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 or inaccurate costs and completion dates for our services, which could affect our ~~estimates.~~estimates; and

•	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.

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 Item ~~1A,~~1A, “Risk Factors” and Item 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”).

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

	September 30, 2019			March 31, 2019			June 30, 2020			March 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	55,832		$	79,816		$	144,382		$	86,231
Accounts receivable—trade, net		355,178			299,899			393,044			374,998
Accounts receivable—other, net		38,613			41,328			33,076			36,570
Inventories		57,198			50,493			93,323			50,268
Financing receivables—net, current		108,646			63,767			116,120			70,169
Deferred costs		19,225			17,301			20,785			22,306
Other current assets		6,867			7,499			6,102			9,256
Total current assets		641,559			560,103			806,832			649,798

Financing receivables and operating leases—net		79,512			59,032			68,862			74,158
Property, equipment and other assets		35,304			17,328			33,025			32,596
Goodwill		118,097			110,807			118,097			118,097
Other intangible assets—net		39,794			38,928			32,046			34,464
TOTAL ASSETS	$	914,266		$	786,198		$	1,058,862		$	909,113

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Current liabilities:
Accounts payable	$	107,336		$	86,801		$	136,507		$	82,919
Accounts payable—floor plan		129,668			116,083			175,701			127,416
Salaries and commissions payable		23,679			21,286			26,460			30,952
Deferred revenue		50,284			47,251			57,271			55,480
Recourse notes payable—current		-			28			37,271			37,256
Non-recourse notes payable—current		77,608			38,117			55,667			29,630
Other current liabilities		32,924			19,285			30,683			22,986
Total current liabilities		421,499			328,851			519,560			386,639

Non-recourse notes payable—long term		8,404			10,502			5,500			5,872
Deferred tax liability—net		4,927			4,915			2,731			2,730
Other liabilities		29,147			17,677			28,346			27,727
TOTAL LIABILITIES		463,977			361,945			556,137			422,968

COMMITMENTS AND CONTINGENCIES (Note 10)
COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS' EQUITY

Preferred stock, $0.01 per share par value; 2,000 shares authorized; NaN outstanding		-			-			-			-
Common stock, $0.01 per share par value; 25,000 shares authorized; 13,513 outstanding at September 30, 2019 and 13,611 outstanding at March 31, 2019		144			143
Common stock, $0.01 per share par value; 25,000 shares authorized; 13,553 outstanding at June 30, 2020 and 13,500 outstanding at March 31, 2020								145			144
Additional paid-in capital		141,297			137,243			147,082			145,197
Treasury stock, at cost, 884 shares at September 30, 2019 and 693 shares at March 31, 2019		(67,691	)		(53,999	)
Treasury stock, at cost, 934 shares at June 30, 2020 and 896 shares at March 31, 2020								(71,127	)		(68,424	)
Retained earnings		377,423			341,137			427,579			410,219
Accumulated other comprehensive income—foreign currency translation adjustment		(884	)		(271	)		(954	)		(991	)
Total Stockholders' Equity		450,289			424,253			502,725			486,145
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	914,266		$	786,198		$	1,058,862		$	909,113

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

	Three Months Ended September 30,					Six Months Ended September 30,					Three Months Ended June 30,
	2019			2018		2019			2018		2020		2019

Net sales
Product	$	363,497		$	309,475	$	699,098		$	632,292	$	307,240	$	335,601
Services		48,068			35,568		93,839			69,283		47,791		45,771
Total		411,565			345,043		792,937			701,575		355,031		381,372
Cost of sales
Product		278,863			238,134		538,926			493,946		226,634		260,063
Services		29,671			21,409		58,341			41,426		29,840		28,670
Total		308,534			259,543		597,267			535,372		256,474		288,733

Gross profit		103,031			85,500		195,670			166,203		98,557		92,639

Selling, general, and administrative		70,523			57,705		136,310			114,671		69,467		65,787
Depreciation and amortization		3,557			2,741		7,020			5,531		3,516		3,463
Interest and financing costs		576			484		1,204			960		577		628
Operating expenses		74,656			60,930		144,534			121,162		73,560		69,878

Operating income		28,375			24,570		51,136			45,041		24,997		22,761

Other income (expense)		(40	)		322		(85	)		419		98		(45	)

Earnings before tax		28,335			24,892		51,051			45,460		25,095		22,716

Provision for income taxes		8,237			6,889		14,765			12,184		7,735		6,528

Net earnings	$	20,098		$	18,003	$	36,286		$	33,276	$	17,360	$	16,188

Net earnings per common share—basic	$	1.51		$	1.33	$	2.72		$	2.47	$	1.30	$	1.21
Net earnings per common share—diluted	$	1.51		$	1.33	$	2.71		$	2.45	$	1.30	$	1.20

Weighted average common shares outstanding—basic		13,312			13,494		13,334			13,464		13,322		13,356
Weighted average common shares outstanding—diluted		13,350			13,586		13,408			13,597		13,388		13,457

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE~~COMPREHENSIVE INCOME

(in thousands)

													Three Months Ended June 30,
	Three Months Ended September 30,						Six Months Ended September 30,						2020		2019
	2019			2018			2019			2018

NET EARNINGS	$	20,098		$	18,003		$	36,286		$	33,276		$	17,360	$	16,188

OTHER COMPREHENSIVE INCOME, NET OF TAX:

Foreign currency translation adjustments		(350	)		(143	)		(613	)		(800	)		37		(263	)

Other comprehensive income (loss)		(350	)		(143	)		(613	)		(800	)		37		(263	)

TOTAL COMPREHENSIVE INCOME	$	19,748		$	17,860		$	35,673		$	32,476		$	17,397	$	15,925

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS ~~(in~~

(in thousands)

Six Months Ended September 30,
2019 2018

Cash Flows From Operating Activities:
Net earnings $ 36,286 $ 33,276

Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization 10,077 8,867
Reserve for credit losses, inventory obsolescence, and sales returns 631 178
Share-based compensation expense 4,054 3,561
Deferred taxes (3 ) -
Payments from lessees directly to lenders—operating leases (34 ) (75 )
Gain on disposal of property, equipment, and leased equipment (436 ) (939 )
Gain on sale of financing receivables - (2,584 )
Other - 2
Changes in:
Accounts receivable (46,100 ) (29,287 )
Inventories-net (5,301 ) (16,688 )
Financing receivables—net (76,423 ) (5,922 )
Deferred costs and other assets (18,826 ) 4,920
Accounts payable-trade 15,585 2,375
Salaries and commissions payable, deferred revenue, and other liabilities 26,086 (14,769 )
Net cash used in operating activities $ (54,404 ) $ (17,085 )

Cash Flows From Investing Activities:
Proceeds from sale of property, equipment, and leased equipment $ 653 $ 1,764
Purchases of property, equipment, and operating lease equipment (4,888 ) (6,451 )
Purchases of assets to be leased or financed - (8,620 )
Issuance of financing receivables - (88,442 )
Repayments of financing receivables - 33,349
Proceeds from sale of financing receivables - 30,463
Cash used in acquisitions, net of cash acquired (13,815 ) -
Net cash used in investing activities $ (18,050 ) $ (37,937 )

	Three Months Ended June 30,
	2020			2019

Cash flows from operating activities:
Net earnings	$	17,360		$	16,188

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization		4,779			4,964
Reserve for credit losses		787			351
Share-based compensation expense		1,885			1,919
Deferred taxes		1			(3	)
Payments from lessees directly to lenders—operating leases		(8	)		(22	)
Gain on disposal of property, equipment, and operaing lease equipment		(25	)		(203	)
Changes in:
Accounts receivable		(14,880	)		(69,281	)
Inventories-net		(43,038	)		(7,774	)
Financing receivables—net		(24,745	)		(58,198	)
Deferred costs and other assets		4,973			(14,379	)
Accounts payable-trade		53,675			21,089
Salaries and commissions payable, deferred revenue, and other liabilities		5,630			17,955
Net cash provided by (used in) operating activities		6,394			(87,394	)

Cash flows from investing activities:
Proceeds from sale of property, equipment, and operating lease equipment		118			292
Purchases of property, equipment and operating lease equipment		(2,277	)		(1,518	)
Net cash used in investing activities		(2,159	)		(1,226	)

Cash flows from financing activities:
Borrowings of non-recourse and recourse notes payable		10,332			41,394
Repayments of non-recourse and recourse notes payable		(1,874	)		(3,414	)
Repurchase of common stock		(2,703	)		(13,318	)
Repayments of financing of acquisitions		-			(265	)
Net borrowings on floor plan facility		48,285			19,930
Net cash provided by financing activities		54,040			44,327

Effect of exchange rate changes on cash		(124	)		81

Net increase (decrease) in cash and cash equivalents		58,151			(44,212	)

Cash and cash equivalents, beginning of period		86,231			79,816

Cash and cash equivalents, end of period	$	144,382		$	35,604

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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(in thousands)

Six Months Ended September 30,
2019 2018

Cash Flows From Financing Activities:
Borrowings of non-recourse and recourse notes payable $ 54,877 $ 27,157
Repayments of non-recourse and recourse notes payable (5,629 ) (11,229 )
Repurchase of common stock (13,692 ) �� (10,135 )
Repayments of financing of acquisitions (785 ) (2,134 )
Net borrowings (repayments) on floor plan facility 13,585 8,662
Net cash provided by financing activities 48,356 12,321

Effect of exchange rate changes on cash 114 150

Net Decrease in Cash and Cash Equivalents (23,984 ) (42,551 )

Cash and Cash Equivalents, Beginning of Period 79,816 118,198

Cash and Cash Equivalents, End of Period $ 55,832 $ 75,647

Supplemental Disclosures of Cash Flow Information:
Cash paid for interest $ 1,115 $ 945
Cash paid for income taxes $ 12,471 $ 11,221
Cash paid for amounts included in the measurement of lease liabilities $ 2,566 $ -

Schedule of Non-Cash Investing and Financing Activities:
Proceeds from sale of property, equipment, and leased equipment $ - $ 461
Purchases of property, equipment, and operating lease equipment $ (396 ) $ (934 )
Purchases of assets to be leased or financed $ - $ 1,010
Issuance of financing receivables $ - $ (36,655 )
Proceeds from sale of financing receivables $ - $ 40,265
Financing of acquisitions $ (1,464 ) $ -
Borrowing of non-recourse and recourse notes payable $ 82,462 $ 37,688
Repayments of non-recourse and recourse notes payable $ (34 ) $ (63 )
Vesting of share-based compensation $ 8,972 $ 12,769
New operating lease assets obtained in exchange for lease obligations $ 5,225 $ -

	Three Months Ended June 30,
	2020			2019
Supplemental disclosures of cash flow information:
Cash paid for interest	$	558		$	595
Cash paid for income taxes	$	193		$	5,616
Cash paid for amounts included in the measurement of lease liabilities	$	1,503		$	1,081

Schedule of non-cash investing and financing activities:
Purchases of property, equipment, and operating lease equipment	$	(237	)	$	(1,947	)
Borrowing of non-recourse and recourse notes payable	$	22,824		$	30,046
Repayments of non-recourse and recourse notes payable	$	(8	)	$	(22	)
Vesting of share-based compensation	$	7,472		$	7,774
Repurchase of common stock	$	-		$	(137	)
New operating lease assets obtained in exchange for lease obligations	$	726		$	1,291

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Six Months Ended September 30, 2019																		Three Months Ended June 30, 2020
	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
Balance, March 31, 2019		13,611		$	143	$	137,243	$	(53,999	)	$	341,137	$	(271	)	$	424,253
Balance, March 31, 2020																				13,500		$	144	$	145,197	$	(68,424	)	$	410,219	$	(991	)	$	486,145
Issuance of restricted stock awards		86			1		-		-			-		-			1			91			1		-		-			-		-			1
Share-based compensation		-			-		1,919		-			-		-			1,919			-			-		1,885		-			-		-			1,885
Repurchase of common stock		(188	)		-		-		(13,455	)		-		-			(13,455	)		(38	)		-		-		(2,703	)		-		-			(2,703	)
Net earnings		-			-		-		-			16,188		-			16,188			-			-		-		-			17,360		-			17,360
Foreign currency translation adjustment		-			-		-		-			-		(263	)		(263	)		-			-		-		-			-		37			37

