What changed in this filing

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Item 9A. Controls and Procedures

2021-05-21 compared with 2020-05-22 · 194 added, 308 removed, 956 unchanged (34% of the section changed)

34 unchanged sentences

Information about our directors may be found under the caption “Proposal 1 – Election of Directors” in our Proxy Statement for the 2021 Annual Meeting of Stockholders (the “Proxy Statement”).

The information in the Proxy Statement set forth under the captions of “Delinquent Section 16(a) Reports,” “Corporate Governance – Code of Conduct” and “- Board Committees” is incorporated herein by reference.

The information in the Proxy Statement set forth under the captions of “Corporate Governance – Code of Conduct” and “- Board Committees” is incorporated herein by reference.

The information under the heading “Executive Officers” in Item 1 of this report is incorporated in this section by reference.

40 unchanged sentences

2012 Employee Long-term Incentive Plan (updated to reflect stock split effected March 31, 2017) (Incorporated herein by reference to Exhibit 10.8 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2017).

Form of Award Agreement – Restricted Stock Agreement (for awards granted under and subject to the provisions of the e Plus inc.

Form of Award Agreement – Restricted Stock Agreement (for awards granted under and subject to the provisions of the ePlus inc.

2012 Employee Long-Term Incentive Plan) (Incorporated herein by reference to Exhibit 10.24 to our Annual Report on Form 10-K for the fiscal year ended March 31, 2013).

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(Incorporated herein by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on April 3, 2020).

Amendment No.

10, dated May 18, 2020, to Amended and Restated Business Financing Agreement between ePlus Technology, inc.

and Wells Fargo Commercial Distribution Finance, LLC.

(Incorporated herein by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on May 21, 2020).

Amended and Restated Agreement for Wholesale Financing, dated July 23, 2012, by and between General Electric Commercial Distribution Finance and e Plus Technology, inc.

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(Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on April 3, 2020).

Amendment No.

10, dated May 18, 2020, to Amended and Restated Agreement for Wholesale Financing between ePlus Technology, inc.

and Wells Fargo Commercial Distribution Finance, LLC.

(Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 21, 2020).

Employment Agreement, effective May 7, 2018, by and between ePlus inc.

6 unchanged sentences

Cash Incentive Plan, effective April 1, 2018, (Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on July 18, 2018).

Amendment No.

10, dated May 18, 2020, to Amended and Restated Business Financing Agreement between ePlus Technology, inc.

and Wells Fargo Commercial Distribution Finance, LLC.

(Incorporated herein by reference to Exhibit 10.2 to our Current Report on Form 8-K filed on May 21, 2020).

Amendment No.

10, dated May 18, 2020, to Amended and Restated Agreement for Wholesale Financing between ePlus Technology, inc.

and Wells Fargo Commercial Distribution Finance, LLC.

(Incorporated herein by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on May 21, 2020)

Subsidiaries of e Plus inc.

109 unchanged sentences

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of e Plus inc.

We have audited the internal control over financial reporting of ePlus inc.

and subsidiaries (the "Company") as of March 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the US federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

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Financing receivables and operating leases—net

Deferred tax asset—net

Property, equipment and other assets

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Total current liabilities

Recourse notes payable - long-term

Non-recourse notes payable - long-term

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AND SUBSIDIARIES

CONSOLIDATED S TATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

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Payments from lessees directly to lenders—operating leases

Gain on disposal of property, equipment, and leased equipment

Gain on sale of financing receivables

Gain on disposal of property, equipment, and operating lease equipment

Gain on sale of financial receivables

Accounts receivable

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Cash flows from investing activities:

Proceeds from sale of property, equipment, and leased equipment

Proceeds from sale of property, equipment, and operating lease equipment

Purchases of property, equipment, and operating lease equipment

Cash used in acquisitions, net of cash acquired

Purchases of assets to be leased or financed

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Proceeds from sale of financing receivables

Cash used in acquisitions, net of cash acquired

Net cash used in investing activities

CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(in thousands)

Year Ended March 31,

Cash flows from financing activities:

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Cash and cash equivalents, end of period

CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

(in thousands)

Year Ended March 31,

Supplemental disclosures of cash flow information:

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Issuance of financing receivables

Repayments of financing receivables

Proceeds from sale of financing receivables

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Vesting of share-based compensation

Repurchase of common stock

New operating lease assets obtained in exchange for lease obligations

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USE OF ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the US requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.

