BAB, INC. Annual Report 2021

Plain-text annual report

1 BAB, Inc.Project Type: 10-KEDGAR Submission ProofCreated At: 2/25/2022 12:02:26 PM ESTSubmission Information Submission Type10-KReturn Copy?offContact NameRDG FilingsContact Phone1-415-643-6080Exchange(s)NONEConfirmation of Paper Copy?offFiler CIK0001123596Filer CCC********Emerging Growth CompanyFalseex Transition PeriodFalseReporting Period11/30/2021Well Known Seasoned Issuer?FalseVoluntary Filer?FalseSmaller Reporting Company?TrueAccelerated Filer StatusNon-Accelerated FilerShell Company?FalseDocuments 10-KFORM 10-KEX-21.1Exhibit 21.1EX-31.1Exhibit 31.1EX-31.2Exhibit 31.2EX-32.1Exhibit 32.1EX-32.2Exhibit 32.2GRAPHICgraphic1.jpgGRAPHICgraphic2.jpgFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST11 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K (Mark one) ☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended: November 30, 2021 ☐TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from ______ to ______Commission file number: 0-31555 BAB, Inc.(Exact name of registrant as specified in its charter) Delaware36-4389547(State or other jurisdiction of incorporation)(IRS Employer or organization Identification No.) 500 Lake Cook Road, Suite 475 Deerfield, Illinois 60015(Address of principal executive offices) (Zip Code)Registrant’s telephone number: (847) 948-7520 Securities registered pursuant to Section 12(b) of the Act:Title of each classTrading Symbol(s)Name of exchange on which registeredCommon Stock BABBNASDAQ/OTC Securities registered pursuant to Section 12(g) of the Act:None (Title of Class) Indicate by check mark if the issuer is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No Indicate by check mark whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. ☐ Yes ☒ No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 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 past90 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-Tduring the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growthcompany. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the ExchangeAct. 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 revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control overfinancial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐Yes ☒ No The aggregate market value of the voting common equity held by nonaffiliates as of the last business day of the registrant’s most recently completed second fiscalquarter was: $3,613,316 based on 4,817,754 shares held by nonaffiliates as of May 31, 2021; Closing price ($0.75) for said shares in the NASDAQ OTCQB Marketplace asof such date. State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 7,263,508 shares of Common Stock, as ofFebruary 25, 2022. DOCUMENTS INCORPORATED BY REFERENCESee index to exhibits Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST22 FORM 10-K INDEX PART I Item 1.Business3Item 1A.Risk Factors8Item 1B.Unresolved Staff Comments8Item 2.Properties8Item 3.Legal Proceedings8Item 4. Mine Safety Disclosures8PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities9Item 6.Reserved10Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations10Item 7A.Quantitative and Qualitative Disclosures About Market Risk15Item 8. Financial Statements and Supplementary Data16Item 9. Changes in and Disagreement with Accountants on Accounting and Financial Disclosure37Item 9A.Controls and Procedures37Item 9B.Other Information37PART III Item 10.Directors, Executive Officers and Corporate Governance38Item 11. Executive Compensation40Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters42Item 13.Certain Relationships, Related Transactions and Director Independence43Item 14.Principal Accountant Fees and Services43PART IV Item 15.Exhibits and Financial Statement Schedules44 - 2 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST33 PART I ITEM 1. BUSINESS 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 inBAB and MFM locations. SweetDuet® (“SD”) frozen yogurt can be added as an additional brand in a BAB or MFM location. Operations was formed in 1995, primarilyto operate Company-owned stores of which there are currently none. The assets of Jacobs Bros. Bagels (“Jacobs Bros.”) were acquired in 1999, and any brandedwholesale 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 unitsunder the BAB, MFM and SD trade names. At November 30, 2021, the Company had 68 franchise units and 4 licensed units in operation in 20 states. There are 3 unitsunder development. The Company's revenues are derived primarily from the ongoing royalties paid to the Company by its franchisees and from receipt of initialfranchise fees. Additionally, the Company derives revenue from the sale of licensed products (My Favorite Muffin mix, Big Apple Bagels cream cheese and Brewster'scoffee) to franchisees, licensees and other approved customers. The BAB franchised brand consists of units operating as “Big Apple Bagels®,” featuring daily baked bagels, flavored cream cheeses, premium coffees, gourmet bagelsandwiches and other related products. BAB units are primarily concentrated in the Midwest and Western United States. The MFM brand consists of units operatingas “My Favorite Muffin Gourmet Muffin Bakery™” (“MFM Bakery”), featuring a large variety of freshly baked muffins and coffees and units operating as “My FavoriteMuffin 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-alonefranchises, 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 inexisting MFM units. The Company expects to continue to realize efficiencies in servicing the combined base of BAB and MFM franchisees. Net IncomeThe Company reported net income of $651,000 for fiscal year ended November 30, 2021 and a net loss of $66,000 for fiscal year ended November 30, 2020. November 30,2021 net operating income was $542,000 compared to $233,000 in 2020. Food Service IndustryFood service businesses are often affected by changes in consumer tastes; national, regional, and local economic conditions; demographic trends; traffic patterns; andthe type, number and location of competing restaurants. Multi-unit food service chains, such as the Company's, can also be substantially adversely affected bypublicity resulting from problems with food quality, illness, injury or other health concerns or operating issues stemming from one store or a limited number of stores.The food service business is also subject to the risk that shortages or interruptions in supply caused by adverse weather or other conditions could negatively affect theavailability, quality and cost of ingredients and other food products. In addition, factors such as inflation, increased food and labor costs, regional weather conditions,availability and cost of suitable sites and the availability of experienced management and hourly employees may also adversely affect the food service industry ingeneral and the Company's results of operations and financial condition in particular. - 3 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST44 CUSTOMERS The Company’s franchisees represent a varied geographic and demographic group. Among some of the primary services the Company provides to its franchisees aremarketing assistance, training, time-tested successful recipes, bulk purchasing discounts, food service knowledgeable personnel and brand recognition. SUPPLIERS The Company's major suppliers are Coffee Bean International, Dawn Food Products, Inc., Savencia Cheese USA, Coca-Cola and U.S. Foods. The Company is notdependent on any of these suppliers for future growth and profitability since like products that may be purchased from these suppliers is available from other sources. LOCATIONS The Company had 68 franchised locations and 4 licensed units in 20 states. There are 3 units under development. STORE OPERATIONS BIG APPLE BAGELS®--BAB franchised stores bake a variety of fresh bagels daily and offer up to 11 flavors of cream cheese spreads. Stores also offer a wideassortment of breakfast and lunch bagel sandwiches, salads, soups, various dessert items, fruit smoothies, gourmet coffees and other beverages. A typical BAB storeis in an area with a mix of both residential and commercial properties and ranges from 1,500 to 2,000 square feet. The Company's current store design is approximately1,800 square feet, with seating capacity for 20 to 30 persons, and includes approximately 750 square feet devoted to production and baking. A satellite store is typicallysmaller than a production store, averaging 800 to 1,200 square feet. Although franchise stores may vary in size from other franchise stores, store layout is generallyconsistent. MY FAVORITE MUFFIN®--MFM franchised stores bake 20 to 25 varieties of muffins daily from over 125 recipes. They also serve gourmet coffees, beverages and, atMFM Cafe locations, a variety of bagels, bagel sandwiches and related products. A typical MFM store is in an area with a mix of both residential and commercialproperties and ranges from 1,500 to 2,000 square feet. The typical MFM Café store design is approximately 1,800 square feet, with seating capacity for 20 to 30 persons.The MFM Bakery is approximately 1,500 square feet, with seating for 10 to 12 persons and typically sells only muffins and coffee. Although franchise stores may vary insize from other franchise stores, store layout is generally consistent. SWEETDUET®--SD the Company has one SweetDuet franchised store which offers frozen yogurt and various toppings from which customers prepare their own yogurtcreations. They also serve My Favorite Muffin® gourmet muffins and Brewster’s® Coffee. Beginning in 2014, the SweetDuet concept is available as an added brand toa BAB or MFM location. BREWSTER'S® COFFEE--Although the Company doesn't have, or actively market, Brewster's stand-alone franchises, Brewster's coffee products are sold in most of thefranchised units. FRANCHISING The Company requires payment of an initial franchise fee per store, plus an ongoing 5% royalty on net sales. Additionally, BAB, MFM and SD franchisees are membersof a marketing fund requiring an ongoing 3% contribution for general system-wide marketing. BAB currently requires a franchise fee of $25,000 on a franchisee's first fullproduction BAB store. There is currently a $10,000 veterans discount for the franchise fee for the first location. The fee for subsequent production stores for BAB is$20,000. MFM currently requires a franchise fee of $30,000 on a franchisee's first full production MFM store. The fee for subsequent production stores for MFM is$25,000. - 4 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST55 The Company's current Franchise Disclosure Documents (“FDD”) provides for, among other things, the opportunity for prospective franchisees to enter into aPreliminary Agreement for their first production store. This agreement enables a prospective franchisee a period of 60 days in which to locate a site. The fee for thisPreliminary Agreement is $10,000. If a prospective franchisee fails to submit a site to Corporate in the designated timeframe, the preliminary agreement may be terminatedand the fee is nonrefundable. If the prospective franchisee submits in writing, the request to terminate the agreement within the required timeframe, prior to submitting asite for approval Corporate will issue a refund of the preliminary fee less $3,000. If the prospective franchisee submits one site for approval that is not approved byCorporate, Corporate may, at its sole discretion either grant an extension to the above referenced 60 day period or terminate the Preliminary Agreement and refund thepreliminary fee less $3,000. If a site is approved, the entire $10,000 will be applied toward the initial franchise fee. See also last paragraph under "GovernmentRegulation" section in this 10-K. The Company's Franchise Agreement provides a franchisee with the right to develop one store at a specific location. Each FranchiseAgreement is for a term of 10 years with the right to renew. Franchisees are expected to be in operation no later than 10 months following the signing of the FranchiseAgreement. The Company currently advertises its franchising opportunities in directories, newspapers and the internet. In addition, prospective franchisees contact the Companyas a result of patronizing an existing store. COMPETITION The quick service restaurant industry is intensely competitive with respect to product quality, concept, location, service and price. There are a number of national,regional and local chains operating both owned and franchised stores which compete with the Company on a national level or solely in a specific market or region. TheCompany believes that because the industry is extremely fragmented, there is a significant opportunity for expansion in the bagel, muffin and coffee concept chains. The Company believes the primary direct competitors of its bagel units are Panera Bread Company, Bruegger's Bagel Bakery and Einstein Noah Restaurant Group, whichoperates Einstein Bros. Bagels. There are several other regional bagel chains with fewer than 50 stores, as well as numerous small, independently owned bagel bakeriesand national fast food restaurants such as Dunkin’ Donuts and McDonald’s, all of which may compete with the Company. There is no major national competitor in themuffin business, but there are a number of regional and local operators. Additionally, the Company competes directly with a number of national, regional and local coffeecompetitors. Other competition includes supermarket bakery sections and prepackaged, fresh and frozen bagels, muffins and yogurt. Certain of these competitors may have greaterproduct and name recognition and larger financial, marketing and distribution capabilities than the Company. The Company believes the startup costs associated withopening a retail food establishment offering similar products on a stand-alone basis are competitive with the startup costs associated with opening its stores and,accordingly, such startup costs are not an impediment to entry into the retail bagel, muffin, frozen yogurt or coffee