6.	Share-based Compensation

Shares reserved for issuance

As of December 31, 2015, the Company had reserved for issuance (in thousands):

	December 31, 2015		June 30, 2015
2014 Employee Stock Purchase Plan		11,000		12,000
Employee stock options and awards outstanding		12,485		15,273
Employee stock options and awards available for grant		4,768		5,450
Total shares reserved for issuance		28,253		32,723

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

	Three Months Ended				Six Months Ended
	December 31, 2015		December 31, 2014		December 31, 2015		December 31, 2014
Cost of product revenue	$	277	$	275	$	572	$	558
Cost of service revenue		277		272		644		563
Research and development		1,165		1,544		2,795		3,188
Sales and marketing		1,291		1,566		2,719		3,123
General and administrative		935		1,092		1,886		2,131
Total share-based compensation expense	$	3,945	$	4,749	$	8,616	$	9,563

During the three and six months ended December 31, 2015 and 2014, the Company did not capitalize any share-based compensation expense in inventory, as the amounts were immaterial.

Stock Awards

Stock awards may be granted under the 2013 Equity Incentive Plan (the “2013 Plan”) on terms approved by the Compensation Committee of the Board of Directors. Stock awards generally provide for the issuance of restricted stock units (including performance or market-based restricted stock units) which vest over a fixed period.

The following table summarizes stock award activity for the six months ended December 31, 2015 (in thousands, except grant date fair value):

	Number of			Weighted-
	Shares			Average Grant-		Aggregate Fair
	(000’s)			Date Fair Value		Market Value ($000’s)
Non-vested stock awards outstanding at June 30, 2015		4,597		$	3.82
Granted		2,889		$	3.14
Vested		(1,729	)	$	4.68
Cancelled		(582	)	$	3.77
Non-vested stock awards outstanding at December 31, 2015		5,175		$	3.16	$	21,113

The following table summarizes stock option activity under all plans for the six months ended December 31, 2015 (in thousands, except per share and contractual term):

				Weighted-		Weighted-
				Average		Average		Aggregate
	Number of			Exercise		Remaining		Intrinsic
	Shares			Price		Contractual		Value
	(000’s)			Per Share		Term (years)		(000’s)
Options outstanding at June 30, 2015		10,604		$	4.03		3.79		410
Granted		5		$	3.79
Exercised		(240	)	$	3.23
Cancelled		(3,059	)	$	3.83
Options outstanding at December 31, 2015		7,310		$	4.13		4.32	$	3,632
Exercisable at December 31, 2015		4,908		$	4.14		3.39	$	2,174
Vested and expected to vest at December 31, 2015		6,984		$	4.12		4.25	$	3,476

The weighted-average grant-date fair value of options granted during the three and six months ended December 31, 2015 was $1.59. The weighted-average grant-date fair value of options granted during the three and six months ended December 31, 2014 was $1.66 and $1.96, respectively.

The weighted-average fair value of shares granted under the Company’s 2014 ESPP during the six months ended December 31, 2015, was $1.97. The weighted-average fair value of shares granted under the Company’s 1999 ESPP during the three and six months ended December 31, 2014, was $1.17 and $1.33, respectively.

The Company uses the straight-line method for expense attribution, and the Company estimates forfeitures and only recognizes expense for those shares expected to vest. The Company’s estimated forfeiture rate for fiscal 2016 is based on the Company’s historical forfeiture experience and is 13% for non-executives and 19% for executives.

The fair value of each stock option grant under the Company's 2013 Plan and 2005 Equity Incentive Plan 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. The Company uses the Monte-Carlo simulation model to determine the fair value and the derived service period of stock awards with market conditions, on the date of the grant. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk-free rate is based upon the estimated life of the option and is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on a blended rate of the implied volatilities from traded options on the Company’s stock and historical volatility on the Company’s stock.

The fair value of each share purchase option under the Company's 2014 ESPP and 1999 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. The expected term of the 2014 ESPP and the 1999 ESPP represents the term of the offering period of each option. The risk-free rate is based upon the estimated life and is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on a blended rate of the implied volatilities from traded options and historical volatility on the Company’s stock.

	Stock Option Plan						Employee Stock Purchase Plan						Stock Option Plan						Employee Stock Purchase Plan
	Three Months Ended						Three Months Ended						Six Months Ended						Six Months Ended
	December 31, 2015			December 31, 2014			December 31, 2015			December 31, 2014			December 31, 2015			December 31, 2014			December 31, 2015			December 31, 2014
Expected life	4.0 years			4.8 years			—			0.25 years			4.0 years			4.7 years			1.25 years			0.25 years
Risk-free interest rate		1.78	%		1.67	%		—	%		0.03	%		1.78	%		1.61	%		0.29	%		0.02	%
Volatility		52	%		54	%		—	%		63	%		52	%		54	%		58	%		57	%
Dividend yield		—	%		—	%		—	%		—	%		—	%		—	%		—	%		—	%