Estimates are used when accounting for items and matters including, but not limited to, revenue recognition, residual asset values, vendor consideration, lease classification, goodwill and intangibles, reserves for credit losses, inventory obsolescence, and the recognition and measurement of income tax assets and other provisions and contingencies.

Estimates are used when accounting for items and matters including, but not limited to, revenue recognition, residual asset values, vendor consideration, lease classification, goodwill and intangibles, 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.

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 write off financing receivables when we deem them to be uncollectable.

Through the year ended March 31, 2021, we recognized an increase in the allowance to reflect the forecasted credit deterioration due to the COVID-19 pandemic.

BUSINESS COMBINATIONS — We account for business combinations using the acquisition method, which requires that the total purchase price for each of the acquired entity be allocated to the assets acquired and liabilities assumed based on their fair values at the acquisition date.

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We have a lockbox account whose purpose is to collect and distribute customer payments under financing arrangements.

As of March 31, 2020, and March 31, 2019, we had no amounts being held in trust for third party recipients within our lockbox account.

As of March 31, 2021, we had $ 0.7 million being held in trust for third-party recipients within our lockbox account.

There were no amounts being held in trust for third-party recipients as of March 31, 2020.

As of March 31, 2021, and March 31, 2020, there were no restrictions on the withdrawal of funds from our money market funds.

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Cash and cash equivalents may include short-term investments that are maintained principally with financial institutions in the US.

Our risk on accounts receivable and financing receivables is reduced by having a broad customer base in a diverse range of industries and through the ongoing evaluation of collectability of our portfolio.

Our credit risk is further mitigated by transferring certain financial assets to financial institutions on a non-recourse basis and, concerning leases, by owning the underlying asset.

Our accounts receivable-trade balance as of March 31, 2021, and 2020 included approximately 20 % concentration of invoices due from Verizon Communications Inc.

The risk on our accounts receivable and financing receivables is reduced by having a broad customer base in a diverse range of industries and through the ongoing evaluation of collectability of our portfolio.

The credit risk is further mitigated by transferring certain of our financing receivables to financial institutions on a non-recourse basis and, for our lease receivables, by owning the underlying asset.

A substantial portion of our sales are products from Cisco Systems, which represented approximately 36 %, 40 %, and 42 %, of our technology segment net sales for the years ended March 31, 2021, 2020, and 2019, respectively.

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On March 31, 2021, the carrying amounts of our notes receivables, recourse and non-recourse payables were $ 112.6 million, $ 18.1 million and $ 56.1 million, respectively, and their fair values were $ 113.2 million, $ 18.1 million and $ 56.3 million, respectively.

At March 31, 2019, the carrying amounts of our notes receivables and non-recourse payables were $ 40.4 million and $ 48.6 million, respectively, and their fair values were $ 40.5 million and $ 48.7 million, respectively.

The carrying amount and fair value of our recourse notes payable at March 31, 2019, were insignificant.

On March 31, 2020, the carrying amounts of our notes receivables, recourse and non-recourse payables were $ 54.8 million, $ 37.3 million and $ 35.5 million, respectively, and their fair values were $ 55.4 million, $ 37.3 million and $ 35.5 million, respectively.

FINANCING RECEIVABLES AND OPERATING LEASES — Financing receivables and operating leases consists of notes receivable, sales-type leases and operating leases.

8 unchanged sentences

We report all foreign currency transaction gains or losses in other income (expense) on our consolidated statement of operations.

We recognized a loss of $ 0.4 million, a gain of $ 0.4 million, and a loss of $ 0.8 million due to foreign currency translations for the years ended March 31, 2020, 2019, and 2018, respectively.

We recognized a gain of $ 0.5 million, a loss of $ 0.4 million, and a gain of $ 0.4 million due to foreign currency translations for the years ended March 31, 2021, 2020, and 2019, respectively.

GOODWILL — We test goodwill for impairment on an annual basis, as of October 1, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

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Conversely, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

IMPLEMENTATION COSTS OF A HOSTING ARRANGEMENT- We capitalize implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

We classify these capitalized costs in the same balance sheet line item as the amounts prepaid for the related hosting arrangement and we present the amortization of these capitalized costs in the same income statement line item as the service fees for the related hosting arrangement.

We amortize the capitalized implementation costs over the term of the hosting arrangement.

INCOME TAXES — Deferred income taxes are accounted for in accordance with Codification Topic 740 Income Taxes (“Codification Topic 740”).

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Our determination of the net realizable value for inventories is based on the terms of underlying purchase commitments from our customers, current economic conditions including the impact of COVID-19, and other relevant factors.

