9. Stock Incentive Plan and Employee Stock Purchase Plan

As of June 30, 2017, the Company had three outstanding stock incentive plans: the 2016 Equity Incentive Plan, or the 2016 Plan; the 2007 Incentive Award Plan, or the 2007 Plan; and the 1998 Stock Incentive Plan, or the 1998 Plan. The 2016 Plan permits the granting of stock options, stock appreciation rights, restricted stock awards, performance shares, performance units, and restricted stock units, or RSUs. The vesting of RSUs granted under the 2016 Plan are primarily service-based (over the requisite service period) while the vesting of performance units granted under the 2016 Plan are primarily performance-based, or PSUs, or market-based, or MSUs. Only employees of the Company are eligible to receive incentive stock options. Non-employees may be granted non-qualified stock options.

Stock options granted under the 2016 Plan have an exercise price of at least 100% of the fair market value of the underlying stock on the grant date. The stock options have 10 year contractual terms and generally become exercisable for 25% of the option shares one year from the date of grant and then ratably over the following 36 months. Service-based RSUs granted under the equity plans generally vest 25% of the share units covered by the grant on each of the first through fourth anniversaries of the date of the grant, subject to the continued service of the grantee through each such date. However, certain of the outstanding RSUs under our equity plans vest 50% upon the first anniversary year of the grant date, and 50% upon the second anniversary year of the grant date. The Board of Directors has the discretion to use different vesting schedules.

As of June 30, 2017, the 2007 plan and the 1998 Plan each continued to remain in effect; however, the Company can no longer grant equity awards under such plans.

The following table summarizes the share-based compensation charges included in the Company's consolidated statements of operations and comprehensive loss (in thousands):

	Years ended June 30,
	2017		2016		2015
Cost of revenue	$	1,991	$	1,677	$	1,874
Research and development		2,490		2,564		2,971
Selling and marketing		2,827		2,633		2,945
General and administrative		6,321		5,764		6,140

Total	$	13,629	$	12,638	$	13,930

The amount of capitalized share-based compensation costs as components of inventory for the years ended June 30, 2017, 2016 and 2015 was insignificant.

Stock Options

The fair value of each option is estimated at the date of grant using the Black-Scholes option pricing formula with the following assumptions:

	Years Ended June 30,
	2017			2016(1)			2015(1)
Risk-free interest rate		1.76	%		—	%		—	%
Dividend yield		—	%		—	%		—	%
Expected term		5.12			—			—
Expected volatility		46.4	%		—	%		—	%


(1)	The Company did not issue any stock options for the years ended June 30, 2016 and 2015.

Determining Fair Value of Stock Options

The fair value of each grant of stock options was determined by the Company using the methods and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.

Valuation and Amortization Method—The Company estimates the fair value of its stock options using the Black-Scholes option-pricing model. This fair value is then amortized over the requisite service periods of the awards.

Expected Term—The Company estimates the expected term of stock option by taking the average of the vesting term and the contractual term of the option, as illustrated by the simplified method.

Expected Volatility—The expected volatility is derived from the Company's historical stock volatility over a period approximately equal to the expected term of the options.

Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury yield curve on the date of grant.

Dividend Yield—The dividend yield assumption is based on the Company's history and expectation of no dividend payouts.

A summary of option activity under the Company's Incentive Plan during the fiscal years is presented below (in thousands except per share and term amounts):

	Options Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (In Years)		Aggregate Intrinsic Value
Balance at June 30, 2014		3,209		$	7.44		5.38	$	8,251
Options granted		—			—
Options exercised		(529	)		4.84
Options forfeited/expired		(143	)		8.72

Balance at June 30, 2015		2,537			7.91		5.10	$	1,862
Options granted		—			—
Options exercised		(59	)		4.89
Options forfeited/expired		(101	)		7.53

Balance at June 30, 2016		2,377			8.00		3.97	$	452
Options granted		760			5.05
Options exercised		(113	)		5.18
Options forfeited/expired		(561	)		13.38

Balance at June 30, 2017		2,463			6.05		5.42	$	191


Vested or Expected to vest at June 30, 2017		2,463			6.05		5.42	$	191


Exercisable at June 30, 2017		1,703		$	6.49		3.64	$	191

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the fair value of the Company's common stock on June 30, 2017 of $4.75 and the exercise price of the options that would have been received by option holders if all options exercisable had been exercised on June 30, 2017. The total intrinsic value of options exercised in the years ended June 30, 2017, 2016 and 2015 was approximately $0.1 million, $0.1 million and $1.4 million, respectively.

