Compensation costs in 2016 and 2015 include compensation costs for share-based payments granted to employees and directors based on the estimated grant date fair value.

As of December 31, 2016, the total unrecognized compensation cost related to non-vested options amounted to $155,000, which is expected to be recognized over the options’ weighted average remaining vesting period of 2.32 years.

The Company has Stock Option Plans (the “Plans”) under which incentive and non-qualified stock options may be granted to its employees, officers, directors and others. Generally, incentive stock options are granted at fair value, become exercisable over a four-year period, and are subject to the employee’s continued employment. Non-qualified options are granted at exercise prices determined by the Board of Directors and vest over varying periods. A summary of the status of the Company’s stock options as of December 31, 2016 and 2015 and changes during the years then ended are as follows:

There are 190,000 shares available for granting future options as of December 31, 2016. It is the Company’s policy to issue shares from authorized but unissued common stock when stock options are exercised.

The following table summarizes outstanding options that are vested and expected to vest under the Company’s stock option plans as of December 31, 2016:

	Number of Shares	Weighted Average Exercise Price Per Share	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value

Outstanding Options	710,000	$2.73	5.42	$44,000

Vested and Expected to Vest	658,000	$2.81	5.16	$37,000
Options Exercisable	485,000	$3.12	4.06	$11,000

The following table shows total share-based compensation expense included in the consolidated statement of operations:

	Years Ended
	December 31, 2016	December 31, 2015
Cost of services and maintenance	$ 13,000	$ 7,000
Product development	-	1,000
Sales and marketing	-	1,000
General and administrative	107,000	132,000
Stock-based compensation expense	$ 120,000	$ 141,000

On September 24, 2008, the Company issued 826,000 shares of Series-A Convertible Preferred Stock (“Series A Preferred Stock”) to its Chief Executive Officer at a price of $3.63 per share for a total of $3,000,000. Dividends accrue daily on the Series A Preferred Stock at a rate of 10% and are payable only when, and if, declared by the Company’s Board of Directors, quarterly in arrears. The Company reported $300,000 in Series-A Preferred Stock dividends for the years ended December 31, 2016 and 2015.

The Series A Preferred Stock may be converted into common stock at the rate of one share of common for each share of Series A Preferred Stock. The Company may redeem, subject to board approval, all of the shares of Series A Preferred Stock then outstanding at a price equal to the greater of (i) 130% of the purchase price plus all accrued and unpaid dividends and (ii) the fair market value of such number of shares of common stock which the holder of the Series A Preferred Stock would be entitled to receive had the redeemed Series A Preferred Stock been converted immediately prior to the redemption. In the event of a liquidation of the Company, the holder of the Series A and (Series B) Preferred Stock shall be entitled to receive in preference to the holders of the common stock, the original amount invested in the Preferred Stock plus any unpaid and accrued dividends. Preferred stock dividends on the Series A are declared quarterly by the Board of Directors. At December 31, 2016, there was an accrued dividend payable of $150,000.

The Company reports the Series A Preferred Stock on the Company’s consolidated balance sheet within stockholders’ equity.

On June 20, 2014, the Company issued 797,000 of Series-B Convertible Preferred Stock (“Series B Preferred Stock”) to its Chief Executive Officer at a price of $2.51 per share in exchange for the cancellation of $2,000,000 of outstanding principal owed to its Chief Executive Officer under a Revolving Promissory Note dated March 26, 2014.

The Series B Preferred Stock may be converted into shares of common stock on a one-to-one ratio, subject to customary anti-dilution provisions. The Series B Preferred Stock will pay a quarterly dividend, which will accrue at an annual rate of 10%. The Company’s Chief Executive Officer may convert 100% of his shares of the Series B Preferred Stock into shares of common stock. Each and every outstanding share of Series B Preferred Stock is subject to mandatory and automatic conversion into shares of common stock if the closing price of the common stock as reported by the principal exchange or quotation system on which such common stock is traded or reported exceeds 300% of the then current conversion price for 30 consecutive trading days. The Company may redeem all of the outstanding shares of the Series B Preferred Stock issued at a price per share equal to 300% of the purchase price. The Series B Preferred Stock ranks senior to the Common Stock and on parity with the Company’s Series A Convertible Preferred Stock. In the event of a liquidation of the Company, the holder of the Series B and (Series A) Preferred Stock shall be entitled to receive in preference to the holders of the common stock, the original amount invested in the preferred stock plus any unpaid and accrued dividends. Preferred stock dividends on the Series B are declared quarterly by the Board of Directors. At December 31, 2016, there were accrued dividends of $100,000.

The Company reports the Series B Preferred Stock on the Company’s consolidated balance sheet within stockholders’ deficit at the amount of net proceeds received less an imputed dividend cost. The imputed dividend cost of $110,000 was the result of the preferred stock having a dividend rate during the first two years after its issuance (7%) that was lower than the rate that became fixed (10%) after the initial two-year period. The imputed dividend cost of $110,000 is being amortized over the first two years from the date of issuance and is based upon the present value of the dividend discount using a 10% yield. The Company amortized $30,000 and $60,000 related to the imputed dividend cost for the years ended December 31, 2016 and 2015, respectively. The Company reported $170,000 and $140,000 in Series-B Preferred Stock dividends for the years ended December 31, 2016 and 2015, respectively. The imputed dividend cost became fully amortized in 2016.