LESSEE ACCOUNTING — We lease office space over initial terms typically between 3 and 6 years.

LESSEE ACCOUNTING — We lease office space for periods up to 6 years.

At the lease commencement date, we recognize operating lease liabilities based on the present value of the future minimum lease payments.

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We typically depreciate internal use IT equipment over three years , perpetual software licenses over five years , furniture and fixtures over five years , and telecommunications equipment over seven years .

RESERVES FOR CREDIT LOSSES —We maintain our reserves for credit losses related to our accounts receivable and financing receivables at levels believed to be adequate to absorb potential losses inherent in their respective balances.

We increase our reserve for credit losses through a charge to bad debt expense for potential losses.

We decrease our reserve for credit losses when we charge off the related receivable in the period the receivables are deemed uncollectable.

We recognize recoveries of receivables previously charged off when received.

Our determination of the adequacy of the reserves for credit losses for accounts receivable is based on the age of the receivable balance, our internal rating of the customer’s credit quality, our historical credit losses, current economic conditions including the impact of COVID-19, and other relevant factors.

Our determination of the adequacy of the reserve for credit losses for financing receivables is based on our internal rating of the customer’s credit quality, our historical credit losses, current economic conditions including the impact of COVID-19, the fair value of the underlying collateral, and the volume, growth, and composition of our portfolio, and other relevant facts.

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 update the internal credit quality rating at least annually or when an indicator of a change in credit quality arises, such as a delinquency or bankruptcy.

RESIDUAL ASSETS — Our estimate for the residual asset in a lease is the amount we expect to derive from the underlying asset following the end of the lease term.

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We typically invoice our customers for third-party products upon shipment, unless our customers lease the equipment through our financing segment, in which case the arrangement is accounted for as a lease in accordance with Codification Topic 842, Leases ("Codification Topic 842").

We typically invoice our customers for third-party software upon delivery and third-party services at the point of sale, unless our customers finance these assets equipment through our financing segment, in which case we record a financing receivable based on the terms of the arrangement.

We typically invoice our customers for third-party software upon delivery and third-party services at the point of sale, unless our customers finance these products through our financing segment, in which case we record a financing receivable based on the terms of the arrangement.

Product Revenue

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In these transactions, we recognize revenue when the customer has signed a bill-and-hold agreement with us, the product is identified separately as belonging to the customer and, when orders include configuration, such configuration is complete, and the product is ready for delivery to the customer.

We recognize sales of leased equipment within our financing segment when control passes to the customer, which is typically the date of sale.

We recognize sales of off-lease equipment within our financing segment when control passes to the customer, which is typically the date that title to the equipment is transferred per the sales agreement.

Sales of third-party software

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RECENT ACCOUNTING PRONOUNCEMENTS

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS —We adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) in our quarter ended June 30, 2019 using a transition option that allows entities to initially apply the new leasing 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.

As part of our transition, 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 million and lease liabilities of $ 12.3 million and a reduction in prepaid assets of $ 0.4 million at the beginning of our quarter ended 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 .

The amendments in this update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

We are adopting this update in our quarter ending June 30, 2020.

CREDIT LOSSES — We adopted ASU 2016-13 on April 1, 2020.

The amendments in this update replaced 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.

Our adoption of this update, including 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.

Contract balances

2 unchanged sentences

The following table provides the balance of contract liabilities from contracts with customers (in thousands):

Years Ended March 31,

Contract liabilities

Current (included in deferred revenue)

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Occasionally, our leases provide the lessee a bargain purchase option.

The following table provides the profit recognized for sales-type leases at their commencement date (in thousands):

The following table provides the profit recognized for sales-type leases at their commencement date, including modifications that are recognized on a net basis, for the years ended March 31, 2021, and 2020 (in thousands):

Year Ended March 31 ,

Cost of sales

The following table provides interest income in aggregate for sales-type leases and lease income for operating leases (in thousands):

The following table provides interest income in aggregate on our sales-type leases and lease income on our operating leases for the years ended March 31, 2021 , and 2020 (in thousands) :

Year Ended March 31 ,

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FINANCING RECEIVABLES—NET

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

The following tables provide a disaggregation of our financing receivables - net (in thousands):

March 31, 2021

Lease-Related

Total Financing

Minimum payments

Estimated unguaranteed residual value (1)

Gross receivables

Unguaranteed residual value (1)

Initial direct costs, net of amortization

Unearned income

Reserve for credit losses (3)

Includes estimated unguaranteed residual values of $ 14,972 thousand for sales-type leases, which have been sold and accounted for as sales .

