SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of event reported): July 1, 2000.
CIRTRAN CORPORATION
(Exact name of registrant as specified in its charter)
Commission File Number: 33-13674-LA
NEVADA 68-0121636
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4125 South 6000 West
West Valley City, Utah 84128
(Address of principal executive (Zip Code)
offices)
Registrant's Telephone Number: (801) 963-5112
VERMILLION VENTURES, INC.
5882 South 900 East, Suite 202, Salt Lake City, Utah 84121
(Former name, former address and former fiscal year,
if changed since last report)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Change in Control Transaction
On July 1, 2000, Vermillion Ventures, Inc. ("Company")
issued 10,000,000 shares of its common stock to acquire
substantially all of the assets of Circuit Technology, Inc., a
Utah corporation ("CTI"), through the Company's wholly owned
subsidiary, CTI Systems, Inc. ("CTSI"), which is now the
operating subsidiary of the Company. The shares issued to CTI
represent approximately 98.6% of the issued and outstanding
common stock of the Company immediately following the
acquisition. In connection with the transaction, the former
directors of the Company appointed Iehab J. Hawatmeh a director
of the Company and then resigned all of their positions with the
Company as officers and directors.
New Management
Iehab J. Hawatmeh is now the president, secretary, and sole
director of the Company. Mr. Hawatmeh served as the President
and Chief Executive Officer of CTI since 1993. In this position
he was responsible for all operational, financial, marketing, and
sales activities of CTI. He will continue to perform similar
functions for CTSI and the Company.
It is expected that Shaher Hawatmeh (brother of Iehab J.
Hawatmeh), Sidney Cwand, and Ahab Okal, all former officers of
CTI will serve as executive officers of CTSI.
Shaher Hawatmeh served as the Vice President and Treasurer
of CTI since 1993. In these positions he was responsible for
budget development, strategic planning, asset management, and
marketing. He will continue to perform similar functions for
CTSI.
Sidney Cwand served as Secretary of CTI since 1993. In the
course of his employment, Mr. Cwand has has responsibilities with
respect to sales, purchasing, and project estimating. He will
continue to perform similar functions for CTSI.
Ahab Okal served as the Manufacturing and Engineering
Manager of CTI since April 1998. In this position he was
responsible for all engineering, quality, manufacturing,
production, and test departments. He will continue to perform
similar functions for CTSI. From April 1994 to April 1998, Mr.
Okal was Manufacturing Engineering Manager for UltraDent
Products, Inc., of South Jordan, Utah, a dental pharmaceutical
manufacturing company.
Total compensation paid in each year of the three-year
period ended December 31, 1999, to the foregoing persons is as
follows:
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Annual
Compensation
Name Year Salary ($)
Iehab J. Hawatmeh 1999 187,230
1998 128,923
1997 104,635
Shaher Hawatmeh 1999 86,154
1998 74,157
1997 53,363
Sidney Cwand 1999 34,856
1998 32,996
1997 30,576
Ahab Okal 1999 48,291
1998 33,952
1997 0
No employment agreements or other arrangements have been
established with the new executive officers of the Company.
Certain Relationships and Related Transactions
The Company leases its principal offices and manufacturing
facility from I & R Properties LLC, a Utah limited liability
company, at a monthly lease rate of $16,000 under a lease that
expires November 2006. The Company has the option of renewing
the lease for two additional 10 year terms. I & R Properties,
LLC is owned and controlled by Iehab J. Hawatmeh, an officer,
director and principal stockholder of the Company, Raed Hawatmeh,
a principal stockholder of the Company, and Shaher Hawatmeh, an
officer of CTSI.
Stock Ownership of Management and Certain Stockholders
The following table sets forth as of July 2, 2000, the
number and percentage of the outstanding shares of common stock
which, according to the information supplied to the Company, were
beneficially owned by (i) each person who is currently a director
of the Company, (ii) each executive officer, (iii) all current
directors and executive officers of the Company as a group and
(iv) each person who, to the knowledge of the Company, is the
beneficial owner of more than 5% of the outstanding common stock.
Except as otherwise indicated, the persons named in the table
have sole voting and dispositive power with respect to all shares
beneficially owned, subject to community property laws where
applicable.
