BAB, INC. Annual Report 2023

Plain-text annual report

BAB, Inc.Project Type: 10-KEDGAR Submission ProofCreated At: 2/22/2024 7:06:57 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 Period11/30/2023Well 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 32.2GRAPHICimg01.jpgGRAPHICimg02.jpgFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST1 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 1934 For the fiscal year ended: November 30, 2023 ☐TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-31555 BAB, Inc.(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: $3,516,960 based on 4,817,754 shares held by nonaffiliates as of May 31, 2023; Closing price ($0.73) for said shares in the NASDAQ OTCQB Marketplace asof such date. If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect thecorrection of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any ofthe registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ 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 26, 2024. DOCUMENTS INCORPORATED BY REFERENCESee index to exhibits Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST2 Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST3 FORM 10-K INDEX PART I Item 1.Business3 Item 1A.Risk Factors7 Item 1B.Unresolved Staff Comments7 Item 2.Properties 7 Item 3.Legal Proceedings 7 Item 4. Mine Safety Disclosures7 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities8 Item 6.Reserved9 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations9 Item 7A.Quantitative and Qualitative Disclosures About Market Risk15 Item 8. Financial Statements and Supplementary Data16 Item 9. Changes in and Disagreement with Accountants on Accounting and Financial Disclosure37 Item 9A.Controls and Procedures37 Item 9B.Other Information37 PART III Item 10.Directors, Executive Officers and Corporate Governance 38 Item 11. Executive Compensation40 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters42 Item 13.Certain Relationships, Related Transactions and Director Independence43 Item 14.Principal Accountant Fees and Services43 PART IV Item 15.Exhibits and Financial Statement Schedules44 - 2 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST4 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, 2023, the Company had 63 franchise units and 4 licensed units in operation in 20 states. There are 5 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, and Brewster's coffee) to franchisees, licenseesand 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 $467,000 for fiscal year ended November 30, 2023 and net income of $432,000 for fiscal year ended November 30, 2022. November30, 2023 net operating income was $615,000 compared to $608,000 in 2022. 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST5 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 The Daily Java, Dawn Food Products, Inc., Coca-Cola, SYSCO, and Gordon Food Service. The Company is not dependent on any ofthese 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 63 franchised locations and 4 licensed units in 20 states. There are 5 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST6 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 Bros. Bagels. There are severalother regional bagel chains with fewer than 65 stores, as well as numerous small, independently owned bagel bakeries and national fast-food restaurants such asDunkin’ and McDonald’s, all of which may compete with the Company. There is no major national competitor in the muffin business, but there are a number of regionaland local operators. Additionally, the Company competes directly with a number of national, regional and local coffee competitors. 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 Bros. Bagels, Bruegger's Bagel Bakery and Panera Bread Company. TheCompany's continued success is dependent on its reputation for providing high quality and value with respect to its service, products and franchises. This reputation isaffected by the performance 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST7 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. The MFM brand consists of units operating as “My Favorite Muffin Gourmet Muffin Bakery®” (“MFM Bakery”), featuring a large variety of freshlybaked muffins and coffees and units operating as “My Favorite Muffin Your All Day Bakery Café®” (“MFM Cafe”) featuring these products as well as a variety ofspecialty bagel sandwiches and related products. These marks are licensed by the Company to its franchisees pursuant to Franchise Agreements. In February 1999,the Company acquired the trademark of "Jacobs Bros. Bagels®" upon purchasing certain assets of Jacobs Bros. The "Jacobs Bros. Bagels®" mark is also registeredunder 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST8 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. EMPLOYEES As of November 30, 2023, the Company employed 11 full time people and one part time person in the Corporate headquarters. The employees are responsible forcorporate management and oversight, franchising, accounting, advertising and operations. None of the Company's employees are subject to any collective bargainingagreements and management considers 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. 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. On February 15, 2024 the Company signed a lease for the same executive office space in Deerfield, Illinois, consisting of approximately 5,300 square feet. The lease is fora period of 6 years, beginning April 1, 2024 through March 31, 2030 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 - 7 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST9 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, 2023 and 2022. The Company's common stock is traded on the NASDAQ OTCQB Marketplace under the symbol "BABB." Year Ended: November 30, 2023 Low High First quarter 0.73 0.92 Second quarter 0.70 0.86 Third quarter 0.69 0.85 Fourth quarter 0.69 0.80 Year Ended: November 30, 2022 Low High First quarter 0.75 0.91 Second quarter 0.82 0.95 Third quarter 0.79 1.00 Fourth quarter 0.68 0.89 As of February 26, 2024, the Company's Common Stock was held by 116 registered holders of record. Registered ownership includes nominees who may hold securitieson behalf of multiple beneficial shareholders. The Company estimates that the number of beneficial shareholders of its common stock at