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, 2022
☐	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, a smaller reporting company, or an emerging growth company.    Large accelerated filer ☐      Accelerated filer ☐     Non-accelerated filer ☐     Smaller reporting company ☒      Emerging growth 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 13, 2022 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	19
Item 4	Controls and Procedures	19
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, 2022			November 30, 2021
	(unaudited)			(audited)
ASSETS
Current Assets
Cash	$	1,451,214		$	1,462,026
Restricted cash		707,311			596,132
Receivables
Trade accounts and notes receivable (net of allowance for doubtful accounts of $12,850 in 2022 and $13,878 in 2021 )		81,913			91,306
Marketing fund contributions receivable from franchisees and stores		29,877			26,086
Prepaid expenses and other current assets		87,260			88,315
Total Current Assets		2,357,575			2,263,865
Property, plant and equipment (net of accumulated depreciation of $159,414 in 2022 and $158,666 in 2021)		-			748
Deposit on equipment		41,700			-
Trademarks		461,445			461,445
Goodwill		1,493,771			1,493,771
Definite lived intangible assets (net of accumulated amortization of $133,811 in 2022 and $131,042 in 2021)		20,818			22,664
Operating lease right of use		173,222			217,648
Total Noncurrent Assets		2,190,956			2,196,276
Total Assets	$	4,548,531		$	4,460,141
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$	7,797		$	2,064
Income tax payable		25,564			14,223
Accrued expenses and other current liabilities		265,186			316,544
Unexpended marketing fund contributions		731,675			620,535
Deferred franchise fee revenue		31,282			34,545
Deferred licensing revenue		14,583			3,571
Current portion operating lease liability		110,106			106,392
Total Current Liabilities		1,186,193			1,097,874
Long-term Liabilities (net of current portion)
Operating lease liability		97,602			153,702
Deferred franchise revenue		121,991			110,557
Deferred tax liability		197,614			164,114
Deferred licensing revenue		-			298
Total Long-term Liabilities		417,207			428,671
Total Liabilities	$	1,603,400		$	1,526,545
Stockholders' Equity
Preferred shares -$.001 par value; 4,000,000 authorized; no shares outstanding as of May 31, 2022 and November 30, 2021		-			-
Preferred shares -$.001 par value; 1,000,000 Series A authorized; no shares outstanding as of May 31, 2022 and November 30, 2021		-			-
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, 2022 and November 30, 2021		13,508,257			13,508,257
Additional paid-in capital		987,034			987,034
Treasury stock		(222,781	)		(222,781	)
Accumulated deficit		(11,327,379	)		(11,338,914	)
Total Stockholders' Equity		2,945,131			2,933,596
Total Liabilities and Stockholders' Equity	$	4,548,531		$	4,460,141

SEE ACCOMPANYING NOTES

3

BAB, Inc.

Consolidated Statements of Income

For the Three Months and Six Months Ended May 31, 2022 and May 31, 2021

(Unaudited)

	Three months ended May 31,				Six months ended May 31,
	2022		2021		2022		2021
REVENUES
Royalty fees from franchised stores	$	465,491	$	420,726	$	879,712	$	767,386
Franchise Fees		9,102		9,172		18,079		26,011
Licensing fees and other income		73,729		68,435		144,072		226,365
Marketing fund revenue		276,110		250,486		520,845		451,962
Total Revenues		824,432		748,819		1,562,708		1,471,724
OPERATING EXPENSES
Selling, general and administrative expenses:
Payroll and payroll-related expenses		253,502		230,725		489,631		440,495
Occupancy		33,303		34,644		66,885		69,350
Advertising and promotion		5,153		1,619		8,486		3,187
Professional service fees		19,616		22,353		63,901		80,390
Travel		5,855		365		7,672		1,392
Employee benefit expenses		35,732		31,896		77,860		69,894
Depreciation and amortization		1,284		1,119		2,594		2,333
Marketing fund expenses		276,110		250,486		520,845		451,962
Other		61,928		53,444		104,316		93,586
Total Operating Expenses		692,483		626,651		1,342,190		1,212,589
Income from operations		131,949		122,168		220,518		259,135
Interest income		58		111		129		234
Loan forgiveness		-		-		-		228,155
Income before provision for income taxes		132,007		122,279		220,647		487,524
Provision for income taxes
Current tax expense		21,591		7,500		30,341		18,500
Deferred tax		16,500		28,000		33,500		49,000
Net Income	$	93,916	$	86,779	$	156,806	$	420,024
Net Income per share - Basic and Diluted	$	0.01	$	0.01	$	0.02	$	0.06
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	$	0.02	$	0.02

SEE ACCOMPANYING NOTES

4

BAB, Inc.

Consolidated Statements of Cash Flows

For Six Months Ended May 31, 2022 and May 31, 2021

(Unaudited)

	May 31, 2022			May 31, 2021
Operating activities
Net Income	$	156,806		$	420,024
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization		2,594			2,333
Deferred tax expense		33,500			49,000
Provision for uncollectible accounts, net of recoveries		(1,028	)		(1,226	)
Noncash lease expense		49,656			49,656
Loan forgiveness		-			(228,155	)
Changes in:
Trade accounts receivable and notes receivable		10,421			(1,019	)
Marketing fund contributions receivable		(3,791	)		(6,868	)
Prepaid expenses and other		1,053			28,360
Accounts payable		(8,490	)		(264	)
Accrued liabilities		(25,793	)		(5,916	)
Unexpended marketing fund contributions		111,140			95,928
Deferred revenue		18,885			(11,921	)
Operating lease liability		(57,616	)		(56,291	)
Net Cash Provided by Operating Activities		287,337			333,641
Investing activities
Purchase of equipment		(41,700	)		-
Net Cash Used In Investing Activities		(41,700	)		-
Financing activities
Cash distributions/dividends		(145,270	)		(145,271	)
Net Cash Used In Financing Activities		(145,270	)		(145,271	)
Net Increase in Cash and Restricted Cash		100,367			188,370
Cash and Restricted Cash - Beginning of Period		2,058,158			1,632,923
Cash and Restricted Cash - End of Period	$	2,158,525		$	1,821,293
Supplemental disclosure of cash flow information:
Interest paid	$	-		$	-
Income taxes paid	$	38,100		$	1,700

SEE ACCOMPANYING NOTES

5

BAB, Inc.

Notes to Unaudited Consolidated Financial Statements

For the Three and Six Months Ended May 31, 2022 and May 31, 2021

(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, 2022, the Company had 68 franchise units and 4 licensed units in operation in 20 states. 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 licensing agreements.

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, 2021 which was filed February 25, 2022. 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.

Use 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.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and demand deposits with banks with original maturities of less than 90 days.

