UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31, 2015~~June 30, 2016

☐	~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from____ to ____ .

Commission file number: 1-34167

ePlus inc.

(Exact name of registrant as specified in its charter)

Delaware		54-1817218
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

13595 Dulles Technology Drive, Herndon, VA 20171-3413

(Address, including zip code, of principal executive offices)

Registrant’s telephone number, including area code: (703) 984-8400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares of common stock outstanding as of ~~January~~July 29, 2016 was 7,~~482,213~~7,093,603

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ePlus inc. AND SUBSIDIARIES

Part I. Financial Information:

~~Part I. Financial Information:~~

Item 1.	Financial Statements

	Unaudited Condensed Consolidated Balance Sheets as of ~~December 31, 2015~~June 30, 2016 and March 31, ~~2015~~2016	5

	Unaudited Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months ended ~~December 31,~~June 30, 2016 and 2015 ~~and 2014~~	6

	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three ~~and Nine~~ Months ended ~~December 31,~~June 30, 2016 and 2015 ~~and 2014~~	7

	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months ended ~~December 31,~~June 30, 2016 and 2015 ~~and 2014~~	8

	Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the ~~Nine~~Three Months ended ~~December 31, 2015~~June 30, 2016	10

	Notes to Unaudited Condensed Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2624

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4138

Item 4.	Controls and Procedures	4138

Part II. Other ~~Information:~~Information

Item 1.	Legal Proceedings	4239

Item 1A.	Risk Factors	4239

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4340

Item 3.	Defaults Upon Senior Securities	4440

Item 4.	Mine Safety Disclosures	4440

Item 5.	Other Information	4440

Item 6.	Exhibits	4541

Signatures & Certifications		4642

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or “Exchange Act,” and are made in reliance upon the protections provided by such acts for forward-looking statements. Such statements are not based on historical fact, but are based upon numerous assumptions about future conditions that may not occur. Forward-looking statements are generally identifiable by use of forward-looking words such as “may,” “should,” “would,” “intend,” “estimate,” “will,” “potential,” “possible,” “could,” “believe,” “expect,” “intend,” “plan,” “anticipate,” “project,” and similar expressions. Readers are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf. Forward-looking statements are made based upon information that is currently available or management’s current expectations and beliefs concerning future developments and their potential effects upon us, speak only as of the date hereof, and are subject to certain risks and uncertainties. We do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware. Actual events, transactions and results may materially differ from the anticipated events, transactions or results described in such statements. Our ability to consummate such transactions and achieve such events or results is subject to certain risks and uncertainties. Such risks and uncertainties include, but are not limited to, the matters set forth below:

national and international political instability fostering uncertainty and volatility in the global economy ~~and financial markets~~ including exposure to fluctuation in foreign currency rates, and downward pressure on prices;

significant adverse changes in, reductions in, or ~~losses~~loss of ~~relationships with~~ our ~~larger~~largest customer or one or more of our large customers, or vendors;

the creditworthiness of our customers and our ability to reserve adequately for credit losses;

reduction of vendor incentives provided to us;

we offer a comprehensive set of ~~solutions—~~solutions — integrating information technology (IT) product sales, third-party software assurance and maintenance, our advanced professional and managed services, our proprietary software, and financing, and may encounter some of the challenges, risks, difficulties and uncertainties frequently faced by companies offering a similar ~~companies,~~set of solutions, such as:

managing a diverse product set of solutions in highly competitive markets with a number of key vendors;

increasing the total number of customers utilizing integrated solutions by up-selling within our customer base and gaining new customers;

adapting to meet changes in markets and competitive developments;

maintaining and increasing advanced professional services by retaining highly skilled personnel and vendor certifications;

increasing the total number of customers who utilize our managed services and professional services and continuing to enhance our managed services offerings to remain competitive in the marketplace;

~~maintain~~maintaining our proprietary software and ~~update~~updating our technology infrastructure to remain competitive in the marketplace; and

reliance on third parties to perform some of our service obligations;

changes in the IT industry and/or rapid changes in product offerings, including the proliferation of the cloud, infrastructure as a service and software as a service;

our dependency on continued innovations in hardware, software, and services offerings by our vendors and our ability to partner with them;

future growth rates in our core businesses;

failure to comply with public sector contracts or applicable laws;

changes to or loss of ~~any~~ members of our senior management team and/or failure to successfully implement succession plans;

our dependence on key personnel to maintain certain customer relationships, and our ability to hire, train, and retain sufficient qualified personnel;

our ability to implement comprehensive plans for the integration of sales forces, cost containment, asset rationalization, systems integration and other key strategies;

a possible decrease in the capital spending budgets of our customers or a decrease in purchases from us;

our contracts may not be adequate to protect us and our professional and liability insurance policies coverage may be insufficient to cover a claim;

disruptions in our IT systems and data and audio communication networks;

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our ability to secure ~~our and~~ our customers’ electronic and other confidential information, and remain secure during a cyber-security attack;

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our ability to raise capital, maintain or increase as needed our lines of credit with vendors or floor planning facility, or obtain debt for our financing transactions or the effect of those changes on our common stock or its holders;

our ability to realize our investment in leased equipment;

our ability to successfully integrate acquired businesses;

the possibility of goodwill impairment charges in the future;

our ability to protect our intellectual property rights and successfully defend any challenges to the validity of our patents or allegations that we are infringing upon any third party patents, and the costs associated with those actions, and, when appropriate, license required technology;

exposure to changes in, interpretations of, or enforcement trends in legislation; and

significant changes in accounting standards including changes to the financial reporting of leases which could impact the demand for our leasing services, or misclassification of products and services we sell resulting in the misapplication of revenue recognition policies.

We cannot be certain that our business strategy will be successful or that we will successfully address these and other challenges, risks and uncertainties. For a further list and description of various risks, relevant factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see ~~the~~ Item 1A, “Risk Factors” and Item 7,2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections contained elsewhere in this report, as well as other reports that we file with the Securities and Exchange Commission (“SEC”).

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~~PART I.~~

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

ePlus inc. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE ~~SHEET~~SHEETS

	As of December 31, 2015		As of March 31, 2015			As of June 30, 2016			As of March 31, 2016
ASSETS	(in thousands, except per share data)					(in thousands, except per share data)

Current assets:
Cash and cash equivalents	$	66,567	$	76,175		$	78,807		$	94,766
Accounts receivable—trade, net		258,553		218,458			258,829			234,628
Accounts receivable—other, net		35,908		31,345			37,909			41,771
Inventories—net		24,971		19,835			46,376			33,343
Financing receivables—net, current		68,466		66,909			72,826			56,448
Deferred costs		11,170		20,499			4,267			6,371
Other current assets		8,198		7,413			7,605			10,649
Total current assets		473,833		440,634			506,619			477,976

Financing receivables and operating leases—net		88,443		76,991			70,285			75,906
Deferred tax assets		4,311		3,875
Property, equipment and other assets		8,989		9,248			9,526			8,644
Goodwill and other intangible assets		54,858		40,798
Goodwill and other intangible assets—net							52,669			54,154
TOTAL ASSETS	$	630,434	$	571,546		$	639,099		$	616,680

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Current liabilities:
Accounts payable—equipment	$	28,995	$	20,330
Accounts payable—trade		47,610		46,090
Accounts payable						$	74,608		$	76,780
Accounts payable—floor plan		127,999		99,418			144,509			121,893
Salaries and commissions payable		15,002		14,860			14,102			14,981
Deferred revenue		24,950		34,363			17,511			18,344
Recourse notes payable—current		2,327		889			2,299			2,288
Non-recourse notes payable—current		34,800		28,560			39,151			26,042
Other current liabilities		13,499		13,575			15,491			13,118
Total current liabilities		295,182		258,085			307,671			273,446

Recourse notes payable—long term		1,782		2,801			898			1,054
Non-recourse notes payable—long term		10,656		24,314			14,581			18,038
Deferred tax liability		3,707		3,271
Deferred tax liability—net							2,993			3,001
Other liabilities		2,433		3,813			3,202			2,263
TOTAL LIABILITIES		313,760		292,284			329,345			297,802

COMMITMENTS AND CONTINGENCIES (Note 7)
COMMITMENTS AND CONTINGENCIES (Note 8)

STOCKHOLDERS' EQUITY

Preferred stock, $.01 per share par value; 2,000 shares authorized; none issued or outstanding		-		-			-			-
Common stock, $.01 per share par value; 25,000 shares authorized; 13,237 issued and 7,482 outstanding at December 31, 2015 and 13,114 issued and 7,389 outstanding at March 31, 2015		132		131
Common stock, $.01 per share par value; 25,000 shares authorized; 13,296 issued and 7,167 outstanding at June 30, 2016 and 13,237 issued and 7,365 outstanding at March 31, 2016							133			132
Additional paid-in capital		116,441		111,072			118,969			117,511
Treasury stock, at cost, 5,755 and 5,725 shares at December 31, 2015 and March 31, 2015, respectively		(120,654)		(118,179	)
Treasury stock, at cost, 6,129 and 5,872 shares at June 30, 2016 and March 31, 2016, respectively							(150,555	)		(129,518	)
Retained earnings		321,267		286,477			341,895			331,224
Accumulated other comprehensive income—foreign currency translation adjustment		(512)		(239	)		(688	)		(471	)
Total Stockholders' Equity		316,674		279,262			309,754			318,878
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	630,434	$	571,546		$	639,099		$	616,680

See Notes to Unaudited Condensed Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended December 31,				Nine Months Ended December 31,					Three Months Ended June 30,
	2015		2014		2015		2014			2016		2015

	(in thousands, except per share data)									(in thousands, except per share data)

Net sales	$	298,644	$	306,241	$	904,796	$	876,017	��	$	298,503	$	269,866
Cost of sales		234,584		240,803		709,685		690,216			230,839		210,736
Gross profit		64,060		65,438		195,111		185,801			67,664		59,130

Professional and other fees		1,882		1,436		4,913		4,846			1,786		1,518
Salaries and benefits		37,372		35,632		108,326		102,831			39,798		35,214
General and administrative expenses		6,765		7,233		21,129		20,664			6,470		5,571
Depreciation and amortization											1,775		1,208
Interest and financing costs		396		575		1,371		1,830			349		553
Operating expenses		46,415		44,876		135,739		130,171			50,178		44,064

Operating income		17,645		20,562		59,372		55,630

Other income		-		6,169		-		7,603

Earnings before tax		17,645		26,731		59,372		63,233			17,486		15,066

Provision for income taxes		7,348		11,230		24,582		26,303			6,815		6,252

Net earnings	$	10,297	$	15,501	$	34,790	$	36,930		$	10,671	$	8,814

Net earnings per common share—basic	$	1.41	$	2.14	$	4.79	$	5.02		$	1.52	$	1.22
Net earnings per common share—diluted	$	1.40	$	2.13	$	4.74	$	4.97		$	1.50	$	1.21

Weighted average common shares outstanding—basic		7,280		7,230		7,260		7,351			7,033		7,225
Weighted average common shares outstanding—diluted		7,329		7,279		7,336		7,413			7,108		7,301

See Notes to Unaudited Condensed Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended June 30,
	2015			2014			2015			2014			2016			2015
	(amounts in thousands)												(amounts in thousands)

NET EARNINGS	$	10,297		$	15,501		$	34,790		$	36,930		$	10,671		$	8,814

OTHER COMPREHENSIVE INCOME, NET OF TAX:
Foreign currency translation adjustments		(139	)		(153	)		(273	)		(197	)
Foreign currency translation adjustments (net of tax effect of $40 and $11, respectively)														(217	)		43
Other comprehensive income (loss)		(139	)		(153	)		(273	)		(197	)		(217	)		43

TOTAL COMPREHENSIVE INCOME	$	10,158		$	15,348		$	34,517		$	36,733		$	10,454		$	8,857

See Notes to Unaudited Condensed Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended December 31,						Three Months Ended June 30,
	2015			2014			2016			2015
	(in thousands)						(in thousands)
Cash Flows From Operating Activities:
Net earnings	$	34,790		$	36,930		$	10,671		$	8,814

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:
Depreciation and amortization		13,020			11,441			2,775			4,235
Reserve for credit losses, inventory obsolescence and sales returns		(91	)		275			191			(391	)
Share-based compensation expense		4,210			3,428			1,458			1,231
Excess tax benefit from share-based compensation		(1,159	)		(734	)
Payments from lessees directly to lenders—operating leases		(3,587	)		(6,011	)		(1,884	)		(1,458	)
Gain on disposal of property, equipment and operating lease equipment		(2,621	)		(2,438	)		(889	)		(325	)
Gain on sale of financing receivables		(5,439	)		(4,640	)		(1,455	)		(1,490	)
Gain on settlement		-			(1,434	)
Other		224			46			109			47
Changes in:
Accounts receivable—trade		(31,692	)		(27,378	)		(24,283	)		31,368
Accounts receivable—other		(1,176	)		4,492			4,378			6,416
Inventories		(5,643	)		(314	)		(13,188	)		(5,384	)
Financing receivables—net		(10,670	)		(14,927	)		244			(65	)
Deferred costs, other intangible assets and other assets		5,888			(6,309	)		4,115			(3,027	)
Accounts payable—equipment		(197	)		(578	)
Accounts payable—trade		(5,715	)		(15,451	)
Accounts payable								3,827			(13,350	)
Salaries and commissions payable, deferred revenue and other liabilities		(9,018	)		13,672			1,212			(3,792	)
Net cash used in operating activities	$	(18,876	)	$	(9,930	)
Net cash (used in) provided by operating activities							$	(12,719	)	$	21,756

Cash Flows From Investing Activities:
Maturities of supplemental benefit plan investments	$	-		$	2,544
Proceeds from sale of property, equipment and operating lease equipment		5,349			7,401		$	2,100		$	1,843
Purchases of property, equipment and operating lease equipment		(17,008	)		(7,571	)		(890	)		(6,924	)
Purchases of assets to be leased or financed		(10,828	)		(7,628	)		(6,052	)		(9,437	)
Issuance of financing receivables		(102,612	)		(93,205	)		(32,100	)		(44,253	)
Repayments of financing receivables		49,230			50,577			5,856			21,132
Proceeds from sale of financing receivables		48,174			24,216			13,576			11,214
Premiums paid on life insurance		-			(47	)
Cash used in acquisitions, net of cash acquired		(16,649	)		(7,992	)
Net cash used in investing activities	$	(44,344	)	$	(31,705	)	$	(17,510	)	$	(26,425	)

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS –- continued

	Nine Months Ended December 31,						Three Months Ended June 30,
	2015			2014			2016			2015
	(in thousands)						(in thousands)
Cash Flows From Financing Activities:
Borrowings of non-recourse and recourse notes payable	$	27,865		$	40,329		$	11,979		$	7,957
Repayments of non-recourse and recourse notes payable		(254	)		(1,580	)		(2	)		(186	)
Repurchase of common stock		(2,475	)		(37,080	)		(20,640	)		(2,475	)
Dividends paid		(80	)		(90	)		-			(80	)
Payments of contingent consideration		(1,158	)		-
Excess tax benefit from share-based compensation		1,159			734
Net borrowings (repayments) on floor plan facility		28,581			10,689			22,616			10,983
Net cash provided by financing activities		53,638			13,002			13,953			16,199

Effect of exchange rate changes on cash		(26	)		(24	)		317			3

Net Decrease in Cash and Cash Equivalents		(9,608	)		(28,657	)
Net Increase (Decrease) in Cash and Cash Equivalents								(15,959	)		12,606

Cash and Cash Equivalents, Beginning of Period		76,175			80,179			94,766			76,175

Cash and Cash Equivalents, End of Period	$	66,567		$	51,522		$	78,807		$	88,781

Supplemental Disclosures of Cash Flow Information:
Cash paid for interest	$	65		$	201		$	19		$	27
Cash paid for income taxes	$	26,463		$	26,233		$	1,367		$	9,072

Schedule of Non-Cash Investing and Financing Activities:
Proceeds from sales of property, equipment and operating lease equipment	$	7,993		$	297
Purchase of property, equipment, and operating leases	$	(11,985	)	$	(336	)
Purchase of assets to be leased or financed included in accounts payable	$	(8,554	)	$	(15,633	)
Investing Activities
Proceeds from sale of property, equipment, and operating lease equipment							$	161		$	6,783
Purchase of property, equipment, and operating lease equipment							$	(1,873	)	$	(8,069	)
Purchase of assets to be leased or financed							$	(9,247	)	$	(3,781	)
Issuance of financing receivables	$	(91,022	)	$	-		$	(39,779	)	$	(39,154	)
Repayment of financing receivables	$	12,357		$	-		$	7,114		$	4,831
Proceeds from sale of financing receivables	$	75,584		$	79,663		$	31,901		$	6,960

Financing Activities
Borrowing of recourse and nonrecourse notes payable	$	42,840		$	-		$	12,210		$	27,603
Repayments of non-recourse and recourse notes payable	$	(22,292	)	$	(26,469	)	$	(9,616	)	$	(10,498	)
Vesting of share-based compensation	$	7,743		$	6,439		$	7,280		$	7,083
Contingent consideration	$	-		$	1,980
Repurchase of common stock included in accounts payable							$	(1,459	)	$	-

See Notes to Unaudited Condensed Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive						Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive
	Shares			Par Value		Capital		Stock			Earnings		Income			Total			Shares			Par Value		Capital		Stock			Earnings		Income			Total
	(in thousands)
Balance, April 1, 2015		7,389		$	131	$	111,072	$	(118,179	)	$	286,477	$	(239	)	$	279,262


Excess tax benefit of share-based ompensation		-			-		1,159		-			-		-			1,159
Balance, April 1, 2016																				7,365		$	132	$	117,511	$	(129,518	)	$	331,224	$	(471	)	$	318,878
Issuance of shares for option exercises																				-			-		-		-			-		-			-
Excess tax benefit of share- based compensation																				-			-		-		-			-		-			-
Issuance of restricted stock awards		123			1		-		-			-		-			1			59			1		-		-			-		-			1
Share-based compensation		-			-		4,210		-			-		-			4,210			(257	)		-		1,458		-			-		-			1,458
Repurchase of common stock		(30	)		-		-		(2,475	)		-		-			(2,475	)		-			-		-		(21,037	)		-		-			(21,037	)
Dividends declared																				-			-		-		-			-		-			-
Net earnings		-			-		-		-			34,790		-			34,790			-			-		-		-			10,671		-			10,671

Foreign currency translation adjustment		-			-		-		-			-		(273	)		(273	)		-			-		-		-			-		(217	)		(217	)
Balance, December 31, 2015		7,482		$	132	$	116,441	$	(120,654	)	$	321,267	$	(512	)	$	316,674
Balance, June 30, 2016																				7,167		$	133	$	118,969	$	(150,555	)	$	341,895	$	(688	)	$	309,754

See Notes to Unaudited Condensed Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~BASIS~~DESCRIPTION OF ~~PRESENTATION~~BUSINESS — Our company was founded in 1990 and is a Delaware corporation. e~~Plus~~ePlus inc. is sometimes referred to in this Quarterly Report on Form 10-Q as ~~“we,” “our,” “us,”~~"we," "our," "us," "ourselves," or “e~~Plus.”~~"ePlus." ePlus inc. is a holding company that through its subsidiaries provides information technology solutions which enable organizations to optimize their IT environment and supply chain processes. We also provide consulting, professional and managed services and complete lifecycle management services including flexible financing solutions. We focus on middle market and large enterprises in North America and the United Kingdom.

