` 
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

**Form 10-KSB**

 

[X]  Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
For the Fiscal Year Ended December 31, 2007
 
[   ]  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 000-1321573
  
**MIDNIGHT CANDLE COMPANY**

(Name of small business issuer in its charter)
 
**Nevada**

**20-1763307**

(State or other jurisdiction of incorporation or organization)

(I.R.S. employer identification number)
  
**79013 Bayside Court**

**Indio, CA**

**92203**

(Address of principal executive offices)

(Zip code)
  
Issuer’s telephone number: (760)772-1872
 
Securities Registered Pursuant to Section 12(b) of the Act:	
 
Title of each class

Name of each exchange on which registered

None

None
      
Securities Registered Pursuant to Section 12(g) of the Act:
 
None

(Title of class)
  
(Title of class)

 

 

 

 

 
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.  [X] Yes [   ] No

 

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [   ]

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). [  ]

 

The issuer's revenue for its most recent fiscal year was $49.

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the most recent price at which the common equity was sold: $23,000 as of December 31, 2007.

 

The number of shares outstanding of each of the issuer's classes of common equity, as of December 31, 2007 was 5,230,000.

 

**DOCUMENTS INCORPORATED BY REFERENCE**

 

If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").  The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1990).

 

None. 

 

Transitional Small Business Disclosure Format (Check one): Yes [   ] No [X]

 

PART I

3

  ITEM 1.  DESCRIPTION OF BUSINESS

3

  ITEM 2.  DESCRIPTION OF PROPERTY

7

  ITEM 3.  LEGAL PROCEEDINGS

7

  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

8

PART II

8

  ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER

  MATTERS MARKET INFORMATION FOR COMMON STOCK

8

  ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

11

  ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

28

  ITEM 8A.  CONTROLS AND PROCEDURES

28

  ITEM 8B.  OTHER INFORMATION

28

PART III

29

  ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;

  COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

29

  ITEM 10.  EXECUTIVE COMPENSATION

30

  ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

31

  ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

31

  ITEM 13.  EXHIBITS

32

  ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

32

SIGNATURES

33

 

 
 
2

 
**FORWARD LOOKING STATEMENTS**

This Annual Report contains forward-looking statements about our business, financial condition and prospects that reflect our 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 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 its 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 Report, words such as,  *"believes,"*  *"expects," "intends,"*  *"plans,"*  *"anticipates,"*  *"estimates"*and similar expressions are intended to identify and qualify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions.

 

**PART I**

ITEM 1.  DESCRIPTION OF BUSINESS

 

**Business Development and Summary**

 

We were incorporated in the State of Nevada on September 24, 2004.  We are a startup company with limited operations and no employees.  Since our inception, we have raised capital through sales of equity and debt securities to finance our development stage activities.  To date, we have expended $37,151 in pursuit of our business plan, establishing our website at www.midnightcandleco.com and purchasing an inventory of candles.  We have realized only minimal sales of $464 and have no source of recurring revenues.  As of December 31, 2007, we had only $438 in saleable inventory, which we believe is insufficient to generate revenues to sustain our operations.  

 

Our administrative office is located at 79013 Bayside Court, Indio, California 92203, telephone (760) 772-1872.

 

MIDC's fiscal year end is December 31.

 

**Business of Issuer**

 

Principal Services and Principal Markets

 

Our business objective is to market scented candles to consumers and businesses.  However, it is the opinion of our management that our target market and likely purchaser of our products will primarily be female.  They believe that women, as opposed to men, favor candles for their fragrance and decorative nature.  As a result, we offer candles in a variety of sizes, styles, colors and fragrances.  We do not manufacture any products.  All products are purchased from third-party suppliers or manufacturers.  The primary products we stock generally include the following candle types:

 

1.

Jar Candles - scented candles in decorative glass jars,

 

2.

Pillar Candles - tall upright candles and

 

3.

Tea Lights - small candles contained in plastic or metallic cups.

 

In September of 2007 we purchased additional inventory of candles from Discount Candle Shop and made them available for sale on our website.  To date, we have recognized sales of $464, net of allowances, attributable to the candles we purchased since February of 2006.  We do not have any agreements to sell our candles on a recurring basis and are unable to predict the stability of, or assure that we will continue to generate, revenues.  

 
 
3

 
Distribution Methods of the Products 

 

The Internet lends itself well to the distribution of candles and candle-related merchandise due to its ability to provide pictures, information and purchasing capabilities direct to the consumer, at his or her leisure. We have published a website at http://www.midnightcandleco.com, which serves as the sole method through which we market, sell and distribute the products we have for sale.  The site, although published and fully-functional, is minimalist in nature.  We believe that to attract purchasers, we should make aesthetic changes to our website.  However, as of December 31, 2007, we had insufficient cash on hand to pay for web development services.  We believe that unless we are able to improve the “look and feel” of our Internet presence, we will be unable to attract purchasers.

 

We expect to use general parcel services as our distribution methods to fulfill customer orders.  Such services include, without limitation, United Parcel Service, DHL and Federal Express.

 

Industry background and competition

 

We operate in the scented candle segment of the giftware industry.  Significantly all of our competitors have longer operating histories, and established manufacturing or supply chain systems, as well greater financial, management, sales, marketing and other resources than we do.  

 

The candle market overall is highly fragmented.  Competitors range from multi-national entities to retailers serving a limited geographical region.  Premium market candle manufacturers include Colonial Candles, owned by Blyth Industries, Inc., which also owns PartyLite, and A.I. Root and Village Candle.  Midnight Candle's retail store competitors include The White Barn Candle Company, which is owned by Limited Brands, Inc., as well as Wicks n' Sticks and Candleman.  Other retail competition includes specialty candle stores, as well as gift retailers.  

 

Midnight Candle Company competes generally for the disposable income of consumers with other producers in the giftware industry.  The giftware industry is highly competitive with a large number of both large and small participants.  The products we sell compete with other scented and unscented candle products and with other gifts within a comparable price range, like boxes of candy, flowers, wine, fine soap and related merchandise.  Our competitors distribute their products through independent gift retailers, department stores, mass market stores and mail order houses.  We are a small company with limited capital resources, minimal saleable inventory and negative cash flows.  As such, we currently compete unfavorably in the general marketplace.  Unless we find a way to increase our revenue generating ability, we will not be able to continue as a going concern.