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 June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope, including trade receivables. The amendments in this update broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The guidance in ASU 2016-13 is effective for public companies for fiscal years and for interim periods with those fiscal years beginning after December 15, 2023. The Company will adopt ASU 2019-13 for fiscal year ending November 30, 2024 and the adoption of this guidance is not expected to have any material impact on the Company’s financial position, cash flows or results of operations.

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, 2023, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company will adopt ASU 2019-12 for fiscal year ending November 30, 2024 and the adoption of this guidance is not expected to have any material impact on the Company’s financial position, cash flows or results of operations.

Management does not believe that there are any recently issued and effective or not yet effective accounting pronouncements as of May 31, 2022 that would have or are expected to have any significant effect on the Company’s financial position, cash flows or income statement.

Statement of Cash Flows

The chart below shows the cash and restricted cash within the consolidated statements of cash flows as of May 31, 2022 and May 31, 2021 were as follows:

	May 31, 2022		May 31, 2021
Cash and cash equivalents	$	1,451,214	$	1,360,173
Restricted cash		707,311		461,120
Total cash and restricted cash	$	2,158,525	$	1,821,293

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.

8

3. Revenue Recognition (continued)

Franchise and related revenue (continued)

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. The Company considers certain pre-opening activities and the franchise rights and related ongoing services to represent 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 fees from franchised stores 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.

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

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 liability is reduced when the gift cards are redeemed by a franchise. Although there are no expiration dates for our gift cards, based on our analysis of historical gift card redemption patterns, we can reasonably estimate the amount of gift cards for which redemption is remote, which is referred to as “breakage.” The Company recognizes gift card breakage proportional to actual gift card redemptions on a quarterly basis and the corresponding revenue 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 franchisee 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. 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. The Company historically presented the net activities of the marketing fund within the balance sheet in the Condensed Consolidated Balance Sheet. While this reclassification impacts the gross amount of reported revenue and expenses the amounts will be offsetting, and there is no impact on net income.   

Disaggregation of Revenue

The following table presents disaggregation of revenue from contracts with customers for the three months and six months ended May 31, 2022 and May 31, 2021:

	For three months ended May 31, 2022		For three months ended May 31, 2021		For six months ended May 31, 2022		For six months ended May 31, 2021
Sign Shop revenue	$	3,205	$	3,617	$	3,296	$	6,619
Settlement revenue		10,000		-		16,750		95,308
Total revenue at a point in time		13,205		3,617		20,046		101,927
Revenue recognized over time
Royalty revenue		465,491		420,726		879,712		767,386
Franchise fees		9,102		9,172		18,079		26,011
License fees		4,378		1,375		8,756		8,125
Gift card revenue		357		1,396		2,560		2,956
Nontraditional revenue		55,789		62,047		112,710		113,357
Marketing fund revenue		276,110		250,486		520,845		451,962
Total revenue over time		811,227		745,202		1,542,662		1,369,797
Grand total	$	824,432	$	748,819	$	1,562,708	$	1,471,724

10

3. Revenue Recognition (continued)

Contract balances

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.

	May 31, 2022		November 30, 2021
Liabilities
Contract liabilities - current	$	981,737	$	861,615
Contract liabilities - long-term		121,991		110,855
Total Contract Liabilities	$	1,103,728	$	972,470

	May 31, 2022			November 30, 2021
Contracts at beginning of period	$	972,470		$	697,763
Revenue Recognized during period		(593,477	)		(1,063,614	)
Additions during period		724,735			1,338,321
Contracts at end of period	$	1,103,728		$	972,470

Transaction price allocated to remaining performance obligations (franchise agreements and license fee agreement) for the year ended November 30:

2022	$	40,875	(a)
2023		20,458
2024		19,125
2025		18,958
2026		14,908
Thereafter		53,532
Total	$	167,856

(a) represents the estimate for the remainder of 2022

4. Units Open and Under Development

Units which are open or under development at May 31, 2022 are as follows:

	May 31, 2022		May 31, 2021
Stores open:
Franchisee-owned stores		68		70
Licensed Units		4		3
		72		73
Unopened stores with Franchise Agreements		2		2
Total operating units and units with Franchise Agreements		74		75

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, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Numerator:
Net income available to common shareholders	$	93,916	$	86,779	$	156,806	$	420,024
Denominator:
Weighted average outstanding shares
Basic and diluted common stock		7,263,508		7,263,508		7,263,508		7,263,508
Earnings per Share - Basic	$	0.01	$	0.01	$	0.02	$	0.06

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, 2022 and February 28, 2021, 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 it’s carrying value, a quantitative assessment is then performed. Based on the qualitative analysis conducted during the quarter, management does not believe that an impairment existed at February 28, 2022 and 2021. Management reviewed the assessment as of May 31, 2022 and there were no material changes.

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, 2022 the remaining lease term was 21 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.

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7. Lease Commitments (continued)

Gross future minimum annual rental commitments as of May 31, 2022 are as follows:

	Undiscounted Rent Payments
Year Ending November 30:
2022		58,057
2023		118,322
2024		40,177
Total Undiscounted Rent Payments		216,556
Present Value Discount		(8,848	)
Present Value	$	207,708
Short-term lease liability	$	110,106
Long-term lease liability		97,602
Total Operating Lease Liability	$	207,708

8. Paycheck Protection Program 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.

On December 9, 2020 the PPP loan in the amount of $228,155 and related accrued interest was forgiven by the Small Business Administration (“SBA”). The amount forgiven is recognized as loan forgiveness income during the first quarter, ended February 28, 2021.

9. Income Taxes

For the six months ended May 31, 2022 the Company recorded deferred taxes of $33,500 and current tax expense of $30,341 for an effective tax rate of 28.9% compared to $18,500 of current tax expense and $49,000 of deferred tax expense for the six months ended May 31, 2021 for an effective tax rate of 13.8%. The reduction in the 2021 effective tax rate relates to the nontaxable Paycheck Protection Program loan forgiveness in December 2020 of approximately $228,000.

10. Stockholder’s Equity

On June 3, 2022 the Board of Directors declared a $0.01 distribution/dividend per share to stockholders of record as of June 22, 2022, payable July 11, 2022. On March 7, 2022 the Board of Directors declared a $0.01 cash distribution/dividend per share to stockholders of record as of March 29, 2022, paid April 18, 2022. On December 06, 2021 the Board of Directors declared a $0.01 cash distribution/dividend per share to stockholders of record as of December 22, 2021, paid January 11, 2022.

