10-Q

FORM 10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 31, 2020
☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to _________________ Commission file number: 0-31555

BAB, Inc.

(Name of small business issuer in its charter)

Delaware	36-4389547
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

 500 Lake Cook Road, Suite 475, Deerfield, Illinois 60015

(Address of principal executive offices) (Zip Code)

Issuer's telephone number (847) 948-7520

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	BABB	OTCQB

Indicate by checkmark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐      

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒   No ☐      

Indicate by checkmark whether the registrant is a large accelerated filer, accelerated filer, a non-accelerated filer, or a smaller reporting company. Large accelerated filer ☐      Accelerated filer ☐     Non-accelerated filer ☐     Smaller reporting company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      ☐                               

Indicate by check mark whether the registrant is a shell company. Yes ☐         No ☒

As of July 14, 2020 BAB, Inc. had: 7,263,508 shares of Common Stock outstanding.

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4	Controls and Procedures	18
PART II	OTHER INFORMATION	19
Item 1.	Legal Proceedings	19
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3	Defaults Upon Senior Securities	19
Item 4	Mine Safety Disclosures	19
Item 5	Other Information	19
Item 6	Exhibits	20
SIGNATURE		21

2

PART I

ITEM 1. FINANCIAL STATEMENTS

BAB, Inc.

Consolidated Balance Sheets

	May 31, 2020			November 30, 2019
	(unaudited)
ASSETS
Current Assets
Cash	$	1,006,891		$	1,095,235
Restricted cash		269,228			400,434
Receivables
Trade accounts and notes receivable (net of allowance for doubtful accounts of $21,810 in 2020 and $24,792 in 2019 )		49,143			66,870
Marketing fund contributions receivable from franchisees and stores		-			17,219
Prepaid expenses and other current assets		68,845			94,145
Total Current Assets		1,394,107			1,673,903
Property, plant and equipment (net of accumulated depreciation of $156,431 in 2020 and $155,752 in 2019)		2,984			3,662
Trademarks		461,445			461,445
Goodwill		1,493,771			1,493,771
Definite lived intangible assets (net of accumulated amortization of $126,114  in 2020 and $125,278 in 2019)		14,379			12,625
Operating lease right of use		344,152			384,159
Deferred tax asset		200,000			200,000
Total Noncurrent Assets		2,516,731			2,555,662
Total Assets	$	3,910,838		$	4,229,565
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	6,648		$	4,195
Accrued expenses and other current liabilities		246,376			287,414
Unexpended marketing fund contributions		267,033			416,305
Deferred franchise fee revenue		29,189			29,363
Deferred licensing revenue		16,071			31,072
Current portion operating lease liability		95,615			92,139
Total Current Liabilities		660,932			860,488
Long-term Liabilities (net of current portion)
Operating lease liability		310,449			359,242
Deferred franchise revenue		94,828			72,670
Deferred licensing revenue		5,655			7,440
Long term debt		228,155			-
Total Long-term Liabilities		639,087			439,352
Total Liabilities	$	1,300,019		$	1,299,840
Stockholders' Equity
Preferred shares -$.001 par value; 4,000,000 authorized; no shares outstanding as of May 31, 2020 and November 30, 2019		-			-
Preferred shares -$.001 par value; 1,000,000 Series A authorized; no shares outstanding as of May 31, 2020 and November 30, 2019		-			-
Common stock -$.001 par value; 15,000,000 shares authorized; 8,466,953 shares issued and 7,263,508 shares outstanding as of May 31, 2020 and November 30, 2019		13,508,257			13,508,257
Additional paid-in capital		987,034			987,034
Treasury stock		(222,781	)		(222,781	)
Accumulated deficit		(11,661,691	)		(11,342,785	)
Total Stockholders' Equity		2,610,819			2,929,725
Total Liabilities and Stockholders' Equity	$	3,910,838		$	4,229,565

SEE ACCOMPANYING NOTES

3

BAB, Inc.

Consolidated Statements of Income

For the Three Month Periods Ended May 31, 2020 and May 31, 2019

 (Unaudited)

	Three months ended May 31,					Six months ended May 31,
	2020			2019		2020			2019
REVENUES
Royalty fees from franchised stores	$	238,491		$	419,737	$	625,830		$	792,855
Franchise Fees		3,874			3,413		7,524			16,826
Licensing fees and other income		62,424			95,232		139,598			192,213
Marketing fund revenue		47,031			255,832		274,552			484,620
Total Revenues		351,820			774,214		1,047,504			1,486,514
OPERATING EXPENSES
Selling, general and administrative expenses:
Payroll and payroll-related expenses		219,112			234,697		449,517			450,632
Occupancy		34,674			30,911		68,352			50,547
Advertising and promotion		7,734			11,336		21,644			22,663
Professional service fees		30,412			22,230		79,529			81,864
Travel		1,510			9,776		9,509			17,735
Employee benefit expenses		37,006			34,190		74,196			73,923
Depreciation and amortization		774			401		1,514			800
Marketing fund expenses		47,031			255,832		274,552			484,620
Other		45,224			41,828		82,258			69,117
Total Operating Expenses		423,477			641,201		1,061,071			1,251,901
(Loss)/Income from operations		(71,657	)		133,013		(13,567	)		234,613
Interest income		97			124		201			384
Income before provision for income taxes		(71,560	)		133,137		(13,366	)		234,997
Provision for income taxes
Current tax expense		-			5,000		15,000			10,000
Net (Loss)/Income	$	(71,560	)	$	128,137	$	(28,366	)	$	224,997
Net (Loss)/Income per share - Basic and Diluted	$	(0.01	)	$	0.02	$	(0.00	)	$	0.03
Weighted average shares outstanding - Basic and diluted		7,263,508			7,263,508		7,263,508			7,263,508
Cash distributions declared per share	$	0.01		$	0.01	$	0.04		$	0.04

SEE ACCOMPANYING NOTES

4

BAB, Inc.

Consolidated Statements of Cash Flows

For the Three Months Ended May 31, 2020 and May 31, 2019

(Unaudited)

	For the six months ended:
	May 31, 2020			May 31, 2019
Operating activities
Net (Loss) Income	$	(28,366	)	$	224,997
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization		1,514			800
Provision for uncollectible accounts, net of recoveries		(3,871	)		(13,792	)
Noncash lease expense		49,656			51,068
Changes in:
Trade accounts receivable and notes receivable		21,599			27,510
Marketing fund contributions receivable		17,219			(941	)
Prepaid expenses and other		25,300			2,140
Accounts payable		2,453			7,408
Accrued liabilities		(96,004	)		(14,690	)
Unexpended marketing fund contributions		(149,272	)		(46,256	)
Deferred revenue		5,197			(23,756	)
Net Cash (Used In)/ Provided by Operating Activities		(154,575	)		214,488
Investing activities
Capitalization of trademark renewals		(2,590	)		(4,665	)
Net Cash (Used In) By Investing Activities		(2,590	)		(4,665	)
Financing activities
Loan proceeds		228,155			-
Cash distributions/dividends		(290,540	)		(290,540	)
Net Cash Used In Financing Activities		(62,385	)		(290,540	)
Net Decrease in Cash, Cash Equivalents and Restricted Cash		(219,550	)		(80,717	)
Cash, Cash Equivalents and Restricted Cash - Beginning of Period		1,495,669			1,509,227
Cash, Cash Equivalents and Restricted Cash - End of Period	$	1,276,119		$	1,428,510
Supplemental disclosure of cash flow information:
Interest paid	$	-		$	-
Income taxes paid	$	35,262		$	2,000

 SEE ACCOMPANYING NOTES

5

BAB, Inc.

Notes to Unaudited Consolidated Financial Statements

For the Three Months Ended May 31, 2020 and May 31, 2019

(Unaudited)

Note 1. Nature of Operations

BAB, Inc. (“the Company”) has three wholly owned subsidiaries: BAB Systems, Inc. (“Systems”), BAB Operations, Inc. (“Operations”) and BAB Investments, Inc. (“Investments”). Systems was incorporated on December 2, 1992, and was primarily established to franchise Big Apple Bagels® (“BAB”) specialty bagel retail stores. My Favorite Muffin (“MFM”) was acquired in 1997 and is included as a part of Systems. Brewster’s (“Brewster’s”) was established in 1996 and the coffee is sold in BAB and MFM locations. SweetDuet® (“SD”) frozen yogurt can be added as an additional brand in a BAB location. Operations was formed in 1995, primarily to operate Company-owned stores of which there are currently none. The assets of Jacobs Bros. Bagels (“Jacobs Bros.”) were acquired in 1999, and any branded wholesale business uses this trademark. Investments was incorporated in 2009 to be used for the purpose of acquisitions. To date there have been no acquisitions.

The Company was incorporated under the laws of the State of Delaware on July 12, 2000.  The Company currently franchises and licenses bagel and muffin retail units under the BAB, MFM and SD trade names. At May 31, 2020, the Company had 72 franchise units and 7 licensed units in operation in 22 states and the United Arab Emirates. There are 2 units under development. The Company additionally derives income from the sale of its trademark bagels, muffins and coffee through nontraditional channels of distribution including under a licensing agreement with Green Beans Coffee.

The BAB franchised brand consists of units operating as “Big Apple Bagels®,” featuring daily baked bagels, flavored cream cheeses, premium coffees, gourmet bagel sandwiches and other related products. BAB units are primarily concentrated in the Midwest and Western United States.  The MFM brand consists of units operating as “My Favorite Muffin Gourmet Muffin Bakery™” (“MFM Bakery”), featuring a large variety of freshly baked muffins and coffees and units operating as “My Favorite Muffin Your All Day Bakery Café®” (“MFM Cafe”) featuring these products as well as a variety of specialty bagel sandwiches and related products.  The SweetDuet® is a branded self-serve frozen yogurt that can be added as an additional brand in a BAB location.  Although the Company doesn't actively market Brewster's stand-alone franchises, Brewster's coffee products are sold in most franchised units.     

The Company is leveraging on the natural synergy of distributing muffin products in existing BAB units and, alternatively, bagel products and Brewster's Coffee in existing MFM units. The Company expects to continue to realize efficiencies in servicing the combined base of BAB and MFM franchisees.

The accompanying condensed consolidated financial statements are unaudited. These financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted pursuant to such SEC rules and regulations; nevertheless, the Company believes that the disclosures are adequate to make the information presented not misleading.  These financial statements and the notes hereto should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended November 30, 2019 which was filed February 24, 2020.  In the opinion of the Company's management, the condensed consolidated financial statements for the unaudited interim period presented include all adjustments, including normal recurring adjustments, necessary to fairly present the results of such interim period and the financial position as of the end of said period. The results of operations for the interim period are not necessarily indicative of the results for the full year.