Balance, June 30, 2019		13,509		$	144	$	139,162	$	(67,454	)	$	357,325	$	(534	)	$	428,643

Issuance of restricted stock awards		7					-		-			-		-			-
Share-based compensation		(3	)		-		2,135		-			-		-			2,135
Repurchase of common stock					-		-		(237	)		-		-			(237	)
Net earnings		-			-		-		-			20,098		-			20,098
Foreign currency translation adjustment		-			-		-		-			-		(350	)		(350	)

Balance, September 30, 2019		13,513		$	144	$	141,297	$	(67,691	)	$	377,423	$	(884	)	$	450,289
Balance, June 30, 2020																				13,553		$	145	$	147,082	$	(71,127	)	$	427,579	$	(954	)	$	502,725

	Six Months Ended September 30, 2018																		Three Months Ended June 30, 2019
	Common Stock					Additional Paid-In		Treasury			Retained		Accumulated Other Comprehensive						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
Balance, March 31, 2018		13,761		$	142	$	130,000	$	(36,016	)	$	277,945	$	532		$	372,603
Balance, March 31, 2019																				13,611		$	143	$	137,243	$	(53,999	)	$	341,137	$	(271	)	$	424,253
Issuance of restricted stock awards		70			1		-		-			-		-			1			86			1		-		-			-		-			1
Share-based compensation		-			-		1,693		-			-		-			1,693			-			-		1,919		-			-		-			1,919
Repurchase of common stock		(108	)		-		-		(9,059	)		-		-			(9,059	)		(188	)		-		-		(13,455	)		-		-			(13,455	)
Dividends declared		-			-		-		-			-		-			-
Net earnings		-			-		-		-			15,273		-			15,273			-			-		-		-			16,188		-			16,188
Foreign currency translation adjustment		-			-		-		-			-		(657	)		(657	)		-			-		-		-			-		(263	)		(263	)

Balance, June 30, 2018		13,723		$	143	$	131,693	$	(45,075	)	$	293,218	$	(125	)	$	379,854
Issuance of restricted stock awards		7			-		-		-			-		-			-
Share-based compensation		-			-		1,868		-			-		-			1,868
Repurchase of common stock		(3	)		-		-		(305	)		-		-			(305	)
Dividends declared		-			-		-		-			-		-			-
Net earnings		-			-		-		-			18,003		-			18,003
Foreign currency translation adjustment		-			-		-		-			-		(143	)		(143	)

Balance, September 30, 2018		13,727		$	143	$	133,561	$	(45,380	)	$	311,221	$	(268	)	$	399,277
Balance, June 30, 2019																				13,509		$	144	$	139,162	$	(67,454	)	$	357,325	$	(534	)	$	428,643

See Notes to Unaudited Consolidated Financial Statements.

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ePlus inc. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

BASIS OF PRESENTATION — The unaudited consolidated financial statements include the accounts of 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 unaudited consolidated financial statements from the dates of acquisition.

INTERIM FINANCIAL STATEMENTS — The unaudited consolidated financial statements for the ~~six~~three months ended ~~September~~ June 30, ~~2019~~2020, and ~~2018~~2019, 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 ~~six~~three months ended ~~September~~ June 30, ~~2019~~2020, and ~~2018~~2019 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending March 31, ~~2020~~2021, or any other future period. These unaudited consolidated financial statements do not include all disclosures required by the accounting principles generally accepted in the United States (“US GAAP”) for annual financial statements. Our audited consolidated financial statements are contained in our annual report on Form ~~10-K~~10-K for the year ended March 31, ~~2019~~2020 (“~~2019~~2020 Annual Report”), which should be read in conjunction with these interim consolidated financial statements.

USE OF ESTIMATES — The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of 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 intangible assets, ~~reserves~~allowance 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.

CONCENTRATIONS OF RISK — A substantial portion of our sales are products from Cisco Systems, which were ~~43%~~37% of our technology segment’s net sales for the three months ended ~~September~~June 30, ~~2019~~2020, and ~~45%~~40% for the three months ended ~~September~~June 30, ~~2018, and 42% and 43% of our technology segment’s net sales for the six months ended September 30, 2019 and 2018, respectively.~~2019.

SIGNIFICANT ACCOUNTING POLICIES — The significant accounting policies used in preparing these Consolidated Financial Statements were applied on a basis consistent with those reflected in our Consolidated Financial Statements for the year ended March 31, ~~2019,~~2020, except for changes from the adoption of ~~Accounting Standards Update ("ASU") 2016-02,~~ ~~Leases~~ ~~(Topic 842), as amended (“ASU 2016-02”). This update establishes Codification Topic 842,~~ ~~Leases~~ ~~(“Codification Topic 842”) within the~~ Financial Accounting Standards Board (“FASB”) Accounting Standards ~~Codification (“Codification”~~Update ("ASU")~~. The updates to our accounting policies from adopting ASU 2016-02 are provided below.~~

FINANCING REVENUE — We account for leases to customers in accordance with Codification Topic 842. We utilize a portfolio approach by grouping many similar assets being leased to one customer together.

We classify our leases as either sales-type leases or operating leases. We classify leases as sales-type leases if any one of five criteria are met, each of which indicate that the lease transfers control of the underlying asset to the lessee. We classify our other leases as operating leases.

~~Table of Contents~~

For sales-type leases, upon lease commencement, we recognize the present value of the lease payments and the residual asset discounted using the rate implicit in the lease. When we are financing equipment provided by another dealer, we typically do not have any selling profit or loss arising from the lease. When we are the dealer of the equipment being leased, we typically recognize revenue in the amount of the lease receivable and cost of sales in the amount of the carrying value of the underlying asset minus the unguaranteed residual asset. After the commencement date, we recognize interest income as part of net sales using the effective interest method.

For operating leases, we recognize the underlying asset as an operating lease asset. We depreciate the asset on a straight-line basis to its estimated residual value over its estimated useful life. We recognized the lease payments over the lease term on a straight-line basis as part of net sales.

In all our leases, we recognize variable lease payments, primarily reimbursement for property taxes associated with the leased asset, as part of net sales in the period in which the changes in facts and circumstances on which the variable lease payments are based occur. We exclude from revenues and expenses any sales taxes reimbursed by the lessee.

We also finance third-party software and third-party services for our customers, which we classify as notes-receivable. We recognize interest income on our notes-receivable using the effective interest method.

~~We account for transfers of our financial assets, including our lease receivables and notes receivable, under Codification Topic 860~~ 2016~~Transfers and Servicing~~- ~~(“Codification Topic 860”). When a transfer meets all the requirements for sale accounting, we derecognize the financial asset and record a net gain or loss that is included in net sales.~~

LESSEE ACCOUNTING — We lease office space over initial terms typically between 3 and 6 years. At the lease commencement date, we recognize operating lease liabilities based on the present value of the future minimum lease payments. In determining the present value of future minimum lease payments, we use our incremental borrowing rate based on the information available at the commencement date. When the future minimum payments encompass non-lease components, we account for the lease and non-lease components as a single lease component. We elected not to recognize right-of-use assets and lease liabilities for leases with an initial term of 12 months or less. We recognize lease expense on a straight-line basis over the lease term beginning on the commencement date.

2.	~~RECENT ACCOUNTING PRONOUNCEMENTS~~

~~RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS —We adopted~~ ASU 2016-02 in our quarter ended June 30, 2019 using a transition option that allows entities to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Under this transition option, we do not update the financial information and disclosures for comparative periods.

Additionally, we elected a package of practical expedients to not reassess whether any expired or existing contracts are or contain leases, not reassess the lease classification for any expired or existing leases, and not reassess initial direct costs for any existing leases. As a result of our adoption, we recorded an initial impact to our consolidated balance sheets of establishing right-of-use assets of $~~12.7~~13, ~~million and lease liabilities of $12.3~~ ~~million and a reduction in prepaid assets of $0.4~~ ~~million at the beginning of our quarter ending June 30, 2019.~~

~~RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED —In June 2016, the FASB issued ASU 2016-13,~~ Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended (“ASU 2016-13”). The updates to our accounting policies from adopting ASU 2016-13 are provided below.

ALLOWANCE FOR CREDIT LOSSES — We maintain an allowance for credit losses related to our accounts receivable and financing receivables. We record an expense in the amount necessary to adjust the allowance for credit losses to our current estimate of expected credit losses on financial assets. We estimate expected credit losses based on our internal rating of the customer’s credit quality, our historical credit losses, current economic conditions, and other relevant factors. Prior to providing credit, we assign an internal rating for each customer’s credit quality based on the customer’s financial status, rating agency reports and other financial information. We review our internal ratings for each customer at least annually or when there is an indicator of a change in credit quality, such as a delinquency or bankruptcy. We charge off uncollectable financing receivables when we stop pursuing collection.

2.	RECENT ACCOUNTING PRONOUNCEMENTS

CREDIT LOSSES — We adopted ASU 2016-13 on April 1, 2020. The amendments in this update replace the incurred loss impairment methodology in current US 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~~We are adopting this update ~~requires adoption under a modified retrospective approach and will become effective for us~~ in ~~the~~our quarter ending June 30, 2020. ~~We are currently evaluating the impact~~Our adoption of this update, onincluding the cumulative-effect adjustment to retained earnings, is not significant to our financial statements. Refer to Note 7, “Allowance for Credit Losses” for additional information.

For the six months ended September 30, 2019, net sales increased 13.0%, or $91.4 million, to $792.9 million, compared to $701.6 million in the same period in the prior fiscal year. Product sales for the six months ended September 30, 2019 increased 10.6%, or $66.8 million, to $699.1 million compared to $632.3 million in the prior year. Services sales during the six months ended September 30, 2019 increased 35.4%, or $24.6 million, to $93.8 million compared to prior year services sales

Table of $69.3 million. The increase in net sales was due to organic growth and the acquisition of SLAIT in January 2019 as well as the acquisition of ABS Technology in August 2019. The greatest increase in demand for products was from our customers in the telecom, media and entertainment, healthcare, technology, and SLED customers, which was partially offset by reductions the all other category of customers, during the six months ended September 30, 2019 compared to the prior year.Contents

Adjusted gross billings ~~increased 19.2%~~decreased 0.4%, or ~~$93.2~~$2.0 million, to ~~$579.1~~$546.4 million for the three months ended ~~September~~June 30, ~~2019~~2020, from ~~$485.9~~$548.4 million for the same period in the prior fiscal year. ~~For the six months ended September 30, 2019,~~There was a decrease in adjusted gross billings ~~increased 16.5%, or $159.3 million, to $1,127.4 million,~~ from ~~$968.2 million for the same period~~our customers in the ~~prior fiscal year. The~~healthcare, telecom, media and entertainment, and all the other categories of customers which was almost entirely offset by increases in demand from SLED, financial services, and technology markets. For the three months ended June 30, 2020, there was an increase in adjusted gross billings ~~is due~~of $25.3 million, to ~~higher demand from the same customer end markets~~$205.2 million for products that ~~were previously identified for the increase in~~we recognize revenue on a net ~~sales~~basis, such as, third-party maintenance, software assurance, subscriptions/SaaS licenses, and ~~the acquisitions of SLAIT and ABS Technology.~~services.

Consolidated gross profit ~~increased 20.5%, or $17.5 million~~for the three months ended June 30, 2020, rose 6.4% to ~~$103.0~~$98.6 million, compared with ~~$85.5~~$92.6 million for the three months ended ~~September~~June 30, ~~2018.~~2019. Consolidated gross margins were ~~25.0%~~27.8% for the three months ended ~~September~~June 30, ~~2019,~~2020, which is an increase of 20350 basis points compared to 24.8% for the same period in the prior fiscal year. The gross margin improvement was higher product margins and service revenues. For the six months ended September 30, 2019, consolidated gross profit rose 17.7% to $195.7 million, compared with $166.2 million for the same period in the prior fiscal year. Consolidated gross margins were 24.7% for the six months ended September 30, 2019, an increase of 100 basis points compared to 23.7%24.3% for the same period in the prior fiscal year. The increase in margins for the ~~six-month~~three-month period was due to a shift in product mix, as we sold a higher proportion of third-party maintenance, software assurance and subscription/SaaS licenses, and services, which are recognized on a net basis. Also contributing to the gross margin improvement was higher product margins, an increase in services revenue, and ~~service revenues.~~higher gross profit from of our financing segment.