On January 27, 2021 the Board of Directors declared a $0.01 quarterly cash distribution/dividend per share to stockholders of record as of February 10, 2021 and paid February 24, 2021. On March 17, 2021 the Board of Directors declared a $0.01 cash distribution/dividend per share to stockholders of record as of April 1, 2021, paid April 22, 2021. On June 3, 2021 the Board of Directors declared a $0.01 cash distribution/dividend per share to stockholders of record as of June 21, 2021, paid July 12, 2021. On September 10, 2021 the Board of Directors declared a $0.01 cash distribution/dividend per share to stockholders of record as of September 27, 2021, paid October 18, 2021.

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10. 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. On March 4, 2021 an amendment was filed extending the final expiration date to mean the eleventh anniversary date of the original agreement. All other original rights and provisions remain the same.

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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 68 franchised and 4 licensed units at May 31, 2022 compared to 70 franchised and 3 licensed units at May 31, 2021.  System-wide revenues for the six months ended May 31, 2022 were $18.3 million and May 31, 2021 was $15.6 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.

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, 2022, the Company employed 12 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.

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Results of Operations

Three Months Ended May 31, 2022 versus Three Months Ended May 31, 2021

For the three months ended May 31, 2022 and May 31, 2021, the Company reported net income of $94,000 and $87,000, respectively. Total revenue of $824,000 increased $75,000, or 10%, for the three months ended May 31, 2022, as compared to total revenue of $749,000 for the three months ended May 31, 2021.

Royalty fee revenue of $465,000, for the quarter ended May 31, 2022, increased $44,000, or 10.5%, from the $421,000 for quarter ended May 31, 2021. In 2021 there was still some slight COVID-19 concerns for restaurant patrons which is reflected in the lower royalty sales volume.

Franchise fee revenue were $9,000, for the quarters ended May 31, 2022 and 2021. Second quarter for both years included one transfer and monthly franchise fee amortization.

Licensing fee and other income of $74,000, for the quarter ended May 31, 2022, increased $6,000 or 8.8% from $68,000 for same quarter 2021.

Marketing Fund revenues of $276,000, for the quarter ended May 31, 2022, increased $25,000, or 10.0% from $251,000 for the quarter ended May 31, 2021. The primary reason Marketing Fund revenue increased in 2022 is that store revenues increased in 2022.

Total operating expenses of $692,000, for the quarter ended May 31, 2022, increased $65,000, or 10.4% from $627,000 for the quarter ended May 31, 2021. The increase was primarily related to an increase in Marketing Fund expenses of $25,000, payroll expense of $23,000, employee benefit expense of $4,000, travel expense of $6,000, franchise development of $5,000 and advertising and promotion of $3,000, offset by a decrease in general operating expenses of $1,000.

For the three months ended May 31, 2022 the provision for income tax was $38,000, compared to $35,000 for the three months ending May 31, 2021.

Earnings per share, as reported for basic and diluted outstanding shares for the quarters was $0.01 for quarters ended May 2022 and 2021.

Six Months Ended May 31, 2022 versus Six Months Ended May 31, 2021

For the six months ended May 31, 2022 and May 31, 2021, the Company reported net income of $157,000 and $420,000, respectively. Total revenue of $1,563,000 increased $91,000, or 6.2%, for the six months ended May 31, 2022, as compared to total revenue of $1,472,000 for the six months ended May 31, 2021.

Royalty fee revenue of $880,000, for the six months ended May 31, 2022, increased $113,000, or 14.7%, from the $767,000 for six months ended May 31, 2021. In 2021 there was still some slight COVID-19 concerns for restaurant patrons which is reflected in the lower royalty sales volume.

Franchise fee revenues of $18,000, for the six months ended May 31, 2022, decreased $8,000, or 30.8%, from the $26,000 for the six months ended May 31, 2021. The $8,000 decrease was driven by several factors. For the six month period ended May 31, 2022, in addition to the normal franchise fee amortization, the Company recorded revenue for two store transfers. For the six months ended May 31, 2021, the Company recognized additional franchise fee amortization of $12,000 related to a store that closed prior to the end of its ten year franchise agreement, and revenue related to one store transfer.

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Licensing fee and other income of $144,000, for the six months ended May 31, 2022, decreased $82,000 or 36.3% from $226,000 for same period 2021. For the six months ended May 31, 2022 there was a $79,000 decrease in settlement income because a store closed and paid settlement fee to close, there was a $3,000 decrease in Sign Shop revenue and a $1,000 decrease in nontraditional revenue in 2022 compared to same period 2021.

Marketing Fund revenues of $521,000, for the six months ended May 31, 2022, increased $69,000, or 15.3% from $452,000 for the six months ended May 31, 2021. The primary reason Marketing Fund revenue increased for the six months of 2022 were increased store revenues in 2022. In 2021 there was still some slight COVID-19 concerns for restaurant patrons which is reflected in the lower royalty sales volume.

Total operating expenses of $1,342,000, for the six months ended May 31, 2022, increased $129,000, or 10.6% from $1,213,000 for the same period 2021. The increase was primarily related to an increase in Marketing Fund expenses of $68,000, a $50,000 increase in salaries with an additional Business Consultant and a salary increase January 2022 for all employees, $9,000 increase in franchise development, a $6,000 increase in travel, an $8,000 increase in employee benefits and a $5,000 increase in advertising in 2022 compared to same period 2021. This was offset by a $17,000 decrease in professional fees consisting of legal and accounting fees in 2022 compared to same period 2021.

For the six months ended May 31, 2022 the provision for income tax was $64,000 compared to a $68,000 income tax provision for the six months ending May 31, 2021. In 2022 deferred taxes were $17,000 versus 2021 of $49,000 in deferred taxes. The federal and state effective tax rate used to compute income tax expense is a federal rate of 21% and a state rate of 7.11%, which is net of the federal tax effect.

In fiscal 2021, the Company’s income included the $228,000 of forgiveness, but it is excluded from federal and state tax calculations as a permanent difference, thereby reducing the federal and state effective rate from the customary effective tax rate used to compute income tax expense.

Earnings per share, as reported for basic and diluted outstanding shares for the six months ended May 2022 and 2021 were $0.02 and $0.06, respectively. In 2021 the Paycheck Protection Program loan forgiveness accounted for $0.03 of the $0.06 earnings per share.

Liquidity and Capital Resources

At May 31, 2022, the Company had working capital of $1,171,000 and unrestricted cash of $1,451,000. At May 31, 2021 the Company had working capital of $1,050,000 and unrestricted cash of $1,360,000.