6

2. Summary of Significant Accounting Policies

Unaudited Consolidated Financial Statements

The accompanying unaudited Condensed Consolidated Financial Statements of BAB, Inc. have been prepared pursuant to generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for Form 10-Q. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Uses of Estimates

The preparation of the financial statements and accompanying notes are 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, liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates.

Accounts and Notes Receivable

Receivables are carried at original invoice amount less estimates for doubtful accounts. Management determines the allowance for doubtful accounts by reviewing and identifying troubled accounts and by using historical collection experience. A receivable is considered to be past due if any portion of the receivable balance is outstanding 90 days past the due date. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded as income when received. Certain receivables have been converted to unsecured interest-bearing notes.

Property, Plant and Equipment

Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are 3 to 7 years for property and equipment and 10 years, or term of lease if less, for leasehold improvements. Maintenance and repairs are charged to expense as incurred. Expenditures that materially extend the useful lives of assets are capitalized.

Advertising and Promotion Costs

The Company expenses advertising and promotion costs as incurred. All advertising and promotion costs were related to the Company’s franchise operations.

Leases

The company accounts for leases under ASC 842. Lease arrangements are determined at the inception of the contract. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current and long-term operating lease liabilities on the consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities on the consolidated balance sheets. 

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

7

2. Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. 

The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have yet been issued.

If an entity early adopts these amendments in an interim period, it should reflect any adjustments as of the beginning of the annual period that includes that interim period. In addition, an entity that elects to early adopt the standard is required to adopt all of the amendments in the same period (i.e., an entity cannot select which amendments to early adopt). The Company is still evaluating the specific effect of this change. The Company will adopt ASU 2019-12 for fiscal year ending November 30, 2021.

Management does not believe that there are any other recently issued and effective or not yet effective pronouncements that would have or are expected to have any significant effect on the Company’s financial position, cash flows or results of operations.

Statement of Cash Flows

The chart below shows the cash and restricted cash within the consolidated statements of cash flows as of May 31, 2020 and May 31, 2019 were as follows:

	May 31, 2020		May 31, 2019
Cash and cash equivalents	$	1,006,891	$	1,031,711
Restricted cash		269,228		396,799
Total cash, cash equivalents and restricted cash	$	1,276,119	$	1,428,510

8

3. Revenue Recognition

Franchise and related revenue 

The Company sells individual franchises. The franchise agreements typically require the franchisee to pay an initial, non-refundable fee prior to opening the respective location(s), and continuing royalty fees on a weekly basis based upon a percentage of franchisee net sales. The initial term of franchise agreements are typically 10 years.  Subject to the Company’s approval, a franchisee may generally renew the franchise agreement upon its expiration.  If approved, a franchisee may transfer a franchise agreement to a new or existing franchisee, at which point a transfer fee is typically paid by the current owner which then terminates that franchise agreement. A franchise agreement is signed with the new franchisee with no franchise fee required. If a contract is terminated prior to its term, it is a breach of contract and a penalty is assessed based on a formula reviewed and approved by management. Revenue generated from a contract breach is termed settlement income by the Company and included in licensing fees and other income.

Under the terms of our franchise agreements, the Company typically promises to provide franchise rights, pre-opening services such as blueprints, operational materials, planning and functional training courses, and ongoing services, such as management of the marketing fund. Upon adoption of Topic 606, the Company determined that certain pre-opening activities, and the franchise rights and related ongoing services, represented two separate performance obligations. The franchise fee revenue has been allocated to the two separate performance obligations using a residual approach. The Company has estimated the value of performance obligations related to certain pre-opening activities deemed to be distinct based on cost plus an applicable margin, and assigned the remaining amount of the initial franchise fee to the franchise rights and ongoing services. Revenue allocated to preopening activities is recognized when (or as) these services are performed. Revenue allocated to franchise rights and ongoing services is deferred until the store opens, and recognized on a straight line basis over the duration of the agreement, as this ensures that revenue recognition aligns with the customer’s access to the franchise right.

Royalty income is recognized during the respective franchise agreement based on the royalties earned each period as the underlying franchise store sales occur. Adoption of ASC 606 will not change when the royalty revenue is recognized, this new guidance did not impact the recognition of royalty income.

There are two items involving revenue recognition of contracts that require us to make subjective judgments: the determination of which performance obligations are distinct within the context of the overall contract and the estimated stand alone selling price of each obligation. In instances where our contract includes significant customization or modification services, the customization and modification services are generally combined and recorded as one distinct performance obligation.

Gift Card Breakage Revenue

The Company sells gift cards to its customers in its retail stores and through its Corporate office. The Company’s gift cards do not have an expiration date and are not redeemable for cash except where required by law. Revenue from gift cards is recognized upon redemption in exchange for product and reported within franchisee store revenue and the royalty and marketing fees are paid and shown in the Condensed Consolidated Statements of Income. Until redemption, outstanding customer balances are recorded as a liability. An obligation is recorded at the time of sale of the gift card and it is included in accrued expenses on the Company’s Condensed Consolidated Balance Sheets.

The Company recognizes gift card breakage proportional to actual gift card redemptions as required under ASC 606 on a quarterly basis and it is included in licensing fees and other revenue. Significant judgments and estimates are required in determining the breakage rate and will be reassessed each quarter.

9

3. Revenue Recognition (continued)

Nontraditional and rebate revenue

As part of the Company’s franchise agreements, the franchisee purchases products and supplies from designated vendors.  The Company may receive various fees and rebates from the vendors and distributors on product purchases by franchisees.  In addition, the Company may collect various initial fees, and those fees are classified as deferred revenue in the balance sheet and straight lined over the life of the contract as deferred revenue in the balance sheet. The Company does not possess control of the products prior to their transfer to the franchisee and products are delivered to franchisees directly from the vendor or their distributors. The Company recognizes the rebates as franchisees purchase products and supplies from vendors or distributors and recognizes the initial fees over the contract life and the fees are reported as licensing fees and other income in the Condensed Consolidated Statements of Income.

Marketing Fund

Franchise agreements require the franchisee to pay continuing marketing fees on a weekly basis, based on a percentage of franchisees sales. Marketing fees are not paid on franchise wholesale sales. The balance sheet includes marketing fund cash, which is the restricted cash, accounts receivable and unexpended marketing fund contributions. The Company has determined that although the marketing fees are not separate performance obligations distinct from the underlying franchise right, the Company acts as the principal as it is primarily responsible for the fulfillment and control of the marketing services. As a result, the Company records marketing fees in revenues and related marketing fund expenditures in expenses in the Condensed Consolidated Statement of Income.

Contract balances 

Information about contract balances is as follows:

	May 31, 2020		December 1, 2019
Assets
Accounts receivable	$	45,491	$	58,853
Total Assets		45,491		58,853
Liabilities
Contract liabilities - current		485,357		622,724
Contract liabilities - long-term		100,483		80,110
Total Contract Liabilities	$	585,840	$	702,834

10

3. Revenue Recognition (continued)

Accounts receivable represent weekly royalty payments and monthly vendor rebate payments that represent billed and unbilled receivables due as of May 31, 2020 and December 1, 2019. The balance of contract liabilities includes franchise fees, license fees and vendor payments that have ongoing contract rights and the fees are being straight lined over the contract life. Contract liabilities also include marketing fund balances and gift card liability balances.

	Accounts Receivable			Contract Liabilities
Balance at December 1, 2019	$	58,853		$	702,834
Revenue Recognized		264,144			(433,024	)
Amounts (collected) or invoiced, net		(277,506	)		316,030
Balance at May 31, 2020	$	45,491		$	585,840

Transaction price from license fees and nontraditional revenue allocated to remaining performance obligations as of May 31, 2020:

(a)      2020	$	61,625
2021		44,753
2022		18,667
2023		13,995
2024		11,864
Thereafter		12,989
Total	$	163,893

(a) represents the estimate for the remainder of 2020

The Company has elected to apply certain practical expedients as defined in ASC 606-10-50-14 through 606-10-50-14A, including (i) performance obligations that are a part of a contract that has an original expected duration of one year or less; (ii) the right to invoice practical expedient; and (iii) variable consideration related to unsatisfied performance obligations that is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation, and the terms of that variable consideration relate specifically to our efforts to transfer the distinct service, or to a specific outcome from transferring the distinct service. As such, sales-based royalty and marketing income, as well as gift card breakage revenue, is not included in the above transaction price chart.

4. Units Open and Under Development

Units which are open or under development at May 31, 2020 are as follows:

Stores open:
Franchisee-owned stores	72
Licensed Units	7
	79
Unopened stores with Franchise Agreements	2
Total operating units and units with Franchise Agreements	81

11

5. Earnings per Share

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

	For the three months ended:					For the six months ended:
	May 31, 2020			May 31, 2019		May 31, 2020			May 31, 2019
Numerator:
Net (loss)/income available to common shareholders	$	(71,560	)	$	128,137	$	(28,366	)	$	224,997
Denominator:
Weighted average outstanding shares
Basic and diluted common stock		7,263,508			7,263,508		7,263,508			7,263,508
(Loss)/Earnings per Share - Basic	$	(0.01	)	$	0.02	$	(0.00	)	$	0.03

6. Goodwill and Other Intangible Assets

Accounting Standard Codification (“ASC”) 350 “Goodwill and Other Intangible Assets” requires that assets with indefinite lives no longer be amortized, but instead be subject to annual impairment tests.

Following the guidelines contained in ASC 350, the Company tests goodwill and intangible assets that are not subject to amortization for impairment annually or more frequently if events or circumstances indicate that impairment is possible.  The Company has elected to conduct its annual test during the first quarter.  During the quarter ended February 28, 2020, management qualitatively assessed goodwill to determine whether testing was necessary.  Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy, and changes in the composition and carrying amounts of net assets.  If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying value, a quantitative assessment is then performed.  After reviewing and determining that the changes to the Company’s operations and overall business environment since the first quarter 2020, management believes that the decrease in sales is temporary and has determined that the carrying value of goodwill was not impaired at May 31, 2020, and was not considered necessary.  In addition, the overall fair market value of the Company exceeds the book value of intangibles and goodwill as of May 31, 2020.

Due to the impact of the COVID-19 pandemic sales were affected in April and May of 2020.  The pandemic continues to affect sales during the third quarter of 2020, but sales recovery at store locations is occurring.  With the sales recovery occurring in June and the Payroll Protection Program Loan received in May 2020, which will more than likely be forgiven, we believe that there will be no material effect on the intangible and goodwill values.  Management has reviewed goodwill and intangibles for the second quarter 2020 and will continue to review goodwill and intangible assets for impairment in the future quarters as more information and results are seen for the economic recovery of the franchise systems related to the Coronavirus pandemic.

