UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| (Mark One) |
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | |
For the quarterly period ended: March 31, 2010 |
| |
| Or |
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| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | |
| For the transition period from ____________ to _____________ |
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Commission File Number: 000-51842 |
| |
| MIDNIGHT CANDLE COMPANY |
| (Exact name of registrant as specified in its charter) |
| |
| Nevada | 20-1763307 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
| 79013 Bayside Court, Indio, CA | 92203 |
| (Address of principal executive offices) | (Zip Code) |
| | |
| (760) 772-1872 |
| (Registrant's telephone number, including area code) |
| |
| ___________ |
| (Former name, former address and former fiscal year, if changed since last report) |
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that ht registrant was required to submit and post such files). Yes [ ] No [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:
| Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
| Common Stock, $0.001 par value | 156,900,000 shares |
| (Class) | (Outstanding as at May 21, 2010) |
MIDNIGHT CANDLE COMPANY
Table of Contents
PART I – FINANCIAL INFORMATION
MIDNIGHT CANDLE COMPANY
(A DEVELOPMENT STAGE COMPANY)
| | | March 31, | | | December 31, | |
| | | 2010 | | | 2009 | |
| ASSETS | | (Unaudited) | | | | |
| | | | | | | |
| Current Assets: | | | | | | |
| Cash | | $ | 275 | | | $ | 11 | |
| | | | | | | | | |
| Total Current Assets | | | 275 | | | | 11 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 275 | | | $ | 11 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | | | | | | | | |
| | | | | | | | | |
| LIABILITY | | | | | | | | |
| Current Liabilities: | | | | | | | | |
| Accounts payable | | $ | 125 | | | $ | 125 | |
| Notes payable | | | 16,535 | | | | 10,726 | |
| Notes payable – related party | | | 15,000 | | | | 15,000 | |
| | | | | | | | | |
| Total Current Liabilities | | | 31,660 | | | | 25,851 | |
| | | | | | | | | |
| Total Liabilities | | | 31,660 | | | | 25,851 | |
| | | | | | | | | |
| STOCKHOLDERS’ (DEFICIT) | | | | | | | | |
| Common stock, $0.001 par value, 200,000,000 shares | | | | | | | | |
| authorized, 156,900,000 shares issued and outstanding | | | 156,900 | | | | 156,900 | |
| Additional paid-in capital | | | (128,100 | ) | | | (128,400 | ) |
| (Deficit) accumulated during development stage | | | (60,185 | ) | | | (54,340 | ) |
| | | | | | | | | |
| Total Stockholders’ (Deficit) | | | (31,385 | ) | | | (25,840 | ) |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | | $ | 275 | | | $ | 11 | |
The accompanying notes are an integral part of these condensed financial statements.
MIDNIGHT CANDLE COMPANY
(A DEVELOPMENT STAGE COMPANY)
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(WITH CUMULATIVE TOTALS SINCE INCEPTION)
| | | | | | | | | Cumulative Totals | |
| | | | | | | | | September 24, 2004 (Inception) | |
| | | 2010 | | | 2009 | | | through March 31, 2010 | |
| | | | | | | | | | |
| OPERATING REVENUES | | | | | | | | | |
| Sales, net of allowance of $107 | | $ | - | | | $ | - | | | $ | 464 | |
| | | | | | | | | | | | | |
| Cost of sales | | | - | | | | - | | | | 273 | |
| Freight in | | | - | | | | - | | | | 95 | |
| | | | | | | | | | | | | |
| GROSS PROFIT | | | - | | | | - | | | | 96 | |
| | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | |
| Professional fees | | | 4,175 | | | | 2,846 | | | | 41,346 | |
| General and administrative expenses | | | 1,670 | | | | 188 | | | | 18,498 | |
| Total Operating Expenses | | | 5,845 | | | | 3,034 | | | | 59,844 | |
| | | | | | | | | | | | | |
| LOSS BEFORE OTHER INCOME | | | (5,845 | ) | | | (3,034 | ) | | | (59,844 | ) |
| | | | | | | | | | | | | |
| OTHER (INCOME) EXPENSE | | | | | | | | | | | | |
| Interest (income) | | | - | | | | - | | | | (1 | ) |
| Impairment expense | | | - | | | | - | | | | 438 | |
| Total Other (Income) Expense | | | - | | | | - | | | | 437 | |
| | | | | | | | | | | | | |
| NET (LOSS) APPLICABLE TO COMMON SHARES | | $ | (5,845 | ) | | $ | (3,034 | ) | | $ | (60,185 | ) |
| | | | | | | | | | | | | |
| WEIGHTED AVERAGE COMMON SHARES | | | | | | | | | | | | |
| OUTSTANDING | | | 156,900,000 | | | | 156,900,000 | | | | | |
| | | | | | | | | | | | | |
| LOSS PER BASIC AND DILUTED COMMON SHARES | | $ | (0.00 | ) | | $ | (0.00 | ) | | | | |
The accompanying notes are an integral part of these condensed financial statements.