During the six months ended May 31, 2022, the Company had net income of $157,000 and operating activities provided cash of $287,000. The principal adjustments to reconcile the net income to cash provided by operating activities for the six months ending May 31, 2022 was depreciation and amortization of $3,000, deferred tax expense of $34,000 and noncash lease expense of 50,000, less the recovery of uncollectible accounts of $1,000. In addition, changes in operating assets and liabilities increased cash by $45,000. During the six months ended May 31, 2021, the Company had net income of $420,000 and operating activities provided cash of $334,000. The principal adjustments to reconcile the net income to cash provided by operating activities for the six months ending May 31, 2021 was depreciation and amortization of $2,000, deferred tax expense of $49,000 and noncash lease expense of $50,000, less PPP loan forgiveness of $228,000 and the recovery of uncollectible accounts of $1,000. In addition, changes in operating assets and liabilities increased cash by $42,000.

The Company had investing activities of $42,000 for an equipment deposit for the six months ended May 31, 2022 and no investing activity in same period 2021.

Cash distributions/dividends used $145,000 in financing activities for the six months ending May 31, 2022 and 2021.  

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Cash Distribution and Dividend Policy

The Company continues to monitor any possibly re-occurring impact of the Coronavirus variants on its operations when determining the future cash distribution/dividend payments. It is the Company’s intent that future cash distributions/dividend payments 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. For fiscal 2022 a $0.01 cash distribution has been declared for the first and second quarters.

Determination of whether distributions are considered a cash distribution, cash dividend or combination of the two will not be made until after December 31, 2022, as the classification or combination is dependent upon the Company’s earnings and profits for tax purposes for its fiscal year ending November 30, 2022.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope, including trade receivables. The amendments in this update broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The guidance in ASU 2016-13 is effective for public companies for fiscal years and for interim periods with those fiscal years beginning after December 15, 2023. The Company will adopt ASU 2019-13 for fiscal year ending November 30, 2024 and the adoption of this guidance is not expected to have any material impact on the Company’s financial position, cash flows or results of operations.

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, 2023, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company will adopt ASU 2019-12 for fiscal year ending November 30, 2024 and the adoption of this guidance is not expected to have any material impact on the Company’s financial position, cash flows or results of operations.

Management does not believe that there are any recently issued and effective or not yet effective accounting pronouncements as of May 31, 2022 that would have or are expected to have any significant effect on the Company’s financial position, cash flows or income statement.

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, 2021, filed with the Securities and Exchange Commission on February 25, 2022. 

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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, 2022 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.

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 2022 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

Amendment No. 5 to the Company’s Preferred Shares Rights Agreement dated May 6, 2013 was filed on March 8, 2021. The amendment revises the definition of “Final Expiration Date” to mean the eleventh anniversary of the date of the Preferred Shares Rights Agreement.

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(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, 2006 filed February 28, 2007)
3.2	Bylaws of the Company (See Form 10-KSB for year ended November 30, 2006 filed 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 22, 2019)
4.6	Preferred Shares Rights Agreement Amendment No. 5 (See Form 8-K filed March 8, 2021)
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	Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Taxonomy Extension Calculation
101.DEF	Inline XBRL Taxonomy Extension Definition
101.LAB	Inline XBRL Taxonomy Extension Labels
101.PRE	Inline XBRL Taxonomy Extension Presentation
104	Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101)

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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 13, 2022	/s/ Geraldine Conn
	Geraldine Conn
	Chief Financial Officer

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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 13, 2022	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 13, 2022	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, 2022, 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 13, 2022	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, 2022, 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 13, 2022	By:	/s/ Geraldine Conn
	Geraldine Conn, Chief Financial Officer

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Document And Entity Information - shares	6 Months Ended
	May 31, 2022	Jul. 13, 2022
Document Information [Line Items]
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	May 31, 2022
Document Transition Report	false
Entity File Number	0-31555
Entity Registrant Name	BAB, Inc
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	36-4389547
Entity Address, Address Line One	500 Lake Cook Road, Suite 475
Entity Address, City or Town	Deerfield
Entity Address, State or Province	IL
Entity Address, Postal Zip Code	60015
City Area Code	847
Local Phone Number	948-7520
Title of 12(b) Security	Common Stock
Trading Symbol	BABB
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Emerging Growth Company	false
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		7,263,508
Entity Central Index Key	0001123596
Amendment Flag	false
Current Fiscal Year End Date	--11-30

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Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	May 31, 2022	Nov. 30, 2021
Current Assets
Cash	$ 1,451,214	$ 1,462,026
Restricted cash	707,311	596,132
Receivables
Trade accounts and notes receivable (net of allowance for doubtful accounts of $12,850 in 2022 and $13,878 in 2021 )	81,913	91,306
Marketing fund contributions receivable from franchisees and stores	29,877	26,086
Prepaid expenses and other current assets	87,260	88,315
Total Current Assets	2,357,575	2,263,865
Property, plant and equipment (net of accumulated depreciation of $159,414 in 2022 and $158,666 in 2021)	0	748
Deposit on equipment	41,700	0
Trademarks	461,445	461,445
Goodwill	1,493,771	1,493,771
Definite lived intangible assets (net of accumulated amortization of $133,811 in 2022 and $131,042 in 2021)	20,818	22,664
Operating lease right of use	173,222	217,648
Total Noncurrent Assets	2,190,956	2,196,276
Total Assets	4,548,531	4,460,141
Current Liabilities
Accounts payable	7,797	2,064
Income tax payable	25,564	14,223
Accrued expenses and other current liabilities	265,186	316,544
Current portion operating lease liability	110,106	106,392
Total Current Liabilities	1,186,193	1,097,874
Long-term Liabilities (net of current portion)
Operating lease liability	97,602	153,702
Contract with customer, liability, noncurrent	0	110,855
Deferred tax liability	197,614	164,114
Total Long-term Liabilities	417,207	428,671
Total Liabilities	1,603,400	1,526,545
Stockholders' Equity
Preferred shares	0	0
Common stock -$.001 par value; 15,000,000 shares authorized; 8,466,953 shares issued and 7,263,508 shares outstanding as of May 31, 2022 and November 30, 2021	13,508,257	13,508,257
Additional paid-in capital	987,034	987,034
Treasury stock	(222,781)	(222,781)
Accumulated deficit	(11,327,379)	(11,338,914)
Total Stockholders' Equity	2,945,131	2,933,596
Total Liabilities and Stockholders' Equity	4,548,531	4,460,141
Series A Preferred Stock [Member]
Stockholders' Equity
Preferred shares	0	0
Marketing Fund [Member]
Current Liabilities
Unexpended marketing fund contributions	731,675	620,535
Franchise [Member]
Current Liabilities
Unexpended marketing fund contributions	31,282	34,545
Long-term Liabilities (net of current portion)
Contract with customer, liability, noncurrent	121,991	110,557
License [Member]
Current Liabilities
Unexpended marketing fund contributions	$ 14,583	3,571
Long-term Liabilities (net of current portion)
Contract with customer, liability, noncurrent		$ 298

