November 14, 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 the last quarter of 2006.

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


                                       27
<PAGE>


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.

Through the date of this Report,  Arrowhead continues to test market the product
via  television  and has  approached  CirTran  to help  market the  product  via
retailers.

On  September  20, 2006,  CirTran  announced  that its wholly owned  subsidiary,
Diverse Media Group  ("DMG"),  signed an exclusive  marketing  and  distribution
agreement with  Maryland-based  Natural Product Solutions for its VirMax for Men
and Women DS product line. DMG has already overseen production services where it
has produced a 120-second spot that debuted in October 2006,  airing on national
cable  networks.  As of the date of this Report,  we are working on updating the
infomercial.

On September 21, 2006, CirTran announced that, DMG signed an exclusive marketing
and   distribution   agreement   with  Awareness   Technologies,   Inc.,  a  Los
Angeles-based   company,   for  its  WebWatcher  Computer  Monitoring  Software.
Awareness   Technologies   has   successfully   created  a  unique,   completely
undetectable  software  surveillance  tool  that is being  used to help  parents
monitor and control their children's  internet  activity in protecting them from
potential  online  predators.   The  software's   secondary  platform  is  being
positioned to assist  companies  and  government  agencies in  monitoring  their
employees'  computer usage in an effort to increase  efficiency in the workplace
by reducing employees'  non-work related  activities.  DMG will be providing all
marketing  and  distribution  channels  for Direct  Response TV,  Radio,  Print,
Live-Shopping, Retail, and Catalog.

On  October  11,  2006,   CirTran  announced  that,  DMG  had  signed  a  retail
distribution  and  marketing  agreement  with  Wines and  Wines,  a  Miami-based
distributor of fine wines and spirits from around the world.  Under the terms of
the agreement,  DMG will use its best efforts to market and distribute all Wines
and Wines products  exclusively into various  distributors and retailers such as
Southern Wine and Spirits,  Trader Joe's,  Beverages and More,  Wal-Mart,  Sam's
Club, Costco,  Young's Markets and Vendome  nationally,  as well as restaurants,
liquor  stores  and  entertainment  venues  exclusively  throughout  California.
Previously,  Wines and Wines  focused  on markets  throughout  its home state of
Florida,  where it launched two product brands in 2005,  called the Sun of Chile
and Covinas brands,  which have generated more than $3 million in total revenues
since their  entrance into the market,  being sold at price points  ranging from
$8.99 to $9.99.  Wines and Wines provide a wide  selection of premium wines from
Chile, Spain, Argentina and South Africa which sell at all price levels.

On November 7, 2006, CirTran announced that, DMG signed an exclusive contract to
market and distribute the Solar Style line of solar chargers to major  retailers
in the U.S.  and abroad.  Solar  Style  offers a diverse  line of products  with
multiple  connectors,  all based on the latest advancements in PV Solar charging
to convert sunlight into usable energy for personal  electronic  devices.  Solar
Style also includes,  or offers as options, AC car battery chargers with many of
its products.


                                       28
<PAGE>


On November 15, 2006, CirTran announced that, DMG signed an exclusive licensing,
manufacturing and marketing  agreement with Beautiful Eyes(R),  Inc., of Malibu,
California, for a new "hot lashes" product which it will bring to the sold-on-TV
and retail marketplaces.  Under the terms of the agreement, DMG will have access
to the patented technology  developed by Beautiful Eyes and its founder,  former
model Alexandra  Roberts,  and the designs,  technical  drawings,  manufacturing
specifications and know-how, trade secrets and other proprietary information and
technology.  DMG will develop a new product for sale through TV infomercials and
at mass  retail,  which it will  market  through  its  personal  and  healthcare
products division.

         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


                                       29
<PAGE>


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.

On  November  14, 2006 we  announced  that Racore has  received,  processed  and
shipped its first order from Lear Siegler  Services,  Inc., of San Antonio,  and
that Lear Siegler has opened an account to  facilitate  ordering and  processing
add-on  business.  A major  provider of operations,  maintenance,  modification,
overhaul,  systems  integration,  logistics  support  and  training  services to
government  agencies  and  commercial  customers  in the U.S.  and abroad,  Lear
Siegler's  first  order was for 100 Racore  8192 100FX 100 Mbps Fiber  Optic PCI
Fast Ethernet Network Adapters with ST Fiber Connectors.

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.


                                       30
<PAGE>


Recent Developments

Lockdown  Agreements  - On July 20,  2006,  the Company  entered into a lockdown
agreement  with Cornell  (the  "Cornell  Agreement")  and related to the Cornell
Debenture.  Pursuant to the Cornell Agreement,  Cornell agreed that it would not
convert any of the  principal  or interest on the Cornell  Debenture or exercise
any of the  Warrants  granted to Cornell  until the  Company had taken the steps
necessary to increase its authorized  capital.  As such, the Company was able to
lock down  50,000,000  shares  underlying  the Cornell  Debenture and 10,000,000
shares underlying the Cornell Warrants.

On July 20, 2006,  the Company  entered into a lockdown  agreement  with ANAHOP,
(the "ANAHOP  Agreement"),  Albert Hagar,  and Fadi Nora, and related to the May
and June private placement  transactions  discussed above. Albert Hagar and Fadi
Nora  were the  designees  to whom  ANAHOP  assigned  the  30,000,000  warrants.
Pursuant  to the ANAHOP  Agreement,  Hagar and Nora  agreed  that they would not
exercise any of the warrants they  received in  connection  with the May or June
private  offerings  until the Company had taken the steps  necessary to increase
our authorized capital.  Additionally,  ANAHOP agreed that it would not make the
Second Tranche  Payment to purchase the Second Tranche Shares until we had taken
the steps  necessary  to increase its  authorized  capital.  As such,  under the
ANAHOP  Agreement,  the  Company  was able to lock down  21,428,571  shares (the
"Second Tranche  Shares"),  and 93,000,000 shares underlying the warrants issued
to Hagar and Nora in the May and June private placements.

Media Syndication Global Agreement

On July 3, 2006, the Company  finalized a Marketing and  Distribution  Agreement
(the "MD Agreement")  with Media  Syndication  Global,  LLC, a Delaware  limited
liability  company  ("MSG").  The MD  Agreement  relates  to the  marketing  and
distribution  by MSG of a product  designed by Advanced  Beauty  Solutions,  LLC
("ABS"), which were purchased by the Company.

Background
----------

In a Current Report filed with the SEC on June 13, 2006,  the Company  announced
that it had closed a  transaction  (the  "Asset  Purchase")  whereby the Company
purchased certain assets of ABS, subject to the approval of the U.S.  Bankruptcy
Court adjudicating the bankruptcy  proceedings of ABS (the "Bankruptcy  Court").
On June 7, 2006,  the  Bankruptcy  Court  entered an order  approving  the Asset
Purchase.

Pursuant to the order entered by the Bankruptcy  Court, the Company was required
to give to Tristar Products, Inc. ("Tristar") a first-right opportunity to enter
into a world-wide  marketing and  distribution  agreement with the Company.  The
term of the first-right period ended on July 3, 2006.