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Common Percent of
Shares Class
Circuit Technology, Inc. 9,200,000 90.1
4125 South 6000 West
West Valley City, Utah 84128
Cogent Capital Corp. 800,000 7.9
11444 South 1780 East
Sandy, Utah 84092
Iehab J. Hawatmeh (1)(2) 9,200,000 90.1
c/o Circuit Technology, Inc.
4125 South 6000 West
West Valley City, Utah 84128
Shaher Hawatmeh (1)(2) -0- -0-
c/o Circuit Technology, Inc.
4125 South 6000 West
West Valley City, Utah 84128
Sidney Cwand (1) -0- -0-
c/o Circuit Technology, Inc.
4125 South 6000 West
West Valley City, Utah 84128
Ahab Okal (1) -0- -0-
c/o Circuit Technology, Inc.
4125 South 6000 West
West Valley City, Utah 84128
All Officers and Directors as a 9,200,000 90.1
Group (4 persons)
_________________________
(1) These persons are all of the officers and directors of the
Company and CTSI.
(2) Iehab J. Hawatmeh is the president, a director, and
controlling stockholder of CTI. Accordingly, Mr. Hawatmeh holds
shared voting and investment control over the shares of common
stock held by CTI. It is expected that CTI will distribute the
9,200,000 shares of the Company's common stock received in the
acquisition to the CTI stockholders pro rata based on stock
ownership in CTI. Assuming this distribution is effected, the
stock ownership of certain officers and the holders of 5% of the
Company's issued and outstanding common stock would include the
following:
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Common Percent of
Shares Class
Iehab J. Hawatmeh 2,093,086 20.6
c/o Circuit Technology, Inc.
4125 South 6000 West
West Valley City, Utah 84128
Raed Hawatmeh 2,229,283 22.0
10989 Bluffside Drive
Studio City, CA 91604
Roger Kokozyon 1,870,831 18.4
4539 Haskell Avenue
Encion, CA 91436
Saliba Private Trust 695,453 6.8
115 S. Valley Street
Burbank, CA 91505
Shaher Hawatmeh 221,506 2.2
c/o Circuit Technology, Inc.
4125 South 6000 West
West Valley City, Utah 84128
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The Acquisition
On July 1, 2000, the Company acquired through its wholly
owned subsidiary substantially all the assets of CTI, a
corporation engaged in the business of assembling complex printed
circuit boards and other electronic assemblies and providing
related component part production services to OEM manufacturers
of electronic equipment for a wide variety of business
applications. The principal office of CTI, and now the Company,
is located in West Valley City, Utah. The purchase price for CTI
paid at closing consists of the assumption of certain CTI
liabilities and 10,000,000 shares of common stock of the Company.
The final dollar amount of the purchase price will be determined
on the basis of the CTI balance sheet as of June 30, 2000, which
is in the process of being prepared. The purchase price was
determined through arms-length negotiations between the Company
and CTI on the basis of the tangible assets of CTI and the
goodwill associated with the business. The principal owners of
CTI, Iehab J. Hawatmeh, Raed Hawatmeh, Roger Kokozyon, and the
Saliba Private Trust, were not affiliated or associated with the
Company or its affiliates prior to the acquisition.
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Business of the Company After the Acquisition
General
Following the acquisition of the assets of CTI, the Company
will continue the historical business of CTI through CTSI, its
wholly owned subsidiary formed to effect the acquisition.
References herein to the "Company" or CirTran include the Company
and its new operating subsidiary.
CirTran provides a mixture of high and medium size volume
turnkey manufacturing services using surface mount technology
(SMT), ball-grid array (BGA) assembly, pin-through-hole (PTH) and
custom injection molded cabling for leading electronics OEMs in
the communications, networking, peripherals, gaming, consumer
products, telecommunications, automotive, medical, and
semiconductor industries. The Company provides a wide variety of
pre-manufacturing, manufacturing and post-manufacturing services.
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.