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Consolidated Balance Sheets (Current Period Unaudited)-parentheticals (Parentheticals) - USD ($)	May 31, 2022	Nov. 30, 2021
Trade accounts and notes receivable, allowance for doubtful accounts	$ 12,850	$ 13,878
Property, plant and equipment, accumulated depreciation	159,414	158,666
Definite lived intangible assets, accumulated amortization	$ 133,811	$ 131,042
Preferred shares, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred Stock, Shares Authorized (in shares)	4,000,000	4,000,000
Preferred Stock, Shares Outstanding, Ending Balance (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 Stock, Shares Authorized (in shares)	1,000,000	1,000,000
Preferred Stock, Shares Outstanding, Ending Balance (in shares)	0	0

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Consolidated Statements of Income (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2022	May 31, 2021	May 31, 2022	May 31, 2021
REVENUES
Revenues	$ 824,432	$ 748,819	$ 1,562,708	$ 1,471,724
OPERATING EXPENSES
Payroll and payroll-related expenses	253,502	230,725	489,631	440,495
Occupancy	33,303	34,644	66,885	69,350
Advertising and promotion	5,153	1,619	8,486	3,187
Professional service fees	19,616	22,353	63,901	80,390
Travel	5,855	365	7,672	1,392
Employee benefit expenses	35,732	31,896	77,860	69,894
Depreciation and amortization	1,284	1,119	2,594	2,333
Marketing fund expenses	276,110	250,486	520,845	451,962
Other	61,928	53,444	104,316	93,586
Total Operating Expenses	692,483	626,651	1,342,190	1,212,589
Income from operations	131,949	122,168	220,518	259,135
Interest income	58	111	129	234
Loan forgiveness	0	0	0	228,155
Provision for income taxes
Income before provision for income taxes	132,007	122,279	220,647	487,524
Current tax expense	21,591	7,500	30,341	18,500
Deferred tax	16,500	28,000	33,500	49,000
Net Income	$ 93,916	$ 86,779	$ 156,806	$ 420,024
Net Income per share - Basic and Diluted (in dollars per share)	$ 0.01	$ 0.01	$ 0.02	$ 0.06
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	$ 0.02	$ 0.02
Royalty [Member]
REVENUES
Revenues	$ 465,491	$ 420,726	$ 879,712	$ 767,386
Franchise [Member]
REVENUES
Revenues	9,102	9,172	18,079	26,011
Licensing Fees and Other Income [Member]
REVENUES
Revenues	73,729	68,435	144,072	226,365
Marketing Fund [Member]
REVENUES
Revenues	$ 276,110	$ 250,486	$ 520,845	$ 451,962

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Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	May 31, 2022	May 31, 2021
Operating activities
Net Income	$ 156,806	$ 420,024
Adjustments to reconcile net income to cash flows provided by operating activities:
Depreciation and amortization	2,594	2,333
Deferred tax	33,500	49,000
Provision for uncollectible accounts, net of recoveries	(1,028)	(1,226)
Noncash lease expense	49,656	49,656
Loan forgiveness	0	(228,155)
Changes in:
Trade accounts receivable and notes receivable	10,421	(1,019)
Marketing fund contributions receivable	(3,791)	(6,868)
Prepaid expenses and other	1,053
Accounts payable	(8,490)	(264)
Accrued liabilities	(25,793)	(5,916)
Unexpended marketing fund contributions	111,140	95,928
Deferred revenue	18,885	(11,921)
Operating lease liability	(57,616)	(56,291)
Net Cash Provided by Operating Activities	287,337	333,641
Investing activities
Purchase of equipment	(41,700)	0
Net Cash Used In Investing Activities	(41,700)	0
Financing activities
Cash distributions/dividends	(145,270)	(145,271)
Net Cash Used In Financing Activities	(145,270)	(145,271)
Net Increase in Cash and Restricted Cash	100,367	188,370
Cash and Restricted Cash - Beginning of Period	2,058,158	1,632,923
Cash and Restricted Cash - End of Period	2,158,525	1,821,293
Supplemental disclosure of cash flow information:
Interest paid	0	0
Income taxes paid	$ 38,100	$ 1,700

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Note 1 - Nature of Operations

6 Months Ended

May 31, 2022

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, 2022, the Company had 68 franchise units and 4 licensed units in operation in 20 states. 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 licensing agreements.

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, 2021 which was filed February 25, 2022. 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.

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Note 2 - Summary of Significant Accounting Policies

6 Months Ended

May 31, 2022

Notes to Financial Statements

Significant Accounting Policies [Text Block]

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.

Use 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.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and demand deposits with banks with original maturities of less than 90 days.

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 June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope, including trade receivables. The amendments in this update broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The guidance in ASU 2016-13 is effective for public companies for fiscal years and for interim periods with those fiscal years beginning after December 15, 2023. The Company will adopt ASU 2019-13 for fiscal year ending November 30, 2024 and the adoption of this guidance is not expected to have any material impact on the Company’s financial position, cash flows or results of operations.

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, 2023, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company will adopt ASU 2019-12 for fiscal year ending November 30, 2024 and the adoption of this guidance is not expected to have any material impact on the Company’s financial position, cash flows or results of operations.

Management does not believe that there are any recently issued and effective or not yet effective accounting pronouncements as of May 31, 2022 that would have or are expected to have any significant effect on the Company’s financial position, cash flows or income statement.

Statement of Cash Flows

The chart below shows the cash and restricted cash within the consolidated statements of cash flows as of May 31, 2022 and May 31, 2021 were as follows:

	May 31, 2022		May 31, 2021
Cash and cash equivalents	$	1,451,214	$	1,360,173
Restricted cash		707,311		461,120
Total cash and restricted cash	$	2,158,525	$	1,821,293

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Note 3 - Revenue Recognition

6 Months Ended

May 31, 2022

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. The Company considers certain pre-opening activities and the franchise rights and related ongoing services to represent 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 fees from franchised stores 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.

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

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 liability is reduced when the gift cards are redeemed by a franchise. Although there are no expiration dates for our gift cards, based on our analysis of historical gift card redemption patterns, we can reasonably estimate the amount of gift cards for which redemption is remote, which is referred to as “breakage.” The Company recognizes gift card breakage proportional to actual gift card redemptions on a quarterly basis and the corresponding revenue 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 franchisee 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. 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. The Company historically presented the net activities of the marketing fund within the balance sheet in the Condensed Consolidated Balance Sheet. While this reclassification impacts the gross amount of reported revenue and expenses the amounts will be offsetting, and there is no impact on net income.   

