Share-based Compensation

As of March 31, 2015, the Company had 15,578,378 shares available for issuance, of which 12,000,000 shares are available under the 2014 Employee Stock Purchase Plan ("ESPP"), which was approved by the shareholders on November 12, 2014. There are 66,382 shares available under the 1999 ESPP and 3,511,996 shares available under the 2013 Stock Plan.

Share-based compensation expense recognized in the condensed consolidated financial statements by line item caption is as follows (in thousands):



	Three Months Ended				Nine Months Ended
	March 31, 2015		March 31, 2014		March 31, 2015		March 31, 2014
Cost of product revenue	$	265	$	268	$	823	$	568
Cost of service revenue	254		420		816		623
Research and development	1,423		1,419		4,611		2,559
Sales and marketing	1,291		1,765		4,414		3,614
General and administrative	1,139		970		3,271		2,510
Total share-based compensation expense	$	4,372	$	4,842	$	13,935	$	9,874

The Company did not capitalize any stock-based compensation expense in inventory, as the amounts were immaterial during the three and nine months ended March 31, 2015 and 2014, respectively.

Stock Awards

Stock awards may be granted under the 2013 Plan on terms approved by the Board of Directors. Stock awards generally provide for the issuance of restricted stock which vests over a fixed period.

During the three months ended March 31, 2015, the Company began expensing market-performance based restricted stock units to senior executive officers that had been granted during the second quarter of fiscal 2015.

The following table summarizes stock award activity for the nine months ended March 31, 2015:



	Number of Shares (000’s)		Weighted- Average Grant- Date Fair Value		Aggregate Fair Market Value ($000's)
Non-vested stock outstanding at June 30, 2014	6,000		$	4.98
Granted	1,305		$	3.45
Vested	(2,216	)	$	5.09	$	7,985
Cancelled	(409	)	$	4.42
Non-vested stock outstanding at March 31, 2015	4,680		$	4.55

Stock Options

The following table summarizes stock option activity under all plans for the nine months ended March 31, 2015.



	Number of Shares (000’s)		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (000’s)
Options outstanding at June 30, 2014	11,732		$	4.26	5.13	$	6,846
Granted	1,153		$	4.11
Exercised	(425	)	$	3.17		$	381
Cancelled	(1,245	)	$	5.12
Options outstanding at March 31, 2015	11,215		$	4.19	4.73	$	493
Exercisable at March 31, 2015	6,047		$	3.95	3.94	$	473
Vested and expected to vest at March 31, 2015	10,441		$	4.17	4.66	$	489

The weighted-average grant-date per share fair value of options granted was $1.34 and $2.71 during the three months ended March 31, 2015 and 2014, respectively.

The weighted-average grant-date per share fair value of options granted was $1.91 and $2.39 during the nine months ended March 31, 2015 and 2014, respectively.

The Company uses the Monte-Carlo simulation model to determine the fair value and the derived service period o performance-based option awards, with market conditions, on the date of the grant.

ESPP

The weighted-average estimated per share fair value of shares purchased under the Company’s ESPP was $0.59 and $1.62 during the three months ended March 31, 2015 and 2014, respectively.

The weighted-average estimated per share fair value of shares purchased under the Company’s ESPP was $1.02 and $1.44 during the nine months ended March 31, 2015 and 2014, respectively.

Excluding the options assumed as part of the Enterasys acquisition, the fair value of each option award and share purchase option under the Company's ESPP is estimated on the date of grant using the Black-Scholes-Merton option valuation model with the weighted average assumptions noted in the following table.



	Stock Option Plan				Employee Stock Purchase Plan				Stock Option Plan				Employee Stock Purchase Plan
	Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
	March 31, 2015		March 31, 2014		March 31, 2015		March 31, 2014		March 31, 2015		March 31, 2014		March 31, 2015		March 31, 2014
Expected life	4.6 years		5.0 years		0.50 years		0.25 years		4.7 years		4.0 years		0.33 years		0.25 years
Risk-free interest rate	1.49	%	1.41	%	0.07	%	0.09	%	1.60	%	1.23	%	0.04	%	0.10	%
Volatility	54	%	57	%	58	%	57	%	54	%	56	%	58	%	51	%
Dividend yield	—	%	—	%	—	%	—	%	—	%	—	%	—	%	—	%