Note 7 - Lease Receivables Commitments

12 Months Ended

Nov. 30, 2023

Notes to Financial Statements

Lessor, Sales-type Leases [Text Block]

Note 7 – Lease Receivables Commitments

The Company leases restaurant equipment to a certain franchise under a sales-type lease agreement. The lease agreement does not contain any non-lease components. The lease term is for a period of seven years, beginning June 1, 2022 and ending June 1, 2029. The lease requires weekly payments of $121 for a total 365 payments, and a final optional buy-out payment of $4,800, which management believes estimates residual value. At November 30, 2023, management does not believe the unguaranteed residual asset value of $4,800 to be impaired. The equipment is owned by BAB Systems, Inc., and title will not pass to lessee until all payments are made, including the final buy-out payment. The equipment value is collateral for the outstanding balance of the lease receivable, and the Company manages the risk associated with the residual value by requiring the lessee to use the equipment within specified parameters. A Business Consultant employed by BAB Systems, Inc. makes annual visits and reviews the usage and condition of the leased equipment.

During the period ended November 30, 2023 and 2022, the Company recorded lease revenue, which is included in licensing fees and other income in 2022 and interest income in 2023 and 2022 related to the lease as follows:

	November 30, 2023		November 30, 2022
Lease income	$	-	$	5,319
Lease interest		456		256
Total lease revenue	$	456	$	5,575

The sales lease is included in the balance sheet at the current value of the lease payments at a 1.25% discount rate, which reflects the rate implicit in the lease agreement.

Future minimum lease payments receivable as of November 30, 2023 are as follows:

	Undiscounted Rent Payments
Year Ending November 30:
2024		6,283
2025		6,283
2026		6,404
2027		6,283
2028		6,283
thereafter		7,942
Total Undiscounted Lease Payments		39,478
Unamortized interest income		(1,172	)
Lease receivable, net	$	38,306
Short-term lease receivable	$	5,900
Long-term lease receivable		32,406
Total lease receivable	$	38,306