February 26, 2024, isapproximately 1,062 based upon information provided by a proxy services firm. CASH DISTRIBUTION AND DIVIDEND POLICY On December 11, 2023 the Board of Directors declared a $0.02 cash distribution/dividend per share, $0.01 quarterly and $0.01 special, to stockholders of record asof December 27, 2023, paid January 16, 2024. On September 12, 2023 the Board of Directors (“Board”) declared a $0.01 distribution/dividend per share to stockholders of record as of September 28, 2023, paidOctober 18, 2023. On June 6, 2023 the Board declared a $0.01 distribution/dividend per share to stockholders of record as of June 22, 2023, paid on July 11, 2023. OnMarch 13, 2023 the Board declared a $0.01 distribution/dividend per share to stockholders of record as of March 30, 2023, paid on April 19, 2023. On December 07, 2022the Board declared a $0.02 cash distribution/dividend per share, $0.01 quarterly and $0.01 special, to stockholders of record as of December 22, 2022, paid January 11,2023. On September 9, 2022 the Board declared a $0.01 distribution/dividend per share to stockholders of record as of September 28, 2022, paid October 20, 2022. On June 3,2022 the Board declared a $0.01 distribution/dividend per share to stockholders of record as of June 22, 2022, paid July 11, 2022. On March 7, 2022 the Board declared a$0.01 cash distribution/dividend per share to stockholders of record as of March 29, 2022, paid April 18, 2022. On December 06, 2021 the Board declared a $0.01 cashdistribution/dividend per share to stockholders of record as of December 22, 2021, paid January 11, 2022. On May 6, 2013, the Board authorized and declared a dividend distribution of one right for each outstanding share of the common stock of the Company to stockholdersof 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 SeriesA Participating Preferred Stock of the Company at an exercise price of $0.90 per one-thousandth of a Preferred Share, subject to adjustment. The complete terms of theRights are set forth in a Preferred Shares Rights Agreement, dated May 6, 2013, between the Company and IST Shareholder Services, as rights agent. - 8 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST10 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, other than exempt person as defined in the agreement, that acquires 15% (or 20% in the case of certain institutional investors whoreport their holdings on Schedule 13G) or more of the Common Shares without the approval of the Board. As a result, the overall effect of the Rights Agreement and theissuance of the Rights may be to render more difficult a merger, tender or exchange offer or other business combination involving the Company that is not approved bythe Board. However, neither the Rights Agreement nor the Rights should interfere with any merger, tender or exchange offer or other business combination approved bythe 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 mean the eleventhanniversary date of the original agreement. All other original rights and provisions remain the same. On April 4, 2023 an amendment was filed extending the finalexpiration date to mean the fourteenth 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 are not made until after December 31, 2023, as theclassification or combination is dependent upon the Company’s earnings and profits for tax purposes for its fiscal year ending November 30, 2023. 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. - 9 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST11 GENERAL The Company has 63 franchised and 4 licensed units with 5 units under development at the end of 2023. Units in operation and under development at the end of 2022included 68 franchised and 4 licensed units and 2 units under development. System-wide revenues were $40.5 million in 2023 and $38.2 million in 2022. 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, and Brewster's coffee) to franchisees, licensees and other approvedcustomers. YEAR 2023 COMPARED TO YEAR 2022 Total revenues from all sources increased $223,000, or 6.8%, to $3,510,000 in 2023 from $3,287,000 in the prior year. Marketing revenue increased $163,000 in 2023compared to 2022 and royalty revenue increased $107,000, offset by a decrease in franchise fee revenue of $26,000 in 2023 versus 2022, and licensing and other revenuedecreased $20,000 in 2023 compared to 2022. Royalty fee revenue of $1,945,000, for the fiscal year ended November 30, 2023, increased $107,000, or 5.8%, from the $1,838,000 for fiscal year ended November 30,2022. The increase in royalties for the fiscal year ended November 30, 2023 was primarily due to franchisees continued increase in usage of online ordering and deliveryservices in their areas, combined with many franchisees during fiscal 2023 raised prices, as was common in the restaurant industry. Franchise fee revenue decreased $26,000, or 49.1%, to $27,000 in 2023 as compared to $53,000 in 2022. In 2023 there were two transfers, and one store closed that had notbeen fully amortized resulting in $2,000 in franchise fees recognized, in addition to the normal monthly amortization. In 2022 there were five transfers, one store closedthat had not been fully amortized resulting in $5,000 in franchise fees recognized and one store opened resulting in $6,000 in franchise fee in addition to the normalmonthly amortization. Licensing fees and other income decreased $20,000, or 6.4%, to $294,000 in 2023 compared to $314,000 in 2022. Marketing fund revenues increased $163,000, or 15.1% to$1,244,000 in 2023 compared to $1,081,000 in 2022. Total operating expenses in 2023 were $2,895,000, or 82.5% of revenues, compared to $2,679,000, or 81.5% of revenues in 2022. Total operating expenses in 2023increased $216,000, or 8.1%, compared to 2022. The increase in operating expenses of $216,000, or 8.1% in 2023 was primarily due to an increase in marketing expenses of $163,000, an increase in payroll and payrolltaxes of $43,000, an increase in travel expenses of $7,000, an increase in occupancy expense of $6,000, an increase in employee benefit expenses of $2,000, and otherexpenses increased $2,000 compared to the same period 2022. These were offset by a decrease in professional fee expense of $4,000, and a decrease in advertising andpromotion expense of $3,000 in fiscal 2023 compared to the same period 2022. Interest income was $36,000 in 2023 versus less than $1,000 in 2022. In 2023 there was an income tax expense of $183,000 which includes $27,000 of noncash deferred tax expense, $117,000 of federal income tax, and $39,000 of state taxes. In2022 there was an income tax expense of $176,000 which includes $117,000 of noncash deferred tax expense, $37,000 of federal income tax, which was net of an NOLcarryover and $22,000 of state taxes. There was net income of $467,000 in 2023 versus a net income of $432,000 in 2022. Total operating income before interest and taxes was $615,000 in 2023 or 17.5% of revenue as compared to $608,000 or 18.5% of revenue in the prior year. In 2023 and2022 earnings per share for basic and diluted outstanding shares was $0.06 for both years. - 10 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST12 LIQUIDITY AND CAPITAL RESOURCES At November 30. 