7. Lease Commitments

The Company rents its office under an operating lease which requires it to pay base rent, real estate taxes, insurance and general repairs and maintenance. A lease was signed in June of 2018, effective October 1, 2018, expiring on March 31, 2024 with an option to renew for a 5 year period. A six month rent abatement and tenant allowance was provided in the lease, with any unused portion to be applied to base rent. The unused portion was determined to be $21,300. The renewal option has not been included in the measurement of the lease liability.

Monthly rent expense is recognized on a straight-line basis over the term of the lease. At May 31, 2020 the remaining lease term was 46 months. The operating lease is included in the balance sheet at the present value of the lease payments at a 5.25% discount rate. The discount rate was considered to be an estimate of the Company’s incremental borrowing rate.

12

7. Lease Commitments (continued)

Gross future minimum annual rental commitments as of May 31, 2020 are as follows:

	Undiscounted Rent Payments
Year Ending November 30:
2020	$	55,409
2021		113,024
2022		115,673
2023		118,322
Thereafter		40,176
Total Undiscounted Rent Payments		442,604
Present Value Discount		(36,540	)
Present Value	$	406,064
Short-term lease liability	$	95,615
Long-term lease liability		310,449
Total Operating Lease Liability	$	406,064

8. Loan

On May 1, 2020, BAB Systems, Inc. received loan proceeds of $228,155 from Lake Forest Bank and Trust Company, N.A., pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title 1 of the CARES Act, which was enacted March 27, 2020.

The PPP Loan, which was in the form of a Note dated April 30, 2020 was issued to BAB Systems, Inc. The BAB PPP Loan has a two-year term and bears interest at a rate of 1% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The BAB PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The promissory note contains events of default and other provisions customary for a loan of this type.

Under the terms of the CARES Act, PPP Loan participants can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. Under the terms of the PPP, PPP loans and accrued interest are forgivable between eight weeks and twenty-four weeks, as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight week period. BAB intends to use the loan proceeds for purposes consistent with the PPP, and anticipates that all or a majority of the loan amount will be forgiven, but there is no assurance provided that the Company will obtain forgiveness of the PPP Loan in whole or part.

9. Stockholder’s Equity

On December 5, 2019, a $.01 quarterly and a $0.02 special cash distribution/dividend per share was declared and paid on January 8, 2020.

On March 4, 2020, a $0.01 quarterly cash distribution/dividend per share was declared to shareholders of record as of March 23, 2020 and paid April 08, 2020.

13

9. Stockholder’s Equity (Continued)

On May 6, 2013, the Board of Directors (“Board”) of BAB, Inc. authorized and declared a dividend distribution of one right for each outstanding share of the common stock of BAB, Inc. to stockholders of record at the close of business on May 13, 2013. Each right entitles the registered holder to purchase from the Company one one-thousandth of a share of the Series A Participating Preferred Stock of the Company at an exercise price of $0.90 per one-thousandth of a Preferred Share, subject to adjustment. The complete terms of the Rights are set forth in a Preferred Shares Rights Agreement, dated May 6, 2013, between the Company and IST Shareholder Services, as rights agent.

The Board adopted the Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group that acquires 15% (or 20% in the case of certain institutional investors who report their holdings on Schedule 13G) or more of the Common Shares without the approval of the Board. As a result, the overall effect of the Rights Agreement and the issuance of the Rights may be to render more difficult a merger, tender or exchange offer or other business combination involving the Company that is not approved by the Board. However, neither the Rights Agreement nor the Rights should interfere with any merger, tender or exchange offer or other business combination approved by the Board.

Full details about the Rights Plan are contained in a Form 8-K filed by the Company with the U.S. Securities and Exchange Commission on May 7, 2013.

On June 18, 2014 an amendment to the Preferred Shares Rights Agreement was filed appointing American Stock Transfer & Trust Company, LLC as successor to Illinois Stock Transfer Company. All original rights and provisions remain unchanged. On August 18, 2015 an amendment was filed to the Preferred Shares Rights Agreement changing the final expiration date to mean the fifth anniversary of the date of the original agreement. All other original rights and provisions remain the same. On May 22, 2017 an amendment was filed extending the final expiration date to mean the seventh anniversary date of the original agreement. All other original rights and provisions remain the same. On February 22, 2019 an amendment was filed extending the final expiration date to mean the ninth anniversary date of the original agreement. All other original rights and provisions remain the same.

10. Subsequent Events

The COVID-19 outbreak in the United States has resulted in reduced customer traffic for our franchisees, resulting in reduced royalty revenue and ultimately reduced nontraditional revenues with a significant impact in April and May.  Management believes that the disruption in customer traffic is temporary and as of the end of May 2020, most states have opened up or are opening up for limited indoor and outdoor dining.    

In order to support our franchisees during this difficult time, the Company waived the 3% marketing fees from March 16, 2020 through May 31, 2020, with graduated amounts of marketing fees scheduled to be collected beginning in June 2020. We have provided as much information on the CARES stimulus package, with several franchises receiving Payroll Protection Program (PPP) loans, and we continue to encourage those that have not applied to do so. We applied and received PPP loan funds. For information, see the 8-K filed on May 5, 2020 with the Security and Exchange Commission.

While the Coronavirus pandemic has created challenges for restaurants around the country, we are proud of the work our franchisees have put in to adapt to changing regulations and government mandates.  As states begin to open up and ease restrictions we have seen franchise locations total system-wide sales rebound from down approximately 67% in week 20 of our fiscal year to down approximately 12% in week 32.  We are continuing to evaluate the effects of the Coronavirus pandemic outbreak on our operations.

14

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements contained in Management's Discussion and Analysis of Financial Condition and Results of Operations, including statements regarding the development of the Company's business, the markets for the Company's products, anticipated capital expenditures, and the effects of completed and proposed acquisitions, and other statements contained herein regarding matters that are not historical facts, are forward-looking statements as is within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Because such statements include risks and uncertainties, actual results could differ materially from those expressed or implied by such forward-looking statements as set forth in this report, the Company's Annual Report on Form 10-K and other reports that the Company files with the Securities and Exchange Commission. Certain risks and uncertainties are wholly or partially outside the control of the Company and its management, including its ability to attract new franchisees; the continued success of current franchisees; the effects of competition on franchisees and consumer acceptance of the Company's products in new and existing markets; fluctuation in development and operating costs; brand awareness; availability and terms of capital; adverse publicity; acceptance of new product offerings; availability of locations and terms of sites for store development; food, labor and employee benefit costs; changes in government regulation (including increases in the minimum wage); regional economic and weather conditions; the hiring, training, and retention of skilled corporate and restaurant management; and the integration and assimilation of acquired concepts. Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revision to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

General

There are 72 franchised and 7 licensed units at May 31, 2020 compared to 73 franchised and 6 licensed units at May 31, 2019.  System-wide revenues for the six months ended May 31, 2020 were $12.7 million and May 31, 2019 was $16.1 million.

The Company's revenues are derived primarily from the ongoing royalties paid to the Company by its franchisees and receipt of initial franchise fees.  Additionally, the Company derives revenue from the sale of licensed products (My Favorite Muffin mix, Big Apple Bagels cream cheese and Brewster's coffee), and through nontraditional channels of distribution through a licensing agreement with Green Beans Coffee.

Royalty fees represent a 5% fee on net retail and wholesale sales of franchised units. Royalty revenues are recognized on an accrual basis using actual franchise receipts. Generally, franchisees report and remit royalties on a weekly basis. The majority of month-end receipts are recorded on an accrual basis based on actual numbers from reports received from franchisees shortly after the month-end. Estimates are utilized in certain instances where actual numbers have not been received and such estimates are based on the average of the last 10 weeks’ actual reported sales.

There are two items involving revenue recognition of contracts that require us to make subjective judgments: the determination of which performance obligations are distinct within the context of the overall contract and the estimated stand alone selling price of each obligation. In instances where our contract includes significant customization or modification services, the customization and modification services are generally combined and recorded as one distinct performance obligation.

The Company earns licensing fees from the sale of BAB branded products, which includes coffee, cream cheese, muffin mix and frozen bagels from a third-party commercial bakery, to the franchised and licensed units.

As of May 31, 2020, the Company employed 13 full-time employees at the Corporate office. The employees are responsible for corporate management and oversight, accounting, advertising and franchising.  None of the Company's employees are subject to any collective bargaining agreements and management considers its relations with its employees to be good.

15

Results of Operations

Three Months Ended May 31, 2020 versus Three Months Ended May 31, 2019

For the three months ended May 31, 2020 and May 31, 2019, the Company reported a net loss of $72,000 and net income of $128,000, respectively. Total revenue of $352,000 decreased $422,000, or 54.5%, for the three months ended May 31, 2020, as compared to total revenue of $774,000 for the three months ended May 31, 2019. Marketing fee revenues of $47,000, decreased $209,000, or 81.6% for the three months in 2020, as compared to $256,000 in 2019. The 3% marketing fee was waived from March 16, 2020 to May 31, 2020 in order to assist franchisees in cost reduction during the Coronavirus pandemic.

Royalty fee revenue of $239,000, for the quarter ended May 31, 2020, decreased $181,000, or 43.1%, from the $420,000 for quarter ended May 31, 2019. The royalty revenue reduction was due to states limiting or eliminating in store dining and operating restrictions in states due to the Coronavirus pandemic

Franchise fee revenues of $4,000, for the quarter ended May 31, 2020, increased $1,000, or 33.3%, from the $3,000 for the quarter ended May 31, 2019. There were no transfers or new store openings for either year.

Licensing fee and other income of $62,000, for the quarter ended May 31, 2020, decreased $33,000 or 34.7% from $95,000 for same quarter 2019. Settlement income decreased $14,000 and a decrease in nontraditional revenue related to the decrease in sales because of COVID19 of $24.000, offset by an increase in license fees of $5,000.

Total operating expenses of $423,000, for the quarter ended May 31, 2020, decreased $218,000, or 34.0% from $641,000 for the quarter ended May 31, 2019. The decrease was primarily a reduction in Marketing Fund expenses of $209,000 because expenses were reduced to offset the reduction in funds collected. BAB Systems waived marketing fees for March 16, 2020 through May 31, 2020 to help franchisees during the sales reduction because of COVID19. In 2020 employee salaries decreased $16,000 because of a 2 week salary reduction before the PPP loan was received, there was a reduction in franchise advertising and travel related to the pandemic of $3,000 and $8,000, respectively, offset by an increase to occupancy expense of $4,000 related to CAM charges, legal fees increased $8,000 and a $3,000 increased in other expenses, which included a $3,000 increase in bad debt expense compared to 2019.