Prior to the  approval of the Asset  Purchase by the  Bankruptcy  Court,  and in
anticipation  of such  approval,  the Company had entered  into the MD Agreement
with MSG,  subject to (A) the approval of the Asset  Purchase by the  Bankruptcy
Court; (B) the Company's completion of the purchase of ABS's assets; and (C) the
Company's  failure to enter into a  distribution  agreement  with  Tristar.  The
Company and MSG entered into the MD  Agreement  on April 24, 2006,  although the
effective  date of the MD Agreement  was the date on which all three  conditions
listed above were satisfied.  Additionally, the MD Agreement provided to MSG the
opportunity  to perform test  marketing of the product,  which was  successfully
completed.

Pursuant  to the MD  Agreement,  the  Company  granted  to  MSG  the  exclusive,
world-wide rights to advertise,  promote, market, sell, and otherwise distribute
the True  Ceramic  Pro Bionic  hair  styler  (the  "Product"),  designed by ABS.
Additionally,  MSG agreed  that during the term of the MD  Agreement,  MSG would
purchase  100% of its  requirements  of the Product,  together with any products


                                       31
<PAGE>


that are substantially  similar to the Product (a "Similar  Product"),  from the
Company. MSG also agreed that it would not purchase,  manufacture,  or cause any
third  party  to  manufacture  any  Similar  Product  during  the term of the MD
Agreement and for one year following the termination of the MD Agreement, except
from the Company.

Under the MD Agreement,  MSG is required to purchase an initial minimum quantity
of 10,000 units,  and yearly  quantities of at least 400,000 units.  The initial
term of the MD Agreement is for three years from the effective  date. If MSG has
purchased  the  required  minimum  quantities  during the initial  term,  the MD
Agreement will renew for additional one-year terms.

The MD Agreement  may be  terminated by either party upon 45 days' notice to the
other party upon the breach by the other party of any material terms, covenants,
conditions,  or obligations under the MD Agreement.  However, if the breach upon
which such  notice of  termination  is based  shall have been fully cured to the
reasonable  satisfaction of the  non-breaching  party within such notice period,
then such notice of termination shall be deemed  rescinded.  The Company and MSG
agreed that such right of  termination  was in addition to such other rights and
remedies as the terminating party would have under applicable law.

The Company and MSG agreed that all customer  lists,  price  lists,  written and
unwritten marketing plans,  techniques,  methods and data, sales and transaction
data, and other information designated or deemed either by MSG or the Company as
being confidential or a trade secret, shall constitute confidential  information
of MSG or the Company,  respectively ("Confidential  Information").  The Company
and MSG agreed to hold all Confidential  Information in the strictest confidence
and shall protect all Confidential Information with the same degree of care that
MSG  or  the  Company  would  exercise  with  respect  to  its  own  proprietary
information.

As of the date of this report, MSG had failed to order the minimum  requirements
required in the  agreement to maintain the  exclusive  marketing  rights for the
product.  The company is  currently  working  with MSG on amending  the existing
agreement  to better  enhance the  marketing  program  currently in place and to
increase sales.

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.


                                       32
<PAGE>


Revenue Recognition

Revenue is recognized when products are shipped. Title passes to the customer or
independent  sales  representative  at the time of  shipment.  The Company  also
recognizes  revenue  using  the  Bill  & Hold  method  prescribed  by SEC  Staff
Accounting  Bulletin  104.  The  "Bill  &  Hold"  method  provides  for  revenue
recognition  when a customer  order has been completed but has not shipped as an
accommodation to the customer.  This method was adopted during the quarter ended
September  30,  2006,  in response to orders  placed by  customers in the direct
sales market  only,  whereby the  customer  order is  confirmed  but delivery is
delayed according to a prescribed delivery schedule. 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."

During June 2006 the President of the Company loaned the Company a net amount of
$110,837 which was recorded as a note payable to a Shareholder.  In August 2006,
the Company  made a payment to the  President  which  repaid the entire  balance
$110,837 of the loan.

During  December  2005 the President of the Company  loaned the Company  $95,806
which was recorded as a note payable to a Shareholder. 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 President  which repaid the entire balance $95,806
of the loan.

Results of Operations - Comparison of the Three and Nine months ended  September
30, 2006 and 2005

         Sales and Cost of Sales

Net sales decreased to $3,044,853 for the three month period ended September 30,
2006, as compared to $4,291,762  during the same period in 2005,  for a decrease
of 29.1%.  Net sales  decreased to  $7,007,118  for the nine months period ended
September 30, 2006, as compared to  $11,521,411  during the same period in 2005,


                                       33
<PAGE>


for a decrease of 39.2%.  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
discussion below under "Legal  Proceedings").  Cost of sales decreased by 11.9%,
from  $2,620,109  during the three months  period ended  September  30, 2005, to
$2,307,237  during the same period in 2006. Cost of sales decreased by 34.9%, to
$4,529,641  during  the nine  months  period  ended  September  30,  2006,  from
$6,962,380  during the same  period in 2005.  The  decrease  in cost of sales is
directly due to the decrease in revenue. Gross margin for the three months ended
September  30, 2006 was 24.2%  which was  comparable  to the 39.0% gross  margin
reported in the same  period in 2005.  Gross  margin for the nine months  period
ended  September  30,  2006,  was 35.4%,  down from 39.6% for the same period in
2005. The majority of the increase is due to a considerable decrease in the sale
of Ab King  which has less  favorable  margins  compared  to other  CirTran-Asia
products. The sales in the other 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 September 30, 2006, was $1,783,446,
as compared to  $2,271,604  at December 31, 2005.  The decrease in inventory was
due to the sale of inventory acquired in the bankruptcy settlement with ABS (see
discussion below under "Legal Proceedings").

         Selling, General and Administrative Expenses

During  the  three  months  ended  September  30,  2006,  selling,  general  and
administrative expenses were $1,062,570 versus $1,036,565 for the same period in
2005, a 2.5% increase. During the nine months ended September 30, 2006, selling,
general and  administrative  expenses were $3,826,899  versus $3,565,707 for the
same period in 2005, a 7.3%  increase.  The increase in the percentage is due to
the additional  salaries,  commissions  paid to Diverse Media Group,  legal fees
paid to support  litigating  our cases,  and consulting fee paid primarily to an
outside sales force. The outside sales force is a temporary method of evaluation
the performance of potential fulltime sales personnel,  and as such a portion of
the consulting fees may be reported as salaries and bonuses in future periods.

         Other Income and Expenses

Interest  expense for three months  ended  September  30, 2006,  was $693,494 as
compared  to  $149,732  for the same  period in 2005,  an  increase  of  363.2%.
Interest  expense for nine months ended  September 30, 2006,  was  $2,330,309 as
compared to $412,530  for the same  period in 2005,  an increase of 464.9%.  The
increase is due  primarily to accretion of notes  payable that contain  embedded
derivative features.