BASIS OF PRESENTATION — The ~~unaudited condensed~~ consolidated financial statements include the accounts of e~~Plus~~ePlus inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The accounts of businesses acquired are included in the consolidated financial statements from the dates of acquisition.

INTERIM FINANCIAL STATEMENTS — The condensed consolidated financial statements for the three ~~and nine~~ months ended ~~December 31,~~June 30, 2016 and 2015 ~~and 2014~~ were prepared by us, without audit, and include all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of our financial position, results of operations, changes in comprehensive income and cash flows for such periods. Operating results for the three ~~and nine~~ months ended ~~December 31,~~June 30, 2016 and 2015 ~~and 2014~~ are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending March 31, ~~2016~~2017 or any other future period. These unaudited condensed consolidated financial statements do not include all disclosures required by the accounting principles generally accepted in the United States (“U.S. GAAP”) for annual financial statements. Our audited consolidated financial statements are contained in our annual report on Form 10-K for the year ended March 31, ~~2015~~2016 (“~~2015~~2016 Annual ~~Report”~~Financial Statements”), which should be read in conjunction with these interim condensed consolidated financial statements.

USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Estimates are used when accounting for items and matters including, but not limited to, revenue recognition, residual values, vendor consideration, lease classification, goodwill and intangibles, reserves for credit losses, inventory obsolescence, and the recognition and measurement of income tax assets and other provisions and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates.

The notes to the consolidated financial statements contained in the ~~2015~~2016 Annual ~~Report~~Financial Statements include additional discussion of the significant accounting policies and estimates used in the preparation of our consolidated financial statements. There have been no material changes to our significant accounting policies and estimates during the ~~nine~~three months ended ~~December 31, 2015.~~June 30, 2016.

CONCENTRATIONS OF RISK —A— A substantial portion of our sales of product and services are from sales of Cisco Systems, ~~Hewlett-Packard,~~Hewlett Packard Enterprise (“HPE”), and NetApp products, which represented approximately ~~48%~~52%, ~~6% and 7%, and 49%, 8%~~4% and 5%, respectively, ~~of our technology segment sales of product and services~~ for the three ~~and nine~~ months ended ~~December 31, 2015,~~June 30, 2016, as compared ~~to 45%, 7%~~Cisco Systems, Hewlett Packard (“HP”), and 8%NetApp products which represented approximately 51%, 10%, and ~~50%, 8%, and 7%~~4%, respectively, ~~of our technology segment sales of product and services~~ for the three ~~and nine~~ months ended ~~December 31, 2014.~~June 30, 2015. Any changes in our vendors’ ability to provide products could have a material adverse effect on our business, results of operations and financial condition.

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2.	RECENT ACCOUNTING PRONOUNCEMENTS

RECENTLY ~~ISSUED~~ADOPTED ACCOUNTING PRONOUNCEMENTS ~~—. On November 20, 2015,~~— In March 2016, the ~~FASB~~Financial Accounting Standards Board (“FASB”) issued ~~ASU 2015-17,~~Accounting Standards Update (“ASU”) 2016-09, ~~Balance Sheet Classification of Deferred Taxes~~Stock Compensation. ~~To simplify~~This update simplifies several aspects of the ~~presentation of deferred income taxes, the amendments in this ASU require that deferred tax assets and liabilities be classified as noncurrent in a classified balance sheet.~~accounting for share-based payment transactions. As permitted, we elected to early adopt this ~~ASU~~update during the quarter ended June 30, 2016. The amendments requiring recognition of excess tax benefits and deficiencies in the income statement have been applied prospectively resulting in a benefit in the current period of $0.4 million, or $0.06 per share. We elected to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using a retrospective transition method, and as a result, $1.1 million of excess tax benefits related to share-based awards which were previously classified as cash flows from financing activities in the ~~retrospective approach, effective with our current Form 10-Q filing~~quarter ended June 30, 2015 have been reclassified as cash flows from operating activities. As part of adopting this update, we additionally elected as an accounting policy to account for ~~December 31, 2015.~~forfeitures of share-based awards when they occur. As we had previously estimated the forfeiture rate to be zero, there is no cumulative-effect adjustment to retained earnings as a result of ~~adopting this ASU, we recast~~ our March 31, 2015 balance sheet by decreasing deferred tax assets-current and Property, equipment and other assets by $3,643 thousand and $232 thousand, respectively, and creating a new line item for non-current deferred tax assets in the amount of $3,875 thousand. There is no impact to our condensed consolidated statement of operations and cash flows.election.

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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED — In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which will supersede all current U.S. GAAP on this topic. The FASB subsequently issued ASU 2016-08, Principal versus Agent Considerations, ASU 2016-10, Identifying Performance Obligations and Licensing, and ASU 2016-12, Narrow-Scope Improvements and Practical Expedients, in March 2016, April 2016 and May 2016, respectively, to amend the guidance in ASU 2014-09. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB ~~deferred~~issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, to defer the effective date of ~~this standard~~ASU 2014-09 by one year. Including the one-year deferral, ~~the new guidance becomes~~these updates become effective for us in our quarter ending June 30, 2018, and early adoption is permitted for us in our quarter ending June 30, ~~2017~~.2017. The ~~standard~~update can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. We are currently evaluating the impact ~~it will have~~of this update on our financial statements ~~and disclosures~~ and have not yet selected our planned transition approach.

In February 2016, the FASB issued ASU 2016-02, Leases, which will supersede the current U.S. GAAP on this topic. The core principle of this update is that a lessee should recognize the assets and liabilities that arise from leases. This update requires adoption under the modified retrospective approach and becomes effective for us in our quarter ending June 30, 2019. Early adoption is permitted. We are currently evaluating the impact of this update on our financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This update requires adoption under a modified retrospective approach and becomes effective for us in our quarter ending June 30, 2020. Early adoption is permitted beginning in our quarter ending June 30, 2019. We are currently evaluating the impact of this update on our financial statements.

2.3.	FINANCING RECEIVABLES AND OPERATING LEASES

Our financing receivables and operating leases consist of assets that we ~~financed~~finance for our customers, which we manage as a portfolio of investments. Equipment financed for our customers is accounted for as investments in direct financing, sales-type or operating leases in accordance with Accounting Standards Codification (“ASC”) Topic 840, Leases. We also finance third-party software, maintenance, and services for our customers, which are classified as notes receivables. Our notes receivables are interest bearing and are often due over a period of time that corresponds with the terms of the leased products.

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FINANCING RECEIVABLES—NET

Our financing receivables, net consist of the following (in thousands):

December 31, 2015	Notes Receivables			Lease-Related Receivables			Total Financing Receivables
June 30, 2016										Notes Receivables			Lease-Related Receivables			Total Financing Receivables
Minimum payments	$	56,311		$	74,551		$	130,862		$	56,191		$	73,233		$	129,424
Estimated unguaranteed residual value (1)		-			10,893			10,893			-			16,748			16,748
Initial direct costs, net of amortization (2)		439			845			1,284			581			477			1,057
Unearned income		-			(6,405	)		(6,405	)		-			(5,842	)		(5,842	)
Reserve for credit losses (3)		(3,580	)		(831	)		(4,411	)		(3,452	)		(731	)		(4,182	)
Total, net	$	53,170		$	79,053		$	132,223		$	53,320		$	83,885		$	137,205
Reported as:
Current	$	29,733		$	38,733		$	68,466		$	37,454		$	35,372		$	72,826
Long-term		23,437			40,320			63,757			15,866			48,513			64,379
Total, net	$	53,170		$	79,053		$	132,223		$	53,320		$	83,885		$	137,205

(1)

Includes estimated unguaranteed residual values of ~~$4,438~~$7,843 thousand for direct financing leases, which have been sold and accounted for as sales under ASC Topic, ~~860,~~ Transfers and Servicing.

(2)

Initial direct costs are shown net of amortization of ~~$706~~$623 thousand.

(3)

For details on reserve for credit losses, refer to Note 4,5, “Reserves for Credit Losses.”

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March 31, 2015	Notes Receivables			Lease-Related Receivables			Total Financing Receivables
March 31, 2016										Notes Receivables			Lease-Related Receivables			Total Financing Receivables
Minimum payments	$	59,943		$	66,415		$	126,358		$	44,442		$	66,303		$	110,745
Estimated unguaranteed residual value (1)		-			8,376			8,376			-			12,693			12,693
Initial direct costs, net of amortization (2)		429			495			924			312			475			787
Unearned income		-			(5,233	)		(5,233	)		-			(5,543	)		(5,543	)
Reserve for credit losses (3)		(3,573	)		(881	)		(4,454	)		(3,381	)		(685	)		(4,066	)
Total, net	$	56,799		$	69,172		$	125,971		$	41,373		$	73,243		$	114,616
Reported as:
Current	$	33,484		$	33,425		$	66,909		$	24,962		$	31,486		$	56,448
Long-term		23,315			35,747			59,062			16,411			41,757			58,168
Total, net	$	56,799		$	69,172		$	125,971		$	41,373		$	73,243		$	114,616

(1)

Includes estimated unguaranteed residual values of ~~$3,977~~$6,722 thousand for direct financing leases which have been sold and accounted for as sales under ASC Topic, ~~860,~~ Transfers and Servicing.

(2)

Initial direct costs are shown net of amortization of ~~$647~~$612 thousand.

(3)

For details on reserve for credit losses, refer to Note 4,5, “Reserves for Credit Losses.”

OPERATING LEASES—NET

Operating leases—net represents leases that do not qualify as direct financing leases. The components of the operating leases—net are as follows (in thousands):

	December 31, 2015			March 31, 2015			June 30, 2016			March 31, 2016
Cost of equipment under operating leases	$	43,240		$	36,283		$	15,572		$	36,635
Accumulated depreciation		(18,554	)		(18,354	)		(9,666	)		(18,897	)
Investment in operating lease equipment—net (1)	$	24,686		$	17,929		$	5,906		$	17,738

(1)

These totals include estimated unguaranteed residual values of ~~$4,452~~$1,202 thousand and ~~$4,340~~$3,417 thousand as of ~~December 31, 2015~~June 30, 2016 and March 31, ~~2015,~~2016, respectively.

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TRANSFERS OF FINANCIAL ASSETS

We enter into arrangements to transfer the contractual payments due under financing receivables and operating ~~leases,~~lease agreements, which are accounted for as sales or secured borrowings in accordance with ~~ASC~~ Codification Topic, ~~860~~, Transfers and Servicing. For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable. As of ~~December 31, 2015~~June 30, 2016 and March 31, ~~2015,~~2016 we had financing receivables of $49.7 million and $36.1 million, respectively, and operating leases of ~~$54.6~~$3.8 million and ~~$61.9~~$13.9 million, respectively, ~~which~~that were collateral for non-recourse notes payable. See Note ~~6, “Notes~~7, "Notes Payable and Credit Facility.”"

For transfers accounted for as sales, we derecognize the carrying value of the asset transferred and recognize a net gain or loss on the sale, which isare presented within net sales in the ~~unaudited condensed~~ consolidated statement of operations. ~~During~~For both the three months ended ~~December 31,~~June 30, 2016 and 2015, ~~and 2014,~~ we recognized net gains of ~~$1.4~~$1.5 million, and ~~$1.5 million, respectively. The fair value of assets received~~total proceeds from these sales ~~was $54.1~~were $54.2 million and ~~$44.8 million for the three months ended December 31, 2015 and 2014, respectively. During the nine months ended December 31, 2015 and 2014, we recognized net gains of $5.4 million and $4.6~~$24.3 million, respectively. ~~The fair value~~For certain assignments of financial assets, ~~received from these~~we retain a servicing obligation. For assignments accounted for as sales, ~~was $162.7 million and $138.6 million for~~we allocate a portion of the ~~nine months ended December 31, 2015 and 2014, respectively.~~proceeds to deferred revenues, which is recognized as we perform the services. In a limited number of such sales, we indemnified the assignee in the event that the lessee elected to early terminate the lease. Our maximum potential future payments related to such guarantees is $1.3 million. We believe the possibility of making any payments to be remote.

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3.4.	GOODWILL AND OTHER INTANGIBLE ASSETS

Our goodwill and other intangible assets consist of the following (in thousands):

	December 31, 2015							March 31, 2015							June 30, 2016							March 31, 2016
	Gross Carrying Amount		Accumulated Amortization / Impairment Loss			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization / Impairment Loss			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization / Impairment Loss			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization / Impairment Loss			Net Carrying Amount

Goodwill	$	51,026	$	(8,673	)	$	42,353	$	42,785	$	(8,673	)	$	34,112	$	50,684	$	(8,673	)	$	42,011	$	50,824	$	(8,673	)	$	42,151
Customer relationships & other intangibles		19,680		(8,069	)		11,611		12,005		(6,560	)		5,445		20,205		(10,247	)		9,958		20,401		(9,193	)		11,208
Capitalized software development		2,693		(1,799	)		894		2,693		(1,452	)		1,241		2,722		(2,022	)		700		2,709		(1,914	)		795
Total	$	73,399	$	(18,541	)	$	54,858	$	57,483	$	(16,685	)	$	40,798	$	73,611	$	(20,942	)	$	52,669	$	73,934	$	(19,780	)	$	54,154

GOODWILL

Goodwill represents the premium paid over the fair value of the net tangible and intangible assets that are individually identified and separately recognized in business combinations. ~~Customer relationships and capitalized software development costs are amortized over an estimated useful life, which is generally between 3 to 7 years.~~

All of our goodwill as of ~~December 31, 2015~~June 30, 2016 and March 31, ~~2015~~2016 is related to our technology segment. ~~The following table summarizes the amount of goodwill allocated to our reporting units (in thousands):~~

Reporting Unit
December 31,
2015

March 31,
2015

Technology $ 41,264 $ 33,023
Software Document Management 1,089 1,089

~~Goodwill increased by $8.2 million due to addition of $8.3 million from the acquisition of~~ ~~the businesses of IGX Acquisition Global, LLC, IGXGlobal UK Limited, and IGX Support, LLC (collectively, “IGX”) in~~ ~~December, 2015 and offset by a negligible amount due to foreign currency translation. See Note 14, “Business Combinations,” for additional information.~~

We test goodwill for impairment on an annual basis, as of the first day of our third fiscal quarter, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

~~During~~Goodwill decreased by $0.1 million during the ~~quarter~~three months ended ~~December 31, 2015, we performed a qualitative assessment for goodwill in accordance with the provisions of Codification Topic~~ ~~Intangibles – Goodwill and Other, and concluded that the fair value of technology and software document management reporting units, more likely than not, exceed their respective carrying amounts as of October 1, 2015.~~June 30, 2016, due to foreign currency translation.

During the quarter ended December 31, 2014, we elected to bypass the qualitative assessment of goodwill and estimate the fair values of the reporting units. The fair value of the Technology and Software Document Management reporting units substantially exceeded their respective carrying values as of October 1, 2014, and our conclusions regarding the recoverability of goodwill would not be impacted by a ten percent change in their fair values.

OTHER INTANGIBLE ASSETS

Customer relationships and capitalized software development costs are amortized over an estimated useful life, which is generally between 3 to 7 years. Trade names and trademarks are amortized over an estimated useful life of 10 years.

Total amortization expense for other intangible assets was ~~$0.8~~$1.2 million and $0.7 million for the three months ended June 30, 2016 and ~~$2.1 and $1.7 million for the nine months ended December 31,~~ 2015, ~~and 2014,~~ respectively.

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4.5.	RESERVES FOR CREDIT LOSSES

Activity in our reserves for credit losses for the ~~nine~~three months ended ~~December 31,~~June 30, 2016 and 2015 ~~and 2014~~ were as follows (in thousands):

Accounts
Receivable

Notes
Receivable

Lease-Related
Receivables
Total
Balance April 1, 2015 $ 1,169 $ 3,573 $ 881 $ 5,623
Provision for credit losses 12 7 (50 ) (31 )
Write-offs and other (119 ) - - (119 )
Balance December 31, 2015 $ 1,062 $ 3,580 $ 831 $ 5,473

	Accounts Receivable		Notes Receivable		Lease-Related Receivables		Total
Balance April 1, 2016	$	1,127	$	3,381	$	685	$	5,193
Provision for credit losses		15		71		46		132
Balance June 30, 2016	$	1,142	$	3,452	$	731	$	5,325

	Accounts Receivable			Notes Receivable		Lease-Related Receivables			Total			Accounts Receivable			Notes Receivable			Lease-Related Receivables		Total
Balance April 1, 2014	$	1,364		$	3,364	$	1,024		$	5,752
Balance April 1, 2015												$	1,169		$	3,573		$	881	$	5,623
Provision for credit losses		69			244		39			352			(149	)		(33	)		34		(148	)
Write-offs and other		(228	)		-		(31	)		(259	)		(77	)		-			-		(77	)
Balance December 31, 2014	$	1,205		$	3,608	$	1,032		$	5,845
Balance June 30, 2015												$	943		$	3,540		$	915	$	5,398

Our reserves for credit losses and minimum payments associated with our notes receivables and lease-related receivables disaggregated on the basis of our impairment method were as follows (in thousands):

	December 31, 2015				March 31, 2015				June 30, 2016				March 31, 2016
	Notes Receivable		Lease- Related Receivables		Notes Receivable		Lease- Related Receivables		Notes Receivable		Lease- Related Receivables		Notes Receivable		Lease- Related Receivables
Reserves for credit losses:
Ending balance: collectively evaluated for impairment	$	427	$	708	$	440	$	740	$	350	$	608	$	279	$	562
Ending balance: individually evaluated for impairment		3,153		123		3,133		141		3,102		123		3,102		123
Ending balance	$	3,580	$	831	$	3,573	$	881	$	3,452	$	731	$	3,381	$	685

Minimum payments:
Ending balance: collectively evaluated for impairment	$	53,109	$	74,409	$	56,525	$	66,255	$	53,089	$	73,091	$	41,340	$	66,161
Ending balance: individually evaluated for impairment		3,202		142		3,418		160		3,102		142		3,102		142
Ending balance	$	56,311	$	74,551	$	59,943	$	66,415	$	56,191	$	73,233	$	44,442	$	66,303

The net credit exposure for the balance evaluated individually for impairment as of ~~December~~June 30, 2016 and March 31, ~~2015~~2016, was ~~$3.3 million,~~ $3.2 million, of which is related to ~~one customer. During fiscal year 2012, we began selling and financing various products and services to~~ a ~~large law firm, which filed for bankruptcy~~customer in May 2012. As of March 31, and December 31, 2015, we had $3.2 million of notes and lease-related receivables from this customer and total reserves for credit losses of $3.2 million, which represented our estimated probable loss.bankruptcy. The note and lease receivables associated with this customer are our only receivables on ~~non-accrual~~nonaccrual status. We place receivables on nonaccrual status when events, such as a borrower declaring bankruptcy, occur that indicate a receivable will not be collectable. We charge off uncollectable financing receivables when we stop pursuing collection.