Our operating expenses for the three months ended ~~September~~June 30, ~~2019~~2020, increased ~~22.5%, or $13.7 million,~~5.3% to ~~$74.7~~$73.6 million, as compared to ~~$60.9~~$69.9 million for the prior year period. The majority of this increase ~~for the three months ended September 30, 2019,~~ ~~is due to the~~ reflects increase in selling, general, and administrative expense of ~~22.2%~~5.6% or ~~$12.8~~$3.7 million, due, in part to increases in variable compensation, ~~as well as the operating expenses associated with the acquisitions of SLAIT~~employee salaries and ~~ABS Technology.~~benefits, and allowance for credit losses, partially offset by reductions in travel and entertainment, and general office related expenses. As of ~~September~~June 30, ~~2019,~~ 2020, we had ~~1,629~~ e~~Plus~~1,536 employees, ~~which includes employees joining ePlus as~~ a ~~result~~decrease of ~~our recent acquisition of ABS Technology, an increase of 374, or 29.8%,~~2 from ~~1,255~~1,538 last year. ~~This increase also includes 235 employees as of September 30, 2019 from our acquisition of SLAIT, including the employees performing our staffing services.~~ For the six months ended September 30, 2019, operating expenses increased 19.3%, or $23.4 million, to $144.5 million, as compared to $121.2 million in the prior year period. The majority of this increase for the six months ended September 30, 2019, is due to the increase in selling, general, and administrative expense of 18.9% or $21.6 million, due in part to increases in variable compensation, software license and maintenance, and the operating expenses associated with the acquisitions of SLAIT and ABS. Depreciation and amortization expense increased ~~$0.8~~$0.1 million, ~~and $1.5 million for the three and six months ended September 30, 2019, respectively,~~ due to the ~~SLAIT and~~ ABS Technology ~~acquisitions. Interest~~acquisition in August 2019, and interest and financing costs ~~increased~~decreased $0.1 million, ~~and $0.2 million, for the three and six months ended September 30, 2019, respectively~~ due to ~~an increase~~a decrease in the average balance of non-recourse notes payable outstanding during the ~~six~~three months ended ~~September~~June 30, ~~2019,~~2020, as compared to the prior year.

As a result, operating income ~~for~~increased $2.2 million, or 9.8%, to $25.0 million and operating margin increased by 100 basis points to 7.0%, as compared to the three months ended ~~September~~June 30, 2019 increased $3.8 million, or 15.5%, to $28.4 million as compared to $24.6 for the same period in the prior year period. For the six months ended September 30, 2019, operating income increased $6.1 million, or 13.5%, to $51.1 million, as compared to $45.0 million for the same period in the prior year.2019.

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~~Our effective tax rate for the current quarter was 29.1%, compared to 27.7%, in the prior year quarter.~~ Consolidated net earnings for the three months ended ~~September~~June 30, ~~2019,~~2020, were ~~$20.1~~$17.4 million, an increase of ~~11.6%~~7.2%, or $2.1 million, over the prior year’s results. Our effective tax rate for the six months ended September 30, 2019 was 28.9%, compared to 26.8%, for the same period in the prior year, during which time the consolidated net earnings were $36.3 million, an increase of 9.0%, or $3.0 million, compared to the prior year’s results. The increase in our effective income tax rate is due to a decrease in the tax benefit on the vesting of restricted stock and an increase in estimated permanent items.

~~Consolidated net earnings for the three months ended September 30, 2019 were $20.1 million, an increase of 11.6%, or $2.1~~$1.2 million, over the prior year’s results, due to the increase in ~~revenues and~~ gross profit, partially offset by increased operating expenses. ~~For~~Our effective tax rate for the ~~six months ended September 30, 2019, net earnings were $36.3 million, an increase of $3.0 million, or 9.0%~~current quarter was 30.8%, ~~over~~compared with 28.7% in the prior ~~year’s results,~~year quarter. The change in our effective tax rate was due to an adjustment to the ~~increase in revenues and gross profit, partially offset by increased operating expenses and acquisition related expenses.~~federal benefit on state taxes.

Adjusted EBITDA increased ~~$5.5~~$2.1 million, or ~~18.5%~~7.5%, to ~~$35.4~~$30.7 million and adjusted EBITDA margin ~~decreased 10~~increased 120 basis points to ~~8.6%~~8.7% for the three months ended ~~September~~June 30, 2019, as compared to prior year period of 8.7%. For the six months ended September 30, 2019, adjusted EBITDA increased $8.7 million, or 15.8%, to $64.0 million and the adjusted EBITDA margin increased 20 basis points to 8.1%2020, as compared to the prior year period of ~~7.9% for the six months ended September 30, 2019, compared to the prior year period.~~7.5%.

Diluted earnings per share increased ~~13.5%~~8.3%, or ~~$0.18,~~$0.10, to ~~$1.51~~$1.30 per share for the three months ended ~~September~~June 30, ~~2019,~~2020, as compared to ~~$1.33~~$1.20 per share for the ~~same period in the prior year.~~three months ended June 30, 2019. Non-GAAP diluted earnings per share increased ~~18.3%, or $0.28,~~4.9% to ~~$1.81~~$1.51 for the three months ended ~~September~~June 30, ~~2019. For the six months ended September 30, 2019, diluted earnings per share increased 10.6%, or $0.26, to $2.71 per share,~~2020, as compared to ~~$2.45 per share compared to the prior year period. Non-GAAP diluted earnings per share increased 16.0%, or $0.45, to $3.26~~$1.44 for the ~~six~~three months ended ~~September~~June 30, ~~2019, as compared to $2.81 for the six months ended September 30, 2018.~~2019.

Cash and cash equivalents ~~decreased $24.0~~increased $58.2 million or ~~30.0%~~67.4% to ~~$55.8~~$144.4 million at ~~September~~June 30, ~~2019,~~2020, as compared to ~~$79.8~~$86.2 million as of March 31, ~~2019.~~2020. The ~~decrease~~increase is primarily the result of ~~share repurchases, investments~~the extension of payment terms by 30 days from certain vendor partners that deferred $34.2 million in ~~our financing portfolio, working capital required for~~payments and a payroll tax deferral under the ~~growth~~Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that deferred $2.6 million in ~~our technology segment,~~payments that will be paid in December 2021 and ~~an increase in our cash conversion cycle, partially offset by cash flows from operations.~~December 2022. Our cash on hand, funds generated from operations, amounts available under our credit facility, and the possible monetization of our investment portfolio have provided sufficient liquidity for our business.

The extent of the impact of COVID-19 is uncertain and may impact our liquidity position over the longer term. As credit markets have tightened as a result of COVID-19, we may have difficulty funding our financing transactions with lenders, which may result in the use of our cash or a decrease in financing originations.

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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 IT products.

Our technology segment derives revenue from the sales of new equipment and service engagements. Included in net sales are revenues derived from performing advanced IT professional and managed services that may be sold together with and integral to third-party products and software. 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.

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.

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We endeavor to minimize our cost of sales through incentive programs provided by vendors and distributors. The programs for which we qualify 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; 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, as well as internationally in the UK, Canada, Iceland, and Spain. 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.

Fluctuations in ~~Revenues~~Operating Results

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, decision to sell financial assets, 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 other post-term events.

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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~~areas over the longer term, which may reduce our results from ~~operations in~~operations. COVID-19 may negatively affect market demand, which will likely lower our financial results, and may adversely impact our ability to expand. We are uncertain as to the ~~short term.~~extent and duration of the impact to the IT market demand for our products and services.

CRITICAL ACCOUNTING ESTIMATES

~~The preparation of financial statements~~As disclosed in conformity with US 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 inNote 2, “Recent Accounting Pronouncements”, we adopted a ~~change in financial results. On~~new credit loss standard on April 1, 2020. Under this new standard, we estimate an ~~ongoing basis, we reevaluate our estimates, including those related to revenue recognition, residual values, vendor incentives, lease classification, goodwill and intangibles, and reserves~~allowance for credit losses related to accounts receivable for future expected credit losses by using relevant information such as historical information, current conditions, and ~~income taxes specifically relating to uncertain tax positions. We base estimates~~reasonable and supportable forecasts. The allowance is measured on a collective basis when similar risk characteristics exist, and a loss-rate for each group with similar risk characteristics is determined using historical credit loss experience ~~and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form~~as the basis for ~~making judgments about~~ the ~~carrying values~~estimation of ~~assets and liabilities that~~expected credit losses. Adjustments to historical loss information are ~~not readily apparent from other sources. For all such estimates, we caution that future events rarely develop exactly~~made for differences in current conditions, as well as changes in forecasted ~~and therefore, these estimates may require adjustment.~~macroeconomic conditions. Our allowance reflects the forecasted credit deterioration due to the COVID-19 pandemic.

Our other 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 ~~2019~~2020 Annual Report.

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SEGMENT RESULTS OF OPERATIONS

The three ~~and six~~ months ended ~~September~~June 30, ~~2019,~~2020, compared to the three ~~and six~~ months ended ~~September~~June 30, ~~2018~~2019

Technology Segment

The results of operations for our technology segment for the three months ended June 30, 2020, and 2019 were as follows (dollars in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,				Three Months Ended June 30,
	2019		2018		2019		2018		2020		2019		Change
Net sales
Product	$	349,650	$	299,200	$	672,414	$	612,349	$	293,433	$	322,764	$	(29,331	)	(9.1	%)
Services		48,068		35,568		93,839		69,283		47,791		45,771		2,020		4.4	%
Total		397,718		334,768		766,253		681,632		341,224		368,535		(27,311	)	(7.4	%)

Cost of sales
Product		276,475		236,404		534,529		490,468		224,543		258,054		(33,511	)	(13.0	%)
Services		29,671		21,409		58,341		41,426		29,840		28,670		1,170		4.1	%
Total		306,146		257,813		592,870		531,894		254,383		286,724		(32,341	)	(11.3	%)

Gross profit		91,572		76,955		173,383		149,738		86,841		81,811		5,030		6.1	%

Selling, general, and administrative		67,189		55,138		129,856		109,592		65,556		62,667		2,889		4.6	%
Depreciation and amortization		3,529		2,740		6,936		5,529		3,488		3,407		81		2.4	%
Interest and financing costs										265		-		265		-
Operating expenses		70,718		57,878		136,792		115,121		69,309		66,074		3,235		4.9	%

Operating income	$	20,854	$	19,077	$	36,591	$	34,617	$	17,532	$	15,737	$	1,795		11.4	%

Adjusted gross billings	$	579,084	$	485,856	$	1,127,447	$	968,157	$	546,394	$	548,363	$	(1,969	)	(0.4	%)
Adjusted EBITDA	$	27,789	$	24,284	$	49,208	$	44,625	$	23,161	$	21,419	$	1,742		8.1	%

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Net sales: Net sales for the three months ended ~~September~~June 30, ~~2019,~~2020, were $~~397.7~~341.2 million compared to $~~334.8~~$368.5 million during the three months ended ~~September~~June 30, ~~2018, an increase~~2019, a decrease of ~~18.8%~~7.4% or ~~$62.9~~$27.3 million, due to ~~increases from~~decreases in net sales to customers in the technology, telecom, media and entertainment, ~~technology,~~ SLED, financial services, and ~~healthcare industries,~~all the other customer categories, which was partially offset by a ~~decrease~~small increase in ~~demand from financial services.~~sales to customers in the healthcare category. Product sales ~~for the three months ended September 30, 2019 increased 16.9%~~decreased 9.1%, or ~~$50.5~~$29.3 million, to $293.4 million due to ~~higher demand from our customers. Service~~a shift in mix to third-party maintenance, software assurance, subscriptions/SaaS licenses, and services where we recognize revenue on a net basis. Services revenues increased ~~35.1%~~4.4%, or ~~$12.5~~$2.0 million, $47.8 million to ~~$48.1 million~~ due to an increase in staffing and professional and managed ~~services primarily from~~services.