As a  result  of the  above  factors,  we had a net loss of  $2,980,288  for the
quarter  ended  September  30, 2006, as compared to a profit of $575,042 for the
quarter ended  September 30, 2005. We also reported a net loss of $3,912,604 for
the nine months ended  September  30, 2006,  as compared to a profit of $839,543
for the same period ended  September 30, 2005.  This net loss is attributed to a
substantial  decrease in sales and a large negative fluctuation in the valuation
of our derivative liability of approximately  $175,000, and accretion expense on
notes payable of approximately $1,900,000.


                                       34
<PAGE>


Details of the ABS transaction
------------------------------

In  connection  with  the  Advance  Beauty  Solutions,  LLC  ("ABS")  bankruptcy
proceedings,  the  Company  acquired  all of the assets of ABS for an  aggregate
purchase  price of  $2,310,000.  The assets  purchased  included  inventory of a
product which had been the subject of an agreement  between the Company and ABS,
the True Ceramic Pro flat iron.  Pursuant to the asset purchase  agreement,  the
Company must pay a royalty to the ABS bankruptcy  estate in connection  with the
sale by the Company of the True  Ceramic Pro units.  The royalty  portion of the
purchase price is contingent,  based on sales of each True Ceramic Pro flat iron
unit.  The  amount of the  royalty  to be paid is $3 per unit and is  limited to
total of  $4,135,000.  The  minimum  guaranteed  royalty  payment  of  $435,000,
guaranteed  by the  Company,  is due  within  two years of the date of the asset
purchase  agreement.  Pursuant to the  bankruptcy  court's  orders,  the initial
$435,000  amount of royalty  payments paid into the ABS estate will be disbursed
to other  individuals  and entities with claims against ABS's estate.  After the
guaranteed  payment of $435,000  has been made,  the royalty  payments  into the
estate shall be prorated among five individuals and entities with claims against
ABS's  bankruptcy  estate who have an aggregate  claim against the ABS estate of
$2,100,000 (constituting approximately 56.7% of the remaining claims against the
estate) and the Company,  which has an aggregate claim against the ABS estate of
$1,600,000 (constituting approximately 43.3% of the remaining claims against the
estate). Following the payment of an aggregate of $4,135,000 in royalty payments
to the ABS estate, the Company shall have no further royalty  obligations to the
estate.

Purchase of Assets
------------------

In connection  with  agreements  between the Company and ABS, the Company had an
approved claim against the ABS estate of $2,350,000.  The Company and ABS agreed
upon, and the bankruptcy  court approved,  the purchase by the Company of assets
of ABS. The  aggregate  purchase  price paid was  $2,310,000,  consisting of the
following: $1,125,000 in cash, which was paid at the time of the finalization of
the purchase of the assets; a reduction of the Company's  approved claim against
the ABS estate in the amount of $750,000;  and a guaranteed  royalty  payment to
the ABS estate of $435,000.  The cash portion of the purchase  price funded with
the proceeds of sales of the Company's restricted stock and from operations. The
Company's  approved  claim was  reduced  by  $750,000,  which went from being an
account  receivable to being part of the carrying value of the assets purchased,
leaving an approved claim against the ABS estate of  $1,600,000.  The guaranteed
royalty payment of $435,000 is discussed above.

A summary of the ABS asset purchase transaction is as follows:

         Cash                                                        $ 1,125,000
         Reduction of ABS Accounts Receivable                            750,000
         Guaranteed Royalty Payment                                      435,000
         Total Purchase Price                                        $ 2,310,000

A summary of the  treatment of the account  receivable at December 31, 2005 from
ABS is as follows:

         Assets Purchased w/ Accts. Rec.                             $   750,000
         Note  Receivable from Bankruptcy Estate                       1,600,000
         Total Allocation of Accounts Receivable Balance             $ 2,350,000

Funds for the payment of the ABS asset purchase consisted of $1,000,000 that the
Company raised through a private placement of 14,285,715 shares of the Company's
common  stock,  and $125,000  which was obtained  from Company  operations.  The
shares in the private offering were purchased by and issued to ANAHOP,  Inc. The


                                       35
<PAGE>


Company disclosed the sale of the shares and accompanying  warrants in a Current
Report on Form 8-K filed with the SEC on May 30, 2006.

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
$23,239,914 at September 30, 2006, compared to $19,327,310 at December 31, 2005.
Our net loss for the quarter ending September 30, 2006, was $2,980,288, compared
to net income of $575,042 for the quarter ended September 30, 2005. Our net loss
was  $3,912,604  for the nine months ended  September 30, 2006, as compared to a
profit of $839,543 for the nine months  ended  September  30, 2005.  Our current
liabilities  exceeded our current assets by $5,899,947 as of September 30, 2006,
compared  to  $1,142,874  as  of  December  31,  2005.  The  change  was  mostly
attributable  to the change in the convertible  debentures.  For the nine months
ended September 30, 2006 and 2005, we had negative cash flows from operations of
$1,631,660 and $1,255,396 respectively.

         Cash

We had cash on hand of  $717,357  at  September  30,  2006,  and  $1,427,865  at
December 31, 2005.

Cash used in  operating  activities  was  $1,631,660  for the nine months  ended
September  30,  2006.  Cash  received  from  customers  of  $8,131,448  was  not
sufficient  to  offset  cash  paid  to  vendors,  suppliers,  and  employees  of
$8,574,483.  The non-cash  charges were for  depreciation  and  amortization  of
$246,142 and accretion  expense of $1,924,996.  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.

Cash used in investing activities during the nine months ended September 30,
2006 consisted of the purchase of assets from Advanced Beauty Solutions (ABS) of
$1,125,000 along with equipment and furniture purchases of $262,100.  Intangible
assets of $556,163  were also  acquired and consist of  capitalized  direct cost
associated  with the settlement of the ABS law suit, the  acquisition of $50,000
of patent costs and $37,500 of infomercial  costs.  Forty  thousand  dollars was
also  advanced  to  Diverse  Talent  Group  under  the terms of a line of credit
agreement.

Cash provided by financing  during the first nine months ended September 30,
2006 was $3,137,213.  This was primarily from  $1,500,000  received from ANAHOP,
Inc.  through the sale of the  Company's  common stock in the quarter ended June
30, 2006. In the quarter ended September 30, 2006, an additional  $1,500,000 was
received  from  Cornell for the sale of a 5%  convertible  debenture,  discussed
below.

Net cash used by financing  activities was $232,798 during the nine months ended
September  30, 2006 and was  primarily  related to payments on notes  payable to
stockholders of $206,643.

         Accounts Receivable

At September 30, 2006, we had  receivables of  $2,233,651,  net of a reserve for
doubtful accounts of $2,617, as compared to $3,358,981 at December 31, 2005, net
of a reserve of $158,374.


                                       36
<PAGE>


This  decrease was primarily  attributed to the  settlement of ABS and decreased
sales in the last two months of the second  quarter as  compared to the last two
months in 2005.  Receivables  at December 31, 2005,  included the unpaid balance
from ABS. (See ABS history beginning on page 26).

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.

