FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
[ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
BAB,, Inc.
(Name of small business issuer in its charter)
Delaware | 36-4389547 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
500 Lake Cook Road, Suite 475, Deerfield, Illinois 60015
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (847) 948-7520
Indicate by checkmark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by checkmarkcheck mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or aan emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☒ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company. Yes ☐ No ☒
As of October 13, 2017 April 15, 2019 BAB, Inc. had: 7,263,508 shares of Common Stock outstanding.
TABLE OF CONTENTS
PART I | FINANCIAL INFORMATION | 3 |
Item 1. | Financial Statements | 3 |
Item 2 | Management's Discussion and Analysis of Financial Condition and Results of | |
Item 3 | Quantitative and Qualitative Disclosures About Market Risk | |
Item 4 | Controls and Procedures | |
PART II | OTHER INFORMATION | |
Item 1. | Legal Proceedings | |
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | |
Item 3 | Defaults Upon Senior Securities | |
Item 4 | Mine Safety Disclosures | |
Item 5 | Other Information | |
Item 6 | Exhibits | |
SIGNATURE |
PART I
ITEM 1. | FINANCIAL STATEMENTS |
BAB, Inc.
Consolidated Balance Sheets
February 28, 2019 | November 30, 2018 | |||||||||||||||
August 31, 2017 | November 30, 2016 | (unaudited) | ||||||||||||||
ASSETS | ||||||||||||||||
Current Assets | ||||||||||||||||
Cash | $ | 745,745 | $ | 907,116 | $ | 965,541 | $ | 1,065,265 | ||||||||
Restricted cash | 702,100 | 598,887 | 421,940 | 443,962 | ||||||||||||
Receivables | ||||||||||||||||
Trade accounts and notes receivable (net of allowance for doubtful accounts of $20,317 in 2017 and $25,319 in 2016 ) | 54,351 | 50,844 | ||||||||||||||
Trade accounts and notes receivable (net of allowance for doubtful accounts of $28,342 in 2019 and $39,377 in 2018 ) | 84,904 | 78,012 | ||||||||||||||
Marketing fund contributions receivable from franchisees and stores | 10,831 | 10,238 | 13,071 | 15,831 | ||||||||||||
Inventories | 26,940 | 16,130 | ||||||||||||||
Prepaid expenses and other current assets | 98,080 | 81,021 | 62,243 | 69,490 | ||||||||||||
Total Current Assets | 1,638,047 | 1,664,236 | 1,547,699 | 1,672,560 | ||||||||||||
Property, plant and equipment (net of accumulated depreciation of $154,221 in 2017 and $152,334 in 2016) | 4,254 | 1,226 | ||||||||||||||
Property, plant and equipment (net of accumulated depreciation of $155,137 in 2019 and $155,024 in 2018) | 1,029 | 1,142 | ||||||||||||||
Trademarks | 459,637 | 455,182 | 459,637 | 459,637 | ||||||||||||
Goodwill | 1,493,771 | 1,493,771 | 1,493,771 | 1,493,771 | ||||||||||||
Definite lived intangible assets (net of accumulated amortization of $123,398 in 2017 and $114,290 in 2016) | - | 9,108 | ||||||||||||||
Definite lived intangible assets (net of accumulated amortization of $124,235 in 2019 and $123,949 in 2018) | 10,206 | 9,742 | ||||||||||||||
Operating lease right of use | 461,122 | 480,785 | ||||||||||||||
Deferred tax asset | 248,000 | 248,000 | 248,000 | 248,000 | ||||||||||||
Total Noncurrent Assets | 2,205,662 | 2,207,287 | 2,673,765 | 2,693,077 | ||||||||||||
Total Assets | $ | 3,843,709 | $ | 3,871,523 | $ | 4,221,464 | $ | 4,365,637 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||
Current Liabilities | ||||||||||||||||
Accounts payable | $ | 39,665 | $ | 43,383 | $ | 37,272 | $ | 38,224 | ||||||||
Accrued expenses and other current liabilities | 271,645 | 365,169 | 299,593 | 296,227 | ||||||||||||
Unexpended marketing fund contributions | 713,727 | 609,380 | 434,597 | 459,413 | ||||||||||||
Deferred franchise fee revenue | - | 40,000 | 48,149 | 27,000 | ||||||||||||
Deferred licensing revenue | 24,047 | 49,226 | 26,905 | 46,667 | ||||||||||||
Current and Total Liabilities | 1,049,084 | 1,107,158 | ||||||||||||||
Current portion operating lease liability | 55,879 | 48,635 | ||||||||||||||
Total Current Liabilities | 902,395 | 916,166 | ||||||||||||||
Long-term Liabilities (net of current portion) | ||||||||||||||||
Operating lease liability | 448,390 | 449,409 | ||||||||||||||
Deferred franchise revenue | 65,163 | - | ||||||||||||||
Deferred licensing revenue | 10,119 | - | ||||||||||||||
Total Long-term Liabilities | 523,672 | 449,409 | ||||||||||||||
Total Liabilities | $ | 1,426,067 | $ | 1,365,575 | ||||||||||||
Stockholders' Equity | ||||||||||||||||
Preferred shares -$.001 par value; 4,000,000 authorized; no shares outstanding as of August 31, 2017 and November 30, 2016 | - | - | ||||||||||||||
Preferred shares -$.001 par value; 1,000,000 Series A authorized; no shares outstanding as of August 31, 2017 and November 30, 2016 | - | - | ||||||||||||||
Common stock -$.001 par value; 15,000,000 shares authorized; 8,466,953 shares issued and 7,263,508 shares outstanding as of August 31, 2017 and November 30, 2016 | 13,508,257 | 13,508,257 | ||||||||||||||
Preferred shares -$.001 par value; 4,000,000 authorized; no shares outstanding as of February 28, 2019 and November 30, 2018 | - | - | ||||||||||||||
Preferred shares -$.001 par value; 1,000,000 Series A authorized; no shares outstanding as of February 28, 2019 and November 30, 2018 | - | - | ||||||||||||||
Common stock -$.001 par value; 15,000,000 shares authorized; 8,466,953 shares issued and 7,263,508 shares outstanding as of February 28, 2019 and November 30, 2018 | 13,508,257 | 13,508,257 | ||||||||||||||
Additional paid-in capital | 987,034 | 987,034 | 987,034 | 987,034 | ||||||||||||
Treasury stock | (222,781 | ) | (222,781 | ) | (222,781 | ) | (222,781 | ) | ||||||||
Accumulated deficit | (11,477,885 | ) | (11,508,145 | ) | (11,477,113 | ) | (11,272,448 | ) | ||||||||
Total Stockholders' Equity | 2,794,625 | 2,764,365 | 2,795,397 | 3,000,062 | ||||||||||||
Total Liabilities and Stockholders' Equity | $ | 3,843,709 | $ | 3,871,523 | $ | 4,221,464 | $ | 4,365,637 |
SEESEE ACCOMPANYING NOTES
BAB, Inc.