Disaggregation of Revenue

The following table presents disaggregation of revenue from contracts with customers for the three months and six months ended May 31, 2022 and May 31, 2021:

	For three months ended May 31, 2022		For three months ended May 31, 2021		For six months ended May 31, 2022		For six months ended May 31, 2021
Sign Shop revenue	$	3,205	$	3,617	$	3,296	$	6,619
Settlement revenue		10,000		-		16,750		95,308
Total revenue at a point in time		13,205		3,617		20,046		101,927
Revenue recognized over time
Royalty revenue		465,491		420,726		879,712		767,386
Franchise fees		9,102		9,172		18,079		26,011
License fees		4,378		1,375		8,756		8,125
Gift card revenue		357		1,396		2,560		2,956
Nontraditional revenue		55,789		62,047		112,710		113,357
Marketing fund revenue		276,110		250,486		520,845		451,962
Total revenue over time		811,227		745,202		1,542,662		1,369,797
Grand total	$	824,432	$	748,819	$	1,562,708	$	1,471,724

Contract balances

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.

	May 31, 2022		November 30, 2021
Liabilities
Contract liabilities - current	$	981,737	$	861,615
Contract liabilities - long-term		121,991		110,855
Total Contract Liabilities	$	1,103,728	$	972,470

	May 31, 2022			November 30, 2021
Contracts at beginning of period	$	972,470		$	697,763
Revenue Recognized during period		(593,477	)		(1,063,614	)
Additions during period		724,735			1,338,321
Contracts at end of period	$	1,103,728		$	972,470

Transaction price allocated to remaining performance obligations (franchise agreements and license fee agreement) for the year ended November 30:

2022	$	40,875	(a)
2023		20,458
2024		19,125
2025		18,958
2026		14,908
Thereafter		53,532
Total	$	167,856

(a) represents the estimate for the remainder of 2022

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Note 4 - Units Open and Under Development

6 Months Ended

May 31, 2022

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, 2022 are as follows:

	May 31, 2022		May 31, 2021
Stores open:
Franchisee-owned stores		68		70
Licensed Units		4		3
		72		73
Unopened stores with Franchise Agreements		2		2
Total operating units and units with Franchise Agreements		74		75

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Note 5 - Earnings Per Share

6 Months Ended

May 31, 2022

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, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Numerator:
Net income available to common shareholders	$	93,916	$	86,779	$	156,806	$	420,024
Denominator:
Weighted average outstanding shares
Basic and diluted common stock		7,263,508		7,263,508		7,263,508		7,263,508
Earnings per Share - Basic	$	0.01	$	0.01	$	0.02	$	0.06

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Note 6 - Goodwill and Other Intangible Assets

6 Months Ended

May 31, 2022

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, 2022 and February 28, 2021, 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 it’s carrying value, a quantitative assessment is then performed. Based on the qualitative analysis conducted during the quarter, management does not believe that an impairment existed at February 28, 2022 and 2021. Management reviewed the assessment as of May 31, 2022 and there were no material changes.

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Note 7 - Lease Commitments

6 Months Ended

May 31, 2022

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, 2022 the remaining lease term was 21 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, 2022 are as follows:

	Undiscounted Rent Payments
Year Ending November 30:
2022		58,057
2023		118,322
2024		40,177
Total Undiscounted Rent Payments		216,556
Present Value Discount		(8,848	)
Present Value	$	207,708
Short-term lease liability	$	110,106
Long-term lease liability		97,602
Total Operating Lease Liability	$	207,708

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Note 8 - Paycheck Protection Program Loan

6 Months Ended

May 31, 2022

Notes to Financial Statements

Long-Term Debt [Text Block]

8. Paycheck Protection Program 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.

On December 9, 2020 the PPP loan in the amount of $228,155 and related accrued interest was forgiven by the Small Business Administration (“SBA”). The amount forgiven is recognized as loan forgiveness income during the first quarter, ended February 28, 2021.

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Note 9 - Income Taxes

6 Months Ended

May 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

9. Income Taxes

For the six months ended May 31, 2022 the Company recorded deferred taxes of $33,500 and current tax expense of $30,341 for an effective tax rate of 28.9% compared to $18,500 of current tax expense and $49,000 of deferred tax expense for the six months ended May 31, 2021 for an effective tax rate of 13.8%. The reduction in the 2021 effective tax rate relates to the nontaxable Paycheck Protection Program loan forgiveness in December 2020 of approximately $228,000.

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Note 10 - Stockholder's Equity

6 Months Ended

May 31, 2022

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

10. Stockholder’s Equity

On June 3, 2022 the Board of Directors declared a $0.01 distribution/dividend per share to stockholders of record as of June 22, 2022, payable July 11, 2022. On March 7, 2022 the Board of Directors declared a $0.01 cash distribution/dividend per share to stockholders of record as of March 29, 2022, paid April 18, 2022. On December 06, 2021 the Board of Directors declared a $0.01 cash distribution/dividend per share to stockholders of record as of December 22, 2021, paid January 11, 2022.

On January 27, 2021 the Board of Directors declared a $0.01 quarterly cash distribution/dividend per share to stockholders of record as of February 10, 2021 and paid February 24, 2021. On March 17, 2021 the Board of Directors declared a $0.01 cash distribution/dividend per share to stockholders of record as of April 1, 2021, paid April 22, 2021. On June 3, 2021 the Board of Directors declared a $0.01 cash distribution/dividend per share to stockholders of record as of June 21, 2021, paid July 12, 2021. On September 10, 2021 the Board of Directors declared a $0.01 cash distribution/dividend per share to stockholders of record as of September 27, 2021, paid October 18, 2021.

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. On March 4, 2021 an amendment was filed extending the final expiration date to mean the eleventh anniversary date of the original agreement. All other original rights and provisions remain the same.

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Significant Accounting Policies (Policies)

6 Months Ended

May 31, 2022

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

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.

Use of Estimates, Policy [Policy Text Block]

Use 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. 

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash EquivalentsCash and cash equivalents include cash on hand and demand deposits with banks with original maturities of less than 90 days.

