FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
-
Commission file number: 0-28926
ePlus inc.
(Exact name of registrant as specified in its charter)
Delaware 54-1817218
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Herndon Parkway, Herndon, VA 20170
(Address, including zip code, of principal offices)
Registrant's telephone number, including area code: (703) 834-5710
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ___ [ X ] _____ No [ ____ ]
The number of shares of Common Stock outstanding as of August 9, 2002,
was 10,397,030.
TABLE OF CONTENTS
ePlus inc. AND SUBSIDIARIES
Part I. Financial Information:
Item 1. Financial Statements - Unaudited:
Condensed Consolidated Balance Sheets as of March 31, 2002 and
June 30, 2002 2
Condensed Consolidated Statements of Earnings, Three Months
Ended June 30, 2001 and 2002 3
Condensed Consolidated Statements of Cash Flows, Three Months
Ended June 30, 2001 and 2002 4
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
Part II. Other Information:
Item 1. Legal Proceedings 22
Item 2. Changes in Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
ePlus inc. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
As of March 31, 2002 As of June 30, 2002
-------------------- -------------------
ASSETS
Cash and cash equivalents ................................... $ 28,223,503 $ 32,260,183
Accounts receivable, net of allowance
for doubtful accounts of $3,719,207 and
$3,478,403 as of March 31, 2002 and
June 30, 2002, respectively ................................. 41,397,320 55,492,421
Notes receivable 227,914 197,432
Employee advances 69,042 62,613
Inventories 871,857 1,470,453
Investment in leases and leased equipment - net 169,087,078 164,505,903
Property and equipment - net 6,144,061 5,853,262
Deferred tax asset 5,471,658 5,076,158
Other assets 27,503,121 28,161,902
------------- ---------------
TOTAL ASSETS $ 278,995,554 $ 293,080,327
============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable - equipment $ 3,898,999 $ 4,741,272
Accounts payable - trade 15,104,985 27,472,484
Salaries and commissions payable 491,716 510,834
Accrued expenses and other liabilities 19,091,729 23,602,566
Income taxes payable 364,183 1,287,046
Recourse notes payable 4,659,982 3,584,206
Nonrecourse notes payable 129,095,051 123,692,431
--------------------------------
Total Liabilities 172,706,645 184,890,839
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; 2,000,000 shares authorized;
none issued or outstanding -- --
Common stock, $0.01 par value; 50,000,000 shares authorized;
10,395,870 and 10,396,980 issued and outstanding at
March 31, 2002 and June 30, 2002, respectively $ 104,619 $ 105,030
Additional paid-in capital 62,414,067 62,686,869
Treasury Stock, at cost, 66,100 and 106,100 shares,respectively (574,800) (921,800)
Retained earnings 44,345,023 46,319,070
Other comprehensive income -- 319
------------------------------
Total Stockholders' Equity 106,288,909 108,189,488
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 278,995,554 $ 293,080,327
=========== ===========
See Notes to Condensed Consolidated Financial Statements
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ePlus inc. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended
June 30,
2001 2002
---- ----
REVENUES
Sales of equipment $36,453,739 $ 50,631,880
Sales of leased equipment 452,108 4,611,303
------- ---------
36,905,847 55,243,183
Lease revenues
10,792,055 10,575,403
Fee and other income 5,595,434 6,356,694
--------- ---------
16,387,489 16,932,097
---------- ----------
TOTAL REVENUES 53,293,336 72,175,280
---------- ----------
COSTS AND EXPENSES
Cost of sales, equipment 31,351,389 45,389,224
Cost of sales, leased equipment 427,370 4,535,001
------- ---------
31,778,759 49,924,225
Direct lease costs 3,288,399 910,776
Professional and other fees 720,524 773,073
Salaries and benefits 6,966,460 11,178,983
General and administrative expenses 3,623,994 3,628,301
Interest and financing costs 3,350,257 2,410,584
--------- ---------
17,949,634 18,901,717
---------- ----------
TOTAL COSTS AND EXPENSES 49,728,393 68,825,942
---------- ----------
EARNINGS BEFORE PROVISION FOR INCOME TAXES 3,564,943 3,349,338
--------- ---------
PROVISION FOR INCOME TAXES 1,425,977 1,373,203
--------- ---------
NET EARNINGS $ 2,138,966 1,976,135
============ =========
NET EARNINGS PER COMMON SHARE - BASIC $ 0.22 $ 0.19
============ ============
NET EARNINGS PER COMMON SHARE - DILUTED $ 0.21 $ 0.19
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 9,946,355 10,404,895
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 10,138,328 10,506,489
See Notes to Condensed Consolidated Financial Statements.