Consolidated Statements of Income
For the Three and NineMonth Periods Ended August 31, 2017February 28, 2019 and 20168
(Unaudited)
Three months ended August 31, | Nine months ended August 31, | For the three months ended: | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | February 28, 2019 | February 28, 2018 | |||||||||||||||||||
REVENUES | ||||||||||||||||||||||||
Royalty fees from franchised stores | $ | 446,778 | $ | 441,949 | $ | 1,295,021 | $ | 1,298,562 | $ | 373,118 | $ | 385,051 | ||||||||||||
Franchise fees | 10,000 | 60,000 | 50,000 | 78,000 | ||||||||||||||||||||
Franchise Fees | 13,413 | - | ||||||||||||||||||||||
Licensing fees and other income | 107,049 | 114,181 | 319,404 | 384,885 | 96,981 | 115,416 | ||||||||||||||||||
Marketing fund revenue | 228,788 | - | ||||||||||||||||||||||
Total Revenues | 563,827 | 616,130 | 1,664,425 | 1,761,447 | 712,300 | 500,467 | ||||||||||||||||||
OPERATING EXPENSES | ||||||||||||||||||||||||
Selling, general and administrative expenses: | ||||||||||||||||||||||||
Payroll and payroll-related expenses | 258,601 | 248,233 | 767,585 | 768,300 | 215,935 | 207,362 | ||||||||||||||||||
Occupancy | 43,913 | 43,599 | 133,708 | 131,337 | 19,636 | 39,839 | ||||||||||||||||||
Advertising and promotion | 5,997 | 10,485 | 17,709 | 32,077 | 11,327 | 993 | ||||||||||||||||||
Professional service fees | 29,079 | 36,844 | 106,653 | 108,376 | 59,634 | 61,309 | ||||||||||||||||||
Travel | 9,686 | 9,196 | 28,562 | 26,532 | 7,959 | 9,075 | ||||||||||||||||||
Employee benefit expense | 42,245 | 38,869 | 122,498 | 116,224 | ||||||||||||||||||||
Employee benefit expenses | 39,733 | 27,471 | ||||||||||||||||||||||
Depreciation and amortization | 617 | 5,167 | 10,995 | 15,183 | 399 | 152 | ||||||||||||||||||
Marketing fund expenses | 228,788 | - | ||||||||||||||||||||||
Other | 41,640 | 58,186 | 156,001 | 176,629 | 27,289 | 38,460 | ||||||||||||||||||
Total Operating Expenses | 431,778 | 450,579 | 1,343,711 | 1,374,658 | 610,700 | 384,661 | ||||||||||||||||||
Income from operations | 132,049 | 165,551 | 320,714 | 386,789 | 101,600 | 115,806 | ||||||||||||||||||
Interest income | 24 | 90 | 87 | 423 | 260 | 24 | ||||||||||||||||||
Interest expense | - | (396 | ) | - | (1,190 | ) | ||||||||||||||||||
Income before provision for income taxes | 132,073 | 165,245 | 320,801 | 386,022 | 101,860 | 115,830 | ||||||||||||||||||
Provision for income taxes | ||||||||||||||||||||||||
Current tax | - | - | - | - | ||||||||||||||||||||
Current tax expense | 5,000 | 15,000 | ||||||||||||||||||||||
Net Income | $ | 132,073 | $ | 165,245 | $ | 320,801 | $ | 386,022 | $ | 96,860 | $ | 100,830 | ||||||||||||
Net Income per Share - Basic and Diluted | $ | 0.02 | $ | 0.02 | $ | 0.04 | $ | 0.05 | ||||||||||||||||
Net Income per share - Basic and Diluted | $ | 0.01 | $ | 0.01 | ||||||||||||||||||||
Weighted average shares outstanding - Basic and Diluted | 7,263,508 | 7,263,508 | 7,263,508 | 7,263,508 | ||||||||||||||||||||
Weighted average shares outstanding - Basic and diluted | 7,263,508 | 7,263,508 | ||||||||||||||||||||||
Cash distributions declared per share | $ | 0.01 | $ | 0.01 | $ | 0.04 | $ | 0.05 | $ | 0.03 | $ | 0.02 |
SEESEE ACCOMPANYING NOTES
BAB, Inc.
Consolidated Statements of Cash Flows
For the NineThree Months Ended August 31,2017February 28, 2019 and 20168
(Unaudited)
For the nine months ended August 31, | For the three months ended: | |||||||||||||||
2017 | 2016 | February 28, 2019 | February 28, 2018 | |||||||||||||
Operating activities | ||||||||||||||||
Net income | $ | 320,801 | $ | 386,022 | ||||||||||||
Adjustments to reconcile net income to cash | ||||||||||||||||
flows provided by operating activities: | ||||||||||||||||
Net Income | $ | 96,860 | $ | 100,830 | ||||||||||||
Adjustments to reconcile net income to cash flows provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 10,995 | 15,183 | 399 | 152 | ||||||||||||
Provision for uncollectible accounts, net of recoveries | (5,001 | ) | (3,954 | ) | (11,035 | ) | (1,163 | ) | ||||||||
Noncash lease expense | 25,888 | - | ||||||||||||||
Changes in: | ||||||||||||||||
Trade accounts receivable and notes receivable | 1,494 | 15,574 | 4,142 | 8,816 | ||||||||||||
Restricted cash | (103,213 | ) | (181,876 | ) | ||||||||||||
Marketing fund contributions receivable | (593 | ) | 12,319 | 2,760 | 2,582 | |||||||||||
Inventories | (10,810 | ) | 3,544 | - | 6,068 | |||||||||||
Prepaid expenses and other | (17,059 | ) | (7,385 | ) | 8,596 | 6,614 | ||||||||||
Accounts payable | (3,718 | ) | 654 | (952 | ) | 4,172 | ||||||||||
Accrued liabilities | (93,524 | ) | (13,416 | ) | 624 | 27,529 | ||||||||||
Unexpended marketing fund contributions | 104,347 | 169,557 | (24,816 | ) | (14,147 | ) | ||||||||||
Deferred revenue | (65,179 | ) | (48,631 | ) | (5,556 | ) | (893 | ) | ||||||||
Net Cash Provided by Operating Activities | 138,540 | 347,591 | 96,910 | 140,560 | ||||||||||||
Investing activities | ||||||||||||||||
Proceeds from sale of equipment | - | 4,516 | ||||||||||||||
Capitalization of trademark renewals | (4,455 | ) | (4,022 | ) | (750 | ) | (4,246 | ) | ||||||||
Purchase of Equipment | (4,915 | ) | - | |||||||||||||
Net Cash Used In Investing Activities | (9,370 | ) | (4,022 | ) | ||||||||||||
Net Cash (Used In)/Provided By Investing Activities | (750 | ) | 270 | |||||||||||||
Financing activities | ||||||||||||||||
Cash distributions/dividends | (290,541 | ) | (363,175 | ) | (217,906 | ) | (145,270 | ) | ||||||||
Net Cash Used In Financing Activities | (290,541 | ) | (363,175 | ) | (217,906 | ) | (145,270 | ) | ||||||||
Net Decrease in Cash | (161,371 | ) | (19,606 | ) | ||||||||||||
Cash, Beginning of Period | 907,116 | 837,382 | ||||||||||||||
Cash, End of Period | $ | 745,745 | $ | 817,776 | ||||||||||||
Net Decrease in Cash, Cash Equivalents and Restricted Cash | (121,746 | ) | (4,440 | ) | ||||||||||||
Cash, Cash Equivalents and Restricted Cash - Beginning of Period | 1,509,227 | 1,486,080 | ||||||||||||||
Cash, Cash Equivalents and Restricted Cash - End of Period | $ | 1,387,481 | $ | 1,481,640 | ||||||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||||
Interest paid | $ | - | $ | - | $ | - | $ | - | ||||||||
Income taxes paid | $ | 18,173 | $ | 8,171 | $ | 1,800 | $ | - |
SEE ACCOMPANYING NOTES
BAB, Inc.
Notes to Unaudited Consolidated Financial Statements
For the Three and NineMonth Periods Ended August 31, 2017February 28, 2019 and 20162018
(Unaudited)
Note 1.Nature1. Nature of Operations
BAB,, Inc. 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®Muffin (“MFM”) was acquired in 1997 and is included as a part of Systems. Brewster’s® CoffeeBrewster’s (“Brewster’s”) was established in 1996 and the coffee is sold in BAB and MFM locations as well as through license agreements. SweetDuetlocations. SweetDuet® (“SD”) frozen yogurt can be added as an additional brand in a BAB or MFM location. Operations was formed on August 30,in 1995, primarily to operate Company-owned stores of which there are currently none. The assets of Jacobs Bros. Bagels®Bagels (“Jacobs Bros.”) were acquired on February 1,in 1999, and any branded wholesale business uses this trademark. Investments was incorporated September 9,in 2009 to be used for the purpose of acquisitions. To date there have been no acquisitions.
The Company was incorporated under the laws of the State of Delaware on July 12, 2000. The Company currently franchises and licenses bagel and muffin retail units under the BAB, and MFM and SD trade names. At August 31, 2017,February 28, 2019, the Company had 8373 franchise units and 36 licensed units in operation in 24 states.23 states and the United Arab Emirates. There are 3 units under development. The Company additionally derives income from the sale of its trademark bagels, muffins and coffee through nontraditional channels of distribution including under a licensing agreement with Green Beans Coffee. Also, included in licensing fees and other income is Operations Sign Shop revenue. For franchise consistency and convenience, the Sign Shop provides the majority of signage to franchisees, including but not limited to, menu panels, interior and exterior signage and point of purchase materials.