         Accounts Payable

Accounts  payable  were  $1,021,576  at  September  30,  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 $23,239,914 and a
total  stockholders'  equity of $567,550 at September  30, 2006. As of September
30,  2006,  our  monthly   operating  costs  and  interest   expenses   averaged
approximately $1,100,000 per month.

With the settlement of ABS bankruptcy,  the Company now has the rights to market
the True  Ceramic  Pro Flat  iron.  As a result,  the item is being  sold  under
contract and has generated significant sales of approximately  $1,300,000 during
the quarter ended  September 30, 2006.  We  anticipate  continued  sales of this
product into the foreseeable future.

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.

All proceeds  from the sale of company stock to ANAHOP have been received as per
the terms of the agreement. The contract provides for additional future payments
from ANAHOP at such time when the  Company has  achieved a listing on a national
stock exchange.

Convertible Debentures

Highgate - On May 26, 2005, the Company  entered into an agreement with Highgate
Funds,  Ltd.  ("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


                                       37
<PAGE>


interest  owed at September  30, 2006 and  December  31, 2005,  was $227,966 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  September  30,  2006  the  carrying  value of the
Debenture was $1,544,347.  The carrying value will be accreted each quarter over
the life of the Debenture until the carrying value equals the  unconverted  face
value of $2,850,000 (see below).  The fair value of the derivative  liability as
of September 30, 2006 was $2,221,058.

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 common stock over the 20 trading days preceding the conversion.


                                       38
<PAGE>


In September 2006, Highgate converted $150,000 of its convertible debenture into
8,051,530  shares of the Company's common stock at a conversion rate of $0.01863
per share,  which was the lower of $0.10 or 100% of the lowest closing bid price
of the Company's common stock over the 20 trading days preceding the conversion.

In  November  2006,  Highgate  converted  $100,000  of accrued  interest  of its
convertible  debenture into 5,128,205  shares of the Company's common stock at a
conversion rate of $0.019 per share, which was the lower of $0.10 or 100% of the
lowest closing bid price of the Company's  common 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 September 30, 2006 and December 31, 2005, was $55,890 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.


                                       39
<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 September
30, 2006 the carrying value of the Cornell Debenture was $434,252.  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 relating to the Cornell debenture,  excluding the warrants,
as of  September  30, 2006 was  $1,342,864.  The fair value of the  warrants was
$80,452 as of September 30, 2006.

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

In  connection  with the  Cornell  Debenture,  Cornell  agreed that it could not
convert  any  amount of  principal  or  interest  of the  Cornell  Debenture  in
accordance  with the terms  and  conditions  of the  Lockdown  Agreement  by and
between the Company and Cornell July 20, 2006, until the Company has effectuated
an increase in its authorized capital.  The Company and Cornell also agreed that
in the  event  that  the  Company  had  not  effectuated  such  increase  in its
authorized  capital by October  30,  2006,  which was  subsequently  extended to
December 31, 2006, such failure would constitute an event of default on parallel
with  those  set  forth  in the  Purchase  Agreement  and  subject  to the  same
consequences as those listed in the Purchase Agreement.

As of September 30, 2006, Cornell had not converted any of the Cornell Debenture
into shares of the Company's common stock.

Cornell - On August 23,  2006,  the  Company  entered  into  another  securities
purchase agreement (the "Purchase Agreement") with Cornell, relating to the sale
by the Company of a 5% Secured Convertible Debenture, due April 23, 2009, in the
aggregate principal amount of $1,500,000 (the "August Debenture").

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 September  30, 2006 and December 31, 2005 was $7,603 and zero,
respectively.

The Company also paid a  commitment  fee of $120,000  and a  structuring  fee of
$15,000 to Cornell. As such, of the total purchase amount of $1,500,000, the net
proceeds to the Company were  $1,365,000.  The Company  used these  proceeds for
general corporate and working capital purposes, in its discretion.

The August  Debenture  bears  interest  at a rate of 5%.  Cornell is entitled to
convert,  at its option,  all or part of the  principal  amount  owing under the
August Debenture into shares of the Company's common stock at a conversion price
equal one hundred  percent  (100%) of the lowest closing bid price of the Common
Stock as listed on the OTC Bulletin  Board,  as quoted by Bloomberg L.P. for the
twenty (20) trading days  immediately  preceding the  Conversion  Date Except as
otherwise  set  forth  in the  August  Debenture,  Cornell's  right  to  convert
principal  amounts owing under the August Debenture into shares of the Company's
common stock is limited as follows:

         (i)      Cornell  may  convert up to  $500,000  worth of the  principal
                  amount plus  accrued  interest of the August  Debenture in any
                  consecutive  30-day  period  when the  price of the  Company's
                  stock is $0.03 per share or less at the time of conversion;

         (ii)     Cornell may convert  any amount of the  principal  amount plus
                  accrued  interest of the August  Debenture in any  consecutive
                  30-day period when the price of the Company's stock is greater
                  than $0.03 per share at the time of conversion; and




                                       40
<PAGE>


         (iii)    Upon the  occurrence of an Event of Default (as defined in the
                  Debenture),  Cornell may, in its sole  discretion,  accelerate
                  full  repayment  of all  debentures  outstanding  and  accrued
                  interest  thereon  or  may,  notwithstanding  any  limitations
                  contained  in  the  August   Debenture   and/or  the  Purchase
                  Agreement,  convert  all  debentures  outstanding  and accrued
                  interest  thereon in to shares of the  Company's  Common Stock
                  pursuant to the August Debenture.

Under the terms of the  August  Debenture,  except  upon an event of  default as
defined in the August  Debenture,  Cornell may not convert the August  Debenture
for a number of shares  of  common  stock in excess of that  number of shares of
common  stock  which,  upon giving  effect to such  conversion,  would cause the
aggregate number of shares of Common Stock beneficially owned by Cornell and its
affiliates  to  exceed  4.99% of the  outstanding  shares  of the  common  stock
following such conversion.

Pursuant to the August Debenture, interest is to be paid at the time of maturity
or conversion.  The Company may, in its option,  pay accrued interest in cash or
in shares of its common stock. If paid in stock,  the conversion  price shall be
the  closing bid price of the common  stock on either (i) the date the  interest
payment is due; or (ii) if the  interest  payment is not made when due, the date
on which the interest payment is made.

Also pursuant to the August  Debenture,  the Company has the right to redeem, by
giving 3 days'  written  notice  to  Cornell,  a  portion  or all of the  August
Debenture then outstanding by paying an amount equal to one hundred five percent
(105%) of the amount redeemed plus interest accrued  thereon.  In the event that
the Company  redeems only a portion of the outstanding  principal  amount of the
August Debenture, Cornell may convert all or any portion of the unpaid principal
or  interest  of the  August  Debenture  not  being  redeemed  by  the  Company.
Additionally, if after the earlier to occur of (x) fifteen (15) months following
the date of the  purchase  of the August  Debenture  or (y) twelve  (12)  months
following  the date on which the  initial  registration  statement  is  declared
effective, all or any portion of the August Debenture remains outstanding,  then
the Company, at the request of Cornell,  shall redeem such amount outstanding at
the rate of five hundred  thousand  dollars  ($500,000)  per each 30-day period.
Finally,  upon the  occurrence  of an event of  default as defined in the August
Debenture,  Cornell can convert all outstanding  principal and accrued  interest
under this August Debenture  irrespective of any of the limitations set forth in
the August Debenture and/or the Purchase Agreement,  and in such event, all such
principal and interest shall become immediately due and payable.