 

Sources and availability of raw materials and the names of principal suppliers

 

We do not procure any raw materials, nor do we produce any of the candles or candle-related products we sell.  We have purchased our salable inventory from The Candle Factory and Discount Candle Shop.  We have no other suppliers or distributors from which we expect to order additional inventory.

 

Effect of existing or probable government regulations

 

Midnight Candle Company is not aware of any existing or probable government regulations that would have a material effect on our business. Costs and effects of compliance with environmental laws

 

Employees

 

Midnight Candle Company is currently in the development stage.  During the development stage, we plan to rely exclusively on the services of our officers and sole director to set up our business operations.  Our two officers are involved in MIDC business on a part-time basis only and are prepared to dedicate additional time, as needed.  At this time, there are no other full- or part-time employees.  We do not expect to hire any additional employees over the next 12 months.  

 
 
4

 
Reports to Security Holders

 

(1)

Midnight Candle Company will furnish shareholders with audited annual financial reports certified by MIDC's independent accountants.

 

(2)

MIDC will file periodic and current reports, which are required in accordance with Section 15(d) of the Securities Act of 1933, with the Securities and Exchange Commission to maintain the fully reporting status.

 

(3)

The public may read and copy any materials MIDC files with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20002.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  Our SEC filings will be available on the SEC Internet site, located athttp://www.sec.gov.

 

**Risk Factors**

** **

*Limited Operating History.*

 

Midnight Candle Company was formed on September 24, 2004.  We have a relatively insignificant operating history on which to evaluate our business.  Our prospectus must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development.  We cannot guarantee you that we will be successful as an online retailer of candles and candle-related products.

 

*Competitive Risks.*

 

Midnight Candle Company is entering the candle business, which is a highly competitive market segment with relatively low barriers to entry.  Our competitors include larger and more established companies.  To the best of our management's knowledge, some of our competitors include Colonial Candles, owned by Blyth Industries, Inc. and A.I. Root and Village Candle.  Generally, our actual and potential competitors have longer operating histories, significantly greater financial and marketing resources, as well as greater name recognition.  Therefore, many of these competitors may be able to devote greater resources than MIDC to sales and marketing efforts, expanding their chain of distribution and hiring and retaining key employees.  There can be no assurance that our current or potential competitors will not develop or offer comparable or superior products to those expected to be offered by us.  Increased competition could result in lower than expected operating margins or loss of market share, any of which would materially and adversely affect our business, results of operation and financial condition.

 

*Investors may lose their entire investment if we fail to implement our business plan.*

 

We have no demonstrable operations record on which you can evaluate our business and prospects.  Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies in their early stages of development.  These risks include, without limitation, competition, the absence of ongoing revenue streams, inexperienced management and lack of brand recognition.  We cannot guarantee that we will be successful in accomplishing our objectives.  To date, we have generated only minimal revenues and expect to incur losses in the foreseeable future.  If we fail to develop a sustainable base of operations, we may be forced to cease operations, in which case investors may lose their entire investment.

 

*We may not be able to attain profitability without additional funding, which may be unavailable.*

 

We have limited capital resources.  We have operated with negative net cash outflows since our inception.  Unless we begin to generate sufficient revenues to finance operations as a going concern, we may experience liquidity and solvency problems.  Such liquidity and solvency problems may force us to go out of business if additional financing is not available.  A possibility of such outcome presents a risk of complete loss of investment in our common stock.

 

*Reliance upon Key Personnel and Necessity of Additional Personnel.*

 

Midnight Candle Company is largely dependent upon the personal efforts and abilities of Helen C. Cary.  The success of MIDC will also be largely dependent upon our ability to attract quality management and employees to help manage the growth of our operations.
 
5

 

*Control by Current Management May Impede the Ability of Minority Shareholders to Exercise Control over Midnight Candle Company*

 

Currently, the president and CEO directly owns or controls 5,000,000 shares of common stock in Midnight Candle Company, which is 96% of the common stock outstanding.  As a result, the president and CEO of MIDC could exercise control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions.  This concentration of ownership limits the power to exercise control by the minority shareholders.

 

*Potential Conflicts of Interest May Jeopardize the Business of Midnight Candle Company*

 

The implementation of the business plan of Midnight Candle Company depends substantially on the ideas, skills, and experience of Helen C. Cary.  Without an employment contract, Midnight Candle Company may lose Ms. Cary to other pursuits without a sufficient warning and, consequently, go out of business.  Ms. Cary is involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, Ms. Cary may face a conflict in selecting between Midnight Candle Company and her other business interests.  Midnight Candle Company has not and, at this time, does not anticipate that it will formulate a policy for the resolution of such conflicts.

 

*Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.*

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.  Our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.  Investors relying upon this misinformation may make an uninformed investment decision.

 

*Investors may have difficulty liquidating their investment because our stock will be subject to penny stock regulation*.

 

The SEC has adopted rules that regulate broker/dealer practices in connection with transactions in penny stocks.  Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange system).  The penny stock rules require a broker/dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the SEC that provides information about penny stocks and the nature and level of risks in the penny stock market.  The broker/dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker/dealer, and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account.  In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker/dealer must make a special written determination that a penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction.  These disclosure requirements may have the effect of reducing the level of trading activity in any secondary market for a stock that becomes subject to the penny stock rules, and accordingly, customers in Company securities may find it difficult to sell their securities, if at all.

 
 
6

 
*Should a Public Trading Market in the Stock of Midnight Candle Company Fail to Develop or Be Sustained, Investors May Lose Their Entire Investment.*

 

As of this date of this Annual Report, no public market for Midnight Candle Company's Common Stock has yet been established.  There can be no assurance that a meaningful trading market will subsequently develop. Should a viable public trading market in the stock of Midnight Candle Company fail to develop, investors in Midnight Candle Company's common stock may lose their entire investment. In addition, in the event that  a viable  public  trading  market for  Midnight Candle Company's common  stock  does  develop, such  trading,  if  and  when transacted, may be subject to the low-priced security or so-called  "penny  stock" rules that impose  additional  sales practice  requirements  on  broker-dealers  who  sell  such securities.   For any transaction involving a penny stock, the rules require, among other things, the delivery, prior to the transaction, of a disclosure schedule required by the SEC relating to the penny stock market.  The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in the customer's account. As a result, characterization as a "penny stock" can adversely affect   the   market   liquidity   for   the   securities.  Furthermore,  the  market  price of  the  Company's  common stock,  if  and when traded, may be subject to  significant fluctuations,  and such fluctuations, as well  as  economic conditions generally, may adversely affect the market price of our securities.