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]

LeasesThe 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 June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope, including trade receivables. The amendments in this update broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The guidance in ASU 2016-13 is effective for public companies for fiscal years and for interim periods with those fiscal years beginning after December 15, 2023. The Company will adopt ASU 2019-13 for fiscal year ending November 30, 2024 and the adoption of this guidance is not expected to have any material impact on the Company’s financial position, cash flows or results of operations. 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, 2023, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company will adopt ASU 2019-12 for fiscal year ending November 30, 2024 and the adoption of this guidance is not expected to have any material impact on the Company’s financial position, cash flows or results of operations. Management does not believe that there are any recently issued and effective or not yet effective accounting pronouncements as of May 31, 2022 that would have or are expected to have any significant effect on the Company’s financial position, cash flows or income statement.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Statement of Cash Flows The chart below shows the cash and restricted cash within the consolidated statements of cash flows as of May 31, 2022 and May 31, 2021 were as follows: 

	May 31, 2022		May 31, 2021
Cash and cash equivalents	$	1,451,214	$	1,360,173
Restricted cash		707,311		461,120
Total cash and restricted cash	$	2,158,525	$	1,821,293

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Note 2 - Summary of Significant Accounting Policies (Tables)

6 Months Ended

May 31, 2022

Notes Tables

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

	May 31, 2022		May 31, 2021
Cash and cash equivalents	$	1,451,214	$	1,360,173
Restricted cash		707,311		461,120
Total cash and restricted cash	$	2,158,525	$	1,821,293

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Note 3 - Revenue Recognition (Tables)

6 Months Ended

May 31, 2022

Notes Tables

Disaggregation of Revenue [Table Text Block]

	For three months ended May 31, 2022		For three months ended May 31, 2021		For six months ended May 31, 2022		For six months ended May 31, 2021
Sign Shop revenue	$	3,205	$	3,617	$	3,296	$	6,619
Settlement revenue		10,000		-		16,750		95,308
Total revenue at a point in time		13,205		3,617		20,046		101,927
Revenue recognized over time
Royalty revenue		465,491		420,726		879,712		767,386
Franchise fees		9,102		9,172		18,079		26,011
License fees		4,378		1,375		8,756		8,125
Gift card revenue		357		1,396		2,560		2,956
Nontraditional revenue		55,789		62,047		112,710		113,357
Marketing fund revenue		276,110		250,486		520,845		451,962
Total revenue over time		811,227		745,202		1,542,662		1,369,797
Grand total	$	824,432	$	748,819	$	1,562,708	$	1,471,724

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

	May 31, 2022		November 30, 2021
Liabilities
Contract liabilities - current	$	981,737	$	861,615
Contract liabilities - long-term		121,991		110,855
Total Contract Liabilities	$	1,103,728	$	972,470

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

	May 31, 2022			November 30, 2021
Contracts at beginning of period	$	972,470		$	697,763
Revenue Recognized during period		(593,477	)		(1,063,614	)
Additions during period		724,735			1,338,321
Contracts at end of period	$	1,103,728		$	972,470

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

2022	$	40,875	(a)
2023		20,458
2024		19,125
2025		18,958
2026		14,908
Thereafter		53,532
Total	$	167,856

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Note 4 - Units Open and Under Development (Tables)

6 Months Ended

May 31, 2022

Notes Tables

Schedule of Franchisor Disclosure [Table Text Block]

	May 31, 2022		May 31, 2021
Stores open:
Franchisee-owned stores		68		70
Licensed Units		4		3
		72		73
Unopened stores with Franchise Agreements		2		2
Total operating units and units with Franchise Agreements		74		75

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Note 5 - Earnings Per Share (Tables)

6 Months Ended

May 31, 2022

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, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Numerator:
Net income available to common shareholders	$	93,916	$	86,779	$	156,806	$	420,024
Denominator:
Weighted average outstanding shares
Basic and diluted common stock		7,263,508		7,263,508		7,263,508		7,263,508
Earnings per Share - Basic	$	0.01	$	0.01	$	0.02	$	0.06

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Note 7 - Lease Commitments (Tables)

6 Months Ended

May 31, 2022

Notes Tables

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

	Undiscounted Rent Payments
Year Ending November 30:
2022		58,057
2023		118,322
2024		40,177
Total Undiscounted Rent Payments		216,556
Present Value Discount		(8,848	)
Present Value	$	207,708
Short-term lease liability	$	110,106
Long-term lease liability		97,602
Total Operating Lease Liability	$	207,708

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Note 1 - Nature of Operations (Details Textual)	May 31, 2022	May 31, 2021
Number of Wholly Owned Subsidiaries	3
Number of Stores	74	75
Number of States in which Entity Operates	20
Franchised Units [Member]
Number of Stores	68	70
Licensed Units [Member]
Number of Stores	4	3
Units Under Development [Member]
Number of Stores	2

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Note 2 - Summary of Significant Accounting Policies (Details Textual)	6 Months Ended
	May 31, 2022
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

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Note 2 - Summary of Significant Accounting Policies - Summary of Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($)	May 31, 2022	Nov. 30, 2021	May 31, 2021	Nov. 30, 2020
Cash	$ 1,451,214	$ 1,462,026	$ 1,360,173
Restricted cash	707,311		461,120
Total cash and restricted cash	$ 2,158,525	$ 2,058,158	$ 1,821,293	$ 1,632,923

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Note 2 - Summary of Significant Accounting Policies - Summary of Cash, Cash Equivalents, and Restricted Cash-parentheticals (Details)

6 Months Ended

May 31, 2022

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Statement of Cash Flows The chart below shows the cash and restricted cash within the consolidated statements of cash flows as of May 31, 2022 and May 31, 2021 were as follows: 

	May 31, 2022		May 31, 2021
Cash and cash equivalents	$	1,451,214	$	1,360,173
Restricted cash		707,311		461,120
Total cash and restricted cash	$	2,158,525	$	1,821,293

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Note 3 - Revenue Recognition (Details Textual)	6 Months Ended
	May 31, 2022
Initial Franchise Term (Year)	10 years
Royalty Fees From Franchises Percentage	5.00%

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Note 3 - Revenue Recognition - Disaggregation of Revenue (Details) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2022	May 31, 2021	May 31, 2022	May 31, 2021
Revenues	$ 824,432	$ 748,819	$ 1,562,708	$ 1,471,724
Transferred at Point in Time [Member]
Revenues	13,205	3,617	20,046	101,927
Transferred over Time [Member]
Revenues	811,227	745,202	1,542,662	1,369,797
Sign Shop [Member] | Transferred at Point in Time [Member]
Revenues	3,205	3,617	3,296	6,619
Structured Settlement Annuity [Member] | Transferred at Point in Time [Member]
Revenues	10,000	0	16,750	95,308
Royalty [Member]
Revenues	465,491	420,726	879,712	767,386
Royalty [Member] | Transferred over Time [Member]
Revenues	465,491	420,726	879,712	767,386
Franchise [Member]
Revenues	9,102	9,172	18,079	26,011
Franchise [Member] | Transferred over Time [Member]
Revenues	9,102	9,172	18,079	26,011
License [Member] | Transferred over Time [Member]
Revenues	4,378	1,375	8,756	8,125
Gift Card [Member] | Transferred over Time [Member]
Revenues	357	1,396	2,560	2,956
Non-traditional Revenue [Member] | Transferred over Time [Member]
Revenues	55,789	62,047	112,710	113,357
Marketing Fund [Member]
Revenues	276,110	250,486	520,845	451,962
Marketing Fund [Member] | Transferred over Time [Member]
Revenues	$ 276,110	$ 250,486	$ 520,845	$ 451,962