businesses. The Company believes that its stores compete favorably in terms of food quality, taste, convenience, customer service and value, which the Company believes areimportant factors to its targeted customers. Competition in the food service industry is often affected by changes in consumer tastes, national, regional and localeconomic and real estate conditions, demographic trends, traffic patterns, the cost and availability of labor, consumer purchasing power, availability of product and localcompetitive factors. The Company attempts to manage or adapt to these factors, but not all such factors are within the Company's control. Such factors could cause theCompany and some or all of its franchisees to be adversely affected. The Company competes for qualified franchisees with a wide variety of investment opportunities in the restaurant business, as well as other industries. Investmentopportunities in the bagel bakery cafe business include franchises offered by Einstein Noah Restaurant Group and Panera Bread Company. The Company's continuedsuccess is dependent on its reputation for providing high quality and value with respect to its service, products and franchises. This reputation is affected by theperformance of its franchise stores and licensed units that sell branded products over which the Company has limited control. - 5 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST66 TRADEMARKS AND SERVICE MARKS The trademarks, trade names and service marks used by the Company contain common descriptive English words and thus may be subject to challenge by users ofthese words, alone or in combination with other words, to describe other services or products. Some persons or entities may have prior rights to these names or marks intheir respective localities. Accordingly, there is no assurance that such names and marks are available in all locations. Any challenge, if successful, in whole or in part,could restrict the Company's use of the names and marks in areas in which the challenger is found to have used the name or mark prior to the Company's use. Any suchrestriction could limit the expansion of the Company's use of the names or marks into that region, and the Company and its franchisees may be materially and adverselyaffected. The trademarks and service marks "Big Apple Bagels®," "My Favorite Muffin®," “SweetDuet®”and "Brewster's® Coffee" are registered under applicable federaltrademark law. These marks are licensed by the Company to its franchisees pursuant to Franchise Agreements. In February 1999, the Company acquired the trademarkof "Jacobs Bros. Bagels®" upon purchasing certain assets of Jacobs Bros. The "Jacobs Bros. Bagels®" mark is also registered under applicable federal trademark law. The Company is aware of the use by other persons and entities in certain geographic areas of names and marks which are the same as, or similar to, the Company'snames and marks. Some of these persons or entities may have prior rights to those names or marks in their respective localities; therefore, there is no assurance that thenames and marks are available in all locations. It is the Company's policy to pursue registration of its names and marks whenever possible and to vigorously oppose anyinfringement of its names and marks. GOVERNMENT REGULATION The Company is subject to the Trade Regulation Rule of the Federal Trade Commission (the "FTC") entitled “Disclosure Requirements and Prohibitions ConcerningFranchising'' (the "Amended FTC Franchise Rule") and state and local laws and regulations that govern the offer, sale and termination of franchises and the refusal torenew franchises. Continued compliance with these broad federal, state and local regulatory networks is essential and costly. The failure to comply with suchregulations may have a material adverse effect on the Company and its franchisees. Violations of franchising laws and/or state laws and regulations regulatingsubstantive aspects of doing business in a particular state could limit the Company's ability to sell franchises or subject the Company and its affiliates to rescissionoffers, monetary damages, penalties, imprisonment and/or injunctive proceedings. In addition, under court decisions in certain states, absolute vicarious liability may beimposed upon franchisors based upon claims made against franchisees. Even if the Company is able to obtain insurance coverage for such claims, there can be noassurance that such insurance will be sufficient to cover potential claims against the Company. The Company and its franchisees are required to comply with federal, state and local government regulations applicable to consumer food service businesses, includingthose relating to the preparation and sale of food, minimum wage requirements, overtime, working and safety conditions, citizenship requirements, as well as regulationsrelating to zoning, construction, health and business licensing. Each store is subject to regulation by federal agencies and to licensing and regulation by state and localhealth, sanitation, safety, fire and other departments. Difficulties or failures in obtaining the required licenses or approvals could delay or prevent the opening of a newCompany-owned or franchise store, and failure to remain in compliance with applicable regulations could cause the temporary or permanent closing of an existing store.The Company believes that it is in material compliance with these provisions. Continued compliance with these federal, state and local laws and regulations is costly butessential, and failure to comply may have an adverse effect on the Company and its franchisees. The Company's franchising operations are subject to regulation by the FTC under the Amended FTC Franchise Rule which requires, among other things, that theCompany prepare and periodically update a comprehensive disclosure document known as a Franchise Disclosure Document (“FDD”) in connection with the sale andoperation of its franchises. In addition, some states require a franchisor to register its franchise with the state before it may offer a franchise to a prospective franchisee.The Company believes its FDDs, together with any applicable state versions or supplements, comply with both the FTC guidelines and all applicable state lawsregulating franchising in those states in which it has offered franchises. - 6 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST77 The Company is also subject to a number of state laws, as well as foreign laws (to the extent it offers franchises outside of the United States), that regulate substantiveaspects of the franchisor-franchisee relationship, including, but not limited to, those concerning termination and non-renewal of a franchise. COVID-19 DISCUSSION In March 2020, the COVID-19 outbreak was declared a national public health emergency and states placed restrictions on many businesses. Many states mandatedreduced hours, reduced or no public access. The restaurant industry was hit particularly hard because of the normal human contact. The COVID-19 outbreak hascontinued through fiscal 2021 with the appearance of various COVID-19 variants. The Company reviewed and monitored the various state regulations for 2020 and 2021,and continues to review and monitor the regulations as they change. Similar to many businesses across the world, BAB, Inc. was hard hit in March and April of 2020. Our franchise locations were restricted to limited hours and restrictionswere put on contact between customers and workers. We promoted and provided tools and social media postings which provided our franchisees with the ability tocontinue to operate with limited contact, such as, online orders, third party pick-up and curbside service. Our franchisees began using the tools and sales increasedMay through our fiscal year end, November 30, 2020. Royalty revenues during fiscal 2021 have exceeded fiscal 2019 pre-COVID revenues by 2%. Additionally, the Company waived marketing fees, from week ending March 22, through May 31, 2020 in order to assist our franchisees financially. A graduated return tothe original 3% fees was reinstated with 1.5% assessed in June, 2% in July and then a full 3% reinstatement for the week ending August 2, 2020. In 2020, when the COVID-19 pandemic began, the Company responded to reduced revenues by reducing variable costs as quickly as possible. Franchise advertisingexpense was reduced, salaries were reduced until we received our PPP loan, a decrease in operating supplies and professional fees were also reduced. We encouragedand provided information to our franchises as to how to apply for the loan and later how to get the loan forgiven. This stimulus package was of great help to us, and tomany of the franchises in our system. In fiscal 2021 the Company continued to review expenses and respond to necessary changes as needed. Expenses increasedduring fiscal 2021 as income returned to a pre-COVID level. During the COVID-19 pandemic in 2020 and 2021, we have instituted policies and procedures to keep our employees safe. Hand sanitizer, sanitizing wipes and masks areprovided for the convenience of employees. Masks are required to be worn in the office in common areas if within 6 feet of another individual. We also institutedstaggered in-office days to minimize personal contact. Employees were able to work remotely with no significant impact to operations. EMPLOYEES As of November 30, 2021, the Company employed 13 full time persons in the Corporate headquarters. The employees are responsible for corporate management andoversight, franchising, accounting, advertising and operations. None of the Company's employees are subject to any collective bargaining agreements and managementconsiders its relations with its employees to be good. BAB, Inc. considers its employees one of its greatest assets. The Company offers its employees competitive pay and a benefit program. All employees receive fair andequitable pay. The Company contributes 65% of the cost of health, dental and vision insurance premiums. The Company also contributes up to 4% of matching fundsfor the 401(k) program. Daily working hours are reasonably flexible. The Company from time-to-time hires individuals who are beginning their career with an entry level job and provides on the job training. We encourage employees toexpand and develop their talents while employed at the Company so that when the Company has open employment opportunities it can promote from within itsemployee base. - 7 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST88 ITEM 1A. RISK FACTORS Not required for smaller reporting companies. ITEM 1B. UNRESOLVED STAFF COMMENTS Not required for smaller reporting companies. ITEM 2. PROPERTIES The Company's principal executive office, consisting of approximately 5,300 square feet, is located in Deerfield, Illinois and is leased. 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. ITEM 3. 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 suchproceedings or claims cannot be predicted with certainty, management does not believe that the outcome of any such proceedings or claims will have a material effect onour financial position. We know of no pending or threatened proceeding or claim to which we are or will be a party. ITEM 4. MINE SAFETY DISCLOSURES None - 8 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST99 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The following table sets forth the quarterly high and low reported closing sales prices for the Company's common stock, as reported in the Nasdaq Small Cap Market forthe two years ended November 30, 2021 and 2020. The Company's common stock is traded on the NASDAQ OTCQB Marketplace under the symbol "BABB." Year Ended: November 30, 2021 Low High First quarter 0.52 0.71 Second quarter 0.65 0.75 Third quarter 0.70 0.81 Fourth quarter 0.72 0.87 Year Ended: November 30, 2020 Low High First quarter 0.79 0.87 Second quarter 0.44 0.81 Third quarter 0.46 0.60 Fourth quarter 0.50 0.60 As of February 24, 2022, the Company's Common Stock was held by 125 registered holders of record. Registered ownership includes nominees who may hold securitieson behalf of multiple beneficial owners. The Company estimates that the number of beneficial owners of its common stock at February 24, 2022, is approximately 1,100based upon information provided by a proxy services firm. CASH DISTRIBUTION AND DIVIDEND POLICY 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 andpaid 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 September27, 2021, paid October 18, 2021. On December 5, 2019, a $0.01 quarterly and a $0.02 special cash distribution/dividend per share was declared and paid on January 9, 2020. On March 4,2020, a $0.01 quarterly cash distribution/dividend per share was declared to stockholders of record as of March 23, 2020 and paid April 08, 2020. Because of the COVID-19 epidemic, dividends were suspended after the March 4, 2020 declaration for the remainder of 2020. On May 6, 2013, the Board of Directors (“Board”) of BAB, Inc. authorized and declared a dividend distribution of one right for each outstanding share of the commonstock 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 toadjustment. The complete terms of the Rights are set forth in a Preferred Shares Rights Agreement, dated May 6, 2013, between the Company and IST ShareholderServices, as rights agent. - 9 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST1010 The Board adopted the Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significantpenalty 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 theCommon 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 difficulta merger, tender or exchange offer or other business combination involving the Company that is not approved by the Board. However, neither the Rights Agreement northe 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 IllinoisStock Transfer Company. All original rights and provisions remain unchanged. On August 18, 2015 an amendment was filed to the Preferred Shares Rights Agreementchanging 