There was no income tax expense for the three months ending May 31, 2020 and $5,000 for the same period in 2019.

(Loss)/Earnings per share, as reported for basic and diluted outstanding shares for the quarters ended May 31, 2020 and May 31, 2019 was ($.01) and $0.02 respectively.

Six Months Ended May 31, 2019 versus Six Months Ended May 31, 2018

For the six months ended May 31, 2020 the Company reported a net loss of $28,000 compared to net income of $225,000 in 2019. Total revenue of $1,048,000 decreased $439,000, or 29.5%, for the six months ended May 31, 2020, as compared to total revenue of $1,487,000 for the six months ended May 31, 2019. Marketing fee revenues of $274,000, decreased $211,000, or 43.5% for the six months in 2020, as compared to $485,000 for the same period 2019. The 3% marketing fee was waived from March 16, 2020 to May 31, 2020 in order to assist franchisees in cost reduction during the Coronavirus pandemic.

Royalty fee revenue of $626,000, for the six months ended May 31, 2020, decreased $167,000, or 21.1%, from the $793,000 for the six months ended May 31, 2019. The royalty revenue decreased was due to state in store dining closures and operating restrictions in states due to the Coronavirus pandemic in 2020.

Franchise fee revenues of $8,000, for the six months ended May 31, 2020, decreased $9,000 from $17,000 for the period ended May 31, 2019. There were no transfer in 2020 and two transfers for the six months ended May 31, 2019. In addition, there is $8,000 in 2020 and $7,000 in 2019 from the adoption of ASC606 franchise fees revenue recognition standard.

16

Licensing fee and other income of $140,000 for the six months ended May 31, 2020 decreased $52,000, or 27.1%, from $192,000 for the six months ended May 31, 2019. The decrease was primarily due to a decrease in settlement income of $42,000, a decrease of $21,000 for nontraditional revenue related to decreased sales as a result of the Coronavirus pandemic, offset by an increase in license fee revenue of $11,000 for the six months ended 2020 versus same period 2019.

Total operating expenses of $1,061,000 decreased $191,000, or 15.3%, for the six months ended May 31, 2020, from $1,252,000 for the same period 2019. The decrease was primarily due to reducing expenses for the Marketing Fund because the 3% fees were not collected from March 16, 2020 through May 31, 2020, this was a $211,000 expense reduction for the six months ended May 31, 2020 compared to 2019, a $1,000 decrease in payroll expense, a $2,000 decrease in professional fees and an $8,000 decrease in travel related to the Coronavirus pandemic in 2020 compared to 2019. These were offset by an increase in occupancy expenses in 2020 of $18,000 compared to 2019 due to full rent expense in 2020, an $11,000 increase in provision for bad debt because a note was collected that had a reserve that resulted in an increased change in provision for bad debt in 2019 and an increase of $2,000 in general operating expenses.

There was an income tax expense of $15,000 and $10,000, respectively for May 2020 and 2019.

(Loss)/Earnings per share, as reported for basic and diluted outstanding shares for the six months ended May 31, 2020 were $0.00 (zero) and 2019 was $0.03 per share.

Liquidity and Capital Resources

At May 31, 2020, the Company had working capital of $733,000 and unrestricted cash of $1,007,000. At November 30, 2019 the Company had working capital of $813,000 and unrestricted cash of $1,095,000.

During the six months ended May 31, 2020, the Company had a net loss of $28,000 and operating activities used cash of $155,000. The principal adjustments to reconcile the net loss to cash used in operating activities for the six months ending May 31, 2020 was depreciation and amortization of $2,000 and noncash lease expense of $50,000, less the provision for uncollectible accounts of $4,000. In addition, changes in operating assets and liabilities decreased cash by $174,000. During the six months ended May 31, 2019, the Company had net income of $225,000 and operating activities provided cash of $214,000. The principal adjustments to reconcile net income to cash provided in operating activities for the three months ending May 31, 2019 was an increase in noncash lease expense of $51,000, depreciation and amortization expense of $1,000 and a decrease in the provision for uncollectible accounts of $14,000. In addition, changes in operating assets and liabilities decreased cash by $49,000.

The Company’s investing activities were $3,000 and $5,000, respectively for the six months ended May 31, 2020 and 2019.

On May 1, 2020 the Company received loan proceeds of $228,000 through the CARES act offered by the Treasury Department and Small Business Administration.  The loan can be forgiven based on a formula if the company maintains employee retention and payroll expenses for an eight or 24 week period, in additions to certain other expenses (rent and utilities).  See Note 8 for additional information.  During January and April 2020 the Company used $291,000 for cash distribution/dividend payments for the six month period ended May 31, 2020 and used $291,000 for cash distribution/dividend payments during the same period in 2019.

On March 4, 2020 the Board of Directors declared a $0.01 per share quarterly cash distribution/dividend to shareholders of record as of March 23, 2020 paid April 08, 2020.

Cash Distribution and Dividend Policy

Due to the impact of the Coronavirus Pandemic, the Company’s intent is to suspend future dividends. Future cash distributions/dividends will be considered after reviewing profitability expectations and financing needs and will be declared at the discretion of the Board of Directors. The Company will continue to analyze its ability to pay cash distributions/dividends on a quarterly basis.

Determination of whether distributions are considered a cash distribution, cash dividend or combination of the two will not be made until after December 31, 2020, as the classification or combination is dependent upon the Company’s earnings and profits for tax purposes for its fiscal year ending November 30, 2020.

17

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. 

The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have yet been issued.

If an entity early adopts these amendments in an interim period, it should reflect any adjustments as of the beginning of the annual period that includes that interim period. In addition, an entity that elects to early adopt the standard is required to adopt all of the amendments in the same period (i.e., an entity cannot select which amendments to early adopt). The Company is still evaluating the specific effect of this change. The Company will adopt ASU 2019-12 for fiscal year ending November 30, 2021.

Management does not believe that there are any other recently issued and effective or not yet effective pronouncements that would have or are expected to have any significant effect on the Company’s financial position, cash flows or results of operations.

Critical Accounting Policies

The Company has identified other significant accounting policies that, as a result of the judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operations involved could result in material changes to its financial condition or results of operations under different conditions or using different assumptions.  The Company's most critical accounting policies are related to revenue recognition, valuation of long-lived and intangible assets, deferred tax assets and the related valuation allowance.  Details regarding the Company's use of these policies and the related estimates are described in the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 2019, filed with the Securities and Exchange Commission on February 24, 2020. 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

BAB, Inc. has no interest, currency or derivative market risk.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of both our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on such evaluation, both our Chief Executive Officer and Chief Financial Officer have concluded that, as of May 31, 2020 our disclosure controls and procedures are effective (i) to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) to ensure that information required to be disclosed by us in the reports that we submit under the Exchange Act is accumulated and communicated to our management, including our executive and financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

18

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) during the six months of fiscal year 2020 to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Compliance with Section 404 of Sarbanes-Oxley Act

The Company is in compliance with Section 404 of the Sarbanes-Oxley Act of 2002 (the “Act”).

PART II

ITEM 1. LEGAL PROCEEDINGS 

We may be subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of such proceedings or claims cannot be predicted with certainty, management does not believe that the outcome of any of such proceedings or claims will have a material effect on our financial position. We know of no pending or threatened proceeding or claim to which we are or will be a party.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None.

19

ITEM 6.

(a)  EXHIBITS

The following exhibits are filed herewith.

INDEX NUMBER	DESCRIPTION
3.1	Articles of Incorporation (See Form 10-KSB for year ended November 30, 2006filed February 28, 2007)
3.2	Bylaws of the Company (See Form 10-KSB for year ended November 30, 2006filed February 28, 2007)
4.1	Preferred Shares Rights Agreement (See Form 8-K filed May 7, 2013)
4.2	Preferred Shares Rights Agreement Amendment No. 1 (See Form 8-K filed June 18, 2014)
4.3	Preferred Shares Rights Agreement Amendment No. 2 (See Form 8-K filed August 18, 2015)
4.4	Preferred Shares Rights Agreement Amendment No. 3 (See Form 8-K filed May 22, 2017)
4.5	Preferred Shares Rights Agreement Amendment No. 4 (See Form 8-K filed February 25, 2019)
21.1	List of Subsidiaries of the Company
31.1, 31.2	Section 302 of the Sarbanes-Oxley Act of 2002
32.1, 32.2	Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation
101.DEF	XBRL Taxonomy Extension Definition
101.LAB	XBRL Taxonomy Extension Labels
101.PRE	XBRL Taxonomy Extension Presentation

20

SIGNATURE

In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BAB, Inc.

Dated:  July 14, 2020	/s/ Geraldine Conn
	Geraldine Conn
	Chief Financial Officer

21

EX-21.1

Exhibit 21.1

BAB Systems, Inc., an Illinois corporation

BAB Operations, Inc., an Illinois corporation

BAB Investments, Inc., an Illinois corporation

EX-31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14 (a) OR RULE 15d-14 (a) OF THE SECURITIES EXCHANGE ACT OF 1934.

I, Michael W. Evans, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of BAB, Inc.

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a -15(e) and 15d -15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d -15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 14, 2020	by / s/ Michael W. Evans
	Michael W. Evans, Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14 (a) OR RULE 15d-14 (a) OF THE SECURITIES EXCHANGE ACT OF 1934.

I, Geraldine Conn, certify that:

(1) I have reviewed this quarterly report on Form 10-Q of BAB, Inc.

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a -15(e) and 15d -15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d -15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.  

Date: July 14, 2020	By: /s/ Geraldine Conn
	Geraldine Conn, Chief Financial Officer

EX-32.1

Exhibit 32.1

BAB, Inc.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the BAB, Inc. (the "Company") Quarterly Report on Form 10-Q for the period ended May 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael W. Evans, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition, results of operations, and cash flows of the Company.

Date:  July 14, 2020	By:  /s/ Michael W. Evans
	Michael W. Evans, Chief Executive Officer

EX-32.2

Exhibit 32.2

BAB, Inc.

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the BAB, Inc. (the "Company") Quarterly Report on Form 10-Q for the period ended May 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Geraldine Conn, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition, results of operations, and cash flows of the Company.