MIDNIGHT CANDLE COMPANY
(A DEVELOPMENT STAGE COMPANY)
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(WITH CUMULATIVE TOTALS SINCE INCEPTION)
| | | | | | | | | Cumulative Totals | |
| | | | | | | | | September 24, 2004 (Inception) | |
| | | 2010 | | | 2009 | | | through March 31, 2010 | |
| | | | | | | | | | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | |
| Net (loss) | | $ | (5,845 | ) | | $ | (3,034 | ) | | $ | (60,185 | ) |
| | | | | | | | | | | | | |
| Adjustments to reconcile net (loss) to net cash | | | | | | | | | | | | |
| (used in) operating activities: | | | | | | | | | | | | |
| Impairment of inventory | | | - | | | | - | | | | 438 | |
| | | | | | | | | | | | | |
| Changes in assets and liabilities | | | | | | | | | | | | |
| (Increase) in inventory | | | - | | | | - | | | | (438 | ) |
| Increase in accounts payable | | | - | | | | 1,861 | | | | 125 | |
| | | | | | | | | | | | | |
| Total adjustments | | | - | | | | 1,861 | | | | 125 | |
| | | | | | | | | | | | | |
| Net cash (used in) operating activities | | | (5,845 | ) | | | (1,173 | ) | | | (60,060 | ) |
| | | | | | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | |
| Contributed capital | | | 300 | | | | - | | | | 300 | |
| Issuance of common stock | | | - | | | | - | | | | 28,500 | |
| Proceeds from note payable | | | 5,809 | | | | 985 | | | | 16,535 | |
| Proceeds from note payable – related party | | | - | | | | - | | | | 15,000 | |
| | | | | | | | | | | | | |
| Net cash provided by financing activities | | | 6,109 | | | | 985 | | | | 60,335 | |
| | | | | | | | | | | | | |
| NET INCREASE (DECREASE) IN CASH | | | 264 | | | | (188 | ) | | | 275 | |
| | | | | | | | | | | | | |
| CASH – BEGINNING OF PERIOD | | | 11 | | | | 272 | | | | - | |
| | | | | | | | | | | | | |
| CASH – END OF PERIOD | | $ | 275 | | | $ | 84 | | | $ | 275 | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL CASH FLOWS INFORMATION: | | | | | | | | | | | | |
| Cash paid for: | | | | | | | | | | | | |
| Interest | | $ | - | | | $ | - | | | $ | - | |
| Income taxes | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF NON-CASH | | | | | | | | | | | | |
| FINANCING ACTIVITY: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Note payable converted to equity | | $ | - | | | $ | - | | | $ | 500 | |
The accompanying notes are an integral part of these condensed financial statements.
MIDNIGHT CANDLE COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS MARCH 31, 2010 AND 2009
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
The accompanying interim financial statements included 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-Q 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, and the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condense d financial statements be read in conjunction with the December 31, 2009 audited financial statements, filed in Form 10-K on April 15, 2010, 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 is 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 contain all adjustments (including normal recurring adjustments) necessary to present fairly the operations for the periods presented.
Midnight Candle Company (the “Company”) is a distributor of candles and intends to market candles 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 Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 915-10-05, “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.
MIDNIGHT CANDLE COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2010 AND 2009
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 had no cash equivalents at March 31, 2010 and December 31, 2009.
The Company maintains cash and cash equivalent balances at a financial institution that is insured by the Federal Deposit Insurance Corporation up to the federally insured limits. At March 31, 2010 and December 31, 2009, there were no uninsured balances.
Going Concern
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 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 expenses 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.
Accounts Receivable
Accounts receivable are stated at the amount the Company expects to collect from outstanding balances and do not bear interest. On a periodic basis, management evaluates its accounts receivable and determines the requirement for an allowance for doubtful accounts based on its assessment of the current and collectible status of individual accounts with past due balances over 90 days.
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
Revenue is recognized when products are shipped, the price is fixed or reasonably determinable, and collectability is reasonably assured.
Fair Value of Financial Instruments
The Company’s financial instruments are all carried at amounts that approximate their estimated fair value as of March 31, 2010 and December 31, 2009.
MIDNIGHT CANDLE COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2010 AND 2009
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 carry forwards generated by sustaining deficits during the development stage.