The Market and Strategy
CirTran is benefiting from increased market acceptance of,
and reliance upon, the use of manufacturing specialists by many
electronics OEMs. It is estimated by IPC--Association Connecting
Electronics Industries that the U.S. electronics manufacturing
services (EMS) industry market increased 25% to $22.5 billion in
1998. The Company believes the trend towards outsourcing
manufacturing will continue. OEMs utilize manufacturing
specialists for many reasons including the following:
Reduce Time to Market. Due to intense competitive pressures in
the electronics industry, OEMs are faced with increasingly
shorter product life-cycles and therefore have a growing need to
reduce the time required to bring a product to market. OEMs can
reduce their time to market by using a manufacturing specialist's
manufacturing expertise and infrastructure.
Reduce Investment. As electronic products have become more
technologically advanced and are shipped in greater unit volumes,
the necessary investment required for internal manufacturing has
increased significantly for working capital, capital equipment,
labor, systems and infrastructure. Use of manufacturing
specialists enables OEMs to gain access to advanced manufacturing
capabilities while substantially reducing overall resource
requirements.
Focus Resources. Because the electronics industry is
experiencing greater levels of competition and more rapid
technological change, many OEMs increasingly are seeking to focus
their resources on activities and technologies in which they add
the greatest value. By offering comprehensive electronics
assembly and related manufacturing services, manufacturing
specialists allow OEMs to focus on their own core competencies
such as product development and marketing.
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Access Leading Manufacturing Technology. Electronic products and
electronics manufacturing technology have become increasingly
sophisticated and complex, making it difficult for OEMs to
maintain the necessary technological expertise to manufacture
products internally. OEMs are motivated to work with a
manufacturing specialist in order to gain access to the
specialist's expertise in interconnect, test and process
technologies.
Improve Inventory Management and Purchasing Power. Electronics
industry OEMs are faced with increasing difficulties in planning,
procuring and managing their inventories efficiently due to
frequent design changes, short product life-cycles, large
investments in electronic components, component price
fluctuations and the need to achieve economies of scale in
materials procurement. OEMs can reduce production costs by using
a manufacturing specialist's volume procurement capabilities. In
addition, a manufacturing specialist's expertise in inventory
management can provide better control over inventory levels and
increase the OEM's return on assets.
Our goal is to offer its customers the significant
competitive advantages that can be obtained from manufacturing
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. To achieve this goal,
CirTran's strategy emphasizes the following key elements:
Quality. CirTran believes that product quality is a critical
success factor in the electronics manufacturing market. We
strive for continuous improvement of our processes and have
adopted a number of quality improvement and measurable quality
standards for design, manufacturing and distribution management
systems.
Manufacturing Partnerships. An important element of CirTran's
strategy is to establish partnerships with major and emerging OEM
leaders in diverse segments across the electronics industry. Our
customer base consists of leaders in industry segments such as
the communications, networking, peripherals, gaming, consumer
products, telecommunications, automotive, medical, and
semiconductor industries. Due to the costs inherent in
supporting customer relationships, CirTran focuses its efforts on
customers with which the opportunity exists to develop long-term
business partnerships. Our goal is to provide its customers with
total manufacturing solutions for both new and more mature
products, as well as across product generations. CirTran's
manufacturing services range from providing design and new
product introduction services, to just-in-time delivery on low to
medium volume turnkey and consignment projects and projects that
require more value-added services, to servicing OEMs that require
price-sensitive, high-volume production.
Turnkey Capabilities. Another element of our strategy is to
provide a complete range of manufacturing management and value-
added services, including materials management, board design,
concurrent engineering, assembly of complex printed circuit
boards and other electronic assemblies, test engineering,
software manufacturing, accessory packaging and post-
manufacturing services. CirTran believes that as manufacturing
technologies become more complex and as product life cycles
shorten, OEMs will increasingly contract for manufacturing
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on a turnkey basis as they seek to reduce their time to market
and capital asset and inventory costs. A substantial portion of
our revenue is from its turnkey business. CirTran believes that
the ability to manage and support large turnkey projects is a
critical success factor and a significant barrier to entry for
the market it serves. In addition, CirTran believes that due to
the difficulty and long lead-time required to change
manufacturers, turnkey projects generally increase an OEM's
dependence on its manufacturing specialist, resulting in greater
stability of our customer base and in closer working
relationships. CirTran has been successful in establishing sole
source positions with many of its customers for certain of their
products.