 

*We Have No History of Paying Dividends.*

 

Midnight Candle Company has never declared or paid any cash dividends on its common stock. For the foreseeable future, Alchemy intends to  retain  any  earnings  to finance the development and expansion of its business,  and it  does  not anticipate paying any cash dividends  on  its common  stock.  Any future determination to  pay  dividends will  be  at  the discretion of the Board of Directors  and will  be dependent upon then existing conditions, including Alchemy's financial condition and the results of operations, capital requirements, contractual restrictions, business  prospects, and other factors that  the  Board  of Directors considers relevant.
 

ITEM 2.  DESCRIPTION OF PROPERTY

We use office space at 79013 Bayside Court, Indio, CA 92203.  Ms. Helen C. Cary, the sole director and an officer, is providing the office space at no charge to us.  We believe that this arrangement is suitable given that our current operations are primarily administrative.  We also believe that we will not need to lease additional administrative offices for at least the next 12 months.  There are currently no proposed programs for the renovation, improvement or development of the facilities we currently use.

               

Our management does not currently have policies regarding the acquisition or sale of real estate assets primarily for possible capital gain or primarily for income.  We do not presently hold any investments or interests in real estate, investments in real estate mortgages or securities of or interests in persons primarily engaged in real estate activities.

 

ITEM 3.  LEGAL PROCEEDINGS

 

No Director, officer, significant employee, or consultant of Midnight Candle Company has been convicted  in  a criminal proceeding, exclusive of traffic violations.

 

No  Director,  officer,  significant  employee, or consultant  of  Midnight Candle Company has been permanently  or temporarily  enjoined,  barred,  suspended,  or   otherwise limited   from   involvement  in  any  type  of   business, securities or banking activities.

 

No Director, officer, significant employee, or consultant of Midnight Candle Company has been convicted of violating a federal or state securities or commodities law.

 

Midnight Candle Company is not a party to any pending legal proceedings.

 

No director, officer, significant employee or consultant of Pet Express Supply, Inc. has had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
 
7

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

We did not hold a shareholders meeting in 2007, thus there was no vote of securities holders in 2007.

 

**PART II**

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION FOR COMMON STOCK

 

**Market information**

 

Our common equity is currently listed on the OTC Bulletin Board under the symbol "MIDC."  As of December 31, 2007, no public market in our common stock had developed and there can be no assurance that a meaningful trading market will subsequently develop.  We make no representation about the value of our common stock.

 

**Shares Available Under Rule 144**

 

We have 5,230,000 shares of common stock outstanding, of which 5,000,000 shares may be sold at any time under Rule 144.  In general, under Rule 144 as currently in effect, a person, or persons whose shares are aggregated, who owns shares that were purchased from us, or any affiliate, at least one year previously, including a person who may be deemed our affiliate, is entitled to sell within any three month period, a number of shares that does not exceed the greater of:

 

1.

1% of the then outstanding shares of our common stock; or

 

2.

The average weekly trading volume of our common stock during the four calendar weeks preceding the date on which notice of the sale is filed with the Securities and Exchange Commission.

 

Sales under Rule 144 are also subject to manner of sale provisions, notice requirements and the availability of current public information about us.  Any person who is not deemed to have been our affiliate at any time during the 90 days preceding a sale, and who owns shares within the definition of “restricted securities” under Rule 144 under the Securities Act that were purchased from us, or any affiliate, at least two years previously, is entitled to sell such shares under Rule 144(k) without regard to the volume limitations, manner of sale provisions, public information requirements or notice requirements.

 

Future sales of restricted common stock under Rule 144 or otherwise or of the shares could negatively impact the market price of our common stock.  We are unable to estimate the number of shares that may be sold in the future by our existing stockholders or the effect, if any, that sales of shares by such stockholders will have on the market price of our common stock prevailing from time to time.  Sales of substantial amounts of our common stock by existing stockholders could adversely affect prevailing market prices.

 

**Holders**

 

As of December 31, 2007, Midnight Candle Company has 5,230,000 shares of $0.001 par value common stock issued and outstanding held by 24 shareholders of record.  Midnight Candle Company's Transfer Agent is:  Holladay  Stock Transfer, Inc., 2939 N. 67th Place, Suite C, Scottsdale, AZ 85251, and phone: (480) 481-3940, fax: (480) 481-3941.

 

**Dividends**

 

Midnight Candle Company has never declared or paid any cash dividends on its common stock. For the foreseeable future, MIDC intends to  retain  any  earnings  to finance the development and expansion of its business,  and it  does  not anticipate paying any cash dividends  on  its common  stock.  Any future determination to  pay  dividends will  be  at  the discretion of the Board of Directors  and will  be dependent upon then existing conditions, including Midnight Candle Company's financial condition and the  results  of operations, capital requirements, contractual restrictions, business  prospects, and other factors that  the  Board  of Directors considers relevant.
 
8

 

**Securities Authorized for Issuance Under Equity Compensation Plans**

 

The following table provides the following information as of December 31, 2007, for equity compensation plans previously approved by security holders, as well as those not previously approved by security holders:

 

1.

The number of securities to be issued upon the exercise of outstanding options, warrants and rights;

 

2.

The weighted-average exercise price of the outstanding options, warrants and rights; and

 

3.

Other than securities to be issued upon the exercise of the outstanding options, warrants and rights, the number of securities remaining available for future issuance under the plan.

 

**Plan Category**

**Number of**

**Securities to be**

** issued upon**

**exercise of**

**outstanding options,**

**warrants and rights**

**Weighted average**

**exercise price of**

**outstanding options,**

**warrants and rights**

**Number of**

**securities remaining**

**available for future**

**issuance**
 
(a)

(b)

(c)

Equity compensation plans approved by security holders

-

-

-
    
Equity compensation plans not approved by security holders

-

-

-
    
Total

-

-

-

 

**Recent Sales of Unregistered Securities**

 

**Sales conducted under an exemption from registration provided under Section 4(2).**

 

In November 2004, Midnight Candle Company issued 5,000,000 shares of its Common Stock as founders' shares to Helen C. Cary, an officer and the sole director of MIDC, at par ($0.001 per share) for cash of $5,000.    

 

We believe that the transaction delineated above is exempt from the registration provisions of Section 5 of the Securities Act as such exemption is provided under Section 4(2) because:

 

1.