Recent Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board (the “FASB”) clarified previously issued GAAP related to fair value measurements and disclosures and issued new requirements. The clarification component includes disclosures about inputs and valuation techniques used in determining fair value, and providing fair value measurement information for each class of assets and liabilities. The new requirements relate to disclosures of transfers between the levels in the fair value hierarchy, as well as the individual components in the rollforward of the lowest level (Level 3) in the fair value hierarchy. These changes in GAAP are effective for annual periods beginning after December 15, 2009, except for the provision concerning the rollforward of activity of the Level 3 fair value measurement, whose effective date is for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company does not expect this amendment to have a material effect on its consolidated financial statements.
MIDNIGHT CANDLE COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2010 AND 2009
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 three months ended March 31, 2010 and 2009:
| | | 2010 | | | 2009 | |
| Net loss | | $ | (5,845 | ) | | $ | (3,034 | ) |
| | | | | | | | | |
| Weighted average common shares outstanding (Basic) | | | 156,900,000 | | | | 156,900,000 | |
| | | | | | | | | |
| Options | | | - | | | | - | |
| Warrants | | | - | | | | - | |
| | | | | | | | | |
| Weighted average common shares outstanding (Diluted) | | | 156,900,000 | | | | 156,900,000 | |
There are no common stock equivalents outstanding at March 31, 2010 and 2009.
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.
The Company currently has no potentially dilutive securities outstanding.
NOTE 3 - NOTES PAYABLE – RELATED PARTY
Represents three unsecured notes payable for $5,000 each to the officer of the Company. They were all used for working capital needs. There are no stated terms and the notes are due on demand.
Represents numerous unsecured loans aggregating $16,535 from a non-affiliated third-party that loans the Company money on an as-needed basis. The notes are due on demand and bear no interest.
On August 19, 2009, the Company entered into a Revolving Line of Credit Promissory Note with a non-related, third party entity for a total of $30,000. Any principal balance borrowed against the Note accrues interest at a rate of 10% per year. The entire unpaid balance and interest accrued thereupon are due on December 31, 2011. The Company has not borrowed against this note and the balance due as of March 31, 2010 is $0.
MIDNIGHT CANDLE COMPANY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 2010 AND 2009
NOTE 5 - STOCKHOLDERS’ (DEFICIT)
On September 24, 2004 the Company was formed with one class of common stock, par value $.001. The Company is currently authorized to issue up to 200,000,000 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.
On October 15, 2008, the Company affected a forward split of the Company’s issued and outstanding common stock on a 30:1 basis and further amended the Company’s Articles of Incorporation which will increase the authorized capital stock of the Company from 100,000,000 shares with a par value of $0.001 per share to 200,000,000 shares of par value common stock. All shares have been retroactively restated to report this transaction.
As of March 31, 2010, there have been no other issuances of common stock.
Management's Discussion and Analysis of Financial Condition 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, Midnight Candle’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. During the three month periods ended March 31, 2010 and 2009, we did not generate any revenues, nor did we incur any cost of goods sold and shipping charges. Since our inception to March 31, 2010, we generated an aggregate of $571 in gross revenues from sales of our candles and had returns and allowances in the amount of $107, resulting in net revenues since inception of $464. After accounting for cost of sales in the amount of $307, adding a sales discount of $34 and shipping costs of $95, we realized a gross profit of $96 from the period from our inception through March 31, 2010. We are unable to predict the stability of, and ability to continue to generate, ongoing revenues. We have no saleable inventory and can not predict when, if at all, we will be able to generate revenues for the foreseeable future.
In the course of our operations, we incur operating expenses composed primarily of general and administrative costs and professional fees. General and administrative expenses are essentially the cost of doing business, and encompass, without limitation, the following: licenses; taxes; general office expenses, such as postage, supplies and printing; utilities; bank charges; website costs; and other miscellaneous expenditures not otherwise classified. Professional fees include: accounting fees charged related to interim reports and annual audits; tax preparation fees for filing Federal and State income tax returns; transfer agent fees for printing certificates, annual account maintenance fees and obtaining various report, ledgers or lists for internal review or periodic financial statement preparation and confirmat ion; consulting costs for marketing and advertising, website development and maintenance, financial statement preparation and general business development; legal fees for legal work performed related to our general business or maintaining our public reporting status; and Edgarization fees for the submission of reports and information statements with the U.S. Securities and Exchange Commission.
