|UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-QSB
|----------------------------------------------------------------------------------------
|                                                                                        
|(Mark One)                                                                              
|x                                                                                       
|For the quarterly period ended:September 30, 2006                                       
|                                                                                        
|Or                                                                                      
|                                                                                        
|o                                                                                       
|For the transition period from ____________ to _____________                            
|                                                                                        
|Commission File Number: 000-50983                                                       
|                                                                                        
|MIDNIGHT CANDLE COMPANY                                                                 
|(Exact name of registrant as specified in its charter)                                  
|                                                                                        
|Nevada                                                                                  
|(State or other jurisdiction of incorporation or organization)                          
|                                                                                        
|79013 Bayside Court

Indio, California                                                  
|(Address of principal executive offices)                                                
|                                                                                        
|(760) 772-1872                                                                          
|(Registrants telephone number, including area code)                                    
|                                                                                        
|N/A                                                                                     
|(Former name, former address and former fiscal year, if changed since last report)      
|                                                                                        
|                                                                                        

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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X ] No o



APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes oNo o



APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 5,230,000











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MIDNIGHT CANDLE COMPANY

(A Development Stage Company)



Table of Contents



Page



|PART I  FINANCIAL INFORMATION                | 3 
|--------------------------------------------- | --
|Unaudited Financial Statements                | 3 
|CONDENSED BALANCE SHEET                       | 4 
|CONDENSED STATEMENTS OF OPERATIONS            | 5 
|CONDENSED STATEMENTS OF CASH FLOWS            | 6 
|NOTES TO CONDENSED FINANCIAL STATEMENTS       | 7 
|Managements Discussion and Plan of Operation | 16
|Controls and Procedures                       | 17
|PART II  OTHER INFORMATION                   | 18
|Exhibits and Reports on Form 8-K              | 18
|SIGNATURES                                    | 19



















2



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Unaudited Financial Statements



The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and pursuant to the rules and regulations of the Securities and Exchange Commission (Commission). While these statements reflect all normal recurring adjustments which are, in the opinion of management, necessary for fair presentation of the results of the interim period, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto, which are included in the Companys Registration Statement on Form 10-KSB for the year ended December 31, 2005 previously filed with the Commission on February 23, 2006, and subsequent amendments made thereto.















3



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MIDNIGHT CANDLE COMPANY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED BALANCE SHEET

SEPTEMBER 30, 2006

(UNAUDITED)





|ASSETS                                                        |  |   |         |  
|------------------------------------------------------------- |  | - | ------- | -
|                                                              |  |   |         |  
|Current Assets:                                               |  |   |         |  
|Cash and cash equivalents                                     |  | $ | 3,011   |  
|Accounts receivable                                           |  |   | 122     |  
|Inventory                                                     |  |   | 136     |  
|                                                              |  |   |         |  
|Total Current Assets                                          |  |   | 3,269   |  
|                                                              |  |   |         |  
|TOTAL ASSETS                                                  |  | $ | 3,269   |  
|                                                              |  |   |         |  
|                                                              |  |   |         |  
|                                                              |  |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                          |  |   |         |  
|                                                              |  |   |         |  
|LIABILITIES                                                   |  | $ |        |  
|                                                              |  |   |         |  
|Total Liabilities                                             |  |   |        |  
|                                                              |  |   |         |  
|STOCKHOLDERS EQUITY                                          |  |   |         |  
|Common stock, $.001 Par Value; 100,000,000 shares authorized; |  |   |         |  
|5,230,000 shares issued and outstanding                       |  |   | 5,230   |  
|Additional paid-in capital                                    |  |   | 23,270  |  
|Deficit accumulated during the development stage              |  |   | (25,231 | )
|                                                              |  |   |         |  
|Total Stockholders Equity                                    |  |   | 3,269   |  
|                                                              |  |   |         |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY                    |  | $ | 3,269   |  









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





4



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MIDNIGHT CANDLE COMPANY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

(WITH CUMULATIVE TOTALS SINCE INCEPTION)