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The age of the recorded minimum lease payments and net credit exposure associated with our investment in direct financing and sales-type leases that are past due disaggregated based on our internally assigned credit quality rating (“CQR”) were as follows as of ~~December 31, 2015~~June 30, 2016 and March 31, ~~2015~~2016 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Unbilled Minimum Lease Payments		Total Minimum Lease Payments		Unearned Income			Non- Recourse Notes Payable			Net Credit Exposure			31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Unbilled Minimum Lease Payments		Total Minimum Lease Payments		Unearned Income			Non- Recourse Notes Payable			Net Credit Exposure

December 31, 2015
June 30,2016																							June 30,2016

High CQR	$	175	$	78	$	422	$	675	$	935	$	54,323	$	55,933	$	(3,664	)	$	(23,362	)	$	28,907		$	330	$	149	$	266	$	745	$	302	$	49,644	$	50,691	$	(2,808	)	$	(19,741	)	$	28,142
Average CQR		50		13		66		129		79		18,268		18,476		(1,394	)		(6,566	)		10,516			47		24		34		105		64		22,231		22,400		(1,251	)		(2,766	)		18,383
Low CQR		-		-		142		142		-		-		142		(19	)		-			123			-		-		142		142		-		-		142		(19	)		-			123
Total	$	225	$	91	$	630	$	946	$	1,014	$	72,591	$	74,551	$	(5,077	)	$	(29,928	)	$	39,546		$	377	$	173	$	442	$	992	$	366	$	71,875	$	73,233	$	(4,078	)	$	(22,507	)	$	46,648

March 31, 2015
March 31, 2016																							March 31, 2016

High CQR	$	70	$	185	$	133	$	388	$	430	$	41,213	$	42,031	$	(2,340	)	$	(16,561	)	$	23,130		$	575	$	52	$	94	$	721	$	984	$	46,157	$	47,862	$	(2,705	)	$	(22,914	)	$	22,243
Average CQR		15		68		19		102		75		24,047		24,224		(1,742	)		(9,397	)		13,085			15		17		78		110		159		18,030		18,299		(1,387	)		(8,714	)		8,198
Low CQR		-		-		-		-		-		160		160		(19	)		-			141			-		-		142		142		-		-		142		(19	)		-			123
Total	$	85	$	253	$	152	$	490	$	505	$	65,420	$	66,415	$	(4,101	)	$	(25,958	)	$	36,356		$	590	$	69	$	314	$	973	$	1,143	$	64,187	$	66,303	$	(4,111	)	$	(31,628	)	$	30,564

The age of the recorded notes receivable balance disaggregated based on our internally assigned CQR were as follows as ~~December 31, 2015~~June 30, 2016 and March 31, ~~2015~~2016 (in thousands):

	31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Unbilled Notes Receivable		Total Notes Receivable		Non- Recourse Notes Payable			Net Credit Exposure			31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Current		Unbilled Notes Receivable		Total Notes Receivable		Non- Recourse Notes Payable			Net Credit Exposure

December 31, 2015
June 30, 2016																				June 30, 2016

High CQR	$	837	$	585	$	2,253	$	3,675	$	252	$	30,416	$	34,343	$	(20,690	)	$	13,653		$	785	$	-	$	2,168	$	2,953	$	2,739	$	29,366	$	35,058	$	(18,630	)	$	16,428
Average CQR		265		-		174		439		97		18,230		18,766		(11,536	)		7,230			723		80		-		803		142		17,086		18,031		(12,130	)		5,901
Low CQR		-		-		3,102		3,102		-		100		3,202		-			3,202			-		-		3,102		3,102		-		-		3,102		-			3,102
Total	$	1,102	$	585	$	5,529	$	7,216	$	349	$	48,746	$	56,311	$	(32,226	)	$	24,085		$	1,508	$	80	$	5,270	$	6,858	$	2,881	$	46,452	$	56,191	$	(30,760	)	$	25,431

March 31, 2015
March 31, 2016																				March 31, 2016

High CQR	$	338	$	260	$	161	$	759	$	2,455	$	35,996	$	39,210	$	(18,255	)	$	20,955		$	399	$	305	$	2,168	$	2,872	$	301	$	24,092	$	27,265	$	(11,644	)	$	15,621
Average CQR		57		-		-		57		376		16,882		17,315		(11,665	)		5,650			-		-		-		-		202		13,873		14,075		(9,942	)		4,133
Low CQR		-		-		656		656		-		2,762		3,418		-			3,418			-		-		3,102		3,102		-		-		3,102		-			3,102
Total	$	395	$	260	$	817	$	1,472	$	2,831	$	55,640	$	59,943	$	(29,920	)	$	30,023		$	399	$	305	$	5,270	$	5,974	$	503	$	37,965	$	44,442	$	(21,586	)	$	22,856

We estimate losses on our net credit exposure to be between 0% - 5% for customers with highest CQR, as these customers are investment grade or the equivalent of investment grade. We estimate losses on our net credit exposure to be between 2% - 15% for customers with average CQR, and between 15% - 100% for customers with low CQR, which includes customers in bankruptcy.

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5.6.	PROPERTY, EQUIPMENT, OTHER ASSETS AND LIABILITIES

Our property, equipment, other assets and liabilities consist of the following (in thousands):

	December 31, 2015		March 31, 2015		June 30, 2016		March 31, 2016
Other current assets:
Deposits & funds held in escrow	$	565	$	4,281	$	3,105	$	3,116
Prepaid assets		3,165		2,652		3,654		6,683
Other		4,468		480		846		850
Total other current assets	$	8,198	$	7,413	$	7,605	$	10,649

Other assets:
Deferred costs	$	2,155	$	2,308	$	1,842	$	1,831
Property and equipment, net		6,160		6,127		6,166		6,266
Other		674		813		1,518		547
Total other assets - long term	$	8,989	$	9,248	$	9,526	$	8,644

	December 31, 2015		March 31, 2015		June 30, 2016		March 31, 2016
Other current liabilities:
Accrued expenses	$	5,244	$	5,302	$	7,481	$	7,109
Deferred compensation		-		222
Other		8,255		8,051		8,010		6,009
Total other current liabilities	$	13,499	$	13,575	$	15,491	$	13,118

Other liabilities:
Deferred revenue	$	2,049	$	2,923	$	1,908	$	1,866
Other		384		890		1,294		397
Total other liabilities - long term	$	2,433	$	3,813	$	3,202	$	2,263

6.7.	NOTES PAYABLE AND CREDIT FACILITY

Non-recourse and recourse obligations consist of the following (in thousands):

	December 31, 2015		March 31, 2015		June 30, 2016		March 31, 2016

Recourse notes payable with interest rates ranging from 2.70% and 5.00% at December 31, 2015 and ranging from 2.24% and 4.13% at March 31, 2015.
Recourse notes payable with interest rates ranging from 2.70% and 4.13% at June 30, 2016 and at March 31, 2016.
Current	$	2,327	$	889	$	2,299	$	2,288
Long-term		1,782		2,801		898		1,054
Total recourse notes payable	$	4,109	$	3,690	$	3,197	$	3,342

Non-recourse notes payable secured by financing receivables and investments in operating leases with interest rates ranging from 1.70% to 7.50% at December 31, 2015 and ranging from 1.70% to 10.00% as of March 31, 2015.
Non-recourse notes payable secured by financing receivables and investments in operating leases with interest rates ranging from 2.00% to 8.00% at June 30, 2016 and ranging from 1.70% to 8.50% as of March 31, 2016.
Current	$	34,800	$	28,560	$	39,151	$	26,042
Long-term		10,656		24,314		14,581		18,038
Total non-recourse notes payable	$	45,456	$	52,874	$	53,732	$	44,080

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Principal and interest payments on the non-recourse notes payable are generally due monthly in amounts that are approximately equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable. The weighted average interest rate for our non-recourse notes payable was ~~3.09%~~3.08% and ~~3.23%~~3.13%, as of ~~December 31, 2015~~June 30, 2016 and March 31, ~~2015,~~2016, respectively. The weighted average interest rate for our recourse notes payable was ~~3.54%~~3.20% and ~~3.19%~~3.24%, as of ~~December 31, 2015~~June 30, 2016 and March 31, ~~2015,~~2016, respectively. Under recourse financing, in the event of a default by a customer, the lender has recourse to the customer, the assets serving as collateral, and us. Under non-recourse financing, in the event of a default by a customer, the lender generally only has recourse against the customer, and the assets serving as collateral, but not against us.

In May 2014, we entered into an agreement to repurchase the rights, title, and interest to payments due under a financing agreement. This financing agreement was previously assigned to a third party financial institution and accounted for as a secured borrowing. In conjunction with the repurchase agreement, we recognized a gain

Table of ~~$1.4 million in the nine months ended December 31, 2014, which is presented within other income in our unaudited condensed consolidated statement of operations.~~Contents

Our technology segment, through our subsidiary ePlus Technology, inc., finances its operations with funds generated from operations, and with a credit facility with GEWells Fargo Commercial Distribution Finance, ~~Corporation (“GECDF”).~~LLC or WFCDF. This facility provides short-term capital for our technology segment. There are two components of the ~~GECDF~~WFCDF credit facility: (1) a floor plan component, and (2) an accounts receivable component. Under the floor plan component, we had outstanding balances of ~~$128.0~~$144.5 million and ~~$99.4~~$121.9 million as of ~~December 31, 2015~~June 30, 2016 and March 31, ~~2015,~~2016, respectively. Under the accounts receivable component, we had no outstanding balances as of ~~December 31, 2015~~June 30, 2016 and March 31, ~~2015.~~2016. As of ~~December 31, 2015,~~June 30, 2016, the facility agreement had an aggregate limit of the two components of $250 million, and the accounts receivable component had a sub-limit of $30 million, which bears interest assessed at a rate of the One Month LIBOR plus two and one half percent.

The credit facility has full recourse to ePlus Technology, inc. and ~~its subsidiary,~~ e~~Plus Technology Services, inc., and~~ is secured by a blanket lien against all ~~their~~its assets, such as receivables and inventory. Availability under the facility may be limited by the asset value of equipment we purchase or accounts receivable, and may be further limited by certain covenants and terms and conditions of the facility. These covenants include but are not limited to a minimum excess availability of the facility and minimum earnings before interest, taxes, depreciation and amortization (“EBITDA”) of ePlus Technology, inc. ~~and its subsidiary~~. We were in compliance with these covenants as of ~~December 31, 2015.~~June 30, 2016. In addition, the facility restricts the ability of ePlus Technology, inc. ~~and its subsidiary~~ to transfer funds to its affiliates in the form of dividends, loans or advances with certain exceptions for dividends to ePlus inc. The facility also requires that financial statements of e~~Plus~~ePlus Technology, inc. ~~and its subsidiary~~ be provided within 45 days of each quarter and 90 days of each fiscal year end and also includes that other operational reports be provided on a regular basis. Either party may terminate with 90 days’ advance notice. We are not, and do not believe that we are reasonably likely to be, in breach of the ~~GECDF~~WFCDF credit facility. In addition, we do not believe that the covenants of the ~~GECDF~~WFCDF credit facility materially limit our ability to undertake financing. In this regard, the covenants apply only to our subsidiary, ePlus Technology, inc. ~~and its subsidiary.~~ This credit facility is secured by the assets of only ePlus Technology, ~~inc. and its subsidiary,~~ e~~Plus Technology Services,~~ inc. and the guaranty as described below.

The facility provided by ~~GECDF~~WFCDF requires a guaranty of $10.5 million by ePlus inc. The guaranty requires ePlus inc. to deliver its annual audited financial statements by certain dates. We have delivered the annual audited financial statements for the year ended March 31, ~~2015,~~2016, as required. The loss of the ~~GECDF~~WFCDF credit facility could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology segment and as an operational function of our accounts payable process.

We executed an amendment to the WFCDF credit facility, which as of July 28, 2016, temporarily increases the aggregate limit of the two components from $250.0 million to $300.0 million through October 31, 2016.

Fair Value

As of ~~December 31, 2015~~June 30, 2016 and March 31, ~~2015,~~2016, the fair value of our long-term recourse and non-recourse notes payable approximated their carrying value.

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7.8.	COMMITMENTS AND CONTINGENCIES

Legal Proceedings

We ~~were the plaintiff in~~are not currently a lawsuit filed in the United States District Court for the Eastern District of Virginia (“the Trial Court”) in which, on January 27, 2011, a jury unanimously found that Lawson Software, Inc. (“Lawson”) infringed certain ePlus patents. On August 16, 2013, the Trial Court found, by clear and convincing evidence, that Lawson was in contempt of the Trial Court’s May 23, 2011, injunction which restricted Lawson from taking certain actions that infringed one our patents, and entered judgment in our favor in the amount of $18.2 million. Lawson appealed, and while the appeal was pending, on April 3, 2014, the United States Patent and Trademark Office issued a notice canceling the patent. On July 25, 2014, the Appeals Court vacated the injunction and the contempt order. On June 18, 2015, the Appeals Court, in a 5-5 split opinion, denied our petition for rehearing. We have filed a petition asking the United States Supreme Court to consider the case.

These types of cases are complex in nature, are likely to have significant expenses associated with them, and we cannot predict when any litigation will be resolved, whether we will be successful in any claim for monetary or equitable relief, whether any award ultimately received will exceed the costs incurred to pursue the matter, or how long it will take to bring any matter to resolution.

We filed a claim in a class action suit in the United States District Court for the Northern District of California. The suit alleged that ten groups of companies conspired to fix, raise, maintain or stabilize prices of certain flat panels used in many flat screen televisions, monitors and notebook computers. On August 6, 2014, the Claims Administrator issued to us a Notice of Claim Final Determination. On October 20, 2014, the court issued an order directing that approved claims be paid, and on October 31, 2014, we received a payment of $6.2 million, which is presented within other income in our ~~unaudited condensed~~ ~~consolidated statement of operations.~~

~~Other Matters~~

~~We may become~~ party to ~~various~~any legal proceedings with loss contingencies that are expected to be material. From time to time, we may be a plaintiff, or may be named as a defendant, in legal actions arising from our normal business activities, none of which has had a material effect on our business, results of operations or financial condition. Legal proceedings which may arise in the ordinary course of business ~~including~~include preference payment claims asserted in customer bankruptcy proceedings, tax audits, claims of alleged infringement of patents, trademarks, copyrights and other intellectual property rights, claims of alleged non-compliance with contract provisions, employment related claims, claims by competitors, vendors or customers, claims related to alleged violations of laws and regulations, and claims relating to alleged security or privacy breaches. ~~Although we~~We attempt to ameliorate the effect of potential litigation through insurance coverage and contractual protections such as rights to indemnification and limitations of liability. We do not expect that the outcome in any of these matters, individually or collectively, will have a material adverse effect on our financial condition or results of operations, however, litigation is inherently unpredictable. Therefore, judgments could be rendered or settlements entered that could adversely affect our results of operations or cash flows in a particular period. We provide for costs related to contingencies when a loss is probable and the amount is reasonably determinable.

Contingencies Related to Third-Party Review

From time to time, we are subject to potential claims and assessments from third parties. We are also subject to various governmental, customer and partner audits. We continually assess whether or not such claims have merit and warrant accrual. Where appropriate, we accrue estimates of anticipated liabilities in our consolidated financial statements. Such estimates are subject to change and may affect our results of operations and our cash flows.

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8.9.	EARNINGS PER SHARE

Basic earnings per share is ~~computed~~calculated by dividing net earnings ~~attributable~~available to common ~~shares~~shareholders by the basic weighted average number of shares of common ~~shares~~stock outstanding ~~for the~~during each period. Diluted ~~net~~ earnings per share ~~include~~is calculated by dividing net earnings available to common shareholders by the ~~potential dilution~~basic weighted average number of ~~securities that could participate in our earnings, but not securities that are anti-dilutive. In the past, certain unvested~~ shares of ~~restricted~~common stock awards (“RSAs”) that contained a service period also contained non-forfeitable rights to dividends, whether paid or unpaid. As a result, these RSAs were considered participating securities because their holders had the right to participate in earnings withoutstanding plus common stockholders. We used the two-class method to allocate net income between common shares and other participating securities for the nine months ended December 31, 2014. As of December 31, 2015, we had no unvested shares of RSAs that contained a service period and non-forfeitable rights to dividends. We no longer grant RSAs that contain a service period and non-forfeitable rights to dividends.stock equivalents during each period.

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The following table provides a reconciliation of the numerators and denominators used to calculate basic and diluted net ~~earnings~~income per common share as disclosed on our consolidated statements of operations for the three ~~and nine~~ months ended ~~December 31,~~June 30, 2016 and 2015 ~~and December 31, 2014~~ (in thousands, except per share data).:

Three months ended
December 31,

Nine months ended
December 31,

2015 2014 2015 2014
Basic and diluted common shares outstanding:

Weighted average common shares outstanding — basic 7,280 7,230 7,260 7,351
Effect of dilutive shares 49 49 76 62
Weighted average shares common outstanding — diluted 7,329 7,279 7,336 7,413

Calculation of earnings per common share - basic:

Net earnings $ 10,297 $ 15,501 $ 34,790 $ 36,930
Net earnings attributable to participating securities - - - 63
Net earnings attributable to common shareholders $ 10,297 $ 15,501 $ 34,790 $ 36,867

Earnings per common share - basic $ 1.41 $ 2.14 $ 4.79 $ 5.02

Calculation of earnings per common share - diluted:

Net earnings attributable to common shareholders— basic $ 10,297 $ 15,501 $ 34,790 $ 36,867
Add: undistributed earnings attributable to participating securities - - - 1
Net earnings attributable to common shareholders— diluted $ 10,297 $ 15,501 $ 34,790 $ 36,868

Earnings per common share - diluted $ 1.40 $ 2.13 $ 4.74 $ 4.97

~~As of December 31, 2015 and 2014, we did not have any unexercised stock options.~~

	Three months ended June 30,
	2016		2015

Net earnings attributable to common shareholders - basic and diluted	$	10,671	$	8,814

Basic and diluted common shares outstanding:
Weighted average common shares outstanding — basic		7,033		7,225
Effect of dilutive shares		75		76
Weighted average shares common outstanding — diluted		7,108		7,301

Earnings per common share - basic	$	1.52	$	1.22

Earnings per common share - diluted	$	1.50	$	1.21

9.10.

STOCKHOLDERS’ EQUITY

On August 13, 2015, our board of directors authorized the Company to repurchase up to 500,000 shares of its outstanding common stock over a 12-month period beginning on August 17, 2015 through August 16, 2016. The plan authorized purchases to be made from time to time in the open market, or in privately negotiated transactions, subject to availability. Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

During the ~~nine~~three months ended ~~December 31,~~June 30, 2016, we purchased 226,792 shares of our outstanding common stock at an average cost of $81.21 per share for a total purchase price of $18.4 million under the share repurchase plan. We also purchased 29,736 shares of common stock at a value of $2.6 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

During the three months ended June 30, 2015, we did not purchase any shares of our outstanding common stock under ~~any~~the share repurchase ~~plans;~~plan; however, we did purchase 30,447 shares of common stock at a value of $2.5 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

During the nine months ended December 31, 2014, we repurchased 690,922 shares of our outstanding common stock at an average cost of $50.73 per share for a total purchase price of $35.1 million under a share repurchase plan. We also purchased 35,158 shares of common stock at a value of $2.0 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

Since the inception of our initial repurchase program on September 20, 2001 to ~~December 31, 2015,~~June 30, 2016, we have repurchased approximately ~~5.6~~5.9 million shares of our outstanding common stock at an average cost of ~~$20.00~~$23.44 per share for a total purchase price of ~~$111.6~~$138.9 million.

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~~10.~~11.

SHARE-BASED COMPENSATION

Share-Based Plans

As of ~~December 31, 2015,~~June 30, 2016, we had share-based awards outstanding under the following plans: (1) the 2008 Non-Employee Director Long-Term Incentive Plan (“2008 Director LTIP”), and (2) the 2012 Employee Long-Term Incentive Plan ("2012 Employee LTIP"). All the share-based plans define fair market value as the previous trading day's closing price when the grant date falls on a date the stock was not traded.