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ePlus inc. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
June 30,
2001 2002
---- ----
Cash Flows From Operating Activities:
Net earnings $ 2,138,966 $ 1,976,135
Adjustments to reconcile net earnings to net cash (used) provided by
operating activities:
Depreciation and amortization 1,274,207 1,497,121
(Recovery of) provision for credit losses (28,155) 222,223
Deferred taxes -- 395,500
Loss on sale of operating lease equipment (1,743) (59,851)
Adjustment of basis to fair market value of inventories and investments, 1,001,169 --
Payments from lessees directly to lenders (113,473) --
Loss on disposal of property and equipment 12,420 --
Changes in:
Accounts receivable 16,224,951 (13,460,209)
Other receivables 1,355,953 (708,952)
Employee advances (10,373) 3,114
Inventories 800,153 (598,512)
Other assets 111,149 302,276
Accounts payable - equipment (2,529,381) 842,273
Accounts payable - trade (356,279) 11,374,535
Salaries and commissions payable, accrued
expenses and other liabilities (4,620,631) 5,369,313
---------- ---------
Net cash provided by operating activities 15,258,933 7,157,966
---------- ---------
Cash Flows From Investing Activities:
Purchases of operating lease equipment (887,976) (254,575)
Increase in investment in direct financing and sales-type leases (6,307,318) (10,359,732)
Purchases of property and equipment (607,882) (424,190)
Cash used in acquisitions, net of cash acquired (1,000,000) --
Increase in other assets (420,711) --
-------- ----------
Net cash used in investing activities (9,223,887) (11,038,497)
---------- -----------
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Three Months Ended
June 30,
2001 2002
------------------------------------------
Cash Flows From Financing Activities:
Borrowings:
Nonrecourse 21,906,914 20,469,775
Repayments:
Nonrecourse (12,832,837) (11,400,914)
Recourse (830) (75,778)
Purchase of treasury stock - (347,000)
Proceeds from issuance of capital stock, net of expenses 62,445 271,128
Net payments on lines of credit (5,027,284) (1,000,000)
---------- ----------
Net cash provided by financing activities 4,108,408 7,917,211
--------- ---------
Net Increase in Cash and Cash Equivalents 10,143,454 4,036,680
Cash and Cash Equivalents, Beginning of Period 24,534,183 28,223,503
---------- ----------
Cash and Cash Equivalents, End of Period $ 34,677,637 $ 32,260,183
================ ===============
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest $ 125,084 $ 1,797,374
================ ===============
Cash paid for income taxes $ 982,344 $ 261,142
================ ===============
Schedule of Non-Cash Investing and Financing Activities:
Common stock issued for assets in acquisition, 422,833 shares at $9.16/share $ 3,873,150 $ -
Liabilities assumed in acquisition $ 1,293,534 $ -
See Notes To Condensed Consolidated Financial Statements.
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ePlus inc. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated interim financial statements of ePlus inc. and
subsidiaries (the "Company") included herein have been prepared by the Company
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission and reflect all adjustments that are, in the opinion of
management, necessary for a fair statement of results for the interim periods.
All adjustments made were normal, recurring accruals. Certain prior year amounts
have been reclassified to conform to the current year's presentation.
These interim financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K (No. 0-28926) for the year ended March 31, 2002 (the "Company's
2002 Form 10-K"). Operating results for the interim periods are not necessarily
indicative of results for an entire year.
2. INVESTMENTS IN LEASES AND LEASED EQUIPMENT - NET
Investments in leases and leased equipment - net consists of the following:
As of
March 31, 2002 June 30, 2002
(In Thousands)
------------------------------
Investment in direct financing
and sales-type leases - net $ 167,628 $ 163,516
Investment in operating lease
equipment - net 1,459 990
--------------- --------------
$ 169,087 $ 164,506
=============== ==============
INVESTMENT IN DIRECT FINANCING AND SALES-TYPE LEASES
The Company's investment in direct financing and sales-type leases consists of
the following:
As of
March 31, 2002 June 30, 2002
(In Thousands)
------------------------------
Minimum lease payments $ 161,788 $ 164,646
Estimated unguaranteed residual value 25,880 24,128
Initial direct costs, net of amortization (1) 3,424 3,320
Less: Unearned lease income (20,412) (25,526)
Reserve for credit losses (3,052) (3,052)
-------------- --------------
Investment in direct finance and sales
type leases, net $ 167,628 $ 163,516
============== ===============
(1) Initial direct costs are shown net of amortization of $5,486 and
$5,893 at March 31, and June 30, 2002, respectively.
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The Company's net investment in direct financing and sales-type leases is
collateral for non-recourse and recourse equipment notes.
INVESTMENT IN OPERATING LEASE EQUIPMENT
Investment in operating leases primarily represents equipment leased for two to
three years and leases that are short-term renewals on month-to-month status.
The components of the net investment in operating lease equipment are as
follows:
As of
March 31, 2002 June 30, 2002
(In Thousands)
--------------------------------
Cost of equipment under operating leases $ 13,916 $ 13,100
Initial direct costs 14 11
Less: Accumulated depreciation and
Amortization (12,471) (12,121)
----------------- --------------
----------------- --------------
Investment in operating lease equipment, net $ 1,459 $ 990
================= ==============
3. BUSINESS COMBINATIONS
On October 4, 2001, the Company purchased all the outstanding stock of SourceOne
Computer Corporation, a technology and services company located in Silicon
Valley. Total consideration paid of $2,807,500 included $800,006 in cash and
274,999 shares of unregistered common stock, valued at $7.30 per share. The
issuance of these securities was made in reliance on an exemption from
registration provided by Section 4(2) or Regulation D of the Securities Act, as
amended, as a transaction by an issuer not involving any public offering. The
shareholders of SourceOne represented their intention to acquire the securities
for investment only and not with a view to or for distribution in connection
with such transaction, and an appropriate legend was affixed to the share
certificates issued in the transaction. The shareholders of SourceOne had
adequate access to information about ePlus through information made available to
the shareholders of SourceOne. The shareholders of SourceOne were granted
certain registration rights in connection with the transaction.
On March 29, 2002, the Company purchased certain fixed assets, customer lists,
and contracts, and assumed certain liabilities, relating to Elcom International,
Inc.'s IT fulfillment and IT professional services business. The Elcom purchase
added offices in Boston, San Diego, New Jersey, and New York City. The purchase
price included $2.2 million in cash and the assumption of certain liabilities of
approximately $0.1 million.
The impact of pro-forma financial information as if the acquisitions had
occurred at the beginning of the periods presented is not material.
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4. ISSUANCES OF COMMON STOCK, WARRANTS AND REPURCHASES OF COMMON STOCK
On September 20, 2001, the Company's Board of Directors authorized the
repurchase from time to time of up to 750,000 shares of its outstanding common
stock to a maximum of $5,000,000. As of June 30, 2002, the Company had
repurchased 106,100 shares of its outstanding common stock at an average cost of
$8.69 per share for a total of $921,800.
5. SEGMENT REPORTING
The Company manages its business segments on the basis of the products and
services offered. The Company's reportable segments consist of its traditional
financing business unit and technology sales business unit. The financing
business unit offers lease-financing solutions to corporations and governmental
entities nationwide. The technology sales business unit sells information
technology equipment and software and related services primarily to corporate
customers on a nationwide basis. The technology sales business unit also
provides Internet-based business-to-business supply chain management solutions
for information technology and other operating resources. The Company evaluates
segment performance on the basis of segment net earnings.