Date:  July 14, 2020	By:   /s/ Geraldine Conn
	Geraldine Conn, Chief Financial Officer

XML

Document And Entity Information - shares	6 Months Ended
	May 31, 2020	Jul. 14, 2020
Document Information [Line Items]
Entity Registrant Name	BAB, INC.
Entity Central Index Key	0001123596
Trading Symbol	babb
Current Fiscal Year End Date	--11-30
Entity Filer Category	Non-accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Interactive Data Current	Yes
Entity Common Stock, Shares Outstanding (in shares)		7,263,508
Entity Shell Company	false
Document Type	10-Q
Document Period End Date	May 31, 2020
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2
Amendment Flag	false
Title of 12(b) Security	Common Stock

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	May 31, 2020	Nov. 30, 2019
Current Assets
Cash	$ 1,006,891	$ 1,095,235
Restricted cash	269,228	400,434
Receivables
Trade accounts and notes receivable (net of allowance for doubtful accounts of $21,810 in 2020 and $24,792 in 2019 )	49,143	66,870
Marketing fund contributions receivable from franchisees and stores		17,219
Prepaid expenses and other current assets	68,845	94,145
Total Current Assets	1,394,107	1,673,903
Property, plant and equipment (net of accumulated depreciation of $156,431 in 2020 and $155,752 in 2019)	2,984	3,662
Trademarks	461,445	461,445
Goodwill	1,493,771	1,493,771
Definite lived intangible assets (net of accumulated amortization of $126,114 in 2020 and $125,278 in 2019)	14,379	12,625
Operating lease right of use	344,152	384,159
Deferred tax asset	200,000	200,000
Total Noncurrent Assets	2,516,731	2,555,662
Total Assets	3,910,838	4,229,565
Current Liabilities
Accounts payable	6,648	4,195
Accrued expenses and other current liabilities	246,376	287,414
Contract with customer, liability, current	485,357
Current portion operating lease liability	95,615	92,139
Total Current Liabilities	660,932	860,488
Long-term Liabilities (net of current portion)
Operating lease liability	310,449	359,242
Contract with customer, liability, noncurrent	100,483
Long term debt	228,155
Total Long-term Liabilities	639,087	439,352
Total Liabilities	1,300,019	1,299,840
Stockholders' Equity
Preferred shares
Common stock -$.001 par value; 15,000,000 shares authorized; 8,466,953 shares issued and 7,263,508 shares outstanding as of May 31, 2020 and November 30, 2019	13,508,257	13,508,257
Additional paid-in capital	987,034	987,034
Treasury stock	(222,781)	(222,781)
Accumulated deficit	(11,661,691)	(11,342,785)
Total Stockholders' Equity	2,610,819	2,929,725
Total Liabilities and Stockholders' Equity	3,910,838	4,229,565
Series A Preferred Stock [Member]
Stockholders' Equity
Preferred shares
Marketing Fund [Member]
Current Liabilities
Contract with customer, liability, current	267,033	416,305
Franchise [Member]
Current Liabilities
Contract with customer, liability, current	29,189	29,363
Long-term Liabilities (net of current portion)
Contract with customer, liability, noncurrent	94,828	72,670
License [Member]
Current Liabilities
Contract with customer, liability, current	16,071	31,072
Long-term Liabilities (net of current portion)
Contract with customer, liability, noncurrent	$ 5,655	$ 7,440

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	May 31, 2020	Nov. 30, 2019
Trade accounts and notes receivable, allowance for doubtful accounts	$ 21,810	$ 24,792
Property, plant and equipment, accumulated depreciation	156,431	155,752
Definite lived intangible assets, accumulated amortization	$ 126,114	$ 123,949
Preferred shares, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred shares, authorized (in shares)	4,000,000	4,000,000
Preferred shares, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	15,000,000	15,000,000
Common stock, issued (in shares)	8,466,953	8,466,953
Common stock, outstanding (in shares)	7,263,508	7,263,508
Series A Preferred Stock [Member]
Preferred shares, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred shares, authorized (in shares)	1,000,000	1,000,000
Preferred shares, outstanding (in shares)	0	0

XML

Consolidated Statements of Income (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2020	May 31, 2019	May 31, 2020	May 31, 2019
REVENUES
Revenues	$ 351,820	$ 774,214	$ 1,047,504	$ 1,486,514
OPERATING EXPENSES
Payroll and payroll-related expenses	219,112	234,697	449,517	450,632
Occupancy	34,674	30,911	68,352	50,547
Advertising and promotion	7,734	11,336	21,644	22,663
Professional service fees	30,412	22,230	79,529	81,864
Travel	1,510	9,776	9,509	17,735
Employee benefit expenses	37,006	34,190	74,196	73,923
Depreciation and amortization	774	401	1,514	800
Marketing fund expenses	47,031	255,832	274,552	484,620
Other	45,224	41,828	82,258	69,117
Total Operating Expenses	423,477	641,201	1,061,071	1,251,901
(Loss)/Income from operations	(71,657)	133,013	(13,567)	234,613
Interest income	97	124	201	384
Income before provision for income taxes	(71,560)	133,137	(13,366)	234,997
Provision for income taxes
Current tax expense		5,000	15,000	10,000
Net (Loss)/Income	$ (71,560)	$ 128,137	$ (28,366)	$ 224,997
Net (Loss)/Income per share - Basic and Diluted (in dollars per share)	$ (0.01)	$ 0.02	$ 0	$ 0.03
Weighted average shares outstanding - Basic and diluted (in shares)	7,263,508	7,263,508	7,263,508	7,263,508
Cash distributions declared per share (in dollars per share)	$ 0.01	$ 0.01	$ 0.04	$ 0.04
Royalty [Member]
REVENUES
Revenues	$ 238,491	$ 419,737	$ 625,830	$ 792,855
Franchise [Member]
REVENUES
Revenues	3,874	3,413	7,524	16,826
Licensing Fees and Other Income [Member]
REVENUES
Revenues	62,424	95,232	139,598	192,213
Marketing Fund [Member]
REVENUES
Revenues	$ 47,031	$ 255,832	$ 274,552	$ 484,620

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	May 31, 2020	May 31, 2019
Operating activities
Net (Loss) Income	$ (28,366)	$ 224,997
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization	1,514	800
Provision for uncollectible accounts, net of recoveries	(3,871)	(13,792)
Noncash lease expense	49,656	51,068
Changes in:
Trade accounts receivable and notes receivable	21,599	27,510
Marketing fund contributions receivable	17,219	(941)
Prepaid expenses and other	25,300	2,140
Accounts payable	2,453	7,408
Accrued liabilities	(96,004)	(14,690)
Unexpended marketing fund contributions	(149,272)	(46,256)
Deferred revenue	5,197	(23,756)
Net Cash (Used In)/ Provided by Operating Activities	(154,575)	214,488
Investing activities
Capitalization of trademark renewals	(2,590)	(4,665)
Net Cash (Used In) By Investing Activities	(2,590)	(4,665)
Financing activities
Loan proceeds	228,155
Cash distributions/dividends	(290,540)	(290,540)
Net Cash Used In Financing Activities	(62,385)	(290,540)
Net Decrease in Cash, Cash Equivalents and Restricted Cash	(219,550)	(80,717)
Cash, Cash Equivalents and Restricted Cash - Beginning of Period	1,495,669	1,509,227
Cash, Cash Equivalents and Restricted Cash - End of Period	1,276,119	1,428,510
Supplemental disclosure of cash flow information:
Interest paid
Income taxes paid	$ 35,262	$ 2,000

XML

Note 1 - Nature of Operations

6 Months Ended

May 31, 2020

Notes to Financial Statements

Nature of Operations [Text Block]

Note

1.

Nature of Operations

BAB, Inc. (“the Company”) has

three

wholly owned subsidiaries: BAB Systems, Inc. (“Systems”), BAB Operations, Inc. (“Operations”) and BAB Investments, Inc. (“Investments”). Systems was incorporated on

December 2, 1992,

and was primarily established to franchise Big Apple Bagels® (“BAB”) specialty bagel retail stores. My Favorite Muffin (“MFM”) was acquired in

1997

and is included as a part of Systems. Brewster’s (“Brewster’s”) was established in

1996

and the coffee is sold in BAB and MFM locations. SweetDuet® (“SD”) frozen yogurt can be added as an additional brand in a BAB location. Operations was formed in

1995,

primarily to operate Company-owned stores of which there are currently

none.

The assets of Jacobs Bros. Bagels (“Jacobs Bros.”) were acquired in

1999,

and any branded wholesale business uses this trademark. Investments was incorporated in

2009

to be used for the purpose of acquisitions. To date there have been

no

acquisitions.

The Company was incorporated under the laws of the State of Delaware on

July 12, 2000. 

The Company currently franchises and licenses bagel and muffin retail units under the BAB, MFM and SD trade names. At

May 31, 2020,

the Company had

72

franchise units and

7

licensed units in operation in

22

states and the United Arab Emirates. There are

2

units under development. The Company additionally derives income from the sale of its trademark bagels, muffins and coffee through nontraditional channels of distribution including under a licensing agreement with Green Beans Coffee.

The BAB franchised brand consists of units operating as “Big Apple Bagels®,” featuring daily baked bagels, flavored cream cheeses, premium coffees, gourmet bagel sandwiches and other related products. BAB units are primarily concentrated in the Midwest and Western United States.  The MFM brand consists of units operating as “My Favorite Muffin Gourmet Muffin Bakery™” (“MFM Bakery”), featuring a large variety of freshly baked muffins and coffees and units operating as “My Favorite Muffin Your All Day Bakery Café®” (“MFM Cafe”) featuring these products as well as a variety of specialty bagel sandwiches and related products.  The SweetDuet® is a branded self-serve frozen yogurt that can be added as an additional brand in a BAB location.  Although the Company doesn't actively market Brewster's stand-alone franchises, Brewster's coffee products are sold in most franchised units.     

The Company is leveraging on the natural synergy of distributing muffin products in existing BAB units and, alternatively, bagel products and Brewster's Coffee in existing MFM units. The Company expects to continue to realize efficiencies in servicing the combined base of BAB and MFM franchisees.

The accompanying condensed consolidated financial statements are unaudited. These financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted pursuant to such SEC rules and regulations; nevertheless, the Company believes that the disclosures are adequate to make the information presented

not

misleading.  These financial statements and the notes hereto should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form

10

-K for the year ended

November 30, 2019

which was filed

February 24, 2020. 

In the opinion of the Company's management, the condensed consolidated financial statements for the unaudited interim period presented include all adjustments, including normal recurring adjustments, necessary to fairly present the results of such interim period and the financial position as of the end of said period. The results of operations for the interim period are

not

necessarily indicative of the results for the full year.

XML

Note 2 - Summary of Significant Accounting Policies

6 Months Ended

May 31, 2020

Notes to Financial Statements

Significant Accounting Policies [Text Block]

2.