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 May22, 2017 an amendment was filed extending the final expiration date to mean the seventh anniversary date of the original agreement. All other original rights andprovisions remain the same. On February 22, 2019 an amendment was filed extending the final expiration date to mean the ninth anniversary date of the originalagreement. All other original rights and provisions remain the same. On March 4, 2021 an amendment was filed extending the final expiration date to meanthe eleventh anniversary date of the original agreement. All other original rights and provisions remain the same. Determination of whether distributions are considered a cash distribution, cash dividend or combination of the two will not be made until after December 31, 2021, as theclassification or combination is dependent upon the Company’s earnings and profits for tax purposes for its fiscal year ending November 30, 2021. The Company believes execution of its cash distribution/dividend policy will not have any material adverse effects on its ability to fund current operations or futurecapital investments. ITEM 6. RESERVED ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The selected financial data contained herein has been derived from the consolidated financial statements of the Company included elsewhere in this Report on Form 10-K. The data should be read in conjunction with the consolidated financial statements and notes thereto. Certain statements contained in Management's Discussion andAnalysis of Financial Condition and Results of Operations, including statements regarding the development of the Company's business, the markets for the Company'sproducts, anticipated capital expenditures, and the effects of completed and proposed acquisitions, and other statements and disclosures contained herein andthroughout this Annual Report regarding matters that are not historical facts, are forward-looking statements (as such term is defined in the Private Securities LitigationReform Act of 1995). In such cases, we may use words such as "believe," "intend," "expect," "anticipate" and the like. Because such statements include risks anduncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Certain risks and uncertainties are wholly orpartially outside the control of the Company and its management, including its ability to attract new franchisees; the continued success of current franchisees; theeffects of competition on franchisee store results; consumer acceptance of the Company's products in new and existing markets; fluctuation in development andoperating costs; brand awareness; availability and terms of capital; adverse publicity; acceptance of new product offerings; availability of locations and terms of sitesfor store development; food, labor and employee benefit costs; changes in government regulation (including increases in the minimum wage); regional economic andweather 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 orcircumstances after the date hereof or to reflect the occurrence of unanticipated events. - 10 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST1111 GENERAL The Company has 68 franchised and 4 licensed units with 3 units under development at the end of 2021. Units in operation and under development at the end of 2020included 72 franchised and 7 licensed units and 1 unit under development. System-wide revenues were $35.0 million in 2021 and $28.6 million in 2020. The Company's revenues are derived primarily from the ongoing royalties paid to the Company by its franchisees and from 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) to franchisees,licensees and other approved customers. YEAR 2021 COMPARED TO YEAR 2020 Total revenues from all sources increased $700,000, or 29.5%, to $3,072,000 in 2021 from $2,372,000 in the prior year. Marketing revenue increased $309,000 in 2021compared to 2020, franchise fee revenue increased $27,000 in 2021 versus 2020, royalty revenue increased $300,000 and licensing and other revenue increased $64,000 in2021 compared to 2020. Royalty revenue from franchise stores increased $300,000, or 21.8%, to $1,679,000 in 2021 as compared to $1,379,000 in 2020. The increase in royalty revenue wasprimarily a result of some COVID-19 pandemic restrictions being lifted in 2021. In fiscal 2020 the COVID-19 pandemic resulted in many states ordering temporaryrestaurant indoor dining areas closed and severely limiting indoor in person ordering, reducing customer traffic. Franchise fee revenue increased $27,000, or 122.7%, to $49,000 in 2021 as compared to $22,000 in 2020. In 2021 a store closed that had not been fully amortized, resultingin $12,000 of franchise fees recognized. In 2021, there were four transfers compared to two transfers in 2021. Licensing fees and other income increased $64,000, or 21.4%, to $363,000 in 2021 compared to $299,000 in 2020. Marketing fund revenues increased $309,000, or 45.9% to$981,00 in 2021 compared to $672,000 in 2020. The 2021 Marketing fund revenues were close to pre-covid revenues. Because of a decrease in sales in 2020 due to theCOVID-19 pandemic, the Company waived marketing fees from franchises from week ending March 22, through May 31, 2020 and a graduated return to the original 3%fees was reinstated with 1.5% assessed in June, 2% in July and then 3% for the week ending August 2, 2020..Total operating expenses in 2021 were $2,530,000, or 82.4% of revenues, compared to $2,138,000, or 90.1% of revenues in 2020. Total operating expenses in 2021increased $392,000, or 18.3%, compared to 2020. The increase in operating expenses of $392,000 in 2021 was primarily due to an increase in marketing expenses of $309,000, which was due to COVID-19 and reducedmarketing fund revenues in 2020. In 2021 payroll increased $85,000 primarily because in 2021 bonuses were paid to executives and employees where they weren’t paid in2020. Business insurance increased $10,000, Sign Shop cost of goods sold increased $5,000 with general expenses increasing $1,000 and an increase in depreciation andamortization of $1,000, offset by a decrease in legal expenses of $12,000, a decrease of $4,000 in employee benefit expense and a decrease of $2,000 in advertisingexpense in 2021 compared to 2020. Interest income was less than $1,000 in 2021 and 2020. There was an income tax expense in 2021 of $119,000 which includes $79,000 of noncash deferred tax expense and $40,000 of state income tax expense compared to 2020income tax expense of $300,000, which includes $285,000 of noncash deferred tax expense and $15,000 of state income tax expense. There was net income of $651,000 in2021 versus a net loss of $66,000 in 2020. The expense was $181,000 higher in 2020, due to an adjustment of the estimate of utilizable net operating losses in future years,resulting in a decrease in the related deferred tax asset, and an ending net deferred tax liability as of November 30, 2020. Total operating income was $542,000 in 2021 or 17.6% of revenue as compared to $233,000 or 9.8% of revenue in the prior year. In 2021 earnings per share for basic anddiluted outstanding shares was $0.09 compared to a $.01 per share loss for basic and diluted outstanding shares in 2020. - 11 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST1212 LIQUIDITY AND CAPITAL RESOURCES At November 30. 2021, the Company had working capital of $1,167,000 and unrestricted cash of $1,462,000. At November 30, 2020, the Company had working capital of$732,000 and unrestricted cash of $1,236,000, which includes the proceeds of a Paycheck Protection Program (“PPP”) loan of $228,155. During fiscal 2021, the Company had net income of $651,000 and operating activities which provided cash of $718,000. The principal adjustments to reconcile net incometo cash provided by operating activities were depreciation and amortization of $5,000, deferred tax expense of $79,000 and noncash lease expense of $99,000, less debtforgiveness of $228,000 and the provision for uncollectible accounts of $3,000. In addition, changes in other operating assets and liabilities decreased cash a total of$115,000. During fiscal 2020, the Company had a net loss of $66,000 and operating activities which provided cash of $213,000. The principal adjustments to reconcile thenet loss to cash provided by operating activities were depreciation and amortization of $4,000, deferred tax expense of $285,000 and noncash lease expense of $99,000,less the provision for uncollectible accounts of $7,000. In addition, changes in other operating assets and liabilities decreased cash a total of $102,000. During fiscal 2021, the Company used $3,000 for investing activities for equipment purchases and trademark renewal. During fiscal 2020, the Company used $13,000 forinvesting activities for equipment purchases and trademark renewals. Financing activities in fiscal 2021 included cash used for distributions/dividend payments to common stockholders of $291,000 and in fiscal 2020 included fundsincreasing cash flow of $228,155 for a PPP loan and cash distributions/dividend payments to common stockholders of $291,000. Although there can be no assurances that the Company will be able to pay cash distributions/dividends in the future, it is the Company’s intent that future cashdistributions/dividends will be considered based on profitability expectations and financing needs and will be declared at the discretion of the Board of Directors. It isthe Company’s intent going forward to declare and pay cash distributions/dividends on a quarterly basis if warranted. In 2020 the impact of the COVID-19 pandemic caused the Company to suspend dividends in the third and fourth quarters of 2020. Cash distributions/dividends wereconsidered after reviewing profitability expectations and financing needs for fiscal 2021 and a dividend/distribution was declared January 27, 2021 by the Board ofDirectors of $0.01 payable February 2021. Determination of whether distributions are considered a cash distribution, cash dividend or combination of the two will not be made until after December 31, 2021, as theclassification or combination is dependent upon the Company’s earnings and profits for tax purposes for its fiscal year ending November 30, 2021. The Company believes execution of its cash distribution/dividend policy will not have any material adverse effects on its ability to fund current operations or futurecapital investments. The Company was granted a PPP loan in May 2020 in the amount $228,155. The loan was forgiven through the SBA on December 8, 2020 and is reflected in other incomein fiscal year 2021. OFF BALANCE SHEET ARRANGEMENTS The Company has no off balance sheet arrangements. - 12 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST1313 CRITICAL ACCOUNTING POLICIES The Company's significant accounting policies are presented in the Notes to the Consolidated Financial Statements (see Note 2 of the audited consolidated financialstatements included herein). While all of the significant accounting policies impact the Company's Consolidated Financial Statements, some of the policies may beviewed to be more critical. The more critical policies are those that are most important to the portrayal of the Company's financial condition and results of operationsand that require management's most difficult, subjective and/or complex judgments and estimates. Management bases its judgments and estimates on historicalexperience and various other factors that are believed to be reasonable under the circumstances. The results of judgments and estimates form the basis for makingjudgments about the Company's value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates underdifferent assumptions or conditions. Management believes the following are its most critical accounting policies because they require more significant judgments andestimates in preparation of its consolidated financial statements. Long-Lived Assets Property and equipment are recorded at cost. Improvements and replacements are capitalized, while expenditures for maintenance and routine repairs that do not extendthe life of the asset are charged to expense as incurred. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets. Property,equipment and leasehold improvements are stated at cost, less accumulated depreciation. Estimated useful lives for the purpose of depreciation and amortization are 3to 7 years for property and equipment and 10 years, or the term of the lease if less, for leasehold improvements. 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 besubject to annual impairment tests. The Company follows this guidance. Following the guidelines contained in ASC 350, the Company tests goodwill and intangible assets that are not subject to amortization for impairment annually or morefrequently if events or circumstances indicate that impairment is possible. The Company has elected to conduct its annual test during the first quarter. During thequarters ended February 28, 2021 and 2020, management qualitatively assessed goodwill to determine whether testing was necessary. Factors that managementconsiders 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 likelythan not that the fair value of a reporting unit is less than it’s carrying value, a quantitative assessment is then performed. Although the Covid-19 Pandemic caused significant disruption to our industry, the Company has been able to recover much quicker than expected and 2020 royaltyrevenues were 83.7% of fiscal 2019 royalty revenues. For the twelve months of fiscal 2021, royalty revenues exceeded the twelve months of fiscal 2019 (pre-pandemic)royalty revenues by 2%. Management reviewed and updated the qualitative assessment conducted during the first quarter 2021 at year end and does not believe thatany impairment exists at November 30, 2021. Concentrations of Credit Risk Certain financial instruments potentially subject the Company to concentrations of credit risk. These financial instruments consist primarily of royalty and wholesaleaccounts receivables. The Company believes it has maintained adequate reserves for doubtful accounts. The Company reviews the collectability of receivablesperiodically taking into account payment history and industry conditions. Deferred Taxes The Company routinely reviews the future realization of tax assets based on projected future reversals of taxable temporary differences, available tax planning strategiesand projected future taxable income. As of November 30, 2021, the net operating loss carryforwards which it believes it will utilize are approximately $160,000, expiringbetween 2022 and 2029 for U.S. federal tax purposes. - 13 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST1414 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 leaseright-of-use (“ROU”) assets, other current liabilities and long-term operating lease liabilities on the consolidated balance sheets. Finance leases are included in propertyand 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 atcommencement date. As most leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at commencement date indetermining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial directcosts 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. Leaseexpense for minimum lease payments is recognized on a straight-line basis over the lease term. 