During the years ended June 30, 2017, 2016 and 2015, the Company recognized $0.5 million, $0.8 million and $1.1 million, respectively, of share-based compensation expense for stock options granted to employees.

Tax benefits from tax deductions for exercised options and disqualifying dispositions in excess of the deferred tax asset attributable to stock compensation costs for such options are credited to additional paid-in capital. Realized excess tax benefits related to stock options exercises was zero for each of the years ended June 30, 2017, 2016 and 2015.

As of June 30, 2017, there was approximately $1.4 million of unrecognized compensation cost net of estimated forfeitures, related to unvested stock options, which is expected to be recognized over a weighted average period of 3.42 years.

The following table summarizes information about outstanding and exercisable options at June 30, 2017 (in thousands, except years and exercise price):

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighte Average Exercise Price		Number Outstanding		Weighted Average Exercise Price
$4.00 - 4.01		248		4.35	$	4.01		248	$	4.01
$4.23 - 4.94		61		1.83		4.66		61		4.66
$5.05 - 5.05		760		9.42		5.05		—		—
$5.38 - 5.68		266		2.54		5.65		266		5.65
$5.74 - 6.28		394		4.45		6.16		394		6.16
$6.32 - 6.63		247		2.97		6.50		247		6.50
$6.75 - 6.82		14		4.22		6.77		14		6.77
$6.96 - 6.96		276		5.25		6.96		276		6.96
$7.06 - 13.45		143		2.20		9.74		143		9.74
$15.22 - 15.22		54		0.50		15.22		54		15.22

Total Outstanding		2,463		5.42	$	6.05		1,703	$	6.49

Restricted Stock

The following table summarizes the activity of RSUs, PSUs and MSUs (in thousands, except fair value per share):

Unvested Resstricted Stock	Restricted Stock Units			Performance Stock Units			Market Stock Units			Total Number of Shares Underlying Stock Awards			Weighted Average Grant Date Fair Value Per Share
Unvested at June 30, 2014		3,116			25			806			3,947		$	6.24
Granted		1,679			20			513			2,212			6.77
Vested		(1,150	)		(25	)		—			(1,175	)		6.73
Cancelled/Forfeited		(320	)		—			(181	)		(501	)		6.20

Unvested at June 30, 2015		3,325			20			1,138			4,483			6.86
Granted		2,563			—			585			3,148			6.12
Vested		(1,138	)		(20	)		(413	)		(1,571	)		6.81
Cancelled/Forfeited		(546	)		—			(148	)		(694	)		6.59

Unvested at June 30, 2016		4,204			—			1,162			5,366			6.48
Granted		1,622			10			708			2,340			5.03
Vested		(1,534	)		—			(176	)		(1,710	)		4.99
Cancelled/Forfeited		(408	)		—			(361	)		(769	)		5.86

Unvested at June 30, 2017		3,884			10			1,333			5,227		$	5.75

As of June 30, 2017, there was approximately $26.3 million of unrecognized compensation cost, net of estimated forfeitures, related to restricted stock, which is expected to be recognized over a weighted average period of 2.13 years.

Restricted Stock Units

The Company recognized $9.5 million, $7.6 million and $7.9 million of share-based compensation expense, net of estimated forfeitures, related to RSUs during the years ended June 30, 2017, 2016 and 2015. The weighted average grant date fair value per share of RSUs was $5.03, $6.01 and $6.79 for the years ended June 30, 2017, 2016 and 2015, respectively. The aggregate fair market value of RSUs that vested during the year ended June 30, 2017 was $7.6 million.

Performance Stock Units

The Compensation Committee approved the grant of 10,000, zero and 20,000 PSUs to select employees of the Company in the years ended June 30, 2017, 2016 and 2015, respectively. Of these PSUs, zero, 20,000 and 25,000 vested in the years ended June 30, 2017, 2016 and 2015, respectively, due to the achievement of the requisite performance targets while none were cancelled in the years ended June 30, 2017, 2016 and 2015, respectively.

The Company recognized zero, $0.04 million, and $0.2 million of share-based compensation expense, net of estimated forfeitures, related to PSUs during the years ended June 30, 2017, 2016, and 2015, respectively.

Market Stock Units

The Compensation Committee approved the performance equity program, referred to as the market stock unit program, or MSU program, in October 2012. The Company's MSU Program uses the Russell 2000 index as a performance benchmark and requires that the Company's total stockholder return match or exceed that of the Russell 2000. Based on a sliding scale of how much the Company's total stockholder return outperforms the Russell 2000 benchmark, the participating executives can earn up to a maximum of 150% of the target number of shares over two measurement periods. The Company uses a Monte-Carlo simulation to calculate the fair value of the award on the grant date. The Compensation Committee approved the grant of 0.7 million, 0.6 million and 0.5 million MSUs to select employees of the Company in the years ended June 30, 2017, 2016 and 2015, respectively. Of these MSUs, 0.2 million, 0.4 million and 0.5 million vested in the years ending June 30, 2017, 2016 and 2015, respectively, due to the Company's total stockholder return performance against the Russell 2000 index while 0.4 million, 0.1 million and 0.2 million MSUs were cancelled in the years ended June 30, 2017, 2016 and 2015, respectively.

The Company recognized $2.5 million, $3.0 million and $3.4 million of share-based compensation expense, net of estimated forfeitures, related to MSUs during the years ended June 30, 2017, 2016 and 2015, respectively. The weighted average grant date fair value per share of MSUs was $5.20, $6.61 and $6.64 for the years ended June 30, 2017, 2016 and 2015, respectively. As of June 30, 2017, there was approximately $2.6 million of unrecognized compensation cost, net of estimated forfeitures, related to MSUs.

Employee Stock Purchase Plan

Under the Company's Amended and Restated 2007 Employee Stock Purchase Plan, or ESPP, qualified employees are permitted to purchase the Company's common stock at 85% of the lower of the fair market value of the common stock on the commencement date of each offering period or the fair market value on the specified purchase date. The ESPP is deemed compensatory and compensation costs are accounted for under ASC 718, Stock Compensation. Employees' payroll deductions may not exceed 10% of their salaries. Employees may purchase up to 2,500 shares per period provided that the value of the shares purchased in any calendar year may not exceed $25,000, as calculated pursuant to the purchase plan.

The Company estimates the fair value of ESPP shares at the date of grant using the Black-Scholes option pricing model. The weighted average assumptions were as follows:

	Years Ended June 30,
	2017	2016	2015
Risk-free interest rate	0.49% - 0.70%	0.51% - 0.70%	0.07% - 0.26%
Dividend yield	—%	—%	—%
Expected term	0.5 - 1.0	0.5 - 1.0	0.5 - 1.0
Expected volatility	24.6% - 42.0%	33.3% - 49.1%	27.1% - 41.3%

The risk-free rate for the expected term of the ESPP option was based on the U.S. Treasury Constant Maturity rate for each offering period; expected volatility was based on the historical volatility of the Company's common stock; and the expected term was based upon the offering period of the ESPP. For the years ended June 30, 2017, 2016 and 2015, the Company recognized $1.2 million, $1.3 million and $1.3 million, respectively, of compensation expense related to its ESPP.

The Company issued 0.9 million and 0.7 million shares under the ESPP in fiscal 2017 and 2016, respectively, at a weighted average price per share of $3.84 and $4.92, respectively. As of June 30, 2017, total unrecognized compensation cost related to the ESPP plan was $0.6 million, which the Company expects to recognize over a weighted average period of 0.6 years.