This issuance did not involve underwriters, underwriting discounts or commissions;

 

2.

Restrictive legends are placed on all certificates issued;

 

3.

The distribution did not involve general solicitation or advertising; and

 

4.

The distribution was made only to insiders, accredited investors or investors who were sophisticated enough to evaluate the risks of the investment.  All sophisticated investors were given access to all information about our business and the opportunity to ask questions and receive answers about our business from our management prior to making any investment decision.

 

**Recent Private Placement**

 

In June 2005, we completed an offering of our common stock to a group of private investors.  We issued 230,000 shares of $0.001 par value common stock for cash at $0.10 per share.  The offering (a) involved no general solicitation, (b) involved less than thirty-five non-accredited purchasers, and (c) relied on a detailed disclosure document to communicate to the investors all material facts about Midnight Candle Company, including an audited balance sheet and reviewed statements of income, changes in stockholders’ equity and cash flows.  Thus, we believe that the offering was exempt from registration under Regulation D, Rule 505 of the Securities Act of 1933, as amended.

 
 
9

 
ITEM 6.  MANAGEMENT’S DISCUSSION AND PLAN OF OPERATIONS.

 

**Management’s Discussion**

 

Forward-Looking Statements

 

The statements contained in all parts of this document that are not historical facts are, or may be deemed to  be, "forward-looking statements" within the meaning of  Section 27A of  the Securities Act of 1933 and Section 21E of  the Securities  Exchange  Act  of  1934.  Such  forward-looking statements include, but are not limited to, those  relating to the following: the Company's ability to secure necessary financing;  plans for opening one or more restaurant units (including the scope, timing, impact and effects  thereof); expected growth; future operating expenses; future margins; fluctuations in interest rates; ability to continue to grow and  implement growth, and regarding  future  growth,  cash needs, operations, business plans and financial results and any other statements that are not historical facts.

 

When  used  in this document, the words "anticipate," "estimate,"  "expect,"  "may,"  "plans,"  "project,"   and similar expressions are intended to be among the statements that  identify  forward-looking statements.  Midnight Candle Company’s results may differ significantly from the results discussed in   the   forward-looking   statements.   Such statements involve risks and uncertainties, including, but not limited to, those relating to costs, delays and difficulties related to the Company’s dependence on  its ability  to attract and retain skilled managers  and  other personnel;  the  intense competition within the  restaurant industry;  the  uncertainty of  the  Company's  ability  to manage  and continue its growth and implement its business strategy; its vulnerability to general economic conditions; accuracy  of accounting and other estimates; the Company's future  financial  and operating results,  cash  needs  and demand  for  its  services; and the  Company's  ability  to maintain and comply with permits and licenses; as  well  as other  risk factors described in this Annual Report. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those projected.

 

**Management’s Discussion**

 

Midnight Candle Company was incorporated in the State of Nevada on September 24, 2004.  During the twelve month period ended December 31, 2007, we generated $49 in net revenues from sales of our candles.  We realized a gross profit of $49.  Comparatively, in the year ago period ended December 31, 2006, we generated $415 in revenues, and incurred $273 in cost of goods sold and $95 in shipping charges, thus realizing a gross profit of $47.  Since our inception through December 31, 2007, we have generated a total of $464 in net revenues from sales of candles, while aggregate costs of sales were $368, resulting in a gross profit of $96.  We do not have any long-term agreements to supply our candles to any one customer.  As a result, we are unable to predict the stability of, and ability to continue to generate, ongoing revenues.

 

For the year ended December 31, 2007, we incurred operating expenses in our continued pursuit of our candle business in the amount of $6,928, consisting of $6,121 in professional fees and general and administrative expenses in the amount of $807.  Total operating expenses for the fiscal year 2007 were roughly 53%, or $7,736, lower than the year ago period ended December 31, 2006, during which time we incurred total operating expenses in the amount of $14,664.  Total operating expenses for the fiscal year 2006 consisted primarily of $8,310 in professional fees and $6,354 in general and administrative fees.  Management believes that the decrease in expenditures in 2007 from 2006 can be ascribed to our decreased business activity and failed attempts to generate sales from our inventory of candles.  Total operating expenses since our inception on December 6, 2004 to December 31, 2007 were $36,787, of which $23,336 is attributable to professional fees and $13,451 in general and administrative expenses.  

 

Since our inception, we have incurred net losses due to our sales revenues being significantly lower than our operating expenditures.  For the year ended December 31, 2007, our net loss was $6,879, compared to a net loss of $14,617 in the year ago period ended December 31, 2006.  From the date of our inception to December 31, 2007, we had a cumulative deficit of $36,690.  We expect to incur ongoing losses for the next 12 months of operations unless we are able to increase our revenue generating ability significantly.  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.
 
10

 

Since our incorporation, we have raised a total of $28,000 through private sales of our common equity. In November 2004, we issued 5,000,000 shares of our common stock to Helen C. Cary, an officer and our sole director, in exchange for cash in the amount of $5,000.  Additionally, in March and June 2005, we sold an aggregate of 230,000 shares of our common stock to 23 unrelated third parties for cash proceeds of $23,000.  Our sole director and an officer, Ms. Cary, has loaned us $5,000 in January 2007 to sustain our minimal operations and meet financial obligations.  The loan is due in January 2008 and bears no interest.  We can not assure you that any financing can be obtained or, if obtained, that it will be on reasonable terms.  In the event we are unable to obtain further funding, we will be unable to conduct further operations and, consequently, go out of business.  Without realization of additional capital, it would be unlikely for us to continue as a going concern.

 

Our management believes that our cash on hand as of December 31, 2007 in the amount of $1,250 is not sufficient to maintain our current minimal level of operations for the next approximately 12 months.  Generating sales in the next 12 months is imperative for us to support our operations and to continue as a going concern. We believe that we will be required to generate a minimum of approximately $10,000 in revenues over the next 12 months in order for us to support ongoing operations.  Unfortunately, we do not have sufficient saleable inventory to generate such amount of required revenues.  Additionally, we have insufficient resources with which to implement marketing activities to generate awareness of our brand and products.  Our management believes it unlikely for us to generate sufficient revenues to meet our minimal level of expenditures to meet our expenses, and it is therefore unlikely we will continue to operate as a going concern.  

 

Our management does not anticipate the need to hire additional full- or part- time employees over the next 12 months, as the services provided by our officers and sole director appear sufficient at this time.  Our officers work for us on a part-time basis, and are prepared to devote additional time, as necessary.  