Summary of

S

ignificant

A

ccounting

P

olicies

Unaudited

C

onsolidated

F

inancial

S

tatements

The accompanying unaudited Condensed Consolidated Financial Statements of BAB, Inc. have been prepared pursuant to generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for Form

10

-Q. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Uses of

E

stimates

The preparation of the financial statements and accompanying notes are 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, liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates.

Accounts and Notes Receivable

Receivables are carried at original invoice amount less estimates for doubtful accounts. Management determines the allowance for doubtful accounts by reviewing and identifying troubled accounts and by using historical collection experience. A receivable is considered to be past due if any portion of the receivable balance is outstanding

90

days past the due date. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded as income when received. Certain receivables have been converted to unsecured interest-bearing notes.

Property, Plant and Equipment

Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are

3

to

7

years for property and equipment and

10

years, or term of lease if less, for leasehold improvements. Maintenance and repairs are charged to expense as incurred. Expenditures that materially extend the useful lives of assets are capitalized.

Advertising and Promotion Costs

The Company expenses advertising and promotion costs as incurred. All advertising and promotion costs were related to the Company’s franchise operations.

Leases

The company accounts for leases under ASC

842.

Lease arrangements are determined at the inception of the contract. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current and long-term operating lease liabilities on the consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities on the consolidated balance sheets. 

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do

not

provide an implicit rate, we use an incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The lease terms

may

include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Recent Accounting Pronouncements

In

December 2019,

the FASB issued ASU

2019

-

12,

 

“Income Taxes (Topic

740

): Simplifying the Accounting for Income Taxes,” 

which is intended to simplify various aspects related to accounting for income taxes. ASU

2019

-

12

removes certain exceptions to the general principles in Topic

740

and also clarifies and amends existing guidance to improve consistent application. 

The amendments in ASU

2019

-

12

are effective for public business entities for fiscal years beginning after

December 15, 2020,

including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have yet been issued.

If an entity early adopts these amendments in an interim period, it should reflect any adjustments as of the beginning of the annual period that includes that interim period. In addition, an entity that elects to early adopt the standard is required to adopt all of the amendments in the same period (i.e., an entity cannot select which amendments to early adopt). The Company is still evaluating the specific effect of this change. The Company will adopt ASU 

2019

-

12

 for fiscal year ending 

November 30, 2021.

Management does

not

believe that there are any other recently issued and effective or

not

yet effective pronouncements that would have or are expected to have any significant effect on the Company’s financial position, cash flows or results of operations.

Statement of Cash Flows

The chart below shows the cash and restricted cash within the consolidated statements of cash flows as of

May 31, 2020

and

May 31, 2019

were as follows:

	May 31, 2020		May 31, 2019
Cash and cash equivalents	$	1,006,891	$	1,031,711
Restricted cash		269,228		396,799
Total cash, cash equivalents and restricted cash	$	1,276,119	$	1,428,510

XML

Note 3 - Revenue Recognition

6 Months Ended

May 31, 2020

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

3.

Revenue Recognition

Franchise and related revenue

The Company sells individual franchises. The franchise agreements typically require the franchisee to pay an initial, non-refundable fee prior to opening the respective location(s), and continuing royalty fees on a weekly basis based upon a percentage of franchisee net sales. The initial term of franchise agreements are typically

10

years.  Subject to the Company’s approval, a franchisee

may

generally renew the franchise agreement upon its expiration.  If approved, a franchisee

may

transfer a franchise agreement to a new or existing franchisee, at which point a transfer fee is typically paid by the current owner which then terminates that franchise agreement. A franchise agreement is signed with the new franchisee with

no

franchise fee required. If a contract is terminated prior to its term, it is a breach of contract and a penalty is assessed based on a formula reviewed and approved by management. Revenue generated from a contract breach is termed settlement income by the Company and included in licensing fees and other income.

Under the terms of our franchise agreements, the Company typically promises to provide franchise rights, pre-opening services such as blueprints, operational materials, planning and functional training courses, and ongoing services, such as management of the marketing fund. Upon adoption of Topic

606,

the Company determined that certain pre-opening activities, and the franchise rights and related ongoing services, represented

two

separate performance obligations. The franchise fee revenue has been allocated to the

two

separate performance obligations using a residual approach. The Company has estimated the value of performance obligations related to certain pre-opening activities deemed to be distinct based on cost plus an applicable margin, and assigned the remaining amount of the initial franchise fee to the franchise rights and ongoing services. Revenue allocated to preopening activities is recognized when (or as) these services are performed. Revenue allocated to franchise rights and ongoing services is deferred until the store opens, and recognized on a straight line basis over the duration of the agreement, as this ensures that revenue recognition aligns with the customer’s access to the franchise right.

Royalty income is recognized during the respective franchise agreement based on the royalties earned each period as the underlying franchise store sales occur. Adoption of ASC

606

will

not

change when the royalty revenue is recognized, this new guidance did

not

impact the recognition of royalty income.

There are

two

items involving revenue recognition of contracts that require us to make subjective judgments: the determination of which performance obligations are distinct within the context of the overall contract and the estimated stand alone selling price of each obligation. In instances where our contract includes significant customization or modification services, the customization and modification services are generally combined and recorded as

one

distinct performance obligation.

Gift Card

Breakage Revenue

The Company sells gift cards to its customers in its retail stores and through its Corporate office. The Company’s gift cards do

not

have an expiration date and are

not

redeemable for cash except where required by law. Revenue from gift cards is recognized upon redemption in exchange for product and reported within franchisee store revenue and the royalty and marketing fees are paid and shown in the Condensed Consolidated Statements of Income. Until redemption, outstanding customer balances are recorded as a liability. An obligation is recorded at the time of sale of the gift card and it is included in accrued expenses on the Company’s Condensed Consolidated Balance Sheets.

The Company recognizes gift card breakage proportional to actual gift card redemptions as required under ASC

606

on a quarterly basis and it is included in licensing fees and other revenue. Significant judgments and estimates are required in determining the breakage rate and will be reassessed each quarter.

Nontraditional and rebate revenue

As part of the Company’s franchise agreements, the franchisee purchases products and supplies from designated vendors.  The Company

may

receive various fees and rebates from the vendors and distributors on product purchases by franchisees.  In addition, the Company

may

collect various initial fees, and those fees are classified as deferred revenue in the balance sheet and straight lined over the life of the contract as deferred revenue in the balance sheet. The Company does

not

possess control of the products prior to their transfer to the franchisee and products are delivered to franchisees directly from the vendor or their distributors. The Company recognizes the rebates as franchisees purchase products and supplies from vendors or distributors and recognizes the initial fees over the contract life and the fees are reported as licensing fees and other income in the Condensed Consolidated Statements of Income.

Marketing Fund

Franchise agreements require the franchisee to pay continuing marketing fees on a weekly basis, based on a percentage of franchisees sales. Marketing fees are

not

paid on franchise wholesale sales. The balance sheet includes marketing fund cash, which is the restricted cash, accounts receivable and unexpended marketing fund contributions. The Company has determined that although the marketing fees are

not

separate performance obligations distinct from the underlying franchise right, the Company acts as the principal as it is primarily responsible for the fulfillment and control of the marketing services. As a result, the Company records marketing fees in revenues and related marketing fund expenditures in expenses in the Condensed Consolidated Statement of Income.

Contract balances

Information about contract balances is as follows:

	May 31, 2020		December 1, 2019
Assets
Accounts receivable	$	45,491	$	58,853
Total Assets		45,491		58,853
Liabilities
Contract liabilities - current		485,357		622,724
Contract liabilities - long-term		100,483		80,110
Total Contract Liabilities	$	585,840	$	702,834

Accounts receivable represent weekly royalty payments and monthly vendor rebate payments that represent billed and unbilled receivables due as of

May 31, 2020

and

December 1, 2019.

The balance of contract liabilities includes franchise fees, license fees and vendor payments that have ongoing contract rights and the fees are being straight lined over the contract life. Contract liabilities also include marketing fund balances and gift card liability balances.

	Accounts Receivable			Contract Liabilities
Balance at December 1, 2019	$	58,853		$	702,834
Revenue Recognized		264,144			(433,024	)
Amounts (collected) or invoiced, net		(277,506	)		316,030
Balance at May 31, 2020	$	45,491		$	585,840

Transaction price from license fees and nontraditional revenue allocated to remaining performance obligations as of

May 31, 2020:

(a)      2020	$	61,625
2021		44,753
2022		18,667
2023		13,995
2024		11,864
Thereafter		12,989
Total	$	163,893

(a) represents the estimate for the remainder of

2020

The Company has elected to apply certain practical expedients as defined in ASC

606

-

10

-

50

-

14

through

606

-

10

-

50

-

14A,

including (i) performance obligations that are a part of a contract that has an original expected duration of

one

year or less; (ii) the right to invoice practical expedient; and (iii) variable consideration related to unsatisfied performance obligations that is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation, and the terms of that variable consideration relate specifically to our efforts to transfer the distinct service, or to a specific outcome from transferring the distinct service. As such, sales-based royalty and marketing income, as well as gift card breakage revenue, is

not

included in the above transaction price chart.

XML

Note 4 - Units Open and Under Development

6 Months Ended

May 31, 2020

Notes to Financial Statements

Units Open and Under Development [Text Block]

4.

Units Open and Under Development

Units which are open or under development at

May 31, 2020

are as follows:

Stores open:
Franchisee-owned stores	72
Licensed Units	7
	79
Unopened stores with Franchise Agreements	2
Total operating units and units with Franchise Agreements	81

XML

Note 5 - Earnings Per Share

6 Months Ended

May 31, 2020

Notes to Financial Statements

Earnings Per Share [Text Block]

5.

Earnings per Share

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

	For the three months ended:					For the six months ended:
	May 31, 2020			May 31, 2019		May 31, 2020			May 31, 2019
Numerator:
Net (loss)/income available to common shareholders	$	(71,560	)	$	128,137	$	(28,366	)	$	224,997
Denominator:
Weighted average outstanding shares
Basic and diluted common stock		7,263,508			7,263,508		7,263,508			7,263,508
(Loss)/Earnings per Share - Basic	$	(0.01	)	$	0.02	$	(0.00	)	$	0.03

XML

Note 6 - Goodwill and Other Intangible Assets

6 Months Ended

May 31, 2020

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

6

. Goodwill and Other Intangible Assets

Accounting Standard Codification (“ASC”)

350

“Goodwill and Other Intangible Assets” requires that assets with indefinite lives

no

longer be amortized, but instead be subject to annual impairment tests.

