STOCKHOLDERS’ EQUITY



a.	Composition of common stock capital:



	Authorized		Issued and outstanding
	Number of shares
	December 31,		December 31,
	2018	2017	2018	2017
Stock of $0.001 par value:
Common stock	200,000,000	200,000,000	29,576,880	28,146,162



b.	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.



c.	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 was increased on January 1, 2016 and has been, 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, 2019, 2018, 2017 and 2016, the share reserve under the 2013 Plan was automatically increased by 1,183,075, 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 year ended December 31, 2018 is as follows:



	Year ended
	December 31, 2018
	Number		Weighted average exercise price		Aggregate intrinsic value (in thousands)		Weighted average remaining contractual life (years)
Options outstanding at the beginning of the year	1,456,285		$	16.172	$	47,152	4.906
Granted	—		$	—
Exercised	(744,636	)	$	14.469
Forfeited	(1,981	)	$	32.473
Options outstanding at the end of the period	709,668		$	17.941	$	24,810	4.513
Options exercisable at the end of the period	687,508		$	17.856	$	24,093	4.439

There were no options granted in 2018.

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 years ended December 31, 2018, 2017 and 2016 was $40,610, $22,382 and $9,418, respectively. As of December 31, 2018 and 2017, there was $142 and $2,208, 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 0.712 and 0.887 years, respectively.

The options outstanding as of December 31, 2018 have been separated into ranges of exercise price as follows:



Range of exercise price				Options outstanding as of December 31, 2018	Weighted average remaining contractual life (years)	Weighted average exercise price		Options exercisable as of December 31, 2018	Weighted average remaining contractual life (years)	Weighted average exercise price of options exercisable
$	1.256	—	1.576	130,479	0.663	$	1.282	130,479	0.663	$	1.282
$	6.230	—	8.800	12,356	3.007	$	8.039	12,356	3.007	$	8.039
$	12.470	—	16.870	147,125	5.014	$	14.030	132,541	4.781	$	13.637
$	19.510	—	21.660	220,211	5.599	$	21.174	218,573	5.594	$	21.185
$	22.010	—	24.230	85,870	5.284	$	22.364	85,870	5.284	$	22.364
		$29.880		66,349	6.145	$	29.880	60,411	6.145	$	29.880
		$39.860		47,278	5.225	$	39.860	47,278	5.225	$	39.860
				709,668	4.513	$	17.941	687,508	4.439	$	17.856



d.	Options issued to consultants:

The Company’s outstanding options granted to consultants for services as of December 31, 2018 were as follows:



Issuance date	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	5,468	$	21.660	5,468	November 2024
May 2015	1,137	$	19.510	929	May 2025
February 2016	2,138	$	16.870	1,408	February 2026
	23,493			22,555



e.	Restricted stock units:

The following provides a summary of the restricted stock unit activity for the Company for the year ended December 31, 2018:



	Number of Shares Underlying Outstanding Restricted Stock Units		Weighted- Average Grant Date Fair Value
Outstanding as of January 1, 2018	2,018,121		$	27.32
Granted	1,255,824		$	53.79
Vested	(671,768	)	$	28.54
Forfeited	(162,150	)	$	36.89
Unvested as of December 31, 2018	2,440,027		$	40.00



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 has been, and will be, increased 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) 400,000.00 shares of common stock. On January 1, 2019, 2018, 2017 and 2016, the share reserve under the ESPP was automatically increased by 177,358, 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 (in thousands):



	Year ended
	December 31,
	2018		2017		2016
Cost of revenues	$	1,757	$	1,078	$	699
Research and development	9,645		5,209		3,052
Sales and marketing	16,081		8,542		6,104
General and administrative	7,478		5,006		3,083
Total	$	34,961	$	19,835	$	12,938

For the year ended December 31, 2018, the Company recognized tax benefits on stock-based compensation expense, which are reflected in the provision for income taxes in the consolidated statements of operations, of $40. The Company did not recognize any tax benefits on stock-based compensation expense in 2017 and 2016.