For the three months ended March 31, 2010, we incurred operating expenses in the amount of $5,845. In comparison, operating expenses in the three months ended March 31, 2009 were $3,034. The components of the comparable periods are as follows:
| | | Three months ended | | | Change | |
| | | March 31, | | | 2009 to 2010 | |
| Expense | | 2010 | | | 2009 | | | $ | | | | % | |
| | | | | | | | | | | | | | |
| Accounting Fees | | $ | 1,075 | | | $ | 2,500 | | | $ | (1,425 | ) | | | (57 | )% |
| Licenses, Permits, Taxes | | | 1,634 | | | | - | | | | 1,634 | | | | - | % |
| Office Expenses | | | 36 | | | | 188 | | | | (152 | ) | | | (81 | )% |
| Professional Fees | | | 3,100 | | | | 346 | | | | 2,754 | | | | 796 | % |
| | | | | | | | | | | | | | | | | |
| Total Operating Expenses | | $ | 5,845 | | | $ | 3,034 | | | $ | 2,811 | | | | 93 | % |
Overall expenses increased by 93% from the three months ended March 31, 2009 to the comparable period ended March 31, 2010. We attribute the bulk of the increase to a material increase in professional fees paid to third-parties, of which $3,000 was for website design and development related to a relaunch of our Internet presence. Our management cautions that the variations in all expense categories are not accurate indications of long-term trends and ongoing expenses will continue to vary drastically from period to period. We caution that, due to the minimal level of operating activities performed during the periods in question, a dramatic one-time spike or drop in any item could make period-to-period comparisons difficult or unreliable.
Aggregate operating expenses since our inception on September 24, 2004 to March 31, 2010 were $59,844, comprised, as follows:
| | | Inception to | | | % of | |
| Expense | | March 31, 2010 | | | Expenses | |
| | | | | | | |
| Accounting Fees | | $ | 28,289 | | | | 47 | % |
| Legal Fees | | | 3,500 | | | | 6 | % |
| Office Expenses | | | 10,387 | | | | 17 | % |
| Professional Fees | | | 6,557 | | | | 11 | % |
| Licenses and Permits | | | 5,809 | | | | 10 | % |
| Uncollectible Accounts | | | 123 | | | NIL | |
| Website Development and Maintenance | | | 5,179 | | | | 9 | % |
| | | | | | | | | |
| Total Operating Expenses | | $ | 59,844 | | | | 100 | % |
Accounting-related expense is credited with 47% of aggregate operating expenses since our inception to March 31, 2010. These fees include auditing by our independent registered public accountants, bookkeeping, tax preparation and other accounting-specific consulting services. We expect to continue to incur general and administrative expenses for the foreseeable future, although we cannot estimate the extent of these costs.
We have experienced net losses in all periods since our inception. Our net loss for the three months ended March 31, 2010 was $5,845. Comparatively, during the three months ended March 31, 2009, our net loss totaled $3,034. Our net loss since the date of our inception through March 31, 2010 was $60,185, after taking into consideration $1 in interest income and the impairment of our remaining inventory of $438 during the year ended December 31, 2009. We anticipate incurring ongoing operating losses and cannot predict when, if at all, we may expect these losses to plateau or narrow.
Liquidity and Capital Resources
Our management believes that our cash on hand as of March 31, 2010 in the amount of $275 is not sufficient to maintain even our current minimal level of operations for the next approximately 12 months. As of March 31, 2010, we owed $125 in accounts payable to vendors and service providers, as well as an aggregate of $31,535 in notes payable, of which $15,000 is to due to Ms. Helen Cary, an officer and director, the aggregate sum of which greatly exceeds our current assets.
As of August 12, 2009, we have reached an agreement with the holder of the $15,000 in notes payable, Ms. Helen Cary, an officer and director, to extend the due dates of all such notes indefinitely, and for all balances to be due on demand and bear no interest. Ms. Cary received no beneficial terms in this transaction. Rather, we were the recipient of terms highly beneficial to us, as Ms. Cary did not and has not yet demanded any of the notes be repaid, nor is there any interest being charged or accrued on any of the notes.
On August 19, 2009, the Company entered into a Revolving Line of Credit Promissory Note with a non-related, third party entity for a total of $30,000. Any principal balance borrowed against the Note accrues interest at a rate of 10% per year. The entire unpaid balance and interest accrued thereupon are due on December 31, 2011. The balance owed on this line of credit as of March 31, 2010 is $0.
Our management does 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 any of our directors. Additionally, we believe that this fact shall not materially change.
Evaluation of Disclosure Controls and Procedures
We maintain a set of disclosure controls and procedures designed to ensure that information we are required to disclose in 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 management that its evaluation of internal control over financial reporting identified a material weakness as defined in Public Company Accounting Oversight Board Standard No. 5 in the Company’s 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, the size of the Company 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 has taken all actions to ensure that the filing includes all required content and the financial statements presented are in conformity with US generally accepted accounting principles for interim financi al reporting pursuant to the rules of the SEC.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
| 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 * |
| | |
| 10 | Line of Credit |
| | |
| 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. |
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 | Title | Date |
| | | |
| /s/ Helen C. Cary | President and | May 21, 2010 |
| Helen C. Cary | Chief Executive Officer | |
| | | |
| /s/Patrick Deparini | Secretary/Treasurer | May 21, 2010 |
| Patrick Deparini | Chief Financial Officer | |
