NOTE

4:–

STOCKHOLDERS’ EQUITY

a. 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.

awards were granted under the

2005

Stock Plan subsequent to

December

31,

2013,

and

further awards will be granted under the

2005

Stock Plan.

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 was increased on

January

2016

and will be increased on each

January

thereafter by

four

percent (

) of the number of shares of common stock issued and outstanding on each

December

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 (

) of the number of shares of common stock issued and outstanding on each

December

31.

January 1, 2018,

2017

and

2016,

the share reserve under the

2013

Plan was automatically increased by

1,125,846,

1,072,870

and

1,042,766

shares, respectively. 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

three

months ended

March 31, 2018

is as follows:

	Three Months Ended March 31, 2018 (unaudited)
	Number			Weighted average exercise price		Aggregate intrinsic value (in thousands)		Weighted average remaining contractual life (years)

Options outstanding as of January 1, 2018		1,456,285		$	16.172	$	47,152		4.906
Granted		-		$	-
Exercised		(203,474	)	$	17.596
Forfeited		(1,234	)	$	22.070

Options outstanding as of March 31, 2018		1,251,577		$	15.935	$	55,777		4.622

Options exercisable at the end of the period		1,122,468		$	15.151	$	50,903		4.367

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 period. Total intrinsic value of options exercised for the

three

months ended

March 31, 2018

was

$7,824.

b. The options outstanding as of

March 31, 2018 (

unaudited) have been separated into ranges of exercise price as follows:

Range of exercise price			Options outstanding as of March 31, 2018		Weighted average remaining contractual life (years)		Weighted average exercise price		Options exercisable as of March 31, 2018		Weighted average remaining contractual life (years)		Weighted average exercise price of options exercisable

$1.039	-	1.576		361,725		1.090	$	1.275		361,725		1.090	$	1.275
$6.230	-	8.800		28,656		3.776	$	7.174		28,656		3.776	$	7.174
$12.470	-	16.870		204,001		5.534	$	13.387		180,041		5.220	$	12.923
$19.510	-	21.660		328,024		6.375	$	21.205		266,979		6.341	$	21.201
$22.010	-	24.230		148,740		6.047	$	22.297		138,475		6.042	$	22.318
	$29.880			92,028		6.899	$	29.880		58,189		6.899	$	29.880
	$39.860			88,403		5.978	$	39.860		88,403		5.978	$	39.860

				1,251,577		4.622	$	15.935		1,122,468		4.367	$	15.151

c. Options issued to consultants:

The Company’s outstanding options granted to consultants for services as of

March 31, 2018 (

unaudited) were as follows:

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

February 2013		1,500	$	12.470		1,500	February 2023
August 2013		4,188	$	21.140		4,188	August 2023
March 2014		7,844	$	39.860		7,844	March 2024
May 2014		5,991	$	22.010		5,690	May 2024
November 2014		7,032	$	21.660		5,428	November 2024
May 2015		1,312	$	19.510		730	May 2025
February 2016		2,250	$	16.870		1,050	February 2026

		30,117				26,430

d. Restricted stock units:

A summary of restricted stock units for employees, consultants and non-employee directors of the Company for the

three

months ended

March 31, 2018 (

unaudited) is as follows:

	Number of shares underlying outstanding restricted stock units			Weighted- average grant date fair value
Unvested balance - January 1, 2018		2,018,121		$	27.32
Granted		1,061,150		$	51.95
Vested		(408,615	)	$	24.91
Forfeited		(19,900	)	$	32.66
Unvested balance – March 31, 2018		2,650,756		$	37.51

e. As of

March 31, 2018,

there was

$1,366

and

$93,961

of total unrecognized compensation cost related to unvested employee stock options and unvested restricted stock units, respectively. This cost is expected to be recognized over a period of approximately

0.785

years and

3.127

years for stock options and restricted stock units, respectively.

2015

Employee Stock Purchase Plan

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 was increased on

January 1, 2016,

and will increase each

January 1

thereafter, by an amount equal to the lesser of (i)

one

percent (

) 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 (

) 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, 2018,

2017

and

2016,

the share reserve under the ESPP was automatically increased by

188,813,

158,695

and

21,383

shares, respectively. The ESPP will continue in effect until the earlier of (i) the date when

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:

	Three Months Ended March 31,
	2018		2017
	(unaudited)
	(in thousands)

Cost of revenues	$	362	$	227
Research and development		2,105		1,130
Sales and marketing		3,101		2,059
General and administrative		1,359		988

Total	$	6,927	$	4,404

Since the Company is in a net loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all the periods as the inclusion of all potential common shares outstanding would have been anti-dilutive. There were

3,932,450

and

4,339,384

potentially dilutive shares from the conversion of outstanding RSUs and stock options that were

not

included in the calculation of diluted net loss per share as of

March 31, 2018

and

2017,

respectively.