2023, the Company had working capital of $1,614,000 and unrestricted cash of $1,889,000. At November 30, 2022, the Company had working capital of1,386,000 and unrestricted cash of $1,623,000. During fiscal 2023, the Company had net income of $467,000 and operating activities which provided cash of $534,000. The principal adjustments to reconcile net incometo cash provided by operating activities were depreciation and amortization of $4,000, deferred tax expense of $28,000, provision for uncollectible accounts of $18,000and noncash lease expense of $99,000. In addition, changes in other operating assets and liabilities decreased cash a total of $82,000. During fiscal 2022, the Companyhad net income of $432,000 and operating activities which provided cash of $135,000. The principal adjustments to reconcile net income to cash provided by operatingactivities were depreciation and amortization of $4,000, deferred tax expense of $118,000 and noncash lease expense of $99,000, less the recovery of uncollectibleaccounts of $1,000 and $5,000 in sales-type lease income. In addition, changes in other operating assets and liabilities decreased cash a total of $512,000. During fiscal 2023, the Company used $1,000 for investing activities and no funds were used in fiscal 2022. Financing activities in fiscal 2023 and fiscal 2022 included cash used for distributions/dividend payments to common stockholders of $363,000 and $291,000,respectively. 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. Determination of whether distributions are considered a cash distribution, cash dividend or combination of the two will not be made until after December 31, 2023, as theclassification or combination is dependent upon the Company’s earnings and profits for tax purposes for its fiscal year ending November 30, 2023. 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. OFF BALANCE SHEET ARRANGEMENTS The Company has no off balance sheet arrangements. - 11 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST13 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, 2023 and 2022, 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 returned to growth of royalty revenues. For the twelve months endedNovember 30, 2023 royalty revenues were up 5.8% from same period 2022 and 18.2% from the same period 2019 (pre-pandemic). Management reviewed and updated thequalitative assessment conducted during the first quarter 2023 at year end and does not believe that any impairment exists at November 30, 2023. 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. - 12 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST14 Lease Receivables Commitments The Company leases restaurant equipment to a certain franchise under a sales-type lease agreement. The lease agreement does not contain any non-lease components.The lease term is for a period of seven years, beginning June 1, 2022 and ending June 1, 2029. The lease requires weekly payments of $121 for a total 365 payments, and afinal optional buy-out payment of $4,800, which management believes estimates residual value. At November 30, 2023, management does not believe the unguaranteedresidual asset value of $4,800 to be impaired. During the period ended November 30, 2023, the Company had no revenue from the sale of the lease compared to $5,319 in 2022. The income is included in Licensingfees and other income on the Consolidated Statements of Income for fiscal 2022. The Company also recorded interest income from the lease of $456 in 2023 and $256 in2022. The sales lease is included in the balance sheet at the current value of the lease payments at a 1.25% discount rate, which reflects the rate implicit in the lease agreement. 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. - 13 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST15 Franchise and related revenue (continued) 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 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. 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, 2023 and 2022 were liabilities of $226,000 and $239,000, 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. - 14 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST16 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, 2022. The Company will adopt ASU 2016-13 in the first quarter of fiscal 2024. In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures” which is intended to simplify various aspects related to accounting forincome taxes. ASU 2023-09 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistentapplication. The amendments in ASU 2023-09 are effective for public business entities for fiscal years beginning after December 15, 2024, including interim periodstherein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. TheCompany will adopt ASU 2023-09 for fiscal year ending November 30, 2026. Management does not believe that there are any recently issued and effective or not yet effective accounting pronouncements as of November 30, 2023 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST17 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, 2023 and 2022 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST18 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors andStockholders of BAB, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of BAB, Inc. (the Company) as of November 30, 2023 and 2022, and the related statements of income,stockholders’ equity, and cash flows for each of the years in the two-year period ended November 30, 2023, 