Both segments utilize the Company's proprietary software and services throughout
the organization. Sales, license, service, maintenance fees and related costs of
our proprietary software are included in the technology sales business unit.
Fees and other income relative to services generated by our proprietary software
and services are included in the financing business unit.
The accounting policies of the financing and technology business units are the
same as those described in Note 1, "Organization and Summary of Significant
Accounting Policies" in the Company's 2002 Form 10-K. Corporate overhead
expenses are allocated on the basis of revenue volume, estimates of actual time
spent by corporate staff, and asset utilization, depending on the type of
expense.
The Company changed reporting segments during the year ended March 31, 2002. All
prior period balances have been reclassified to conform to the new reporting
segments.
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Technology
Financing Sales
Business Business
Unit Unit Total
------------- ------------- -------------
Three months ended June 30, 2001
Sales $ 506,737 $ 36,399,110 $ 36,905,847
Lease revenues 10,792,055 -- 10,792,055
Fee and other income 3,926,568 1,668,866 5,595,434
------------- ------------- -------------
Total revenues 15,225,360 38,067,976 53,293,336
Cost of sales 938,367 30,840,392 31,778,759
Direct lease costs 3,288,399 -- 3,288,399
Selling, general and administrative
expenses 5,370,857 5,940,121 11,310,978
------------- ------------- -------------
Segment earnings 5,627,737 1,287,463 6,915,200
Interest expense 3,331,325 18,932 3,350,257
------------- ------------- -------------
Earnings before income taxes 2,296,412 1,268,531 3,564,943
============= ============= =============
Assets $ 247,594,611 $ 55,377,229 $ 302,971,840
Three months ended June 30, 2002
Sales $ 5,034,425 $ 50,208,758 $ 55,243,183
Lease revenues 10,575,403 -- 10,575,403
Fee and other income 3,030,053 3,326,641 6,356,694
------------- ------------- -------------
Total revenues 18,639,881 53,535,399 72,175,280
Cost of sales 5,249,429 44,674,796 49,924,225
Direct lease costs 910,776 -- 910,776
Selling, general and administrative --
expenses 6,662,813 8,917,544 15,580,357
------------- ------------- -------------
Segment earnings 5,816,863 (56,941) 5,759,922
Interest expense 2,256,498 154,086 2,410,584
------------- ------------- -------------
Earnings (Loss) before income taxes 3,560,365 (211,027) 3,349,338
============= ============= =============
Assets $ 229,781,841 $ 63,298,486 $ 293,080,327
6. NEW ACCOUNTING PRONOUNCEMENTS
Effective April 1, 2001, the Company adopted SFAS No. 140, "Accounting for
Transfer and Servicing of Financial Assets and Extinguishments of Liabilities -
a replacement of FASB Statement No. 125," which revises the standards for
accounting for securitizations and other transfers of financial assets and
collateral and requires certain disclosures, but carries over the majority of
SFAS No. 125's provisions without reconsideration. The Company's adoption of
SFAS No. 140 did not have a material impact on its financial position or results
of operations.
In June 2001, the FASB issued SFAS No. 141, "Business Combinations." SFAS No.
141 addresses the accounting and reporting for business combinations and
broadens the criteria for recording intangible assets separate from goodwill. On
July 1, 2001, the Company adopted SFAS No. 141 which requires the use of the
-9-
purchase method of accounting for all business combinations initiated after June
30, 2001. The Company's adoption of SFAS No. 141 did not have a material impact
on its financial statements.
On July 20, 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." The Company has adopted SFAS No. 142 retroactive to April 1, 2001, as
permitted. SFAS No. 142 requires that goodwill and other intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually.
As of June 30, 2002, the Company had goodwill, net of accumulated amortization,
of $22,106,292, an increase of $22,984 during the three months ending June 30,
2002. This increase relates to legal expenses incurred relating to the SourceOne
acquisition. Goodwill, net of accumulated amortization, was $17,445,572 as of
June 30, 2001. No goodwill amortization expense was recognized during the three
month periods ended June 30, 2002 and 2001.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion and analysis of results of operations and financial
condition of the Company should be read in conjunction with the Condensed
Consolidated Financial Statements and the related Notes thereto included
elsewhere in this report, and the Company's 2002 Form 10-K.
Overview
Certain statements contained herein are not based on historical fact, but are
forward-looking statements that are based upon numerous assumptions about future
conditions that may not occur. Actual events, transactions and results may
materially differ from the anticipated events, transactions, or results
described in such statements. Our ability to consummate such transactions and
achieve such events or results is subject to certain risks and uncertainties.
Such risks and uncertainties include, but are not limited to, the existence,
demand for, and acceptance of, the Company's services, economic conditions, the
impact of competition and pricing, results of financing efforts and other
factors affecting the Company's business that are beyond our control. The
Company undertakes no obligation and does not intend to update, revise or
otherwise publicly release the results of any revisions to these forward-looking
statements that may be made to reflect future events or circumstances.
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, interest rate fluctuations 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 the sale of
equipment in our lease portfolio prior to the expiration of the lease term to
the lessee or to a third party. Such sales of leased equipment prior to the
expiration of the lease term may have the effect of increasing revenues and net
earnings during the period in which the sale occurs, and reducing revenues and
net earnings otherwise expected in subsequent periods.
We currently derive the majority of our revenue from sales and financing of
information technology and other assets. We have expanded our product and
service offerings under the Enterprise Cost Management, or ECM, model which
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represents the continued evolution of our original implementation of ePlus
e-commerce products entitled ePlusSuite. Our ECM model is our framework for
combining IT sales and professional services, leasing and financing services,
asset management software and services, procurement software, and electronic
catalog content management software and services.
We have expanded our sales and marketing personnel to approximately 186 people
from both hiring personnel and from the acquisitions of SourceOne Computer
Corporation and Elcom International, Inc. Both are information technology sales
and services entities. These two acquisitions and our hiring of other sales
persons have expanded our current locations to 36, all of which are in the
United States.
