NOTE 8:- STOCKHOLDERS’ EQUITY (DEFICIENCY)

Composition of common stock capital:

	Authorized				Issued and outstanding
	Number of shares
	December 31,				December 31,
	2015		2014		2015		2014
Stock of $0.001 par value:
Common stock		200,000,000		200,000,000		26,069,154		24,685,604

Common stock rights:

The Company’s Amended and Restated Certificate of Incorporation authorizes the Company to issue 200,000,000 shares of common stock, par value $0.001 per share.

The common stock confers upon its holders the right to participate in the general meetings of the Company, to vote at such meetings (each share represents one vote), to elect board members and to participate in any distribution of dividends or any other distribution of the Company’s property, including the distribution of surplus assets upon liquidation.

Stock option plans:

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”) which was subsequently approved by the Company’s stockholders. The Company initially reserved 1,904,633 shares of common stock 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. On January 1, 2016, the share reserve under the 2013 Plan was automatically increased by 1,042,766 shares. 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 year ended December 31, 2015 is as follows:

	Year ended December 31, 2015
	Number			Weighted average exercise price		Aggregate intrinsic value (in thousands)		Weighted 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		(1,334,351	)	$	1.521
Forfeited		(154,900	)	$	25.265
Options outstanding at the end of the period		2,782,560		$	14.026	$	21,337		6.246
Vested and expected to vest		2,677,503		$	13.623	$	21,284		6.156
Options exercisable at the end of the period		1,794,249		$	8.841	$	20,496		5.035

A summary of employees’ stock options activities during the years ended December 31, 2014 and 2013 is as follows:

	Year ended December 31, 2014
	Number			Weighted average exercise price		Aggregate intrinsic value (in thousands)		Weighted average remaining contractual life (years)
Options outstanding at the beginning of the year		3,233,235		$	4.033	$	65,723		5.700
Granted		1,111,940		$	25.077
Exercised		(213,174	)	$	1.663
Forfeited		(51,390	)	$	19.449
Options outstanding at the end of the period		4,080,611		$	9.697	$	95,855		6.092
Vested and expected to vest		3,965,741		$	9.318	$	94,581		6.000
Options exercisable at the end of the period		2,620,454		$	2.638	$	79,117		4.359

	Year ended December 31, 2013
	Number			Weighted average exercise price		Aggregate intrinsic value (in thousands)		Weighted average remaining contractual life (years)
Options outstanding at the beginning of the year		2,809,923		$	1.782	$	43,801		5.952
Granted		541,150		$	15.267
Exercised		(105,021	)	$	1.239
Forfeited		(12,817	)	$	13.998
Options outstanding at the end of the period		3,233,235		$	4.033	$	65,723		5.700
Vested and expected to vest		3,203,465		$	3.941	$	65,412		5.668
Options exercisable at the end of the period		2,550,694		$	1.473	$	58,377		4.799

The weighted average grant date fair values of options granted during the years ended December 31, 2015, 2014 and 2013 were $28.637, $14.087 and $14.002, respectively.

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 years ended December 31, 2015, 2014 and 2013 were $27,885, $4,800 and $2,218, respectively. As of December 31, 2015 and 2014, there were $11,779 and $17,016, respectively, of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2005 Stock Plan and 2013 Plan. This cost is expected to be recognized over a period of approximately 2.416 and 3.173 years, respectively.

The options outstanding as of December 31, 2015 have been separated into ranges of exercise price as follows:

Range of exercise price			Options outstanding as of December 31, 2015		Weighted average remaining contractual life (years)		Weighted average exercise price		Options exercisable as of December 31, 2015		Weighted average remaining contractual life (years)		Weighted average exercise price of options exercisable
$0.901	-	1.576		978,178		2.923	$	1.224		978,178		2.923	$	1.224
$6.230	-	8.800		145,693		5.920	$	6.786		137,391		5.895	$	6.785
	$12.470			378,149		7.177	$	12.470		261,065		7.159	$	12.470
$19.510	-	21.660		640,743		8.609	$	21.219		211,571		8.477	$	21.237
$22.010	-	24.230		309,222		8.298	$	22.293		127,326		8.280	$	22.365
	$29.880			154,200		9.148	$	29.880		—		0.000	$	0.000
	$39.86			176,375		8.227	$	39.860		78,718		8.227	$	39.860
				2,782,560		6.246	$	14.026		1,794,249		5.035	$	8.841

The options outstanding as of December 31, 2014 have been separated into ranges of exercise price as follows:

Range of exercise price			Options outstanding as of December 31, 2014		Weighted average remaining contractual life (years)		Weighted average exercise price		Options exercisable as of December 31, 2014		Weighted average remaining contractual life (years)		Weighted average exercise price of options exercisable
$0.070	-	0.901		594,591		2.504	$	0.728		594,591		2.504	$	0.728
$1.039	-	1.576		1,651,595		4.255	$	1.261		1,651,595		4.255	$	1.261
$6.230	-	8.800		174,222		6.886	$	6.724		135,318		6.815	$	6.739
	$12.470			413,680		8.175	$	12.470		184,504		8.152	$	12.470
$21.00	-	24.23		1,039,073		9.476	$	21.611		54,446		8.812	$	21.764
	$39.86			207,450		9.227	$	39.860		—		0.000	$	0.000
				4,080,611		6.092	$	9.697		2,620,454		4.359	$	2.638

Options issued to consultants:

The Company’s outstanding options granted to consultants for pre-sales and marketing services as of December 31, 2015 were as follows:

Issuance date	Options for shares of common stock		Exercise price per share		Options exercisable		Exercisable through
	(number)				(number)
February 2013		3,000	$	12.470		2,125	February 2023
August 2013		5,000	$	21.140		2,917	August 2023
October 2013		823	$	24.230		479	October 2023
March 2014		14,438	$	39.860		6,422	March 2024
May 2014		8,700	$	22.010		3,444	May 2024
August 2014		219	$	21.000		354	August 2024
November 2014		12,000	$	21.660		3,250	November 2024
May 2015		5,250	$	19.510		—	May 2025
		49,430				18,991

The Company’s outstanding options granted to consultants for sales and pre-marketing services as of December 31, 2014 were as follows:

Issuance date	Options for shares of common stock		Exercise price per share		Options exercisable		Exercisable through
	(number)				(number)
December 2006		15,000	$	0.901		15,000	December 2016
February 2013		4,000	$	12.470		1,832	February 2023
August 2013		5,000	$	21.140		1,665	August 2023
October 2013		1,250	$	24.230		363	October 2023
March 2014		16,450	$	39.860		-	March 2024
May 2014		8,700	$	22.010		-	May 2024
August 2014		36,250	$	21.000		-	August 2024
November 2014		12,000	$	21.660		-	November 2024
		98,650				18,860

Restricted stock units:

The following provides a summary of the restricted stock unit activity for the Company for the year ended December 31, 2015:

	Number of Shares Underlying Outstanding Restricted Stock Units			Weighted- Average Grant Date Fair Value
Outstanding as of January 1, 2015		27,470		$	21.00
Granted		685,065		$	23.30
Vested		(36,789	)	$	19.90
Forfeited		(32,240	)	$	23.56
Unvested as of December 31, 2015		643,506		$	23.38

The following provides a summary of the restricted stock unit activity for the Company for the year ended December 31, 2014:

	Number of Shares Underlying Outstanding Restricted Stock Units			Weighted- Average Grant Date Fair Value
Outstanding as of January 1, 2014		-		$	-
Granted		31,905		$	21.00
Vested		(4,435	)	$	21.00
Forfeited		-		$	-
Unvested as of December 31, 2014		27,470		$	21.00

2015 Employee Stock Purchase Plan

On May 5, 2015, the Company’s stockholders approved the Varonis Systems, Inc. 2015 Employee Stock Purchase Plan (the “ESPP”), which the Company’s board of directors had adopted on March 19, 2015. The ESPP became effective as of June 30, 2015. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation, at not less than 85% of the fair market value of the Company’s common stock on the first day or last trading day in the offering period, subject to any plan limitations. The Company initially reserved 500,000 shares of common stock for issuance under the ESPP. The number of shares available for issuance under the ESPP will be increased on January 1, 2016, and will increase each January thereafter, by an amount equal to the lesser of (i) one percent (1%) of the number of shares of common stock issued and outstanding on each December 31 immediately prior to the date of increase, except that the amount of each such 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 issuance under the ESPP to two percent (2%) of the number of shares of common stock issued and outstanding on each such December 31, or (ii) 400,000 shares of common stock. On January 1, 2016, the share reserve under the ESPP was automatically increased by 21,383 shares. The ESPP will continue in effect until the earlier of (i) the date when no shares of common stock are available for issuance thereunder or (ii) June 30, 2025; unless terminated prior thereto by the Company’s board of directors or compensation committee, each of which has the right to terminate the ESPP at any time.

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):

	Year ended December 31,
	2015		2014		2013
Cost of revenues	$	419	$	192	$	39
Research and development		1,954		1,198		551
Sales and marketing		3,041		2,478		841
General and administrative		2,380		796		357
Total	$	7,794	$	4,664	$	1,788