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 respectivelocation(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 10years. Subject to the Company’s approval, a franchisee may generally renew the franchise agreement upon its expiration. If approved, a franchisee may transfer afranchise 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. Afranchise 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 isassessed based on a formula reviewed and approved by management. Revenue generated from a contract breach is termed settlement income by the Company andincluded 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 andthe franchise rights and related ongoing services represent two separate performance obligations. The franchise fee revenue has been allocated to the two separateperformance obligations using a residual approach. The Company has estimated the value of performance obligations related to certain pre-opening activities deemed tobe 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. Revenueallocated to preopening activities is recognized when (or as) these services are performed. Revenue allocated to franchise rights and ongoing services is deferred untilthe 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 accessto the franchise right. Royalty income is recognized during the respective franchise agreement based on the royalties earned each period as the underlying franchise store sales occur. There are two items involving revenue recognition of contracts that require us to make subjective judgments: the determination of which performance obligations aredistinct within the context of the overall contract and the estimated stand-alone selling price of each obligation. In instances where our contract includes significantcustomization or modification services, the customization and modification services are generally combined and recorded as one distinct performance obligation. 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 andrebates from the vendors and distributors on product purchases by franchisees. In addition, the Company may collect various initial fees, and those fees are classifiedas 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 controlof the products prior to their transfer to the franchisee and products are delivered to franchisees directly from the vendor or their distributors. The Company recognizesthe 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 aslicensing fees and other income in the Condensed Consolidated Statements of Income. - 14 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST1515 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 notredeemable for cash except where required by law. Revenue from gift cards is recognized upon redemption in exchange for product and reported within franchisee storerevenue and the royalty and marketing fees are paid and shown in the Condensed Consolidated Statements of Income. Until redemption, outstanding customer balancesare 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 ConsolidatedBalance Sheets. Included in accounts payable and accrued expenses at November 30, 2021 and 2020 were liabilities of $210,000 and $184,000, respectively forunredeemed gift cards. 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 giftcard redemption patterns, we can reasonably estimate the amount of gift cards for which redemption is remote, which is referred to as “breakage.” The Companyrecognizes gift card breakage proportional to actual gift card redemptions on a quarterly basis and the corresponding revenue is included in licensing fees and otherrevenue. Significant judgments and estimates are required in determining the breakage rate and will be reassessed each quarter. 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’smain goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope, including tradereceivables. The amendments in this update broaden the information that an entity must consider in developing its expected credit loss estimate for assets measuredeither 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 beginningafter 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 anymaterial 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 variousaspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existingguidance to improve consistent application. The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15,2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements haveyet been issued. The Company will adopt ASU 2019-12 for fiscal year ending November 30, 2022 and the adoption of this guidance is not expected to have any materialimpact 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 November 30, 2021 that would haveor are expected to have any significant effect on the Company’s financial position, cash flows or income statement. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK In regard to interest, foreign currency and commodity price risk the Company does not believe that these are significant risk factors. - 15 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST1616 ITEM 8. FINANCIAL STATEMENTS The Consolidated Financial Statements and Report of Independent Registered Public Accounting Firm is included immediately following. BAB, Inc.Years Ended November 30, 2021 and 2020 C o n t e n t s Report of Independent Registered Public Accounting Firm (PCAOB 29)17 Consolidated Balance Sheets18 Consolidated Statements of Income19 Consolidated Statements of Stockholders’ Equity20 Consolidated Statements of Cash Flows21 Notes to the Consolidated Financial Statements22 - 36 - 16 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST1717 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholdersof BAB, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of BAB, Inc. (the Company) as of November 30, 2021 and 2020, and the related statements of income,stockholders’ equity, and cash flows for each of the years in the two-year period ended November 30, 2021, and the related notes (collectively referred to as the financialstatements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2021 and 2020, andthe results of its operations and its cash flows for each of the years in the two-year period ended November 30, 2021, in conformity with accounting principles generallyaccepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statementsbased on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to beindependent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and ExchangeCommission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged toperform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financialreporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express nosuch opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performingprocedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to becommunicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especiallychallenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as awhole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures towhich they relate. Valuation of goodwill and indefinite-lived intangible assets At November 30, 2021, the Company’s goodwill was $1,493,771 and indefinite-lived intangible assets were $461,445. As disclosed in Note 2 to the consolidated financialstatements, goodwill and indefinite-lived intangible assets are tested for impairment either qualitatively or quantitively at least annually, or more frequently if indicatorsof impairment require the performance of interim impairment assessment. During the year ended November 30, 2021, management qualitatively assessed goodwill todetermine whether additional quantitative testing was necessary. Auditing the accounting for goodwill and indefinite-lived intangible assets was highly judgmental due to the qualitative nature of the goodwill impairment evaluation,and the subjectivity in determining whether it is more likely than not that the fair value of goodwill and indefinite-lived intangible assets are less than the carryingamount. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financialstatements. These procedures included obtaining an understanding and evaluating the design and operating effectiveness of controls over the Company’s process ofaccounting for goodwill and indefinitelived intangible assets, and evaluating events and circumstances identified by management to support an assertion that it is notmore likely than not that the fair value of a reporting unit is less than its carrying amount. Relevant events and circumstances evaluated included general macroeconomicconditions, industry and market conditions in which the Company operates, changes in cost factors, overall financial performance, including both actual and expectedperformance, entity-specific events, changes in share price, both in absolute terms and relative to peers, and any applicable quantitative analysis used to supportqualitative discussions. /s/ Sassetti LLCOak Brook, IllinoisFebruary 25, 2022 We have served as the Company’s auditor since 2007. 2107 Swift Drive, Suite 210, Oak Brook, IL 60523 ▪ 708.386.1433 ▪ www.sassetti.com - 17 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST1818 BAB, IncConsolidated Balance SheetsNovember 30, 2021 and 2020 November 30, 2021 November 30, 2020 ASSETS Current Assets Cash $1,462,026 $1,236,081 Restricted cash 596,132 396,842 Receivables Trade accounts and notes receivable (net of allowance for doubtful accounts of $13,878 in 2021 and$18,152 in 2020 ) 91,306 62,969 Marketing fund contributions receivable from franchisees and stores 26,086 17,544 Prepaid expenses and other current assets 88,315 96,723 Total Current Assets 2,263,865 1,810,159 Property, plant and equipment (net of accumulated depreciation of $158,666 in 2021 and $157,118 in 2020) 748 2,296 Trademarks 461,445 461,445 Goodwill 1,493,771 1,493,771 Definite lived intangible assets (net of accumulated amortization of $131,042 in 2021 and $127,474 in 2020) 22,664 23,707 Operating lease right of use 217,648 303,084 Total Noncurrent Assets 2,196,276 2,284,303 Total Assets $4,460,141 $4,094,462 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $2,064 $10,279 Income tax payable 14,223 - Accrued expenses and other current liabilities 316,544 288,888 Unexpended marketing fund contributions 620,535 387,117 Deferred franchise fee revenue 34,545 33,957 Deferred licensing revenue 3,571 31,071 Current portion operating lease liability 106,392 99,149 Payroll Protection Program loan - 228,155 Total Current Liabilities 1,097,874 1,078,616 Long-term Liabilities (net of current portion) Operating lease liability 153,702 260,094 Deferred franchise revenue 110,557 93,929 Deferred tax liability 164,114 84,940 Deferred licensing revenue 298 3,869 Total Long-term Liabilities 428,671 442,832 Total Liabilities $1,526,545 $1,521,448 Stockholders' Equity Preferred shares -$.001 par value; 4,000,000 authorized; no shares outstanding as of November 30, 2021 and 2020 - - Preferred shares -$.001 par value; 1,000,000 Series A authorized; no shares outstanding as of November 30, 2021and 2020 - - Common stock -$.001 par value; 15,000,000 shares authorized; 8,466,953 shares issued and 7,263,508 sharesoutstanding as of November 30, 2021 and 2020 13,508,257 13,508,257 Additional paid-in capital 987,034 987,034 Treasury stock (222,781) (222,781)Accumulated deficit (11,338,914) (11,699,496)Total Stockholders' Equity 2,933,596 2,573,014 Total Liabilities and Stockholders' Equity $4,460,141 $4,094,462 See accompanying notes - 18 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST1919 BAB, IncConsolidated Statements of IncomeYears Ended November 30, 2021 and 2020 2021 2020 REVENUES Royalty fees from franchised stores $1,678,970 $1,379,153 Franchise Fees 49,595 21,955 Licensing fees and other income 362,943 298,766 Marketing fund revenue 980,630 671,659 Total Revenues 3,072,138 2,371,533 OPERATING EXPENSES Selling, general and administrative expenses: Payroll and payroll-related expenses 970,465 885,410 Occupancy 133,247 133,053 Advertising and promotion 22,980 25,216 Professional service fees 101,168 112,981 Travel 9,930 10,245 Employee benefit expenses 133,132 136,821 Depreciation and amortization 5,116 3,562 Marketing fund expenses 980,630 671,659 Other 173,746 159,195 Total Operating Expenses 2,530,414 2,138,142 Income from operations 541,724 233,391 Interest income 417 378 Debt forgiveness - Paycheck Protection Program loan 228,155 - Income before provision for income taxes 770,296 233,769 Provision for income taxes Current tax expense 40,000 15,000 Deferred tax expense 79,174 284,940 Total Tax Provision 119,174 299,940 Net (Loss)/Income $651,122 $(66,171) Net (Loss)/Income per share - Basic and Diluted $0.09 $(0.01) Weighted average shares outstanding - Basic and