Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-outfirst-in, first-out method. Inventories consist of the following as of:

The Company recognizes abnormal production costs, including fixed cost variances from normal production capacity, fixed production overhead costs, idle facilities, freight handling costs and spoilage, as an expense in the period incurred, without adjusting overhead absorption rates. Normal production capacity is defined as the production expected to be achieved over a number of periods or seasons under normal circumstances, taking into account the loss of capacity resulting from planned maintenance. The Company had 0 abnormal productions costs for the three months ended June 30, 2021 or June 30, 2020.

In fiscal 2021, cultivation of astaxanthin was completed in the firstsix months of the fiscal year during the most productive months of the year due to the best growing conditions, compared to year-round production in the prior year.fiscal years. The same approach is being followed in fiscal year 2022. The Company calculates total production costs for the year based on normal capacity of production expected to be achieved in a year under normal circumstances. These costs are then allocated into inventory based on the period of production, not including abnormal production costs. Allocating fixed and overhead costs requires management'smanagement’s judgement to determine when production is outside of the normal range of expected variation in production.

Other non-inventoriable fixed costs of $79,000$4,000 and $158,000$28,000 were expensed to cost of sales for the three months ended December 31, 2020 June 30, 2021 and 2019,2020, respectively. Non-inventoriable fixed costs of $124,000 and $258,000 were expensed to cost of sales for the nine months ended December 31, 2020 and 2019, respectively.

Equipment and leasehold improvements consist of the following as of:

Management has determined no0 asset impairment existed as of December 31,June 30, 2021 and June 30, 2020, and March 31, 2020, respectively. Depreciation and amortization expense were approximately $423,000$400,000 and $487,000$467,000 for the three months ended December 31, 2020 June 30, 2021 and 2019,2020, respectively. Depreciation and amortization expense were approximately $1,340,000 and $1,458,000 for the nine months ended December 31, 2020 and 2019, respectively.

On November 30, 2018, the Company completed the purchase of a six-acresix-acre production and research facility from Cellana LLC (“Cellana”) under a purchase agreement that was signed August 31, 2018. In accordance with the terms of the third amendment to the asset purchase agreement, the Company acquired the asset for $495,000 with a cash down payment of $100,000 leaving a short-term obligation of $395,000 on the asset purchase.

The short-term obligation was comprised of two separate loans in the principal amount of $180,000$180,000 and $215,000.$215,000. The first loan of $180,000 bore an interest rate of 6.25% and was payable in four monthly installments of principal and interest. The loan commenced on December 1, 2018 and matured on July 15, 2019. There were no0 principal amounts outstanding at December 31, 2020 June 30, 2021 or March 31, 2020.2021.

The second loan had a principal amount of $215,000 and was a non-interest bearing loan that was payable in twelve monthly installments. The loan commenced on December 1, 2018 and matured on October 15, 2019. This contract contained a hold back of $38,000 pending resolution of certain closing items by the seller, which have been resolved. The principal amounts outstanding at December 31,June 30, 2021 and June 30, 2020 and March 31, 2020 were $0 and $38,000,$19,000, respectively.

Total debt consists of the following as of:

Line of Credit and Term Loans

On August 30, 2016, the Credit Agreement, which the Company entered into with the Bank on June 3, 2016, became effective after the Company and the Bank received the necessary approvals from the State of Hawaii to secure the lien on the Company’s leasehold property in Kona, Hawaii. The Credit Agreement allows the Company to borrow up to $2,000,000 on a revolving basis. Borrowings under the Credit Agreement bear interest at the Wall Street Journal prime rate (3.25% at both June 30, 2021 and 4.75% at December 31, 2020 and March 31, 2020, respectively) 2021) plus 2%, floating. At floating, provided that at no time shall the annual interest rate be less than 5.25%.

At December 31, 2020 June 30, 2021 and March 31, 2020, 2021, the outstanding balance under the Credit Agreement was $1,750,000 and $2,000,000, respectively,$1,000,000, and was included in current liabilities on the Condensed Consolidated Balance Sheets. The line of credit, which is subject to annual renewal, was renewed on August 30, 2020 and will be subject to renewal upon expiration on August 30, 2021.