Adjusted gross billings decreased 0.4%, or $2.0 million, to $546.4 million for the ~~SLAIT acquisition. For the six~~three months ended ~~September~~June 30, ~~2019, net sales increased 12.4%, or $84.6~~2020, from $548.4 million ~~to $766.3 million compared to $681.6 million during~~for the same period in the prior fiscal year. ~~Product sales for the six months ended September 30, 2019 increased 9.8%, or $60.1 million to $672.4 million due to higher~~A decrease in demand from our ~~customers; and services revenues increased 35.4%, or $24.6 million, to $93.8 million, due to increases from~~ customers in the healthcare, telecom, media and entertainment, and all the other categories of customers, was almost entirely offset by increases in demand from SLED, financial services, and technology ~~SLED, and healthcare industries.~~

~~Adjusted gross billings for~~markets. For the three months ended ~~September~~June 30, ~~2019 increased to $579.1 million, or 19.2%, from $485.9 million during the three months ended September 30, 2018. The~~2020, there was an increase in adjusted gross billings ~~was due, in part,~~of $25.3 million, to ~~the SLAIT~~$205.2 million for products that we recognize revenue on a net basis, such as, third-party maintenance, software assurance, subscriptions/SaaS licenses, and ~~ABS Technology acquisitions as well as higher demand from~~services.

We rely on our ~~current~~vendors to fulfill a large majority of shipments to our customers. ~~For the six months ended September 30, 2019, adjusted gross billings increased by 16.5% to $1,127.4 million compared to $968.2 million during the same period in the prior year.~~ As of ~~September~~June 30, 2020, we had open orders of $426.8 million and deferred revenue of $71.8 million. As of June 30, 2019, we had open orders of ~~$210.7 million and deferred revenue of $66.5 million. As of September 30, 2018, we had open orders of $150.3~~$210.6 million and deferred revenues of ~~$48.5~~$60.9 million.

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

	Twelve Months Ended June 30,
	2020			2019			Change
Revenue by customer end market:
Technology		21	%		21	%		0	%
SLED		16	%		17	%		(1	%)
Financial Services		13	%		15	%		(2	%)
Healthcare		15	%		15	%		0	%
Telecom, Media & Entertainment		19	%		14	%		5	%
All others		16	%		18	%		(2	%)
Total		100	%		100	%

	Twelve Months Ended June 30,
	2020			2019			Change
Revenue by vendor:
Cisco Systems		39	%		42	%		(3	%)
NetApp		4	%		4	%		0	%
HP Inc. & HPE		4	%		6	%		(2	%)
Dell/EMC		7	%		5	%		2	%
Juniper Networks		5	%		3	%		2	%
Arista Networks		4	%		4	%		0	%
All others		37	%		36	%		1	%
Total		100	%		100	%

Our revenues by customer end market have remained consistent over the year with over 80% of our revenues generated from customers within the five end markets identified ~~below.~~above. During the trailing twelve-month period ended June 30, 2020, we had an increase in the percentage total revenues from customers in the telecom, media and entertainment industry, and decreases in the percentage of total revenues in the SLED, and financial services markets. These changes ~~in revenue by customer end market~~ were driven by changes caused by the COVID-19 pandemic, changes in customer buying cycles, and the timing of specific IT related ~~initiatives. The percentage~~initiatives, rather than the acquisition or loss of ~~net sales by industry are summarized below:~~a customer or set of customers.

Twelve Months Ended
September 30,

2019 2018 Change
Revenue by customer end market:
Technology 22 % 23 % (1 %)
SLED 17 % 17 % -
Financial Services 14 % 15 % (1 %)
Healthcare 15 % 15 % -
Telecom, Media & Entertainment 16 % 13 % 3 %
All others 16 % 17 % (1 %)
Total 100 % 100 %

~~Cisco systems and HP companies, combined, produced the~~The majority of our revenues by vendor ~~at 47%~~are derived from our top six suppliers, which, when combined is a fairly constant percentage of 63% and ~~45%~~64% of total revenues for the twelve-month ~~period~~periods ended ~~September~~June 30, ~~2019~~2020, and ~~2018,~~2019, respectively. None of the vendors included within the “other” category exceeded 5% of total revenues. ~~The percentage of net sales by vendor are summarized below:~~

Twelve Months Ended
September 30,

2019 2018 Change
Revenue by vendor:
Cisco Systems 41 % 40 % 1 %
NetApp 3 % 4 % (1 %)
HP Inc. & HPE 6 % 5 % 1 %
Dell/EMC 4 % 4 % -
Juniper Networks 4 % 3 % 1 %
Arista Networks 5 % 4 % 1 %
All others 37 % 40 % (3 %)
Total 100 % 100 %

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Cost of sales: The ~~18.7% increase~~11.3% decrease in cost of sales was due to the ~~increase~~decrease in service and product sales and .a shift in product mix, as we sold a higher proportion of third-party software assurance, maintenance and services, which are recognized on a net basis resulting in an improvement in gross margin on product sales. Our gross margin ~~remained constant at 23.0%~~increased 320 basis points to 25.4% for the three months ended ~~September~~June 30, 2019 and 2018. A higher proportional increase in service sales offset a 10-basis point decline in product margin to 20.9%, and a 150-basis point decline in service margin to 38.3% for the three months ended September 30, 2019. For the six months ended September 30, 2019, gross margin increased by 60 basis points of the prior year period; product margin also increased by 60 basis points to 20.5%,2020, compared to ~~19.9%~~22.2% in the same period in the prior year ~~period. Gross margin was not affected by a reduction in service margin,~~ due to an ~~offsetting~~ increase in ~~service sales.~~our services revenues and a shift in product mix. Vendor incentives earned as a percentage of sales ~~decreased 10 basis points and 30~~increased 50 basis points for the three ~~and six~~ months ended ~~September~~June 30, ~~2019, respectively,~~2020, resulting in a favorable impact on gross margin, as compared to same period in the prior year.

Selling, general, and administrative: Selling, general, and administrative expenses of ~~$67.2~~$65.6 million for the three months ended ~~September~~June 30, ~~2019~~2020, increased by ~~$12.1~~$2.9 million, or ~~21.9%~~4.6% from ~~$55.1~~$62.7 million the prior year. Salaries and benefits increased ~~$10.0~~$5.5 million, or ~~22.4%~~10.8% to ~~$54.6~~$57.0 million, compared to ~~$44.6~~$51.5 million during the prior ~~year. The increase is~~year due to ~~increased employment levels with approximately 43.1% of this~~an increase due to higher variable compensation related to the increase in gross ~~profit.~~profit, and higher replacement costs from turnover. Our technology segment had ~~1,595~~1,500 employees as of ~~September~~June 30, ~~2019, an increase~~2020, a decrease of ~~382, or 31.5%,~~5 from ~~1,213~~1,505 at ~~September~~June 30, 2018. This increase includes 91 employees joining ePlus as a result of our recent acquisition of ABS Technology, and 235 employees as of September 30, 2019 from our acquisition of SLAIT, including the employees performing our staffing services.

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For the six months ended September 30, 2019, selling, general, and administrative expenses increased by $20.3 million, or 18.5%, to $129.9 million compared to $109.6 million the prior year. Salaries and benefits increased $16.2 million, or 18.0% to $106.1 million, compared to $89.9 million during the prior year due to increased employment levels. Approximately 37.9% of this increase is due to higher variable compensation related to the increase in gross profit.

2019. General and administrative expenses ~~increased $2.1~~decreased $2.6 million, or ~~20.3%~~23.7%, to ~~$12.7~~$8.5 million during the three months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$10.5~~$11.2 million the prior ~~year. For the six months ended September 30, 2019,~~year, due to a decrease in general office related expenses, acquisition related expenses, and ~~administrative~~travel and entertainment expenses ~~increased $4.1 million, or 21.0%, to $23.6 million. The increase in selling, general and administrative expenses was primarily~~resulting from restrictions on travel due to the ~~acquisition of SLAIT and ABS Technology, as well as other acquisition related expenses.~~COVID-19 pandemic.

Depreciation and amortization: Depreciation and amortization increased ~~$0.8~~$0.1 million, or ~~28.8%~~2.4%, to $3.5 million during the three months ended ~~September~~June 30, ~~2019~~2020, as compared to ~~$2.7~~$3.4 million in the prior year, due to the acquisition of ~~SLAIT in January 2019 and~~ ABS Technology in August ~~2019,~~2019.

Interest and ~~increased $1.4~~financing costs: Interest and financing costs of $0.3 million ~~or 25.4%, to $6.9 million~~were incurred in the ~~six~~three months ended ~~September~~June 30, ~~2019,~~2020, compared to none in the prior ~~year periods.~~year. The increase is due to $35.0 million in borrowings under the accounts receivable component of our Technology segment credit facility.

Segment operating income: As a result of the foregoing, operating income was ~~$20.9~~$17.5 million, an increase of $1.8 million, or ~~9.3%~~11.4%, for the three months ended ~~September~~June 30, ~~2019~~2020, as compared to ~~$19.1~~$15.7 million in the prior year period. For the ~~six months ended September 30, 2019, operating income was $36.6 million, compared to $34.6 million in the prior year, an increase of $2.0 million, or 5.7%. For the~~ three months ended ~~September~~June 30, ~~2019,~~2020, adjusted EBITDA was ~~$27.8~~$23.2 million, an increase of ~~$3.5~~$1.7 million, or ~~14.4%~~8.1%, compared to ~~$24.3 million in the prior year period. Adjusted EBITDA was $49.2 million, an increase of $4.6 million, or 10.3%, for the six months ended September 30, 2019, compared to $44.6~~$21.4 million in the prior year period.

Financing Segment

The results of operations for our financing segment for the three months ended June 30, 2020, and 2019 were as follows (dollars in thousands):

	Three Months Ended September 30,				Six Months Ended September 30,				Three Months Ended June 30,
	2019		2018		2019		2018		2020		2019		Change
Net product sales	$	13,847	$	10,275	$	26,684	$	19,943	$	13,807	$	12,837	$	970		7.6	%

Cost of product sales		2,388		1,730		4,397		3,478		2,091		2,009		82		4.1	%

Gross profit		11,459		8,545		22,287		16,465		11,716		10,828		888		8.2	%

Selling, general, and administrative		3,334		2,567		6,454		5,079		3,911		3,120		791		25.4	%
Depreciation and amortization		28		1		84		2		28		56		(28	)	(50.0	%)
Interest and financing costs		576		484		1,204		960		312		628		(316	)	(50.3	%)
Operating expenses		3,938		3,052		7,742		6,041		4,251		3,804		447		11.8	%

Operating income	$	7,521	$	5,493	$	14,545	$	10,424	$	7,465	$	7,024	$	441		6.3	%

Adjusted EBITDA	$	7,616	$	5,596	$	14,764	$	10,625	$	7,553	$	7,148	$	405		5.7	%

Net sales: Net sales increased by ~~$3.6~~$1.0 million, or ~~34.8%~~7.6%, to $13.8 million for the three months ended ~~September~~June 30, ~~2019,~~2020, as compared to prior year results due to higher ~~transactional gains,~~post contract earnings, and portfolio earnings, ~~and post contract earnings.~~which partially were offset by lower transactional gains. During the ~~three months~~quarters ended ~~September~~June 30, ~~2019~~2020, and ~~2018,~~2019, we recognized net gains on sales of financial assets of ~~$4.1~~$2.5 million and ~~$1.2~~$3.3 million, respectively, and the fair value of assets received from these sales were ~~$95.1~~$73.2 million and ~~$47.2~~$69.9 million, respectively. ~~For the six months ended September~~

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At June 30, 2019, net sales increased to $26.7 million, an increase of $6.7 million, or 33.8% as compared to prior year of $19.9 million. During the six months ended September 30, 2019 and 2018, we recognized net gains on sales of financial assets of $7.5 million and $2.5 million, respectively, and the fair value of assets received from these sales were $172.0 million and $94.0 million, respectively. At September 30, 2019,2020, we had ~~$188.2~~$185.0 million in financing receivables and operating leases, compared to ~~$165.4~~$169.5 million as of ~~September~~June 30, ~~2018,~~2019, an increase of ~~$22.8~~$15.5 million, or ~~13.8%~~9.1%.