~~For a summary of descriptions and vesting periods of the 2008 Director LTIP, and the 2012 Employee LTIP discussed above, refer to our 2015 Annual Report.~~

Restricted Stock Activity

For the ~~nine~~three months ended ~~December 31,~~June 30, 2016, we granted 230 restricted shares under the 2008 Director LTIP, and 57,269 restricted shares under the 2012 Employee LTIP. For the three months ended June 30, 2015, we granted ~~6,383~~212 restricted shares under the 2008 Director LTIP, and 118,974 ~~restricted shares under the 2012 Employee LTIP. For the nine months ended December 31, 2014, we granted 10,058 restricted shares under the 2008 Director LTIP, and 78,165~~ restricted shares under the 2012 Employee LTIP. A summary of the restricted shares is as follows:

Number of
Shares

Weighted
Average Grant-
date Fair Value

Nonvested April 1, 2015 176,514 $ 52.75
Granted 125,357 $ 81.76
Vested (95,321 ) $ 48.79
Forfeited (2,321 ) $ 64.06
Nonvested December 31, 2015 204,229 $ 72.28

	Number of Shares			Weighted Average Grant- date Fair Value

Nonvested April 1, 2016		203,828		$	72.33
Granted		57,499		$	86.40
Vested		(82,571	)	$	66.07
Nonvested June 30, 2016		178,756		$	79.75

Upon each vesting period of the restricted stock awards, employees are subject to minimum tax withholding obligations. Under the 2012 Employee LTIP, we may purchase a sufficient number of shares due to the participant to satisfy their minimum tax withholding on employee stock awards. For the three months ended June 30, 2016, the Company had withheld 29,736 shares of common stock at a value of $2.6 million, which was included in treasury stock.

Compensation Expense

We recognize compensation cost for awards of restricted stock with graded vesting on a straight line basis over the requisite service period and estimate the forfeiture rate to be zero, which is based on historical experience. There are no additional conditions for vesting other than service conditions. During the three months ended ~~December 31,~~June 30, 2016 and 2015, ~~and 2014,~~ we recognized $1.5 million and $1.2 ~~million, respectively, of total share-based compensation expense. During the nine months ended December 31, 2015 and 2014, we recognized $4.2 million and $3.4~~ million, respectively, of total share-based compensation expense. Unrecognized compensation expense related to non-vested restricted stock was ~~$11.5~~$13.5 million as of ~~December 31, 2015,~~June 30, 2016, which will be fully recognized over the next ~~fifty-four~~forty-eight (48) months.

We also provide our employees with a contributory 401(k) plan. Employer contribution percentages are determined by us and are discretionary each year. The employer contributions vest pro-ratably over a four-year service period by the employees, after which all employer contributions will be fully vested. For both the three months ended ~~December 31,~~June 30, 2016 and 2015, ~~and 2014,~~ our estimated contribution expense for the plan was $0.4 million. ~~For the nine months ended December 31, 2015 and 2014, our estimated contribution expense for the plan was $1.1 million and $1.0 million, respectively.~~

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~~11.~~12.

INCOME TAXES

We account for our tax positions in accordance with Codification Topic Income Taxes. Under the guidance, we evaluate uncertain tax positions based on the two-step approach. The first step is to evaluate each uncertain tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained in an audit, including resolution of related appeals or litigation processes, if any. For tax positions that are not likely of being sustained upon audit, the second step requires us to estimate and measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon ultimate settlement.

We recognize interest and penalties for uncertain tax positions. As of ~~December 31, 2015~~June 30, 2016 our gross liability related to uncertain tax positions was $72 thousand. At ~~December 31, 2015~~June 30, 2016 if the unrecognized tax benefits of $72 thousand were to be recognized, including the effect of interest, penalties and federal tax benefit, the impact would be ~~$103~~$104 thousand.

We also recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. Our audited condensed consolidated statements of operations included interest of $1 thousand for the three months ended June 30, 2016, and $1 thousand for the same period last year. We did not recognize any additional penalties. We had ~~$47~~$49 thousand and ~~$68~~$44 thousand accrued for the payment of interest at ~~December 31,~~June 30, 2016 and 2015, ~~and 2014,~~ respectively.

21As permitted by the recently issued ASU 2016-09, Stock Compensation, we elected to early adopt this update during the quarter ended June 30, 2016. The amendments requiring recognition of excess tax benefits and deficiencies in the income statement have been applied prospectively resulting in a benefit in the current period of $0.4 million.

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~~12.~~13.

FAIR VALUE OF FINANCIAL INSTRUMENTS

We account for the fair values of our assets and liabilities in accordance with ASC Topic 820, Fair Value Measurement and Disclosure. The following table summarizes the fair value hierarchy of our financial instruments as of ~~December 31, 2015~~June 30, 2016 and March 31, ~~2015~~2016 (in thousands):

Fair Value Measurement Using

Recorded
Amount

Quoted Prices in
Active Markets
for Identical
Assets (Level 1)

Significant
Other
Observable
Inputs (Level 2)

Significant
Unobservable
Inputs (Level 3)

December 31, 2015:

Assets:

Money market funds $ 9,505 $ 9,505 $ - $ -

Liabilities:

Contingent consideration $ 990 $ - $ - $ 990

			Fair Value Measurement Using								Fair Value Measurement Using
	Recorded Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Recorded Amount		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
March 31, 2015:

June 30, 2016
Assets:

Money market funds	$	25,004	$	25,004	$	-	$	-	$	36,521	$	36,521	$	-		$	-

Liabilities:
Contingent consideration									$	1,119	$	-	$	-		$	1,119

March 31, 2016
Assets:
Money market funds									$	39,509	$	39,509	$	-		$	-

Liabilities:
Contingent consideration	$	1,830	$	-	$	-	$	1,830	$	1,041	$	-	$	-		$	1,041

For the three ~~and nine~~ months ended ~~December 31, 2015,~~June 30, 2016, we recorded adjustments that increased the fair value of our liability for contingent consideration by ~~$3 thousand and $318 thousand, respectively,~~$78 thousand; and such adjustments were presented within general and administrative expenses in our unaudited condensed consolidated statement of operations. ~~There was no adjustment in fair value recognized in either~~For the three ~~or the nine~~ months ended ~~December 31, 2014. We estimated~~June 30, 2015, we recorded adjustments that increased the fair value ~~using a Monte Carlo simulation model.~~

~~During the quarter ended December 31, 2015, we paid $1.2 million to satisfy the first year~~ of ~~the~~our liability for contingent consideration ~~arrangement.~~by $110 thousand.

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~~13.~~14.

SEGMENT REPORTING

Our operations are conducted through two segments. Our technology segment includes sales of information technology products, third-party software, third-party maintenance, advanced professional and managed services and our proprietary software to commercial enterprises, state and local governments, and government contractors. Our financing segment consists of the financing of IT equipment, software and related services to commercial enterprises, state and local governments, and government contractors. Our reportable segment information was as follows (in thousands):

	Three Months Ended														Three Months Ended
	December 31, 2015							December 31, 2014							June 30, 2016						June 30, 2015
	Technology		Financing			Total		Technology		Financing		Total			Technology		Financing		Total		Technology		Financing		Total

Sales of product and services	$	287,859	$	-		$	287,859	$	295,679	$	-	$	295,679		$	290,181	$	-	$	290,181	$	259,696	$	-	$	259,696
Financing revenue		-		9,289			9,289		-		8,406		8,406			-		6,987		6,987		-		8,346		8,346
Fee and other income		1,506		(10	)		1,496		2,140		16		2,156			1,276		59		1,335		1,811		13		1,824
Net sales		289,365		9,279			298,644		297,819		8,422		306,241			291,457		7,046		298,503		261,507		8,359		269,866

Cost of sales, product and services		231,503		-			231,503		238,202		-		238,202			229,847		-		229,847		207,718		-		207,718
Direct lease costs		-		3,081			3,081		-		2,601		2,601			-		992		992		-		3,018		3,018
Cost of sales		231,503		3,081			234,584		238,202		2,601		240,803			229,847		992		230,839		207,718		3,018		210,736

Professional and other fees		1,608		274			1,882		1,158		278		1,436			1,497		289		1,786		1,262		256		1,518
Salaries and benefits		35,043		2,329			37,372		33,507		2,125		35,632			37,485		2,313		39,798		32,952		2,262		35,214
General and administrative expenses		6,530		235			6,765		6,918		315		7,233			6,231		239		6,470		5,325		246		5,571
Depreciation and amortization																1,771		4		1,775		1,204		4		1,208
Interest and financing costs		10		386			396		19		556		575			-		349		349		19		534		553
Operating expenses		43,191		3,224			46,415		41,602		3,274		44,876			46,984		3,194		50,178		40,762		3,302		44,064

Operating income		14,671		2,974			17,645		18,015		2,547		20,562
Earnings before tax															$	14,626	$	2,860	$	17,486	$	13,027	$	2,039	$	15,066

Other income		-		-			-		-		6,169		6,169

Earnings before provision for income taxes	$	14,671	$	2,974		$	17,645	$	18,015	$	8,716	$	26,731

Selected Financial Data - Statement of Cash Flow														Selected Financial Data - Statement of Cash Flow
Depreciation and amortization	$	1,327	$	3,078		$	4,405	$	1,244	$	2,566	$	3,810		$	1,788	$	987	$	2,775	$	1,237	$	2,998	$	4,235
Purchases of property, equipment and operating lease equipment	$	506	$	884		$	1,390	$	1,846	$	3,774	$	5,620		$	652	$	238	$	890	$	618	$	6,306	$	6,924

Selected Financial Data - Balance Sheet														Selected Financial Data - Balance Sheet

Total assets	$	401,422	$	229,012		$	630,434	$	366,740	$	224,625	$	591,365		$	450,992	$	188,107	$	639,099	$	352,760	$	227,625	$	580,385

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Nine Months Ended
December 31, 2015 December 31, 2014
Technology Financing Total Technology Financing Total

Sales of product and services $ 871,814 $ - $ 871,814 $ 843,619 $ - $ 843,619
Financing revenue - 27,914 27,914 - 26,339 26,339
Fee and other income 5,038 30 5,068 5,969 90 6,059
Net sales 876,852 27,944 904,796 849,588 26,429 876,017

Cost of sales, product and services 700,429 - 700,429 681,852 - 681,852
Direct lease costs - 9,256 9,256 - 8,364 8,364
Cost of sales 700,429 9,256 709,685 681,852 8,364 690,216

Professional and other fees 4,175 738 4,913 4,065 781 4,846
Salaries and benefits 101,471 6,855 108,326 96,140 6,691 102,831
General and administrative expenses 20,381 748 21,129 19,379 1,285 20,664
Interest and financing costs 51 1,320 1,371 77 1,753 1,830
Operating expenses 126,078 9,661 135,739 119,661 10,510 130,171

Operating income 50,345 9,027 59,372 48,075 7,555 55,630

Other income - - - - 7,603 7,603

Earnings before provision for income taxes $ 50,345 $ 9,027 $ 59,372 $ 48,075 $ 15,158 $ 63,233

Depreciation and amortization $ 3,728 $ 9,243 $ 12,971 $ 3,219 $ 8,222 $ 11,441
Purchases of property, equipment and operating lease equipment $ 1,700 $ 15,308 $ 17,008 $ 2,932 $ 4,639 $ 7,571
Total assets $ 401,422 $ 229,012 $ 630,434 $ 366,740 $ 224,625 $ 591,365

~~14.~~15.

BUSINESS COMBINATIONS

IGX acquisition

On December 4, 2015, our subsidiary e~~Plus~~ePlus Technology, inc., acquired certain assets and assumed certain liabilities of IGX Acquisition Global, LLC (“IGX Acquisition”), and IGX Support, LLC, including IGX Acquisition’s wholly-owned subsidiary, IGXGlobal UK Limited (collectively, “IGX”), which provide advanced security solutions, secured networking products and related professional services to a diverse set of domestic and international customers including commercial, enterprise, and state, local, and education (SLED) organizations. IGX is headquartered near Hartford, CT and has a sales presence in New York and Boston as well as an operating branch in London that serves its United Kingdom (“UK”) and global customers. IGXGlobal UK Limited is a private limited company, registered in England and Wales.

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The total purchase price, net of cash acquired, was $16.6 million paid in cash. The allocation of the purchase ~~price has been allocated~~consideration to the assets acquired and liabilities assumed ~~based on their estimated fair values on the transaction date, including identifiable~~is presented below (in thousands):

	Acquisition Date Amount
	(in millions)

Accounts receivable—trade, net	$	8,457
Property and equipment		81
Identified intangible assets		8,710
Accounts payable and other current liabilities		(8,641	)
Deferred tax liability		(89	)

Total identifiable net assets		8,518
Goodwill		8,131

Total purchase consideration	$	16,649

The identified intangible assets consist of $7.9 million related to customer relationships with an estimated useful life of 7 years, and other net assets of $0.4 million. Our purchase price allocation is preliminary and subject to revision as additional information related to the ~~fair value of assets and liabilities becomes available.~~ following:

	Estimated Useful Lives (in years)		Acquisition Date Amount

Intangible assets—customer relationships		7	$	7,680
Intangible assets—trade names		10		520
Intangible assets—backlog		1		510

Total identified intangible assets			$	8,710

We ~~recognized~~assigned goodwill related to this transaction of ~~$8.3~~$8.1 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce, an entry into the UK and European markets and expected synergies, none of which qualify for recognition as a separate intangible asset. The total amount of goodwill that is expected to be deductible for tax purposes is ~~$5.7~~$5.8 million. The impact to our revenues and net earnings from this acquisition is not material.

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~~Evolve acquisition~~

~~On August 18, 2014, our subsidiary,~~ ePlus Technology, inc., acquired the operating assets and assumed certain liabilities of Granite Business Solutions, Inc. dba Evolve Technology Group (“Evolve”). Located in Sacramento, CA, Evolve provided information security, collaboration, virtualization and data center solutions to an established customer base of state, local and educational institutions, as well as commercial enterprises. Our acquisition expands our presence in the western United States.

The total purchase price was $10.5 million, which consists of cash paid, amounts to be paid to Evolve upon collection of certain accounts receivables, and the fair value of contingent consideration. We estimated the fair value of the contingent consideration to be $2.0 million as of the acquisition date using a Monte Carlo simulation model. The maximum payout for contingent consideration is $2.5 million over 3 years. The purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values on the transaction date, including identifiable intangible assets of $4.0 million related to customer relationships with an estimated useful life of 6 years, and other net assets of $0.6 million. We recognized goodwill related to this transaction of $4.5 million, which was assigned to our technology reporting unit. The goodwill recognized in the acquisition is attributable to the acquired assembled workforce, their presence in the western United States, and expected synergies, none of which qualify for recognition as a separate intangible asset. Goodwill associated with the acquisition is deductible for tax purposes.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion is intended to further the reader’s understanding of our consolidated financial condition and results of operations. It should be read in conjunction with the financial statements included in this quarterly report on Form 10-Q and our annual report on Form 10-K for the year ended March 31, ~~2015~~2016 (“~~2015~~2016 Annual ~~Report”~~Financial Statements”). These historical financial statements may not be indicative of our future performance. This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risks described in Part I, Item 1A, “Risk Factors,” in our ~~2015~~2016 Annual ~~Report.~~Financial Statements.

EXECUTIVE OVERVIEW

Business Description

We are a leading ~~integrator~~provider of ~~technology solutions for~~ information technology (IT) ~~lifecycle management. We~~solutions which enable organizations to optimize their IT ~~infrastructure~~environment and supply chain ~~processes by delivering~~processes. We deliver and integrate world-class IT products and software from top vendors, ~~providing a consultative approach~~and provide private, hybrid, and public cloud solutions to meet customers’ evolving needs. We also provide consulting, professional and managed services and ~~providing our proprietary software, as well as~~complete lifecycle management services including flexible financing ~~solutions for all our offerings.~~solutions. We have been in the business of selling, leasing, financing, and managing information technology and other assets for more than ~~24 years and have been licensing our proprietary software for more than 15~~26 years.

Our primary focus is to deliver secure, integrated technology solutions for our customers’ data center, network, security, maintenance, and collaboration needs, including hosted, on-premise, hybrid and cloud infrastructures. These solutions ~~consist~~may encompass the full lifecycle of IT and include consulting, assessments, architecture, design, testing, implementation, and ongoing managed services and ~~products encompassing initial and~~ periodic ~~assessments,~~ consultative ~~engagements, architecture, design, and implementation of~~business reviews. We offer security, storage, cloud, mobility, hyper-converged infrastructure, and other advanced technologies. We design, implement and provide an array of IT solutions from multiple leading IT vendors. We are an authorized reseller from over 1,000 vendors, but primarily from approximately 100 vendors, including Check Point, Cisco Systems, Dell, EMC, FireEye, F5 Networks, ~~Hewlett-Packard Enterprise,~~ HP Inc., HPE, Intel Security-McAfee, Juniper ~~McAfee,~~Networks, NetApp, Nimble Storage, Oracle, Palo Alto Networks, Pure Storage, ~~and~~ VMware, among many others. We possess top-level engineering certifications with a broad range of leading IT vendors that enable us to offer multi-vendor IT solutions that are optimized for each of our customers’ specific requirements. Our hosted, proprietary software solutions are focused on giving our customers more control over their IT supply chain, by automating and optimizing the procurement and management of their assets.

Our ~~scale~~size and strong financial ~~position~~results have enabled us to invest in the engineering and technology resources required to stay current with emerging technology trends and deliver leading edge IT solutions. We believe we are a trusted IT advisor to our customers, delivering turn-key IT solutions that incorporate hardware, software, security and both managed and professional services. In addition, we offer a wide range of leasing and financing options for technology and other capital assets. We believe our lifecycle approach offering of integrated IT products, services, financing, and our proprietary supply chain software, is unique in the industry. It allows us to offer a customer service strategy that spans the continuum from fast delivery of competitively priced products, services, subsequent management and upkeep, through to end-of-life disposal services. This selling approach also permits us to grow with our customers and solidify our relationships through hands-on engagement and understanding of their needs.

We focus exclusively on middle market and large enterprises. For the twelve months ended ~~December 31, 2015,~~June 30, 2016, the percentage of revenue by customer end market within our technology segment includes state and local government, and educational institutions ~~23%;~~22%, technology ~~23%;~~industry 22%, telecommunications, media and entertainment 14%;, healthcare 11%, and financial services 12%~~; and healthcare, 10%~~. The majority of our sales were generated within the United ~~States. We also~~States, however, we have the ability to support our customers nationally and internationally and in fiscal year 2016 we acquired our ~~December 2015 acquisition of~~ ~~IGXGlobal UK Limited expanded our~~first international ~~presence.~~

~~Our revenues are composed of sales of product and services, financing revenues and fee and other income. Our operations are conducted through two segments: technology and financing.~~subsidiary which is located in the U.K. Our technology segment ~~accounted~~accounts for ~~97%~~98% of our net sales, ~~in both the three~~ and ~~nine months ended December 31, 2015,~~84% of our operating income, while our financing segment accounts for 2% of our net sales, and ~~83% and 85%~~16% of our operating income for the three ~~and nine~~ months ended ~~December 31, 2015, respectively.~~June 30, 2016.

