v3.26.1
Significant Accounting Policies (Policies)
 6 Months Ended
May 31, 2026
Accounting Policies [Abstract]  
Basis of Accounting, Policy [Policy Text Block]

Unaudited Consolidated Financial Statements

 

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

 
Use of Estimates, Policy [Policy Text Block]

Use of Estimates

 

The preparation of the financial statements and accompanying notes are in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates.

 
Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, demand deposits and treasury notes with banks and equity firms with original maturities of less than 90 days. The balance of bank accounts may, at times, 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 risk related to cash at May 31, 2026.

 
Receivable [Policy Text Block]

Accounts Receivable and Notes Receivable

 

The Current Expected Credit Losses (“CECL”) reserve methodology requires companies to measure expected credit losses on financial instruments based on the total estimated amount to be collected over the lifetime of the instrument. Under the CECL model, reserves may be established against financial asset balances even if the risk of loss is remote or has not yet manifested itself. The Company records specific reserves against account balances of franchisees deemed at-risk when a potential loss is likely or imminent as a result of prolonged payment delinquency (greater than 90 days past due) and where notable credit deterioration has become evident. For financial assets that are not currently deemed at-risk, an allowance is recorded based on expected loss rates derived pursuant to the Company's CECL methodology that assesses three components - historical losses, current conditions, and reasonable and supportable forecasts, if applicable.

 

The Company considers its portfolio segments to be the following:

 

Accounts Receivable (Franchise-Related): Most of the Company’s short-term receivables due from franchisees are derived from royalty, advertising and other franchise-related fees.

 

Notes Receivable: Notes receivable balances primarily relate to the conversion of (1) certain past due franchisee accounts receivable or (2) early franchise termination fees converted to notes receivable. These notes are usually not collateralized. Notes receivable prior to 2026 are reserved in their entirety and have specific reserves recorded against them amounting to $49,350 as of May 31, 2026.

 

Accounts Receivables (Vendor Related): Receivables due from vendors and distributors consist of royalty receivables related to the sale of certain food products to franchisees through the Company’s network of suppliers and distributors and are included as part of Accounts Receivable.

 

Receivable balances by portfolio segment are as follows:

 

   

May 31, 2026

    

November 30, 2025

  

Accounts Receivable (Franchisee Related)

   $ 68,185     $ 54,796  

Accounts Receivable (Vendor Related)

     17,800       21,550  

Notes Receivable

     49,584       50,482  
      135,569       126,828  

Less: Allowance for Credit Losses

     (49,350 )     (49,350 )

Total Receivables

     86,219       77,478  

Less: Current Portion

     (86,219 )     (77,478 )

Long-Term Receivables

   $ -     $ -  

 

The Company's internal credit quality indicators for all portfolio segments primarily consider delinquency. The Company does not currently have any uncollateralized lease receivables. Past due lease receivables would be assigned an internal risk rating of Grade II-IV, depending on significance of delinquency. For uncollateralized notes receivable, the Company also considers the status of the franchisee note holder and the term of the note. Notes receivable from current franchisees are considered to have an elevated risk of credit loss based on their common origination from past due franchise accounts receivable but have some indication of collectability given ongoing operations (Internal Grade II). Notes receivable due from payers who no longer have an operating franchise are considered to have a high likelihood of credit loss (Internal Grade III). That likelihood increases if the note is outstanding for longer than one year (Internal Grade IV). At May 31, 2026, the note receivable due for 2025 is a current franchisee, all other notes receivable were due from former franchisees and have original terms over one year.

 

Changes in the allowance for credit losses during the six months ended May 31, 2026 and May 31, 2025 were as follows:

 

   

Accounts

Receivable

(Franchise Related)

    

Accounts

Receivable (Vendor

Related)

    

Notes

Receivable

    

Total

  

Balance at November 30, 2025

   $ -     $ -     $ 49,350     $ 49,350  

Write-offs

     -       -       -       -  

Recoveries

     -       -       -       -  

Provision for Credit Losses

     -       -       -       -  

Balance at May 31, 2026

   $ -     $ -     $ 49,350     $ 49,350  

 

   

Accounts

Receivable

(Franchise Related)

    

Accounts

Receivable (Vendor

Related)

    

Notes

Receivable

    

Total

  

Balance at November 30, 2024

   $ -     $ -     $ 51,103     $ 51,103  

Write-offs

     -       -       -       -  

Recoveries

     -       -       (974 )     (974 )

Provision for Credit Losses

     -       -       -       -  

Balance at May 31, 2025

   $ -     $ -     $ 50,129     $ 50,129  

 

The Company considers a receivable past due 31 days after the payment due date. The delinquency status of receivables (other than accounts receivable) at May 31, 2026 was as follows:

 

   

Current

    

0-30 days Past Due

    

30-60 days

Past Due

    

Over 90

days past

due

    

Total

  
                                         

Notes Receivable

   $ 15,110     $ 831     $ 831     $ 31,995     $ 48,767  
    $ 15,110     $ 831     $ 831     $ 31,995     $ 48,767  