diluted 7,263,508 7,263,508 Cash distributions declared per share $0.04 $0.04 See accompanying notes - 19 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST2020 BAB, IncConsolidated Statements of Stockholders’ EquityYears Ended November 30, 2021 and 2020 Additional Accumulated Common Stock Paid-In Treasury Stock Deficit November 30, 2019 8,466,953 $13,508,257 $987,034 1,203,445 $(222,781) $(11,342,785) $2,929,725 Dividends Declared (290,540) (290,540) Net (Loss) (66,171) (66,171) November 30, 2020 8,466,953 $13,508,257 $987,034 1,203,445 $(222,781) $(11,699,496) $2,573,014 Dividends Declared (290,540) (290,540) Net Income 651,122 651,122 November 30, 2021 8,466,953 $13,508,257 $987,034 1,203,445 $(222,781) $(11,338,914) $2,933,596 See accompanying notes - 20 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST2121 BAB, IncConsolidated Statements of Cash FlowsYears Ended November 30, 2021 and 2020 November 30, 2021 November 30, 2020 Operating activities Net (Loss)/Income $651,122 $(66,171)Adjustments to reconcile net income to cash flows provided by operating activities: Depreciation and amortization 5,116 3,562 Deferred tax expense 79,174 284,940 Provision for uncollectible accounts, net of recoveries (3,474) (7,080)Noncash lease expense 99,311 99,312 Debt forgiveness - Paycheck Protection Program loan (228,155) - Changes in: Trade accounts receivable and notes receivable (24,863) 10,981 Marketing fund contributions receivable (8,542) (325)Prepaid expenses and other 8,408 (2,578)Accounts payable 6,008 6,084 Accrued liabilities 27,656 1,474 Unexpended marketing fund contributions 233,418 (29,188)Deferred revenue (13,855) 22,281 Operating lease liability (113,024) (110,375)Net Cash Provided by Operating Activities 718,300 212,917 Investing activities Capitalization of trademark renewals (2,525) (13,278)Net Cash Used In Investing Activities (2,525) (13,278) Financing activities Loan proceeds - 228,155 Cash distributions/dividends (290,540) (290,540)Net Cash Used In Financing Activities (290,540) (62,385) Net Increase/(Decrease) in Cash and Restricted Cash 425,235 137,254 Cash and Restricted Cash - Beginning of Period 1,632,923 1,495,669 Cash and Restricted Cash - End of Period $2,058,158 $1,632,923 Supplemental disclosure of cash flow information: Interest paid $- $- Income taxes paid $38,420 $36,012 See accompanying notes - 21 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST2222 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 1 - Nature of Operations BAB, Inc (“the Company”) has three wholly owned subsidiaries: BAB Systems, Inc. (“Systems”) and 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 inBAB and MFM locations. SweetDuet® (“SD”) frozen yogurt can be added as an additional brand in a BAB or MFM location. Operations was formed in 1995, primarilyto operate Company-owned stores of which there are currently none. The assets of Jacobs Bros. Bagels (“Jacobs Bros.”) were acquired in 1999, and any brandedwholesale 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 unitsunder the BAB, MFM and SD trade names. At November 30, 2021, the Company had 68 franchise units and 4 licensed units in operation in 20 states. There are 3 unitsunder development. The Company's revenues are derived primarily from the ongoing royalties paid to the Company by its franchisees and from receipt of initialfranchise fees. Additionally, the Company derives revenue from the sale of licensed products (My Favorite Muffin mix, Big Apple Bagels cream cheese and Brewster'scoffee) to franchisees, licensees and other approved customers. The BAB franchised brand consists of units operating as “Big Apple Bagels®,” featuring daily baked bagels, flavored cream cheeses, premium coffees, gourmet bagelsandwiches and other related products. BAB units are primarily concentrated in the Midwest and Western United States. The MFM brand consists of units operatingas “My Favorite Muffin Gourmet Muffin Bakery™” (“MFM Bakery”), featuring a large variety of freshly baked muffins and coffees and units operating as “My FavoriteMuffin 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-alonefranchises, 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 inexisting MFM units. The Company expects to continue to realize efficiencies in servicing the combined base of BAB and MFM franchisees. Note 2 - Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have beeneliminated in consolidation. Uses of Estimates The preparation of the financial statements and accompanying notes are in conformity with accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingentassets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differfrom those estimates. - 22 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST2323 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 2 - Summary of Significant Accounting Policies (continued) 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 andidentifying troubled accounts and by using historical collection experience. A receivable is considered to be past due if any portion of the receivable balance isoutstanding 90 days past the due date. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded as incomewhen 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-linemethod 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, forleasehold improvements. Maintenance and repairs are charged to expense as incurred. Expenditures that materially extend the useful lives of assets are capitalized. 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 besubject to annual impairment tests. The Company follows this guidance. Following the guidelines contained in ASC 350, the Company tests goodwill and intangible assets that are not subject to amortization for impairment annually or morefrequently if events or circumstances indicate that impairment is possible. The Company has elected to conduct its annual test during the first quarter. During thequarters ended February 28, 2021 and 2020, management qualitatively assessed goodwill to determine whether testing was necessary. Factors that managementconsiders 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 likelythan not that the fair value of a reporting unit is less than it’s carrying value, a quantitative assessment is then performed. Although the Covid-19 Pandemic caused significant disruption to our industry, the Company was able to recover much quicker than expected and 2020 royalty revenueswere 83.7% of fiscal 2019 royalty revenues. For the twelve months of fiscal 2021, royalty revenues exceeded the twelve months of fiscal 2019 (pre-pandemic) royaltyrevenues by 2%. Management reviewed and updated the qualitative assessment conducted during the first quarter 2021 at year end and does not believe that anyimpairment exists at November 30, 2021. - 23 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST2424 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 2 - Summary of Significant Accounting Policies (continued) Goodwill and Other Intangible Assets (continued) The net book value of goodwill and intangible assets with indefinite and definite lives are as follows: Goodwill Trademarks Definite LivedIntangibles Total Net Balance as of November 30, 2019 $1,493,771 $461,445 $12,625 $1,967,841 Additions - - 13,278 13,278 Amortization expense - - (2,196) (2,196)Net Balance as of November 30, 2020 $1,493,771 $461,445 $23,707 $1,978,923 Additions - - 2,525 2,525 Amortization expense - - (3,568) (3,568)Net Balance as of November 30, 2021 $1,493,771 $461,445 $22,664 $1,977,880 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.Advertising and promotion expense was $23,000 and $25,000 in 2021 and 2020, respectively. Income Taxes The Company accounts for income taxes in accordance with FASB Topic 40. Deferred tax assets and liabilities are classified as noncurrent on the balance sheet. Deferredincome taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amountsused for income tax purposes. The benefits from net operating losses carried forward may be impaired or limited in certain circumstances. The Company files a consolidated U.S. income tax return and tax returns in various state jurisdictions. Review of the Company’s possible tax uncertainties as ofNovember 30, 2021 did not result in any positions requiring disclosure. Should the Company need to record interest and/or penalties related to uncertain tax positions orother tax authority assessments, it would classify such expenses as part of the income tax provision. The Company has not changed any of its tax policies or adoptedany new tax positions during the fiscal year ended November 30, 2021 and believes it has filed appropriate tax returns in all jurisdictions for which it has nexus. The Company’s income tax returns, which are filed as a consolidated return. for the years ending November 30, 2018, 2019 and 2020 are subject to examination by the IRSand corresponding states, generally for three years after they are filed. - 24 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST2525 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 2 - Summary of Significant Accounting Policies (continued) 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 leaseright-of-use (“ROU”) assets, other current liabilities and long-term operating lease liabilities on the consolidated balance sheets. Finance leases are included in propertyand 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 atcommencement date. As most leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at commencement date indetermining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial directcosts 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. Leaseexpense 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’smain goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope, including tradereceivables. The amendments in this update broaden the information that an entity must consider in developing its expected credit loss estimate for assets measuredeither 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 beginningafter 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 anymaterial 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 variousaspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existingguidance to improve consistent application. The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15,2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements haveyet been issued. The Company will adopt ASU 2019-12 for fiscal year ending November 30, 2022 and the adoption of this guidance is not expected to have any materialimpact 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 November 30, 2021 that would haveor are expected to have any significant effect on the Company’s financial position, cash flows or income statement. - 25 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST2626 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 2 - Summary of Significant Accounting Policies (continued) SegmentsAccounting standards have established annual reporting standards for an enterprise’s operating segments and related disclosures about its products, services,geographic areas and major customers. The Company’s operations were a single reportable segment. Statement of Cash Flows The chart below shows the cash and restricted cash within the consolidated statements of cash flows as of November 30, 2021 and November 30, 2020 were as follows: November 30, 2021 November 30, 2020 Cash and cash equivalents $1,462,026 $1,236,081 Restricted cash 596,132 396,842 Total cash and restricted cash $2,058,158 $1,632,923 Earnings Per Share The Company computes earnings per share (“EPS”) under ASC 260 “Earnings per Share.” Basic net earnings are divided by the weighted average number of commonshares outstanding during the year to calculate basic net earnings per common share. Diluted net earnings per common share are calculated to give effect to thepotential dilution that could occur if options or other contracts to issue common stock were exercised and resulted in the issuance of additional common shares. Thereare currently no stock options issued or outstanding. 2021 2020 Numerator: Net income available to common stockholders $651,122 $(66,171) Denominator: Weighted average outstanding shares Basic and diluted 7,263,508 7,263,508 Earnings per Share - Basic and diluted $0.09 $(0.01) At November 30, 2021 and 2020, there are no common stock equivalents. In addition, the weighted average shares do not include any effects for potential shares relatedto the Preferred Shares Rights Agreement. - 26 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST2727 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 2 - Summary of Significant Accounting Policies (continued) 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 respectivelocation(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 10years. Subject to the Company’s approval, a franchisee may generally renew the franchise agreement upon its expiration. If approved, a franchisee may transfer afranchise 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. Afranchise 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 isassessed based on a formula reviewed and approved by management. Revenue generated from a contract breach is termed settlement income by the Company andincluded in licensing fees and other income. There are two items involving revenue recognition of contracts that require us to make subjective judgments: the determination of which performance obligations aredistinct within the context of the overall contract and the estimated standalone selling price of each obligation. In instances where our contract includes significantcustomization or modification services, the customization and modification services are generally combined and recorded as one distinct performance obligation. 