Cost of ~~sales:~~sales: Cost of sales increased ~~$0.7 million and $0.9~~$0.1 million for the three ~~and six~~ months ended ~~September~~June 30, ~~2019, compared to the same periods in the prior year, respectively,~~2020, which consists of depreciation expense from operating leases. Gross profit increased by ~~34.1%~~8.2% to ~~$11.5~~$11.7 million, for the three months ended ~~September~~June 30, ~~2019, and increased by 35.4% to $22.3 million, for the six months ended September 30, 2019~~2020, as compared to $10.8 million in the prior year.

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Selling, general and ~~administrative:~~administrative: For the three ~~and six~~ months ended ~~September~~June 30, ~~2019,~~2020, selling, general, and administrative expenses increased by $0.8 million or ~~29.9%~~25.4%, ~~and $1.4 million, or 27.1%, respectively,~~ which was due primarily to an increase variable compensation due to higher gross ~~profit.~~profit and an increase in allowance for credit losses.

Interest and financing costs: Interest and financing costs ~~increased~~decreased by ~~19.0%~~50.3% to ~~$0.6~~$0.3 million for the three months ended ~~September~~June 30, ~~2019 and increased by 25.4% to $1.2 million for the six months ended September 30, 2019,~~2020, compared to the prior year, due to ~~an increase~~a decrease in the average balance and interest rate on total notes payable ~~outstanding over the same periods for the prior year.~~outstanding. Total notes payable ~~were $86.0~~for the financing segment was $63.4 million as of ~~September~~June 30, ~~2019, an increase~~2020, a decrease of ~~$20.7~~$9.5 million, or ~~31.7%~~13.0%, as compared to ~~$65.3~~$72.9 million as of ~~September~~June 30, ~~2018.~~2019. Our weighted average interest rate for non-recourse notes payable was ~~3.98%~~3.54% and ~~4.31%~~4.25%, as of ~~September~~June 30, ~~2019~~2020, and ~~2018,~~2019, respectively.

Segment operating income: As a result of the foregoing, operating income and adjusted EBITDA both increased ~~$2.0~~$0.4 million or ~~36.9%~~6.3% and ~~36.1%~~5.7%, to $7.5 million and $7.6 million, respectively, for the three months ended ~~September~~June 30, ~~2019,~~2020, over the prior year period. ~~For the six months ended September 30, 2019, operating income and adjusted EBITDA both increased $4.1 million, respectively, or 39.5% and 39.0%, to $14.5 million and $14.8 million, respectively.~~

Consolidated

Other income: Other income ~~(expense)~~increased to $0.1 million due to favorable foreign exchange rate during the three months ended ~~September~~June 30, ~~2019, was an expense of $40 thousand,~~2020, compared to ~~income of $322 thousand~~unfavorable foreign exchange rate in the prior ~~year. For the six months ended September 30, 2019 and 2018, other income (expense) was $85 thousand expense and $419 thousand income, respectively.~~year period of $0.1 million, partially offset by interest income.

Income taxes: Our provision for income tax expense was ~~$8.2 million and $14.8~~$7.7 million for the three ~~and six~~ months ended ~~September~~June 30, ~~2019,~~2020, as compared to ~~$6.9 million and $12.2~~$6.5 million for the same ~~periods~~period in the prior year. Our effective income tax rates for the three ~~and six~~ months ended ~~September~~June 30, 2020, and 2019 ~~was 29.1%~~were 30.8% and ~~28.9%~~28.7%, ~~compared to 27.7% and 26.8% for the three and six months ended September 30, 2018.~~respectively. The ~~increase~~change in our effective income tax rate iswas primarily due to ~~a decrease in~~an adjustment to the ~~tax~~federal benefit ~~on the vesting of restricted stock and an increase in estimated permanent items.~~from state taxes.

Net earnings: The foregoing resulted in net earnings of ~~$20.1~~$17.4 million for the three months ended ~~September~~June 30, ~~2019,~~2020, an increase of ~~11.6%~~7.2%, as compared to ~~$18.0~~$16.2 million during the three months ended ~~September~~June 30, ~~2018. For the six months ended September 30, 2019, net earnings were $36.3 million, an increase of $3.0 million, or 9.0%, over the same period in the prior year.~~2019.

Basic and fully diluted earnings per common share ~~were both~~was $1.30, for the three months ended June 30, 2020, an increase of 7.4% and 8.3% as compared to $1.21 and $1.20, respectively, for the three months ended June 30, 2019. Non-GAAP diluted earnings per share increased 4.9% to $1.51 for the three months ended ~~September~~June 30, ~~2019, an increase of 13.5%~~2020, as compared to ~~$1.33 for both the basic and fully diluted earnings per common share~~$1.44 for the ~~same period in the prior year. For the six~~three months ended ~~September~~June 30, ~~2019, basic and fully diluted earnings per common share were $2.72 and $2.71, an increase of 10.1% and 10.6%, as compared to $2.47 and $2.45 for the same period in the prior year, respectively.~~2019.

Weighted average common shares outstanding used in the calculation of basic and diluted earnings per common share for ~~both~~ the three ~~and six~~ months ended ~~September~~June 30, ~~2019~~2020, was 13.3 million and 13.4 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 June 30, 2019, was 13.4 million and 13.5 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity Overview

Our primary ~~sources~~source of ~~liquidity have historically been~~funding is cash ~~and cash equivalents, internally generated funds~~ from operations and borrowings ~~both~~which are accounted for as non-recourse and ~~recourse.~~recourse notes payable. We ~~have used~~use 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.

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ePlus Technology, inc. and certain of its subsidiaries, which are part of our technology segment, finance their operations with funds generated from operations, and with a credit facility with ~~WFCDF.~~Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”). This facility provides short-term capital for our technology segment. There are two components of the WFCDF credit facility: (1) a floor plan component, and (2) an accounts receivable component.

As of September 30, 2019, the facility had an aggregate limit of $325 million for the two components, and the accounts receivable component had a sub-limit of $50 million, which bears interest assessed at a rate of the One Month LIBOR plus two- and one-half percent. We have an election beginning July 1 in each year to temporarily increase the aggregate limit of the two components to $325 million ending the earlier of 90 days following the election or October 31 of that same year.

After a customer places a purchase order with us and we have completed our credit review, 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 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 consolidated balance sheets. There was no outstanding balance at September 30, 2019 or September 30, 2018, while the maximum credit limit was $50 million and $30 million, respectively. The borrowings and repayments under the floor plan component are reflected as “net borrowings (repayments) 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 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 consolidated statements of cash flows. We engage in this payment structure to minimize our interest expense and bank fees in connection with financing the operations of our technology segment.

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

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

Cash Flows

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

Six Months Ended September 30,
2019 2018
Net cash used in operating activities $ (54,404 ) $ (17,085 )
Net cash used in investing activities (18,050 ) (37,937 )
Net cash provided by financing activities 48,356 12,321
Effect of exchange rate changes on cash 114 150

Net Decrease in Cash and Cash Equivalents $ (23,984 ) $ (42,551 )

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	Three Month Ended June 30,
	2020			2019
Net cash provided by (used in) operating activities	$	6,394		$	(87,394	)
Net cash used in investing activities		(2,159	)		(1,226	)
Net cash provided by financing activities		54,040			44,327
Effect of exchange rate changes on cash		(124	)		81

Net increase (decrease) in cash and cash equivalents	$	58,151		$	(44,212	)

Cash flows from operating activities. We ~~used $54.4~~had $6.4 million ~~from~~provided by operating activities during the ~~six~~three months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$17.1~~$87.4 million used in operating activities for the ~~six~~three months ended ~~September~~June 30, ~~2018.~~2019. See below for a breakdown of operating cash flows by segment (in thousands):

	Six Months Ended September 30,						Three Month Ended June 30,
	2019			2018			2020			2019
Technology segment	$	3,833		$	(13,125	)	$	11,191		$	(42,072	)
Financing segment		(58,237	)		(3,960	)		(4,797	)		(45,322	)
Net cash used in operating activities	$	(54,404	)	$	(17,085	)
Net cash provided by (used in) operating activities							$	6,394		$	(87,394	)

Technology Segment: In the ~~six~~three months ended ~~September~~June 30, ~~2019, operating cash flows provided by~~2020, our technology segment ~~was $3.8~~provided $11.2 million asfrom operating activities primarily due to cash generated from ~~earnings exceeding changes in working capital. In addition, cash provided by~~earnings. Additionally, we had net borrowing on the ~~accounts payable –~~ floor plan component of our credit facility ~~was $13.6~~of $48.3 million. ~~Accounts payable – floor plan~~The net borrowing is aprimarily the result of extended payment terms from Cisco that deferred $34.2 million in payments. We use this facility ~~used~~ to manage working capital ~~needs and we are required to~~needs. We present changes in this balance as financing activity in our consolidated statement of cash flows.

In the ~~six~~three months ended ~~September~~June 30, ~~2018,~~2019, our technology segment used ~~$13.1~~$42.1 million from operating activities due to changes in working capital exceeding cash generated from earnings. Partially offsetting the cash used in operations were changes in the accounts payable - floor plan balance of ~~$8.7 million.~~$19.9 million, which is presented as financing activity in our consolidated statement of cash flows.

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 September 30,						As of June 30,
	2019			2018			2020			2019

(DSO) Days sales outstanding (1)		59			60			61			53
(DIO) Days inventory outstanding (2)		10			11			14			11
(DPO) Days payable outstanding (3)		(46	)		(46	)		(45	)		(40	)
Cash conversion cycle		23			25			30			24

(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 adjusted gross billings 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 cost of adjusted gross billings 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 cost of adjusted gross billings for the same three-month period.

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Our cash conversion cycle ~~decreased~~increased to 2330 days at ~~September~~June 30, ~~2019,~~2020, compared to 2524 days at ~~September~~June 30, ~~2018, resulting from a 1 day decrease in DSO and a 1 day decrease in DIO.~~2019. Our standard payment term for customers is between 30-60 days; however, certain customer orders may be approved for extended payment terms. Our DSO increased due to an increase in sales during the quarter ended June 30, 2020, to customers with terms greater than or equal to net 60 days. Our DPO increased 5 days. Invoices processed through our credit facility, or the A/P-floor plan balance, are typically paid within 45-60 days from the invoice date, while A/P trade invoices are typically paid within 30 days from the invoice date; however, certain of our suppliers temporarily increased our terms to 90 days. The 3 day increase in DIO was ~~impacted by an improvement in accounts receivable turnover; while our DIO as of September 30, 2019 was primarily impacted by~~due to an increase in average inventory balances of ~~7.5% while adjusted gross cost of goods sold~~28.1%, or $15.8 million, due to pending projects for ~~the same period increased 19.2% compared~~our customers and some delays in receiving by our customers whose offices were closed due to ~~the same period in the prior year.~~COVID-19.

Financing Segment: In the ~~six~~three months ended ~~September~~June 30, 2020, our financing segment used $4.8 million from operating activities, primarily due to changes in financing receivables net of $24.7 million. In the three months ended June 30, 2019, our financing segment used ~~$58.2~~$45.3 million from operating activities, primarily due to changes in financing receivables- net of ~~$76.4~~$58.2 million. In the six months ended September 30, 2018, our financing segment used $4.0 million from operating activities, primarily due to changes in working capital. In this period, which we elected not to update our cash flow using the transition option available when we adopted ASC 842, changes in financing receivables not sourced through us are reflected in cash flows from investing activities. With the adoption of ASC 842, for periods beginning after April 1, 2019, weWe recognize the change in financing receivables, including the issuance of financing receivables offset by repayments of financing receivables and the proceeds from the transfer of financing receivables, when we account for the transfer as a sale, as part of operating activities.

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Cash flows related to investing activities. In the ~~six~~three months ended ~~September~~June 30, ~~2019,~~2020, we used ~~$18.1~~$2.2 million from investing activities, consisting of ~~$13.8 million for acquisitions, $4.9~~$2.3 million for purchases of property, equipment and operating lease equipment offset by ~~$0.7~~$0.1 million of proceeds from the sale of property, equipment, and operating lease equipment. In the three months ended June 30, 2019, we used $1.2 million from investing activities, consisting of $1.5 million for purchases of property, equipment and operating lease equipment offset by $0.3 million of proceeds from the sale of property, equipment, and operating lease equipment.