 

We do not expect to incur research and development costs.

 

We do not have any off-balance sheet arrangements.

 

We currently do not own any significant plant or equipment that we would seek to sell in the near future.  

 

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

 

ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The following documents (pages F-1 to F-14) form part of the report on the Financial Statements

 
 
PAGE
  
Report of Independent Registered Public Accounting Firm

1

Balance Sheets

2

Statements of Operations 

3

Statement of Stockholders’ Equity (Deficit)

4

Statements of Cash Flows

5

Footnotes

6-14

 

 

11

 
 

 

 

 

 

 

 

 

 

 

 

 

**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**FINANCIAL STATEMENTS**

**DECEMBER 31, 2007 AND 2006**

 

 

 

 

 

 

 

 

 

 

 

 

 
 
12

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**INDEX TO FINANCIAL STATEMENTS**

**DECEMBER 31, 2007 AND 2006**

 

 
 
**Page(s)**
  
Report of Independent Registered Public Accounting Firm

1
  
Financial Statements:
   
Balance Sheets as of December 31, 2007 and 2006

2
  
Statements of Operations for the years ended December 31, 2007	
 
  and 2006 and for the period September 24, 2004	
 
  (Inception) through December 31, 2007 with	
 
  Cumulative Totals Since Inception

3
  
Statement of Changes in Stockholder’s
 
  (Deficit) for the years ended December 31, 2007 and 2006
 
  and for the Period September 24, 2004 (Inception)
 
  through December 31, 2007

4
  
Statements of Cash Flows for the years ended December 31, 2007
 
  and 2006 and for the Period September 24, 2004 (Inception)	
 
  through December 31, 2007 with Cumulative Totals Since Inception  

5
  
Notes to the Financial Statements

6-14

 

 

 

 

 

 
 
13

 
**BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C.**

Certified Public Accountants

406 Lippincott Drive

Suite J

Marlton, New Jersey 08053

(856) 346-2828  Fax (856) 396-0022

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

To the Stockholder

Midnight Candle Company

Indio, California

 

We have audited the accompanying balance sheets of Midnight Candle Company, a development stage company (the “Company”) as of December 31, 2007 and 2006, and the related statements of operations, changes in stockholder’s deficit, and cash flows for each of the years in the two-year period ended December 31, 2007 and for the period September 24, 2004 (Inception) through December 31, 2007 with cumulative totals since the Company’s inception September 24, 2004 for the statements of operations, changes in stockholder’s deficit, and cash flows. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements based on our audits.  

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Our audit included consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Midnight Candle Company as of December 31, 2007 and 2006, and the results of its operations, and cash flows for each of the two years in the period ended December 31, 2007 and for the period September 24, 2004 (Inception) through December 31, 2007 for the period then ended with cumulative totals since inception in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 5 to the financial statements, the Company has just begun operations, and is currently developing their business. They have incurred losses since inception and will be looking to raise capital over the next year to assist in funding their operations. These factors raise substantial doubt about its ability to continue as a going concern.  Management’s operating and financing plans in regards to these matters are also discussed in Note 5.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

 

Bagell Josephs Levine & Company, L.L.C.

Bagell Josephs Levine & Company, L.L.C.

Marlton, New Jersey

February 19, 2008

 

 

F-1
 
14

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**BALANCE SHEETS**

**DECEMBER 31, 2007 AND 2006**

 

**ASSETS**
      
**2007**

**2006**
   
Current Assets:
  
Cash and cash equivalents

$1,250

$1,248

   Accounts receivable

122

122

    Inventory

438

136
   
      Total Current Assets

1,810

1,506
   
**TOTAL ASSETS**

$1,810

$1,506
   
**LIABILITY AND STOCKHOLDER’S (DEFICIT)**
     
**LIABILITY**
  
   Current Liabilities:
  
      Accounts payable

$-

$2,817

      Notes payable- related party

10,000

-
   
       Total Current Liabilities

10,000

2,817
   
**       Total Liabilities**

10,000

2,817
   
**STOCKHOLDER’S (DEFICIT)**
  
Common stock, $.001 Par Value, 100,000,000 shares authorized;
  
5,230,000 shares issued and outstanding	

5,230

5,230

Additional paid-in capital

23,270

23,270

Deficit accumulated during development stage

(36,690)

(29,811)
   
**Total Stockholder’s (Deficit)**

(8,190)

(1,311)
   
**TOTAL LIABILITIES AND STOCKHOLDER'S (DEFICIT)**

$1,810

$1,506

 

 

 

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

 

 

F-2
 
15

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**STATEMENTS OF OPERATIONS**

**FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006**

**AND FOR THE PERIOD SEPTEMBER 24, 2004 (INCEPTION) THROUGH DECEMBER 31, 2007**

** (WITH CUMULATIVE TOTALS SINCE INCEPTION)**

 
  
**Cumulative Totals**
  
**September 24, 2004 (inception)**
 
**2007**

**2006**

**through December 31, 2007**
    
**OPERATING REVENUES**
   
   Sales, net of allowance

$49

$415

$464
    
Cost of Sales

-

273

273

Freight in

-

95

95
    
**GROSS PROFIT**

49

47

96
    
**OPERATING EXPENSES**
   
Professional fees

6,121

8,310

23,336

General and administrative expenses

807

6,354

13,451

**Total Operating Expenses**

6,928

14,664

36,787
    
**LOSS BEFORE OTHER INCOME**

(6,879)

(14,617)

(36,691)
    
**OTHER (INCOME)**
   
  Interest (income)

-

-

(1)

**        Total Other (Income)**

-

-

(1)
    
**LOSS BEFORE PROVISION FOR INCOME TAXES**

(6,879)

(14,617)

(36,691)

**  **Provision for income taxes

-

-

-
    
**NET (LOSS) APPLICABLE TO COMMON SHARES**

$(6,879)

$(14,617)

$(36,690)
    
**WEIGHTED AVERAGE COMMON SHARES**
   
  ** OUTSTANDING**

5,230,000

5,230,000
     
**LOSS PER BASIC AND DILUTED COMMON SHARES OUTSTANDING**

$(0.00)

$(0.00)
 
 

 

 

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

 

 

 