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, 2023 and 2022, andthe results of its operations and its cash flows for each of the years in the two-year period ended November 30, 2023, 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, 2023, 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, 2023, 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 indefinite-lived 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 26, 2024 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST19 Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST20 BAB, IncConsolidated Balance SheetsNovember 30, 2023 and 2022 November 30, 2023 November 30, 2022 (audited) (audited) ASSETS Current Assets Cash $1,888,728 $1,623,256 Restricted cash 183,944 279,405 Receivables Trade accounts and notes receivable (net of allowance for doubtful accounts of $28,873 in 2023 and$10,873 in 2022 ) 71,681 73,972 Marketing fund contributions receivable from franchisees and stores 14,995 12,811 Lease receivable 5,900 5,827 Prepaid expenses and other current assets 96,544 159,226 Total Current Assets 2,261,792 2,154,497 Property, plant and equipment (net of accumulated depreciation of $159,414 in 2023 and $159,414 in 2022) - - Lease receivable 32,406 38,305 Trademarks 461,445 461,445 Goodwill 1,493,771 1,493,771 Definite lived intangible assets (net of accumulated amortization of $138,541 in 2023 and $134,733 in 2022) 16,345 18,972 Operating lease right of use 32,745 127,617 Total Noncurrent Assets 2,036,712 2,140,110 Total Assets $4,298,504 $4,294,607 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $3,042 $5,803 Income tax payable 47,334 - Accrued expenses and other current liabilities 325,880 324,718 Unexpended marketing fund contributions 201,824 291,387 Deferred franchise fee revenue 30,094 33,487 Deferred licensing revenue - 298 Current portion operating lease liability 39,818 113,883 Total Current Liabilities 647,992 769,576 Long-term Liabilities (net of current portion) Operating lease liability - 39,819 Deferred franchise revenue 162,026 128,465 Deferred tax liability 309,293 281,700 Total Long-term Liabilities 471,319 449,984 Total Liabilities $1,119,311 $1,219,560 Stockholders' Equity Preferred shares -$.001 par value; 4,000,000 authorized; no shares outstanding as of November 30, 2023 andNovember 30, 2022 - - Preferred shares -$.001 par value; 1,000,000 Series A authorized; no shares outstanding as of November 30,2023 and November 30, 2022 - - Common stock -$.001 par value; 15,000,000 shares authorized; 8,466,953 shares issued and 7,263,508 sharesoutstanding as of November 30, 2023 and November 30, 2022 13,508,257 13,508,257 Additional paid-in capital 987,034 987,034 Treasury stock (222,781) (222,781)Accumulated deficit (11,093,317) (11,197,463)Total Stockholders' Equity 3,179,193 3,075,047 Total Liabilities and Stockholders' Equity $4,298,504 $4,294,607 See accompanying notes - 18 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST21 BAB, IncConsolidated Statements of IncomeYears Ended November 30, 2023 and 2022 2023 2022 REVENUES Royalty fees from franchised stores $1,944,894 $1,838,276 Franchise Fees 26,999 53,149 Licensing fees and other income 294,062 314,342 Marketing fund revenue 1,243,890 1,081,320 Total Revenues 3,509,845 3,287,087 OPERATING EXPENSES Selling, general and administrative expenses: Payroll and payroll-related expenses 1,012,913 969,796 Occupancy 139,095 133,089 Advertising and promotion 12,186 14,800 Professional service fees 108,977 112,608 Travel 23,331 16,332 Employee benefit expenses 147,191 145,245 Depreciation and amortization 3,807 4,440 Marketing fund expenses 1,243,890 1,081,320 Other 203,682 201,690 Total Operating Expenses 2,895,072 2,679,320 Income from operations 614,773 607,767 Interest income 35,548 412 Income before provision for income taxes 650,321 608,179 Provision for income taxes Current tax expense 155,407 58,601 Deferred tax 27,593 117,586 Total Tax Provision. 183,000 176,187 Net Income $467,321 $431,992 Net Income per share - Basic and Diluted $0.06 $0.06 Weighted average shares outstanding - Basic and diluted 7,263,508 7,263,508 Cash distributions declared per share $0.05 $0.04 See accompanying notes - 19 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST22 BAB, IncConsolidated Statements of Stockholders’ EquityYears Ended November 30, 2023 and 2022 Additional Accumulated Common Stock Paid-In Treasury Stock Deficit November 30, 2021 8,466,953 $13,508,257 $987,034 1,203,445 $(222,781) $(11,338,914) $2,933,596 Dividends Declared (290,541) (290,541) Net Income 431,992 431,992 November 30, 2022 8,466,953 $13,508,257 $987,034 1,203,445 $(222,781) $(11,197,463) $3,075,047 Dividends Declared (363,175) (363,175) Net Income 467,321 467,321 November 30, 2023 8,466,953 $13,508,257 $987,034 1,203,445 $(222,781) $(11,093,317) $3,179,193 See accompanying notes - 20 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST23 BAB, IncConsolidated Statements of Cash FlowsYears Ended November 30, 2023 and 2022 2023 2022 Operating activities Net Income $467,321 $431,992 Adjustments to reconcile net income to cash flows provided by operating activities: Depreciation and amortization 3,807 4,440 Deferred tax expense 27,593 117,586 Provision for uncollectible accounts, net of recoveries 18,000 (633)Noncash lease expense 99,310 99,312 Sales-type lease income - (5,319)Changes in: Trade accounts receivable and notes receivable (9,883) (17,960)Marketing fund contributions receivable (2,184) 13,275 Prepaid expenses and other 62,682 (73,797)Accounts payable (2,761) (10,484)Accrued liabilities 48,496 8,174 Unexpended marketing fund contributions (89,563) (329,148)Deferred revenue 29,870 13,279 Operating lease liability (118,322) (115,673)Net Cash Provided by Operating Activities 534,366 135,044 Investing activities Purchase of equipment (1,180) - Net Cash Used In Investing Activities (1,180) - Financing activities Cash distributions/dividends (363,175) (290,541)Net Cash Used In Financing Activities (363,175) (290,541) Net (Decrease)/Increase in Cash and Restricted Cash 170,011 (155,497)Cash and Restricted Cash - Beginning of Period 1,902,661 2,058,158 Cash and Restricted Cash - End of Period $2,072,672 $1,902,661 Supplemental disclosure of cash flow information: Interest paid $- $- Income taxes paid $52,500 $138,500 Supplemental disclosure of non-cash operating activities: Net investment in lease receivable $- $47,019 See accompanying notes - 21 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST24 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 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, 2023, the Company had 63 franchise units and 4 licensed units in operation in 20 states. There are 5 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, and Brewster's coffee) to franchisees, licenseesand 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST25 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 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. The balances of bank accounts may, attimes, exceed federally insured credit limits. The Company has not experienced any loss in such accounts and believes it is not subject to any significant credit riskrelated to cash at November 30, 2023. 