~~In the six months ended September 30, 2018, we used $37.9 million from investing activities, including $6.5 million for purchases of property, equipment and operating lease equipment.~~ ~~In this period, which we elected not to update our cash flows using the transition option available when we adopted ASC 842. Therefore,~~ cash used in investing activities also included net cash outflows related to financing receivables of $33.3 million, consisting of the issuance of financing receivables of $88.4 million, purchases of assets to be leased or financed of $8.6 million, and was partially offset by cash proceeds from the repayment of financing receivables of $33.3 million, and the sale of financing receivables of $30.5 million.

Cash flows from financing activities. In the ~~six~~three months ended ~~September~~June 30, ~~2019,~~2020, cash provided by financing activities was ~~$48.4~~$54.0 million consisting of net borrowings of non-recourse and recourse notes payable of ~~$49.2~~$8.5 million, net borrowings on floor plan facility of ~~$13.6~~$48.3 million, and offset by ~~$13.7~~$2.7 million in repurchase of common ~~stock and $0.8 million paid to sellers of SLAIT as part of a working capital adjustment.~~stock.

~~Cash~~In the three months ended June 30, 2019, cash provided by financing activities was ~~$12.3~~$44.3 million ~~during the six months ended September 30, 2018, which was primarily due to~~consisting of net borrowings of non-recourse and recourse notes payable of ~~$15.9~~$38.0 million, ~~and~~ net ~~borrowing~~borrowings on floor plan facility of ~~$8.7~~$19.9 million, ~~partially~~and offset by ~~cash used for the~~$13.3 million in repurchase of common stock and $0.3 million paid to sellers of ~~$10.1 million, and~~ ~~repayment~~SLAIT Consulting, LLC as part of ~~financing of acquisitions of $2.1 million~~a working capital adjustment.

Our borrowing of non-recourse and recourse notes payable primarily arises from our financing segment when we transfer contractual payments due to us under lease and financing agreements to third-party financial institutions. When the transfers do not meet the requirements for a sale, the proceeds paid to us represent borrowings of non-recourse ~~and~~or recourse notes payable.

Non-Cash Activities

. We ~~assign~~transfer contractual payments due to us under lease and financing agreements to third-party financial institutions. As a condition ~~to the assignment agreement,~~of these agreements, 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, the customer will make payments to us, and we will remit the payment to the financial institution. The economic impact to us under either structure is similar, in that the assigned contractual payments are paid by the customer and remitted to the lender. However, when our customer makes payments through a trust, such payments represent non-cash transactions.

~~In addition,~~ Also, in certain assignment agreements, we may direct the third-party financial institution to pay some of the proceeds from the assignment directly to the vendor or vendors that have supplied the assets being leased and or financed. In these situations, the portion of the proceeds paid directly to our vendors are non-cash transactions.

~~Liquidity and Capital Resources~~Secured borrowings – Financing segment

We may ~~utilize non-recourse notes payable to~~ finance ~~approximately 80% to 100%~~all or most of the ~~purchase price~~cost of the assets ~~being leased~~that we finance for customers by transferring all or ~~financed by our customers. Any balance~~part of the ~~purchase price remaining after~~contractual payments due to us to third-party financing institutions. When we account for the transfer as a secured borrowing, we recognize the proceeds as either recourse or non-recourse ~~funding~~notes payable. Our customers are responsible for repaying the debt from a secured borrowing. The lender typically secures a lien on the financed assets at the time the financial assets are transferred and ~~any upfront payments received from~~releases it upon collecting all the transferred payments. 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 and their only recourse, upon default by the customer, ~~(our equity investment in~~is against the ~~equipment) must generally be financed by cash flows from our operations,~~customer and the ~~sale of the~~specific equipment ~~leased to third-parties, or other internal means. Although~~under lease. While 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.

~~The financing necessary to support our lease and financing activities has been provided by our cash and non-recourse borrowings.~~ As a result of COVID-19, credit markets have tightened. We ~~monitor our exposure closely. We are~~may no longer be able to ~~obtain financing through our traditional lending sources using primarily non-recourse borrowings~~transfer receivables from ~~third-party banks and finance companies. Non-recourse financings are loans whose repayment is the responsibility of a specific customer, although we may make representations and warranties~~certain customers with lower credit quality 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 payments at a fixed rate of interest, and the lender secures a lien on the financed assets. When the lender is fully repaid, the lien is released, and all further 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, and the lender’s only recourse, upon default, is against the customer and the specific equipment.financial institutions.

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At September 30, 2019, our non-recourse notes payable increased 76.8% to $86.0 million, as compared to $48.6 million at March 31, 2019. There were no recourse notes payable as of September 30, 2019, compared to $28 thousand as of March 31, 2019.

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~~facility — Technology segment

Our subsidiary, ePlus Technology, inc., and certain of its ~~subsidiaries.~~subsidiaries have a financing facility from WFCDF to finance ~~its~~their 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 certain subsidiaries. and is secured by a blanket lien against all its assets, such as chattel paper, receivables and inventory. As of September 30, 2019, the facility had an aggregate limit of the two components of $325 million with an accounts receivable sub-limit of $50 million.

On ~~July 27, 2017,~~May 15, 2020, we executed an amendment to the WFCDF credit facility that ~~temporarily~~ increased the aggregate limit of the two components, ~~from $250 million~~except during a temporary uplift, to ~~$325 million from the date of the agreement through October 31, 2017 and provides us~~$275.0 million. Additionally, we have an election beginning July 1 in each subsequent year to similarly temporarily increase the aggregate limit of the two components to $325 million ending the earlier of 90 days following the date of election and October 31 of that same year. On July 31, 2019, we elected to temporarily increase the aggregate limit to ~~$325 million.~~

~~Availability under~~$350.0 million for a period of not less than 30 days, provided that all such periods shall not exceed 150 days in the ~~facility may be limited by~~aggregate in any calendar year. Further, the ~~asset value of equipment we purchase or~~amendment increased the limit on the accounts receivable ~~and may be further limited by certain covenants and terms and conditions~~component of the ~~facility. These covenants include but are not limited~~WFCDF credit facility to ~~a minimum excess availability~~$100.0 million, changed the interest rate to two percent (2.00%) plus the greater of ~~the facility~~one month LIBOR or seventy-five hundredths of one percent (0.75%), and modified certain restrictions on ePlus Technology, inc.’s ~~minimum earnings before interest, taxes, depreciation~~ability to pay dividends to ePlus inc.

As of June 30, 2020, the limit of the two components of the credit facility was $275 million, and ~~amortization. We were in compliance with these covenants as~~the accounts receivable component had a sub-limit of ~~September 30, 2019. Interest on the~~$100 million.

The WFCDF credit facility is ~~assessed at~~secured by the assets of ePlus Technology, inc. and certain of its subsidiaries, and varies available borrowing based upon the value of their receivables and inventory. Additionally, the credit facility requires a ~~rate~~guaranty of $10.5 million by ePlus inc.

The credit facility restricts the ~~One Month LIBOR plus two-~~ability of ePlus Technology, inc. and ~~one-half percent if~~certain of its subsidiaries to pay dividends to ePlus inc. unless their available borrowing meets certain thresholds. As of June 30, 2020, their available borrowing met the ~~payments are not made on the three specified dates each month.~~ threshold such that there were no restricted net assets of ePlus Technology, inc.

The credit facility ~~also~~ requires that financial statements of ePlus Technology, inc. and certain ~~subsidiaries.~~of its subsidiaries be provided within 45 days ~~of the end~~ of each quarter and 90 days of each fiscal year end, and also requires that other operational reports be provided on a regular basis. Either party may terminate ~~the credit facility~~ with 90 ~~days~~days’ advance ~~written~~ notice.

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

~~The WFCDF credit facility requires a guaranty of $10.5 million by~~ e~~Plus inc. The guaranty requires~~ e~~Plus 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, 2019, as required.~~ The loss of the WFCDF credit facility, including during circumstances related to COVID-19, 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

~~Purchases by~~ e~~Plus Technology, inc.~~. After a customer places a purchase order with us and ~~certain subsidiaries. including computer technology products, software, maintenance and services~~after we have completed our credit review of the customer, we place an order for the equipment with one of our vendors. Generally, most purchase orders from us to our vendors are ~~in part~~first financed ~~through a~~under the floor plan component and reflected in ~~which interest expense for the first thirty to sixty days, in general, is not charged. The floor plan liabilities are recorded as accounts~~“accounts payable—floor ~~plan on~~plan” in our consolidated balance ~~sheets, as they~~sheets. Payments on the floor plan component are ~~normally repaid~~due on three specified dates each month, generally 30-60 days from the invoice date. In addition, certain suppliers have temporarily extended their repayment terms to us due to COVID-19. Most customer payments in our technology segment are remitted to our lockboxes. Once payments are cleared, the monies in the lockbox accounts are automatically and daily transferred to our operating account. On the due dates of the floor plan component, we make cash payments to WFCDF. Our borrowings and repayments under the floor plan component are included in “net borrowings (repayments) on floor plan facility” within cash flows from 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.

~~Table~~financing activities in our consolidated statements of ~~Contents~~

cash flows.

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 September 30, 2019		Balance as of September 30, 2019		Maximum Credit Limit at March 31, 2019		Balance as of March 31, 2019
Maximum Credit Limit at June 30, 2020								Maximum Credit Limit at June 30, 2020	Balance as of June 30, 2020		Maximum Credit Limit at March 31, 2020		Balance as of March 31, 2020
$	325,000	$	129,668	$	250,000	$	116,083	275,000	$	175,701	$	300,000	$	127,416

On July 23, 2020, we elected to exercise the temporary increase in the aggregate limit of the WFCDF credit facility to $350.0 million for a period of not less than 30 days.

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Accounts Receivable Component

. ePlus Technology, inc. and certain ~~subsidiaries.~~of its subsidiaries have an accounts receivable component included within the WFCDF credit facility, 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~~Our borrowings and repayments under the accounts component are included in “borrowings of non-recourse and recourse notes payable” and “repayments of non-recourse and recourse notes payable”, respectively, within cash flows from the financing activities in our consolidated statements of cash flows.

As of June 30, 2020, and March 31, 2020, there was noan outstanding balance ~~outstanding~~ for the accounts receivable component ~~at September~~of $35.0 million. As of June 30, ~~2019, or~~2020, and March 31, ~~2019, while~~2020, the maximum credit limit was ~~$50~~$100.0 million ~~for both periods.~~and $50.0 million, respectively. We may maintain a balance on the accounts receivable component to assist in mitigating risk arising from COVID-19.

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 ~~September~~June 30, ~~2019,~~2020, 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 open 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. These actions may result in increased working capital needs as the business expands. As a result, we may require additional financing to fund our strategy, implementation, potential future acquisitions, and working capital needs, which may include additional debt and equity financing. The impacts of COVID-19 may limit or eliminate our access to capital. While the future is uncertain, we do not believe our credit facility will be terminated by the lender or us. Our lending partners in our financial segment have tightened credit availability and are more discerning in their approval process. However, currently we have funding resources available for our transactions.

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, or our major customers or vendors.

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Our quarterly results of operations are susceptible to fluctuations for a number of reasons, including, but not limited to the worldwide impacts from COVID-19, 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 to a lessee or third-party at the expiration of a lease term or prior to such expiration, 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 ~~2019~~2020 Annual Report.

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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

~~Quantitative and Qualitative Disclosures About Market Risk~~

AOur cash flow may be adversely affected by the risks related to COVID-19 pandemic, which may result in delays in the collections of our accounts receivables or non-payment.

Although a substantial portion of our liabilities are non-recourse, fixed-interest-rate instruments, ~~which were aligned with the customer financing rate creating an interest rate spread that is our profit. Should~~ we not fund these transactions with debt at inception and interest rates rise above our interest rate with our customer, we may not be able to fund the transaction without reduced profit or a loss, thus inhibiting our ability to generate proceeds from the transaction. We utilize ~~our~~ lines of credit and other financing facilities that are subject to fluctuations in short-term interest rates. These non-recourse instruments, which are ~~generally~~ denominated in US dollars, were entered ~~into~~ for other than trading purposes and, ~~with the exception of~~except for amounts drawn under the 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. Our financing transactions are funded with our cash flows, not debt, and may be subject to interest rate risk. If the market interest rate exceeds our internal rate of return, we may not fund the transaction to obtain the proceeds. Borrowings under the WFCDF facility bear interest at a market-based variable rate. As of ~~September~~June 30, ~~2019,~~2020, the aggregate fair value of our recourse and non-recourse borrowings approximated their carrying value.

