We recognize rent expense for these leases on a straight-line basis over the lease term.
Rental expense for the three and nine months ended September 30, 2020 totaled $0.4 million and $1.2 million, respectively. Rental expense for the three and nine months ended September 30, 2019 totaled $0.4 million and
$1.2 million, respectively.
Total cash paid for lease liabilities for the three and nine months ended September 30, 2020
totaled $0.4 million and $1.2 million, respectively. Total cash paid for lease liabilities for the three and nine months ended September 30, 2019 totaled $0.4 million and $1.2 million, respectively.
New leases entered into during the three and nine months ended September 30, 2020 totaled $0 and $0.2 million, respectively. New
leases entered into during the three and nine months ended September 30, 2019 totaled $0 million and $0.5 million, respectively.
5.
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Commitments and Contingencies
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In the ordinary course of our business, the Company is involved in a number of lawsuits and administrative proceedings. While uncertainties are
inherent in the final outcome of these matters, the Companys management believes, after consultation with legal counsel, that the disposition of these proceedings should not have a material adverse effect on our financial position, results of
operations or cash flows.
The Company provides an Employee Retirement Savings Plan (the Retirement Plan) under Section 401(k) of the Internal Revenue
Code of 1986, as amended (the Code), that covers substantially all U.S. based salaried employees. Concurrent with the 2015 acquisition of Hudson IT, the Company expanded employee eligibility under the Retirement Plan to include all U.S.
based W-2 hourly employees. Employees may contribute a percentage of eligible compensation to the Retirement Plan, subject to certain limits under the Code. For Hudson IT employees enrolled in the Hudson
Employee Retirement Savings Plan under the Code at the acquisition date, the Company provided a matching contribution of 50% of the first 6% of the participants contributed pay, subject to vesting based on the combined tenure with Hudson and
Mastech Digital. For all other employees, the Company did not provide for any matching contributions for the nine months ended September 30, 2020 and 2019. Mastech Digitals total contributions to the Retirement Plan for the three months
ended September 30, 2020 and September 30, 2019 related to the former Hudson IT employees totaled approximately $0 and $9,000, respectively. Mastech Digitals total contributions to the Retirement Plan for the nine months ended
September 30, 2020 and September 30, 2019 related to the former Hudson IT employees totaled approximately $0 and $44,000, respectively. Effective January 1, 2020, the Company eliminated the 401(k) match for Hudson IT employees.
7.
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Stock-Based Compensation
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In 2008, the Company adopted a Stock Incentive Plan (the Plan) which, as amended, provides that up to 4,900,000 shares of the
Companys Common Stock shall be allocated for issuance to directors, officers and key personnel. Grants under the Plan can be made in the form of stock options, stock appreciation rights, performance shares or stock awards. During the three
months ended September 30, 2020, the Company granted no stock options under the Plan. During the three months ended September 30, 2019, the Company granted 130,000 stock options at an average strike price of $5.65 under the Plan. During
the nine months ended September 30, 2020, the Company granted restricted share units of 11,475 and 800,000 stock option grants at an average strike price of $15.49. During the three months ended September 30, 2019, the Company granted
restricted share units of 16,365 and 683,000 stock option grants at an average strike price of $6.48. As of September 30, 2020 and December 31, 2019, there were 487,000 shares and 217,000 shares, respectively, available for grants under
the Plan.
Stock-based compensation expense for the three months ended September 30, 2020 and 2019 was $462,000 and $263,000,
respectively, and for the nine months September 30, 2020 and 2019 was $1,530,000 and $766,000. Stock-based compensation expense is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.
During the three and nine months September 30, 2020, the Company issued 1,000 and 318,774 shares, respectively, related to the
vesting of restricted shares and the exercising of stock options. During the three and nine months ended September 30, 2019, the Company issued 0 and 17,460 shares, respectively related to the vesting of restricted shares.
In October 2018, the Board of Directors of the Company approved the Mastech Digital, Inc. 2019 Employee Stock Purchase Plan (the Stock
Purchase Plan). The Stock Purchase Plan is intended to meet the requirements of Section 423 of the Code and had to be approved by the Companys shareholders to be qualified. On May 15, 2019, the Companys shareholders
approved the Stock Purchase Plan. Under the Stock Purchase Plan, 600,000 shares of Common Stock (subject to adjustment upon certain changes in the Companys capitalization) are available for purchase by eligible employees who become
participants in the Stock Purchase Plan. The purchase price per share is 85% of the lesser of (i) the fair market value per share of Common Stock on the first day of the offering period, or (ii) the fair market value per share of Common
Stock on the last day of the offering period.
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