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 andthe franchise rights and related ongoing services to represent two separate performance obligations. The franchise fee revenue has been allocated to the two separateperformance obligations using a residual approach. The Company has estimated the value of performance obligations related to certain pre-opening activities deemed tobe 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. Revenueallocated to preopening activities is recognized when (or as) these services are performed. Revenue allocated to franchise rights and ongoing services is deferred untilthe 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 accessto 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 usingactual franchise receipts. Generally, franchisees report and remit royalties on a weekly basis. The majority of month-end receipts are recorded on an accrual basis basedon actual numbers from reports received from franchisees shortly after the month-end. Estimates are utilized in certain instances where actual numbers have not beenreceived 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 aredistinct within the context of the overall contract and the estimated stand-alone selling price of each obligation. In instances where our contract includes significantcustomization or modification services, the customization and modification services are generally combined and recorded as one distinct performance obligation. - 27 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST2828 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 2 - Summary of Significant Accounting Policies (continued) 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 notredeemable for cash except where required by law. Revenue from gift cards is recognized upon redemption in exchange for product and reported within franchisee storerevenue and the royalty and marketing fees are paid and shown in the Condensed Consolidated Statements of Income. Until redemption, outstanding customer balancesare 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 ConsolidatedBalance 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 giftcard redemption patterns, we can reasonably estimate the amount of gift cards for which redemption is remote, which is referred to as “breakage.” The Companyrecognizes gift card breakage proportional to actual gift card redemptions on a quarterly basis and the corresponding revenue is included in licensing fees and otherrevenue. 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 andrebates from the vendors and distributors on product purchases by franchisees. In addition, the Company may collect various initial fees, and those fees are classifiedas 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 controlof the products prior to their transfer to the franchisee and products are delivered to franchisees directly from the vendor or their distributors. The Company recognizesthe 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 aslicensing 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 paidon franchise wholesale sales. The balance sheet includes marketing fund cash, which is the restricted cash, accounts receivable and unexpended marketing fundcontributions. Although the marketing fees are not separate performance obligations distinct from the underlying franchise right, the Company acts as the principal as itis primarily responsible for the fulfillment and control of the marketing services. As a result, the Company records marketing fees in revenues and related marketing fundexpenditures in expenses in the Condensed Consolidated Statement of Income. The Company historically presented the net activities of the marketing fund within thebalance sheet in the Condensed Consolidated Balance Sheet. While this reclassification impacts the gross amount of reported revenue and expenses the amounts will beoffsetting, and there is no impact on net income. - 28 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST2929 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 3 - Revenue Recognition Disaggregation of Revenue The following table presents disaggregation of revenue from contracts with customers for the year ended November 30, 2021 and 2020: For year endedNovember 30, 2021 For year endedNovember 30, 2020 Revenue recognized at a point in time Sign Shop revenue $8,093 $2,697 Settlement revenue 99,647 33,553 Total revenue at a point in time 107,740 36,250 Revenue recognized over time Royalty revenue 1,678,970 1,379,153 Franchise fees 49,595 21,955 License fees 11,800 29,354 Gift card revenue 4,123 4,472 Nontraditional revenue 239,280 228,690 Marketing fund revenue 980,630 671,659 Total revenue over time 2,964,398 2,335,283 Grand total $3,072,138 $2,371,533 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 overthe contract life. Contract liabilities also include marketing fund balances and gift card liability balances. November 30, 2021 November 30, 2020 Contract liabilities Contract liabilities - current $861,615 $599,965 Contract liabilities - long-term 110,855 97,798 Total Contract Liabilities $972,470 $697,763 2021 2020 Contract liabilities at beginning of period $697,763 $702,834 Revenue Recognized during period (1,063,614) (780,940)Additions during period 1,338,321 775,869 Contract liabilities at end of period $972,470 $697,763 - 29 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST3030 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Contract balances (continued) Transaction price allocated to remaining performance obligations (franchise agreements and license fee agreement) for the year ended November 30: 2022 $38,116 2023 19,256 2024 17,125 2025 16,958 2026 12,908 Thereafter 44,608 Total $148,971 The Company has elected to apply certain practical expedients as defined in ASC 606-10-50-14 through 606-10-50-14A, including (i) performance obligations that are apart of a contract that has an original expected duration of one year or less; (ii) the right to invoice practical expedient; and (iii) variable consideration related tounsatisfied performance obligations that is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performanceobligation, and the terms of that variable consideration relate specifically to our efforts to transfer the distinct service, or to a specific outcome from transferring thedistinct service. As such, sales-based royalty and marketing income, as well as gift card breakage revenue, is not included in the above transaction price chart. Note 4 - Units Open, Licensed and Under Development Big Apple Bagels®, SweetDuet Frozen Yogurt and Gourmet Muffins® and My Favorite Muffin® operating units, licensed units and unopened stores for which aFranchise Agreement has been executed, are as follows: 2021 2020 Stores open: Franchisee-owned stores 68 72 Licensed Units 4 7 72 79 Unopened stores with Franchise Agreements 3 1 Total operating units and units with Franchise Agreements 75 80 - 30 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST3131 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 5 – Income Taxes The components of the Company’s provision for income taxes are as follows: 2021 2020 Current Federal $- $- State 40,000 15,000 Deferred 79,174 284,940 Total $119,174 $299,940 In fiscal 2021, the Company’s income included the $228,000 of PPP loan 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 statutory tax rate used to compute income tax expense at the federal rate of 21% and a state rateof 7.11%, which is net of the federal tax effect for fiscal 2020 and 2021. The effective tax rate for fiscal 2021 is 15.5% versus 128% for the fiscal 2020. In 2020, the decrease in the net deferred tax asset was due to a change in the actual and expected use of net operating losses, (“NOLs”) that were expiring in 2021through 2029. A reconciliation of the expected income tax expense to the recorded income tax expense is as follows for the years ended November 30: 2021 2020 Federal income tax provision computed at federal statutory rate $89,446 $49,091 State income taxes, net of federal tax provision 40,000 16,620 Change in valuation allowance, utilization of NOL's and expected future use of NOL's and other adjustments (10,272) 234,229 Income Tax Provision $119,174 $299,940 - 31 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST3232 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 5 – Income Taxes (continued) The components of the Company’s deferred tax assets and liabilities for federal and state income taxes consist of the following: 2021 2020 Deferred revenue $41,876 $45,771 Marketing Fund net contributions 165,600 111,552 Allowance for doubtful accounts and notes receivable 3,901 5,103 Accrued expenses 52,907 49,176 Operating lease liability 73,112 100,983 Net operating loss carryforwards 33,652 159,567 Valuation allowance - - Total Deferred Income Tax Asset $371,048 $472,152 Depreciation and amortization $(473,971) $(471,895)Right of use lease asset (61,191) (85,197)Total Deferred Income Tax Liabilities $(535,162) $(557,092) Total Net Deferred Tax Liability $(164,114) $(84,940) As of November 30, 2021 the Company has estimated realizable net operating loss carryforwards of approximately $160,000 expiring between 2022 and 2029 for U.S.federal income tax purposes. There are no remaining net operating loss carryforwards to be utilized for state taxes. The Company routinely reviews the future realizationof tax assets based on projected future reversals of taxable temporary differences, available tax planning strategies and projected future taxable income. There is novaluation allowance established for 2021 and 2020 because it is expected that the NOLs will be utilized. The Company’s income tax returns, which are filed as a consolidated return for the years ending November 30, 2018, 2019 and 2020 are subject to examination by the IRSand corresponding states, generally for three years after they are filed. Note 6 – Stockholders’ Equity 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 andpaid 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 September27, 2021, paid October 18, 2021. - 32 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST3333 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 6 – Stockholders’ Equity (continued) On December 5, 2019, a $0.01 quarterly and a $0.02 special cash distribution/dividend per share was declared and paid on January 9, 2020. On March 4,2020, a $0.01 quarterly cash distribution/dividend per share was declared to stockholders of record as of March 23, 2020 and paid April 08, 2020. Because of the COVID-19 epidemic, dividends were suspended after the March 4, 2020 declaration for the remainder of 2020. On May 6, 2013, the Board of Directors (“Board”) of BAB, Inc. authorized and declared a dividend distribution of one right for each outstanding share of the commonstock 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 toadjustment. The complete terms of the Rights are set forth in a Preferred Shares Rights Agreement, dated May 6, 2013, between the Company and IST ShareholderServices, 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 significantpenalty 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 theCommon 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 difficulta merger, tender or exchange offer or other business combination involving the Company that is not approved by the Board. However, neither the Rights Agreement northe 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 IllinoisStock Transfer Company. All original rights and provisions remain unchanged. On August 18, 2015 an amendment was filed to the Preferred Shares Rights Agreementchanging 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 May22, 2017 an amendment was filed extending the final expiration date to mean the seventh anniversary date of the original agreement. All other original rights andprovisions remain the same. On February 22, 2019 an amendment was filed extending the final expiration date to mean the ninth anniversary date of the originalagreement. All other original rights and provisions remain the same. On March 4, 2021 an amendment was filed extending the final expiration date to meanthe eleventh anniversary date of the original agreement. All other original rights and provisions remain the same. Determination of whether distributions are considered a cash distribution, cash dividend or combination of the two will not be made until after December 31, 2021, as theclassification or combination is dependent upon the Company’s earnings and profits for tax purposes for its fiscal year ending November 30, 2021. The Company believes execution of its cash distribution/dividend policy will not have any material adverse effects on its ability to fund current operations or futurecapital investments. - 33 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST3434 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 7 – Recent Accounting Pronouncement In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard’smain goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope, including tradereceivables. The amendments in this update broaden the information that an entity must consider in developing its expected credit loss estimate for assets measuredeither 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 beginningafter 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 anymaterial 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 variousaspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existingguidance to improve consistent application. The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15,2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements haveyet been issued. The Company will adopt ASU 2019-12 for fiscal year ending November 30, 2022 and the adoption of this guidance is not expected to have any materialimpact 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 November 30, 2021 that would haveor are expected to have any significant effect on the Company’s financial position, cash flows or income statement. Note 8 – 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 wassigned 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 tenantallowance 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 notbeen included