We have transactions in foreign currencies, primarily in British Pounds, Euros, and Indian Rupees. 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 our subsidiary’s functional currency. To date, our foreign 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.

The UK referendum (“Brexit”) to leave the European Union ~~(“Brexit”)~~ could impact revenue items, cost items, tax, ~~immigration, trade,~~ goodwill impairments and liquidity, among others. The most obvious immediate impact is the effect of foreign exchange fluctuations on revenue and cost items. ~~We 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.~~

We have determined that our foreign currency exposure for our UK 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 operations and financial position.

We 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.

We lease assets in foreign countries, including Canada, the UK ~~Canada, Iceland,~~ and ~~Spain.~~several other European countries. As a lessor, we ~~have entered into~~ lease ~~contracts and non-recourse, fixed-interest-rate financing~~assets for amounts denominated in British Pounds, Euros, and Canadian ~~Dollars, Icelandic Krona, and Euros. To date,~~dollars. As our foreign operations have been ~~insignificant, and~~smaller compared to our domestic operations, we believe that potential fluctuations in currency exchange rates will not have a material effect on our financial position.

Item 4. Controls and Procedures

~~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 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 ~~September~~June 30, ~~2019.~~2020.

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Changes in Internal Control Over Financial Reporting.

There have not been any changes in our internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2019,~~2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our management, including our CEO and CFO, do 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.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~Legal Proceedings~~

~~From~~We are not currently involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operation. However, from time to time, we may be subject to legal proceedings that arise in the ordinary course of business. Legal proceedings which may arise in the ordinary course of business include, but are not limited to, 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.~~breaches, and claims stemming from actions or events relating to COVID-19. We attempt to ameliorate the effect of potential litigation through insurance coverage and contractual protections such as rights to indemnifications and limitations of liability. Additionally, we proactively seek to recover funds to which we may be entitled. From time to time, we are successful in obtaining recoveries by filing a claim in class action suits, however, we have limited insight into the timing or amount of those recoveries.

We provide for costs relating to contingencies when a loss is probable, and the amount is reasonably determinable. In the opinion of management, there was not at least a reasonable possibility that the Company may have incurred a material loss, or a material loss in excess of a recorded accrual, with respect to loss contingencies for asserted legal and other claims. However, the outcome of legal proceedings and claims brought against us is subject to significant uncertainty. Therefore, although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s consolidated financial statements for that reporting period could be materially adversely affected.

~~determinable.~~

Item 1A. Risk Factors

~~Risk Factors~~

There has not been any material change in the risk factors previously disclosed in Part I, Item 1A of our ~~2019~~2020 Annual Report.

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~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

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 ~~six~~three months ended ~~September~~June 30, ~~2019.~~2020.

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, 2019 through April 30, 2019 - $ - - 385,419 (2 )
May 1, 2019 through May 27, 2019 2,301 $ 83.38 1,300 0 (3 )
May 28, 2019 through May 31, 2019 68,207 $ 72.32 68,207 431,793 (4 )
June 1, 2019 through June 30, 2019 117,093 $ 71.15 79,283 352,510 (5 )
July 1, 2019 through July 31, 2019 3,260 $ 72.87 254 352,256 (6 )
August 1, 2019 through August 31, 2019 - $ - - 352,256 (7 )
September 1, 2019 through September 30, 2019 - $ - - 352,256 (8 )

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, 2020 through April 30, 2020		-	$	-		-		339,324	(2	)
May 1, 2020 through May 27, 2020		996	$	66.75		-		339,324	(3	)
May 28, 2020 through May 31, 2020		-				-		500,000	(4	)
June 1, 2020 through June 30, 2020		36,644	$	71.94		-		500,000	(5	)

(1)

Any shares acquired were in open-market purchases, except for ~~38,811~~37,640 shares, out of which ~~1,001~~996 were repurchased in May ~~2019~~2020 and ~~37,810~~36,644 in June ~~2019~~2020 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, ~~2019~~2020, had purchase limitations on the number of shares of up to 500,000 shares. As of April 30, ~~2019,~~2020, the remaining authorized shares to be purchased were ~~385,419.~~339,324.

(3)

As of May 27, 2019, the authorization under the then existing share repurchase plan expired.

(4)

On May ~~24, 2019,~~20, 2020, the board of directors authorized the company to repurchase up to 500,000 shares of our outstanding common stock commencing on May 28, ~~2019~~2020, and continuing to May 27, ~~2020.~~2021. As of May 31, ~~2019,~~2020, the remaining authorized shares to be purchased were ~~431,793.~~500,000.

(5)

The share purchase authorization in place for the month ended June 30, ~~2019~~2020, had purchase limitations on the number of shares of up to 500,000 shares. As of June 30, ~~2019,~~2020, the remaining authorized shares to be purchased were ~~352,510.~~500,000.

~~(6)~~

The share purchase authorization in place for the month ended July 31, 2019 had purchase limitations on the number of shares of up to 500,000 shares. As of July 31, 2019, the remaining authorized shares to be purchased were 352,256.

~~(7)~~

The share purchase authorization in place for the month ended August 31, 2019 had purchase limitations on the number of shares of up to 500,000 shares. As of August 31, 2019, the remaining authorized shares to be purchased were 352,256.

~~(8)~~

The share purchase authorization in place for the month ended September 30, 2019 had purchase limitations on the number of shares of up to 500,000 shares. As of September 30, 2019, the remaining authorized shares to be purchased were 352,256.

The timing and expiration date of the current stock repurchase authorizations are included in Note 12, “Stockholders’ Equity” to our unaudited condensed consolidated financial statements included elsewhere in this report.

~~Item 3.~~

~~Defaults Upon Senior Securities~~

Item 3. Defaults Upon Senior Securities

Not Applicable.

~~Item 4.~~

~~Mine Safety Disclosures~~

Item 4. Mine Safety Disclosures

Not Applicable.

~~Item 5.~~

~~Other Information~~

Item 5. Other Information

None.

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~~Item 6.~~

~~Exhibits~~

Item 6. Exhibits

Exhibit Number		Exhibit Description

3.1	~~ePlus~~	ePlus inc. Amended and Restated Certificate of Incorporation as amended September 15, 2008 (Incorporated herein by reference as Exhibit 3.1 to our Current Report on Form 8-K filed on September 19, 2008).

3.2		Amended and Restated Bylaws of ~~ePlus~~ePlus inc., as amended February 15, 2018 (Incorporated herein by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on February 20, 2018).

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	~~Inline~~	XBRL Instance Document ~~(the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).~~

101.SCH	~~Inline~~	XBRL Taxonomy Extension Schema Document

101.CAL	~~Inline~~	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	~~Inline~~	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	~~Inline~~	XBRL Taxonomy Extension Label Linkbase Document

101.PRE	~~Inline~~	XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

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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: ~~November 6, 2019~~August 5, 2020	/s/ MARK P. MARRON
	By: Mark P. Marron,
	Chief Executive Officer and
	President
	(Principal Executive Officer)

Date: ~~November 6, 2019~~August 5, 2020	/s/ ELAINE D. MARION
	By: Elaine D. Marion
	Chief Financial Officer
	(Principal Financial Officer)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	PLUS	NASDAQ Global Select Market

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

Contract liabilities	September 30, 2019		March 31, 2019		June 30, 2020		March 31, 2020
Current (included in deferred revenue)	$	49,416	$	46,356	$	56,422	$	54,486
Non-current (included in other liabilities)	$	17,133	$	13,593	$	15,410	$	16,395

Remainder of Year ending March 31, 2021	$	24,863
Year Ending March 31, 2022		13,072
Year Ending March 31, 2023		4,991
Year Ending March 31, 2024		789
Year Ending March 31, 2025 and thereafter		653
Total remaining performance obligations	$	44,368

Part I. Financial Information:

Item 1.	Financial Statements

	Unaudited Consolidated Balance Sheets as of ~~September~~June 30, ~~2019~~2020 and March 31, ~~2019~~2020	5

	Unaudited Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	6

	Unaudited Consolidated Statements of Comprehensive Income for the Three ~~and Six~~ Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	7

	Unaudited Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	8

	Unaudited Consolidated Statements of Stockholders’ Equity for the ~~Six~~Three Months Ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019	10

	Notes to Unaudited Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29 25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45 40

Item 4.	Controls and Procedures	45 40

Part II. Other Information:

Item 1.	Legal Proceedings	46 41

~~Item 1A.~~
Item 1A.	Risk Factors	46 41

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47 42

Item 3.	Defaults Upon Senior Securities	47 42

Item 4.	Mine Safety Disclosures	47 42

Item 5.	Other Information	47 42

Item 6.	Exhibits	48 43

Signatures & Certifications		49 44

Remainder of Year ending March 31, 2020	$	15,118
Year ending March 31, 2021		15,940
Year ending March 31, 2022		7,817
Year ending March 31, 2023		2,124
Year ending March 31, 2024		404
Year ending March 31, 2025 and thereafter		423
Total remaining performance obligations	$	41,826

Profit recognized for sales-type leases
	Three months ended September 30, 2019		Six months ended September 30, 2019		Three months ended June 30, 2020		Three months ended June 30, 2019
Net sales	$	3,133	$	7,987	$	10,163	$	4,854
Cost of sales		2,702		6,652		5,327		3,950
Gross Profit	$	431	$	1,335
Gross profit					$	4,836	$	904

September 30, 2019	Notes Receivables			Lease-Related Receivables			Total Financing Receivables
June 30, 2020										Notes Receivable			Lease Receivables			Financing Receivables

Minimum payments	$	78,483		$	87,989		$	166,472
Estimated unguaranteed residual value (1)		-			20,640			20,640
Gross receivables										$	101,196		$	64,197		$	165,393
Unguaranteed residual value (1)											-			21,534			21,534
Initial direct costs, net of amortization ~~(2)~~		644			284			928			552			-			552
Unearned income		-			(11,327	)		(11,327	)		-			(10,079	)		(10,079	)
Reserve for credit losses ~~(3)~~(2)		(520	)		(500	)		(1,020	)		(1,139	)		(727	)		(1,866	)
Total, net	$	78,607		$	97,086		$	175,693		$	100,609		$	74,925		$	175,534
Reported as:
Current	$	59,603		$	49,043		$	108,646		$	79,262		$	36,858		$	116,120
Long-term		19,004			48,043			67,047			21,347			38,067			59,414
Total, net	$	78,607		$	97,086		$	175,693		$	100,609		$	74,925		$	175,534

Remainder of Year ending March 31, 2020	$	43,732
Year ending March 31, 2021		22,787
Year ending March 31, 2022		14,038
Year ending March 31, 2023		4,979
Year ending March 31, 2024 and thereafter		2,453
Total	$	87,989

Remainder of the Year ending March 31, 2021	$	38,966
Year Ending March 31, 2022		14,156
Year Ending March 31, 2023		8,381
Year Ending March 31, 2024		1,985
Year Ending March 31, 2025 and thereafter		709
Total	$	64,197

	September 30, 2019			March 31, 2019
OPERATING LEASES							June 30, 2020			March 31, 2020

Cost of equipment under operating leases	$	23,927		$	21,532		$	21,263		$	21,276
Accumulated depreciation		(11,462	)		(10,139	)		(11,815	)		(11,159	)
Investment in operating lease equipment—net (1)	$	12,465		$	11,393		$	9,448		$	10,117

Remainder of Year ending March 31, 2020	$	2,507
Year ending March 31, 2021		3,815
Year ending March 31, 2022		2,555
Year ending March 31, 2023		1,455
Year ending March 31, 2024 and thereafter		443
Total	$	10,775

Remainder of the Year ending March 31, 2021	$	2,821
Year Ending March 31, 2022		2,472
Year Ending March 31, 2023		1,528
Year Ending March 31, 2024		477
Year Ending March 31, 2025 and thereafter		34
Total	$	7,332