Initial direct costs are shown net of amortization of $ 295 thousand.

For details on reserve for credit losses, refer to Note 7, “Reserves for Credit Losses.”

Allowance for credit losses (2)

Includes unguaranteed residual values of $ 9,453 thousand that we retained after selling the related lease receivable.

Refer to Note 7, “Allowance for Credit Losses” for details.

March 31, 2020

Lease-Related

Total Financing

Minimum payments

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Unearned income

Reserve for credit losses (3)

Includes $ 8,996 thousand for estimated residual values of sales-type leases and direct financing leases for which we sold the financing assets .

Initial direct costs are shown net of amortization of $ 275 thousand.

For details on reserve for credit losses, refer to Note 7, “Reserves for Credit Losses.”

Future scheduled minimum lease payments for investments in sales-type leases as of March 31, 2020, are as follows (in thousands):

Allowance for credit losses (2)

Includes unguaranteed residual values of $ 14,972 thousand for sales type leases, which have been sold and accounted for as sale s .

Refer to Note 7, “Allowance for Credit Losses” for details.

The following table provides the future scheduled minimum lease payments for investments in sales-type leases as of March 31, 2021 (in thousands):

Year ending March 31, 2022

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Amounts include estimated unguaranteed residual values of $ 2.5 million and $ 3.1 million as of March 31, 2021 , and 2020 , respectively.

Future scheduled minimum lease rental payments as of March 31, 2020, are as follows (in thousands):

The following table provides the future scheduled minimum lease rental payments for operating leases as of March 31, 2021 (in thousands):

Year ending March 31, 2022

2025 and thereafter

TRANSFERS OF FINANCIAL ASSETS

We enter into arrangements to transfer the contractual payments due under financing receivables and operating lease agreements, which are accounted for as secured borrowings in accordance with Codification Topic 860.

We enter into arrangements to transfer the contractual payments due under financing receivables and operating lease agreements, which are accounted for as secured borrowings .

For transfers accounted for as a secured borrowing, the corresponding investments serve as collateral for non-recourse notes payable.

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In a limited number of transfers accounted for as sales, we indemnified the assignee in the event that the lessee elects to early terminate the lease.

As of March 31, 2020, our maximum potential future payments related to such guarantees is not material.

We believe the possibility of making any payments to be remote.

As of March 31, 2021 , our total potential liability that could result from these indemnities is immaterial.

LESSEE ACCOUNTING

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We recognize the current and long-term portions of our lease liability as part of other current liabilities and other liabilities , respectively.

We recognized rent expense of $ 5.6 million as part of selling, general, and administrative expenses during the year ended March 31, 2020.

Supplemental information about the remaining lease terms and discount rates applied as of March 31, 2020:

We recognized rent expense of $ 6.1 million and $ 5.6 million as part of selling, general, and administrative expenses during the years ended March 31, 2021 , and March 31, 2020 , respectively.

Supplemental information about the remaining lease terms and discount rates applied as of March 31, 2021 , and March 30, 2020 , are as follows:

Year Ended March 31 ,

Lease term and Discount Rate

March 31, 2020

Weighted average remaining lease term (months)

Weighted average discount rate

As of March 31, 2020, we have future lease payments under our operating leases (in thousands):

March 31, 2020

The following table provides our future lease payments under our operating leases as of March 31, 2021 (in thousand s) :

Year ending March 31, 2022

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Present value of lease liabilities

Disclosures related to periods prior to our adoption of Codification Topic 842:

We had annual rent expense relating to operating leases of $ 5.2 million and $ 6.7 million for the years ended March 31, 2019, and 2018, respectively.

As of March 31, 2019, we had future minimum lease payments under operating leases as follows (in thousands):

March 31, 2019

Year ending March 31, 2020

2024 and thereafter

Total lease payments

GOODWILL AND OTHER INTANGIBLE ASSETS

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Goodwill represents the premium paid over the fair value of the net tangible and intangible assets that are individually identified and separately recognized in business combinations.

Our entire balance as of March 31, 2020, relates to our technology reportable segment, which we also determined to be one reporting unit.

The change in our goodwill balance during the year ended March 31, 2020, relates to our acquisition of certain assets and liabilities of Innovative Technology Systems & Solutions, Inc.

(“ABS Technology”), which is partially offset by adjustments related to our acquisition of SLAIT Consulting, LLC (“SLAIT”) and foreign exchange translations.