Following the guidelines contained in ASC

350,

the Company tests goodwill and intangible assets that are

not

subject to amortization for impairment annually or more frequently if events or circumstances indicate that impairment is possible.  The Company has elected to conduct its annual test during the

first

quarter.  During the quarter ended

February 28, 2020,

management qualitatively assessed goodwill to determine whether testing was necessary.  Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy, and changes in the composition and carrying amounts of net assets.  If this qualitative assessment indicates that it is more likely than

not

that the fair value of a reporting unit is less than its carrying value, a quantitative assessment is then performed.  After reviewing and determining that the changes to the Company’s operations and overall business environment since the

first

quarter

2020,

management believes that the decrease in sales is temporary and has determined that the carrying value of goodwill was

not

impaired at

May 31, 2020,

and was

not

considered necessary.  In addition, the overall fair market value of the Company exceeds the book value of intangibles and goodwill as of

May 31, 2020.

Due to the impact of the COVID-

19

pandemic sales were affected in

April

and

May

of

2020.

  The pandemic continues to affect sales during the

third

quarter of

2020,

but sales recovery at store locations is occurring.  With the sales recovery occurring in

June

and the Payroll Protection Program Loan received in

May 2020,

which will more than likely be forgiven, we believe that there will be

no

material effect on the intangible and goodwill values.  Management has reviewed goodwill and intangibles for the

second

quarter

2020

and will continue to review goodwill and intangible assets for impairment in the future quarters as more information and results are seen for the economic recovery of the franchise systems related to the Coronavirus pandemic.

XML

Note 7 - Lease Commitments

6 Months Ended

May 31, 2020

Notes to Financial Statements

Commitments Disclosure [Text Block]

7.

Lease Commitments

The Company rents its office under an operating lease which requires it to pay base rent, real estate taxes, insurance and general repairs and maintenance. A lease was signed in

June

of

2018,

effective

October 1, 2018,

expiring on

March 31, 2024

with an option to renew for a

5

year period. A

six

month rent abatement and tenant allowance was provided in the lease, with any unused portion to be applied to base rent. The unused portion was determined to be

$21,300.

The renewal option has

not

been included in the measurement of the lease liability.

Monthly rent expense is recognized on a straight-line basis over the term of the lease. At

May 31, 2020

the remaining lease term was

46

months. The operating lease is included in the balance sheet at the present value of the lease payments at a

5.25%

discount rate. The discount rate was considered to be an estimate of the Company’s incremental borrowing rate.

Gross future minimum annual rental commitments as of

May 31, 2020

are as follows:

	Undiscounted Rent Payments
Year Ending November 30:
2020	$	55,409
2021		113,024
2022		115,673
2023		118,322
Thereafter		40,176
Total Undiscounted Rent Payments		442,604
Present Value Discount		(36,540	)
Present Value	$	406,064
Short-term lease liability	$	95,615
Long-term lease liability		310,449
Total Operating Lease Liability	$	406,064

XML

Note 8 - Loan

6 Months Ended

May 31, 2020

Notes to Financial Statements

Effect of Covid-19 Pandemic [Text Block]

8

. Loan

On

May 1, 2020,

BAB Systems, Inc. received loan proceeds of

$228,155

from Lake Forest Bank and Trust Company, N.A., pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title

1

of the CARES Act, which was enacted

March 27, 2020.

The PPP Loan, which was in the form of a Note dated

April 30, 2020

was issued to BAB Systems, Inc. The BAB PPP Loan has a

two

-year term and bears interest at a rate of

1%

per annum. Monthly principal and interest payments are deferred for

six

months after the date of disbursement. The BAB PPP Loan

may

be prepaid at any time prior to maturity with

no

prepayment penalties. The promissory note contains events of default and other provisions customary for a loan of this type.

Under the terms of the CARES Act, PPP Loan participants can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. Under the terms of the PPP, PPP loans and accrued interest are forgivable between

eight

weeks and

twenty-four

weeks, as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the

eight

week period. BAB intends to use the loan proceeds for purposes consistent with the PPP, and anticipates that all or a majority of the loan amount will be forgiven, but there is

no

assurance provided that the Company will obtain forgiveness of the PPP Loan in whole or part.

XML

Note 9 - Stockholder's Equity

6 Months Ended

May 31, 2020

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

9

. Stockholder’s Equity

On

December 5, 2019,

a

$.01

quarterly and a

$0.02

special cash distribution/dividend per share was declared and paid on

January 8, 2020.

On

March 4, 2020,

a

$0.01

quarterly cash distribution/dividend per share was declared to shareholders of record as of

March 23, 2020

and paid

April 08, 2020.

On

May 6, 2013,

the Board of Directors (“Board”) of BAB, Inc. authorized and declared a dividend distribution of

one

right for each outstanding share of the common stock of BAB, Inc. to stockholders of record at the close of business on

May 13, 2013.

Each right entitles the registered holder to purchase from the Company

one one

-thousandth of a share of the Series A Participating Preferred Stock of the Company at an exercise price of

$0.90

per

one

-thousandth of a Preferred Share, subject to adjustment. The complete terms of the Rights are set forth in a Preferred Shares Rights Agreement, dated

May 6, 2013,

between the Company and IST Shareholder Services, as rights agent.

The Board adopted the Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group that acquires

15%

(or

20%

in the case of certain institutional investors who report their holdings on Schedule

13G

) or more of the Common Shares without the approval of the Board. As a result, the overall effect of the Rights Agreement and the issuance of the Rights

may

be to render more difficult a merger, tender or exchange offer or other business combination involving the Company that is

not

approved by the Board. However, neither the Rights Agreement nor the Rights should interfere with any merger, tender or exchange offer or other business combination approved by the Board.

Full details about the Rights Plan are contained in a Form

8

-K filed by the Company with the U.S. Securities and Exchange Commission on

May 7, 2013.

On

June 18, 2014

an amendment to the Preferred Shares Rights Agreement was filed appointing American Stock Transfer & Trust Company, LLC as successor to Illinois Stock Transfer Company. All original rights and provisions remain unchanged. On

August 18, 2015

an amendment was filed to the Preferred Shares Rights Agreement changing the final expiration date to mean the

fifth

anniversary of the date of the original agreement. All other original rights and provisions remain the same. On

May 22, 2017

an amendment was filed extending the final expiration date to mean the

seventh

anniversary date of the original agreement. All other original rights and provisions remain the same. On

February 22, 2019

an amendment was filed extending the final expiration date to mean the

ninth

anniversary date of the original agreement. All other original rights and provisions remain the same.

XML

Note 10 - Subsequent Events

6 Months Ended

May 31, 2020

Notes to Financial Statements

Subsequent Events [Text Block]

10.

Subsequent Events

The COVID-

19

outbreak in the United States has resulted in reduced customer traffic for our franchisees, resulting in reduced royalty revenue and ultimately reduced nontraditional revenues with a significant impact in

April

and

May. 

Management believes that the disruption in customer traffic is temporary and as of the end of

May 2020,

most states have opened up or are opening up for limited indoor and outdoor dining.    

In order to support our franchisees during this difficult time, the Company waived the

3%

marketing fees from

March 16, 2020

through

May 31, 2020,

with graduated amounts of marketing fees scheduled to be collected beginning in

June 2020.

We have provided as much information on the CARES stimulus package, with several franchises receiving Payroll Protection Program (PPP) loans, and we continue to encourage those that have

not

applied to do so. We applied and received PPP loan funds. For information, see the

8

-K filed on

May 5, 2020

with the Security and Exchange Commission.

While the Coronavirus pandemic has created challenges for restaurants around the country, we are proud of the work our franchisees have put in to adapt to changing regulations and government mandates.  As states begin to open up and ease restrictions we have seen franchise locations total system-wide sales rebound from down approximately

67%

in week

20

of our fiscal year to down approximately

12%

in week

32.

  We are continuing to evaluate the effects of the Coronavirus pandemic outbreak on our operations.

XML

Significant Accounting Policies (Policies)

6 Months Ended

May 31, 2020

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Unaudited

C

onsolidated

F

inancial

S

tatements

The accompanying unaudited Condensed Consolidated Financial Statements of BAB, Inc. have been prepared pursuant to generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for Form

10

-Q. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Uses of

E

stimates

The preparation of the financial statements and accompanying notes are 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, liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates.

Receivable [Policy Text Block]

Accounts and Notes Receivable

Receivables are carried at original invoice amount less estimates for doubtful accounts. Management determines the allowance for doubtful accounts by reviewing and identifying troubled accounts and by using historical collection experience. A receivable is considered to be past due if any portion of the receivable balance is outstanding

90

days past the due date. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded as income when received. Certain receivables have been converted to unsecured interest-bearing notes.

Property, Plant and Equipment, Policy [Policy Text Block]

Property, Plant and Equipment

Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are

3

to

7

years for property and equipment and

10

years, or term of lease if less, for leasehold improvements. Maintenance and repairs are charged to expense as incurred. Expenditures that materially extend the useful lives of assets are capitalized.

Advertising Cost [Policy Text Block]

Advertising and Promotion Costs

The Company expenses advertising and promotion costs as incurred. All advertising and promotion costs were related to the Company’s franchise operations.

Lessee, Leases [Policy Text Block]

Leases

The company accounts for leases under ASC

842.

Lease arrangements are determined at the inception of the contract. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current and long-term operating lease liabilities on the consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities on the consolidated balance sheets. 

Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do

not

provide an implicit rate, we use an incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The lease terms

may

include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In

December 2019,

the FASB issued ASU

2019

-

12,

 

“Income Taxes (Topic

740

): Simplifying the Accounting for Income Taxes,” 

which is intended to simplify various aspects related to accounting for income taxes. ASU

2019

-

12

removes certain exceptions to the general principles in Topic

740

and also clarifies and amends existing guidance to improve consistent application. 

The amendments in ASU

2019

-

12

are effective for public business entities for fiscal years beginning after

December 15, 2020,

including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have yet been issued.

If an entity early adopts these amendments in an interim period, it should reflect any adjustments as of the beginning of the annual period that includes that interim period. In addition, an entity that elects to early adopt the standard is required to adopt all of the amendments in the same period (i.e., an entity cannot select which amendments to early adopt). The Company is still evaluating the specific effect of this change. The Company will adopt ASU 

2019

-

12

 for fiscal year ending 

November 30, 2021.

Management does

not

believe that there are any other recently issued and effective or

not

yet effective pronouncements that would have or are expected to have any significant effect on the Company’s financial position, cash flows or results of operations.