In  connection  with the  August  Debenture,  Cornell  agreed  that it could not
convert  any  amount  of  principal  or  interest  of the  August  Debenture  in
accordance  with the terms  and  conditions  of the  Lockdown  Agreement  by and
between  the  Company and  Cornell  dated July 20,  2006,  until the Company has
effectuated an increase in its authorized capital.  The Company and Cornell also
agreed that in the event that the Company had not  effectuated  such increase in
its authorized  capital by October 30, 2006, which was subsequently  extended to
December 31, 2006, such failure would constitute an event of default on parallel
with  those  set  forth  in the  Purchase  Agreement  and  subject  to the  same
consequences as those listed in the Purchase Agreement.

In connection with the Purchase  Agreement,  the Company also agreed to grant to
Cornell  warrants (the  "Warrants")  to purchase up to an additional  15,000,000
shares of the  Company's  common stock.  The Warrants have an exercise  price of
$0.06 per share, and expire three years from the date of issuance.  The Warrants
also  provide for cashless  exercise if at the time of exercise  there is not an
effective registration statement or if an event of default has occurred.


                                       41
<PAGE>


The  Company  determined  that the  features  on the  August  Debenture  and the
associated warrants fell under derivative accounting treatment.  As of September
30, 2006 the carrying value of the August  Debenture was $449,478.  The carrying
value  will be  accreted  each  quarter  over  the  life of the  Cornell  August
Debenture until the carrying value equals the face value of $1,500,000. The fair
value of the derivative  liability  relating to the August Debenture,  excluding
the  warrants,  as of September 30, 2006 was  $1,626,859.  The fair value of the
warrants was $168,192 as of September 30, 2006.

Additionally,  the  Company  and Cornell  entered  into an amended and  restated
investor  registration  rights agreement (the "Registration  Rights Agreement"),
which superseded Cornell  registration  rights agreement between the Company and
Cornell  entered into in December  2005,  in connection  with a prior  debenture
transaction (the "December 2005  Transaction")  detailed below.  Pursuant to the
Registration Rights Agreement, the Company agreed to file, no later than October
15,  2006,  a  registration  statement  to register  the resale of shares of the
Company's  common stock issuable to Cornell upon conversion of the Debenture and
exercise of the Warrants,  as well as the  convertible  debenture (the "December
Debenture") and warrants (the "December  Warrants")  issued in the December 2005
Transaction, discussed above. The Company agreed to register the resale of up to
231,900,000  shares,  consisting of 206,900,000  shares underlying the Debenture
and the December  Debenture,  and 25,000,000  shares underlying the Warrants and
the December  Warrants.  The Company agreed to keep such registration  statement
effective  until all of the shares issuable upon conversion of the Debenture and
December  Debenture  have been sold.  In the event that the Company  issues more
than  206,900,000  shares of its  common  stock  upon  conversion  of the August
Debenture  and the  December  Debenture,  it will file  additional  registration
statements as necessary.  The agreement was  subsequently  amended to extend the
filing date of the registration to December 31, 2006.

The Company and  Cornell  also  entered  into an amended and  restated  security
agreement (the "Security  Agreement"),  pursuant to which the Company  granted a
second  position  security  interest in all of its  property,  including  goods;
inventory;  contract rights and general intangibles;  documents,  receipts,  and
chattel paper;  accounts and other receivables;  products and proceeds;  and any
interest in any  subsidiary,  joint  venture,  or other  investment  interest to
secure  the  Company's  obligation  under the  August  Debenture,  the  December
Debenture, and the related agreements.

The Company and Cornell  also  entered  into an escrow  agreement  (the  "Escrow
Agreement")  relating to the holding and disbursement of payment of the purchase
price of the  Debenture  and cash payments made by the Company in payment of the
obligations  owing under the Debenture.  The Company and the Investor  appointed
David Gonzalez as the Escrow Agent under the Escrow Agreement.

The Company had  previously  entered into  financing  transactions  with Cornell
Capital Partners, LP ("Cornell"). In April 2003, the Company had entered into an
equity line of credit agreement with Cornell, pursuant to which the Company drew
a total of  $2,150,000  on the equity  line,  and  issued a total of  57,464,386
shares of common  stock to  Cornell.  In May 2004,  the Company  entered  into a
standby equity distribution  agreement,  but the agreement was terminated before
any funds were drawn or any shares were  issued.  Between  June 2003 and January
2005,  Cornell  loaned to the Company an  aggregate  of  $5,595,000  pursuant to
promissory notes issued to Cornell. These notes were paid in full by May 2005.

In December  2005,  the Company  issued the prior Cornell  Debenture to Cornell,
with substantially  similar terms to that issued on August 23, 2006. The Company
also issued the  December  Warrants to purchase up to  10,000,000  shares of the
Company's common stock.


                                       42
<PAGE>


In May 2005, the Company sold convertible  debentures in the aggregate amount of
$3,750,000,  to Highgate  House Funds,  Ltd., a Cayman Island  exempted  company
("Highgate").  Highgate  and Cornell have the same  general  partner,  Yorkville
Advisors, but have different portfolio managers.  Additionally, the escrow agent
appointed in connection with the purchase and sale of both the Cornell debenture
transactions  and the  Highgate  debenture  transaction  is David  Gonzalez,  an
officer of Cornell.

As of November 14, 2006, no amount of the August  Debenture  had been  converted
and no shares of the Company's common stock had been issued to the Investor. The
Company sold the August Debenture without  registration under the Securities Act
of 1933,  as amended  (the "1933 Act") in  reliance on Section  4(2) of the 1933
Act,  and  the  rules  and  regulations  promulgated  thereunder.   Upon  future
conversions, if any, of the August Debenture into shares of the Company's common
stock,  the Company intends to issue the shares without  registration  under the
1933  Act in  reliance  on  Section  4(2) of the 1933  Act,  and the  rules  and
regulations promulgated thereunder. As noted above, the Company anticipates that
any  resales  by  Cornell of the shares  issued  upon  conversion  of the August
Debenture will be made pursuant to a  registration  statement to be filed by the
Company.

The Company does not anticipate that it will use any of the proceeds of the sale
of the August  Debenture to Cornell to repay the  Debenture  sold to Highgate or
the prior Cornell Debenture

Lockdown Agreements

On July 20, 2006, we entered into two lockdown agreements with existing security
holders.