Advanced Manufacturing Process Technology. CirTran intends to
continue to offer its customers the most advanced manufacturing
process technologies, including surface mount technology (SMT),
ball-grid array (BGA) assembly, pin-through-hole (PTH)
technology, manufacturing and test engineering support and design
for manufacturability, and in-circuit and functional test and
full-system mechanical assembly. CirTran has developed
substantial SMT expertise including advanced, vision-based
component placement equipment. CirTran believes that the cost of
SMT assembly facilities and the technical capability required to
operate a high-yield SMT operation are significant competitive
factors in the market for electronic assembly. CirTran also has
the capability to manufacture cables, harnesses and plastic
injection molding systems.
Diverse Geographic Operations. An important element of our
strategy is to establish production facilities in areas of high
customer density or where manufacturing efficiencies can be
achieved. CirTran currently has operations in Utah and Colorado
Springs. The Company is negotiating to acquire a facility in the
Silicon Valley area. CirTran believes that its facilities in
these diverse geographic locations enable us to better address
our customers' objectives regarding cost, shipping location,
frequency of interaction with manufacturing specialists.
Manufacturing and Services
To achieve excellence in manufacturing, CirTran combines
advanced manufacturing technology, such as computer-aided
manufacturing and testing, with manufacturing techniques
including just-in-time manufacturing, total quality management,
statistical process control and continuous flow manufacturing.
Just-in-time manufacturing is a production technique, which
minimizes work-in-process inventory and manufacturing cycle time
while enabling the Company to deliver products to customers in
the quantities and time frame required. Total quality management
is a management philosophy which seeks to impart high levels of
quality in every operation of CirTran and is accomplished by the
setting of quality objectives for every operation, tracking
performance against those objectives, identifying work flow and
policy changes required to achieve higher quality levels and a
commitment by executive management to support changes required to
deliver higher quality. Statistical process control is a set of
analytical and problem-solving techniques based on statistics and
process capability measurements through which CirTran can track
process inputs and resulting quality and determine whether a
process is operating within specified limits. The goal is to
reduce variability in the process, as well as eliminate
aberrations that contribute to quality below the acceptable range
of each process performance standard.
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CirTran's electronics assembly activities consist primarily
of the placement and attachment of electronic and mechanical
components on printed circuit boards and flexible cables. We
also assemble higher-level sub-systems and systems incorporating
printed circuit boards and complex electromechanical components,
in some cases manufacturing and packaging products for shipment
directly to its customers' distributors. In addition, CirTran
provides other manufacturing services including refurbishment and
remanufacturing. CirTran manufactures on a turnkey basis,
directly procuring some or all of the components necessary for
production and on a consignment basis, where the OEM customer
supplies all or some components for assembly.
In conjunction with its assembly activities, CirTran also
provides computer-aided testing of printed circuit boards, sub-
systems and systems, which contributes significantly to our
ability to deliver high quality products on a consistent basis.
CirTran has developed specific strategies and routines to test
board and system level assemblies. In-circuit tests verify that
all components have been properly inserted and that the
electrical circuits are complete. Functional tests determine if
the board or system assembly is performing to customer
specifications. CirTran either designs and procures test
fixtures and develops its own test software or utilizes its
customers' existing test fixtures and test software. In
addition, CirTran provides environmental stress tests of the
board or system assembly.
CirTran provides turnkey manufacturing management to meet
its customers' requirements, including procurement and materials
management and consultation on board design and
manufacturability.
Sales and Marketing
Sales and marketing at CirTran is an integrated process
involving direct salespersons and project managers, as well as
CirTran's senior executives. Our sales resources are directed at
multiple management and staff levels within targeted accounts.
CirTran also uses independent sales representatives in certain
geographic areas. CirTran receives unsolicited inquiries
resulting from advertising and public relations activities, as
well as referrals from current customers. These opportunities are
evaluated against CirTran's customer selection criteria and are
assigned to direct salespersons or independent sales
representatives, as appropriate. Historically, CirTran has had
substantial recurring sales from existing customers.