On May 15, 2001, we acquired from ProcureNet, Inc. the e-commerce procurement
software asset products and software technology for cleaning and categorizing
product descriptions for e-commerce catalogues. These products and services and
associated expenses with this business acquisition have substantially increased
our expenses, and the ability to sell these services and products is expected to
fluctuate depending on the customer demand for these products and services,
which to date is still unproven. These products and services are included in our
Technology Sales Business Unit segment combined with our other sales of IT
products and services. Our leasing and financing activities are included in our
financing sales business unit segment in our financial statements.
As a result of our acquisitions and expansion of sales locations, the Company's
historical results of operations and financial position may not be indicative of
its future performance over time.
SELECTED ACCOUNTING POLICIES
The manner in which lease finance transactions are characterized and reported
for accounting purposes has a major impact upon reported revenue and net
earnings. Lease accounting methods significant to our business are discussed
below.
We classify our lease transactions, as required by the Statement of Financial
Accounting Standards No. 13, "Accounting for Leases", or FASB No. 13, as: (1)
direct financing; (2) sales type; or (3) operating leases. Revenues and expenses
between accounting periods for each lease term will vary depending upon the
lease classification.
For financial statement purposes, we present revenue from all three
classifications in lease revenues, and costs related to these leases in direct
lease costs.
Direct Financing and Sales-Type Leases. Direct financing and sales-type leases
transfer substantially all benefits and risks of equipment ownership to the
customer. A lease is a direct financing or sales-type lease if the
creditworthiness of the customer and the collectibility of lease payments are
reasonably certain and it meets one of the following criteria: (1) the lease
transfers ownership of the equipment to the customer by the end of the lease
term; (2) the lease contains a bargain purchase option; (3) the lease term at
inception is at least 75% of the estimated economic life of the leased
equipment; or (4) the present value of the minimum lease payments is at least
90% of the fair market value of the leased equipment at the inception of the
lease.
Direct financing leases are recorded as investment in direct financing leases
upon acceptance of the equipment by the customer. At the inception of the lease,
unearned lease income is recorded which represents the amount by which the gross
lease payments receivable plus the estimated residual value of the equipment
-11-
exceeds the equipment cost. Unearned lease income is recognized, using the
interest method, as lease revenue over the lease term.
Sales-type leases include a dealer profit or loss that is recorded by the lessor
at the inception of the lease. The dealer's profit or loss represents the
difference, at the inception of the lease, between the fair value of the leased
property and its cost or carrying amount. The equipment subject to such leases
may be obtained in the secondary marketplace, but most frequently is the result
of re-leasing our own portfolio. This profit or loss that is recognized at lease
inception is included in net margin on sales-type leases. For equipment supplied
from our technology sales business unit subsidiaries, the dealer margin is
presented in equipment sales revenue and cost of equipment sales. Interest
earned on the present value of the lease payments and residual value is
recognized over the lease term using the interest method and is included as part
of our lease revenues.
Operating Leases. All leases that do not meet the criteria to be classified as
direct financing or sales-type leases are accounted for as operating leases.
Rental amounts are accrued on a straight-line basis over the lease term and are
recognized as lease revenue. Our cost of the leased equipment is recorded on the
balance sheet as investment in leases and lease equipment and is depreciated on
a straight-line basis over the lease term to our estimate of residual value.
Revenue, depreciation expense and the resulting profit for operating leases are
recorded on a straight-line basis over the life of the lease.
As a result of these three classifications of leases for accounting purposes,
the revenues resulting from the "mix" of lease classifications during an
accounting period will affect the profit margin percentage for such period and
such profit margin percentage generally increases as revenues from direct
financing and sales-type leases increase. Should a lease be financed, the
interest expense declines over the term of the financing as the principal is
reduced.
Residual Values. Residual values represent our estimated value of the equipment
at the end of the initial lease term. The residual values for direct financing
and sales-type leases are reported as part of the investment in direct financing
and sales-type leases, on a net present value basis. The residual values for
operating leases are included in the leased equipment's net book value and are
reported in the investment in operating lease equipment. The estimated residual
values will vary, both in amount and as a percentage of the original equipment
cost, and depend upon several factors, including the equipment type,
manufacturer's discount, market conditions and the term of the lease.
We evaluate residual values on an ongoing basis and record any required changes
in accordance with FASB No. 13. Residual values are affected by equipment supply
and demand and by new product announcements by manufacturers. In accordance with
generally accepted accounting principles, residual value estimates are adjusted
downward when such assets are impaired.
We seek to realize the estimated residual value at lease termination through:
(1) renewal or extension of the original lease; (2) sale of the equipment either
to the lessee or the secondary market; or (3) lease of the equipment to a new
user. The difference between the proceeds of a sale and the remaining estimated
residual value is recorded as a gain or loss in lease revenues when title is
transferred to the lessee, or, if the equipment is sold on the secondary market,
in equipment sales revenues and cost of equipment sales when title is
transferred to the buyer. The proceeds from any subsequent lease are accounted
for as lease revenues at the time such transaction is entered into.
-12-
Initial Direct Costs. Initial direct costs related to the origination of direct
financing or operating leases are capitalized and recorded as part of the net
investment in direct financing leases, or net operating lease equipment, and are
amortized over the lease term.
Sales. Sales revenue includes the following types of transactions: (1) sales of
new or used equipment which is not subject to any type of lease; (2) sales of
equipment subject to an existing lease, under which we are lessor, including any
underlying financing related to the lease; (3) sales of off-lease equipment to
the secondary market; and (4) sales of procurement software. Sales of new or
used equipment are recognized upon shipment. Sales of equipment subject to an
existing lease and off-lease equipment are recognized when constructive title
passes to the purchaser. Revenue from sales of procurement software is
recognized in accordance with the Statement of Position (SOP) 97-2, Software
Revenue Recognition, as amended by SOP 98-4 and SOP 98-9. We recognize revenue
when all the following criteria exist: when there is persuasive evidence that an
arrangement exists, delivery has occurred, no significant obligations by the
Company with regard to implementation remain, the sales price is determinable,
and it is probable that collection will occur. Our accounting policy requires
that revenue earned on software arrangements involving multiple elements be
allocated to each element on the relative fair values of the elements and
recognized when earned. Revenue relative to maintenance and support is
recognized ratably over the maintenance term (usually one year) and revenue
allocated to training, implementation or other services is recognized as the
services are performed.