The first  agreement (the "Cornell  Agreement")  was with Cornell and related to
the Cornell Debenture. Pursuant to the Cornell Agreement, Cornell agreed that it
would not convert any of the  principal or interest on the Cornell  Debenture or
exercise any of the Warrants  granted to Cornell until the Company had taken the
steps  necessary to increase its  authorized  capital.  As such, the Company was
able to lock  down  50,000,000  shares  underlying  the  Cornell  Debenture  and
10,000,000 shares underlying the Cornell Warrants.

The second agreement (the "ANAHOP Agreement") was with ANAHOP, Albert Hagar, and
Fadi  Nora,  and  related  to the May and June  private  placement  transactions
discussed above.  Pursuant to the ANAHOP  Agreement,  Hagar and Nora agreed that
they would not exercise any of the warrants they received in connection with the
May or June private offerings until the Company had taken the steps necessary to
increase its authorized capital.  Additionally,  ANAHOP agreed that it would not
make the Second Tranche  Payment to purchase the Second Tranche Shares until the
Company had taken the steps  necessary to increase our  authorized  capital.  As
such, under the ANAHOP Agreement,  the Company were able to lock down 21,428,571
shares (the "Second  Tranche  Shares"),  and  93,000,000  shares  underlying the
warrants issued to Hagar and Nora in the May and June private placements.

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.


                                       43
<PAGE>


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;

         *        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.)


                                       44
<PAGE>


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 and 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.

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.

Currently,  the Company's financial policies and procedures are being evaluated.
As a result,  several new internal  control  procedures  have been developed and
documented and are being  implemented  accordingly.  The financial  policies and
procedures  evaluation  program will be an ongoing  process to insure  continued
adequacy and compliance with prescribed  internal control  procedures,  with the
initial  development  of the program  primarily  focused on the  development  of
internal control procedures and supporting documentation.

Quarterly Evaluation of Disclosure Controls and Procedures.  Our Chief Executive
Officer and our 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.  As noted above,  the Company is
working to remediate the weakness  described  above,  including the hiring a new
chief financial officer.


                                       45
<PAGE>


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,  beginning
with our Form 10-KSB for the fiscal year ending on  December  31,  2007,  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,  2008.  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

We 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
November 14, 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.

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


                                       46
<PAGE>


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 is
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,
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 denied.  The case
is presently in the discovery  stage.  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 "ABS
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 ABS  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


                                       47
<PAGE>


Declaration  of James C.  Bastian,  Jr.,  attesting  that no  objections  to the
Proposed  Modifications  have  been  received  by ABS,  was  filed  with the ABS
Bankruptcy Court.

On June 6, 2006,  the Company and ABS signed an agreement  (the "Asset  Purchase
Agreement"),  subject to the ABS Bankruptcy  Court's approval.  On June 7, 2006,
the ABS Bankruptcy Court entered orders  approving the Asset Purchase  Agreement
and granting the Sale Motion,  and approving the  settlement  and  compromise of
certain disputed claims against ABS.

Pursuant  to the  settlement  of  ABS's  bankruptcy  proceedings  and the  Asset
Purchase Agreement, the Company has an allowed claim against the ABS's estate in
the amount of $2,350,000, of which $750,000 is to 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.

Under the Asset Purchase Agreement, the Company 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 Assets include personal property;  intellectual property;  certain executory
contracts and unexpired leases; inventory;  ABS's rights under certain insurance
policies;  deposits and prepaid expenses; books and records;  goodwill;  certain
causes of action;  permits;  customer and supplier lists; and telephone  numbers
and listings (collectively, the "Assets").

Under  the  Asset  Purchase  Agreement,  the  Royalty  Obligation  is  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 resolved a related dispute with
ICG in which ICG  assigned  $65,000  of its  secured  claim  against  ABS to the
Company.

Pursuant to the court-approved settlement, payments under the Royalty Obligation
will be made in the following order:

         a)       The Royalty  Obligation  payments will be made  exclusively to
                  ICG and MFC  (collectively,  the "Secured  Parties") until (i)
                  the Secured Parties have been paid in full on account of their
                  $1,243,208.44  secured claim, or (ii) the Secured Parties have
                  been paid $100,000 in payments  under the Royalty  Obligation,
                  whichever comes first.

         b)       The next $70,000 Royalty Obligation payments will be made to a
                  service  provider to ABS (in the amount of $50,000)  and to an
                  individual with an allowed claim (in the amount of $20,000).


                                       48
<PAGE>


         c)       Following  the  payments to the Secured  Parties and others as
                  set forth immediately  above, the remaining Royalty Obligation
                  payments  will be used for  distribution  to  allowed  general
                  unsecured  claims  not  including  those  of the  Company  and
                  certain    insiders    with   unpaid   notes   (the   "Insider
                  Noteholders").

         d)       Following  payments as set forth in (a),  (b),  and (c) above,
                  the Royalty Obligation  payments will be shared pro rata among
                  the Insider  Noteholders (with a total allowed aggregate claim
                  of  $2,100,000),  and the  Company  (with a general  unsecured
                  claim in the amount of $1,600,000), until paid in full.

The total  claims  against  ABS's  estate  that must be paid  before the Company
begins to share in the Royalty Obligation payments is $435,000.

CirTran v. Guthy-Renker  Corporation and Ben Van De Bunt, Civil No. 20060980298,
Third Judicial District Court, Salt Lake County, State of Utah. In May 2006, the
Company  filed suit against  Guthy-Renker  Corporation  and one of its officers,
claiming  breach of contract,  breach of the implied  covenant of good faith and
fair dealing, interference with economic relationships,  misrepresentation,  and
punitive damages. The suit seeks damages in an amount to be proven at trial. The
defendants  filed a motion to stay  litigation  and  compel  arbitration  in the
matter.  The Company filed its response to the motion.  On November 7, 2006, the
motion was granted.  The Company is evaluating its options and intends to pursue
its claims.

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 September 2006, Highgate converted $150,000 of its convertible debenture into
8,051,530 shares of the Company's  restricted  common stock at a conversion rate
of  $0.01863  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  November  2006,  Highgate  converted  $100,000  of accrued  interest  of its
convertible  debenture into 5,128,205  shares of the Company's common stock at a
conversion rate of $0.019 per share, which was the lower of $0.10 or 100% of the
lowest closing bid price of the Company's  common stock over the 20 trading days
preceding the conversion.

On May 24, 2006, we closed a private placement of shares of our common stock and
warrants  (the  "May  Private  Offering").  Pursuant  to a  securities  purchase
agreement (the "Agreement"),  we sold Fourteen Million,  Two Hundred Eighty-five
Thousand,  Seven Hundred  Fifteen  (14,285,715)  shares of our Common Stock (the
"May  Shares")  to  ANAHOP,  Inc.,  a  California  corporation  ("ANAHOP").  The
consideration paid for the May Shares was One Million Dollars  ($1,000,000).  In
addition to the Shares,  we issued  warrants  (the  "Warrants")  to designees of
ANAHOP to purchase up to an additional 30,000,000 shares.

We used the proceeds from the May Private Offering, in part, to finance the cash
purchase portion of our acquisition of the assets of ABS,  following approval of
the Bankruptcy Court.