In the short period since the June 23, 2016, UK referendum (“Brexit”) on whether to remain in, or leave, the European Union, the United Kingdom has faced a remarkable range of political, monetary, economic and even constitutional challenges. For some companies, Brexit could impact revenue items, cost items, tax, goodwill impairments and liquidity, among others. The ~~financing segment accounted~~most obvious immediate impact is the effect of foreign exchange fluctuations on revenue and cost items. We have determined that our foreign currency exposure for 3%our United Kingdom operations is insignificant in relation to total consolidated operations and we believe those potential fluctuations in currency exchange rates and other Brexit related economic and operational risks will not have a material effect on our results of ~~our net sales in both the three~~operations and ~~nine months ended December 31, 2015, and 17% and 15% of our operating income for the three and nine months ended December 31, 2015, respectively.~~financial position.

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Going forward, the Company will evaluate Brexit-related developments on a regular basis to determine if such developments are anticipated to have a material impact on the Company’s results on operations and financial position.

Key Business Metrics

Our management monitors a number of financial and non-financial measures and ratios on a regular basis in order to track the progress of our business. We believe that the most important of these measures and ratios include gross margin, gross margin on product and services, operating income margin, net earnings, net earnings per common share, Adjusted EBITDA, Adjusted EBITDA margin, ~~non-GAAP~~Adjusted gross ~~sales~~billings of product and services, and non-GAAP ~~gross cost of sales, product and services.~~ net earnings per share. We use a variety of operating and other information to evaluate the operating performance of our business, develop financial forecasts, make strategic decisions, and prepare and approve annual budgets. These key indicators include financial information that is prepared in accordance with GAAP and presented in our ~~unaudited condensed~~ consolidated financial statements as well as non-GAAP performance measurement tools.

A summary of these key indicators which are not included in our unaudited condensed consolidated financial statements is presented as follows, (dollars in thousands):

	Three Months Ended December 31,									Nine Months Ended December 31,									For the three months ended June 30,
	2015			2014			Change			2015			2014			Change			2016			2015

Adjusted gross billings of product and services (1)																			$	397,473		$	332,308

Gross margin		21.5	%		21.4	%	10 bps				21.6	%		21.2	%	40 bps				22.7	%		21.9	%
Gross margin, product and services		19.6	%		19.4	%	20 bps				19.7	%		19.2	%	50 bps				20.8	%		20.0	%
Operating income margin		5.9	%		6.7	%	(80 bps)				6.6	%		6.4	%	20 bps				5.9	%		5.6	%

Non-GAAP gross sales of product and services (1)	$	393,922		$	377,262			4.4	%	$	1,157,327		$	1,094,958			5.7	%
Non-GAAP gross cost of sales, product and services (1)	$	337,566		$	319,785			5.6	%	$	985,942		$	933,191			5.7	%
Non-GAAP: Net earnings (2)																			$	11,381		$	9,146
Non-GAAP: Net earnings per common share - diluted (2)																			$	1.54		$	1.25

Adjusted EBITDA (2)	$	18,976		$	21,779			(12.9	%)	$	63,111		$	58,768			7.4	%
Adjusted EBITDA margin (2)		6.4	%		7.1	%	(70 bps)				7.0	%		6.7	%	30 bps
Adjusted EBITDA (3)																			$	19,261		$	16,274
Adjusted EBITDA margin (3)																				6.5	%		6.0	%

Purchases of property and equipment used internally	$	504		$	1,846		$	(1,342	)	$	1,698		$	2,932		$	(1,234	)	$	652		$	618
Purchases of equipment under operating leases		5,328			3,774			1,554			19,752			4,639			15,113			238			6,306
Total capital expenditures	$	5,832		$	5,620		$	212		$	21,450		$	7,571		$	13,879		$	890		$	6,924

(1)

We define ~~non-GAAP~~Adjusted gross ~~sales~~billings of product and services as our sales of product and services calculated in accordance with GAAP, adjusted to exclude the costs incurred related to sales of third party software assurance, subscription licenses, maintenance and services. We define non-GAAP gross cost of sales, product and services as our cost of sales, product and services calculated in accordance with GAAP, adjusted to include the costs incurred related to sales of third party software assurance, maintenance and services. We providehave provided below a reconciliation of ~~non-GAAP~~Adjusted gross ~~sales~~billings of product and services to ~~sales~~Sales of product and services, which is the most directly comparable financial measure to this non-GAAP financial measure. We also provide below a reconciliation of non-GAAP gross cost of sales of product and services to cost of sales, product and services, which is the most directly comparable financial measure to this non-GAAP financial measure.

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We use ~~non-GAAP~~Adjusted gross ~~sales~~billings of product and services ~~and non-GAAP gross cost of sales, product and services~~ as a supplemental ~~measures~~measure of our performance to gain insight into the volume of business generated by our technology ~~segment.~~segment, and to analyze the changes to our accounts receivable and accounts payable. Our use of ~~non-GAAP~~Adjusted gross ~~sales~~billings of ~~product and services and non-GAAP gross cost of sales,~~ product and services as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. In addition, other companies, including companies in our industry, might calculate ~~non-GAAP~~Adjusted gross ~~sales~~billings of ~~product and services and non-GAAP gross cost of sales,~~ product and services or similarly titled measures differently, which may reduce their usefulness as comparative measures.

Three Months Ended
December 31,

Nine Months Ended
December 31,

2015 2014 2015 2014
Sales of products and services $ 287,859 $ 295,679 $ 871,814 $ 843,619
Costs incurred related to sales of third party software assurance, maintenance and services �� 106,063 $ 81,583 285,513 $ 251,339
Non-GAAP gross sales of products and services $ 393,922 $ 377,262 $ 1,157,327 $ 1,094,958

Cost of sales, product and services $ 231,503 $ 238,202 $ 700,429 $ 681,852
Costs incurred related to sales of third party software assurance, maintenance and services 106,063 81,583 285,513 251,339
Non-GAAP gross cost of sales, product and services $ 337,566 $ 319,785 $ 985,942 $ 933,191

	For the three months ended June 30,
	2016		2015
Sales of products and services	$	290,181	$	259,696
Costs incurred related to sales of third party services		107,292		72,612
Adjusted gross billings of product and services	$	397,473	$	332,308

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(2)

Non-GAAP net earnings per common share are based on net earnings calculated in accordance with GAAP, adjusted to exclude other income and acquisition related amortization expense, and related effects on income tax. Non-GAAP provision for income taxes is calculated based on the effective tax rate for the non-GAAP adjustments for the quarter ended June 30, 2016. For comparative purposes, the non-GAAP provision for income tax for the three months ended June 30, 2016, excludes the tax benefit of the $0.4 million associated with the adoption of the stock compensation accounting standard. We use Non-GAAP net earnings per common share as a supplemental measure of our performance to gain insight into our operating performance. We believe that the exclusion of other income and acquisition related amortization expense in calculating Non-GAAP net earnings per common share provides management and investors a useful measure for period-to-period comparisons of our core business and operating results by excluding items that are not comparable across reporting periods. Accordingly, we believe that non-GAAP net earnings per common share provide useful information to investors and others in understanding and evaluating our operating results. However, our use of Non-GAAP net earnings per common share as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. In addition, other companies, including companies in our industry, might calculate Non-GAAP net earnings per common share or similarly titled measures differently, which may reduce their usefulness as comparative measures.

	For the three months ended June 30,
	2016		2015
GAAP: Earnings before tax	$	17,486	$	15,066
Plus: Acquisition related amortization expense		1,089		568
Non-GAAP: Earnings before provision for income taxes		18,575		15,634
Non-GAAP: Provision for income taxes		7,616		6,488
Non-GAAP: Net earnings	$	10,954	$	9,146

GAAP: Net earnings per common share - diluted	$	1.50	$	1.21
Non-GAAP: Net earnings per common share - diluted	$	1.54	$	1.25

~~(2)~~(3)

We define Adjusted EBITDA as net earnings calculated in accordance with GAAP, adjusted for the following: interest expense, depreciation and amortization, provision for income taxes, and other income. We consider the interest on notes payable from our financing segment and depreciation expense presented within cost of sales, which includes depreciation on assets financed as operating leases, to be operating expenses. As such, they are not included in the amounts added back to net earnings in the Adjusted EBITDA calculation. We provide below a reconciliation of Adjusted EBITDA to net earnings, which is the most directly comparable financial measure to this non-GAAP financial measure. Adjusted EBITDA margin is our calculation of Adjusted EBITDA divided by net sales.

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We use Adjusted EBITDA as a supplemental measure of our performance to gain insight into our operating performance. We believe that the exclusion of other income in calculating Adjusted EBITDA and Adjusted EBITDA margin provides management and investors a useful measure for period-to-period comparisons of our core business and operating results by excluding items that are not comparable across reporting periods. Adjusted EBITDA margin is equal to Adjusted EBITDA divided by Net sales. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our operating results. However, our use of Adjusted EBITDA and Adjusted EBITDA margin as analytical tools has limitations, and you should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. In addition, other companies, including companies in our industry, might calculate Adjusted EBITDA and Adjusted EBITDA margin or similarly titled measures differently, which may reduce their usefulness as comparative measures.

Three Months Ended
December 31,

Nine Months Ended
December 31,

2015 2014 2015 2014
Net earnings $ 10,297 $ 15,501 $ 34,790 $ 36,930
Provision for income taxes 7,348 11,230 24,582 26,303
Depreciation and amortization 1,331 1,217 3,739 3,138
Less: Other income - 6,169 - 7,603
Adjusted EBITDA $ 18,976 $ 21,779 $ 63,111 $ 58,768

	Three months ended June 30,
	2016	2015

GAAP: Net earnings	$ 10,671	$ 8,814
Plus: Provision for income taxes	6,815	6,252
Plus: Depreciation and amortization	1,775	1,208
Non-GAAP: Adjusted EBITDA	$ 19,261	$ 16,274

Technology Segment
Earnings before tax	$ 14,626	$ 13,027
Plus: Depreciation and amortization	1,771	1,204
Non-GAAP: Adjusted EBITDA	$ 16,397	$ 14,231

Financing Segment
Earnings before tax	$ 2,860	$ 2,039
Plus: Depreciation and amortization	4	4
Non-GAAP: Adjusted EBITDA	$ 2,864	$ 2,043

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Consolidated Results of Operations

During the three months ended ~~December 31, 2015,~~June 30, 2016, net sales ~~decreased 2.5%~~increased 10.6%, or ~~$7.6~~$28.6 million to ~~$298.6~~$298.5 million, compared to ~~$306.2~~$269.9 million for the same period in the prior fiscal year. ~~Non-GAAP~~Adjusted gross ~~sales~~billings of product and services increased ~~4.4%~~19.6%, or ~~$16.7~~$65.2 million to ~~$393.9 million from $377.3~~$397.5 million, for the ~~quarter~~three months ended ~~December 31, 2015, however, this~~June 30, 2016 from $332.3 million for the same period in the prior fiscal year. The greater percentage increase in Adjusted gross billings of product and services over the percentage increase in net sales was ~~more than offset by~~due to a shift in mix, as we sold a higher proportion of third party software assurance, maintenance and services, which are presented on a net basis.

Net sales of product and services ~~decreased 2.6%~~increased 11.7% or ~~$7.8~~$30.5 million to ~~$287.9~~$290.2 million, from ~~$295.7~~$259.7 million in the prior year quarter ended December 31, 2014. The decrease in net sales of product and services revenues was a result of lower demand from telecom, state and local government and education (“SLED”) customers, and energy/utility companies, which was partially offset by an increase in demand from companies in the technology, financial, and state and retail customers.

~~During the nine~~three months ended December 31, 2015, net sales increased 3.3%, or $28.8 million to $904.8 million, compared to $876.0 million for the same period in the prior fiscal year. Sales of product and services were $871.8 million for the nine months ended December 31, 2015, an increase of 3.3% compared to $843.6 million for the same period last year. Non-GAAP gross sales of product and services were $1,157.3 million compared to $1,095.0 million during the nine months ended December 31, 2014, an increase of 5.7% or $62.4 million. For the nine months ended December 31, 2015, theJune 30, 2015. The increase in net sales of product and services revenues was a result of ~~an increase~~higher demand from state and local government and education (“SLED”) customers, telecom, media & entertainment customers, and healthcare organizations which was partially offset by a decrease in demand from companies in the ~~technology, health care industries,~~ financial ~~and SLED customers; which was partially offset by lower demand from telecom and energy/utility companies.~~services industries.

Consolidated gross profit ~~decreased 2.1%~~rose 14.4% to ~~$64.1~~$67.7 million, compared with ~~$65.4~~$59.1 million infor the ~~third quarter of fiscal~~three months ended June 30, 2015. Consolidated gross margins were ~~21.5%~~22.7% for the three months ended ~~December 31, 2015,~~June 30, 2016, compared to ~~21.4%~~21.9% for the three months ended ~~December 31, 2014.~~June 30, 2015. Our gross margin for product and services was ~~19.6%~~20.8% during the three months ended ~~December 31, 2015~~June 30, 2016 compared to ~~19.4%~~20.0% during the three months ended ~~December 31, 2014.~~

Consolidated gross profit rose 5.0% to $195.1 million, compared with $185.8 million during the nine months ended December 31, 2014. For the nine months ended December 31, 2015, consolidated gross margins were 21.6%, compared to 21.2% for the nine months ended December 31, 2014. Our gross margin for product and services was 19.7% during the nine months ended December 31, 2015 compared to 19.2% during the same period last year.June 30, 2015. Contributing to our margins for ~~both~~ the three month period was a shift in product sales mix, as we sold a higher proportion of third party software assurance, maintenance and ~~nine month periods~~services. Also contributing to the high gross margin was ~~our continued focus on value added services for our customers, including the~~an increase ~~in sales of our professional and managed services, partially offset by a decline~~ in vendor incentives earned as a percentage of sales of product and services of 40 basis points as compared to the prior year, and an increase in sales of our professional and managed services for the three ~~and nine~~ months ended ~~December 31, 2015~~ ~~of 20 basis points and~~June 30, ~~basis points, respectively, from~~ ~~the prior periods.~~2016.

Operating income for the ~~quarter decreased 14.2%~~three months ended June 30, 2016 increased 16.1% to ~~$17.6~~$17.5 million, as compared to ~~$20.6~~$15.1 million for the three months ended ~~December 31, 2014. Operating income margin for the quarter decreased 80 basis points to 5.9% for~~June 30, 2015. For the three months ended December 31, 2015 from 6.7% for the prior year. Operating income for the nine months ended December 31, 2015 increased 6.7% to $59.4 million, as compared to $55.6 million for the nine months ended December 31, 2014. For the nine months ended December 31, 2015,June 30, 2016, the operating income margin increased 2030 basis points to ~~6.6%~~5.9% from ~~6.4%~~5.6% for the same period in the prior year.

Consolidated net earnings for the three months ended ~~December 31, 2015~~June 30, 2016 were ~~$10.3~~$10.7 million, ~~a decrease~~an increase of ~~33.6%~~21.1%, or ~~$5.2~~$1.9 million, over the prior year’s results of ~~$15.5 million, which included other income of $6.2~~$8.8 million. The other income of $6.2 million realized in the prior year was a result of a class action suit which alleged that a group of companies conspired to fix, raise, maintain or stabilize prices of certain flat panels used in many flat screen televisions, monitors and notebook computers.

Net earnings for the nine months ended December 31, 2015 were $34.8 million, a decrease of 5.8% or $2.1 million, as compared to $36.9 million for the nine months ended December 31, 2014. Net earnings included other non-operating income totaling $7.6 million for the nine months ended December 31, 2014. The $7.6 million included the $6.2 million in other income realized from the class action suit, and $1.4 million related to a gain recognized from an arrangement we entered into to repurchase the rights, title, and interest to payments due under a financing arrangement. This financing arrangement was previously assigned to a third party financial institution and accounted for as a secured borrowing.

Adjusted EBITDA ~~decreased $2.8~~increased $3.0 million, or ~~12.9%~~18.4%, to ~~$19.0~~$19.3 million and Adjusted EBITDA margin ~~decreased 70~~increased 50 basis points to ~~6.4%~~6.5% for the three months ended ~~December 31, 2015,~~June 30, 2016, as compared to the prior period of 7.1%. Adjusted EBITDA for the nine months ended December 31, 2015 increased $4.3 million, or 7.4%, to $63.1 million and Adjusted EBITDA margin increased 30 basis points to 7.0% compared to the prior year period of 6.7%6.0%.

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Diluted earnings per share ~~decreased 34.3%~~increased 24.0%, or ~~$0.73~~$0.29 to ~~$1.40~~$1.50 per share for the three months ended ~~December 31, 2015,~~June 30, 2016, as compared to ~~$2.13~~$1.21 per share for the three months ended ~~December 31, 2014. Diluted~~June 30, 2015. Our effective tax rate for the three months ended June 30, 2016 was 39.0%, which includes a tax benefit of $0.4 million, or $0.06 per diluted share, related to the adoption of the new share based compensation accounting standard. Non-GAAP diluted earnings per share ~~decreased 4.6%, or $0.23~~increased 23.2% to ~~$4.74 per share~~$1.54 for the ~~nine~~three months ended ~~December 31, 2015,~~June 30, 2016, as compared to ~~$4.97 per share~~$1.25 for the ~~nine~~three months ended ~~December 31, 2014.~~June 30, 2015.

Cash and cash equivalents decreased ~~$9.6~~$16.0 million or ~~12.6%~~16.8% to ~~$66.6~~$78.8 million at ~~December 31, 2015~~June 30, 2016 compared to March 31, ~~2015. The decrease in cash and cash equivalents was~~2016, mostly due ~~in part~~ to the ~~cash purchase~~repurchase of our common stock of $21.0 million in the ~~businesses of IGX for $16.6 million.~~ quarter ended June 30, 2016. Our cash on hand, funds generated from operations, amounts available under our credit facility and the possible monetization of our investment portfolio provide sufficient liquidity for our business.

Segment Overview

Our operations are conducted through two segments: technology and financing.

Technology Segment

The technology segment sells IT equipment and software and related services primarily to corporate customers, state and local governments, and higher education institutions on a nationwide basis, with geographic concentrations relating to our physical locations. The technology segment also provides Internet-based business-to-business supply chain management solutions for information technology products.

Customers who purchase IT equipment and services from us may have customer master agreements, or CMAs, with our company, which stipulate the terms and conditions of the relationship. Some CMAs contain pricing arrangements, and most contain mutual voluntary termination clauses. Our other customers place orders using purchase orders without a CMA in place or with other documentation customary for the business. Often, our work with state and local governments is based on public bids and our written bid responses. Our service engagements are generally governed by statements of work, and are primarily fixed price (with allowance for changes); however, some service agreements are based on time and materials.

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We endeavor to minimize the cost of sales through incentive programs provided by vendors and distributors. The programs we qualify for are generally set by our reseller authorization level with the vendor. The authorization level we achieve and maintain governs the types of products we can resell as well as such items as pricing received, funds provided for the marketing of these products and other special promotions. These authorization levels are achieved by us through purchase volume, certifications held by sales executives or engineers and/or contractual commitments by us. The authorization levels are costly to maintain and these programs continually change and, therefore, there is no guarantee of future reductions of costs provided by these vendor consideration programs.

Financing Segment

Our financing segment offers financing solutions to corporations, governmental entities, and educational institutions nationwide and also in the United Kingdom, Canada and Iceland. The financing segment derives revenue from leasing IT and medical equipment and the disposition of that equipment at the end of the lease. The financing segment also derives revenues from the financing of third-party software licenses, software assurance, maintenance and other services.