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, 2023 and 2022, 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 returned to growth of royalty revenues. For the twelve months endedNovember 30, 2023 royalty revenues were up 5.8% from same period 2022 and 18.2% from the same period 2019 (pre-pandemic). Management reviewed and updated thequalitative assessment conducted during the first quarter 2023 at year end and does not believe that any impairment exists at November 30, 2023. - 23 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST26 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 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, 2021 $1,493,771 $461,445 $22,664 $1,977,880 Additions - - - - Amortization expense - - (3,692) (3,692)Net Balance as of November 30, 2022 $1,493,771 $461,445 $18,972 $1,974,188 Additions - - 1,180 1,180 Amortization expense - - (3,807) (3,807)Net Balance as of November 30, 2022 $1,493,771 $461,445 $16,345 $1,971,561 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 $12,000 and $15,000 in 2023 and 2022, 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, 2023 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, 2023 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, 2020, 2021 and 2022 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST27 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 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, 2022. The Company will adopt ASU 2016-13 in the first quarter of fiscal 2024. In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures” which is intended to simplify various aspects related to accounting forincome taxes. ASU 2023-09 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistentapplication. The amendments in ASU 2023-09 are effective for public business entities for fiscal years beginning after December 15, 2024, including interim periodstherein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. TheCompany will adopt ASU 2023-09 for fiscal year ending November 30, 2026. Management does not believe that there are any recently issued and effective or not yet effective accounting pronouncements as of November 30, 2023 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST28 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 Note 2 - Summary of Significant Accounting Policies (continued) Segments Accounting 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, 2023 and November 30, 2022 were as follows: November 30, 2023 November 30, 2022 Cash and cash equivalents $1,888,728 $1,623,256 Restricted cash 183,944 279,405 Total cash and restricted cash $2,072,672 $1,902,661 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. 2023 2022 Numerator: Net income available to common stockholders $467,321 $431,992 Denominator: Weighted average outstanding shares Basic and diluted 7,263,508 7,263,508 Earnings per Share - Basic and diluted $0.06 $0.06 At November 30, 2023 and 2022, 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST29 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST30 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 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 are 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST31 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 Note 3 - Revenue Recognition Disaggregation of Revenue The following table presents disaggregation of revenue from contracts with customers for the year ended November 30, 2023 and 2022: For year endedNovember 30, 2023 For year endedNovember 30, 2022 Revenue recognized at a point in time Sign Shop revenue $2,279 $3,296 Settlement revenue 33,500 16,750 Lease income - 5,319 Total revenue at a point in time 35,779 25,365 Revenue recognized over time Royalty revenue 1,944,894 1,838,276 Franchise fees 26,999 53,149 License fees 17,145 17,743 Gift card revenue 21,129 4,665 Nontraditional revenue 220,009 266,569 Marketing fund revenue 1,243,890 1,081,320 Total revenue over time 3,474,066 3,261,722 Grand total $3,509,845 $3,287,087 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, 2023 November 30, 2022 Liabilities Contract liabilities - current $458,162 $563,895 Contract liabilities - long-term 162,026 128,465 Total Contract Liabilities $620,188 $692,360 November 30, 2023 November 30, 2022 Contracts at beginning of period $692,360 $972,470 Revenue Recognized during period (1,685,740) (1,742,303)Additions during period 1,613,568 1,462,193 Contracts at end of period $620,188 $692,360 - 29 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST32 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 Contract balances (continued) Transaction price allocated to remaining performance obligations (franchise agreements and license fee agreement) for the year ended November 30: 2024 30,094 2025 33,833 2026 20,253 2027 18,553 2028 18,021 Thereafter 71,366 Total $192,120 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: November 30, 2023 November 30, 2022 Stores open: Franchisee-owned stores 63 68 Licensed Units 4 4 67 72 Unopened stores with Franchise Agreements 5 2 Total operating units and units with Franchise Agreements 72 74 - 30 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST33 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 Note 5 – Income Taxes The components of the Company’s provision for income taxes are as follows: 2023 2022 Current Federal $116,715 $36,501 State 38,692 22,100 Deferred 27,593 117,586 Total $183,000 $176,187 In fiscal 2023 and 2022 the federal and state effective tax rates were