                                       49
<PAGE>


On June 30, 2006, we closed a second  private  placement of shares of our common
stock and  warrants  (the "June  Private  Offering").  Pursuant to a  securities
purchase  agreement (the "Agreement"),  we agreed to sell Twenty-Eight  Million,
Five Hundred Seventy-One Thousand, Four Hundred Twenty-Eight (28,571,428) shares
of our Common Stock (the "June Shares") to ANAHOP. The total consideration to be
paid  for the  June  Shares  will be Two  Million  Dollars  ($2,000,000)  if all
tranches of the sale close.

Pursuant to the Agreement,  ANAHOP agreed to pay Three Hundred  Thousand Dollars
($300,000)  at the time of  closing,  and an  additional  Two  Hundred  Thousand
Dollars ($200,000) within 30 days of the closing.  (The payments of $300,000 and
$200,000 are referred to collectively as the "First Tranche  Payment.") Upon the
receipt  of the First  Tranche  Payment,  we agreed  to issue a  certificate  or
certificates to the Purchaser representing 7,142,857 of the June Shares.

The remaining $1,500,000 is to be paid by the ANAHOP as follows:

         (i)      No later than thirty calendar days following the date on which
                  any class of our capital  stock is first listed for trading on
                  either the Nasdaq Small Cap Market, the Nasdaq Capital Market,
                  the American Stock  Exchange,  or the New York Stock Exchange,
                  ANAHOP  agreed to pay an  additional  $500,000 to the Company;
                  and

         (ii)     No later than sixty  calendar days following the date on which
                  any class of our capital  stock is first listed for trading on
                  either the Nasdaq Small Cap Market, the Nasdaq Capital Market,
                  the American Stock  Exchange,  or the New York Stock Exchange,
                  ANAHOP agreed to pay an additional  $1,000,000 to the Company.
                  (The  payments  of $500,000  and  $1,000,000  are  referred to
                  collectively as the "Second Tranche Payment.")

Upon  receipt  by us of the  Second  Tranche  Payment,  we  agreed  to  issue  a
certificate or certificates to ANAHOP representing the remaining 21,428,571 June
Shares.

Additionally,  once the Company has received  the Second  Tranche  Payment,  the
Company  agreed to issue  warrants to  designees  of ANAHOP to purchase up to an
additional 63,000,000 shares.

We  intend to use the  proceeds  from the June  Private  Placement  for  general
corporate purposes and working capital.

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


                                       50
<PAGE>


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.

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 November  14,  2006,  no further  loans had been made to the Company  from
Abacas.


                                       51
<PAGE>


As of  December  31,  2001,  Iehab  Hawatmeh  had loaned the  Company a total of
$1,390,125. The loans were demand loans, bore interest at 10% per annum and were
unsecured.  Effective  January  14,  2002,  we entered  into four  substantially
identical agreements with existing  shareholders  pursuant to which we issued an
aggregate of 43,321,186  shares of restricted  common stock at a price of $0.075
per share for  $500,000 in cash and the  cancellation  of  $2,749,090  principal
amount of our debt. Two of these agreements were with the Saliba Private Annuity
Trust,  one of our  principal  shareholders,  and a related  entity,  the Saliba
Living Trust.  The Saliba trusts are also principals of Abacas  Ventures,  Inc.,
which entity  purchased  our line of credit in May 2000.  Pursuant to the Saliba
agreements,  the trusts were issued a total of 26,654,520 shares of common stock
in exchange for $500,000  cash and the  cancellation  of  $1,499,090 of debt. We
used the  $500,000  cash from the sale of the shares for working  capital.  As a
result of this  transaction,  the  percentage  of our common  stock owned by the
Saliba  Private  Annuity  Trust  and the  Saliba  Living  Trust  increased  from
approximately  6.73% to  approximately  17.76%.  Mr. Trevor  Saliba,  one of our
directors and officers,  is a passive  beneficiary of the Saliba Private Annuity
Trust.  Pursuant to the other two agreements  made in January 2002, we issued an
aggregate of 16,666,666  shares of restricted  common stock at a price of $0.075
per share in exchange for the cancellation of $1,250,000 of notes payable by two
shareholders,  Mr. Iehab Hawatmeh (our  president,  a director and our principal
shareholder) and Mr. Rajai Hawatmeh. Of these shares,  15,333,333 were issued to
Iehab Hawatmeh in exchange for the cancellation of $1,150,000 in debt.

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.

No Change in Nominating Procedures

         No changes have been made to the procedures by which  security  holders
may recommend nominees to the Company's Board of Directors.


                                       52
<PAGE>


Item 6.      Exhibits

         Exhibits:

         10.1     Amendment  No. 1 to Investor  Registration  Rights  Agreement,
                  between CirTran  Corporation  and Highgate House Funds,  Ltd.,
                  dated as of June 15, 2006 (filed as an exhibit to Registration
                  Statement on Form SB-2 (File No.  333-128549) and incorporated
                  herein by reference).
         10.2     Amendment  No. 1 to Investor  Registration  Rights  Agreement,
                  between CirTran Corporation and Cornell Capital Partners,  LP,
                  dated as of June 15, 2006 (filed as an exhibit to Registration
                  Statement on Form SB-2 (File No.  333-128549) and incorporated
                  herein by reference).
         10.3     Assignment and Exclusive Services Agreement, dated as of April
                  1, 2006, by and among Diverse Talent Group, Inc.,  Christopher
                  Nassif,   and  Diverse  Media  Group  Corp.  (a  wholly  owned
                  subsidiary  of  Cirtran  Corporation)  (filed as an exhibit to
                  Registration  Statement on Form SB-2 (File No. 333-128549) and
                  incorporated herein by reference).
         10.4     Employment  Agreement between  Christopher  Nassif and Diverse
                  Media Group Corp., dated as of April 1, 2006 (previously filed
                  as an  exhibit  to the  Company's  Current  Report on Form 8-K
                  filed with the  Commission on June 2, 2006,  and  incorporated
                  here in by reference).
         10.5     Loan Agreement  dated as of May 24, 2006, by and among Diverse
                  Talent  Group,  Inc.,  Christopher  Nassif,  and Diverse Media
                  Group Corp  (previously  filed as an exhibit to the  Company's
                  Current  Report on Form 8-K filed with the  Commission on June
                  2, 2006, and incorporated here in by reference).
         10.6     Promissory Note,  dated May 24, 2006  (previously  filed as an
                  exhibit to the Company's Current Report on Form 8-K filed with
                  the  Commission on June 2, 2006, and  incorporated  here in by
                  reference).
         10.7     Security  Agreement,  dated as of May 24, 2006, by and between
                  Diverse  Talent  Group,  Inc.,  and Diverse  Media Group Corp.
                  (previously  filed  as an  exhibit  to the  Company's  Current
                  Report on Form 8-K filed with the  Commission on June 2, 2006,
                  and incorporated here in by reference).
         10.8     Fraudulent  Transaction  Guarantee,  dated as of May 24,  2006
                  (previously  filed  as an  exhibit  to the  Company's  Current
                  Report on Form 8-K filed with the  Commission on June 2, 2006,
                  and incorporated here in by reference).
         10.9     Securities  Purchase Agreement between CirTran Corporation and
                  ANAHOP, Inc., dated as of May 24, 2006 (previously filed as an
                  exhibit to the Company's Current Report on Form 8-K filed with
                  the  Commission on May 30, 2006, and  incorporated  here in by
                  reference).
         10.10    Warrant  for  10,000,000   shares  of  CirTran  Common  Stock,
                  exercisable at $0.15, issued to Albert Hagar (previously filed
                  as an  exhibit  to the  Company's  Current  Report on Form 8-K
                  filed with the  Commission on May 30, 2006,  and  incorporated
                  here in by reference).
         10.11    Warrant  for  5,000,000   shares  of  CirTran   Common  Stock,
                  exercisable at $0.15, issued to Fadi Nora (previously filed as
                  an exhibit to the Company's  Current  Report on Form 8-K filed
                  with the Commission on May 30, 2006, and incorporated  here in
                  by reference).
         10.12    Warrant  for  5,000,000   shares  of  CirTran   Common  Stock,
                  exercisable at $0.25, issued to Fadi Nora (previously filed as
                  an exhibit to the Company's  Current  Report on Form 8-K filed
                  with the Commission on May 30, 2006, and incorporated  here in
                  by reference).
         10.13    Warrant  for  10,000,000   shares  of  CirTran  Common  Stock,
                  exercisable at $0.50, issued to Albert Hagar (previously filed
                  as an  exhibit  to the  Company's  Current  Report on Form 8-K
                  filed with the  Commission on May 30, 2006,  and  incorporated
                  here in by reference).