The Credit Agreement grants the Bank the following security interests in the Company’s property: (a) a lien on the Company’s leasehold interest in its Kona facility; (b) an assignment of the Company’s interest in leases and rents on its Kona facility; and (c) a security interest in all fixtures, furnishings and equipment related to or used by the Company at the Kona facility. Each security interest is further subject to the terms of the Credit Agreement.

In 2015, the Company executed a loan agreement with a lender providing for $2,500,000 in aggregate credit facilities (the “2015“2015 Loan”) secured by substantially all the Company’s assets, pursuant to a Term Loan Agreement dated July 30, 2015 (the “2015(the “2015 Loan Agreement”). The 2015 Loan is evidenced by a promissory note in the amount of $2,500,000,$2,500,000, the repayment of which is partially guaranteed under the provisions of the United States Department of Agriculture (“USDA”) Rural Development Guarantee program. The proceeds of the 2015 Loan were used to pay off a $500,000 short term note payable that matured on September 18, 2015, and to acquire new processing equipment and leasehold improvements at the Company’s Kona, Hawaii facility.

The provisions of the 2015 Loan require the payment of principal and interest until its maturity on September 1,2022, the obligation fully amortizes over seven (7) years. Interest on the 2015 Loan accrues on the outstanding principal balance at an annual variable rate equal to the published Wall Street Journal prime rate (3.25% at both June 30, 2021 and 4.75% at December 31, 2020 and March 31, 2020,2021, respectively) plus 2.0% and is adjustable on the first day of each calendar quarter and fixed for that quarter. At quarter, provided that at no time shall the annual interest rate be less than 6.0%. The 2015 Loan has a prepayment penalty of 5.0% for any prepayment made prior to the first anniversary of the date of the 2015 Loan Agreement, which penalty is reduced by 1.0% each year thereafter until the fifth anniversary of such date, after which there is no prepayment penalty. The balance under the 2015 Loan was $735,000$533,000 and $1,027,000$635,000 at December 31, 2020 June 30, 2021 and March 31, 2020,2021, respectively, and was included in long-term debt in the debt table above.

In 2012, the Company executed a loan agreement with a lender providing for $5,500,000 in aggregate credit facilities (the “2012“2012 Loan”) secured by substantially all the Company’s assets, including a mortgage on the Company's interest in its lease at the National Energy Laboratory of Hawaii Authority, pursuant to a Term Loan Agreement dated August 14,2012 (the “2012“2012 Loan Agreement”). The 2012 Loan is evidenced by promissory notes in the amounts of $2,250,000 and $3,250,000, the repayment of which is partially guaranteed under the provisions of a USDA Rural Development Guarantee. The proceeds of the 2012 Loan were used to acquire processing equipment and leasehold improvements at its Kona, Hawaii facility.

The provisions of the 2012 Loan required the payment of interest only for the first 12 months of the term; thereafter, and until its maturity on August 14,2032, the obligation fully amortizes over nineteen (19) (19) years. Interest on the 2012 Loan accrues on the outstanding principal balance at an annual variable rate equal to the published Wall Street Journal prime rate (3.25% at June 30, 2021 and 4.75% at December 31, 2020 and March 31, 2020, respectively)2021) plus 1.0% and is adjustable on the first day of each calendar quarter and fixed for that quarter. At quarter, provided that at no time shall the annual interest rate be less than 5.5%. The balance under the 2012 Loan was $4,042,000$3,915,000 and $4,222,000$3,978,000 at December 31, 2020 June 30, 2021 and March 31, 2020,2021, respectively, and was included in long-term debt in the debt table above.

