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EXCEL - IDEA: XBRL DOCUMENT - MORGANS FOODS INCFinancial_Report.xls
10-Q - FORM 10-Q - MORGANS FOODS INCmrfd_10q-110412.htm
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EX-10.1 - EXHIBIT 10.1 - MORGANS FOODS INCex10-1.htm
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Note 1 - Summary of Significant Accounting Policies
9 Months Ended
Nov. 04, 2012
Significant Accounting Policies [Text Block]
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The interim consolidated financial statements of Morgan's Foods, Inc. (the “Company”) have been prepared without audit.  In the opinion of Company management, all adjustments have been included.  Unless otherwise disclosed, all adjustments consist only of normal recurring adjustments necessary for a fair statement of results of operations for the interim periods.  These unaudited financial statements have been prepared using the same accounting principles that were used in preparation of the Company’s annual report on Form 10-K for the year ended February 26, 2012.  Certain prior period amounts have been reclassified to conform to current period presentations.  The results of operations for the twelve and thirty-six weeks ended November 4, 2012 are not necessarily indicative of the results to be expected for the full year.  Although the Company believes that the disclosures are adequate to make the information presented not misleading, it is suggested that these condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the fiscal year ended February 26, 2012.

The Company’s debt is reported at historical cost, based upon stated interest rates which represented market rates at the time of borrowing.  The market for variable rate debt for restaurant financing is currently extremely limited.  The Company’s debt is not publicly traded and there are few lenders or financing transactions for similar debt in the marketplace at this time.  Management has concluded that it is not practicable to estimate the fair value of the Company’s debt as of November 4, 2012.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has incurred losses in fiscal years 2012 and 2011 and has negative working capital and an accumulated deficit at November 4, 2012.  The Company has managed its liquidity in 2012 through the refinancing of substantially all of its debt, the sale and leaseback of restaurant properties and entering into a Remodel Agreement with KFC in December 2011.  Should the Company have difficulty meeting its forecasts, this could have an adverse effect on its liquidity position. Management has taken actions to improve its cash flows, including closely monitoring its expenses and store closings for underperforming stores during fiscal years 2011 and 2012 and through the thirty-six weeks ended November 4, 2012 and expects to be able to achieve its forecast for fiscal 2013. However, there can be no assurances that our cash flow will be sufficient to allow us to continue as a going concern if we are unable to meet our projections.