The BAB franchised brand consists of units operating as “Big Apple Bagels,Bagels®,” featuring daily baked bagels, flavored cream cheeses, premium coffees, gourmet bagel sandwiches and other related products. BAB units are primarily concentrated in the Midwest and Western United States. The MFM brand consists of units operating as "My“My Favorite Muffin" Gourmet Muffin Bakery™” (“MFM Bakery”), featuring a large variety of freshly baked muffins coffees and related products,coffees and units operating as "My“My Favorite Muffin and Bagel Cafe®,"Your All Day Bakery Café®” (“MFM Cafe”) featuring these products as well as a variety of specialty bagel sandwiches and related products. The SweetDuet Frozen Yogurt & Gourmet Muffins® brandSweetDuet® is a fusion concept, pairingbranded self-serve frozen yogurt with MFM’s exclusive line of My Favorite Muffin gourmet muffins. SD frozen yogurtthat can be added as an additional brand in a BAB or MFM location. Although the Company doesn't actively market Brewster's stand-alone franchises, Brewster's coffee products are sold in most franchised units.
The Company is leveraging on the natural synergy of distributing muffin products in existing BAB units and, alternatively, bagel products and Brewster's Coffee in existing MFM units. The Company expects to continue to realize efficiencies in servicing the combined base of BAB and MFM franchisees.
The accompanying condensed consolidated financial statements are unaudited. These financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted pursuant to such SEC rules and regulations; nevertheless, the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements and the notes hereto should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended November 30, 20162018 which was filed February 23, 2017.25, 2019. In the opinion of the Company's management, the condensed consolidated financial statements for the unaudited interim period presented include all adjustments, including normal recurring adjustments, necessary to fairly present the results of such interim period and the financial position as of the end of said period. The results of operations for the interim period are not necessarily indicative of the results for the full year.
2. Summary of significant accounting policies
Unaudited consolidated financial statements
The accompanying unaudited Condensed Consolidated Financial Statements of BAB, Inc. have been prepared pursuant to generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for Form 10-Q. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
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 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.
Accounts and Notes Receivable
Receivables are carried at original invoice amount less estimates for doubtful accounts. Management determines the allowance for doubtful accounts by reviewing and identifying troubled accounts and by using historical collection experience. A receivable is considered to be past due if any portion of the receivable balance is outstanding 90 days past the due date. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded as income when received. Certain receivables have been converted to unsecured interest-bearing notes.
Property, Plant and Equipment
Property and equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are 3 to 7 years for property and equipment and 10 years, or term of lease if less, for leasehold improvements. Maintenance and repairs are charged to expense as incurred. Expenditures that materially extend the useful lives of assets are capitalized.
Advertising and Promotion Costs
The Company expenses advertising and promotion costs as incurred. All advertising and promotion costs were related to the Company’s franchise operations.
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 common shares outstanding during the year to calculate basic net earnings per common share. Diluted net earnings per common share are calculated to give effect to the potential dilution that could occur if options or other contracts to issue common stock were exercised and resulted in the issuance of additional common shares.
For the three months ended: | ||||||||
February 28, 2019 | February 28, 2018 | |||||||
Numerator: | ||||||||
Net income available to common shareholders | $ | 96,860 | $ | 100,830 | ||||
Denominator: | ||||||||
Weighted average outstanding shares | ||||||||
Basic and diluted common stock | 7,263,508 | 7,263,508 | ||||||
Earnings per Share - Basic | $ | 0.01 | $ | 0.01 |
2. UnitsSummary of significant accounting policies (continued)
Leases
The company accounts for leases under ASU 2016-02. Lease arrangements are determined at the inception of the contract. Operating leases are included in operating lease right-of-use (“ROU”) assets, other current and long-term operating lease liabilities on the consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities on the consolidated balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. Additionally, for certain equipment leases, we apply a portfolio approach to effectively account for the operating lease ROU assets and liabilities.
Recently Adopted Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (“Topic 606”) and has since issued various amendments which provide additional clarification and implementation guidance on Topic 606. This guidance establishes principles for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The Company adopted this new guidance effective the first day of fiscal 2019 using the modified retrospective transition method and applied Topic 606 to those contracts which were not completed as of December 1, 2018.
The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit at the beginning of fiscal 2019. In performing its analysis, the Company reflected the aggregate effect of all modifications when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price. Comparative information from prior year periods has not been adjusted and continues to be reported under the accounting standards in effect for those periods under “Revenue Recognition” (“Topic 605”). Refer to Note 3 for further disclosure of the impact of the new guidance.
Liabilities
In March 2016, the FASB issued ASU 2016-04, Recognition of Breakage for Certain Prepaid Stored-Value Products. The new guidance creates an exception under ASC 405-20, Liabilities-Extinguishments of Liabilities, to derecognize financial liabilities related to certain prepaid stored-value products using a revenue-like breakage model. In general, these liabilities may be extinguished proportionately in earnings as redemptions occur, or when redemption is remote if issuers are not entitled to the unredeemed stored value. The Company adopted this guidance effective December 1, 2018 in connection with its adoption of Topic 606, utilizing the modified retrospective method. Refer to Note 3 for further disclosure of the impact of the new guidance.
2. Summary of significant accounting policies (continued)
Statement of Cash Flows
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force), (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for all interim and annual reporting periods beginning after December 15, 2017. The Company adopted this new guidance on December 1, 2018 using a retrospective transition method, and restated the cash flow statement for the prior period presented.
The chart below show the cash, cash equivalents, and restricted cash within the consolidated statements of cash flows as of February 28, 2019 and February 28, 2018 were as follows:
| February 28, 2019 | February 28, 2018 | ||||||
Cash and cash equivalents | $ | 965,541 | $ | 799,564 | ||||
Restricted cash | 421,940 | 682,076 | ||||||
Total cash, cash equivalents and restricted cash | $ | 1,387,481 | $ | 1,481,640 |
3. Revenue Recognition
The Company adopted Topic 606 on December 1, 2018 using the modified retrospective transition method and recorded an increase to opening accumulated deficit of $84,000. The adoption of this standard update resulted in no tax impact. The Company adopted Topic 606 only for contracts with remaining performance obligations as of December 1, 2018, under the modified retrospective transition method. Comparative information from prior year periods has not been adjusted and continues to be reported under the accounting standards in effect for those periods under Topic 605.
The adoption changed the timing of recognition of initial franchise fees, development fees, the reporting of advertising fund contributions and related expenditures, as well as timing of the recognition of gift card breakage.
The cumulative effects of the changes made to the Condensed Consolidated Balance Sheets as of December 1, 2018, for the adoption of Topic 606 were as follows:
Balance at November 30, 2018 | Adjustments Due to ASC 606 | Balance at December 1, 2018 | ||||||||||
Assets | ||||||||||||
Other assets | $ | 66,295 | $ | (1,348 | ) | $ | 64,947 | |||||
Liabilities | ||||||||||||
Accrued gift card liability | 146,290 | 2,742 | 149,032 | |||||||||
Other current liabilities | ||||||||||||
Deferred revenue | 27,000 | 82,225 | 109,225 | |||||||||
Shareholders (deficit) equity | ||||||||||||
Accumulated deficit | (11,272,448 | ) | (83,619 | ) | (11,356,067 | ) |
3. Revenue Recognition (continued)
The following table presents disaggregation of revenue from contracts with customers for the three months ended February 28, 2019 and 2018:
For three months ended February 28, 2019 | For three months ended February 28, 2018 (1) | |||||||
Royalty revenue | $ | 373,118 | $ | 385,051 | ||||
Franchise fees | 13,413 | - | ||||||
License fees | 2,500 | - | ||||||
Gift card revenue | 1,631 | 26,260 | ||||||
Sign Shop revenue | 372 | 1,788 | ||||||
Settlement revenue | 30,220 | 36,475 | ||||||
Nontraditional revenue | 62,258 | 50,893 | ||||||
Marketing fund revenue | 228,788 | - | ||||||
Net revenue | $ | 712,300 | $ | 500,467 |
(1) | As disclosed in Note 2, prior period amounts have not been adjusted under the modified retrospective method of adoption of Topic 606. |
Franchise and related revenue
The Company sells individual franchises. The franchise agreements typically require the franchisee to pay an initial, non-refundable fee prior to opening the respective location(s), and continuing royalty fees on a weekly basis based upon a percentage of franchisee net sales. The initial term of franchise agreements are typically 10 years. Subject to the Company’s approval, a franchisee may generally renew the franchise agreement upon its expiration. If approved, a franchisee may transfer a franchise agreement to a new or existing franchisee, at which point a transfer fee is typically paid by the current owner which then terminates that franchise agreement. A franchise agreement is signed with the new franchisee with no franchise fee required. If a contract is terminated prior to its term, it is a breach of contract and a penalty is assessed based on a formula reviewed and approved by management. Revenue generated from a contract breach is termed settlement income by the Company and included in licensing fees and other income.
