NOTE 4:–

STOCKHOLDERS’ EQUITY

On December 30, 2005, the Company’s board of directors adopted the Varonis Systems, Inc. 2005 Stock Plan (the “2005 Stock Plan”). As of December 31, 2013, the Company had reserved 4,713,319 shares of common stock available for issuance to employees, directors, officers and consultants of the Company and its subsidiaries. The options generally vest over four years. No awards were granted under the 2005 Stock Plan subsequent to December 31, 2013, and no further awards will be granted under the 2005 Stock Plan.

On November 14, 2013, the Company’s board of directors adopted the Varonis Systems, Inc. 2013 Omnibus Equity Incentive Plan (the “2013 Plan”). As of June 30, 2015, the Company had reserved 1,904,633 shares of common stock available for issuance under the 2013 Plan to employees, directors, officers and consultants of the Company and its subsidiaries. The number of shares of common stock available for issuance under the 2013 Plan will be increased on January 1, 2016 and on each January 1 thereafter by four percent (4%) of the number of shares of common stock issued and outstanding on each December 31 immediately prior to the date of increase (rounded down to the nearest whole share), but the amount of each increase will be limited to the number of shares of common stock necessary to bring the total number of shares of Common Stock available for grant and issuance under the 2013 Plan to five percent (5%) of the number of shares of common stock issued and outstanding on each December 31. Awards granted under the 2013 Plan generally vest over four years. Any award that is forfeited or canceled before expiration becomes available for future grants under the 2013 Plan.

A summary of employees’ stock options activities during the period ended June 30, 2015 is as follows:

	Period ended June 30, 2015 (unaudited)
	Number			Average exercise price		Aggregate intrinsic value (in thousands)		Average remaining contractual life (years)

Options outstanding at the beginning of the year		4,080,611		$	9.697	$	95,855		6.092
Granted		191,200		$	28.253
Exercised		(202,771	)	$	2.936
Forfeited		(100,802	)	$	26.269

Options outstanding at the end of the period		3,968,238		$	10.515	$	50,482		5.870

Vested and expected to vest		3,874,985		$	10.200	$	50,352		5.794

Options exercisable at the end of the period		2,649,977		$	4.414	$	47,928		4.364

The aggregate intrinsic value in the table above represents the total intrinsic value that would have been received by the option holders had all option holders exercised their options on the last date of the exercise period. Total intrinsic value of options exercised for the six months ended June 30, 2015 was $4,898.

A summary of restricted stock units for employees, consultants and non-employee directors of the Company for the six months ended June 30, 2015 is as follows:

	Number of shares underlying outstanding restricted stock units			Weighted- average grant date fair value
Unvested balance - January 1, 2015		27,470		$	21.00
Granted		474,865		$	25.02
Vested		(11,050	)	$	20.14
Forfeited		(9,840	)	$	22.29
Unvested balance - June 30, 2015		481,445		$	24.96

As of June 30, 2015, there was $16,088 and $10,337 of total unrecognized compensation cost related to non-vested stock options and non-vested restricted stock units, respectively. This cost is expected to be recognized over a period of approximately 2.872 and 3.490 years for stock options and restricted stock units, respectively.

The options outstanding as of June 30, 2015 (unaudited) have been separated into ranges of exercise price as follows:

Range of exercise price			Options outstanding as of June 30, 2015		Weighted average remaining contractual life (years)		Weighted average exercise price		Options exercisable as of June 30, 2015		Weighted average remaining contractual life (years)		Weighted average exercise price of options exercisable

$0.070	-	0.901		467,436		2.422	$	0.883		467,436		2.422	$	0.883
$1.039	-	1.576		1,630,672		3.777	$	1.263		1,630,672		3.777	$	1.263
$6.230	-	8.800		149,818		6.415	$	6.772		128,372		6.357	$	6.777
	$12.470			382,669		7.679	$	12.470		209,815		7.657	$	12.470
	$19.510			30,000		9.871	$	19.510		-		-	$	-
$21.000	-	24.230		969,834		8.987	$	21.609		154,477		8.635	$	21.873
	$29.880			154,200		9.652	$	29.880		-		-	$	-
	$39.860			183,609		8.732	$	39.860		59,205		8.732	$	39.860

				3,968,238		5.870	$	10.515		2,649,977		4.364	$	4.414

The fair value of stock option grants for the period ended June 30, 2015 was estimated using the following weighted average assumptions:

	Period ended June 30, 2015
	unaudited

Expected dividend yield		0	%
Expected volatility		65	%
Risk-free interest rate		2.00	%
Expected term (years)		6.25

Options issued to consultants:

The Company’s outstanding options granted to consultants for sales and pre-marketing services as of June 30, 2015 (unaudited) were as follows:

	Options for shares of common stock		Exercise price per share		Options exercisable		Exercisable through
	(number)				(number)

February 2013		3,500	$	12.470		1,833	February 2023
August 2013		5,000	$	21.140		2,292	August 2023
October 2013		1,084	$	24.230		355	October 2023
March 2014		15,575	$	39.860		5,141	March 2024
May 2014		8,700	$	22.010		2,356	May 2024
August 2014		1,250	$	21.000		-	August 2024
November 2014		12,000	$	21.660		-	November 2024
May 2015		6,250	$	19.510		-	May 2025

		53,359				11,977

Stock-based compensation expense for employees and consultants:

The Company recognized non-cash stock-based compensation expense in the consolidated statements of operations as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
	(unaudited)				(unaudited)
	(in thousands)				(in thousands)

Cost of revenues	$	111	$	46	$	202	$	66
Research and development		544		272		1,011		471
Sales and marketing		702		519		1,439		859
General and administrative		605		141		995		228

Total	$	1,962	$	978	$	3,647	$	1,624