within the customary statutory tax rate of federal 21% and a state rate of 7.11%. A reconciliation of the expected income tax expense to the recorded income tax expense is as follows for the years ended November 30: 2023 2022 Federal income tax provision computed at federal statutory rate $136,857 $128,012 State income taxes, net of federal tax provision 46,336 43,341 Change in valuation allowance and other adjustments (193) 4,834 Tax Provision $183,000 $176,187 - 31 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST34 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 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: 2023 2022 Deferred revenue $54,005 $44,682 Marketing Fund net contributions 50,094 78,541 Allowance for doubtful accounts and notes receivable 8,116 3,056 Accrued expenses 55,070 60,868 Operating lease liability 11,193 43,206 Net operating loss carryforwards - - Total Deferred Income Tax Asset $178,478 $230,353 Depreciation and amortization $(478,566) $(476,180)Right of use lease asset (9,205) (35,873)Total Deferred Income Tax Liabilities $(487,771) $(512,053) Total Net Deferred Tax Liability $(309,293) $(281,700) As of November 30, 2023 and 2022 the Company had no unused net operating loss carryforwards. 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. The Company’s income tax returns, which are filed as a consolidated return for the years ending November 30, 2020, 2021 and 2022 are subject to examination by the IRSand corresponding states, generally for three years after they are filed. Note 6 – Stockholders’ Equity On December 11, 2023 the Board of Directors declared a $0.02 cash distribution/dividend per share, $0.01 quarterly and $0.01 special, to stockholders of record asof December 27, 2023, paid January 16, 2024. On September 12, 2023 the Board of Directors (“Board”) declared a $0.01 distribution/dividend per share to stockholders of record as of September 28, 2023, paidOctober 18, 2023. On June 6, 2023 the Board declared a $0.01 distribution/dividend per share to stockholders of record as of June 22, 2023, paid on July 11, 2023. OnMarch 13, 2023 the Board declared a $0.01 distribution/dividend per share to stockholders of record as of March 30, 2023, paid on April 19, 2023. On December 07, 2022the Board declared a $0.02 cash distribution/dividend per share, $0.01 quarterly and $0.01 special, to stockholders of record as of December 22, 2022, paid January 11,2023. On September 9, 2022 the Board declared a $0.01 distribution/dividend per share to stockholders of record as of September 28, 2022, paid October 20, 2022. On June 3,2022 the Board declared a $0.01 distribution/dividend per share to stockholders of record as of June 22, 2022, paid July 11, 2022. On March 7, 2022 the Board declared a$0.01 cash distribution/dividend per share to stockholders of record as of March 29, 2022, paid April 18, 2022. On December 06, 2021 the Board declared a $0.01 cashdistribution/dividend per share to stockholders of record as of December 22, 2021, paid January 11, 2022. - 32 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST35 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 Note 6 – Stockholders’ Equity (continued) On May 6, 2013, the Board authorized and declared a dividend distribution of one right for each outstanding share of the common stock of the Company to stockholdersof 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 SeriesA Participating Preferred Stock of the Company at an exercise price of $0.90 per one-thousandth of a Preferred Share, subject to adjustment. The complete terms of theRights are set forth in a Preferred Shares Rights Agreement, dated May 6, 2013, between the Company and IST Shareholder Services, as rights agent. The Board adopted the Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significantpenalty upon any person or group, other than exempt person as defined in the agreement, that acquires 15% (or 20% in the case of certain institutional investors whoreport their holdings on Schedule 13G) or more of the Common Shares without the approval of the Board. As a result, the overall effect of the Rights Agreement and theissuance of the Rights may be to render more difficult a merger, tender or exchange offer or other business combination involving the Company that is not approved bythe Board. However, neither the Rights Agreement nor the Rights should interfere with any merger, tender or exchange offer or other business combination approved bythe 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 mean the eleventhanniversary date of the original agreement. All other original rights and provisions remain the same. On April 4, 2023 an amendment was filed extending the finalexpiration date to mean the fourteenth 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 are not made until after December 31, 2023, as theclassification or combination is dependent upon the Company’s earnings and profits for tax purposes for its fiscal year ending November 30, 2023. 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST36 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 Note 7 – Lease Receivables Commitments The Company leases restaurant equipment to a certain franchise under a sales-type lease agreement. The lease agreement does not contain any non-lease components.The lease term is for a period of seven years, beginning June 1, 2022 and ending June 1, 2029. The lease requires weekly payments of $121 for a total 365 payments, and afinal optional buy-out payment of $4,800, which management believes estimates residual value. At November 30, 2023, management does not believe the unguaranteedresidual asset value of $4,800 to be impaired. The equipment is owned by BAB Systems, Inc., and title will not pass to lessee until all payments are made, including thefinal buy-out payment. The equipment value is collateral for the outstanding balance of the lease receivable, and the Company manages the risk associated with theresidual value by requiring the lessee to use the equipment within specified parameters. A Business Consultant employed by BAB Systems, Inc. makes annual visits andreviews the usage and condition of the leased equipment. During the period ended November 30, 2023 and 2022, the Company recorded lease revenue, which is included in licensing fees and other income in 2022 and interestincome in 2023 and 2022 