Under the terms of our franchise agreements, the Company typically promises to provide franchise rights, pre-opening services such as blueprints, operational materials, planning and functional training courses, and ongoing services, such as management of the marketing fund. Under ASC 605, initial franchise fees paid by franchisees for each arrangement were deferred until the store opened and were recognized as revenue in their entirety on that date. Upon adoption of Topic 606, the Company determined that certain pre-opening activities, and the franchise rights and related ongoing services, represented two separate performance obligations. The franchise fee revenue has been allocated to the two separate performance obligations using a residual approach. The Company has estimated the value of performance obligations related to certain pre-opening activities deemed to be distinct based on cost plus an applicable margin, and assigned the remaining amount of the initial franchise fee to the franchise rights and ongoing services. Revenue allocated to preopening activities is recognized when (or as) these services are performed. Revenue allocated to franchise rights and ongoing services is deferred until the store opens, and recognized on a straight line basis over the duration of the agreement, as this ensures that revenue recognition aligns with the customer’s access to the franchise right.
Royalty income is recognized during the respective franchise agreement based on the royalties earned each period as the underlying franchise store sales occur. Adoption of ASC 606 will not change when the royalty revenue is recognized, this new guidance did not impact the recognition of royalty income.
There are two items involving revenue recognition of contracts that require us to make subjective judgments: the determination of which performance obligations are distinct within the context of the overall contract and the estimated stand alone selling price of each obligation. In instances where our contract includes significant customization or modification services, the customization and modification services are generally combined and recorded as one distinct performance obligation.
3. Revenue Recognition (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 not redeemable for cash except where required by law. Revenue from gift cards is recognized upon redemption in exchange for product and reported within franchisee store revenue and the royalty and marketing fees are paid and shown in the Condensed Consolidated Statements of Operations. Until redemption, outstanding customer balances are recorded as a liability. An obligation is recorded at the time of sale of the gift card and it is included in accrued expenses on the Company’s Condensed Consolidated Balance Sheets.
Previously, under Topic 605, the Company recognized revenue from gift cards on an annual basis in the first quarter per a management policy that was formulated based on when the likelihood of the gift card being redeemed by the customer was remote (also referred to as “breakage”) and the Company determined that it did not have a legal obligation to remit the unredeemed gift cards to the relevant jurisdictions. The Company determined the gift card breakage amount based upon its historical redemption patterns. Gift card breakage revenue was previously included in licensing fees and other revenue in the Condensed Consolidated Statements of Income. Under Topic 606, the Company recognizes gift card breakage proportional to actual gift card redemptions on a quarterly basis and it is included in licensing fees and other revenue. Significant judgments and estimates are required in determining the breakage rate and will be reassessed each quarter.
Nontraditional and rebate revenue
As part of the Company’s franchise agreements, the franchisee purchases products and supplies from designated vendors. The Company may receive various fees and rebates from the vendors and distributors on product purchases by franchisees. In addition, the Company may collect various initial fees, and those fees are classified as deferred revenue in the balance sheet and straight lined over the life of the contract as deferred revenue in the balance sheet. The Company does not possess control of the products prior to their transfer to the franchisee and products are delivered to franchisees directly from the vendor or their distributors. Under adoption of ASC 606 the revenue recognition will not change, the Company will recognize the rebates as franchisees purchase products and supplies from vendors or distributors and will recognize the initial fees over the contract life and the fees will be reported as licensing fees and other income in the Condensed Consolidated Statements of Income.
Marketing Fund
Franchise agreements require the franchisee to pay continuing marketing fees on a weekly basis, based on a percentage of franchisees sales. Marketing fees are not paid on franchise wholesale sales. The balance sheet includes marketing fund cash, which is the restricted cash, accounts receivable and unexpended marketing fund contributions. Under Topic 606, the Company has determined that although the marketing fees are not separate performance obligations distinct from the underlying franchise right, the Company acts as the principal as it is primarily responsible for the fulfillment and control of the marketing services. As a result, the Company records marketing fees in revenues and related marketing fund expenditures in expenses in the Condensed Consolidated Statement of Income. The Company historically presented the net activities of the marketing fund within the balance sheet in the Condensed Consolidated Balance Sheet. While this reclassification will impact the gross amount of reported revenue and expenses the amounts will be offsetting, and there will be no impact on net income.
3. Revenue Recognition (continued)
Contract balances
Information about contract balances subject to ASC 606 is as follows:
February 28, 2019 | December 1, 2018 | |||||||
Assets | ||||||||
Accounts receivable | $ | 76,577 | $ | 36,337 | ||||
Total Assets | 76,577 | 36,337 | ||||||
Liabilities | ||||||||
Contract liabilities - current | 603,909 | 647,594 | ||||||
Contract liabilities - long-term | 102,286 | 106,948 | ||||||
Total Contract Liabilities | $ | 706,195 | $ | 754,542 |
Accounts receivable represent weekly royalty payments and monthly vendor rebate payments that represent billed and unbilled receivables due as of February 28, 2019 and December 1, 2018. The balance of contract liabilities includes franchise fees, license fees and vendor payments that have ongoing contract rights and the fees are being straight lined over the contract life. Contract liabilities also include marketing fund balances and gift card liability balances.
Accounts Receivable | Contract Liabilities | |||||||
Balance at beginning of period | $ | 36,337 | $ | 754,542 | ||||
Revenue Recognized | - | (48,347 | ) | |||||
Amounts (collected) or invoiced, net | 40,240 | - | ||||||
Balance at end of period | $ | 76,577 | $ | 706,195 |
Transaction price allocated to remaining performance obligations:
2019(a) | $ | 48,050 | ||
2020 | 20,671 | |||
2021 | 19,254 | |||
2022 | 17,292 | |||
2023 | 12,598 | |||
Thereafter | 32,471 | |||
Total | $ | 150,336 |
(a) represents the estimate for the remainder of 2019 |
��
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 a part 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 to unsatisfied performance obligations that is allocated entirely to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation, and the terms of that variable consideration relate specifically to our efforts to transfer the distinct service, or to a specific outcome from transferring the distinct 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. Additionally, the Company has applied the transition practical expedient that allows the Company to omit the above disclosures for the fiscal year November 30, 2018.
3. Revenue Recognition (continued)
Impact of the Adoption of ASC 606
The adoption changed the timing of recognition of initial franchise fees, the reporting of advertising fund contributions and related expenditures, as well as timing of the recognition of gift card breakage.
In accordance with the new revenue standard requirements, the following tables summarize the effects of the new standard on the Company’s Consolidated Balance Sheet and Statement of Operations for the three months ended February 28, 2019.