	September 30, 2019
Remainder of year ending March 31, 2020	$	2,609
Year ending March 31, 2021		5,341
Year ending March 31, 2022		3,783
Year ending March 31, 2023		2,804
Year ending March 31, 2024		1,053
Thereafter		632
Total lease payments	$	16,221
Less: Interest		(1,035	)
Present value of lease liabilities	$	15,186

	June 30, 2020
Remainder of the year ending March 31, 2021	$	3,899
Year ending March 31, 2022		4,287
Year ending March 31, 2023		3,093
Year ending March 31, 2024		1,248
Year ending March 31, 2025 and thereafter		814
Total lease payments	$	13,341
Less: interest		(733	)
Present value of lease liabilities	$	12,608

	September 30, 2019
	Goodwill			Accumulated Impairment Loss			Net Carrying Amount

Beginning balance	$	119,480		$	(8,673	)	$	110,807
Acquisitions		7,412			-			7,412
Foreign currency translations		(122	)		-			(122	)
Ending balance	$	126,770		$	(8,673	)	$	118,097

	Accounts Receivable		Notes Receivable		Lease Receivables		Total
Balance April 1, 2020	$	1,781	$	798	$	610	$	3,189
Provision for credit losses		329		341		117		787
Write-offs and other		-		-		-		-
Balance June 30, 2020	$	2,110	$	1,139	$	727	$	3,976

	Accounts Receivable			Notes Receivable		Lease- Related Receivables			Total
Balance April 1, 2019	$	1,579		$	505	$	530		$	2,614
Provision for credit losses		311			15		(27	)		299
Write-offs and other		(42	)		-		(3	)		(45	)
Balance September 30, 2019	$	1,848		$	520	$	500		$	2,868

	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		Amortized cost basis by origination year ending March 31,
																							2021		2020		2019		2018		2017		2016 and prior		Total		Transfers (2)			Net credit exposure
September 30, 2019

Notes receivable:

High CQR	$	213	$	354	$	126	$	693	$	190	$	56,065	$	56,948	$	(5,285	)	$	(24,765	)	$	26,898	$	49,137	$	15,822	$	13,503	$	1,024	$	45	$	-	$	79,531	$	(56,342	)	$	23,189
Average CQR		65		36		41		142		283		30,616		31,041		(2,368	)		(9,839	)		18,834		3,426		16,395		1,195		76		-		-		21,092		(11,592	)		9,500
Low CQR		-		-		-		-		-		-		-		-			-			-		-		160		324		-		-		89		573		-			573
Total	$	278	$	390	$	167	$	835	$	473	$	86,681	$	87,989	$	(7,653	)	$	(34,604	)	$	45,732	$	52,563	$	32,377	$	15,022	$	1,100	$	45	$	89	$	101,196	$	(67,934	)	$	33,262

March 31, 2019
Lease receivables:

High CQR	$	325	$	41	$	10	$	376	$	543	$	29,503	$	30,422	$	(2,799	)	$	(11,044	)	$	16,579	$	15,995	$	13,812	$	4,620	$	1,597	$	387	$	16	$	36,427	$	(18,580	)	$	17,847
Average CQR		22		54		15		91		125		33,563		33,779		(2,508	)		(20,848	)		10,423		8,650		11,129		5,498		875		108		3		26,263		(10,123	)		16,140
Low CQR		-		-		-		-		-		-		-		-			-			-		-		-		-		-		-		-		-		-			-
Total	$	347	$	95	$	25	$	467	$	668	$	63,066	$	64,201	$	(5,307	)	$	(31,892	)	$	27,002	$	24,645		24,941	$	10,118	$	2,472	$	495	$	19	$	62,690	$	(28,703	)	$	33,987
Total amortized cost (1)																							$	77,208	$	57,318	$	25,140	$	3,572	$	540	$	108	$	163,886	$	(96,637	)	$	67,249

	31-60 Days Past Due		61-90 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Billed		Unbilled		Amortized Cost
Notes receivable	$	933	$	29	$	1,316	$	2,278	$	22,943	$	25,221	$	75,975	$	101,196
Lease receivables		707		284		1,168		2,159		4,439		6,598		56,092		62,690
Total	$	1,640	$	313	$	2,484	$	4,437	$	27,382	$	31,819	$	132,067	$	163,886

	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

High CQR	$	1,332	$	2	$	280	$	1,614	$	2,878	$	29,057	$	33,549	$	(18,341	)	$	15,208
Average CQR		140		44		142		326		1,135		19,995		21,456		(16,636	)		4,820
Low CQR		63		-		152		215		-		197		412		-			412
Total	$	1,535	$	46	$	574	$	2,155	$	4,013	$	49,249	$	55,417	$	(34,977	)	$	20,440

	September 30, 2019		March 31, 2019
Recourse notes payable with interest rates of 4.00% at March 31, 2019.
Current	$	-	$	28

Non-recourse notes payable secured by financing receivables and investments in operating leases with interest rates ranging from 2.90% to 8.45% as of September 30, 2019 and 3.23% to 8.45% as of March 31, 2019.
Current	$	77,608	$	38,117
Long-term		8,404		10,502
Total non-recourse notes payable	$	86,012	$	48,619

	Number of Shares			Weighted Average Grant- date Fair Value		Number of Shares			Weighted Average Grant- date Fair Value

Nonvested April 1, 2019		224,000		$	67.70
Nonvested April 1, 2020							193,580		$	73.74
Granted		93,264		$	72.89		90,589		$	71.80
Vested		(123,011	)	$	62.04		(104,071	)	$	69.19
Forfeited		(293	)	$	87.18		-		$	-
Nonvested September 30, 2019		193,960		$	70.98
Nonvested June 30, 2020							180,098		$	75.39

			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)

September 30, 2019
June 30, 2020
Assets:
Money market funds	$	127	$	127	$	-	$	-	$	20,128	$	20,128	$	-	$	-

Liabilities:
Contingent consideration	$	283	$	-	$	-	$	283	$	249	$	-	$	-	$	249

March 31, 2019
March 31, 2020
Assets:
Money market funds	$	50	$	50	$	-	$	-	$	128	$	128	$	-	$	-

Liabilities:
Contingent consideration	$	8,942	$	-	$	-	$	8,942	$	220	$	-	$	-	$	220

	Acquisition Date Amount			Acquisition Date Amount
Accounts receivable	$	9,208		$	9,208
Other assets		743			743
Identified intangible assets		5,720			5,720
Accounts payable and other current liabilities		(6,715	)		(6,715	)
Performance obligation		(1,140	)		(1,140	)

Total identifiable net assets		7,816			7,816
Goodwill		7,463			7,461

Total purchase consideration	$	15,279		$	15,277

	Acquisition Date Amount
Accounts receivable	$	10,209
Other assets		1,050
Identified intangible assets		18,190
Accounts payable and other current liabilities		(8,611	)
Performance obligation		(5,110	)

Total identifiable net assets		15,728
Goodwill		34,301

Total purchase consideration	$	50,029

	Three Months Ended
	September 30, 2019							September 30, 2018
	Technology		Financing		Total			Technology		Financing		Total

Sales
Product	$	349,650	$	13,847	$	363,497		$	299,200	$	10,275	$	309,475
Service		48,068		-		48,068			35,568		-		35,568
Net sales	$	397,718	$	13,847	$	411,565		$	334,768	$	10,275	$	345,043

Cost of Sales
Product		276,475		2,388		278,863			236,404		1,730		238,134
Service		29,671		-		29,671			21,409		-		21,409
Total cost of sales		306,146		2,388		308,534			257,813		1,730		259,543
Gross Profit		91,572		11,459		103,031			76,955		8,545		85,500

Selling, general, and administrative		67,189		3,334		70,523			55,138		2,567		57,705
Depreciation and amortization		3,529		28		3,557			2,740		1		2,741
Interest and financing costs		-		576		576			-		484		484
Operating expenses		70,718		3,938		74,656			57,878		3,052		60,930

Operating income		20,854		7,521		28,375			19,077		5,493		24,570

Other income (expense)						(40	)						322

Earnings before tax					$	28,335						$	24,892

Net Sales
Contracts with customers	$	394,585	$	1,411	$	395,996		$	329,682	$	1,060	$	330,742
Financing and other		3,133		12,436		15,569			5,086		9,215		14,301
Net Sales	$	397,718	$	13,847	$	411,565		$	334,768	$	10,275	$	345,043

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	3,658	$	1,455	$	5,113		$	2,970	$	1,397	$	4,367
Purchases of property, equipment and operating lease equipment	$	1,426	$	1,944	$	3,370		$	1,796	$	3,025	$	4,821

Selected Financial Data - Balance Sheet

Total assets	$	690,648	$	223,618	$	914,266		$	565,771	$	209,425	$	775,196

	Six Months Ended													Three Months Ended
	September 30, 2019							September 30, 2018						June 30, 2020						June 30, 2019
	Technology		Financing		Total			Technology		Financing		Total		Technology		Financing		Total		Technology		Financing		Total

Sales
Product	$	672,414	$	26,684	$	699,098		$	612,349	$	19,943	$	632,292	$	293,433	$	13,807	$	307,240	$	322,764	$	12,837	$	335,601
Service		93,839		-		93,839			69,283		-		69,283		47,791		-		47,791		45,771		-		45,771
Net sales		766,253		26,684		792,937			681,632		19,943		701,575		341,224		13,807		355,031		368,535		12,837		381,372

Cost of Sales
Product		534,529		4,397		538,926			490,468		3,478		493,946		224,543		2,091		226,634		258,054		2,009		260,063
Service		58,341		-		58,341			41,426		-		41,426		29,840		-		29,840		28,670		-		28,670
Cost of sales		592,870		4,397		597,267			531,894		3,478		535,372
Total cost of sales															254,383		2,091		256,474		286,724		2,009		288,733
Gross Profit		173,383		22,287		195,670			149,738		16,465		166,203		86,841		11,716		98,557		81,811		10,828		92,639

Selling, general, and administrative		129,856		6,454		136,310			109,592		5,079		114,671		65,556		3,911		69,467		62,667		3,120		65,787
Depreciation and amortization		6,936		84		7,020			5,529		2		5,531		3,488		28		3,516		3,407		56		3,463
Interest and financing costs		-		1,204		1,204			-		960		960		265		312		577		-		628		628
Operating expenses		136,792		7,742		144,534			115,121		6,041		121,162		69,309		4,251		73,560		66,074		3,804		69,878

Operating income		36,591		14,545		51,136			34,617		10,424		45,041		17,532		7,465		24,997		15,737		7,024		22,761

Other income (expense)						(85	)						419
Other income																			98						(45	)

Earnings before tax					$	51,051						$	45,460					$	25,095					$	22,716

Net Sales
Contracts with customers	$	758,266	$	2,200	$	760,466		$	671,141	$	1,656	$	672,797	$	333,987	$	960	$	334,947	$	363,681	$	789	$	364,470
Financing and other		7,987		24,484		32,471			10,491		18,287		28,778		7,237		12,847		20,084		4,854		12,048		16,902
Net sales	$	766,253	$	26,684	$	792,937		$	681,632	$	19,943	$	701,575
Net Sales														$	341,224	$	13,807	$	355,031	$	368,535	$	12,837	$	381,372

Selected Financial Data - Statement of Cash Flow

Depreciation and amortization	$	7,283	$	2,794	$	10,077		$	5,985	$	2,882	$	8,867	$	3,634	$	1,145	$	4,779	$	1,339	$	3,625	$	4,964
Purchases of property, equipment and operating lease equipment	$	2,675	$	2,213	$	4,888		$	2,976	$	3,475	$	6,451	$	2,048	$	229	$	2,277	$	1,249	$	269	$	1,518

Selected Financial Data - Balance Sheet

Total assets	$	690,648	$	223,618	$	914,266		$	565,771	$	209,425	$	775,196	$	834,264	$	224,598	$	1,058,862	$	658,692	$	216,121	$	874,813

	Twelve Months Ended September 30,
	2019			2018			Change
Revenue by customer end market:
Technology		22	%		23	%		(1	%)
SLED		17	%		17	%		-
Financial Services		14	%		15	%		(1	%)
Healthcare		15	%		15	%		-
Telecom, Media & Entertainment		16	%		13	%		3	%
All others		16	%		17	%		(1	%)
Total		100	%		100	%