(UNAUDITED)





|                                             |  | For the nine months ended |           | For the three months ended |   | Cumulative Totals              |  
|-------------------------------------------- |  | ------------------------- | --------- | -------------------------- | - | ------------------------------ | -
|                                             |  | September 30,             |           | September 30,              |   | September 24, 2004 (Inception) |  
|                                             |  | 2006                      |           | 2005                       |   | 2006                           |  
|                                             |  |                           |           |                            |   |                                |  
|OPERATING REVENUES                           |  |                           |           |                            |   |                                |  
|Sales                                        |  | $                         | 415       |                            | $ |                               |  
|                                             |  |                           |           |                            |   |                                |  
|COST OF SALES                                |  |                           | 368       |                            |   |                               |  
|                                             |  |                           |           |                            |   |                                |  
|GROSS PROFIT                                 |  |                           | 47        |                            |   |                               |  
|                                             |  |                           |           |                            |   |                                |  
|OPERATING EXPENSES                           |  |                           |           |                            |   |                                |  
|Professional fees                            |  |                           | 6,304     |                            |   | 4,054                          |  
|General and administrative expenses          |  |                           | 3,780     |                            |   | 1,556                          |  
|Total Operating Expenses                     |  |                           | 10,084    |                            |   | 5,610                          |  
|                                             |  |                           |           |                            |   |                                |  
|NET (LOSS) BEFORE PROVISION FOR INCOME TAXES |  |                           | (10,037   | )                          |   | (5,610                         | )
|Provision for income taxes                   |  |                           |          |                            |   |                               |  
|                                             |  |                           |           |                            |   |                                |  
|NET (LOSS) APPLICABLE TO COMMON SHARES       |  | $                         | (10,037   | )                          | $ | (5,610                         | )
|                                             |  |                           |           |                            |   |                                |  
|WEIGHTED AVERAGE COMMON SHARES               |  |                           |           |                            |   |                                |  
|OUTSTANDING                                  |  |                           | 5,230,000 |                            |   | 5,107,106                      |  
|                                             |  |                           |           |                            |   |                                |  
|NET (LOSS) PER COMMON SHARE OUTSTANDING      |  | $                         | (0.00     | )                          | $ | (0.00                          | )





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





5





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MIDNIGHT CANDLE COMPANY

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005

(WITH CUMULATIVE TOTALS SINCE INCEPTION)

(UNAUDITED)



|                                                    |  |      |         | Cumulative Totals              |  
|--------------------------------------------------- |  | ---- | ------- | ------------------------------ | -
|                                                    |  |      |         | September 24, 2004 (inception) |  
|                                                    |  | 2006 |         | 2005                           |  
|CASH FLOWS FROM OPERATING ACTIVITIES                |  |      |         |                                |  
|Net (loss)                                          |  | $    | (10,037 | )                              | $
|                                                    |  |      |         |                                |  
|Adjustments to reconcile net (loss) to net cash     |  |      |         |                                |  
|(used in) operating activities                      |  |      |         |                                |  
|                                                    |  |      |         |                                |  
|Changes in assets and liabilities                   |  |      |         |                                |  
|(Increase) in accounts receivable                   |  |      | (122    | )                              |  
|(Increase) in inventory                             |  |      | (136    | )                              |  
|Total adjustments                                   |  |      | (258    | )                              |  
|                                                    |  |      |         |                                |  
|Net cash (used in) operating activities             |  |      | (10,295 | )                              |  
|                                                    |  |      |         |                                |  
|CASH FLOWS FROM FINANCING ACTIVITIES                |  |      |         |                                |  
|Issuance of common stock                            |  |      |        |                                |  
|Proceeds from note payable  stockholder            |  |      |        |                                |  
|                                                    |  |      |         |                                |  
|Net cash provided by financing activities           |  |      |        |                                |  
|                                                    |  |      |         |                                |  
|NET INCREASE (DECREASE) IN                          |  |      |         |                                |  
|CASH AND CASH EQUIVALENTS                           |  |      | (10,295 | )                              |  
|                                                    |  |      |         |                                |  
|CASH AND CASH EQUIVALENTS                          |  |      |         |                                |  
|BEGINNING OF PERIOD                                 |  |      | 13,306  |                                |  
|                                                    |  |      |         |                                |  
|CASH AND CASH EQUIVALENTS  END OF PERIOD           |  | $    | 3,011   |                                | $
|                                                    |  |      |         |                                |  
|SUPPLEMENTAL CASH FLOW INFORMATION:                 |  |      |         |                                |  
|During the period, cash was paid for the following: |  |      |         |                                |  
|Interest                                            |  | $    |        |                                | $
|Income taxes                                        |  | $    |        |                                | $
|                                                    |  |      |         |                                |  
|SUPPLEMENTAL DISCLOSURE OF NON-CASH                 |  |      |         |                                |  
|INFORMATION:                                        |  |      |         |                                |  
|                                                    |  |      |         |                                |  
|Forgiveness of note payable converted to equity     |  | $    |        |                                | $