Financing revenue generally falls into the following three categories:

Portfolio income: Interest income from financing receivables and rents due under operating leases;

Transactional gains: Net gains or losses on the sale of financial assets; and

Post-contract earnings: Month-to-month rents; early termination, prepayment, make-whole, or buyout fees; and net gains on the sale of off-lease (used) equipment.

Our financing segment sells the equipment underlying a lease to the lessee or a third-party other than the lessee. These sales occur at the end of the lease term and revenues from the sales of such equipment are recognized at the date of sale. We also recognize revenue from events that occur after the initial sale of a financial asset and remarketing fees from certain residual value investments.

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Fluctuations in Revenues

Our results of operations are susceptible to fluctuations for a number of reasons, including, without limitation, customer demand for our products and services, supplier costs, changes in vendor incentive programs, interest rate fluctuations, general economic conditions, and differences between estimated residual values and actual amounts realized related to the equipment we lease. Operating results could also fluctuate as a result of a sale prior to the expiration of the lease term to the lessee or to a third-party or from post-term events.

We expect to continue to expand by opening new sales locations and hiring additional staff for specific targeted market areas in the near future whenever we can find both experienced personnel and desirable geographic areas. These investments may reduce our results from operations in the short term.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with U.S. GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, or different assumptions were made, it is possible that alternative accounting policies would have been applied, resulting in a change in financial results. On an ongoing basis, we reevaluate our estimates, including those related to revenue recognition, residual values, vendor incentives, lease classification, goodwill and intangibles, reserves for credit losses and income taxes specifically relating to uncertain tax positions. We base estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. For all such estimates, we caution that future events rarely develop exactly as forecasted, and therefore, these estimates may require adjustment.

Our critical accounting estimates have not changed from those reported in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2015~~2016 Annual ~~Report.~~Financial Statements.

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SEGMENT RESULTS OF OPERATIONS

The three ~~and nine~~ months ended ~~December 31, 2015~~June 30, 2016 compared to the three ~~and nine~~ months ended ~~December 31, 2014~~June 30, 2015

Technology Segment

The results of operations for our technology segment for the three ~~and nine~~ months ended ~~December 31,~~June 30, 2016 and 2015 ~~and 2014~~ were as follows (dollars in thousands):

	Three Months Ended December 31,									Nine Months Ended December 31,									For the three months ended June 30,
	2015		2014		Change					2015		2014		Change					2016		2015		Change
Sales of product and services	$	287,859	$	295,679	$	(7,820	)	(2.6	%)	$	871,814	$	843,619	$	28,195		3.3	%	$	290,181	$	259,696	$	30,485		11.7	%
Fee and other income		1,506		2,140		(634	)	(29.6	%)		5,038		5,969		(931	)	(15.6	%)		1,276		1,811		(535	)	(29.5	%)
Net sales		289,365		297,819		(8,454	)	(2.8	%)		876,852		849,588		27,264		3.2	%		291,457		261,507		29,950		11.5	%
Cost of sales, product and services		231,503		238,202		(6,699	)	(2.8	%)		700,429		681,852		18,577		2.7	%		229,847		207,718		22,129		10.7	%
Gross profit		57,862		59,617		(1,755	)	(2.9	%)		176,423		167,736		8,687		5.2	%		61,610		53,789		7,821		14.5	%

Professional and other fees		1,608		1,158		450		38.9	%		4,175		4,065		110		2.7	%		1,497		1,262		235		18.6	%
Salaries and benefits		35,043		33,507		1,536		4.6	%		101,471		96,140		5,331		5.5	%		37,485		32,952		4,533		13.8	%
General and administrative		6,530		6,918		(388	)	(5.6	%)		20,381		19,379		1,002		5.2	%		6,231		5,325		906		17.0	%
Depreciation and amortization																				1,771		1,204		567		47.1	%
Interest and financing costs		10		19		(9	)	(47.4	%)		51		77		(26	)	(33.8	%)		-		19		19		(100.0	%)
Operating expenses		43,191		41,602		1,589		3.8	%		126,078		119,661		6,417		5.4	%		46,984		40,762		6,222		15.3	%

Segment earnings	$	14,671	$	18,015	$	(3,344	)	(18.6	%)	$	50,345	$	48,075	$	2,270		4.7	%	$	14,626	$	13,027	$	1,599		12.3	%

Adjusted EBITDA																			$	16,397	$	14,231	$	2,166		15.2	%

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Net sales: Net sales for the three months ended ~~December 31, 2015~~June 30, 2016 were $~~289.4~~291.5 million compared to $~~297.8~~261.5 million during the three months ended ~~December 31, 2014, a decrease of 2.8%, or $8.5~~ million. The decrease in net sales revenues was a result of a change in sales mix to a higher proportion of sales of third party maintenance and services which are recognized on a net basis. The decrease in net sales of product and services revenues was a result of lower demand from telecom, SLED customers, and energy/utility companies, which was partially offset by an increase in demand from companies in the technology, financial, and state and retail customers.

~~Net sales for the nine months ended December 31,~~June 30, 2015, ~~were $876.9~~ ~~million compared to $849.6~~ ~~million during the nine months ended December 31, 2014,~~ an increase of ~~3.2%~~11.5%, or $~~27.3~~$30.0 million. The increase in net sales of product and services revenues was a result of an increase in demand for products and services from ~~companies in the technology, health care industries, financial,~~our largest corporate, SLED, and ~~SLED customers; which was partially offset by lower demand from telecom and energy/utility companies.~~healthcare customers.

~~Non-GAAP~~Adjusted gross ~~sales~~billings of product and services for the three months ended ~~December 31, 2015~~June 30, 2016 were ~~$393.9~~$397.5 million compared to ~~$377.3~~$332.3 million during the three months ended ~~December 31, 2014,~~June 30, 2015, an increase of ~~4.4%~~19.6% or ~~$16.7~~$65.2 million. Sales of product and services during the three months ended ~~December 31, 2015~~June 30, 2016 were ~~$287.9~~$290.2 million compared to ~~$295.7~~$259.7 million during the three months ended ~~December 31, 2014, a decrease~~June 30, 2015, an increase of ~~2.6%~~11.7% or ~~$7.8~~$30.5 million. ~~This reflected~~The smaller increase in sales of produces and services compared to Adjusted gross billings of product and services, reflects a higher proportion of sales from third party maintenance, software assurance, and services, which are presented on a net basis.

Non-GAAP gross sales of product and services for the nine months ended December 31, 2015 were $1,157.3 million compared to $1,095.0 million during the nine months ended December 31, 2014, an increase of 5.7% or $62.4 million. Sales of product and services during the nine months ended December 31, 2015 were $871.8 million compared to $843.6 million during the nine months ended December 31, 2014, an increase of 3.3%.

Summarized below are the sequential and year over year changes in net sales of product and services:

Quarter Ended	Sequential			Year over Year
June 30, 2016		(0.5	%)		11.7	%
March 31, 2016		1.3	%		13.3	%
December 31, 2015		(11.2	%)		(2.6	%)
September 30, 2015		24.9	%		13.1	%
June 30, 2015		0.9	%		(0.6	%)

Quarter Ended Sequential Year over Year
December 31, 2015 (2.6 %) (11.2 %)
September 30, 2015 24.9 % 13.1 %
June 30,2015 0.9 % (0.6 %)
March 31, 2015 (13.0 %) 3.2 %
December 31, 2014 3.2 % 15.6 %

We rely on our vendors to fulfill a large majority of shipments to our customers. As of ~~December 31,~~June 30, 2016, we had open orders of $200.1 million and deferred revenue of $18.5 million. As of June 30, 2015, we had open orders of ~~$87.9 million and deferred revenue of $26.3 million. As of December 31, 2014, we had open orders of $92.1~~$89.3 million and deferred revenues of $~~28.5~~34.8 million. The increase in open orders of $110.8 million is due to strong demand for products and services from our largest corporate, SLED, and healthcare customers.

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We analyze sales of products and services by customer end market and by manufacturer, as opposed to discrete product and service categories. The percentage of sales of product and services by industry and vendor are summarized below:

	For the twelve months ended June 30,
	2016			2015			Change
Revenue by customer end market:
SLED		22	%		23	%		(1	%)
Technology		22	%		20	%		2	%
Telecom, Media & Entertainment		14	%		18	%		(4	%)
Healthcare		11	%		10	%		1	%
Financial Services		12	%		10	%		2	%
Other		19	%		19	%		0	%
Total		100	%		100	%

Revenue by vendor:
Cisco Systems		49	%		50	%		(1	%)
HP Inc. & HPE		6	%		8	%		(2	%)
NetApp		5	%		6	%		(1	%)
Sub-total		60	%		64	%		(4	%)
Other		40	%		36	%		4	%
Total		100	%		100	%

Our revenues by customer end market have remained consistent over the year as approximately 80% of our revenues were generated from customers within the five end markets identified above. During the trailing twelve months ended June 30, 2016 we had an increase in revenues from customers in the technology, financial services, and healthcare industries, which was partially offset by decreases in the telecom, media and entertainment industry and SLED customers over the prior year period. These changes were driven by changes in customer buying cycles and specific IT related initiatives, rather than the acquisition or loss of a customer or set of customers.

The majority of our revenues by vendor are derived from Cisco Systems, a combined HP Inc. and HPE, and NetApp, which in total, declined to 60% for the trailing twelve months ended June 30, 2016, from 64% in the prior year trailing twelve month period, due to a decline in the percentage of revenues from HP Inc. products. The overall decrease is due to competition and developments in the IT industry. None of the vendors included within the “other” category exceeded 3% of total revenues

Gross profit: Our gross margin for product and services was ~~19.6%~~20.8% during the three months ended ~~December 31, 2015~~June 30, 2016 compared to ~~19.4%~~20.0% during the three months ended ~~December 31, 2014.~~June 30, 2015. The increase in gross margins was due to shifts in our product revenue mix ~~resulting from changes in demand from our customer base.~~

~~Our gross margin for product~~as we sold a higher proportion of third party software assurance, maintenance and services, ~~was 19.7% during the nine months ended December 31, 2015 compared to 19.2% during the nine months ended December 31, 2014.~~which are presented on a net basis. Contributing to our margins for ~~both~~ the three ~~and nine~~ month ~~periods~~period was our continued focus on value added services for our customers, including the increase in sales of our professional and managed ~~services. Vendor~~services, and vendor incentives earned as a percentage of sales of product and services for the three ~~and nine~~ months ended ~~December 31, 2015~~June 30, 2016 ~~declined 20~~increased 40 basis points ~~and 30 basis points, respectively,~~ from the prior year.

Operating expenses: Operating expenses were ~~$43.2million,~~$47.0 million, an increase of ~~$1.6~~$6.2 million or ~~3.8%~~15.3% higher for the current quarter compared to ~~$41.6~~$40.8 million for the three months ended ~~December 31, 2014. Operating expenses for the nine months ended December 31, 2015 were $126.1 million compared to $119.7 million or 5.4% higher than the nine months ended December 31, 2014.~~June 30, 2015.

Professional and other fees: Professional and other fees were ~~$1.6~~$1.5 million for the three months ended ~~December 31, 2015,~~June 30, 2016, compared to ~~$1.2~~$1.3 million for the three months ended ~~December 31, 2014,~~June 30, 2015, due primarily to ~~increased~~ legal and outside consulting fees of $0.3 million related to the acquisition of IGX. Professional and other fees for the nine months ended December 31, 2015 were $4.2 million compared to $4.1 million or 2.7% higher than the nine months ended December 31, 2014.fees.

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Salaries and benefits: Salaries and benefits increased ~~$1.5~~$4.5 million, or ~~4.6%~~13.8%, to ~~$35.0~~$37.5 million during the three months ended ~~December 31, 2015,~~June 30, 2016, compared to ~~$33.5~~$33.0 million during the three months ended ~~December 31, 2014. For the nine months ended December 31, 2015, salaries and benefits were $101.5 million compared to $96.1 million or 5.5% higher than the nine months ended December 31, 2014.~~June 30, 2015. The increase in salaries and benefits is due to additional personnel, ~~merit increases,~~ and ~~higher fringe benefits.~~volume related compensation. Our technology segment had ~~1,006~~1,048 employees as of ~~December 31, 2015,~~June 30, 2016, an increase of 79102 or ~~8.5%~~10.8% from ~~927~~946 as of ~~December 31, 2014.~~June 30, 2015. The position additions included ~~36 organic~~42 sales and engineering positions, and the acquisition of IGX brought us 48 new employees, 44 of which are sales and engineering. The remaining additional staffing positions were administrative and IT related hires. Also contributing to the increase in salaries and benefits was additional healthcare costs of $0.5 million due to an increase in recent claims and the number of insured employees.

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General and administrative expenses: General and administrative expenses ~~decreased $0.4~~increased $0.9 million, or ~~5.6%~~17.0% during the three months ended December 31, 2015 over the same period for the prior year, primarily due to lower software licenses and maintenance expense. During the nine months ended December 31, 2015 general and administrative expenses increased $1.0 million, or 5.2%June 30, 2016 over the same period for the prior year. ~~This increase was primarily~~The additional costs are substantially due to our expanding geographical presence. We also incurred additional expenses due to increases in personnel, including communications, and travel and entertainment expenses. Also contributing to the increase in general and administrative expenses was a reduction in reserves for credit losses in the three months ended June 30, 2015 of $0.1 million.

Depreciation and amortization ~~of intangible assets associated with~~expense: Depreciation and amortization expense increased $0.6 million, or 47.1%, to $1.8 million during the ~~acquisitions of Evolve~~three months ended June 30, 2016 compared to $1.2 million in the prior year. The increase in depreciation and ~~IGX and other costs~~amortization expense is related to the ~~ongoing geographical expansion~~acquisition of ~~our business.~~IGX in December, 2015.

Segment earnings: As a result of the foregoing, segment earnings were ~~$14.7~~$14.6 million, ~~a decrease~~an increase of ~~$3.3~~$1.6 million, or ~~18.6%~~12.3% for the three months ended ~~December 31, 2015, and segment earnings were $50.3~~June 30, 2016 over the prior year period. For the three months ended June 30, 2016 Adjusted EBITDA was $16.4 million, an increase of ~~$2.3~~$2.2 million or ~~4.7% for the nine months ended December 31, 2015, as compared to the same periods for~~$15.2% over the prior ~~year.~~year period.

Financing Segment

The results of operations for our financing segment for the three ~~and nine~~ months ended ~~December 31,~~June 30, 2016 and 2015 ~~and 2014~~ were as follows (dollars in thousands):

	Three Months Ended December 31,										Nine Months Ended December 31,									For the three months ended June 30,
	2015			2014		Change					2015		2014		Change					2016		2015		Change
Financing revenue	$	9,289		$	8,406	$	883		10.5	%	$	27,914	$	26,339	$	1,575		6.0	%	$	6,987	$	8,346	$	(1,359	)	(16.3	%)
Fee and other income		(10	)		16		(26	)	(162.5	%)		30		90		(60	)	(66.7	%)		59		13		46		353.8	%
Net sales		9,279			8,422		857		10.2	%		27,944		26,429		1,515		5.7	%		7,046		8,359		(1,313	)	(15.7	%)
Direct lease costs		3,081			2,601		480		18.5	%		9,256		8,364		892		10.7	%		992		3,018		(2,026	)	(67.1	%)
Gross profit		6,198			5,821		377		6.5	%		18,688		18,065		623		3.4	%		6,054		5,341		713		13.3	%

Professional and other fees		274			278		(4	)	(1.4	%)		738		781		(43	)	(5.5	%)		289		256		33		12.9	%
Salaries and benefits		2,329			2,125		204		9.6	%		6,855		6,691		164		2.5	%		2,313		2,262		51		2.3	%
General and administrative		235			315		(80	)	(25.4	%)		748		1,285		(537	)	(41.8	%)		239		246		(7	)	(2.8	%)
Depreciation and amortization																					4		4		-		0.0	%
Interest and financing costs		386			556		(170	)	(30.6	%)		1,320		1,753		(433	)	(24.7	%)		349		534		(185	)	(34.6	%)
Operating expenses		3,224			3,274		(50	)	(1.5	%)		9,661		10,510		(849	)	(8.1	%)		3,194		3,302		(108	)	(3.3	%)

Operating income		2,974			2,547		427		16.8	%		9,027		7,555		1,472		19.5	%
Other income		-			6,169		(6,169	)	n/a			-		7,603		(7,603	)	n/a
Segment earnings	$	2,974		$	8,716	$	(5,742	)	(65.9	%)	$	9,027	$	15,158	$	(6,131	)	(40.4	%)	$	2,860	$	2,039	$	821		40.3	%

Adjusted EBITDA																				$	2,864	$	2,043	$	821		40.2	%

Net sales: Net sales ~~increased~~decreased by ~~$0.9~~$1.3 million, or ~~10.2%~~15.7%, to ~~$9.3~~$7.0 million for the three months ended ~~December 31, 2015,~~June 30, 2016, as compared to the three months ended ~~December 31, 2014~~June 30, 2015, due ~~to higher post-contract~~lower portfolio earnings. During the quarters ended ~~December 31,~~June 30, 2016 and 2015, ~~and 2014,~~ we recognized net gains on sales of financial assets of ~~$1.4 million and~~ $1.5 million ~~respectively,~~in both years, and the fair value of assets received from these sales were ~~$54.1~~$54.2 million and ~~$44.8~~$24.3 million, respectively. ~~Post~~Portfolio earnings and other financing revenues in total declined by $2.6 million to $2.0 million from $4.6 million recognized in the three months ended June 30, 2015, while post contract earnings increased ~~$1.1~~$1.2 million to ~~$3.3~~$3.5 million for the three months ended ~~December 31, 2015~~June 30, 2016, over the prior year.

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For the nine months ended December 31, 2015, net sales increased by $1.5 million, or 5.7%, to $27.9 million, as compared to the nine months ended December 31, 2014 due to higher transactional gains and higher post-contract earnings. During the nine months ended December 31, 2015 and 2014, we recognized net gains on sales of financial assets of $5.4 million and $4.6 million, respectively, and the fair value of assets received from these sales were $162.7 million and $138.6 million, respectively. Post-contract earnings increased $0.9 million to $8.7 million for the nine months ended December 31, 2015 over the prior year.

At ~~December 31, 2015,~~June 30, 2016, we had ~~$156.9~~$143.1 million in financing receivables and operating leases, compared to ~~$165.1~~$176.3 million as of ~~December 31, 2014,~~June 30, 2015, a decrease of ~~$8.2~~$33.2 million or ~~5.0%~~18.8%.

Gross profit: Gross profit increased ~~$0.4~~$0.7 million due mostly to ~~higher post-contract earnings, partially offset by increased~~a decrease in depreciation expense related to operating leases in the three months ended ~~December 31, 2015~~June 30, 2016 as compared to same period in the prior year. For the nine months ended December 31, 2015 gross profit increased $0.6 million due to higher transactional gains and higher post-contract earnings, being partially offset by increased depreciation expense related to operating leases as compared to the prior year period.

Operating expenses: For the three months ended ~~December 31, 2015,~~June 30, 2016 operating expenses decreased ~~slightly~~ by ~~1.5%~~$0.1 million or 3.3%, which was due primarily to ~~both~~ lower interest and financing costs, ~~and higher prior year reserves for credit losses stemming from an~~offset by a slight increase in ~~our portfolio balance. Salaries~~salaries and ~~benefits partially offset these operating expense reductions due to higher commission expense related to higher sales volume.~~benefits. Our financing segment had 5451 employees as of ~~both December 31, 2015 and 2014.~~June 30, 2016, compared to 50 employees as of June 30, 2015.