in the measurement of the lease liability. Monthly rent expense is recognized on a straight-line basis over the term of the lease. Rent expenses for fiscal 2021 and 2020 were $91,300 and $88,600, respectively. AtNovember 30, 2021, the remaining lease term was 28 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. - 34 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST3535 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 8 – Lease Commitments (continued) Gross future minimum annual rental commitments as of November 30, 2021, are as follows: Year Ending November 30: Undiscounted RentPayments 2022 115,673 2023 118,322 2024 40,177 $274,172 Present Value Discount (14,078)Present Value $260,094 Short-term lease liability $106,392 Long-term lease liability 153,702 $260,094 Note 9 – Employee Benefit Plan The Company maintains a qualified 401(k) plan which allows participants to make pretax contributions. In fiscal 2015, the Company amended the 401(k) plan, establishingit as a Safe Harbor plan effective January 1, 2015. Employee contributions are matched by the Company in accordance with the Plan up to a maximum of 4% of employeeearnings. The Company may also make discretionary contributions to the Plan. In fiscal 2021 and 2020 the Company’s employer match was $32,000 and $34,000,respectively. There were no Company discretionary contributions in 2021 or 2020. Note 10 – 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(“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 amountforgiven is recognized as a gain upon debt extinguishment for fiscal 2021. - 35 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST3636 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2021 and 2020 Note 11 – Contingencies 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 suchproceedings or claims cannot be predicted with certainty, management does not believe that the outcome of any such proceedings or claims will have a material effect onour financial position. We know of no pending or threatened proceeding or claim to which we are or will be a party. Note 12 –Uncertainties and COVID-19 In March 2020, the COVID-19 outbreak was declared a national public health emergency and states placed restrictions on many businesses. Many states mandatedreduced hours, reduced or no public access. The restaurant industry was hit particularly hard because of the normal human contact. The COVID-19 outbreak hascontinued through fiscal 2021 with the appearance of various COVID-19 variants. The Company reviewed and monitored the various state regulations for 2020 and 2021,and continues to review and monitor the regulations as they change. As like many businesses across the world, BAB, Inc. was hard hit in March and April of 2020. Our franchise locations were restricted to limited hours and restrictionswere put on contact between customers and workers. We promoted and provided tools and social media posting which provided our franchisees with the ability tocontinue to operate with limited contact, such as, online orders, third party pick-up and curbside service. Our franchisees began using the tools and sales increasedMay through our fiscal year end, November 30, 2020. Royalty revenues during fiscal 2021 have exceeded fiscal 2019 pre-COVID revenues by 2%. In 2020 when the COVID-19 pandemic began, the Company waived marketing fees, from week ending March 22, through May 31, 2020 in order to assist our franchiseesfinancially. A graduated return to the original 3% fees was reinstated with 1.5% assessed in June, 2% in July and then a full 3% reinstatement for the week endingAugust 2, 2020. The Company responded to reduced revenues by reducing variable costs as quickly as possible. Franchise advertising expense was reduced, salaries were reduced untilwe received our PPP loan, a decrease in operating supplies and professional fees were also reduced. We encouraged and provided information to our franchises as tohow to apply for the loan and later how to get the loan forgiven. This stimulus package was of great help to us, and to many of the franchises in our system. In fiscal2021 the Company continued to review expenses and respond to necessary changes as needed. Expenses increased during fiscal 2021 as income returned to a pre-COVID level. During the COVID-19 pandemic in 2020 and 2021, we have instituted policies and procedures to keep our employees safe. Hand sanitizer, sanitizing wipes and masks areprovided for the convenience of employees. Masks are required to be worn in the office in common areas if within 6 feet of another individual. We also institutedstaggered in-office days to minimize personal contact. Employees were able to work remotely with no significant impact to operations. - 36 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST3737 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE In connection with the audits of the Company’s consolidated financial statements for each of the fiscal years ended November 30, 2021 and 2020, and through the dateof this Current Report, there were: (1) no disagreements between the Company and Sassetti LLC on any matters of accounting principles or practices, financial statementdisclosure or auditing scope or procedures. ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures BAB, Inc.’s Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures, as defined in Item 307 of RegulationS-K of the Securities Exchange Act of 1934, as of the end of the period covered by this report, and they have concluded that these controls and procedures wereeffective (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, summarizedand 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 submitunder the Exchange Act is accumulated and communicated to our management, including our executive and financial officers, or persons performing similar functions, asappropriate, to allow timely decisions regarding required disclosure. Internal Control Over Financial Reporting Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a processdesigned by, or under the supervision of, the Chief Executive Officer and the Chief Financial Officer, management and other personnel, to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples. Our evaluation of internal control over financial reporting includes using the COSO framework, an integrated framework for the evaluation of internal controls issued bythe Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our controlenvironment. Based on our evaluation under the framework described above, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that theCompany’s internal controls and procedures were effective over financial reporting as of November 30, 2021. This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.Management’s report was not subject to attestation requirements by the Company’s registered public accounting firm pursuant to rules of the Securities and ExchangeCommission that permits the Company to provide only management’s report in this annual report. Changes in Internal Control Over Financial Reporting There were no changes in our internal controls or in other factors that could materially affect these controls over financial reporting during the last fiscal quarter. Wehave not identified any significant deficiencies or material weaknesses in our internal controls, and therefore there were no corrective actions taken. ITEM 9B. OTHER INFORMATION None. - 37 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST3838 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's executive officers and directors, and persons who beneficially own more than ten percent ofthe Company's Common Stock, to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission (the "SEC").Executive officers, directors and greater than ten percent beneficial owners are required by the SEC to furnish the Company with copies of all Section 16(a) forms theyfile. Based upon a review of the copies of such forms furnished to the Company, the Company believes that all Section 16(a) filing requirements applicable to its executiveofficers and directors were met during the year ended November 30, 2021. BAB, Inc. (the Company) has a formally established Code of Ethics, pursuant to Section 406 of the Sarbanes-Oxley Act. In order to view the Code of Ethics in itsentirety, see the BAB, Inc. Annual Report, Part III, Item 9, dated November 30, 2007 and filed with the Securities and Exchange Commission on February 28, 2008. Identification of Directors The following two directors are independent directors: Steven G. Feldman became a director of the Company in May 2003. Mr. Feldman brings 26 plus years of experience in business, sales and marketing as the CEO ofTechcare, LLC (1987-2011), an IT managed services firm in Deerfield, IL that was purchased in 2011 by All Covered, a Division of Konica Minolta Solutions, USA, Inc. Since 2014 Mr. Feldman has been working with and investing in a variety of startup companies in the Chicago area. Mr. Feldman earned his degree in accounting and hisCPA at the University of Illinois at Champaign-Urbana. James A. Lentz became a director of the Company in May 2004. From 1971 until 2000, Mr. Lentz was a business professor for Moraine Valley Community College(MVCC). During his tenure at MVCC, Mr. Lentz taught a variety of business related classes, including accounting, finance and marketing. In addition, Mr. Lentz has 10years of experience in the food industry, including holding the position of Director of Franchise Training for BAB Systems, Inc. from 1992 through 1996. Mr. Lentzreceived both his undergraduate degree and a Masters in Business Administration from Northern Illinois University. Executive Officers and Directors Michael W. Evans has served as Chief Executive Officer, President and Director of the Company since its inception. Mr. Evans oversees all aspects of BAB, Inc.,including franchise development, marketing, as well as all corporate franchise sales performance, corporate finance and corporate and franchise operations. Michael K. Murtaugh has served as Vice President and General Counsel and Director of the Company since its inception. Mr. Murtaugh is responsible for dealingdirectly with state franchise regulatory officials, for the negotiation and enforcement of franchise and area development agreements and for negotiations of acquisitionand other business arrangements. Before joining the Company, Mr. Murtaugh was a partner with the law firm of Baker & McKenzie, where he practiced law from 1971 to1993. - 38 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST3939 Executive Officer Geraldine Conn joined the Company as Controller in 2001. In 2014 she became the Chief Financial Officer and Treasurer upon the resignation of the prior Chief FinancialOfficer. She is responsible for accounting, financial reporting, risk management and human resource administration. Ms. Conn has over 25 years of accounting andfinance experience in a management role. Ms. Conn received her CPA in 1986 and a Masters in Business Administration in 1990 from DePaul University. Directors and Executive Officers The following tables set forth certain information with respect to each of the Directors and Executive Officers of the Company and certain key management personnel. Directors and Executive OfficersAgePosition Held with CompanyMichael W. Evans65Chief Executive Officer, President and DirectorMichael K. Murtaugh77Vice President, General Counsel, Secretary and DirectorGeraldine Conn70Chief Financial Officer and TreasurerSteven G. Feldman65DirectorJames A. Lentz74Director Audit Committee The Audit Committee consists of two members, who are both independent directors and both have been deemed to be financial experts as defined in Regulation S-K,Item 407. The function of the Audit Committee is to interact with the independent registered public accounting firm of the Company and to recommend to the Board ofDirectors the appointment of the independent registered public accounting firm. The current Audit Committee consists of Steven G. Feldman and James A. Lentz. The two independent directors comply with the definition of "independent directors"as required by current law and regulations. The Audit Committee has adopted a written Audit Charter. See Appendix I in the Proxy, Form14A filed on April 19, 2006 forthe Charter in its entirety. - 39 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST4040 ITEM 11. EXECUTIVE COMPENSATION The following table sets forth the cash compensation by executive officers that received annual salary and bonus compensation of more than $100,000 during years 2021and 2020 (the "Named Executive Officers"). The Company has no employment agreements with any of its executive officers. Summary Compensation Table Name and PrincipalPositionYear Salary($) Bonus($) StockAwards($) OptionsAwards ($) NonequityIncentive PlanCompensation(S) Non-qualifieddeferredCompensationearnings(S) All othercompensation($)(1) Total($) Michael W. Evans2021 205,488 34,060 - - - - 9,582 249,130 President and CEO2020 206,288 - - - - - 8,323 214,611 Michael K. Murtaugh2021 147,944 24,522 - - - - 5,553 178,019 Vice President and GeneralCounsel2020 148,519 - - - - - 5,198 153,717 Geraldine Conn2021 109,676 7,700 - - - - 4,695 122,071 Chief Financial Officer2020 109,889 - - - - - 4,396 114,285 In fiscal 2021 bonuses were earned and a portion was paid and a portion was waived by Mr Evans and Mr. Murtaugh. In fiscal 2020 bonuses were earned and waived infull by Mr. Evans and Mr. Murtaugh. Bonuses for Executive Officers that are Directors are determined using measurable financial criteria approved by the CompensationCommittee including, but not limited to, company profitability levels and performance in system-wide same store sales. A bonus for the Chief Financial Officer is at thediscretion of the Chief Executive Officer. All other compensation includes the Company 401(k) matching funds. (1)401(k) matching funds: 2021 M. Evans $9,582; M. Murtaugh $5,553; G. Conn $4,695 2020 M. Evans $8,323; M. Murtaugh $5,198; G. Conn $4,396 The following