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





6



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MIDNIGHT CANDLE COMPANY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2006

(UNAUDITED)





|NOTE 1 - | ORGANIZATION AND BASIS OF PRESENTATION
|-------- | --------------------------------------



The condensed unaudited interim financial statements included herein have been prepared by Midnight Candle Company (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). The condensed financial statements and notes are presented as permitted on Form 10-QSB and do not contain information included in the Companys annual statements and notes. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as allowed by such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed unaudited financial statements be read in conjunction with
the December 31, 2005 audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these condensed financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.



The management of the Company believes that the accompanying unaudited condensed financial statements reflect all adjustments (including normal recurring adjustments) necessary to present fairly the operations and cash flows for the periods presented.



Midnight Candle Company (the Company) is a distributor of candles. The candles will be marketed in various sizes, shapes and fragrances. These customized candles will be distributed for home use and small business users. The Company does not plan to produce any candles and expects to purchase all of its saleable products from manufactures or enter into private-label relationships with manufactures to place our corporate name on select products. The Company intends to sell enough candles to support business stability and growth with a large portion being sold through the Companys web-site.











7



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MIDNIGHT CANDLE COMPANY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 2006

(UNAUDITED)





|NOTE 2 - | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-------- | ------------------------------------------



Development Stage Company



The Company is considered to be in the development stage as defined in Statement of Financial Accounting Standards (SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises. The Company has devoted substantially all of its efforts to business planning, research and development. Additionally, the Company has allocated a substantial portion of their time and investment in bringing their product to the market, and the raising of capital.



Use of Estimates



The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



Cash and Cash Equivalents



For financial statement presentation purposes, the Company considers short-term, highly liquid investments with original maturities of three months or less to be cash and cash equivalents.



The Company maintains cash and cash equivalent balances at a financial institution that is insured by the Federal Deposit Insurance Corporation up to $100,000. At September 30, 2006 there were no uninsured balances.



Accounts Receivable



The company conducts business and extends credit based on an evaluation of its customers financial condition, generally without requiring collateral. Exposure to losses on receivables is expected to vary by customer due to the financial condition of each customer. The company monitors exposure to credit losses and maintains allowances for anticipated losses considered necessary under the circumstances.



Inventory



Inventory consists principally of finished foods that are valued at the lower of cost or market, determined using the first-in, first-out (FIFO) method.







8



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MIDNIGHT CANDLE COMPANY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 2006

(UNAUDITED)





|NOTE 2  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-------- | ------------------------------------------

(CONTINUED)



Revenue Recognition



The Companys financial statements are prepared under the accrual method of accounting. Revenues will be recognized in the period the services are performed and costs are recorded in the period incurred rather than paid.



Fair Value of Financial Instruments



The Companys financial instruments are all carried at amounts that approximate their estimated fair value as of September 30, 2006.



Income Taxes



The provision for income taxes includes the tax effects of transactions reported in the financial statements. Deferred taxes would be recognized for differences between the basis for assets and liabilities for financial statement and income tax purposes. The major difference relate to the net operating loss carryforwards generated by sustaining deficits during the development stage.