For the nine months ended December 31, 2015, operating expenses decreased $0.8 million, or 8.1%, which was due primarily to both lower interest and financing costs and additional reserves for credit losses recorded in the prior year stemming from an increase in our portfolio balance. Salaries and benefits increased $0.2 million over the prior year due primarily to higher commission expense related to higher sales volume.

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Interest and financing costs decreased $0.2 million ~~and $0.4 million~~ for the three ~~and nine~~ months ended ~~December 31, 2015, respectively,~~June 30, 2016, compared to the prior year periods due to a decrease in the average total notes payable outstanding and lower average interest rates for the three ~~and nine~~ months ended ~~December 31, 2015.~~June 30, 2016. Total notes payable were ~~$49.6~~$56.9 million as of ~~December 31, 2015,~~June 30, 2016, a decrease of ~~$22.9~~$18.9 million or ~~31.6%~~24.9% compared to ~~$72.5~~$75.8 million as of ~~December 31, 2014.~~June 30, 2015. Our weighted average interest rate for non-recourse notes payable was 3.09%3.08% and ~~3.35%~~3.02%, as of ~~December 31,~~June 30, 2016 and June 30, 2015, ~~and December 31, 2014,~~ respectively.

~~Other income:~~ There was no other income during the three months ended December 31, 2015. During the three months ended December 31, 2014, we received payment in the amount of $6.2 million related to a claim in a class action suit which alleged that a group of companies conspired to fix, raise, maintain or stabilize prices of certain flat panels used in many flat screen televisions, monitors and notebook computers.

There was no other income during the nine months ended December 31, 2015. During the nine months ended December 31, 2014 we recognized other income totaling $7.6 million. In addition to the other income of $6.2 million related to the class action suit, we also recognized other income gain of $1.4 million in conjunction with a repurchase agreement. We entered into an arrangement to repurchase the rights, title, and interest to payments due under a financing arrangement. This financing arrangement was previously assigned to a third party financial institution and accounted for as a secured borrowing.

Segment earnings: As a result of the foregoing, ~~earnings decreased $5.7~~operating income and Adjusted EBITDA both increased $0.8 million ~~and $6.1 million~~or 40.3% for the three ~~and nine~~ months ended ~~December 31, 2015, respectively,~~June 30, 2016 over the prior year ~~periods.~~period.

Consolidated

Income taxes: ~~.Our~~Our provision for income tax expense ~~decreased $3.9 million to $7.3~~was $6.8 million for the three months ended ~~December 31, 2015, and decreased $1.7 million~~June 30, 2016 as compared to ~~$24.6~~$6.3 million for the ~~nine months ended December 31, 2015 as compared to the~~ same ~~periods~~period last year. Our effective income tax rates for the three ~~and nine~~ months ended ~~December 31,~~June 30, 2016 and 2015 were 39.0% and 41.6% ~~and 41.4%,~~ respectively. ~~For the three and nine months ended December 30, 2014 the~~The change in our effective income tax ~~rates were 42.0% and 41.6%, respectively.~~rate was due primarily to a tax benefit of $0.4 million associated with adoption of ASU 2016-07, Stock Compensation.

Net earnings: The foregoing resulted in net earnings of ~~$10.3~~$10.7 million for the three months ended ~~December 31, 2015, a decrease~~June 30, 2016, an increase of ~~33.6%~~21.1%, as compared to ~~$15.5~~$8.8 million during the three months ended ~~December 31, 2014. Net earnings were $34.8 million for the nine months ended December 31, 2015 a decrease of 5.8%, as compared to $36.9 million during the nine months ended December 31, 2014.~~June 30, 2015.

Basic and fully diluted earnings per common share were ~~$1.41~~$1.52 and ~~$1.40,~~$1.50, for the three months ended ~~December 31, 2015, a decrease~~June 30, 2016, an increase of ~~34.1%~~24.6% and ~~34.3%~~24.0% as compared to ~~$2.14~~$1.22 and ~~$2.13,~~$1.21, respectively, for the three months ended December 31, 2014. For the nine months ended December 31, 2015, basic and fully diluted earnings per common share were $4.79 and $4.74, a decrease of 4.6% and 4.6% as compared to $5.02 and $4.97, respectively, for the three months ended December 31, 2014.June 30, 2015.

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Weighted average common shares outstanding used in the calculation of ~~both~~ basic and diluted earnings per common share ~~were 7.3 million~~ for the three months ended ~~December 31, 2015.~~June 30, 2016 was 7.0 million and 7.1 million, respectively. Weighted average common shares outstanding used in the calculation of the basic and diluted earnings per common share for the three months ended ~~December 31, 2014~~June 30, 2015 was 7.2 million and 7.3 million respectively.

Weighted average common shares outstanding used in the calculation of both basic and diluted earnings per common share were 7.3 million for the nine months ended December 31, 2015. Weighted average common shares outstanding used in the calculation of both the basic and diluted earnings per common share were 7.4 million for the nine months ended December 31, 2014.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity Overview

Our primary sources of liquidity have historically been cash and cash equivalents, internally generated funds from operations, and borrowings, both non-recourse and recourse. We have used those funds to meet our capital requirements, which have historically consisted primarily of working capital for operational needs, capital expenditures, purchases of equipment for lease, payments of principal and interest on indebtedness outstanding, acquisitions and the repurchase of shares of our common stock.

Our subsidiary ePlus Technology, inc., part of our technology segment, finances its operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC or (“WFCDF”). (f/k/a GE Commercial Distribution Finance ~~or GECDF,~~LLC). ePlus Technology, inc.'s agreement with WFCDF has an aggregate credit limit of $250 ~~million.~~million as of June 30, 2016. There are two components of this facility: (1) a floor plan component; and (2) an accounts receivable component. After a customer places a purchase order with us and we have completed our credit check, we place an order for the equipment with one of our vendors. Generally, most purchase orders from us to our vendors are first financed under the floor plan component and reflected in “accounts payable—floor plan” in our ~~condensed~~ consolidated balance sheets. Payments on the floor plan component are due on three specified dates each month, generally 30-60 days from the invoice date. On the due date of the invoices financed by the floor plan component, the invoices are paid by the accounts receivable component of the credit facility. The balance of the accounts receivable component is then reduced by payments from our available cash. The outstanding balance under the accounts receivable component is recorded as recourse notes payable on our ~~condensed~~ consolidated balance sheets. There was no outstanding balance at ~~December~~June 30, 2016 or March 31, ~~2015 or December 31, 2014,~~2016, while the maximum credit limit was $30.0 million for both periods. The borrowings and repayments under the floor plan component are reflected as “net borrowings on floor plan facility” in the cash flows from financing activities section of our consolidated statements of cash flows.

Most customer payments in our technology segment are remitted to our lockboxes. Once payments are cleared, the monies in the lockbox accounts are automatically transferred to our operating account on a daily basis. On the due dates of the floor plan component, we make cash payments to ~~GECDF.~~WFCDF. These payments from the accounts receivable component to the floor plan component and repayments from our cash are reflected as “net borrowings on floor plan facility” in the cash flows from financing activities section of our ~~condensed~~ consolidated statements of cash flows. We engage in this payment structure in order to minimize our interest expense and bank fees in connection with financing the operations of our technology segment.

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We believe that cash on hand, and funds generated from operations, together with available credit under our credit facility, will be sufficient to finance our working capital, capital expenditures and other requirements for at least the next twelve calendar months.

Our ability to continue to fund our planned growth, both internally and externally, is dependent upon our ability to generate sufficient cash flow from operations or to obtain additional funds through equity or debt financing, or from other sources of financing, as may be required. IfWhile at this time we do not anticipate requiring any additional sources of financing to fund operations, if demand for IT products declines, our cash flows from operations may be substantially affected.

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Cash Flows

The following table summarizes our sources and uses of cash over the periods indicated (in thousands):

	Nine Months Ended December 31,						Three months ended June 30,
	2015			2014			2016			2015
Net cash used in operating activities	$	(18,876	)	$	(9,930	)
Net cash (used in) provided by operating activities							$	(12,719	)	$	21,756
Net cash used in investing activities		(44,344	)		(31,705	)		(17,510	)		(26,425	)
Net cash provided by financing activities		53,638			13,002			13,953			17,272
Effect of exchange rate changes on cash		(26	)		(24	)		317			3

Net Decrease in Cash and Cash Equivalents	$	(9,608	)	$	(28,657	)
Net increase (decrease) in cash and cash equivalents							$	(15,959	)	$	12,606

Cash flows from operating activities. Cash used in operating activities totaled $~~18.9~~12.7 million during the ~~nine~~three months ended ~~December 31, 2015.~~June 30, 2016. Net earnings adjusted for the impact of non-cash items was ~~$39.3~~$11.0 million. Net changes in assets and liabilities resulted in a decrease of cash and cash equivalents of ~~$58.2~~$23.7 million, primarily due to additions to accounts receivables of ~~$32.9~~$19.9 million, ~~financing receivables—net~~inventories of ~~$10.7~~$13.2 million, partially offset by increases in deferred costs, other intangible assets, and other assets of $4.1 million and ~~reductions~~increases in ~~salaries and commissions~~accounts payable ~~deferred revenues and other liabilities~~ of ~~$9.0~~$3.8 million.

Cash ~~used in~~provided by operating activities totaled ~~$9.9~~$22.8 million during the ~~nine~~three months ended ~~December 31, 2014.~~June 30, 2015. Net earnings adjusted for the impact of non-cash items was ~~$36.9~~$10.7 million. Net changes in assets and liabilities resulted in ~~a decrease~~an increase of cash and cash equivalents of ~~$46.8~~$12.2 million, primarily due to ~~increases~~reductions in accounts receivables of ~~accounts receivable—trade cash of $27.4 million, and investments in financing receivables—net of $14.9 million, and cash used for accounts payable—trade of $15.5~~$37.8 million, partially offset by ~~changes~~reductions in ~~salaries~~accounts payable and ~~commissions payable~~accrued expenses of ~~$5.5~~$17.1 million, in increases in inventories of $5.4 million, and deferred cost and other assets of $3.1 million.

In order to manage our working capital, we monitor our cash conversion cycle for our Technology segment, which is defined as days sales outstanding (“DSO”) in accounts receivable plus days of supply in inventory (“DIO”) minus days of purchases outstanding in accounts payable (“DPO”). The following table presents the components of the cash conversion cycle for our Technology segment:

	As of December 31,						As of June 30,
	2015			2014			2016			2015

Days sales outstanding (1)		56			51			54			54
Days inventory outstanding (2)		6			7			10			8
Days payable outstanding (3)		(42	)		(40	)		(46	)		(45	)
Cash conversion cycle		20			18			18			17

(1)	Represents the rolling three-month average of the balance of trade accounts receivable-trade, net for our Technology segment at the end of the period divided by ~~non-GAAP~~Adjusted gross ~~sales~~billings of product and services for the same three-month period.

(2)	Represents the rolling three-month average of the balance of inventory, net for our Technology segment at the end of the period divided by ~~non-GAAP~~Cost of adjusted gross ~~cost~~billings of ~~sales,~~ product and services for the same three-month period.

(3)

Represents the rolling three-month average of the combined balance of accounts payable-trade and accounts payable-floor plan for our Technology segment at the end of the period divided by ~~non-GAAP~~Cost of adjusted gross ~~cost~~billings of ~~sales,~~ product and services for the same three-month period.

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Our standard payment term for customers is between 30-60 days; however, certain customers are approved for extended payment terms. Invoices processed through our credit facility, or the accounts payable—floor plan balance, are typically paid within 45-60 days from the invoice date, while accounts payable—trade invoices are typically paid within 30 days from the invoice date. Our cash conversion cycle was ~~20 days as of December 31, 2015 and~~ 18 days as of ~~December 31, 2014.~~June 30, 2016 and 17 days as of June 30, 2015.

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Cash flows related to investing activities. Cash used in investing activities was ~~$44.3~~$17.5 million during the ~~nine~~three months ended ~~December 31, 2015, compared to cash used in investing activities of $31.7 million during the same period last year.~~June 30, 2016. Cash used in investing activities during the ~~nine~~three months ended ~~December 31, 2015~~June 30, 2016 was primarily driven by issuance of financing receivables of ~~$102.6~~$32.1 million, and purchases of assets to be leased or financed of $6.1 million, which was partially offset by cash proceeds from the sale of financing receivables of $13.6 million, the ~~acquisition~~repayment financing receivable of $5.9 million, and proceeds from the ~~business~~sale of ~~IGX~~property, equipment and operating lease equipment of ~~$16.6~~$2.1 million.

Cash used in investing activities was $26.4 million for during the three months ended June 30, 2015, which was primarily driven by issuance of financing receivables of $44.3 million, purchase of assets to be leased of $9.4 million and purchases of property, equipment, and operating lease equipment of ~~$17.0 million purchase of assets to be leased of $10.8~~$6.9 million, which was partially offset by cash proceeds from the repayment financing receivable of ~~$49.2~~$21.1 million ~~proceeds from~~and the sale of financing receivables of ~~$48.2 million, and proceeds from the sale of property, equipment and operating lease equipment of $5.3 million.~~

Cash used in investing activities was $31.7 million during the nine months ended December 31, 2014. Cash used in investing activities during the nine months ended December 31, 2014 was primarily driven by issuance of financing receivables of $93.2 million, purchase of assets to be leased and property and equipment of $15.2 million, and cash used in acquisitions of $8.0 million, which was partially offset by cash proceeds from the sale of financing receivable of $24.2 million and the repayment of financing receivables of $50.6 million, and proceeds from the sale of property, equipment and operating lease equipment of $7.4$11.2 million.

Cash flows from financing activities. Cash provided by financing activities was ~~$53.6~~$14.0 million during the ~~nine~~three months ended ~~December 31, 2015,~~June 30, 2016, which was primarily due to net borrowings on the floor plan facility of ~~$28.6~~$22.6 million and net borrowings of non-recourse and recourse notes payable of ~~$27.9~~$12.0 million, which was partially offset by ~~$2.5~~$20.6 million in cash used for the repurchase of common stock. ~~During the nine months ended December 31, 2014, cash~~Cash provided by financing activities was ~~$13.0~~$16.2 million during the three months ended June 30, 2015, which was due to net borrowings on the floor plan facility of $11.0 million and net borrowings of non-recourse and recourse notes payable of ~~$38.7~~$7.8 million. During the three months ended June 30, 2015, $2.5 million ~~and net borrowings on the floor plan facility of $10.7 million, which~~in cash was ~~partially offset by~~used for the repurchase of common ~~stock of $37.1 million.~~stock.

Non-Cash Activities

We assign contractual payments due under lease and financing agreements to third-party financial institutions, which are accounted for as non-recourse notes payable. As a condition to the assignment agreement, certain financial institutions may request that the customer remit their contractual payments to a trust; rather than to us, and the trust pays the financial institution. Alternatively, if the structure of the agreement does not require a trustee, the customer will continue to make payments to us, and we will remit the payment to the financial institution. The economic impact to us under either assignment structure is similar, in that the assigned contractual payments are paid by the customer and remitted to the lender to pay down the corresponding non-recourse notes payable. However, these assignment structures are classified differently within our consolidated statements of cash flows. More specifically, we are required to exclude non-cash transactions from our consolidated statement of cash flows, so certain contractual payments made by the customer to the trust are excluded from our operating cash receipts and the corresponding repayment of the non-recourse notes payable from the trust to the third-party financial institution are excluded from our cash flows from financing activities. Contractual payments received by the trust and paid to the lender on our behalf are disclosed as a non-cash financing activity.

Liquidity and Capital Resources

We may utilize non-recourse notes payable to finance approximately 80% to 100% of the purchase price of the assets being leased or financed by our customers. Any balance of the purchase price remaining after non-recourse funding and any upfront payments received from the customer (our equity investment in the equipment) must generally be financed by cash flows from our operations, the sale of the equipment leased to third parties, or other internal means. Although we expect that the credit quality of our financing arrangements and our residual return history will continue to allow us to obtain such financing, such financing may not be available on acceptable terms, or at all.

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The financing necessary to support our lease and financing activities has been provided by our cash and non-recourse borrowings. We monitor our exposure closely. Historically, we have obtained mostly non-recourse borrowings from third party banks and finance companies. We continue to be able to obtain financing through our traditional lending sources. Non-recourse financings are loans whose repayment is the responsibility of a specific customer, although we may make representations and warranties to the lender regarding the specific contract or have ongoing loan servicing obligations. Under a non-recourse loan, we borrow from a lender an amount based on the present value of the contractually committed lease payments under the lease at a fixed rate of interest, and the lender secures a lien on the financed assets. When the lender is fully repaid from the lease payments, the lien is released and all further rental or sale proceeds are ours. We are not liable for the repayment of non-recourse loans unless we breach our representations and warranties in the loan agreements. The lender assumes the credit risk of each lease, and the lender’s only recourse, upon default by the lessee, is against the lessee and the specific equipment under lease.

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At ~~December 31, 2015,~~June 30, 2016, our non-recourse notes payable ~~decreased 14.0%~~increased 21.9% to ~~$45.5~~$53.7 million, as compared to ~~$52.9~~$44.1 million at March 31, ~~2015.~~2016. Recourse notes payable ~~increased 11.4%~~decreased 4.3% to ~~$4.1~~$3.2 million as of ~~December 31, 2015~~June 30, 2016 compared to ~~$3.7~~$3.3 million as of March 31, ~~2015.~~2016.

Whenever desirable, we arrange for equity investment financing, which includes selling lease payments, including the residual portions, to third parties and financing the equity investment on a non-recourse basis. We generally retain customer control and operational services, and have minimal residual risk. We usually reserve the right to share in remarketing proceeds of the equipment on a subordinated basis after the investor has received an agreed-to return on its investment.

Credit Facility — Technology

Our subsidiary, ePlus Technology, inc., has a financing facility from ~~GECDF~~WFCDF to finance its working capital requirements for inventories and accounts receivable. There are two components of this facility: (1) a floor plan component; and (2) an accounts receivable component. This facility has full recourse to ePlus Technology, inc. and ~~its subsidiary~~ e~~Plus Technology Services, inc. and~~ is secured by a blanket lien against all ~~their~~its assets, such as chattel paper, receivables and inventory. As of ~~December 31, 2015,~~June 30, 2016, the facility had an aggregate limit of the two components of $250.0 million with an accounts receivable sub-limit of $30.0 million.

Availability under the facility may be limited by the asset value of equipment we purchase or accounts receivable, and may be further limited by certain covenants and terms and conditions of the facility. These covenants include but are not limited to a minimum excess availability of the facility and minimum earnings before interest, taxes, depreciation and amortization of ePlus Technology, inc. ~~and its subsidiary~~. We were in compliance with these covenants as of ~~December 31, 2015.~~June 30, 2016. Interest on the facility is assessed at a rate of the One Month LIBOR plus two and one half percent if the payments are not made on the three specified dates each month. The facility also requires that financial statements of ePlus Technology, inc. ~~and its subsidiarybe~~be provided within 45 days of each quarter and 90 days of each fiscal year end and also requires other operational reports be provided on a regular basis. Either party may terminate the facility with 90 days advance written notice.

We are not, and do not believe that we are reasonably likely to be, in breach of the ~~GECDF~~WFCDF credit facility. In addition, we do not believe that the covenants of the ~~GECDF~~WFCDF credit facility materially limit our ability to undertake financing. In this regard, the covenants apply only to our subsidiary, ePlus Technology, inc. ~~and its subsidiary~~. This credit facility is secured by the assets of only ePlus Technology, inc. and ~~its subsidiary~~ e~~Plus Technology Services, inc.and~~ the guaranty as described below.