tables set forth any stock or stock options awarded to executive officers that that are exercisable and not yet exercised or unexercisable as of November30, 2021: OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END Name Number ofsecuritiesunderlyingunexercisedoptions(#)Exercisable Number ofsecuritiesunderlyingunexercisedoptions(#)Unexercisable Equity incentiveplan awards:number ofsecuritiesunderlyingunexercisedunearnedoptions(#) Optionexerciseprice($) OptionexpirationdateMichael W. Evans - - - - President and CEO - - - - Michael K. Murtaugh - - - - Vice President and General Counsel - - - - - 40 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST4141 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END(Continued) Name Number of sharesor units of stockthat have notvested(#) Market value ofshares or units ofstock that havenot vested($) Equity incentiveplan awards:number ofunearned shares,units or otherrights that havenot vested(#) Equity incentiveplan awards:market or payoutvalue ofunearned shares,units or otherrights that havenot vested($) Michael W. Evans - - - - President and CEO - - - - Michael K. Murtaugh - - - - Vice President and General Counsel - - - - The following table sets forth any compensation paid to directors during fiscal year ended November 30, 2021: DIRECTOR COMPENSATIONCompensation for fiscal year ended November 30, 2021 Name Fees earned orpaid in cash($) Stock awards($) Option awards($) Non-equityincentive plancompensation($) Non-qualifiesdeferredcompensationearnings($) All othercompensation($) Total($) Steven Feldman 2,800 - - - - - 2,800 James Lentz 2,500 - - - - - 2,500 Indemnification of Directors and Officers The Company's Certificate of Incorporation limits personal liability for breach of fiduciary duty by its directors to the fullest extent permitted by the Delaware GeneralCorporation Law (the "Delaware Law"). Such Certificate eliminates the personal liability of directors to the Company and its shareholders for damages occasioned bybreach of fiduciary duty, except for liability based on breach of the director's duty of loyalty to the Company, liability for acts or omissions not made in good faith,liability for acts or omissions involving intentional misconduct, liability based on payments or improper dividends, liability based on violation of state securities laws,and liability for acts occurring prior to the date such provision was added. Any amendment to or repeal of such provisions in the Company's Certificate of Incorporationshall not adversely affect any right or protection of a director of the Company for with respect to any acts or omissions of such director occurring prior to suchamendment or repeal. In addition to the Delaware Law, the Company's Bylaws provide that officers and directors of the Company have the right to indemnification from the Company forliability arising out of certain actions to the fullest extent permissible by law. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act")may be permitted to directors, officers or persons controlling the Company pursuant to such indemnification provisions, the Company has been advised that in theopinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable. - 41 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST4242 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth as of February 24, 2022 the record and beneficial ownership of Common Stock held by (i) each person who is known to the Company to bethe beneficial owner of more than 5% of the Common Stock of the Company; (ii) each current director; (iii) each "named executive officer" (as defined in Regulation S-B,Item 402 under the Securities Act of 1933); and (iv) all executive officers and directors of the Company as a group. Securities reported as "beneficially owned" includethose for which the named persons may exercise voting power or investment power, alone or with others. Voting power and investment power are not shared with othersunless so stated. The number and percent of shares of Common Stock of the Company beneficially owned by each such person as of February 24, 2022 includes thenumber of shares which such person has the right to acquire within sixty (60) days after such date. Name and Address Shares Percentage Michael W. Evans500 Lake Cook Road, Suite 475Deerfield, IL 60015 1,432,468 (1) 19.72 Michael K. Murtaugh500 Lake Cook Road, Suite 475Deerfield, IL 60015 968,054 13.33 Geraldine Conn500 Lake Cook Road, Suite 475Deerfield, IL 60015 20,300 .28 Steven G. Feldman500 Lake Cook Road, Suite 475Deerfield, IL 60015 10,000 .14 James A. Lentz1415 College Lane SouthWheaton, IL 60189 14,932 .21 Camelot Event-Driven FundFrank Funds781 Crandon Blvd, Unit 602Key Biscayne, FL 331491 479,411 6.6 Executive officers and directors as a group (5 persons) 2,445,754 (1) 33.67 (1) Includes 3,500 shares inherited by spouse. . - 42 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST4343 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE There are no transactions between the Company and related parties, including officers and directors of the Company. It is the Company's policy that it will not enter intoany transactions with officers, directors or beneficial owners of more than 5% of the Company's Common Stock, or any entity controlled by or under common controlwith any such person, on terms less favorable to the Company than could be obtained from unaffiliated third parties and all such transactions require the consent of themajority of disinterested members of the Board of Directors. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The Board of Directors upon recommendation of the Audit Committee, appointed the firm Sassetti LLC, certified public accountants, for 2021 audit and tax services. The audit reports of Sassetti LLC on the consolidated financial statements of BAB, Inc. and Subsidiaries as of and for the years ended November 30, 2021 and 2020 didnot contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles. Audit fees relate to audit work performed on the financial statements as well as work that generally only the independent auditor can reasonably be expected to provide,including discussions surrounding the proper application of financial accounting and/or reporting standards and reviews of the financial statements included inquarterly reports filed on Form 10-Q. Fees for audit services provided by Sassetti LLC were $50,600 and $54,600 for fiscal 2021 and 2020, respectively. Tax compliance services provided by Sassetti LLC were $10,000 and $11,200 for fiscal 2021 and 2020. During the years ended November 30, 2021 and 2020, Sassetti LLC did not perform any other services for the Company. Preapproval of Policies and Procedures by Audit Committee The accountants provide a quote for services to the Audit Committee before work begins for the fiscal year. After discussion, the Audit Committee then makes arecommendation to the Board of Directors on whether to accept the proposal. Percentage of Services Approved by Audit Committee All services were approved by the Audit Committee. - 43 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST4444 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)Documents filed as part of this report: (1)Financial Statements Consolidated Balance Sheets as at November 30, 2021 and 2020 and the Consolidated Statements of Income, Shareholders’ Equity and Cash Flows for the yearsended November 30, 2021 and 2020 are reported on by Sassetti LLC. These statements are prepared in accordance with United States GAAP. (2)Financial Statement Schedules - none. (b)INDEX TO EXHIBITS The following Exhibits are filed herewith or incorporated by reference: INDEX NUMBERDESCRIPTION3.1Articles of Incorporation (See Form 10-KSB for year ended November 30, 2006)3.2Bylaws of the Company (See Form 10-KSB for year ended November 30, 2006)4.1Preferred Shares Rights Agreement (See Form 8-K filed May 7, 2013)21.1List of Subsidiaries of the Company31.1, 31.2Section 302 of the Sarbanes-Oxley Act of 200232.1, 32.2Section 906 of the Sarbanes-Oxley Act of 2002101.INS*Inline XBRL Instance101.SCH*Inline XBRL Taxonomy Extension Schema101.CAL*Inline XBRL Taxonomy Extension Calculation101.DEF*Inline XBRL Taxonomy Extension Definition101.LAB*Inline XBRL Taxonomy Extension Labels101.PRE*Inline XBRL Taxonomy Extension Presentation104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) *XBRLInformation is furnished and not filed or a part of a registration statement or prospectus For purpose of sections 110 or 12 of the Securities Act of 1933, as amended is deemed not filed for purposes of section 18 of the SecuritiesExchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. - 44 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST4545 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by theundersigned, thereunto duly authorized. BAB, INC. By /s/ Michael W. EvansMichael W. Evans, Director, Chief Executive Officer and President (Principal Executive Officer)Dated: February 25, 2022 Pursuant to the requirements of the Securities Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of theCompany and in the capacities and on the dates indicated. Dated: February 25, 2022By /s/ Michael W. EvansMichael W. Evans, Director, Chief Executive Officer and President (Principal Executive Officer) Dated: February 25, 2022By /s/ Michael K. MurtaughMichael K. Murtaugh, Director and Vice President/General Counsel and Secretary Dated: February 25, 2022By /s/ Geraldine ConnGeraldine Conn, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) Dated: February 25, 2022By /s/ Steven G. FeldmanSteven G. Feldman, Director Dated: February 25, 2022By /s/ James A. LentzJames A. Lentz, Director - 45 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST111 EXHIBIT 21.1 – List of Subsidiaries of the Company BAB Systems, Inc., an Illinois corporation BAB Operations, Inc., an Illinois corporation BAB Investments, Inc., an Illinois corporation Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-21.1 Document Version: 3 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST1111 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 annual report on Form 10-K 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 financialcondition, 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 ActRules 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 andhave: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance 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 ofthe 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 fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’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’sauditors 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 toadversely 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 overfinancial reporting. Date: February 25, 2022By /s/ Michael W. Evans Michael W. Evans, Chief Executive Officer Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-21.1 Document Version: 3 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-31.1 Document Version: 5 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST11111 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 annual report on Form 10-K 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 financialcondition, 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 ActRules 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 andhave: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance 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 ofthe 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 fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’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’sauditors 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 toadversely 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 overfinancial reporting. Date: February 25, 2022 By: /s/ Geraldine Conn Geraldine Conn, Chief Financial Officer Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-21.1 Document Version: 3 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-31.1 Document Version: 5 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-31.2 Document Version: 3 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST111111 Exhibit 32.1 BAB, Inc.CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the BAB, Inc. (the "Company") Annual Report on Form 10-K for the period ended November 30, 2021, as filed with the Securities and ExchangeCommission 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 pursuantto 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: February 25, 2022By: /s/ Michael W. Evans Michael W. Evans, Chief Executive Officer Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-21.1 Document Version: 3 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-31.1 Document Version: 5 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-31.2 Document Version: 3 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-32.1 Document Version: 5 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST1111111 Exhibit 32.2 BAB, Inc.CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the BAB, Inc. (the "Company") Annual Report on Form 10-K for the period ended November 30, 2021, as filed with the Securities and ExchangeCommission 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 toSection 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: February 25, 2022By: /s/ Geraldine Conn Geraldine Conn, Chief Financial Officer Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: 10-K Document Version: 30 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-21.1 Document Version: 3 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-31.1 Document Version: 5 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-31.2 Document Version: 3 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-32.1 Document Version: 5 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-21Document Type: EX-32.2 Document Version: 2 Project ID: 76020Sequence: Created By: Stephanie Wilson Created At: 2/25/2022 12:02:26 PM EST

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