As reported February 28, 2019 | Effect of change | Balance without ASC 606 adoption | ||||||||||
Assets | ||||||||||||
Other assets | $ | 1,547,699 | $ | 1,348 | $ | 1,546,351 | ||||||
Liabilities | ||||||||||||
Accrued gift card liability | 155,391 | 26,665 | 128,726 | |||||||||
Other current liabilities | ||||||||||||
Deferred revenue | 150,336 | 91,972 | 58,364 | |||||||||
Shareholders (deficit) equity | ||||||||||||
Accumulated deficit | (11,477,113 | ) | (40,125 | ) | (11,436,988 | ) |
As reported February 28, 2019 | Effect of change | Balance without ASC606 adoption | ||||||||||
Royalty revenue | $ | 373,118 | $ | - | $ | 373,118 | ||||||
Franchise fees | 13,413 | 3,413 | 10,000 | |||||||||
License fees | 2,500 | (12,500 | ) | 15,000 | ||||||||
Gift card revenue | 1,631 | (31,038 | ) | 32,669 | ||||||||
Sign Shop revenue | 372 | - | 372 | |||||||||
Settlement revenue | 30,220 | - | 30,220 | |||||||||
Nontradtional revenue | 62,258 | - | 62,258 | |||||||||
Marketing fund revenue | 228,788 | 228,788 | 0 | |||||||||
Net revenue | 712,300 | 188,663 | 523,637 | |||||||||
Expenses unaffected by ASC 606 | 381,912 | - | 381,912 | |||||||||
Marketing fund expenses | 228,788 | 228,788 | 0 | |||||||||
Interest (income)/expense | (260 | ) | - | (260 | ) | |||||||
Income tax expense | 5,000 | - | 5,000 | |||||||||
Net expenses | 615,440 | 228,788 | 386,652 | |||||||||
Net income | $ | 96,860 | $ | (40,125 | ) | $ | 136,985 |
4. Units Open and Under Development
Units which are open or under development at August 31, 2017February 28, 2019 are as follows:
Stores open: | ||||
Franchisee-owned stores | ||||
Licensed Units | ||||
Unopened stores with Franchise | ||||
Agreements | ||||
Total operating units and units with Franchise Agreements |
3.
5. Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share:
For the three months ended August 31, | For the nine months ended August 31, | For the three months ended: | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | February 28, 2019 | February 28, 2018 | |||||||||||||||||||
Numerator: | ||||||||||||||||||||||||
Net income available to common shareholders | $ | 132,073 | $ | 165,245 | $ | 320,801 | $ | 386,022 | $ | 96,860 | $ | 100,830 | ||||||||||||
Denominator: | ||||||||||||||||||||||||
Weighted average outstanding shares | ||||||||||||||||||||||||
Basic and diluted | 7,263,508 | 7,263,508 | 7,263,508 | 7,263,508 | ||||||||||||||||||||
Earnings per Share - Basic and Diluted | $ | 0.02 | $ | 0.02 | $ | 0.04 | $ | 0.05 | ||||||||||||||||
Basic and diluted common stock | 7,263,508 | 7,263,508 | ||||||||||||||||||||||
Earnings per Share - Basic | $ | 0.01 | $ | 0.01 |
There were no outstanding options for the three or nine months ended August 31, 2017. For the three and nine months ended August 31, 2016, the Company excluded 175,000 potential shares attributable to outstanding stock options from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.
4. Stock Options
In May 2001, the Company approved a Long-Term Incentive and Stock Option Plan (“Plan”). The Plan reserved and has issued 1,400,000 shares of common stock for grant. All remaining options expired on November 23, 2016 and there were no options outstanding as of August 31, 2017. As of August 31, 2016, there were 1,225,000 stock options exercised or forfeited under the Plan. All options outstanding were either forfeited or expired during the year ended November 30, 2016.
| ||||||||
|
| |||||||
| ||||||||
| ||||||||
| ||||||||
| ||||||||
|
5.6. Goodwill and Other Intangible Assets
Accounting Standard Codification (“ASC”) 350 “Goodwill and Other Intangible Assets” requires that assets with indefinite lives no longer be amortized, but instead be subject to annual impairment tests. The Company follows this guidance and has elected to early adopt ASU 2017-04 “Intangibles – Goodwill and Other” (Topic 350) in the first quarter ended February 28, 2017.
TheFollowing the guidelines contained in ASC 350, the Company tests goodwill and intangible assets that isare not subject to amortization for impairment annually or more frequently if events or circumstances indicate that impairment is possible.
The Company has consistently conductedelected to conduct its annual test during the first quarter. During the quarter ended February 28, 2019, management qualitatively assessed goodwill to determine whether testing iswas 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 its carrying value, a quantitative assessment is then performed. Based on a qualitative evaluation, management determined that the carrying value of goodwill was not impaired at February 28, 2017,2019, and a quantitative assessment was not considered necessary. There were no factors noted at August 31, 2017 that would require additional testing.
The impairment test performed November 30, 2016 was based on a fair market value calculation using a discounted cash flow model that incorporated management’s business plan projection for expected future cash flows. Based on the computation it was determined that no impairment had occurred. There have been no material changes in any of the three quarters of 2017 and it is believed that the cash flow projections are in line with current year income and expenses.
In January 2017, the FASB issued ASU 2017-04, Intangibles- Goodwill and Other (Topic 350), which is intended to simplify the test for goodwill impairment. To simplify the subsequent measurement of goodwill, the standard eliminates Step 2 from the goodwill impairment test. Instead, an entity will perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments in this ASU are effective for the annual reporting periods beginning after December 15, 2019, including the interim periods within that reporting period. The Company elected to early adopt this guidance in the quarter ended February 28, 2017.
6. Recent and Adopted Accounting Pronouncements
Revenue from Contracts with Customers, ASU 2014-09 establishes a comprehensive revenue recognition standard for virtually all industries in U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. The standard requires five basic steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, (v) recognize revenue when (or as) the entity satisfies a performance obligation. Entities will generally be required to make more estimates and use more judgment than under current guidance, which will be highlighted for users through increased disclosure requirements. The ASU is effective for the Company, for fiscal years beginning after December 15, 2017. The Company will adopt ASU 2014-09 for fiscal year ending November 30, 2019 and the Company is evaluating the impact that adoption of this guidance might have on the Company’s financial position, cash flows or results of operations.
6. Recent and Adopted Accounting Pronouncements (Cont’d)7. Lease Commitments
OnThe Company rents its office under an operating lease which requires it to pay base rent, real estate taxes, insurance and general repairs and maintenance. A lease was signed in June of 2018, effective October 1, 2018, expiring on March 31, 2024 with an option to renew for a 5 year period. A six month rent abatement and tenant allowance was provided in the lease, with any unused portion to be applied to base rent and the unused portion has not yet been determined. The renewal option and tenant allowance have not been included in the measurement of the lease liability.
Monthly rent expense is recognized on a straight-line basis over the term of the lease. At February 25, 2016,28, 2019 the FASB issued ASU No. 2016-02, Leases, requiring lessees to recognize a right-of-use asset and aremaining lease liability onterm was 61 months. The operating lease is included in the balance sheet for all leases withat the exceptionpresent value of short-term leases. For lessees, leases will continuethe lease payments at a 5.25% discount rate. The discount rate was considered to be classified as either operating or finance leases in the income statement. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. The effective datean estimate of the new standard for public companies is for fiscal years beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition and requires application of the new guidance at the beginning of the earliest comparative period presented. The Company will adopt ASU 2016-02 for fiscal year ending November 30, 2019 and the Company is evaluating the impact that adoption of this guidance might have on the Company’s financial position, cash flows or results of operations.Company’s incremental borrowing rate.