Over 87% of our net sales during the year ended December
31, 1999, were derived from customers that were also customers
during 1998. Although CirTran seeks to diversify its customer
base, a small number of customers currently are responsible for a
significant portion of our net sales. During the year ended
December 31, 1999, CirTran's ten largest customers accounted for
89% of consolidated net sales. One customer accounted for more
than 10% of net sales during the year. Andrew Wireless Product
represented 30%, 48.8%, 17% and 14% of net sales in 1999, 1998,
1997 and 1996, respectively. No other individual customer
accounted for more than 10% of CirTran's net sales in any of
these years.
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Backlog consists of contracts or purchase orders with
delivery dates scheduled within the next twelve months. At
December 31, 1999, CirTran's backlog was approximately $4.5
million. The backlog was approximately $3 million at December
31, 1998.
Competition
The electronic manufacturing services industry is comprised
of a large number of companies, several of which have achieved
substantial market share. CirTran also faces competition from
current and prospective customers that evaluate CirTran's
capabilities against the merits of manufacturing products
internally. CirTran competes with different companies depending
on the type of service or geographic area. Certain of CirTran's
competitors may have greater manufacturing, financial, research
and development and marketing resources than CirTran. We believe
that the primary basis of competition in its targeted markets is
manufacturing technology, quality, responsiveness, the provision
of value-added services and price. To remain competitive,
CirTran must continue to provide technologically advanced
manufacturing services, maintain quality levels, offer flexible
delivery schedules, deliver finished products on a reliable basis
and compete favorably on the basis of price. CirTran currently
may be at a competitive disadvantage as to price when compared to
manufacturers with lower cost structures, particularly with
respect to manufacturers with established facilities where labor
costs are lower.
Regulation
CirTran's operations are not subject to any significant
federal, state or local regulation.
Employees
CirTran currently employs 120 persons, four in executive
positions, 12 in engineering and design, 98 in clerical and
manufacturing, and six in sales.
Facilities
CirTran leases approximately 40,000 square feet of office
and manufacturing space in West Valley City, Utah, at a monthly
lease rate of $16,000, which serves as the principal offices and
manufacturing facility for the Company. This facility is leased
from I&R Properties, LLC, a company owned and controlled by Iehab
J. Hawatmeh, an officer, director, and principal stockholder of
the Company, Raed Hawatmeh, a principal stockholder of the
Company, and Shaher Hawatmeh, an executive officer of the
Company's subsidiary. CirTran leases a sales office in Newark,
California, which is near Santa Clara, at a monthly lease rate of
$850. The facilities in Utah and California are adequate for the
current needs of the Company.
ITEM 5. OTHER EVENTS
On July 11, 2000, the Company amended its Articles of
Incorporation to change its name to CirTran Corporation, to limit
the liability of directors of the Company, and to exclude the
Company from the operation of the control share and combination
with interested stockholder
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restrictions imposed by the Nevada Revised Statutes. The
amendments were approved by a majority written consent signed by
CTI, the holder of 9,200,000 of the 10,143,567 issued and
outstanding common shares. In the written consent Iehab J.
Hawatmeh was re-elected as a director of the Company by the same
vote.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Financial Statements.
(a) Financial Statements.
It is impracticable for the Company to provide the required
historical financial statements of CTI at the time this report on
Form 8-K is filed. The Company proposes to file the required
financial statements as soon as they are available. The Company
expects that it will file the required financial statements no
later than 60 days after the date on which this report on Form 8-
K is required to be filed.
(b) Pro Forma Financial Information.
It is impracticable for the Company to provide the required
pro forma financial information at the time this report on Form 8-
K is filed. The Company proposes to file the required pro forma
financial information as soon as it is available. The Company
expects that it will file the required financial information no
later than 60 days after the date on which this report on Form 8-
K is required to be filed.
(c) Exhibits. Copies of the following documents are included as
exhibits to this report pursuant to Item 601 of Regulation S-B.
Exhibit SEC Ref. Title of Document
No. No.
1 (2) Asset Purchase Agreement dated June 12,
2000, with exhibits
2 (3)(i) Articles of Incorporation, as amended
3 (3)(ii) By-Laws
4 (10) Lease Agreement for West Valley City,
Utah facility
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned hereunto duly
authorized.
CIRTRAN CORPORATION
DATED: July 14, 2000 By: /s/ Iehab J. Hawatmeh, President
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