                                       53
<PAGE>


         10.14    Asset  Purchase  Agreement,  dated as of June 6, 2006,  by and
                  between   Advanced   Beauty   Solutions,   LLC,   and  CirTran
                  Corporation  (previously  filed as an exhibit to the Company's
                  Current  Report on Form 8-K filed with the  Commission on June
                  13, 2006, and incorporated here in by reference).
         10.15    Securities  Purchase Agreement between CirTran Corporation and
                  ANAHOP,  Inc., dated as of June 30, 2006 (previously  filed as
                  an exhibit to the Company's  Current  Report on Form 8-K filed
                  with the Commission on July 6, 2006, and incorporated  here in
                  by reference).
         10.16    Warrant  for  20,000,000   shares  of  CirTran  Common  Stock,
                  exercisable at $0.15, issued to Albert Hagar (previously filed
                  as an  exhibit  to the  Company's  Current  Report on Form 8-K
                  filed with the  Commission on July 6, 2006,  and  incorporated
                  here in by reference).
         10.17    Warrant  for  10,000,000   shares  of  CirTran  Common  Stock,
                  exercisable at $0.15, issued to Fadi Nora (previously filed as
                  an exhibit to the Company's  Current  Report on Form 8-K filed
                  with the Commission on July 6, 2006, and incorporated  here in
                  by reference).
         10.18    Warrant  for  10,000,000   shares  of  CirTran  Common  Stock,
                  exercisable at $0.25, issued to Fadi Nora (previously filed as
                  an exhibit to the Company's  Current  Report on Form 8-K filed
                  with the Commission on July 6, 2006, and incorporated  here in
                  by reference).
         10.19    Warrant  for  23,000,000   shares  of  CirTran  Common  Stock,
                  exercisable at $0.50, issued to Albert Hagar (previously filed
                  as an  exhibit  to the  Company's  Current  Report on Form 8-K
                  filed with the  Commission on July 6, 2006,  and  incorporated
                  here in by reference).
         10.20    Marketing and  Distribution  Agreement,  dated as of April 24,
                  2006,  by and  between  Media  Syndication  Global,  LLC,  and
                  CirTran  Corporation  (previously  filed as an  exhibit to the
                  Company's Current Report on Form 8-K filed with the Commission
                  on July 10, 2006, and incorporated here in by reference).
         10.21    Lockdown  Agreement  by and between  CirTran  Corporation  and
                  Cornell Capital Partners, LP, dated as of July 20, 2006 (filed
                  as an exhibit to Registration Statement on Form SB-2 (File No.
                  333-128549) and incorporated herein by reference).
         10.22    Lockdown  Agreement  by  and  among  CirTran  Corporation  and
                  ANAHOP,  Inc.,  Albert Hagar,  and Fadi Nora, dated as of July
                  20, 2006  (filed as an exhibit to  Registration  Statement  on
                  Form SB-2 (File No.  333-128549)  and  incorporated  herein by
                  reference).
         10.23    Talent  Agreement  between  CirTran  Corporation and Holyfield
                  Management,  Inc.,  dated  as of March 8,  2006  (filed  as an
                  exhibit  to  Registration  Statement  on Form  SB-2  (File No.
                  333-128549) and incorporated herein by reference).
         10.24    Talent  Agreement  between  CirTran  Corporation and Holyfield
                  Management,  Inc.,  dated  as of March 8,  2006  (filed  as an
                  exhibit  to  Registration  Statement  on Form  SB-2  (File No.
                  333-128549) and incorporated herein by reference).
         10.25    Amendment  No. 2 to Investor  Registration  Rights  Agreement,
                  between CirTran  Corporation  and Highgate House Funds,  Ltd.,
                  dated  as  of  August  10,   2006  (filed  as  an  exhibit  to
                  Registration  Statement on Form SB-2 (File No. 333-128549) and
                  incorporated herein by reference).
         10.26    Amendment  No. 2 to Investor  Registration  Rights  Agreement,
                  between CirTran Corporation and Cornell Capital Partners,  LP,
                  dated  as  of  August  10,   2006  (filed  as  an  exhibit  to
                  Registration  Statement on Form SB-2 (File No. 333-128549) and
                  incorporated herein by reference).


                                       54
<PAGE>


         10.27    Amended  Lock Down  Agreement  by and among  the  Company  and
                  ANAHOP,  Inc.,  Albert  Hagar,  and  Fadi  Nora,  dated  as of
                  November 15, 2006.
         10.28    Amended  Lock Down  Agreement  by and  between the Company and
                  Cornell Capital Partners, L.P., dated as of October 30, 2006.
         10.29    Amendment  to  Debenture  and  Registration  Rights  Agreement
                  between the Company and Cornell Capital Partners,  L.P., dated
                  as of October 30, 2006.

         31.1     Certification
         31.2     Certification
         32.1     Certification  Pursuant to 18 U.S.C.  Section 1350, as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
         32.2     Certification  Pursuant to 18 U.S.C.  Section 1350, as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


                                   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:   November 20, 2006           By:   /s/ Iehab J. Hawatmeh
                                        -------------------------------

                                            Iehab J. Hawatmeh
                                            President
                                            (Principal Executive Officer)


Date:   November 20, 2006           By:   /s/ Richard Ferrone
                                        -------------------------------

                                            Richard Ferrone
                                            Chief Financial Officer
                                            (Principal Financial Officer)




















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