F-3
 
16

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**STATEMENT OF CHANGES IN STOCKHOLDER’S (DEFICIT)**

**FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006 AND**

**FOR THE PERIOD SEPTEMBER 24, 2004 (INCEPTION)**

**THROUGH DECEMBER 31, 2007**

 
    
**Deficit**
     
**Accumulated**
     
**During the**
  
**Common Stock**

**Additional**

**Development**
 
**Description**

**Shares**

**Amount**

**Paid-In Capital**

**Stage**

**Total**
      
**Balance, September 24, 2004**

-

$-

$-

$-

$-
      
Issuance of shares for cash

5,000,000

5,000

-

-

5,000

  
     
Net loss for the period September 24, 2004
     
  (inception) through December 31, 2004

-

-

-

(5,113)

(5,113)
      
**Balance, December 31, 2004**

5,000,000

5,000

-

(5,113)

(113)
      
Issuance of shares for cash

230,000

230

22,770

-

23,000
      
Forgiveness of note payable by officer

-

-

500

-

500
      
Net loss for the year ended December 31, 2005

-

-

-

(10,081)

(10,081)
      
**Balance, December 31, 2005**

5,230,000

5,230

23,270

 (15,194)

13,306
      
Net loss for the year ended December 31, 2006

-

-

-

(14,617)

(14,617)
      
**Balance, December 31, 2006**

5,230,00

5,230

23,270

 (29,811)

1,311
      
Net loss for the year ended December 31, 2007

-

-

-

(6,879)

(6,879)
      
**Balance, December 31, 2007**

5,230,000

$5,230

$23,270

$(36,690)

$(8,190)

 

 

 

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

 

 

F-4
 
17

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**STATEMENTS OF CASH FLOWS**

**FOR THE YEARS ENDED DECEMBER 31, 2007 AND 2006**

**AND FOR THE PERIOD SEPTEMBER 24, 2004 (INCEPTION) THROUGH DECEMBER 31, 2007**

** (WITH CUMULATIVE TOTALS SINCE INCEPTION)**

 
  
**Cumulative Totals**
  
**September 24, 2004 (inception)**
 
**2007**

**2006**

**through December 31, 2007**
    
**CASH FLOWS FROM OPERATING ACTIVITIES**
   
   Net loss

$(6,879)

$(14,617)

$(36,690)
    
Adjustments to reconcile net loss to net cash
   
 (used in) operating activities
       
**Changes in assets and liabilities**
   
   Increase in accounts receivable

-

(122)

(122)

**   **Increase in inventory

(302)

(136)

(438)

   Increase (decrease) in accounts payable

(2,817)

2,817

-
    
   Total adjustments

(3,119)

2,559

560
    
     **Net cash (used in) operating activities**

(9,998)

(12,058)

(37,250)
    
**CASH FLOWS FROM FINANCING ACTIVITIES**
   
   Issuance of common stock

-

-

28,500

   Proceeds from note payable – related party

10,000

-

38,500
    
**     Net cash provided by financing activities**
 
-

28,500
    
**NET INCREASE (DECREASE) IN**
   
**   CASH AND CASH EQUIVALENTS**

2

(12,058)

1,250
    
**CASH AND CASH EQUIVALENTS -**
   
     **BEGINNING OF YEAR**

1,248

13,306

-
    
**CASH AND CASH EQUIVALENTS – END OF YEAR**

$1,250

$1,248

$1,250
    
**SUPPLEMENTAL CASH FLOW INFORMATION:**
   
  During the year, cash was paid for the following:
   
     Interest

$-

$-

$-

     Income taxes

$-

$-

$-
    
**SUPPLEMENTAL DISCLOSURE OF NON-CASH**
   
**   INFORMATION:**
       
  Forgiveness of note payable converted to equity

$-

$-

$500

 

 

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

 

 

F-5
 
18

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**NOTES TO FINANCIAL STATEMENTS**

**DECEMBER 31, 2007 AND 2006**

 

**NOTE 1 -**

**ORGANIZATION AND BASIS OF PRESENTATION**

 

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.

 

**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 December 31, 2007, there were no uninsured balances.

 

 

 

F-6

 

19

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**NOTES TO FINANCIAL STATEMENTS (CONTINUED)**

**DECEMBER 31, 2007 AND 2006**

 

**NOTE 2 -**

**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**

 

**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 of merchandise held for sale in the ordinary course of business and are stated at the lower of cost or market, determined using the first-in, first-out (FIFO) method.

 

**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 December 31, 2007 and 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.

 

 

 

F-7

 

20

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**NOTES TO FINANCIAL STATEMENTS (CONTINUED)**

**DECEMBER 31, 2007 AND 2006**

 

**NOTE 2 -**

**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**

 

**Recent Accounting Pronouncements**

 

**ShareBased Payments**

 

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 adoption for FAS 123R did not have a material impact on its financial position and results of operations.

 

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

 

 

 

 

 

 

 

 

F-8

 

21

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**NOTES TO FINANCIAL STATEMENTS (CONTINUED)**

**DECEMBER 31, 2007 AND 2006**

 

**NOTE 2 -**

**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**(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 adoption of FAS No. 155 did 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 adoption of FAS No. 156 did not have a material impact on its financial position or results of operations.

 

 

 

 

 

F-9

 

22

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**NOTES TO FINANCIAL STATEMENTS (CONTINUED)**

**DECEMBER 31, 2007 AND 2006**

 

**NOTE 2 -**

**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**(CONTINUED)**

 

In September 2006, the FASB issued FAS No. 157 “Fair Value Measurements”, which provides a definition of fair value, establishes a framework for measuring fair value and requires expanded disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The provisions of SFAS No. 157 should be applied prospectively. Management is assessing the potential impact on the Company’s financial condition and results of operations.

 

In September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”, which amends SFAS No. 87 “Employers’ Accounting for Pensions” (SFAS No. 87), SFAS No. 88 “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits” (SFAS No. 88), SFAS No. 106 “Employers’ Accounting for Postretirement Benefits Other Than Pensions” (SFAS No. 106), and SFAS No. 132R “Employers’ Disclosure about Pensions and Other Postretirement Benefits (revised 2003)” (SFAS No. 132R). This Statement requires companies to recognize an asset or liability for the overfunded or underfunded status of their benefit plans in their financial statements. SFAS No. 158 also requires the measurement date for plan assets and liabilities to coincide with the sponsor’s year-end. The standard provides two transition alternatives related to the change in measurement date provisions. The recognition of an asset and liability related to the funded status provision is effective for fiscal year ending after December 15, 2006 and the change in measurement date provisions is effective for fiscal years ending after December 15, 2008. This pronouncement has no effect on the Company at this time.