Other Sources of Revenue. Amounts charged for Procure(+) are recognized as
services are rendered. Amounts charged for the Manage(+) service are recognized
on a straight-line basis over the period the services are provided. Fee and
other income results from: (1) income from events that occur after the initial
sale of a financial asset; (2) re-marketing fees; (3) brokerage fees earned for
the placement of financing transactions; and (4) interest and other
miscellaneous income. These revenues are included in fee and other income in our
consolidated statements of earnings.
Reserve for Credit Losses. The reserve for credit losses is maintained at a
level believed by management to be adequate to absorb potential losses inherent
in the Company's lease and accounts receivable portfolio. As of June 30, 2001
and 2002, the Company's reserve for credit losses was $4,167,315 and $6,530,585,
respectively. Management's determination of the adequacy of the reserve is based
on an evaluation of historical credit loss experience, current economic
conditions, volume, growth, the composition of the lease portfolio, and other
relevant factors. The reserve is increased by provisions for potential credit
losses charged against income. Accounts are either written off or written down
when the loss is both probable and determinable, after giving consideration to
the customer's financial condition, the value of the underlying collateral and
funding status (i.e., discounted on a non-recourse or recourse basis).
The company's reserves for credit losses are segregated between our accounts
receivable and our investment in direct financing leases as follows (in
thousands):
-13-
Investment
Accounts in Direct
Receivable Financing Leases Total
-------------------------------------------------------------------------
Balance April 1, 2001 $ 1,392 $ 2,887 $ 4,279
Bad Debts Expense 1,324 165 1,489
Recoveries (184) - (184)
Assumed in Acquisitions 73 - 73
Other 1,114 - 1,114
-------------------------------------------------------------------------
Balance March 31, 2002 $ 3,719 $ 3,052 $ 6,771
=========================================================================
Bad Debts Expense (222) - (222)
Recoveries - - -
Assumed in Acquisitions - - -
Other (19) - (19)
-------------------------------------------------------------------------
Balance June 30, 2002 $ 3,478 $ 3,052 $ 6,530
=========================================================================
Balances in "Other" include reclasses from prior years. The Company assumed
$72,631 in reserve for credit losses in the acquisition of SourceOne Computer
Corporation.
Investments. The Company had a 5% membership interest in MLC/CLC LLC, a joint
venture to which the Company sold leased equipment. MLC/CLC LLC stopped
purchasing leased equipment prior to the year ending March 31, 2002. Other
assets reflects the Company's investment in MLC/CLC LLC of $628,218 as of June
30, 2001, accounted for using the cost method. The company recorded an
impairment of $628,218 during the quarter ended June 30, 2001 on this
investment. Also included in other assets was an investment of $420,711 as of
June 30, 2001, which the Company wrote off during the quarter ending June 30,
2001 as the underlying equity in the start-up venture did not support the
carrying amount of the Company's investment.
Capitalization of Software Costs for Internal Use. The Company has capitalized
certain costs for the development of internal-use software under the guidelines
of Statement of Position (SOP) 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. Approximately, $0.0 and $0.2
million of internal use software was capitalized during the three months ended
June 30, 2002 and 2001, respectively, which is included in the accompanying
consolidated balance sheet as a component of property and equipment.
Capitalization of Software Costs Available to Customers. In accordance with SFAS
No. 86, "Accounting for Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed", software development costs are expensed as incurred until
technological feasibility has been established, at such time such costs are
capitalized until the product is made available for release to customers. No
development costs have been capitalized for the three months ended June 30, 2002
or 2001 relative to software costs available to customers.
-14-
RESULTS OF OPERATIONS - Three Months Ended June 30, 2002 Compared to Three
Months Ended June 30, 2001
Total revenues generated by the Company during the three-month period ended June
30, 2002 were $72,175,280 compared to revenues of $53,293,336 during the
comparable period in the prior fiscal year, an increase of 35.4%. The increase
is primarily the result of increased sales of equipment and leased equipment.
The Company's revenues are composed of sales and other revenue, and may vary
considerably from period to period. See "POTENTIAL FLUCTUATIONS IN QUARTERLY
OPERATING RESULTS".
Sales revenue, which includes sales of equipment and sales of leased equipment,
increased 49.7% to $55,243,183 during the three-month period ended June 30,
2002, as compared to $36,905,847 generated during the corresponding period in
the prior fiscal year.
Sales of equipment are generated primarily through the Company's technology
sales business unit subsidiaries and represented 91.7% and 98.8% of total sales
revenue for the three months ended June 30, 2002 and 2001, respectively. Sales
of equipment increased 38.9% to $50,631,880 during the current period compared
to $36,453,739 generated during the comparable period in the prior fiscal year.
The increase was a result of higher sales within our technology sales business
unit subsidiaries as well as additional sales resulting from the acquisition of
SourceOne in October 2001 and Elcom in March 2002. The Company realized a gross
margin on sales of equipment of 10.4% and 14.0% for the three-month periods
ended June 30, 2002 and 2001, respectively. The Company's gross margin on sales
of equipment is affected by the mix and volume of products sold.
The Company also recognizes revenue from the sale of leased equipment. During
the three months ended June 30, 2002, sales of leased equipment increased
920.0%. During the three months ended June 30, 2002 and 2001, the Company
recognized a gross margin of 1.7% and 5.5% on leased equipment sales of
$4,611,303 and $452,108, respectively. The significant increase in leased
equipment sales reflects the higher volume of lease equity that the Company sold
to outside investors. Leases that are not equity-sold to investors remain on the
Company's books and lease earnings are recognized accordingly. In addition, the
revenue and gross margin recognized on sales of leased equipment can vary
significantly depending on the nature and timing of the sale, as well as the
timing of any debt funding recognized in accordance with SFAS No. 140.