The 2015 Loan includes a one-timeone-time origination and guaranty fee totaling $113,900 and an annual renewal fee payable in the amount of 0.5% of the USDA guaranteed portion of the outstanding principal balance as of December 31 of each year, beginning December 31,2015. The USDA has guaranteed 80% of all amounts owing under the 2015 Loan. The 2012 Loan included a one-timeone-time origination and guaranty fees totaling $214,500 and an annual renewal fee payable in the amount of 0.25% of the USDA guaranteed portion of the outstanding principal balance as of December 31 of each year, beginning December 31,2012. The USDA has guaranteed 80% of all amounts owing under the 2012 Loan. The balance in unamortized debt issuance costs was $147,000$132,000 and $169,000$140,000 at December 31, 2020 June 30, 2021 and March 31, 2020, 2021, respectively.

Loan Covenants

The Company’s Credit Agreement, 2015 Loan and 2012 Loan are subject to annual debt service and other financial covenants, including covenants which require the Company to meet key financial ratios and customary affirmative and negative covenants.  As of March 31, 2020, 2021, the Company was in compliance with all required annual financial covenants. The next remeasurement date will be March 31, 2021.2022.

Long-term Debt – PPP

In May 2020, the Company obtained a PPP loan in the amount of $1,381,000 which matures on with an original maturity date of May 5, 2022. The note bears interest at a rateIn December 2020, the Company received notice of 1% per annum, payable monthly commencing on November 5, 2020, following an initial six-month deferral period as specified under the PPP.  In October 2020, the initial deferment period for the commencementforgiveness of interest payments was amended by the PPP Flexibility Act, to end atloan in whole, including all accrued unpaid interest. In fiscal 2021, the earliest in April 2021Company recorded the forgiveness of $1,381,000 of principal and at the latest in August 2021.$8,000 of accrued interest for a total of $1,389,000. The Company has used the proceeds of the PPP loan for certain payroll costs in accordance with the PPP. Under the terms of the PPP and the PPP Flexibility Act, up to the entire amount of principal and accrued interest may be forgiven to the extent the proceeds are used for qualifying expenses as determined by the guidance of the U.S. Small Business Administration under these programs. On December 10, 2020, the Company received notice of forgiveness of the PPP loan in whole, including all accrued interest to date. For the three and nine months ended December 31, 2020, $1,389,000 was included in gain on extinguishment of debt on the Condensed Consolidated Statements of Operations. The forgiveness included principal of $1,381,000 and accrued interest of $8,000.

Debt – Related Party

In April 2019, the Company obtained an unsecured subordinateda loan in the amount of $1,500,000 which bearsand the interest at the Wall Street Journal prime rate, plus 1%, or 4.25% and 5.5% at December 31, 2020 and March 30, 2020, respectively, and iswas payable quarterly.  The loan was originally due in April 2021. In April 2021, the Company amended the loan, which extended the expiration to April 2024, converted $500,000 into revolving loans, adjusted the interest rate to reflect a floor of 5%, and granted a security interest in substantially all of the Company’s personal property assets, subject to limited exceptions. Concurrently, with the amendment and conversion of the original loan, the Company repaid in cash the principal amount and anyof $500,000 plus accrued and unpaid interest are due in April 2021to date of $1,900 (see Note 13)13).  TheAt June 30, 2021, the balance under this loan was $1,000,000 and was included in long-term debt, and at March 31, 2021, the balance under this loan was $1,500,000 at December 31, 2020 and March 31, 2020 and$500,000 was included in current maturities of long-term debt and $1,000,000 was included in long-term debt, respectively, in the debt table above. Interest is payable quarterly.

Equipment Finance Agreement

In October 2017, the Company entered into an Equipment Finance Agreement (the “Equipment Agreement”) with a lender, which provides up to $175,000 of financing for equipment. The interest rate on this loan is 4.75%. The provisions of the Equipment Agreement require the payment of principal and interest until its maturity on October 31,2022. The balance under this loan was $68,000$51,000 and $94,000$60,000 at December 31, 2020 June 30, 2021 and March 31, 2020, 2021, respectively, and was included in long-term debt in the debt table above.

 Finance Lease Obligations

In February 2016, the Company executed a finance lease agreement with Bank of the West providing for $51,000 in equipment, secured by the equipment financed. The finance lease matures in March 2021 and is payable in 60 equal monthly payments. The interest rate under this finance lease is 4.18%. The balance under this lease was $4,000 and $11,000 at December 31, 2020 and March 31, 2020, respectively, and was included in current maturities of long-term debt in the debt table above.