 

 

 

 

 

 

 

F-10

 

23

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**NOTES TO FINANCIAL STATEMENTS (CONTINUED)**

**DECEMBER 31, 2007 AND 2006**

**NOTE 2 -**

**SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**(CONTINUED)**

 

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Liabilities, including an amendment of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to choose, at specified election dates, to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses shall be reported on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157 “Fair Value Measurements” (“SFAS No. 157”). The Company is currently assessing the impact that SFAS No. 159 will have on its financial statements.

 

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in Consolidated Financial Statements” (“SFAS No. 160”). SFAS No. 160, This Statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this Statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This Statement improves comparability by eliminating that diversity. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The Company is currently assessing the impact that SFAS No. 160 will have on its financial statements.

 

 

 

 

 

 

 

 

 

F-11

 

24

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**NOTES TO FINANCIAL STATEMENTS (CONTINUED)**

**DECEMBER 31, 2007 AND 2006**

 

**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 for the year ended December 31, 2007 and for the period September 24, 2004 (Inception) through December 31, 2007:

 
 
**2007**
 
**2006**
    
Net Loss

(6,879)
 
(14,617)
    
Weighted average common shares
   
     outstanding (Basic)

5,230,000
 
5,230,000
    
Options
   
Warrants
       
Weighted average common shares
   
     outstanding (Diluted)

5,230,000
 
5,230,000

 

There are no common stock equivalents outstanding at December 31, 2007 and 2006.

 

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.

 

 

 

 

 

 

F-12

 

25

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**NOTES TO FINANCIAL STATEMENTS (CONTINUED)**

**DECEMBER 31, 2007 AND 2006**

 

**NOTE 3 -**

**NOTES PAYABLE – RELATED PARTY**

 

Represents two unsecured notes payable for $5,000 each to the officer of the Company. One is due on demand without interest and the other is due April 20, 2008, without interest. They were both used for working capital needs.

 

**NOTE 4 -**

**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, a stockholder of the Company forgave a note payable to the Company for $500.  

 

As of December 31, 2007, there were no additional issuances of common stock.

 

**NOTE 5 -**

**GOING CONCERN**

 

As shown in the accompanying financial statements, as is typical of companies going through the development stage, the Company incurred losses since inception. 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.
 

 

 

 

 

F-13
 
26

 
**MIDNIGHT CANDLE COMPANY**

**(A DEVELOPMENT STAGE COMPANY)**

**NOTES TO FINANCIAL STATEMENTS (CONTINUED)**

**DECEMBER 31, 2007 AND 2006**

 

**NOTE 6 -**

**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 December 31, 2007 and 2006, deferred tax assets consist of the following:

 
 
**2007**

**2006**

Deferred tax assets

$  11,007

$ 8,943

Less:  valuation allowance

(11,007)

(8,943)

Net deferred tax assets

$          -

$      -

 

At December 31, 2007 and 2006, the Company had accumulated deficits during the development stage of $36,690 and $29,811 available to offset future taxable income through 2020. The Company established valuation on 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.

 

 

 

 

 

 

 

 

 

F-14

 

27

 
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

 

We have had no disagreements with our independent accountants.

 

ITEM 8A.  CONTROLS AND PROCEDURES

 

We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by us in the 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 information required 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, Levine & Company, L.L.C., our independent registered public accounting firm, that during their performance of audit procedures for 2007 Bagell, Josephs, Levine & 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.

 

**Management’s Annual Report on Internal Control over Financial Reporting**

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is a process designed by, or under the supervision of, the chief executive officer and chief financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

Our evaluation of internal control over financial reporting includes using the COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our control environment.

 

Based on our evaluation under the frameworks described above, our management has concluded that our internal control over financial reporting was effective as of December 31, 2007.

 

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation requirements by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.

 

ITEM 8B.  OTHER INFORMATION

 

None.

 
 
28

 
**PART III**

 

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

 

Midnight Candle Company's sole Director is elected by the stockholders to a term of one (1) year and serves until her successor is elected and qualified. The officers are appointed by the Board of Directors to a term of one (1) year and serves until their successor is duly elected and qualified, or until they are removed from office.  The Board of Directors has no nominating, auditing, or compensation committees.

 

The following table sets forth certain information regarding the Officers and Directors of Midnight Candle Company:

 

**Name**

**Age**

**Position**

Helen C. Cary

50

President, Chief Executive 

Officer and Director
   
Patrick Deparini

32

Secretary/Treasurer Principal 

Financial Officer

 

Helen C. Cary has held her office/position since inception,  and  is  expected to hold  her  office/position until  the  next  annual meeting of  Midnight Candle Company's stockholders.  Patrick Deparini has held his office/position since September 1, 2007,  and  is  expected to hold  his  office/position until  the  next  annual meeting of  Midnight Candle Company's stockholders.

 

Helen C. Cary, President, Chief Executive Officer, and Director, attended Rio Salado Community College from 1992 to 1993 and the AWEE Women's Career Center from 1993 to 1994, where she received training in the area of advanced production techniques. Her work experience includes employment contracts with Armtek Defense Systems from 2002 to 2003 and SpeedFam-IPEC from 2000 to 2002. At both companies she was a production supervisor for Chemical Mechanical Planarizer Tool manufacture, where her duties included the power-up, debugging, calibrating and alignment of very sophisticated electronic gear. Since 2004, Ms. Cary has been employed at FX Currency Trading.

 

Patrick Deparini, Secretary/Treasurer, Chief Financial Officer, received a Bachelor of Science degree in Finance, with an emphasis on Managerial Finance, from the University of Nevada, Las Vegas.  For the previous seven years, he has been an officer and director of Nascent Group, Inc., a company offering various document preparation and advisory services.  His duties with Midnight Candle Company include oversight of all operational aspects from corporate governance to implementation of the Company’s business strategy.  

 

**Family Relationships**

 

None.

 

**Board Committees**

 

We currently have no compensation committee or other board committee performing equivalent functions.  Currently, all members of our board of directors participate in discussions concerning executive officer compensation.

 

**Involvement on Certain Material Legal Proceedings During the Last Five Years**

 

No director, officer, significant employee or consultant has been convicted in a criminal proceeding, exclusive of traffic violations.