In March 2016, the Financial Accounting Standards Board issued ASU 2016-04, Liabilities – ExtinguishmentsGross future minimum annual rental commitments as of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products. The amendments in the ASUFebruary 28, 2019, are designed to provide guidance and eliminate diversity in the accounting for derecognition of prepaid stored-value product liabilities. Typically, a prepaid stored-value product liability is to be derecognized when it is probable that a significant reversal of the recognized breakage amount will not subsequently occur. This is when the likelihood of the product holder exercising its remaining rights becomes remote. This estimate shall be updated at the end of each period. The amendments in this ASU are effective for the annual reporting periods beginning after December 15, 2017, including the interim periods within that reporting period. Early adoption is permitted. The Company is still evaluating the impact the guidance will have on the Company’s financial position, cash flows or results of operations.as follows:
Undiscounted Rent Payments | ||||
Year Ending November 30: | ||||
2019 | $ | 71,965 | ||
2020 | 110,375 | |||
2021 | 113,024 | |||
2022 | 115,673 | |||
2023 | 118,322 | |||
Thereafter | 40,176 | |||
Total Undiscounted Rent Payments | 569,535 | |||
Present Value Discount | (65,266 | ) | ||
Present Value | $ | 504,269 | ||
Short-term lease liability | $ | 55,879 | ||
Long-term lease liability | 448,390 | |||
Total Operating Lease Liability | $ | 504,269 |
In November 2015, the Financial
8. Recent Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). The standard requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. The Company will adopt ASU 2015-17 during the year ended November 30, 2018, on a retrospective basis. The effect of this change is not expected to materially alter the Company’s financial position as a whole.Pronouncements
Management does not believe that there are any other recently issued and effective or not yet effective pronouncements as of February 28, 2019 that would have or are expected to have any significant effect on the Company’sCompany’s financial position, cash flows or results of operations.
7. Stockholder’s9. Stockholder’s Equity
The Board of Directors declared a cash distribution/dividend on March 3, June 6 and September 6, 2016 of $0.01 per share, paid April 13, July 11, and October 12, 2016, respectively. On December 5, 2016,6, 2018, a $0.01 quarterly and a $0.01$0.02 special cash distribution/dividend per share was declared and paid on January 9, 2017. January 11, 2019.
On March 15, and June 7, 2017,13, 2019, the Board of Directors declared a $0.01 quarterly cash distribution/dividend per share paid on April 20, and July 13, 2017, respectively.
On September 7, 2017, the Board of Directors declared a $0.01 quarterly cash distribution/dividend to shareholders of record as of September 25, 2017, payable October 13, 2017.
7. Stockholder’s Equity (Cont’d)March 29, 2019, to be paid April 18, 2019.
On May 6, 2013, the Board of Directors (“Board”) of BAB, Inc. adopted a Preferred Shares Rights Agreement (“Rights Plan”)authorized and declared a dividend distribution of one right (equivalent to one one-thousandth of a preferred share), for each outstanding share of the common stock. The Rights Plan is intended to protect BAB, Inc. and its stockholders from efforts to obtain controlstock of BAB, Inc. that the Boardto stockholders of Directors determines are not in the best interest of BAB, Inc. and its stockholders. BAB, Inc. issued one Right for each current share of stock outstandingrecord at the close of business on May 13, 2013. The rights will not be exercisable unless a person or group acquires 15% (20% institutional investors) or more of BAB, Inc.’s common stock (“trigger event”). Should a trigger event occur, eachEach right entitles the registered holder to purchase from the Company one one-thousandth of a share of the Series A Participating Preferred Stock of the Company at an exercise price of $0.90 per one-thousandth of a Preferred Share, subject to adjustment. The complete terms of the Rights will expireare set forth in three yearsa Preferred Shares Rights Agreement, dated May 6, 2013, between the Company and IST Shareholder Services, as rights agent.
The Board adopted the Rights Agreement to protect stockholders from coercive or otherwise unfair takeover tactics. In general terms, it works by imposing a significant penalty upon any person or group that acquires 15% (or 20% in the datecase of declaration.certain institutional investors who report their holdings on Schedule 13G) or more of the Common Shares without the approval of the Board. As a result, the overall effect of the Rights Agreement and the issuance of the Rights may be to render more difficult a merger, tender or exchange offer or other business combination involving the Company that is not approved by the Board. However, neither the Rights Agreement nor the Rights should interfere with any merger, tender or exchange offer or other business combination approved by the Board.
Full details about the Rights Plan are contained in a Form 8-K filed by the Company with the U.S. Securities and Exchange Commission on May 7, 2013.
On June 18, 2014 an amendment to the Preferred Shares Rights Agreement was filed appointing American Stock Transfer & Trust Company, LLC as successor to Illinois Stock Transfer Company. All original rights and provisions remain unchanged. On August 18, 2015 an amendment was filed to the Preferred Shares Rights Agreement changing the final expiration date to mean the fifth anniversary of the date of the original agreement. All other original rights and provisions remain the same. On May 22, 2017 an amendment was filed extending the final expiration date to mean the seventh anniversary date of the original agreement. All other original rights and provisions remain the same. On February 22, 2019 an amendment was filed extending the final expiration date to mean the ninth anniversary date of the original agreement. All other original rights and provisions remain the same.
| ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Certain statements contained in Management's Discussion and Analysis of Financial Condition and Results of Operations, including statements regarding the development of the Company's business, the markets for the Company's products, anticipated capital expenditures, and the effects of completed and proposed acquisitions, and other statements contained herein regarding matters that are not historical facts, are forward-looking statements as is within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Because such statements include risks and uncertainties, actual results could differ materially from those expressed or implied by such forward-looking statements as set forth in this report, the Company's Annual Report on Form 10-K and other reports that the Company files with the Securities and Exchange Commission. Certain risks and uncertainties are wholly or partially outside the control of the Company and its management, including its ability to attract new franchisees; the continued success of current franchisees; the effects of competition on franchisees and consumer acceptance of the Company's products in new and existing markets; fluctuation in development and operating costs; brand awareness; availability and terms of capital; adverse publicity; acceptance of new product offerings; availability of locations and terms of sites for store development; food, labor and employee benefit costs; changes in government regulation (including increases in the minimum wage); regional economic and weather conditions; the hiring, training, and retention of skilled corporate and restaurant management; and the integration and assimilation of acquired concepts. Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revision to these forward-looking statements which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
General
There are 8373 franchised and 6 licensed units at February 28, 2019 compared to 80 franchised and 3 licensed units at August 31, 2017 compared to 86 franchised and 3 licensed units at August 31, 2016.February 28, 2018. System-wide revenues for the ninethree months ended August 31, 2017February 28, 2019 were $26.3$7.8 million as compared to August 31, 2016February 28, 2018 which were $26.4$7.8 million.
The Company's revenues are derived primarily from the ongoing royalties paid to the Company by its franchisees and receipt of initial franchise fees. Additionally, the Company derives revenue from the sale of licensed products (My Favorite Muffin mix, Big Apple Bagels cream cheese Big Apple Bagels frozen bagels and Brewster's coffee), and through nontraditional channels of distribution (Greenthrough a licensing agreement with Green Beans Coffee). Also included in licensing fees and other income is Operation’s Sign Shop revenue. The Sign Shop provides the majority of signage, which includes but is not limited to, posters, menu panels, outside window stickers and counter signs to franchisees to provide consistency and convenience.Coffee.
Royalty fees represent a 5% fee on net retail and wholesale sales of franchised units. Royalty revenues are recognized on an accrual basis using actual franchise receipts. Generally, franchisees report and remit royalties on a weekly basis. The majority of month-end receipts are recorded on an accrual basis based on actual numbers from reports received from franchisees shortly after the month-end. Estimates are utilized in certain instances where actual numbers have not been received and such estimates are based on the average of the last 10 weeks’ actual reported sales.
The Company recognizes franchise feeThere are two items involving revenue uponrecognition of contracts that require us to make subjective judgments: the openingdetermination of a franchise storewhich performance obligations are distinct within the context of the overall contract and the estimated stand alone selling price of each obligation. In instances where our contract includes significant customization or uponmodification services, the signing of a Master Franchise Agreement. Direct costs associated with the franchise salecustomization and modification services are deferred until the franchise fee revenue is recognized. These costs include site approval, construction approval, commissions, blueprintsgenerally combined and training costs.recorded as one distinct performance obligation.
The Company earns licensing feesfees from the sale of BAB branded products, which includes coffee, cream cheese, muffin mix and frozen bagels from a third-party commercial bakery, to the franchised and licensed units.
As of August 31, 2017,February 28, 2019, the Company employed 1513 full-time employees at the Corporate office. The employees are responsible for corporate management and oversight, accounting, advertising and franchising. None of the Company's employees are subject to any collective bargaining agreements and management considers its relations with its employees to be good.
