	December 31, 2018		June 30, 2018
2013 Equity Incentive Plan shares available for grant		7,558		9,957
Employee stock options and awards outstanding		11,577		12,060
2014 Employee Stock Purchase Plan		4,084		5,365
Total shares reserved for issuance		23,219		27,382

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, 2018		December 31, 2017		December 31, 2018		December 31, 2017
Cost of product revenue	$	217	$	134	$	395	$	226
Cost of service revenue		677		296		1,022		429
Research and development		2,797		1,829		5,139		2,880
Sales and marketing		2,983		2,699		5,342		4,342
General and administrative		2,026		2,067		3,627		3,951
Total share-based compensation expense	$	8,700	$	7,025	$	15,525	$	11,828

During the three and six months ended December 31, 2018 or 2017, the Company did not capitalize any share-based compensation expense in inventory, as the amounts were immaterial.

Stock awards may be granted under the 2013 Equity Incentive Plan (the “2013 Plan”) on terms approved by the Compensation Committee of the Board. Stock awards generally provide for the issuance of restricted stock units (“RSUs”) including performance or market-based RSUs which vest over a fixed period of time or based upon the satisfaction of certain performance criteria. The Company uses the straight-line method for expense attribution, and beginning with fiscal 2017, the Company does not estimate forfeitures, but accounts for them as incurred.

The following table summarizes stock award activity for the six months ended December 31, 2018 (in thousands, except grant date fair value):

	Number of Shares			Weighted- Average Grant Date Fair Value		Aggregate Fair Market Value
Non-vested stock awards outstanding at June 30, 2018		7,764		$	8.60	$	61,804
Granted		4,042			6.40
Released		(2,271	)		7.75
Cancelled		(738	)		8.66
Non-vested stock awards outstanding at December 31, 2018		8,797		$	7.80	$	53,661

The following table summarizes stock option activity for the six months ended December 31, 2018 (in thousands, except per share and contractual term):

	Number of Shares			Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Options outstanding at June 30, 2018		2,193		$	3.88		2.90	$	8,996
Granted		852			6.40
Exercised		(178	)		3.56
Cancelled		(87	)		6.01
Options outstanding at December 31, 2018		2,780		$	4.60		3.70	$	4,414
Vested and expected to vest at December 31, 2018		2,780		$	4.60		3.70	$	4,414
Exercisable at December 31, 2018		1,962		$	3.94		2.53	$	4,234

The fair value of each stock option grant under the 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 the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on the historical volatility on the Company’s stock.

The fair value of each RSU grant with performance-based vesting criteria (“PSUs”) under the 2013 Plan is estimated on the date of grant using 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.

During the second quarter of fiscal 2019, the Company approved the grant of 705,009 stock awards, including 357,142 stock awards to its Chief Financial Officer, and 347,867 stock awards to its other employees. During the first quarter of fiscal 2019, the Company approved the grant of 1,269,800 stock awards to its vice president level employees or above (“VPs”), which includes 278,000 stock awards to its Executive Officers. The Company also approved 2,067,074 stock awards to its other employees. Fifty percent (50%) of the stock awards granted to the VPs and the chief executive officer, were in the form of PSUs, with grant date fair values of $6.40, and fifty percent (50%) of the stock awards granted were in the form of service-based RSUs. The RSUs vest from the original grant date as to one-third (1/3) on the one-year anniversary and one-twelfth (1/12) each quarter thereafter, subject to continued service to the Company. No PSUs were granted during the second quarter of fiscal 2018.

For the PSUs referenced in the preceding paragraph, they will be considered earned once the Company’s combined earnings per share equals or exceeds $0.20 over two consecutive quarters (the “FY19 Performance Threshold”). Upon satisfying the FY19 Performance Threshold, the PSUs shall vest with respect to the same number of RSUs that have vested which were granted on the same date and thereafter, shall vest on the same schedule as the RSUs, subject to continued service to the Company. If the FY19 Performance Threshold is not met by the third anniversary of the grant date the award is canceled. In addition, the FY19 Performance Threshold shall be deemed satisfied upon the closing of a Change in Control (within the meaning of the Company’s 2013 Equity Incentive Plan) in the event the per share consideration received by the Company’s stockholders equals or exceeds $10.00 per share.

During the six months ended December 31, 2018, the Performance Thresholds were not achieved for fiscal 2018 or fiscal 2019.

During the first quarter of fiscal 2019, the Company granted 851,700 Performance Stock Options (“PSOs”) to certain officers and executive vice presidents that will vest if the Company’s stock price achieves a price hurdle of $10.00 during the three-year performance period from August 29, 2018 through August 31, 2021. The price hurdle will be deemed to have been achieved if, at any time over the performance period, the Company’s stock maintains a price of $10.00 for 30 consecutive days. If the price hurdle is achieved, the PSOs will vest as follows:

If the price hurdle is met before or on August 31, 2019, one-third of the PSOs will vest on August 31, 2019 and the remainder will vest quarterly over two years.

If the price hurdle is met after August 31, 2019, a number of the PSOs will vest (ratably calculated based upon the time elapsed between August 31, 2018 and the date the hurdle is met) and the remainder will vest quarterly through August 31, 2021. The grant date fair value was $2.62.

The fair value of each share purchase option under the Company’s 2014 Employee Stock Purchase Plan (“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 ESPP represents the term of the offering period of each option. The risk-free rate is based upon the estimated life and on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on the historical volatility on the Company’s stock.

There were no shares granted under the ESPP during the three months ended December 31, 2018 and 2017. There were 1,280,708 and 1,267,930 shares issued under the ESPP during the six months ended December 31, 2018 and 2017, respectively. The following assumptions were used to calculate the fair value of shares granted under the ESPP during the following periods:

	Employee Stock Purchase Plan
	Six Months Ended
	December 31, 2018			December 31, 2017
Expected life	0.5 years			0.5 years
Risk-free interest rate		2.20	%		1.15	%
Volatility		63	%		42	%
Dividend yield		—	%		—	%

The weighted-average fair value of shares granted under the ESPP during the six months ended December 31, 2018 and 2017 was $2.73 and $2.41, respectively.