 

No bankruptcy petitions have been filed by or against any business or property of any director, officer, significant employee or consultant of the Company nor has any bankruptcy petition been filed against a partnership or business association where these persons were general partners or executive officers.
 
29

 
No director, officer, significant employee or consultant has been permanently or temporarily enjoined, barred, suspended or otherwise limited from involvement in any type of business, securities or banking activities.

 

No director, officer or significant employee has been convicted of violating a federal or state securities or commodities law.

 

**Section 16(a) Beneficial Ownership Reporting Compliance**

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors and executive officers, and persons who beneficially own more than 10% of a registered class of the Company's equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Company's securities with the SEC on Forms 3 (Initial Statement of Beneficial Ownership), 4 (Statement of Changes of Beneficial Ownership of Securities) and 5 (Annual Statement of Beneficial Ownership of Securities). Directors, executive officers and beneficial owners of more than 10% of the Company's Common Stock are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms that they file.  Except as otherwise set forth herein, based solely on review of the copies of such forms furnished to the Company, or written representations that no reports were required, the Company believes that for the fiscal year ended December 31, 2007 beneficial owners did not comply with Section 16(a) filing requirements applicable to them to the extent they filed all form required under Section 16(a) in February 2007 and had no trading activity in 2007.

 

**Code of Ethics**

 

We have not adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions in that our officers and our sole director serves in all the above capacities.

 

ITEM 10.  EXECUTIVE COMPENSATION

 

Summary Compensation Table

 

The  following table sets forth, for the fiscal years ended  December  31, 2007 and  2006,   the   cash compensation paid by the Company, as well as certain  other compensation paid with respect to those years  and  months, to   the   Chief  Executive  Officer  and,  to  the  extent applicable, each of the three other most highly compensated executive  officers  of the Company in  all  capacities  in which they served:

 

Summary Compensation Table
 
Name and

Principal Position

Year

Salary ($)

Bonus

($)

Stock

Awards

($)

Option

Awards

($)

Non-

Equity

Incentive

Plan

Compen-

sation

($)

Non-

qualified

Deferred

Compen-

sation

Earnings

($)

All 

Other

Compen

-sation

($)

Total ($)
          
Helen C. Cary

2007

0

0

0

0

0

0

0

0

President

2006

0

0

0

0

0

0

0

0
 
2005

0

0

0

0

0

0

0

0
          
Patrick Deparini

2007

0

0

0

0

0

0

0

0

Treasurer/
         
Secretary
         
 

**Directors' Compensation**

 

We have no formal or informal arrangements or agreements to compensate our sole director for services she provides as director of our company.
 
30

 
**Employment Contracts and Officers' Compensation**

 

Since our incorporation, we have not entered into employment agreements with any of our officers, directors or employees.   Any future  compensation  to  be  paid to  these  individuals  will  be determined  by  our  Board of Directors, and employment  agreements will  be  executed.   We do not currently have plans to pay any

compensation to our officers or directors until such time as we are cash flow positive.

 

**Stock Option Plan And Other Long-term Incentive Plan**

 

We currently do not have existing or proposed option/SAR grants.

 

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

**Security Ownership of Certain Beneficial Owners and Management**

 

The following table sets forth as of December 31, 2007 certain information regarding the beneficial ownership of our common stock by:

 

1.   Each person who is known us to be the beneficial owner of more than 5% of the common stock,

 

2.   Each of our directors and executive officers and

 

3.  All of our directors and executive officers as a group.

 

Except  as  otherwise indicated, the persons or  entities  listed below  have  sole voting and investment power with respect  to  all shares  of common stock beneficially owned by them, except  to  the extent  such  power  may be shared with a  spouse.   No change in control is currently being contemplated.

 

Name and Address of

 

Percentage of Stock

Beneficial Owner

Shares Beneficially Owned
Outstanding (1)   
Helen C. Cary

5,000,000

95.6%

79013 Bayside Court
  
Indio, Ca 92203
     
All Officers and

5,000,000

95.6%

Directors as a Group
  
(1 person)
  
----------------------

(1) All of these shares are owned of record.

 

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

In  November 2004, Midnight Candle Company issued  5,000,000 shares  of  its $0.001 par value common stock as  founder's shares  to  Helen C. Cary, an officer and the sole director of Midnight Candle Company, for total cash in the amount of $5,000.

 

Midnight Candle Company does not lease or rent any property.  Ms. Cary, President, provides office space and services at 79013 Bayside Court, Indio, California, 99203, without charge.

 

 

31

 
ITEM 13.  EXHIBITS

 

**Exhibit**

**Number**

**Name and/or Identification of Exhibit**
  
3

Articles of Incorporation & By-Laws
 
a.  Articles of Incorporation filed on September 24, 2004, incorporated by reference to the	

Registration Statement on Form SB-2, as amended, previously filed with the SEC.
 
b.  Bylaws adopted on September 27, 2004, incorporated by reference to the Registration	

Statement on Form SB-2, as amended, previously filed with the SEC.
  
31

Rule 13a-14(a)/15d-14(a) Certification
  
32

Certification under Section 906 of the Sarbanes-Oxley Act (18 U.S.C. Section 1350)

 

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The following table sets forth fees billed to us by our independent auditors for the years ended December 31, 2007 and 2006 for (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements, (ii) services rendered that are reasonably related to the performance of the audit or review of our financial statements that are not reported as Audit Fees, and (iii) services rendered in connection with tax preparation, compliance, advice and assistance.

 

**SERVICES**

**2007**

**2006**
   
Audit fees

$5,094

$6,388

Audit-related fees

-

354

Tax fees

600

275

All other fees

-

1,854
   
**Total fees**

$5,694

$8,871

 

 
 
32

 
**SIGNATURES**

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

 

 

MIDNIGHT CANDLE COMPANY
 
Signature

Title

Date
   
/s/ Helen C. Cary

Chief Executive Officer, President

March 10, 2008

Helen C. Cary

and Director
 
 

 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

MIDNIGHT CANDLE COMPANY
 
Signature

Title

Date
   
/s/ Helen C. Cary

Chief Executive Officer and

March 10, 2008

Helen C. Cary

President
    
/s/ Patrick Deparini

Chief Financial Officer

March 10, 2008

Patrick Deparini
     
/s/ Patrick Deparini

Principal Accounting Officer

March 10, 2008

Patrick Deparini
  
 

 

 

 

 

 

 

 
 
33

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