The facility provided by ~~GECDF~~WFCDF requires a guaranty of $10.5 million by ePlus inc. The guaranty requires ePlus inc. to deliver its annual audited financial statements by a certain date. We have delivered the annual audited financial statements for the year ended March 31, ~~2015,~~2016, as required. The loss of the ~~GECDF~~WFCDF credit facility could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology segment and as an operational function of our accounts payable process.

Floor Plan Component

The traditional business of ePlus Technology, inc. ~~and its subsidiaryas~~as a seller of computer technology, related peripherals and software products, is in part financed through a floor plan component in which interest expense for the first thirty to sixty days, in general, is not charged. The floor plan liabilities are recorded as accounts payable—floor plan on our ~~condensed~~ consolidated balance sheets, as they are normally repaid within the fifteen to sixty-day time frame and represent assigned accounts payable originally generated with the manufacturer/distributor. In some cases we are able to pay invoices early and receive a discount, but if the fifteen to sixty-day obligation is not paid timely, interest is then assessed at stated contractual rates.

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The respective floor plan component credit limits and actual outstanding balance payables for the dates indicated were as follows (in thousands):

Maximum Credit Limit at December 31, 2015		Balance as of December 31, 2015		Maximum Credit Limit at March 31,2015		Balance as of March 31, 2015
Maximum Credit Limit at June 30, 2016								Maximum Credit Limit at June 30, 2016	Balance as of June 30, 2016		Maximum Credit Limit at March 31, 2016		Balance as of March 31, 2016
$	250,000	$	127,999	$	225,000	$	99,418	250,000	$	144,509	$	250,000	$	121,893

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Accounts Receivable Component

Included within the credit facility, e~~Plus~~ePlus Technology, inc. ~~and its subsidiary have~~has an accounts receivable component from ~~GECDF,~~WFCDF, which has a revolving line of credit. On the due date of the invoices financed by the floor plan component, the invoices are paid by the accounts receivable component of the credit facility. The balance of the accounts receivable component is then reduced by payments from our available cash. The outstanding balance under the accounts receivable component is recorded as recourse notes payable on our consolidated balance sheets. There was no balance outstanding for the accounts receivable component at ~~December 31, 2015~~June 30, 2016 or March 31, ~~2015,~~2016, while the maximum credit limit was $30.0 million for both periods.

Performance Guarantees

In the normal course of business, we may provide certain customers with performance guarantees, which are generally backed by surety bonds. In general, we would only be liable for the amount of these guarantees in the event of default in the performance of our obligations. We are in compliance with the performance obligations under all service contracts for which there is a performance guarantee, and we believe that any liability incurred in connection with these guarantees would not have a material adverse effect on our consolidated statements of operations.

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K or other contractually narrow or limited purposes. As of ~~December 31, 2015,~~June 30, 2016, we were not involved in any unconsolidated special purpose entity transactions.

Adequacy of Capital Resources

The continued implementation of our business strategy will require a significant investment in both resources and managerial focus. In addition, we may selectively acquire other companies that have attractive customer relationships and skilled sales and/or engineering forces. We may also start offices in new geographic areas, which may require a significant investment of cash. We may also acquire technology companies to expand and enhance the platform of bundled solutions to provide additional functionality and value-added services. We may continue to use our internally generated funds to finance investments in leased assets or investments in notes receivables due from our customers. As a result, we may require additional financing to fund our strategy, implementation and potential future acquisitions, which may include additional debt and equity financing.

Inflation

For the periods presented herein, inflation has been relatively low and we believe that inflation has not had a material effect on our results of operations.

Potential Fluctuations in Quarterly Operating Results

Our future quarterly operating results and the market price of our common stock may fluctuate. In the event our revenues or earnings for any quarter are less than the level expected by securities analysts or the market in general, such shortfall could have an immediate and significant adverse impact on the market price of our common stock. Any such adverse impact could be greater if any such shortfall occurs near the time of any material decrease in any widely followed stock index or in the market price of the stock of one or more public equipment leasing and financing companies, IT resellers, software competitors, major customers or vendors of ours.

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Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to currency fluctuations, reduction in IT spending, any reduction of expected residual values related to the equipment under our leases, the timing and mix of specific transactions, the reduction of manufacturer incentive programs, and other factors. Quarterly operating results could also fluctuate as a result of our sale of equipment in our lease portfolio at the expiration of a lease term or prior to such expiration, to a lessee or to a third party and the transfer of financial assets. Sales of equipment and transfers of financial assets may have the effect of increasing revenues and net income during the quarter in which the sale occurs, and reducing revenues and net income otherwise expected in subsequent quarters. See Part I, Item 1A, “Risk Factors,” in our ~~2015~~2016 Annual ~~Report.~~Financial Statements.

We believe that comparisons of quarterly results of our operations are not necessarily meaningful and that results for one quarter should not be relied upon as an indication of future performance.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Although a substantial portion of our liabilities are non-recourse, fixed-interest-rate instruments, we utilize our ~~line~~lines of credit and other financing facilities which are subject to fluctuations in short-term interest rates. These instruments, which are denominated in U.S. dollars, were entered into for other than trading purposes and, with the exception of amounts drawn under the ~~GECDF~~WFCDF facility, bear interest at a fixed rate. Because the interest rate on these instruments is fixed, changes in interest rates will not directly impact our cash flows. ~~Changes in interest rates may affect our ability to fund or transfer our financing arrangements if the rate rises above the fixed rate of the instrument.~~ Borrowings under the ~~GECDF~~WFCDF facility bear interest at a market-based variable rate. As of ~~December 31, 2015,~~June 30, 2016, the aggregate fair value of our recourse and non-recourse ~~notes payable~~borrowings approximated their carrying value.

In December 2015, we purchased 100% of the stock of IGXGlobal UK, Ltd, a company formed and operated in the United Kingdom with a functional currency of ~~Great~~ British Pounds. In addition, the company also transacts in Euros and U. S. Dollars. There is a potential for exposure to fluctuations in foreign currency rates resulting primarily from the translation exposure associated with the preparation of our consolidated financial statements. In addition, we have foreign currency exposure when transactions are not denominated in the subsidiary’s functional currency. To date, our United Kingdom operations are insignificant in relation to total consolidated operations and we believe that potential fluctuations in currency exchange rates will not have a material effect on our financial position.

We have ~~financed certain customer leases for equipment which is located~~operations in Canada and Iceland. As such, we have entered into lease contracts and non-recourse, fixed-interest-rate financing denominated in Canadian dollars and in Icelandic krona. In our fiscal year beginning April 1, 2016, we began entering in financing transactions and non-recourse, fixed-interest-rate financing denominated in British Pounds in the United Kingdom. To date, our ~~Canadian and Icelandic~~foreign operations have been insignificant and we believe that potential fluctuations in currency exchange rates will not have a material effect on our financial position. ~~We also transact business in other foreign currencies which are subject to fluctuation, however, the dollar volume of these transactions is immaterial.~~

Item 4.

Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures, or “disclosure controls,” as defined in the Exchange Act Rule 13a-15(e). Disclosure controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this quarterly report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Our disclosure controls include some, but not all, components of our internal control over financial reporting. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of ~~December 31, 2015.~~June 30, 2016.

Changes in Internal Controls

There have not been any changes in our internal control over financial reporting during the quarter ended ~~December 31, 2015,~~June 30, 2016, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Limitations on the Effectiveness of Controls

Our management, including our CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system cannot provide absolute assurance due to its inherent limitations; it is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. A control system also can be circumvented by collusion or improper management override. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of such limitations, disclosure controls and internal control over financial reporting cannot prevent or detect all misstatements, whether unintentional errors or fraud. However, these inherent limitations are known features of the financial reporting process; therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

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~~PART II.~~

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

We ~~were~~are not currently a party to any legal proceedings with loss contingencies that are expected to be material. From time to time, we may be a plaintiff, or may be named as a defendant, in legal actions arising from our normal business activities, none of which has had a material effect on our business, results of operations or financial condition. Legal proceedings which may arise in the ~~plaintiff~~ordinary course of business include preference payment claims asserted in customer bankruptcy proceedings, tax audits, claims of alleged infringement of patents, trademarks, copyrights and other intellectual property rights, claims of alleged non-compliance with contract provisions, employment related claims, claims by competitors, vendors or customers, claims related to alleged violations of laws and regulations, and claims relating to alleged security or privacy breaches. We attempt to ameliorate the effect of potential litigation through insurance coverage and contractual protections such as rights to indemnification and limitations of liability. We do not expect that the outcome in any of these matters, individually or collectively, will have a material adverse effect on our financial condition or results of operations, however, litigation is inherently unpredictable. Therefore, judgments could be rendered or settlements entered that could adversely affect our results of operations or cash flows in a ~~lawsuit in the United States District Court~~particular period. We provide for ~~the Eastern District of Virginia (“the Trial Court”) in which, on January 27, 2011,~~costs related to contingencies when a ~~jury unanimously found that Lawson Software, Inc. (“Lawson”) infringed certain ePlus patents. On August 16, 2013, the Trial Court found, by clear~~loss is probable and convincing evidence, that Lawson was in contempt of the Trial Court’s May 23, 2011, injunction which restricted Lawson from taking certain actions that infringed one of our patents, and entered judgment in our favor in the amount of $18.2 million. Lawson appealed, and while the appeal was pending, on April 3, 2014, the United States Patent and Trademark Office issued a notice canceling the patent. On July 25, 2014, the Appeals Court vacated the injunction and the contempt order. On June 18, 2015, the Appeals Court, in a 5-5 split opinion, denied our petition for rehearing. We have filed a petition asking the United States Supreme Court to consider the case.

~~Court calendars and rulings are inherently unpredictable, and we cannot predict whether the Supreme Court will hear our case, when any litigation will be resolved, or the outcome thereof.~~is reasonably determinable.

Other Matters

We may become party to various legal proceedings arising in the ordinary course of business including preference payment claims asserted in customer bankruptcy proceedings, claims of alleged infringement of patents, trademarks, copyrights and other intellectual property rights, claims of alleged non-compliance with contract provisions, employment related claims, claims by competitors, vendors or customers, claims related to alleged violations of laws and regulations, and claims relating to alleged security or privacy breaches. Although we do not expect that the outcome in any of these matters, individually or collectively, will have a material adverse effect on our financial condition or results of operations, litigation is inherently unpredictable. Therefore, judgments could be rendered or settlements entered that could adversely affect our results of operations or cash flows in a particular period. We provide for costs related to contingencies when a loss is probable and the amount is reasonably determinable.

Item 1A.

Risk Factors

There has not been any material change in the risk factors previously disclosed in Part I, Item 1A of our ~~2015~~2016 Annual ~~Report, except as noted below:~~

~~Our Results of Operations are Subject to Fluctuations in Foreign Currency~~

In December 2015, we purchased 100% of the stock of IGXGlobal UK Limited, a company formed and operating in the United Kingdom. As result of this acquisition, although not significant, we have additional exposure to fluctuations in foreign currency rates results primarily from the translation exposure associated with the preparation of our consolidated financial statements. While our consolidated financial statements are reported in U.S. dollars, the financial statements of our subsidiaries outside the U.S. are prepared using the local currency as the functional currency and translated into U.S. dollars. As a result, fluctuations in the exchange rate of the U.S. dollar relative to the local currencies of our international subsidiaries in Canada and the United Kingdom could cause fluctuations in our results of operations. We also have foreign currency exposure to the extent net sales and purchases are not denominated in a subsidiary’s functional currency, which could have an adverse effect on our business, results of operations or cash flows.Financial Statements.

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Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information regarding our purchases of ePlus inc. common stock during the ~~nine~~three months ended ~~December 31, 2015.~~June 30, 2016.

Period
Total
number of
shares
purchased
(1)

Average
price paid
per share

Total number of
shares
purchased as
part of publicly
announced plans
or programs

Maximum number (or
approximate dollar
value) of shares that
may yet be purchased
under the plans or
programs
April 1, 2015 through April 30, 2015 - - 351,960 (2 )
May 1, 2015 through May 31, 2015 - - 351,960 (3 )
June 1, 2015 through June 15, 2015 18,284 $ 82.63 - 351,960 (4 )
June 16, 2015 through August 16, 2015 12,163 $ 79.32 - - (5 )
August 17, 2015 through August 31, 2015 - n/a - 500,000 (6 )
September 1, 2015 through September 30, 2015 - n/a - 500,000 (7 )
October 1, 2015 through October 31, 2015 - n/a - 500,000 (8 )
November 1, 2015 through November 30, 2015 - n/a - 500,000 (9 )
December 1, 2015 through December 31, 2015 - n/a - 500,000 (10 )

Period	Total number of shares purchased (1)		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs
April 1, 2016 through April 30, 2016		113,035	$	80.70		113,035		270,663	(2)
May 1, 2016 through May 31, 2016		78,659	$	81.59		78,659		192,004	(3)
June 1, 2016 through June 30, 2016		64,834	$	84.78		35,098		156,906	(4)

(1)

All shares acquired were in open-market purchases, except for 29,736 shares, which were repurchased in June 2016 to satisfy tax withholding obligations that arose due to the vesting of shares of restricted stock.

(2)

The share purchase authorization in place for the month ended April 30, ~~2015~~2016 had purchase limitations on the number of shares of up to 500,000 shares. As of April 30, ~~2015,~~2016, the remaining authorized shares to be purchased were ~~351,960.~~270,663.

(3)

The share purchase authorization in place for the month ended May 31, ~~2015~~2016 had purchase limitations on the number of shares of up to 500,000 shares. As of May 31, ~~2015,~~2016, the remaining authorized shares to be purchased were ~~351,960.~~192,004.

(4)

The share purchase authorization ~~expired~~in place for the month ended June ~~15, 2015 and~~30, 2016 had purchase limitations on the number of shares of up to 500,000 shares. As of June ~~15, 2015,~~30, 2016, the remaining ~~number of~~ authorized shares ~~that could have been~~to be purchased ~~was 351,960.~~

~~(5)~~

~~There was no share purchase authorization plan in place from June 16, 2015 to August 16, 2015. The previous plan expired on June 15, 2015.~~

~~(6)~~

On August 13, 2015, the board of directors authorized the company to repurchase up to 500,000 shares of its outstanding common stock commencing on August 17, 2015 through August 16, 2016. As of August 31, 2015, no stock purchases were ~~made under this authorization.~~

~~(7)~~

The share purchase authorization in place for the month ended September 30, 2015 had purchase limitations on the number of shares of up to 500,000 shares. As of September 30, 2015, no stock purchases were made under this authorization.

~~(8)~~

The share purchase authorization in place for the month ended October 31, 2015 had purchase limitations on the number of shares of up to 500,000 shares. As of October 31, 2015, no stock purchases were made under this authorization.

~~(9)~~

The share purchase authorization in place for the month ended November 30, 2015 had purchase limitations on the number of shares of up to 500,000 shares. As of November 30, 2015, no stock purchases were made under this authorization.

~~(10)~~

The share purchase authorization in place for the month ended December 31, 2015 had purchase limitations on the number of shares of up to 500,000 shares. As of December 31, 2015, no stock purchases were made under this authorization.156,906.

The timing and expiration date of the current stock repurchase authorizations are included in Note 9,10, “Stockholders’ Equity” to our unaudited condensed consolidated financial statements included elsewhere in this report.

~~Table of Contents~~

Item 3.

Defaults Upon Senior Securities

Not Applicable.

Item 4.

Mine Safety Disclosures

Not Applicable.

Item 5.

Other Information

None.

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Item 6.

Exhibits

10.1	Amended and Restated Employment Agreement between ePlus inc. and Mark P. Marron, effective August 1, 2016 (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 27, 2016).

10.2	Employment Agreement between ePlus inc. and Phillip G. Norton, effective August 1, 2016 (Incorporated herein by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on July 27, 2016).

10.3	Amended and Restated Employment Agreement between ePlus inc. and Elaine D. Marion, effective August 1, 2016 (Incorporated herein by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on July 27, 2016).

10.4	Amendment No. 4, dated July 28, 2016, to Amended and Restated Agreement for Wholesale Financing between ePlus Technology, inc. and Wells Fargo Commercial Distribution Finance, LLC (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on August 1, 2016).

10.5	Amendment No. 4, dated July 28, 2016, to Amended and Restated Business Financing Agreement between ePlus Technology, inc. and Wells Fargo Commercial Distribution Finance, LLC (Incorporated herein by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on August 1, 2016).

31.1	Certification of the Chief Executive Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).

31.2	Certification of the Chief Financial Officer of ePlus inc. pursuant to the Securities Exchange Act Rules 13a-14(a) and 15d-14(a).

32	Certification of the Chief Executive Officer and Chief Financial Officer of ePlus inc. pursuant to 18 U.S.C. § 1350.

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ePlus inc.

Date: ~~February 4,~~August 2, 2016	/s/ ~~PHILLIP G. NORTON~~MARK P. MARRON
	By: ~~Phillip G. Norton, Chairman of the Board,~~Mark P. Marron,
	~~President and~~ Chief Executive Officer and President
	(Principal Executive Officer)

Date: ~~February 4,~~August 2, 2016	/s/ ELAINE D. MARION
	By: Elaine D. Marion
	Chief Financial Officer
	(Principal Financial Officer)

Reporting Unit	December 31, 2015		March 31, 2015
Technology	$	41,264	$	33,023
Software Document Management		1,089		1,089

	Number of Shares			Weighted Average Grant- date Fair Value

Nonvested April 1, 2015		176,514		$	52.75
Granted		125,357		$	81.76
Vested		(95,321	)	$	48.79
Forfeited		(2,321	)	$	64.06
Nonvested December 31, 2015		204,229		$	72.28

	Nine Months Ended
	December 31, 2015						December 31, 2014
	Technology		Financing		Total		Technology		Financing		Total

Sales of product and services	$	871,814	$	-	$	871,814	$	843,619	$	-	$	843,619
Financing revenue		-		27,914		27,914		-		26,339		26,339
Fee and other income		5,038		30		5,068		5,969		90		6,059
Net sales		876,852		27,944		904,796		849,588		26,429		876,017

Cost of sales, product and services		700,429		-		700,429		681,852		-		681,852
Direct lease costs		-		9,256		9,256		-		8,364		8,364
Cost of sales		700,429		9,256		709,685		681,852		8,364		690,216

Professional and other fees		4,175		738		4,913		4,065		781		4,846
Salaries and benefits		101,471		6,855		108,326		96,140		6,691		102,831
General and administrative expenses		20,381		748		21,129		19,379		1,285		20,664
Interest and financing costs		51		1,320		1,371		77		1,753		1,830
Operating expenses		126,078		9,661		135,739		119,661		10,510		130,171

Operating income		50,345		9,027		59,372		48,075		7,555		55,630

Other income		-		-		-		-		7,603		7,603

Earnings before provision for income taxes	$	50,345	$	9,027	$	59,372	$	48,075	$	15,158	$	63,233

Depreciation and amortization	$	3,728	$	9,243	$	12,971	$	3,219	$	8,222	$	11,441
Purchases of property, equipment and operating lease equipment	$	1,700	$	15,308	$	17,008	$	2,932	$	4,639	$	7,571
Total assets	$	401,422	$	229,012	$	630,434	$	366,740	$	224,625	$	591,365