Advertising Costs



Advertising and promotions costs are expensed as incurred. The Company incurred no such expenses since inception.









9



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MIDNIGHT CANDLE COMPANY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 2006

(UNAUDITED)





|NOTE 2  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-------- | ------------------------------------------

(CONTINUED)



Recent Accounting Pronouncements



In December 2004, the FASB issued Financial Accounting Standards No. 123 (revised 2004) (FAS 123R), Share-Based Payment, FAS 123R replaces FAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. FAS 123R requires compensation expense, measured as the fair value at the grant date, related to share-based payment transactions to be recognized in the financial statements over the period that an employee provides service in exchange for the award. The Company intends to adopt FAS 123R using the modified prospective transition method as defined in FAS 123R. Under the modified prospective method, companies are required to record compensation cost prospectively for the unvested portion, as of the date of adoption, of previously issued and outstanding awards over the remaining vesting
period of such awards. FAS 123R is effective January 1, 2006. The implementation of this standard did not have a material impact on its financial position, results of operations or cash flows.



In May 2005, the FASB issued FAS No. 154, Accounting Changes and Error Corrections. FAS No. 154 replaces Accounting Principles Board (APB) Opinion No. 20, Accounting Changes and FAS No. 3, Reporting Accounting Changes in Interim Financial Statements. FAS No. 154 requires retrospective application to prior periods financial statements of a voluntary change in accounting principle unless it is impracticable. APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including the cumulative effect of changing to the new accounting principle in net income in the period of the change. FAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of FAS No. 154 did not have a material
impact on the Companys financial position or results of operations.



In February 2006, the FASB issued FAS No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140. FAS No. 155 resolves issues addressed in FAS No. 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets, and permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies









10



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MIDNIGHT CANDLE COMPANY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 2006

(UNAUDITED)





|NOTE 2  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-------- | ------------------------------------------

(CONTINUED)



Recent Accounting Pronouncements (Continued)



which interest-only strips and principal-only strips are not subject to the requirements of FAS No. 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives and amends FAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. FAS No. 155 is effective for all financial instruments acquired or issued after the beginning of the first fiscal year that begins after September 15, 2006. The Company is currently evaluating the effect the adoption of
FAS No. 155 but believes it will not have a material impact on its financial position or results of operations.



In March 2006, the FASB issued FAS No. 156, Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140. FAS No. 156 requires an entity to recognize a servicing asset or liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract under a transfer of the servicers financial assets that meets the requirements for sale accounting, a transfer of the servicers financial assets to a qualified special-purpose entity in a guaranteed mortgage securitization in which the transferor retains all of the resulting securities and classifies them as either available-for-sale or trading securities in accordance with FAS No. 115, Accounting for Certain Investments in Debt and Equity Securities and an acquisition or assumption of an obligation to service a financial asset that does
not relate to financial assets of the servicer or its consolidated affiliates.



Additionally, FAS No. 156 requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, permits an entity to choose either the use of an amortization or fair value method for subsequent measurements, permits at initial adoption a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights and requires separate presentation of servicing assets and liabilities subsequently measured at fair value and additional disclosures for all separately recognized servicing assets and liabilities. FAS No. 156 is effective for transactions entered into after the beginning of the first fiscal year that begins after September 15, 2006. The Company is currently evaluating the effect the adoption of FAS No. 156 but believes it will not have a material impact on its financial
position or results of operations.









11



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MIDNIGHT CANDLE COMPANY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 2006

(UNAUDITED)





|NOTE 2  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-------- | ------------------------------------------

(CONTINUED)



Recent Accounting Pronouncements (Continued)



In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements,(FAS 157). This Standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The adoption of FAS 157 is not expected to have a material impact on the Companys financial position, results of operations or cash flows.