related to the lease as follows: November 30, 2023 November 30, 2022 Lease income $- $5,319 Lease interest 456 256 Total lease revenue $456 $5,575 The sales lease is included in the balance sheet at the current value of the lease payments at a 1.25% discount rate, which reflects the rate implicit in the lease agreement. Future minimum lease payments receivable as of November 30, 2023 are as follows: Undiscounted RentPayments Year Ending November 30: 2024 6,283 2025 6,283 2026 6,404 2027 6,283 2028 6,283 thereafter 7,942 Total Undiscounted Lease Payments 39,478 Unamortized interest income (1,172)Lease receivable, net $38,306 Short-term lease receivable $5,900 Long-term lease receivable 32,406 Total lease receivable $38,306 - 34 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST37 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 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 2023 and 2022 were $97,100 and $91,100, respectively. AtNovember 30, 2023, the remaining lease term was 4 months. The operating lease is included in the balance sheet at the present value of the lease payments at a 5.25%discount rate. The discount rate was considered to be an estimate of the Company’s incremental borrowing rate. Gross future minimum annual rental commitments as of November 30, 2023, are as follows: Undiscounted RentPayments Year Ending November 30: 2024 40,177 Total Undiscounted Rent Payments $40,177 Present Value Discount (359)Present Value $39,818 Short-term lease liability $39,818 Long-term lease liability - Total Operating Lease Liability $39,818 On February 15, 2024 a lease was signed, effective April 1, 2024 for a 6 year period, expiring on March 31, 2030. The Company will be required to pay base rent, realestate taxes, insurance and general repairs and maintenance. Base rent is $23.00 per square foot for the first year with a 3% increase per year before rent abatement andtenant allowance. There is a total of 10 months of gross rent abatement, 2 months in each of the first four years and then one month in the remaining 2 years. The leaseincludes a tenant allowance of $158,900 to be applied evenly to the 62 monthly rent payments. - 35 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST38 BAB, IncNotes to the Consolidated Financial StatementsNovember 30, 2023 and 2022 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 2023 and 2022 the Company’s employer match was $38,700 and $40,100,respectively. There were no Company discretionary contributions in 2023 or 2022. Note 10 – 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. - 36 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST39 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, 2023 and 2022, 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, 2023. 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 year. We havenot 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST40 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, 2023. 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.,and four years (2019-2022) as CFO for an IT firm based in California. Mr. Feldman earned his degree in accounting and his CPA 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST41 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. Evans67Chief Executive Officer, President and DirectorMichael K. Murtaugh79Vice President, General Counsel, Secretary and DirectorGeraldine Conn72Chief Financial Officer and TreasurerSteven G. Feldman67DirectorJames A. Lentz76Director 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST42 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 $100,000 during years 2023and 2022 (the "Named Executive Officers"). The Company has no employment agreements with any of its executive officers. Summary Compensation Table Name and PrincipalPositionYear Salary($) Bonus($) StockAwards($) OptionsAwards($) NonequityIncentive PlanCompensation(S) Non-qualifieddeferredCompensationearnings(S) All othercompensation($)(1) Total($) Michael W. Evans2023 216,202 23,400 - - - - 9,584 249,186 President and CEO2022 215,243 15,000 - - - - 9,210 239,453 Michael K. Murtaugh2023 155,657 15,600 - - - - 5,994 177,251 Vice President and GeneralCounsel 2022 154,967 10,000 - - - - 5,312 170,279 Geraldine Conn2023 119,832 18,000 - - - - 5,513 143,345 Chief Financial Officer 2022 114,216 - - - - - 4,569 118,785 In fiscal 2023 and fiscal 2022 bonuses were earned and a portion was paid and a portion was waived by Mr. Evans and Mr. Murtaugh. Bonuses for Executive Officersthat are Directors are determined using measurable financial criteria approved by the Compensation Committee including, but not limited to, company profitability levelsand performance in system-wide same store sales. A bonus for the Chief Financial Officer is at the discretion of the Chief Executive Officer. All other compensationincludes the Company 401(k) matching funds. (1)401(k) matching funds:2023 M. Evans $9,584; M. Murtaugh $5,994; G. Conn $5,5132022 M. Evans $9,210; M. Murtaugh $5,312; G. Conn $4,569 The following tables set forth any stock or stock options awarded to executive officers that that are exercisable and not yet exercised or unexercisable as of November30, 2023: OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-ENDName Number ofsecuritiesunderlyingunexercisedoptions(#)Exercisable Number ofsecuritiesunderlyingunexercisedoptions(#)Unexercisable Equityincentive planawards:number ofsecuritiesunderlyingunexercisedunearnedoptions(#) Optionexerciseprice($) 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST43 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END(Continued) Name Number of sharesor units of stockthat have notvested(#) Market value ofshares or unitsof stock thathave not vested($) Equity incentiveplan awards:number ofunearned shares,units or otherrights that havenot vested(#) Equity incentiveplan awards: marketor payout value ofunearned shares,units or other rightsthat have notvested($) 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, 2023:DIRECTOR COMPENSATIONCompensation for fiscal year ended November 30, 2023 Name Feesearned orpaid incash($) Stockawards($) Optionawards($) Non-equityincentiveplancompensation($) Non-qualifiesdeferredcompensationearnings($) All othercompensation($) Total($) Steven Feldman 3,500 - - - - - 3,500 James Lentz 3,500 - - - - - 3,500 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST44 