The Company's lease revenues decreased 2.0% to $10,575,403 for the three months
ended June 30, 2002 compared with the corresponding period in the prior fiscal
year. The decrease is primarily the result of small decrease in our lease
portfolio.
For the three months ended June 30, 2002, fee and other income increased 13.6%
over the comparable period in the prior fiscal year. Fee and other income
includes revenues from adjunct services and fees, including broker fees, support
fees, warranty reimbursements, and learning center revenues generated by the
Company's technology sales business unit subsidiaries. The current period
increase in fee and other income is attributable to additional revenues
resulting from the purchase of SourceOne in October 2001 and Elcom in March
2002. We also received settlement money of $2.0 million from Toshiba for the
three months ending June 30, 2002 compared to $2.5 million for the three months
ending June 30, 2001. The Company's fee and other income contains earnings from
certain transactions which are in the Company's normal course of business but
there is no guarantee that future transactions of the same nature, size or
profitability will occur. The Company's ability to consummate such transactions,
-15-
and the timing thereof, may depend largely upon factors outside the direct
control of management. The earnings from these types of transactions in a
particular period may not be indicative of the earnings that can be expected in
future periods.
The Company's direct lease costs decreased 72.3% during the three-month period
ended June 30, 2002 as compared to the same period in the prior fiscal year. The
decrease is primarily the result a lease impairment charge of approximately $1.0
million taken in the June 2001 quarter and a decrease in lease depreciation,
specifically depreciation on the Company's matured lease portfolio.
The increase in professional and other fees of 7.3%, or $52,549, for the current
period over the comparable period in the prior fiscal year, was primarily the
result of expenses related to the Company's outside technical services.
Salaries and benefits expenses increased 60.5% during the three-month period
ended June 30, 2002 over the same period in the prior year. The increase is the
result of additional expense related to the Company's recent acquisitions,
SourceOne Computer Corporation and Elcom International, Inc., which is offset by
reduced commission expenses in the Company's lease financing and technology
sales units.
The Company's general and administrative expenses increased 0.1% to $3,628,301
during the three months ended June 30, 2002, as compared to the same period in
the prior fiscal year.
Interest and financing costs incurred by the Company for the three months ended
June 30, 2002 decreased 28.0% and relates to interest costs on the Company's
indebtedness, both lease-specific and general working capital. Payments for
interest costs on the majority of the Company's non-recourse and certain
recourse notes are typically remitted directly to the lender by the lessee.
The Company's provision for income taxes decreased to $1,373,203 for the three
months ended June 30, 2002 from $1,425,977 for the three months ended June 30,
2001, reflecting effective income tax rates of 41% for the three months ending
June 30, 2002 and 40% for the three months ending June 30, 2001.
The foregoing resulted in a 7.6% decrease in net earnings for the three-month
period ended June 30, 2002 as compared to the same period in the prior fiscal
year. Basic and fully diluted earnings per common share were $0.19 and $0.19 for
the three months ended June 30, 2002, as compared to $0.22 for basic and $0.21
for fully diluted earnings for the three months ended June 30, 2001. Basic and
diluted weighted average common shares outstanding for the three months ended
June 30, 2002 were 10,404,895 and 10,506,489 respectively. For the three months
ended June 30, 2001, the basic and diluted weighted average shares outstanding
were 9,946,355 and 10,138,328, respectively.
LIQUIDITY AND CAPITAL RESOURCES
During the three-month period ended June 30, 2002, the Company generated cash
flows from operations of $7,157,965 and used cash flows from investing
activities of $11,038,497. Cash flows generated by financing activities amounted
to $7,917,211 during the same period. The net effect of these cash flows was a
net increase in cash and cash equivalents of $4,036,680 during the three-month
period. During the same period, the Company's total assets increased
$14,084,773, or 5.0%. The cash balance at June 30, 2002 was $32,260,183 as
compared to $28,223,503 at March 31, 2002.
-16-
The Company's debt financing activities typically provide approximately 80% to
100% of the purchase price of the equipment purchased by the Company for lease
to its customers. Any balance of the purchase price (the Company's equity
investment in the equipment) must generally be financed by cash flow from its
operations, the sale of the equipment leased to third parties, or other internal
means. Although the Company expects that the credit quality of its leases and
its residual return history will continue to allow it to obtain such financing,
no assurances can be given that such financing will be available on acceptable
terms, or at all. The financing necessary to support the Company's leasing
activities has principally been provided by non-recourse and recourse
borrowings. Historically, the Company has obtained recourse and non-recourse
borrowings from 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 to the lender regarding the specific
contract or have ongoing loan servicing obligations. Under a non-recourse loan,
we borrow from a lender an amount based on the present value of the
contractually committed lease payments under the lease at a fixed rate of
interest, and the lender secures a lien on the financed assets. When the lender
is fully repaid from the lease payment, the lien is released and all further
rental or sale proceeds are ours. We are not liable for the repayment of
non-recourse loans unless we breach our representations and warranties in the
loan agreements. The lender assumes the credit risk of each lease, and their
only recourse, upon default by the lessee, is against the lessee and the
specific equipment under lease. The Company has formal programs with Key
Corporate Capital, Inc. and Fleet Business Credit Corporation. In addition to
these programs, recently the Company has regularly funded its leasing activities
with Citizens Leasing Corporation, GE Capital Corporation, De Lage Landen
Financial Services, Inc., Hitachi Leasing America, and Fifth Third Bank, among
others. These programs require that each transaction is specifically approved
and done solely at the lender's discretion. During the three-month period ending
June 30, 2002, the Company's lease related non-recourse debt portfolio decreased
4.2% to $123,692,431.