Results of Operations
Three Months Ended August 31, 2017February 28, 2019 versus Three Months Ended AugustFebruary 28, 2018 31, 2016
For the three months ended August 31, 2017February 28, 2019 and 2016,2018, the Company reported net income of $132,000$97,000 and $165,000,$101,000, respectively. Total revenue of $564,000 decreased $52,000,$712,000 increased $212,000, or 8.4%42.4%, for the three months ended August 31, 2017,February 28, 2019, as compared to total revenue of $616,000$500,000 for the three months ended August 31, 2016.February 28, 2018. Marketing revenue of $229,000 were included per adoption of ASC 606 and franchise fees increased $13,000, offset by a decrease of $12,000 in royalty revenue and an $18,000 decrease in licensing fees and other income. Adoption of ASC606 decreased net income for February 28, 2019 by $40,000, from $137,000 to $97,000. Adoption of ASC606 includes $229,000 in revenue for Marketing revenue and rebates, an increase of $4,000 in franchise fees, offset by a decrease in license fees of $13,000 and gift card breakage of $29,000 making revenues unadjusted for ASC606, $524,000 for February 28, 2019.
Royalty fee revenue of $447,000,$373,000, for the quarter ended August 31, 2017, increased $5,000,February 28, 2019, decreased $12,000, or 1.1%3.1%, from the $442,000$385,000 for quarter ended August 31, 2016.February 28, 2018.
Franchise fee revenues of $10,000,$13,000, for the quarter ended August 31, 2017, decreased $50,000, or 83.3% from the $60,000February 28, 2019, versus none for the quarter ended August 31, 2016.February 28, 2018. There were no store openings and two transfers in the quarter ended August 31, 2017 compared to two stores opened and two transfers2019 versus none in the three months ending August 31, 2016.2018. In addition, there was a $3,000 franchise fee revenue increase for adoption of ASC606 in fiscal 2019.
Licensing fee and other income of $107,000,$97,000, for the quarter ended August 31, 2017,February 28, 2019, decreased $7,000,$18,000, or 6.1%15.7% from $114,000$115,000 for the quarter ended August 31, 2016.February 28, 2018. License fees and settlement income decreased $4,000 and gift card breakage revenue decreased $25,000, offset by an increase in rebate revenue of $11,000 in 2019 compared to 2018. The decrease in gift card breakage revenue was primarily due to decreased Sign Shop revenues for the third quarter ended August 31, 2017adoption of ASC 606 in fiscal 2019. The gift card breakage revenue would have increased $6,000 in 2019 compared to 2018 without the same quarter 2016.adoption.
Total operating expenses of $432,000,$611,000, for the quarter ended August 31, 2017 decreased $19,000,February 28, 2019 increased $226,000, or 4.2%58.7% from $451,000$385,000 for the quarter ended August 31, 2016.February 28, 2018. The 2017 decreaseincrease was primarily due to a decrease in franchise development2019 adoption of $16,000, a decrease in professional servicesASC 606 including marketing expenses of $8,000, a decrease$229,000. Marketing revenue and marketing expenses offset each other. There was an increase of $4,000 each for advertising and amortization and a decrease of $3,000 for Sign Shop cost of goods sold. These were offset by increases$9,000 in payroll and payroll related expensestax expense, and increase in advertising expense of $11,000, an$10,000 and increase in employee benefit expense of $3,000$12,000 and an increase in franchise development of $2,000$3,000, offset by a decrease in occupancy of $20,000 a decrease in uncollectible accounts of $10,000 and a decrease in general expenses of $7,000 for the third quarter 20173 months ended February 28, 2019 compared to the same period in 2016.2018.
Earnings per share, as reported for basic and diluted outstanding shares for the quarter ended August 31, 2017February 28, 2019 and 20162018 was $0.02.$0.01.
Nine Months Ended August 31, 2017 versus Nine Months Ended August 31, 2016
For the nine months ended August 31, 2017 and 2016, the Company reported net income of $321,000 and $386,000, respectively. Total revenue of $1,664,000 decreased $97,000, or 5.5%, for the nine months ended August 31, 2017, as compared to total revenue of $1,761,000 for the nine months ended August 31, 2016.
Royalty fee revenue of $1,295,000, for the nine months ended August 31, 2017, decreased $4,000, or 0.3%, from the $1,299,000 for the nine months ended August 31, 2016. Royalty revenues were primarily flat and 2016 was leap year and included one additional day’s sales.
Franchise fee revenues of $50,000, for the nine months ended August 31, 2017, decreased $28,000, or 35.9%, from the $78,000 for the nine months ended August 31, 2016. One store was opened and five transfers for the nine months in 2017 compared to two stores opened and six transfers in the nine months same period in 2016.
Licensing fee and other income of $319,000, for the nine months ended August 31, 2017, decreased $66,000, or 17.1%, from $385,000 for the nine months ended August 31, 2016. The decrease in 2017 was primarily due to a one time nontraditional vendor rebate payment in 2016 of $40,000, a decrease in Sign Shop revenue of $15,000, a decrease in nontraditional income of $6,000 and a decrease in settlement fees of $5,000 compared to same period 2016.
Total operating expenses of $1,344,000 decreased $31,000, or 2.3%, for the nine months ended August 31, 2017, from $1,375,000 for the same period 2016. The decrease was primarily due to a decrease in Sign Shop cost of goods sold of $24,000, advertising expenses of $14,000, amortization expense of $4,000 and a decrease in franchise development of $2,000 for the nine months ended August 31, 2017 compared to the same period 2016. This was offset by an increase in employee benefit expense of $6,000 and an increase in general expenses of $6,000 for the nine months ended August 31, 2017 compared to the same period 2016.
There was no income tax expense recorded for the nine months ended August 31, 2017 and 2016.
Earnings per share, as reported for basic and diluted outstanding shares for the nine months ended August 31, 2017 and 2016 was $0.04 and $0.05 per share, respectively.
Liquidity and Capital Resources
At August 31, 2017,February 28, 2019, the Company had working capital of $589,000$645,000 and unrestricted cash of $746,000.$966,000. At November 30, 20162018 the Company had working capital of $557,000$756,000 and unrestricted cash of $907,000.$1,065,000.
During the ninethree months ended August 31, 2016,February 28, 2019, the Company had net income of $321,000$97,000 and operating activities provided cash of $139,000.$97,000. The principal adjustments to reconcile the net lossincome to cash provided in operating activities for the ninethree months ending August 31, 2016 were depreciationFebruary 28, 2019 was an increase in noncash lease expense of $26,000 and amortization of $11,000 less a decrease in the provision for uncollectible accounts of $5,000.$11,000. In addition, changes in operating assets and liabilities decreased cash by $188,000.$15,000. During August 31, 2016,the three months ended February 28, 2018, the Company had net income of $386,000$101,000 and operating activities provided cash of $348,000.$152,000. The principal adjustments to reconcile the net lossincome to cash provided in operating activities for the ninethree months ending August 31, 2016 were depreciation and amortization of $15,000 lessFebruary 28, 2018 was a decrease in the provision for uncollectible accounts of $4,000.$1,000. In addition, changes in operating assets and liabilities decreasedincreased cash by $50,000.$52,000.
The Company used $9,000 and $4,000 forThe Company’s investing activities were insignificant for the ninethree months ended August 31, 2017February 28, 2019 and 2016, respectively.2018.
The Company used $291,000$218,000 and $363,000$145,000 for cash distribution/dividend payments during the ninethree month periodperiods ended August 31, 2017February 28, 2019 and 2016, respectively.2018.
On September 7, 2017,March 13, 2019, the Board of Directors declared a $0.01 per share quarterly cash distribution/dividend to shareholders of record as of September 25, 2017, payable October 13, 2017.March 29, 2019, to be paid April 18, 2019. 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 cash distributions/dividends will be considered based on profitability expectations and financing needs and will be declared at the discretion of the Board of Directors. It is the Company’s intent going forward to declare and pay cash distributions/dividends on a quarterly basis if warranted.
The Company believes execution of its cash distribution/dividend policy will not have any material adverse effects on its cash or its ability to fund current operations or future capital investments.
