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. 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 was increased on January 1, 2016 and will be increased 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, 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 nine months ended September 30, 2018 is as follows:



	Nine Months Ended September 30, 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	(689,227	)	$	13.843
Forfeited	(1,471	)	$	21.972

Options outstanding as of September 30, 2018	765,587		$	18.257	$	42,102	4.800

Options exercisable at the end of the period	722,216		$	18.054	$	39,900	4.682

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 nine months ended September 30, 2018 was $38,639.

b. The options outstanding as of September 30, 2018 (unaudited) have been separated into ranges of exercise price as follows:



Range of exercise price				Options outstanding as of September 30, 2018	Weighted average remaining contractual life (years)	Weighted average exercise price		Options exercisable as of September 30, 2018	Weighted average remaining contractual life (years)	Weighted average exercise price of options exercisable

$	1.256	—	1.576	130,625	0.914	$	1.282	130,625	0.914	$	1.282
$	6.230	—	8.800	12,356	3.259	$	8.039	12,356	3.259	$	8.039
$	12.470	—	16.870	157,613	5.201	$	13.936	139,903	4.924	$	13.463
$	19.510	—	21.660	240,699	5.825	$	21.190	230,416	5.806	$	21.191
$	22.010	—	24.230	98,380	5.427	$	22.404	98,380	5.427	$	22.404
		$29.880		75,936	6.397	$	29.880	60,558	6.397	$	29.880
		$39.860		49,978	5.477	$	39.860	49,978	5.477	$	39.860

				765,587	4.800	$	18.257	722,216	4.682	$	18.054



c.	Options issued to consultants:

The Company’s outstanding options granted to consultants for services as of September 30, 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	4,000	$	21.140	4,000	August 2023
March 2014	5,550	$	39.860	5,550	March 2024
May 2014	3,700	$	22.010	3,700	May 2024
November 2014	6,693	$	21.660	6,296	November 2024
May 2015	1,137	$	19.510	805	May 2025
February 2016	2,138	$	16.870	1,250	February 2026

	24,718			23,101



d.	Restricted stock units:

A summary of restricted stock units for employees, consultants and non-employee directors of the Company for the nine months ended September 30, 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	1,220,624		$	53.56
Vested	(553,671	)	$	26.28
Forfeited	(121,351	)	$	37.04
Unvested balance – September 30, 2018	2,563,723		$	38.81

e. As of September 30, 2018, there was $397 and $84,994 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 0.587 years and 2.682 years for stock options and restricted stock units, respectively.



f.	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 was increased on January 1, 2016, and will increase each January 1 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, 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 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.



g.	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 September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(unaudited) (in thousands)				(unaudited) (in thousands)

Cost of revenues	$	470	$	283	$	1,300	$	783
Research and development	2,097		1,374		7,180		3,805
Sales and marketing	3,600		1,856		10,349		6,277
General and administrative	2,232		1,269		5,345		3,580

Total	$	8,399	$	4,782	$	24,174	$	14,445

h. 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 3,354,028 and 3,775,137 potentially dilutive shares from the conversion of outstanding restricted stock units and stock options that were not included in the calculation of diluted net loss per share as of September 30, 2018 and 2017, respectively.