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The following table sets forth as of February 26, 2024 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 26, 2024 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 33149 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST45 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 2023 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, 2023 and 2022 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 $60,000 and $53,500 for fiscal 2023 and 2022, respectively. Tax compliance services provided by Sassetti LLC were $11,000 and $10,600 for fiscal 2023 and 2022. During the years ended November 30, 2023 and 2022, 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST46 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)Documents filed as part of this report: (1)Financial StatementsConsolidated Balance Sheets as at November 30, 2023 and 2022 and the Consolidated Statements of Income, Shareholders’ Equity and Cash Flows for the yearsended November 30, 2023 and 2022 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 filed February 28, 2007)3.2Bylaws of the Company (See Form 10-KSB for year ended November 30, 2006 filed February 28, 2007)4.1Preferred Shares Rights Agreement (See Form 8-K filed May 7, 2013)4.2Preferred Shares Rights Agreement Amendment No. 1 (See Form 8-K filed June 18, 2014)4.3Preferred Shares Rights Agreement Amendment No. 2 (See Form 8-K filed August 18, 2015)4.4Preferred Shares Rights Agreement Amendment No. 3 (See Form 8-K filed May 22, 2017)4.5Preferred Shares Rights Agreement Amendment No. 4 (See Form 8-K filed February 22, 2019)4.6Preferred Shares Rights Agreement Amendment No. 5 (See Form 8-K filed March 8, 2021)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 Presentation *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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST47 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 26, 2024 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 26, 2024By /s/ Michael W. EvansMichael W. Evans, Director, Chief Executive Officer and President (Principal Executive Officer) Dated: February 26, 2024By /s/ Michael K. MurtaughMichael K. Murtaugh, Director and Vice President/General Counsel and Secretary Dated: February 26, 2024By /s/ Geraldine ConnGeraldine Conn, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) Dated: February 26, 2024By /s/ Steven G. FeldmanSteven G. Feldman, Director Dated: February 26, 2024By /s/ James A. LentzJames A. Lentz, Director - 45 -Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST11 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 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-21.1 Document Version: 4 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST111 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 statementsmade, 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 ExchangeAct Rules 13a -15(e) and 15d -15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d -15(f)) for the registrantand have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes 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 theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent 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 theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: February 26, 2024By /s/ Michael W. Evans Michael W. Evans, Chief Executive Officer Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-21.1 Document Version: 4 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-31.1 Document Version: 7 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST1111 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 statementsmade, 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 ExchangeAct Rules 13a -15(e) and 15d -15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d -15(f)) for the registrantand have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes 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 theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent 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 theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date: February 26, 2024By: /s/ Geraldine Conn Geraldine Conn, Chief Financial Officer Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-21.1 Document Version: 4 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-31.1 Document Version: 7 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-31.2 Document Version: 4 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST11111 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, 2023, 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 adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 1.The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended; and 2.The information contained in the Report fairly presents, in all material respects, the financial condition, results of operations, and cash flows of the Company. Date: February 26, 2024By: /s/ Michael W. Evans Michael W. Evans, Chief Executive Officer Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-21.1 Document Version: 4 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-31.1 Document Version: 7 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-31.2 Document Version: 4 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-32.1 Document Version: 4 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST111111 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, 2023, 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 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 26, 2024By: /s/ Geraldine Conn Geraldine Conn, Chief Financial Officer Filer: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: 10-K Document Version: 32 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-21.1 Document Version: 4 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-31.1 Document Version: 7 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-31.2 Document Version: 4 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-32.1 Document Version: 4 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM ESTFiler: BAB, Inc. Project Type: 10-K Description: Form 10-K year ended 11-30-23Document Type: EX-32.2 Document Version: 4 Project ID: 98675Sequence: Created By: Alissa Knight Created At: 2/22/2024 7:06:57 PM EST

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