12.

COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company currently has

operating leases for various buildings, equipment and vehicles. These leases are under non-cancelable operating lease agreements with expiration dates between

November 30, 2020

and

June 30, 2024.

The Company has the option to extend certain leases to

five

ten

-year term(s) and has the right of

first

refusal on any sale.

The Company records lease liabilities within current liabilities or long-term liabilities based upon the length of time associated with the lease payments. The Company records its long-term operating leases as right-of-use assets. Upon initial adoption, using the modified retrospective transition approach,

leases with terms less than

-months have been capitalized to the consolidated balance sheet consistent with ASC

842.

Instead, these leases are recognized in the consolidated statement of operations on a straight-line expense throughout the lives of the leases.

None

of the Company’s leases contain common area maintenance or security agreements.

The Company has made certain assumptions and judgments when applying ASC

842,

the most significant of which is that the Company elected the package of practical expedients available for transition that allow the Company to

not

reassess whether expired or existing contracts contain leases under the new definition of a lease, lease classification for expired or existing leases and whether previously capitalized initial direct costs would qualify for capitalization under ASC

842.

Additionally, the Company did

not

elect to use hindsight when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset. The Company has

contingent rent agreements.

Present Value of Long-term Leases

(in thousands):	May 31, 2020
Right-of-use assets, net	$	451,188

Current portion of lease liability		136,714
Lease liability, less current portion		314,474
Total lease liability	$	451,188

As of

May 31, 2020,

the weighted-average remaining lease term was

1.9

years. The Company’s lease agreements do

not

provide a readily determinable implicit rate nor is it available to the Company from its lessors. Instead, as of

May 31, 2020,

the Company estimates the weighted-average discount rate for its operating leases to be

4.32%

to present value based on the incremental borrowing rate.

Future minimum payments for the next

five

fiscal years and thereafter as of

May 31, 2020

under these long-term operating leases are as follows (in thousands):

Fiscal 2020	$	68,746
Fiscal 2021		263,392
Fiscal 2022		125,648
Fiscal 2023		10,222
Fiscal 2024		2,570
Total future minimum lease payments		470,578
Less amount representing interest		(19,390	)
Present value of obligations under operating leases		451,188
Less current portion		(136,714	)
Long-term operating lease obligations	$	314,474

Annual Bonus Plan

August 31, 2019,

the Compensation Committee of the Board of Directors of the Company approved the material terms of an annual bonus plan for the Company’s executive officers as well as certain officers and employees for the fiscal year ending

August 31, 2020.

For fiscal

2020

as in past years, the total amount available under the bonus plan for all plan participants, including executive officers, is dependent upon the Company’s earnings before interest, taxes and other income (EBITOI), as adjusted to take into account amounts to be paid under the bonus plan and certain other adjustments (Adjusted EBITOI). Each plan participant’s percentage of the overall bonus pool is based upon the number of plan participants, the individual’s annual base salary and the individual’s position and level of responsibility within the Company. In the case of each of the Company’s executive officer participants,

75%

of the amount of their individual bonus payout will be determined based upon the Company’s actual EBITOI for fiscal

2020

compared to a pre-established target EBITOI for fiscal

2020,

and

25%

of the payout will be determined based upon such executive officer’s achievement of certain pre-established individual performance objectives. The payment of bonuses under the plan is discretionary, and bonuses

may

be paid to executive officer participants in both cash and shares of NTIC common stock, with the exact amount and percentages determined by the Company’s Board of Directors, upon recommendation of the Compensation Committee, after the completion of the Company’s consolidated financial statements for fiscal

2020.

There was

$1,200,000

recognized for management bonuses for the

nine

months ended

May 31, 2020,

compared to

$1,450,000

recognized for management bonuses for the

nine

months ended

May 31, 2019.

Two joint ventures (consisting of the Company’s joint ventures in South Korea and Thailand) accounted for

56.2%

of the Company’s trade joint venture receivables at

May 31, 2020,

and

five

joint ventures (consisting of the Company’s joint ventures in South Korea, Thailand, France, Germany and India) accounted for

69.6%

of the Company’s trade joint venture receivables as of

August 31, 2019.

From time to time, the Company is subject to various other claims and legal actions in the ordinary course of its business. The Company records a liability in its consolidated financial statements for costs related to claims, including future legal costs, settlements, and judgments, where the Company has assessed that a loss is probable, and an amount could be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when

amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is

not

probable or the amount is

not

estimable, or both, if there is a reasonable possibility that material loss

may

have been incurred. In the opinion of management, as of

May 31, 2020,

the amount of liability, if any, with respect to these matters, individually or in the aggregate, will

not

materially affect the Company’s consolidated results of operations, financial position, or cash flows.