The FASB also issued in September 2006 Statement of Financial Accounting Standards No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of FASB Statement No. 87, 88, 106 and 132(R), (FAS 158) . This Standard requires recognition of the funded status of a benefit plan in the statement of financial position. The Standard also requires recognition in other comprehensive income certain gains and losses that arise during the period but are deferred under pension accounting rules, as well as modifies the timing of reporting and adds certain disclosures. FAS 158 provides recognition and disclosure elements to be effective as of the end of the fiscal year after December 15, 2006 and measurement elements to be effective for fiscal years ending after December 15, 2008. The Company has not yet analyzed the impact
FAS 158 will have on its financial condition, results of operations, cash flows or disclosures.









12



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MIDNIGHT CANDLE COMPANY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 2006

(UNAUDITED)





|NOTE 2  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-------- | ------------------------------------------

(CONTINUED)



Net (Loss) Per Share of Common Stock



The following table sets forth the computation of basic and diluted earnings per share:



|                               |  | Nine Months Ended, |          
|------------------------------ |  | ------------------ | ---------
|                               |  | September 30, 2006 |          
|                               |  |                    |          
|Net loss                       |  | $                  | (10,037  
|Weighted average common shares |  |                    |          
|outstanding (Basic)            |  |                    | 5,230,000
|                               |  |                    |          
|Options                        |  |                    |         
|Warrants                       |  |                    |         
|                               |  |                    |          
|Weighted average common shares |  |                    |          
|outstanding (Diluted)          |  |                    | 5,230,000



There were no common stock equivalents outstanding at September 30, 2006 and 2005.



Historical net (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants.



All dilutive securities were not included in the calculation of dilutive earnings per share because the effect would be anti-dilutive when the Company has incurred a loss from operations. The Company currently has no potentially dilutive securities outstanding.









13



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MIDNIGHT CANDLE COMPANY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 2006

(UNAUDITED)





|NOTE 3  | STOCKHOLDERS EQUITY
|-------- | --------------------



On September 24, 2004 the Company was formed with one class of common stock, par value $.001. The Company authorized 100,000,000 shares of common stock.



In November 2004, the Company issued 5,000,000 shares of stock to its officer for cash of $5,000.



In March and June 2005, the Company issued 230,000 shares (60,000 and 170,000 shares in March 2005 and June 2005, respectively) of common stock at $0.10 per share for $23,000. These shares were issued in accordance with a Private Placement Memorandum dated December 15, 2004.



In June 2005, the officer of the Company forgave a note payable to the Company for $500 and all related accrued interest.



|NOTE 4  | GOING CONCERN
|-------- | -------------



As shown in the accompanying financial statements, as is typical of companies going through the development stage, the Company incurred a net loss for the period September 24, 2004 (Inception) through September 30, 2006. The Company is currently in the development stage, and there is no guarantee whether the Company will be able to generate enough revenue and/or raise capital to support current operations and generate anticipated sales. This raises substantial doubt about the Companys ability to continue as a going concern.



Management believes that the Companys capital requirements will depend on many factors including the success of the Companys product development efforts. With the business plan being followed, management believes along with working capital being raised that the operations and sales will make the Company a viable entity over the next twelve months.



The financial statements do not include any adjustments relating to the recoverability or classification of recorded assets and liabilities that might result should the Company be unable to continue as a going concern.









14



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MIDNIGHT CANDLE COMPANY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

SEPTEMBER 30, 2006

(UNAUDITED)





|NOTE 5  | PROVISION FOR INCOME TAXES
|-------- | --------------------------



Deferred income taxes will be determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Companys assets and liabilities. Deferred income taxes will be measured based on the tax rates expected to be in effect when the temporary differences are included in the Companys tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.



At September 30, 2006 and 2005, deferred tax assets consisted of the following:





|                           |  | September 30, 2006 |        | September 30, 2005 |  
|-------------------------- |  | ------------------ | ------ | ------------------ | -
|Deferred tax assets        |  | $                  | 8,500  |                    | $
|Less: valuation allowances |  |                    | (8,500 | )                  |  
|Net deferred tax assets    |  | $                  |       |                    | $



At September 30, 2006 and 2005, the Company had accumulated deficits during the development stage of approximately $25,000 and $11,000, respectively, available to offset future taxable income through 2026. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.



|NOTE 6 - | MAJOR SUPPLIER
|-------- | --------------



The Company purchased 100% of its principal products from one supplier during the nine months ending September 30, 2006. The loss of this supplier could severely disrupt the operations of the Company. However, the Company does not expect that the business relationship with this supplier will be lost.