Cash Distribution and Dividend Policy
It is the Company’sCompany’s intent that future cash distributions/dividends will be considered after reviewing profitability expectations and financing needs and will be declared at the discretion of the Board of Directors. Due to the general economic downturn and its impact on the Company, thereThere can be no assurance that the Company will generate sufficient earnings to pay out cash distributions/dividends. The Company will continue to analyze its ability to pay cash distributions/dividends on a quarterly basis.
The Company believes that for tax purposes the cash distributions declared in 2017 may be treated as a return of capital to stockholders depending on each stockholder’s basis or it may be treated as a dividend or a combination of the two. Determination of whether it isdistributions are considered a cash distribution, cash dividend or combination of the two will not be made until after December 31, 2017,2019, as the classification or combination is dependent upon the Company’s earnings and profits for tax purposes for its fiscal year ending November 30, 2017.2019.
The Company believes execution of this policy will not have any material adverse effect on its ability to fund current operations or future capital investments.
Recent and Adopted Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04, Intangibles- Goodwill and Other (Topic 350), which is intended to simplify the test for goodwill impairment. To simplify the subsequent measurement of goodwill, the standard eliminates Step 2 from the goodwill impairment test. Instead, an entity will perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The amendments in this ASU are effective for the annual reporting periods beginning after December 15, 2019, including the interim periods within that reporting period. The Company elected to early adopt this guidance in the quarter ended February 28, 2017.
Revenue from Contracts with Customers, ASU 2014-09 (Topic 606) establishes a comprehensive revenue recognition standard for virtually all industries in U.S. GAAP, including those that previously followed industry-specific guidance such as the real estate, construction and software industries. The revenue standard’sstandard’s core principle is built on the contract between a vendor and a customer for the provision of goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition based on the consideration to which the vendor is entitled. The standard requires five basic steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, (v) recognize revenue when (or as) the entity satisfies a performance obligation. Entities will generally be required to make more estimates and use more judgment than under current guidance, which will be highlighted for users through increased disclosure requirements.
The ASUstandard requires that the transaction price received from customers be allocated to each separate and distinct performance obligation. The transaction price attributable to each separate and distinct performance obligation is then recognized as the performance obligations are satisfied. We have evaluated franchise fees and have determined that under the new standard the franchise fee is not separate and distinct from the overall franchise right. Franchise fees received will be recorded as deferred revenue and recognized as revenue over the term of each respective franchise agreement, typically 10 years. The Company has adopted this standard effective December 1, 2019. See note 3 for the Company, for fiscal years beginning after December 15, 2017. The Company will adopt ASU 2014-09 for fiscal year ending November 30, 2019 and the Company is evaluating the impact thatof adoption of this guidance might have on the Company’s financial position, cash flows or results of operations.
On February 25, 2016,We have evaluated the FASB issued ASU No. 2016-02, Leases, requiring lesseesimpact of our franchise contributions to recognize a right-of-use asset and a lease liability onsubsequent expenditures from our marketing fund. We have determined we are the balance sheet for all leases with the exception of short-term leases. For lessees, leases will continue to be classified as either operating or finance leasesprincipal in the income statement. Lessor accounting is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. The effective date ofthese arrangements and under the new standard for public companies is for fiscal years beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transitionwe have included them as revenue and requires application of the new guidance at the beginning of the earliest comparative period presented.expense items. The Company will adopt ASU 2016-02has adopted this standard effective December 1, 2019. See note 3 for fiscal year ending November 30, 2019 and the Company is evaluating the impact thatof adoption of this guidance might have on the Company’sCompany’s financial position, cash flows orand results of operations.
In March 2016, the Financial Accounting Standards BoardFASB issued ASU 2016-04, Liabilities – Extinguishments of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products.Products. The amendmentsnew guidance creates an exception under ASC 405-20, Liabilities-Extinguishments of Liabilities, to derecognize financial liabilities related to certain prepaid stored-value prodpucts using a revenue-like breakage model. In general, these liabilities may be extinguished proportionately in earnings as redemptions occur, or when redemption is remote if issuers are not entitled to the unredeemed stored value. The Company adopted this guidance effective December 1, 2018 in connection with its adoption of Topic 606, utilizing the modified retrospective method. Refer to Note 3 for further disclosure of the impact of the new guidance.
In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force), (“ASU 2016-18”). ASU 2016-18 requires that a statement of cash flows explain the change during the period in the ASU are designed to providetotal of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted this new guidance on December 1, 2018 using a retrospective transition method, and eliminate diversity inrestated the accounting for derecognition of prepaid stored-value product liabilities. Typically, a prepaid stored-value product liability is to be derecognized when it is probable that a significant reversal of the recognized breakage amount will not subsequently occur. This is when the likelihood of the product holder exercising its remaining rights becomes remote. This estimate shall be updated at the end of each period. The amendments in this ASU are effectivecash flow statement for the annual reporting periods beginning after December 15, 2017, including the interim periods within that reporting period. Early adoption is permitted. The Company is still evaluating the impact the guidance will have on the Company’s financial position, cash flows or results of operations.prior period presented.
In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). The standard requires that deferred tax assets and liabilities be classified as noncurrent on the balance sheet rather than being separated into current and noncurrent. ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted and the standard may be applied either retrospectively or on a prospective basis to all deferred tax assets and liabilities. The Company will adopt ASU 2015-17 during the year ended November 30, 2018, on a retrospective basis. The effect of this change is not expected to materially alter the Company’s financial position as a whole.
Management does not believe that there are any other recently issued and effective or not yet effective pronouncements that would have or are expected to have any significant effect on the Company’sCompany’s financial position, cash flows or results of operations.
Critical Accounting Policies
The Company has identified other significant accounting policies that, as a result of the judgments, uncertainties, uniqueness and complexities of the underlying accounting standards and operations involved could result in material changes to its financial condition or results of operations under different conditions or using different assumptions. The Company's most critical accounting policies are related to revenue recognition, valuation of long-lived and intangible assets, deferred tax assets and the related valuation allowance. Details regarding the Company's use of these policies and the related estimates are described in the Company's Annual Report on Form 10-K for the fiscal year ended November 30, 2016,2018, filed with the Securities and Exchange Commission on February 23, 2017. There have been no material changes to the Company's critical accounting policies that impact the Company's financial condition, results of operations or cash flows for the three or nine months ended August 31, 2017.25, 2019.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
BAB,, Inc. has no interest, currency or derivative market risk.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of both our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this report. Based on such evaluation, both our Chief Executive Officer and Chief Financial Officer have concluded that, as of August 31, 2017February 28, 2019 our disclosure controls and procedures are effective (i) to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) to ensure that information required to be disclosed by us in the reports that we submit under the Exchange Act is accumulated and communicated to our management, including our executive and financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) during the ninethree months of fiscal year 20172019 to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Compliance with Section 404 of Sarbanes-Oxley Act
The Company is in compliance with Section 404 of the Sarbanes-Oxley Act of 2002 (the “Act”).
PART II
ITEM 1. LEGAL PROCEEDINGS |
|
We aremay be subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of such proceedings or claims cannot be predicted with certainty, management does not believe that the outcome of any of such proceedings or claims will have a material effect on our financial position. We know of no pending or threatened proceeding or claim to which we are or will be a party.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
None.
| ITEM 3. DEFAULTS UPON SENIOR SECURITIES |
None.
| ITEM 4. MINE SAFETY DISCLOSURES |
Not applicable
| ITEM 5. OTHER INFORMATION |
None.
| ITEM 6. EXHIBITS |
See index to exhibits
INDEX TO EXHIBITS
(a) EXHIBITS
The following exhibits are filed herewith.
101.INS* | XBRL Instance | |
101.SCH* | XBRL Taxonomy Extension Schema | |
101.CAL* | XBRL Taxonomy Extension Calculation | |
101.DEF* | XBRL Taxonomy Extension Definition | |
101.LAB* | XBRL Taxonomy Extension Labels | |
101.PRE* | XBRL Taxonomy Extension Presentation |
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BAB,, Inc.
Dated: | /s/ Geraldine Conn |
Geraldine Conn | |
Chief Financial Officer |
22
INDEX TO EXHIBITS
(a) EXHIBITS
The following exhibits are filed herewith.
|
| ||
| |||
| |||
| |||
| |||
| |||
| |||
| |||
| |||
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
17