In July 2015, the Company executed a finance lease agreement with Huntington Technology Finance providing for $174,000 in equipment, secured by the equipment financed. The finance lease matured in July 2020 and was payable in 60 equal monthly payments. The interest rate under this lease is 6.57%. The balance under this lease was $0 and $13,000 at December 31, 2020 and March 31, 2020, respectively, and was included in current maturities of long-term debt in the debt table above.

Future principal payments under the loans and finance lease obligations at December 31, 2020June 30,2021 are as follows:

The Company leases facilities, equipment and land under non-cancelable operating leases expiring through 2037. One of its facility leases contains price escalations and a renewal option for five years. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Right-of-use assets and liabilities were recognized at April 1, 2019 based on the present value of lease payments over the lease term, using the Bank’s incremental borrowing rate based on the information available at recognition, and the Company has elected to exclude non-lease components. At December 31, 2020, June 30, 2021, the weighted average remaining lease terms is 13.613.4 years, the weighted average discount rate is 7.5% and for both the ninethree months ended December 31, 2020 June 30, 2021 and 2019,2020, the operating lease costs are $445,000.$147,000.

Supplemental balance sheet information related to leases consist of the following as of:

Maturities of lease liabilities at December 31, 2020 June 30, 2021 are as follows:

Accrued expenses consist of the following as of:

From time to time, the Company may be involved in litigation and investigations relating to claims and matters arising out of its operations in the normal course of business. There were no significant legal matters outstanding at December 31, 2020.June 30, 2021.

The Company has share-based compensation plans, which are more fully described in Note 10, Share-Based Compensation, to the Consolidated Financial Statements included in the Company’s annual report on Form 10-K10-K for the fiscal year ended March 31, 2020 2021 as filed with the SEC on June 23, 2020.22, 2021.

As of December 31, 2020,June 30,2021, the Company had two equity-based compensation plans: the 2016 Equity Incentive Plan (the “2016“2016 Plan”) and the 2014 Independent Director Stock Option and Restricted Stock Grant Plan (the “2014“2014 Directors Plan”). The Company has also issued stock options, which remain outstanding as of December 31, 2020, June 30, 2021, under two equity-based compensation plans which have expired according to their terms: the 2005 Stock Option Plan (the “2005“2005 Plan”) and the 2004 Independent Director Stock Option and Stock Grant Plan (the “2004“2004 Directors Plan”). These plans allowed the Company to award stock options and shares of restricted common stock to eligible employees, certain outside consultants and independent directors. NoNaN additional awards will be issued under the 2005 Plan or the 2004 Directors Plan. 

The following table presents shares authorized, available for future grant and outstanding under each of the Company’s plans:

Stock Options

All stock option grants made under the equity-based compensation plans were issued at exercise prices no less than the Company’s closing stock price on the date of grant. Options under the 2016 Plan, 2005 Plan and 2014 Directors Plan were determined by the Board of Directors or the Compensation Committee of the Board of Directors in accordance with the provisions of the respective plans.  The terms of each option grant include vesting, exercise, and other conditions set forth in a Stock Option Agreement evidencing each grant. No option can have a life in excess of ten (10) (10) years. The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model. The model requires various assumptions, including a risk-free interest rate, the expected term of the options, the expected stock price volatility over the expected term of the options, and the expected dividend yield. Compensation expense for employee stock options is recognized ratably over the vesting term. Compensation expense recognized for options issued under all Plans was $10,000$13,000 and $5,000 for the three months ended December 31, 2020 June 30, 2021 and 2019,2020, respectively. Compensation expense recognized for options issued under all Plans was $19,000 and $123,000 for the nine months ended December 31, 2020 and 2019, respectively. In the first nine months of fiscal year 2020, compensation expense included $109,000 related to a settlement agreement with a former executive.

A summary of option activity under the Company’s stock plans for the sixthree months ended December 31, 2020 June 30, 2021 is presented below: