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Employee Benefit Plans | 3 Months Ended
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Sep. 30, 2019
Share Based Compensation [Abstract] |
Employee Benefit Plans |
12. | Employee Benefit Plans
Shares reserved for issuance The Company had reserved for issuance for the periods noted (in thousands):
|  | September 30, 2019 |  |  | June 30, 2019 |
2013 Equity Incentive Plan shares available for grant |  |  | 3,336 |  |  |  | 8,462 |
Employee stock options and awards outstanding |  |  | 14,566 |  |  |  | 10,455 |
2014 Employee Stock Purchase Plan |  |  | 8,862 |  |  |  | 10,085 |
Total shares reserved for issuance |  |  | 26,764 |  |  |  | 29,002 |
Aerohive 2014 Equity Incentive Plan Pursuant to the acquisition of Aerohive on August 9, 2019, the Company assumed the Aerohive 2014 Equity Incentive Plan (the "Aerohive Plan"). Stock awards outstanding under the Aerohive Plan were converted into awards for Extreme shares as of the Acquisition Date at a predetermined rate pursuant to the Merger Agreement. As of September 30, 2019, total awards to acquire 1,457,321 shares of Extreme common stock were outstanding under the Aerohive Plan. If a participant terminates employment prior to the vesting dates, the non-vested shares will be forfeited and retired. No future grants may be made from the Aerohive Plan. Share-based compensation expense Share-based compensation expense recognized in the condensed consolidated financial statements by line item caption is as follows (in thousands):
|  | Three Months Ended |  |
|  | September 30, 2019 |  |  | September 30, 2018 |  |
Cost of product revenue |  | $ | 250 |  |  | $ | 178 |  |
Cost of service revenue |  |  | 347 |  |  |  | 345 |  |
Research and development |  |  | 2,435 |  |  |  | 2,342 |  |
Sales and marketing |  |  | 3,719 |  |  |  | 2,359 |  |
General and administrative |  |  | 2,083 |  |  |  | 1,601 |  |
Total share-based compensation expense |  | $ | 8,834 |  |  | $ | 6,825 |  |
During the three months ended September 30, 2019, or 2018, 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. 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. The Company does not estimate forfeitures, but accounts for them as incurred. The following table summarizes stock award activity for the three months ended September 30, 2019 (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, 2019 |  |  | 7,736 |  |  | $ | 7.67 |  |  |  |  |
Granted |  |  | 5,485 |  |  |  | 6.83 |  |  |  |  |
Released |  |  | (1,486 | ) |  |  | 6.82 |  |  |  |  |
Cancelled |  |  | (387 | ) |  |  | 6.99 |  |  |  |  |
Non-vested stock awards outstanding at September 30, 2019 |  |  | 11,348 |  |  | $ | 7.43 |  |  | $ | 82,614 |
Vested and expected to vest at September 30, 2019 |  |  | 10,785 |  |  | $ | 7.33 |  |  | $ | 78,512 |
The following table summarizes stock option activity for the three months ended September 30, 2019 (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, 2019 |  |  | 2,719 |  |  | $ | 4.61 |  |  |  | 3.26 |  |  | $ | 5,070 |
Granted |  |  | 637 |  |  |  | 6.70 |  |  |  |  |  |  |  |  |
Exercised |  |  | (119 | ) |  |  | 4.23 |  |  |  |  |  |  |  |  |
Cancelled |  |  | (19 | ) |  |  | 5.02 |  |  |  |  |  |  |  |  |
Options outstanding at September 30, 2019 |  |  | 3,218 |  |  | $ | 5.03 |  |  |  | 3.86 |  |  | $ | 7,235 |
Vested and expected to vest at September 30, 2019 |  |  | 3,218 |  |  | $ | 5.03 |  |  |  | 3.85 |  |  | $ | 7,235 |
Exercisable at September 30, 2019 |  |  | 1,801 |  |  | $ | 3.85 |  |  |  | 1.88 |  |  | $ | 6,179 |
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. 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 average fair value of the options granted was $6.70. 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 three months ended September 30, 2019, the Company approved the grant of 5,484,772 RSUs to employees and directors. 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. These RSUs included 566,038 RSUs to named executive officers and directors. During the three months ended September 30, 2019, the 2019 and 2018 Performance Thresholds for outstanding performance awards were not achieved. 2014 Employee Stock Purchase Plan 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 1,233,544 and 1,280,708 shares issued under the ESPP during the three months ended September 30, 2019 and 2018, 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 |
|  | Three Months Ended |
|  | September 30, 2019 |  |  | September 30, 2018 |
Expected life |  | 0.5 years |  |  | 0.5 years |
Risk-free interest rate |  |  | 1.85 | % |  |  | 2.20 | %
Volatility |  |  | 43 | % |  |  | 63 | %
Dividend yield |  |  | — | % |  |  | — | %
The weighted-average fair value of shares granted under the ESPP during the three months ended September 30, 2019 and 2018 was $2.02 and $2.73, respectively.

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