Statement of Cash Flows

The chart below shows the cash and restricted cash within the consolidated statements of cash flows as of

May 31, 2020

and

May 31, 2019

were as follows:

	May 31, 2020		May 31, 2019
Cash and cash equivalents	$	1,006,891	$	1,031,711
Restricted cash		269,228		396,799
Total cash, cash equivalents and restricted cash	$	1,276,119	$	1,428,510

XML

Note 2 - Summary of Significant Accounting Policies (Tables)

6 Months Ended

May 31, 2020

Notes Tables

Cash, Cash Equivalents, and Restricted Cash, Cash Flow Statement Reconciliation [Table Text Block]

	May 31, 2020		May 31, 2019
Cash and cash equivalents	$	1,006,891	$	1,031,711
Restricted cash		269,228		396,799
Total cash, cash equivalents and restricted cash	$	1,276,119	$	1,428,510

XML

Note 3 - Revenue Recognition (Tables)

6 Months Ended

May 31, 2020

Notes Tables

Contract With Customer Asset and Liability, Subject to Change [Table Text Block]

	May 31, 2020		December 1, 2019
Assets
Accounts receivable	$	45,491	$	58,853
Total Assets		45,491		58,853
Liabilities
Contract liabilities - current		485,357		622,724
Contract liabilities - long-term		100,483		80,110
Total Contract Liabilities	$	585,840	$	702,834

Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block]

	Accounts Receivable			Contract Liabilities
Balance at December 1, 2019	$	58,853		$	702,834
Revenue Recognized		264,144			(433,024	)
Amounts (collected) or invoiced, net		(277,506	)		316,030
Balance at May 31, 2020	$	45,491		$	585,840

Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Table Text Block]

(a)      2020	$	61,625
2021		44,753
2022		18,667
2023		13,995
2024		11,864
Thereafter		12,989
Total	$	163,893

XML

Note 4 - Units Open and Under Development (Tables)

6 Months Ended

May 31, 2020

Notes Tables

Schedule of Franchisor Disclosure [Table Text Block]

Stores open:
Franchisee-owned stores	72
Licensed Units	7
	79
Unopened stores with Franchise Agreements	2
Total operating units and units with Franchise Agreements	81

XML

Note 5 - Earnings Per Share (Tables)

6 Months Ended

May 31, 2020

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	For the three months ended:					For the six months ended:
	May 31, 2020			May 31, 2019		May 31, 2020			May 31, 2019
Numerator:
Net (loss)/income available to common shareholders	$	(71,560	)	$	128,137	$	(28,366	)	$	224,997
Denominator:
Weighted average outstanding shares
Basic and diluted common stock		7,263,508			7,263,508		7,263,508			7,263,508
(Loss)/Earnings per Share - Basic	$	(0.01	)	$	0.02	$	(0.00	)	$	0.03

XML

Note 7 - Lease Commitments (Tables)

6 Months Ended

May 31, 2020

Notes Tables

Lessee, Operating Lease, Liability, Maturity [Table Text Block]

	Undiscounted Rent Payments
Year Ending November 30:
2020	$	55,409
2021		113,024
2022		115,673
2023		118,322
Thereafter		40,176
Total Undiscounted Rent Payments		442,604
Present Value Discount		(36,540	)
Present Value	$	406,064
Short-term lease liability	$	95,615
Long-term lease liability		310,449
Total Operating Lease Liability	$	406,064

XML

Note 1 - Nature of Operations (Details Textual)	May 31, 2020
Number of Wholly Owned Subsidiaries	3
Number of Stores	81
Number of States in which Entity Operates	22
Franchised Units [Member]
Number of Stores	72
Licensed Units [Member]
Number of Stores	7
Units Under Development [Member]
Number of Stores	2

XML

Note 2 - Summary of Significant Accounting Policies (Details Textual)	6 Months Ended
	May 31, 2020
Leasehold Improvements [Member]
Property, Plant and Equipment, Useful Life (Year)	10 years
Minimum [Member]
Property, Plant and Equipment, Useful Life (Year)	3 years
Maximum [Member]
Property, Plant and Equipment, Useful Life (Year)	7 years

XML

Note 2 - Summary of Significant Accounting Policies - Summary of Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($)	May 31, 2020	Nov. 30, 2019	May 31, 2019	Nov. 30, 2018
Cash and cash equivalents	$ 1,006,891	$ 1,095,235	$ 1,031,711
Restricted cash	269,228		396,799
Total cash, cash equivalents and restricted cash	$ 1,276,119	$ 1,495,669	$ 1,428,510	$ 1,509,227

XML

Note 3 - Revenue Recognition (Details Textual)	6 Months Ended
	May 31, 2020
Initial Franchise Term (Year)	10 years

XML

Note 3 - Revenue Recognition - Contract Balances Subject to ASC 606 (Details) - USD ($)	May 31, 2020	Dec. 01, 2019	Nov. 30, 2019
Accounts receivable	$ 45,491	$ 58,853
Total Assets	45,491	58,853	$ 58,853
Contract liabilities - current	485,357	622,724
Contract liabilities - long-term	100,483	80,110
Total Contract Liabilities	$ 585,840	$ 702,834	$ 702,834

XML

Note 3 - Revenue Recognition - Changes in Contract Balances (Details)	6 Months Ended
	May 31, 2020 USD ($)
Balance, accounts receivable	$ 58,853
Balance, contract liabilities	702,834
Revenue Recognized, accounts receivable	264,144
Revenue Recognized, contract liabilities	(433,024)
Amounts (collected) or invoiced, net, accounts receivable	(277,506)
Amounts (collected) or invoiced, net, contract liabilities	316,030
Balance, accounts receivable	45,491
Balance, contract liabilities	$ 585,840

XML

Note 3 - Revenue Recognition - Remaining Performance Obligations (Details)	May 31, 2020 USD ($)
Revenue, remaining performance obligation, amount	$ 163,893

XML

Note 3 - Revenue Recognition - Remaining Performance Obligations 2 (Details)	May 31, 2020 USD ($)
Revenue, remaining performance obligation, amount	$ 163,893
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-06-01
Revenue, remaining performance obligation, amount	$ 61,625	[1]
Revenue, remaining performance obligation, period (Year)	182 days	[1]
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-12-01
Revenue, remaining performance obligation, amount	$ 44,753
Revenue, remaining performance obligation, period (Year)	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-12-01
Revenue, remaining performance obligation, amount	$ 18,667
Revenue, remaining performance obligation, period (Year)	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-12-01
Revenue, remaining performance obligation, amount	$ 13,995
Revenue, remaining performance obligation, period (Year)	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-12-01
Revenue, remaining performance obligation, amount	$ 11,864
Revenue, remaining performance obligation, period (Year)	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-12-01
Revenue, remaining performance obligation, amount	$ 12,989
Revenue, remaining performance obligation, period (Year)	1 year

[1] represents the estimate for the remainder of 2020

XML

Note 4 - Units Open and Under Development - Operating Units (Details)	May 31, 2020
Operating Units and Units with Franchise Agreements	81
Franchised Units [Member]
Operating Units and Units with Franchise Agreements	72
Licensed Units [Member]
Operating Units and Units with Franchise Agreements	7
Total Franchised Owned and Licensed Units [Member]
Operating Units and Units with Franchise Agreements	79
Unopened Store [Member]
Operating Units and Units with Franchise Agreements	2

XML

Note 5 - Earnings Per Share - Computation of Earnings Per Share (Details) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2020	May 31, 2019	May 31, 2020	May 31, 2019
Net (loss)/income available to common shareholders	$ (71,560)	$ 128,137	$ (28,366)	$ 224,997
Weighted average shares outstanding - Basic and diluted (in shares)	7,263,508	7,263,508	7,263,508	7,263,508
Net (Loss)/Income per share - Basic and Diluted (in dollars per share)	$ (0.01)	$ 0.02	$ 0	$ 0.03

XML

Note 6 - Goodwill and Other Intangible Assets (Details Textual) $ in Thousands	6 Months Ended
	May 31, 2020 USD ($)
Goodwill, Impairment Loss	$ 0

XML

Note 7 - Lease Commitments (Details Textual) - USD ($)	Oct. 01, 2018	May 31, 2020
Lessee, Operating Lease, Renewal Term (Year)	5 years
Lessee, Operating Lease, Rent Abatement and Tenant Allowance Period (Month)	180 days
Operating Lease, Expense	$ 21,300
Operating Lease, Weighted Average Remaining Lease Term (Month)		3 years 300 days
Lessee, Operating Lease, Discount Rate		5.25%

XML

Note 7 - Lease Commitments - Gross Future Minimum Annual Rental Commitments (Details) - USD ($)	May 31, 2020	Nov. 30, 2019
2020	$ 55,409
2021	113,024
2022	115,673
2023	118,322
Thereafter	40,176
Total Undiscounted Rent Payments	442,604
Present Value Discount	(36,540)
Present Value	406,064
Short-term lease liability	95,615	$ 92,139
Long-term lease liability	310,449	$ 359,242
Total Operating Lease Liability	$ 406,064

XML

Note 8 - Loan (Details Textual) - USD ($)		6 Months Ended
	May 01, 2020	May 31, 2020	May 31, 2019
Proceeds from Paycheck Protection Program Under CARES Act	$ 228,155	$ 228,155

XML

Note 9 - Stockholder's Equity (Details Textual) - $ / shares									3 Months Ended		6 Months Ended
	Apr. 08, 2020	Mar. 04, 2020	Jan. 08, 2020	Dec. 05, 2019	Feb. 22, 2019	May 22, 2017	Aug. 18, 2015	May 06, 2013	May 31, 2020	May 31, 2019	May 31, 2020	May 31, 2019
Common Stock, Dividends, Per Share, Declared (in dollars per share)									$ 0.01	$ 0.01	$ 0.04	$ 0.04
Preferred Stock Dividends Number of Rights Declared (in shares)								1
Preferred Stock Dividends Number of Rights Minimum Percent of Common Stock that must be Acquired to Make Rights Exercisable								15.00%
Preferred Stock Dividends Number of Rights Minimum Percent of Common Stock that Must be Acquired to Make Rights Exercisable, Institutional Investors								20.00%
Right to Purchase Series A Preferred Stock [Member]
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right (in shares)								0.001
Class of Warrant or Right, Exercise Price of Warrants or Rights (in dollars per share)								$ 0.90
Class of Warrant or Right, Term (Year)					9 years	7 years	5 years
Quarterly Dividend [Member]
Common Stock, Dividends, Per Share, Declared (in dollars per share)		$ 0.01		$ 0.01
Common Stock, Dividends, Per Share, Cash Paid (in dollars per share)	$ 0.01		$ 0.01
Special Cash Distribution [Member]
Common Stock, Dividends, Per Share, Declared (in dollars per share)				$ 0.02
Common Stock, Dividends, Per Share, Cash Paid (in dollars per share)			$ 0.02

XML

Note 10 - Subsequent Events (Details Textual)	3 Months Ended
	May 31, 2020
Marketing Fees, Percent	3.00%