 

The fiscal year of origination of the Company's gross notes receivable by risk rating are as follows

 

   

2026

    

2025

    

2024

    

2023

    

Prior

    

Total

  

Risk rating

                                                

Internal Grade I

   $ -     $ -     $ -     $ -     $ -     $ -  

Internal Grade II

     234       -       -       -       -       234  

Internal Grade III

     -       20,590       -       -       -       20,590  

Internal Grade IV

     -       -       17,886       -       10,874       28,760  

Notes and Lease Receivables, Net of Unamortized Interest

   $ 234     $ 20,590     $ 17,886     $ -     $ 10,874     $ 49,584  

 
Property, Plant, and Equipment [Policy Text Block]

Property, Plant and Equipment

 

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

 
Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Other Intangible Assets

 

Accounting Standard Codification (“ASC”) 350 “Goodwill and Other Intangible Assets” requires that assets with indefinite lives no longer be amortized, but instead be subject to annual impairment tests. 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 more frequently if events or circumstances indicate that impairment is possible. The Company has elected to conduct its annual test during the first quarter. During the quarters ended May 31, 2026 and 2025, management qualitatively assessed goodwill to determine whether testing was necessary. Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy, and changes in the composition and carrying amounts of net assets. If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than it’s carrying value, a quantitative assessment is then performed.

 
Other Assets, Policy [Policy Text Block]

Prepaid Expenses and Other Current Assets

 

Other current assets include a minority investment in AHQ Systems, Inc. The shares were issued to BAB, Inc. as compensation for consulting services and were recorded at a value of $2,250, based on fair market value at the time the services were performed. A total of 150,000 shares were issued, representing a 15% ownership interest. This is considered a related-party investment. Because the investment is immaterial, it has not been subsequently adjusted to fair market value.

 
Advertising Cost [Policy Text Block]

Advertising and Promotion Costs

 

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

 
Income Tax, Policy [Policy Text Block]

Income Taxes

 

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Deferred tax assets and liabilities are classified as noncurrent on the balance sheet. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used 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 of November 30, 2025 did not result in any positions requiring disclosure. Should the Company need to record interest and/or penalties related to uncertain tax positions or other 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 adopted any new tax positions during the six months ended May 31, 2026 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, 2022, 2023 and 2024 are subject to examination by the IRS and corresponding states, generally for three years after they are filed.

 
Lessee, Leases [Policy Text Block]

Leases

 

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

 

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

 
New Accounting Pronouncements, Policy [Policy Text Block]

Accounting Pronouncements

 

In December 2023, the FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures” which is intended to simplify various aspects related to accounting for income taxes. ASU 2023-09 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The amendments in ASU 2023-09 are effective for public business entities for fiscal years beginning after December 15, 2024, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued. The Company will adopt ASU 2023-09 for fiscal year ending November 30, 2026.

 

In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update No. 2024‑03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (“ASU 2024‑03”), which requires public business entities to provide enhanced disclosures that disaggregate certain expense captions in the notes to the financial statements to improve transparency about components of expense categories such as purchases of inventory, employee compensation, depreciation, amortization and related items. ASU 2024‑03 does not change the recognition or measurement of expenses presented on the face of the income statement, but will require additional tabular disclosures in the notes for annual and interim reporting periods. The guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company has not adopted this standard and is currently evaluating the potential effect the standard will have on its consolidated financial statements disclosures.

 

On July 30, 2025 the FASB issued ASU 2025-05, “Measurement of Credit Losses for Accounts Receivable and Contract Assets”. The ASU relates to estimating credit losses under CECL for current accounts receivable and current contract assets arising from revenue transactions accounted for under ASC 606, Revenue from Contracts with Customers, including those acquired in a transaction accounted for under ASC 805, Business Combinations. The ASU does not apply to other types of accounts receivable and loans.

 

For all entities, the ASU provides a practical expedient to assume that current conditions as of the balance sheet date will persist through the reasonable and supportable forecast period for eligible assets. Entities will still be required to adjust historical data used in the estimation to reflect current conditions. The new guidance will be effective for interim and annual periods beginning after December 15, 2025 and is to be adopted on a prospective basis. The Company will adopt ASU 2025-05 for fiscal year ending November 30, 2027.

 

Management does not believe that there are any recently issued and effective or not yet effective accounting pronouncements as of May 31, 2026 that would have or are expected to have any significant effect on the Company’s financial position, cash flows or income statement.

 
Segment Reporting, Policy [Policy Text Block]

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.

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

Statement of Cash Flows

 

The chart below shows the cash and restricted cash within the consolidated statements of cash flows as of May 31, 2026 and 2025 were as follows:

 

   

May 31, 2026

    

May 31, 2025

  
                 

Cash and cash equivalents

   $ 2,215,397     $ 2,048,454  

Restricted cash

     341,057       286,328  

Total cash and restricted cash

   $ 2,556,454     $ 2,334,782