15



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Managements Discussion and Plan of Operation



Forward-Looking Statements



This Quarterly Report contains forward-looking statements about Midnight Candle Companys business, financial condition and prospects that reflect managements assumptions and beliefs based on information currently available. We can give no assurance that the expectations indicated by such forward-looking statements will be realized. If any of our managements assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, MIDCs actual results may differ materially from those indicated by the forward-looking statements.



The key factors that are not within our control and that may have a direct bearing on operating results include, but are not limited to, acceptance of our services, our ability to expand our customer base, managements ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry.



There may be other risks and circumstances that management may be unable to predict. When used in this Quarterly Report, words such as,believes,expects, intends,plans,anticipates,estimatesand similar expressions are intended to identify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions.



Managements Discussion



We were incorporated in the State of Nevada on September 24, 2004, and have begun to implement our planned operations. Since our inception, our efforts have focused primarily on the development and implementation of our business plan, which include the following activities:

| | 1. | Formation of the company and obtaining start-up capital;
| | -- | --------------------------------------------------------

| | 2. | Obtaining capital through sales of our common stock;
| | -- | ----------------------------------------------------

| | 3. | Developing our corporate hierarchy, including naming directors to our board, appointing our executive officers and setting forth a business plan;
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------

| | 4. | Establishing relationships with suppliers of candles;
| | -- | -----------------------------------------------------

| | 5. | Establishing a website at www.midnightcandleco.com; and
| | -- | -------------------------------------------------------

| | 6. | Purchasing an inventory of candles.
| | -- | -----------------------------------



During the three and nine months ended September 30, 2006, we generated $415 in revenues from sales of our candles. In the year ago comparable periods ended September 30, 2005, we did not sell any products and therefore did not generate any revenues. The increase in sales is attributable to the fact that we initiated our sales efforts in the third quarter of 2006. From the period of our inception on September 24, 2004 to September 30, 2006, we generated aggregate revenues of $415. We may be unable to generate ongoing, significant revenues and are unable to forecast our sales for the foreseeable future.



Cost of goods sold in the three and nine months ended September 30, 2006, as well as since our inception, totaled $368. Since we did not have any sales in the three and nine month periods ended September 30, 2005, we did not incur any cost of goods sold.



Expenses for the quarter ended September 30, 2006 were $5,131, which consisted of general and administrative expenses of $2,305 and professional fees of $2,826. In the comparable year ago quarter, we incurred $473 in general and administrative expenses, as well as $2,101 in professional fees, for aggregate expenses of $2,574. The increase of $2,557 in total expenses year over year can be attributed to the increase in operational expenses. During the nine months ended September 30, 2006, expenses totaled $10,084, consisting of $6,304 in professional fees and $3,780 in general and administrative expenses. In the nine months ended September 30, 2005, total expenses were $5,610, consisting of $4,054 in professional fees and $1,556 in general and administrative expenses. The increases in our expenditures year-over-year are attributable to the operating costs associated with conducting general business
activities and the



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commencing of sales of our products. This increase is not indicative of future expenses, as we expect our costs to continue to increase rather than decrease. Since our inception, we have accumulated $25,278 in total expenses, $10,070 of which is due to general and administrative expenses and $15,208 of which were professional fees. We expect to continue to incur general and administrative expenses for the foreseeable future, although we cannot estimate the extent of these costs. As we continue to pursue establishing our base of operations, we expect aggregate expenses to increase.



For the nine months ended September 30, 2006, we incurred a net loss of $10,084, as compared to $5,610 during the nine months ended September 30, 2005. The cumulative net loss was attributable to general and administrative expenses related to the costs of start-up operations. No development related expenses have been or will be paid to our affiliates. We have yet to fully commence our planned principal operations. Our independent registered public accountants have expressed substantial doubt about our ability to continue as a going concern as footnoted in the financial statements. If our business fails, our investors may face a complete loss of their investment.