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Note 3 - Revenue Recognition - Contract Balances Subject to ASC 606 (Details) - USD ($)	May 31, 2022	May 28, 2022	Nov. 30, 2021
Contract liabilities - long-term	$ 0	$ 121,991	$ 110,855
Total Contract Liabilities		1,103,728	972,470
Contract Liabilities, Current and Accrued Expenses and Other Current Liabilities [Member]
Contract liabilities - current		$ 981,737	$ 861,615

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Note 3 - Revenue Recognition - Changes in Contract Balances (Details) - USD ($)	6 Months Ended	12 Months Ended
	May 31, 2022	Nov. 30, 2021
Contracts at beginning of period	$ 972,470	$ 697,763
Revenue Recognized during period	593,477	1,063,614
Additions during period	724,735	1,338,321
Contracts at end of period	$ 1,103,728	$ 972,470

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Note 3 - Revenue Recognition - Remaining Performance Obligations (Details)	May 31, 2022 USD ($)
Revenue, Remaining Performance Obligation, Amount	$ 167,856

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Note 3 - Revenue Recognition - Remaining Performance Obligations 2 (Details)	May 31, 2022 USD ($)
Revenue, Remaining Performance Obligation, Amount	$ 167,856
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-06-01
Revenue, Remaining Performance Obligation, Amount	$ 40,875	[1]
Revenue, remaining performance obligation, period (Year)	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-06-01
Revenue, Remaining Performance Obligation, Amount	$ 20,458
Revenue, remaining performance obligation, period (Year)	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-06-01
Revenue, Remaining Performance Obligation, Amount	$ 19,125
Revenue, remaining performance obligation, period (Year)	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-06-01
Revenue, Remaining Performance Obligation, Amount	$ 18,958
Revenue, remaining performance obligation, period (Year)	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-06-01
Revenue, Remaining Performance Obligation, Amount	$ 14,908
Revenue, remaining performance obligation, period (Year)	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2027-06-01
Revenue, Remaining Performance Obligation, Amount	$ 53,532
Revenue, remaining performance obligation, period (Year)	1 year

[1] represents the estimate for the remainder of 2022

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Note 4 - Units Open and Under Development - Operating Units (Details)	May 31, 2022	May 31, 2021
Operating Units and Units with Franchise Agreements	74	75
Franchised Units [Member]
Operating Units and Units with Franchise Agreements	68	70
Licensed Units [Member]
Operating Units and Units with Franchise Agreements	4	3
Total Franchised Owned and Licensed Units [Member]
Operating Units and Units with Franchise Agreements	72	73
Unopened Store [Member]
Operating Units and Units with Franchise Agreements	2	2

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Note 5 - Earnings Per Share - Computation of Earnings Per Share (Details) - USD ($)	3 Months Ended		6 Months Ended
	May 31, 2022	May 31, 2021	May 31, 2022	May 31, 2021
Net income available to common shareholders	$ 93,916	$ 86,779	$ 156,806	$ 420,024
Weighted average shares outstanding - Basic and diluted (in shares)	7,263,508	7,263,508	7,263,508	7,263,508
Net Income per share - Basic and Diluted (in dollars per share)	$ 0.01	$ 0.01	$ 0.02	$ 0.06

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Note 7 - Lease Commitments (Details Textual) - USD ($)	Oct. 01, 2018	May 31, 2022
Lessee, Operating Lease, Renewal Term (Year)	5 years
Lessee, Operating Lease, Rent Abatement and Tenant Allowance Period (Month)	6 months
Operating Lease, Expense	$ 21,300
Lessee, Operating Lease, Remaining Lease Term (Month)		21 months
Lessee, Operating Lease, Discount Rate		5.25%

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Note 7 - Lease Commitments - Gross Future Minimum Annual Rental Commitments (Details) - USD ($)	May 31, 2022	Nov. 30, 2021
2022	$ 58,057
2023	118,322
2024	40,177
Total Undiscounted Rent Payments	216,556
Present Value Discount	(8,848)
Present Value	207,708
Short-term lease liability	110,106	$ 106,392
Long-term lease liability	97,602	$ 153,702
Total Operating Lease Liability	$ 207,708

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Note 8 - Paycheck Protection Program Loan (Details Textual) - USD ($)			3 Months Ended		6 Months Ended
	Dec. 09, 2020	May 01, 2020	May 31, 2022	May 31, 2021	May 31, 2022	May 31, 2021
Gain (Loss) on Extinguishment of Debt, Total			$ 0	$ 0	$ 0	$ 228,155
Paycheck Protection Program CARES Act [Member]
Proceeds from Issuance of Long-term Debt, Total		$ 228,155
Gain (Loss) on Extinguishment of Debt, Total	$ 228,155				$ 228,000

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Note 9 - Income Taxes (Details Textual) - USD ($)		3 Months Ended		6 Months Ended
	Dec. 09, 2020	May 31, 2022	May 31, 2021	May 31, 2022	May 31, 2021
Deferred Income Tax Expense (Benefit), Total		$ 16,500	$ 28,000	$ 33,500	$ 49,000
Current Income Tax Expense (Benefit), Total		21,591	7,500	$ 30,341	$ 18,500
Effective Income Tax Rate Reconciliation, Percent, Total				28.90%	13.80%
Gain (Loss) on Extinguishment of Debt, Total		$ 0	$ 0	$ 0	$ 228,155
Paycheck Protection Program CARES Act [Member]
Gain (Loss) on Extinguishment of Debt, Total	$ 228,155			$ 228,000

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Note 10 - Stockholder's Equity (Details Textual) - $ / shares													3 Months Ended		6 Months Ended
	Jun. 03, 2022	Mar. 07, 2022	Dec. 06, 2021	Sep. 10, 2021	Jun. 03, 2021	Mar. 17, 2021	Mar. 04, 2021	Jan. 07, 2021	Feb. 22, 2019	May 22, 2017	Aug. 18, 2015	May 06, 2013	May 31, 2022	May 31, 2021	May 31, 2022	May 31, 2021
Common Stock, Dividends, Per Share, Declared (in dollars per share)					$ 0.01								$ 0.01	$ 0.01	$ 0.02	$ 0.02
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)							11 years		9 years	7 years	5 years
Quarterly Dividend [Member]
Common Stock, Dividends, Per Share, Declared (in dollars per share)		$ 0.01	$ 0.01	$ 0.01		$ 0.01		$ 0.01
Quarterly Dividend [Member] | Subsequent Event [Member]
Common Stock, Dividends, Per Share, Declared (in dollars per share)	$ 0.01