Whenever possible and desirable, the Company arranges for equity investment
financing which includes selling assets, including the residual portions, to
third parties and financing the equity investment on a non-recourse basis. The
Company generally retains customer control and operational services, and has
minimal residual risk. The Company usually preserves 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. We actively sell or finance
our equity investment with Bank of America, Fleet Business Credit Corporation
and GE Capital Corporation, among others.
The Company's "Accounts payable - equipment" represents equipment costs that
have been placed on a lease schedule, but for which the Company has not yet
paid. The balance of unpaid equipment cost can vary depending on vendor terms
and the timing of lease originations. As of June 30, 2002, the Company had
$4,741,272 of unpaid equipment cost, as compared to $3,898,999 at March 31,
2002.
The Company's "Accrued expenses and other liabilities" includes deferred income,
reserves for credit losses, and amounts collected and payable, such as sales
taxes and lease rental payments due to third parties. As of June 30, 2002, the
Company had $23,602,566 of accrued expenses and other liabilities.
Working capital for our leasing business is provided through a credit facility
which is a revolving $35 million limit and expires on April 17, 2004.
Participating in this facility are, among others, Branch Banking and Trust
-17-
Company ($10 million), PNC Bank N.A. ($5 million) and National City the agent.
The ability to borrow under this facility is limited to the amount of eligible
collateral at any given time. The credit facility has full recourse to the
Company and is secured by a blanket lien against all of the Company's assets
including the common stock of all wholly-owned subsidiaries. The credit facility
contains certain financial covenants and certain restrictions on, among other
things, the Company's ability to make certain investments, and sell assets or
merge with another company. The interest rates charged on borrowings are the
LIBOR interest rate plus 1.75% to 2.5%. As of June 30, 2002, the Company had no
outstanding balance on the facility. The loss of this relationship could have a
material adverse effect on our future results as we may have to use this
facility for daily working capital and liquidity for our leasing business.
In general, we use the National City facility to pay the cost of equipment to be
put on lease, and we repay borrowings from the proceeds of: (1) long-term,
non-recourse, fixed rate financing which we obtain from lenders after the
underlying lease transaction is finalized or (2) sales of leases to third
parties. The Company has a $3.1 million subordinated recourse note payable due
to Centura Bank resulting from the acquisition of CLG, Inc. This note comes due
in October, 2006 and has an 11% interest rate payable monthly.
ePlus Technology of NC, inc., ePlus Technology of PA, inc. and ePlus Technology,
inc. have separate credit facilities to finance their working capital
requirements for inventories and accounts receivable. Their traditional business
as sellers of computer technology and related network equipment and software
products is financed through agreements known as "floor planning" financing in
which interest expense for the first thirty to forty-five days is not charged
but is paid by the supplier/distributor. The floor planning liabilities are
recorded as accounts payable-trade, as they are normally repaid within the
thirty to forty-five day time-frame and represent an assigned accounts payable
originally generated with the supplier/distributor. If the thirty to forty-five
day obligation is not paid timely, interest is then assessed at stated
contractual rates.
In addition to the floor planning financing, ePlus Technology, inc. and ePlus
Technology of NC, inc. have accounts receivable facilities through Deutsche
Financial Services Corporation. Of the total $33 million dollar facility
provided by Deutsche Financial Services Corporation, $26 million is for
traditional inventory floor planning and $7 million is available for accounts
receivable financing. The maximum available under the accounts receivable
facilities for ePlus Technology, inc. and ePlus Technology of PA, inc. are $5
million and $2 million respectively and as of June 30, 2002 there was no
outstanding balance on these account receivable facilities. Availability under
the lines of credit may be limited by the asset value of equipment purchased by
the Company and may be further limited by certain covenants and terms and
conditions of the facilities.
-18-
As of June 30, 2002, the respective floor planning inventory agreement maximum
credit limits and actual outstanding balances are as follows:
Balance at
Entity Floor Plan Supplier Credit Limit June 30, 2002
------------------------------- -------------------------------- ---------------- -------------------
ePlus Technology of NC, inc. Deutsche Financial Services, $3,500,000 $ 2,426,820
Inc.
IBM Credit Corporation $ 250,000 $ 276,406
ePlus Technology of PA, inc. Deutsche Financial Services, $9,000,000 $ 6,753,189
Inc.
IBM Credit Corporation $1,250,000 $ 1,132,116
ePlus Technology, inc. Deutsche Financial Services, $13,500,000 $ 3,836,411
Inc.
The facilities provided by Deutsche Financial Services Corporation for ePlus
Technology of PA, inc. and ePlus Technology, inc. require a separate guaranty of
up to $4,900,000 and $2,000,000, respectively, by ePlus inc. The floor planning
facility provided by IBM Credit Corporation to ePlus Technology of PA, inc. also
requires a guaranty by ePlus inc. for the total balance outstanding. The loss of
the Deutsche Financial Services Corporation or the IBM Credit Corporation
relationship could have a material adverse effect on our future results as we
rely on these facilities for daily working capital and liquidity for our
technology sales business
The continued implementation of the Company's ECM business model could require a
significant investment in both cash and managerial focus. In addition, the
Company may selectively acquire other companies that have attractive customer
relationships and skilled sales forces. The Company may also acquire technology
companies to expand and enhance the ECM platform to provide additional
functionality and value added services. As a result, the Company may require
additional financing to fund its strategy implementation and potential future
acquisitions, which may include additional debt and equity financing.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's future quarterly operating results and the market price of its
stock may fluctuate. In the event the Company's 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 the Company's 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 or major customers or
vendors of the Company.
The Company's quarterly operating results are also susceptible to fluctuations
for a number of other reasons, including, without limitation, its entry into the
e-commerce market, any reduction of expected residual values related to the
equipment under the Company's leases, and timing of specific factors that may
-19-
affect future operating results. Quarterly operating results could also
fluctuate as a result of the sale by the Company of equipment in its lease
portfolio, at the expiration of a lease term or prior to such expiration, to a
lessee or to a third party. Such sales of equipment 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.