As a result of expenditures related to pursuing our stated business objective of selling candles and lack of significant revenues, we have incurred net losses since our inception. From the date of our inception to September 30, 2006, we had a cumulative deficit of $25,231. We expect to incur ongoing losses for the next 12 months of operations unless we are further able to increase our revenue generating ability significantly.

We have inventory of $136 as of September 30, 2006, which we believe we can sell to generate revenues. Generating sales in the next 6 to 12 months is important to continue as a going concern. However, we cannot guarantee that we will generate such growth. As of September 30, 2006, we had $3,011 of cash on hand, which we believe will be sufficient to continue our operations for at least the next six to twelve months. However, if our expenses are greater than anticipated or if we do not generate sufficient cash flow to support our operations over the next 6 to 12 months, we may need to raise additional capital by issuing capital stock in exchange for cash in order to continue as a going concern. There are no formal or informal agreements to attain such financing. We can not assure you that any financing can be obtained or, if obtained, that it will be on reasonable terms. Without realization of
additional capital, it would be unlikely for us to continue as a going concern.

There are no known trends, events or uncertainties that have had or that are reasonably expected to have a material impact on our revenues from continuing operations. Additionally, we do not believe that our business is subject to seasonal factors. Our management does not expect to incur costs related to research and development. We currently do not own any significant plant or equipment that we would seek to sell in the near future. Our management does not anticipate the need to hire additional full- or part- time employees

We do not anticipate the need to hire additional full- or part- time employees over the next 12 months, as the services provided by our sole officer and director appear sufficient at this time. We believe that our operations are currently on a small scale that is manageable by one individual. We plan to outsource the production of our products, thus our sole officer and directors responsibilities are mainly administrative.

We have not paid for expenses on behalf of any of our directors. Additionally, we believe that this fact shall not materially change.

We have no plans to perform any product research and development in the near term. We do not manufacture any products. There are no expected purchases of plant or significant equipment. Also, there are no plans to hire additional personnel in the near term.



Controls and Procedures



We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified by the SECs rules and forms. Disclosure controls are also designed with the objective of ensuring that this information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.



Based upon their evaluation as of the end of the period covered by this report, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are not effective to ensure that informationrequired to be included in our periodic SEC filings is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms.



Our board of directors was advised by Bagell, Josephs & Company, L.L.C., our independent registered public accounting firm, that during their performance of audit procedures for 2005 Bagell, Josephs & Company, L.L.C. identified a material weakness as defined in Public Company Accounting Oversight Board Standard No. 2 in our internal control over financial reporting.



This deficiency consisted primarily of inadequate staffing and supervision that could lead to the untimely identification and resolution of accounting and disclosure matters and failure to perform timely and effective reviews. However, our size prevents us from being able to employ sufficient resources to enable us to have adequate segregation of duties within our internal control system. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.







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PART II  OTHER INFORMATION



Exhibits and Reports on Form 8-K



|Exhibit Number | Name and/or Identification of Exhibit                                             
|-------------- | ----------------------------------------------------------------------------------
|               |                                                                                   
|3              | Articles of Incorporation & By-Laws                                               
|               |                                                                                   
|               | (a) Articles of Incorporation filed September 24, 2004 *                          
|               |                                                                                   
|               | (b) By-Laws adopted September 27, 2004 *                                          
|               |                                                                                   
|31             | Rule 13a-14(a)/15d-14(a) Certifications                                           
|               |                                                                                   
|32             | Certification under Section 906 of the Sarbanes-Oxley Act (18 U.S.C. Section 1350)



* Incorporated by reference herein filed as exhibits to the Companys Registration Statement on SB-2 previously filed with the SEC on September 21, 2005, and subsequent amendments made thereto.

















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SIGNATURES



Pursuant to the requirements of the Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.





|MIDNIGHT CANDLE COMPANY
|-----------------------
|(Registrant)           
|                       
|                       
|Signature              
|                       
|/s/ Helen C. Cary      
|Helen C. Cary          





















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