The Company believes that comparisons of quarterly results of its operations are
not necessarily meaningful and that results for one quarter should not be relied
upon as an indication of future performance.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Certain statements contained herein are not based on historical fact, but are
forward-looking statements that are based upon numerous assumptions about future
conditions that may not occur. Actual events, transactions and results may
materially differ from the anticipated events, transactions, or results
described in such statements. The Company's ability to consummate such
transactions and achieve such events or results is subject to certain risks and
uncertainties. Such risks and uncertainties include, but are not limited to the
matters set forth below.
Our traditional businesses of equipment leasing and financing and technology
sales have the following risks:
o we may not be able to realize our entire investment in the equipment we
lease;
o we depend on creditworthy customers and may not have reserved adequately
for credit losses;
o capital spending may decrease;
o direct marketing by manufacturers rather than through distributors may
affect future sales; and
o inventory and accounts receivable financing may not be available.
Our eECM solution introduced in May 2002 has had a limited operating history.
Although we have been in the business of financing and selling information
technology equipment since 1990, we will encounter some of the challenges,
risks, difficulties and uncertainties frequently encountered by early-stage
companies using new business models in evolving markets. As a result, the
Company will encounter some of the challenges, risks, difficulties and
uncertainties frequently encountered by early stage companies using new and
unproven business models in new and rapidly evolving markets. Some of these
challenges relate to the Company's ability to:
o increase the total number of users of ECM services;
o adapt to meet changes in its markets and competitive developments; and
o continue to update its technology to enhance the features and functionality
of its suite of products.
We cannot be certain that our business strategy will be successful or that it
will successfully address these and other challenges, risks and uncertainties.
-20-
Over the longer term, the Company expects to derive a significant portion of its
revenues from its ECM business model, which is unproven. The Company expects to
incur expenses that may negatively impact profitability. The Company also
expects to incur significant sales and marketing, research and development, and
general and administrative expenses in connection with the development of this
business. As a result, the Company may incur significant expenses, which may
have a material adverse effect on the future operating results of the Company as
a whole.
Broad and timely acceptance of the ECM services, which is critical to the
Company's future success, is subject to a number of significant risks. These
risks include:
o the electronic commerce business-to-business solutions market is highly
competitive; o the system's ability to support large numbers of buyers and
suppliers is unproven; o significant enhancement of the features and
services of our Enterprise Cost Management solution may be needed to
achieve widespread commercial initial and continued acceptance of the
system;
o the pricing model may not be acceptable to customers;
o if the Company is unable to develop and increase volume from our Enterprise
Cost Management Services, it is unlikely that it will ever achieve or
maintain profitability in this business;
o businesses that have already made substantial up-front payments for
e-commerce solutions may be reluctant to replace their current solution and
adopt the Company's solution;
o the Company's ability to adapt to a new market that is characterized by
rapidly changing technology, evolving industry standards, frequent new
product announcements and established competition;
o we may be unable to protect our intellectual property rights or face claims
from third parties for infringement of their products.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Although a substantial portion of the Company's liabilities are non-recourse,
fixed interest rate instruments, the Company is reliant upon lines of credit and
other financing facilities which are subject to fluctuations in interest rates.
These instruments were entered into for other than trading purposes, are
denominated in U.S. Dollars, and, with the exception of amounts drawn under the
National City Bank and Deutsche facilities, 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. Borrowings under the National
City and Deutsche facilities bear interest at a market-based variable rate. Due
to the relatively short nature of the interest rate periods, we do not expect
our operating results or cash flow to be materially affected by changes in
market interest rates. As of June 30, 2002, the aggregate fair value of our
recourse borrowings approximated their carrying value.
-21-
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6(a) EXHIBITS
Exhibit No. Exhibit Description
----------- -------------------
3.1(1) Certificate of Incorporation of the Company, as amended
3.2 Certificate of Amendment to Certificate of Incorporation
3.3(2) Bylaws of the Company
4.1(2) Speciman certificate of Common Stock of the Company
10.1 Lease Agreement, dated as of November 1, 2001, by and
between the Company, as Tenant, and Phillip G. Norton,
Trustee, as Landlord
99.1 Certification of Chief Executive Officer
-----------
(1) Incorporated herein by reference to the indicated exhibit filed as
part of the Registrant's Form 10-Q filed on November 14, 1997.
(2) Incorporated herein by reference to the indicated exhibit filed as
part of the Registrant's Registration Statement on Form S-1 (No.
333-11737).
Item 6(b) REPORTS ON FORM 8-K
Form 8-K dated March 29, 2002 and filed with the SEC on April 5, 2002 to report
that the Company had purchased fixed assets, customer lists, and contracts and
assumed certain limited liabilities relating to the IT fulfillment and IT
professional services business from Elcom International, Inc. Total
consideration was approximately $2.3 million consisting of cash of $2,150,000
and the assumption of certain liabilities of approximately $113,000.
-22-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
ePlus inc.
/s/ PHILLIP G. NORTON
--------------------------------------------
By: Phillip G. Norton, Chairman of the Board,
President and Chief Executive Officer
Date: August 14, 2002
/s/ STEVEN J. MENCARINI
--------------------------------------------
By: Steven J. Mencarini, Senior Vice President
and Chief Financial Officer
Date: August 14, 2002
-23-
Exibit 99.1
STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND THE CHIEF
FINANCIAL OFFICER OF EPLUS INC.
PURSUANT TO 18 U.S.C.SS.1350
Each of the undersigned hereby certifies in his capacity as an officer of
ePlus inc. (the "Company") that this Quarterly Report on Form 10-Q for the
period ended June 30, 2002, as filed with the Securities and Exchange Commission
on the date hereof (this "Report"), fully complies with the requirements of
Section 13(a) and 15(d) of the Securities Exchange Act of 1934, and the
information contained in this Report fairly presents, in all material respects,
the financial condition and results of operations of the Company.
Dated: August 14, 2002 _______________________
Phillip G. Norton
President and Chief Executive Officer
Dated: August 14, 2002 _______________________
Steven J. Mencarini
Senior Vice President and
Chief Financial Officer
-24-