See Note 16, “Business Combinations” .

Our entire balance as of March 31, 2021 , and March 31, 2020 , relates to our technology reportable segment, which we also determined to be one reporting unit.

The carrying value of goodwill was $ 126.6 and $ 118.1 million as of March 31, 2021 , and March 31, 2020 , respectively.

The increase in the balance during the year ended March 31, 2021 , is due to our acquisition of certain assets and liabilities of Systems Management and Planning, Inc.

(“SMP”) of $ 8.3 million and favorable changes in foreign currency translation of $ 0.2 million .

Refer to Note 16 , “Business Combinations” for details.

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

In our annual test as of October 1, 2019, we performed a qualitative assessment of goodwill and concluded that, more likely than not, the fair value of our technology reporting unit continued to substantially exceed its carrying value.

In our annual tests as of October 1, 2020 , and 2019 , we performed a qualitative assessment of goodwill and concluded that, more likely than not, the fair value of our technology reporting unit continued to substantially exceed its carrying value.

During the fourth quarter of fiscal year 2020, we determined that the uncertainty associated with the economic environment stemming from the COVID-19 pandemic was a triggering event and we elected to perform a quantitative goodwill impairment test.

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Capitalized software development is generally amortized over 5 years.

Total amortization expense was $ 9.4 million, $ 7.9 million, and $ 6.4 million for the years ended March 31, 2020, 2019 and 2018, respectively.

Amortization expense is estimated to be $ 8.2 million, $ 6.6 million, $ 5.1 million, $ 3.8 million, and $ 2.7 million for the years ended March 31, 2021, 2022, 2023, 2024 and 2025, respectively.

See Note 16, “Business Combinations” for additional information regarding acquired intangibles.

RESERVES FOR CREDIT LOSSES

Activity in our reserves for credit losses for the years ended March 31, 2020, 2019 and 2018 were as follows (in thousands):

Lease-Related

The change in the gross carrying amount of other intangible asset is due to the addition of a customer relationship intangible asset of $ 14.3 million from our acquisition of SMP.

Refer to Note 16 , “Business Combinations” for details.

Total amortization expense for customer relationships & other intangible assets was $ 10.3 million, $ 9.4 million, and $ 7.9 million for the years ended March 31, 2021, 2020 and 2019, respectively.

The following table provides the future amortization expense for customer relationships & other intangible assets as of March 31, 2021 (in thousands):

Year ending March 31, 2022

2026 and thereafter

ALLOWANCE FOR CREDIT LOSSES

The following table provides the activity in our allowance for credit losses for the years ended March 31, 2021, 2020 and 2019 (in thousands):

Balance as of March 31, 2018

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Balance as of March 31, 2021

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

March 31, 2020

The following table provides our allowance for credit losses and minimum payments associated with our notes receivables and lease-related receivables disaggregated based on our impairment method as of March 31, 2020 (in thousand s):

March 31, 2020

Reserves for credit losses:

Allowance for credit losses:

Ending balance:

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Ending balance

The net credit exposure for the balance evaluated individually for impairment as of March 31, 2020, and March 31, 2019 was $ 0.1 million, which is related to one customer.

We place receivables on non-accrual status when events occur that indicate a receivable will not be collectable (such as a customer bankruptcy).

We charge off uncollectable financing receivables when we stop pursuing collection.

The age of the recorded minimum lease payments and net credit exposure associated with our investment in sales-type leases that are past due disaggregated based on our internally assigned credit quality rating (“CQR”) were as follows as of March 31, 2020, and 2019 (in thousands):

March 31, 2020

March 31, 2019

The age of the recorded notes receivable balance disaggregated based on our internally assigned CQR were as follows as March 31, 2020, and 2019 (in thousands)

March 31, 2020

March 31, 2019

We estimate losses on our net credit exposure to be between 0 % - 5 % for customers with high CQR, as these customers are investment grade or the equivalent of investment grade.

We estimate losses on our net credit exposure to be between 2 % - 15 % for customers with average CQR, and between 15 % - 100 % for customers with low CQR, which includes customers in bankruptcy.

We evaluate our customers using an internally assigned credit quality rating (“CQR”).

This rating includes accounts with excellent to good business credit, asset quality and capacity to meet financial obligations.

Loss rates in this category are generally less than 1 %.

This rating includes accounts with average credit risk that are more susceptible to loss in the event of adverse business or economic conditions.

Loss rates in this category are generally in the range of 2 % to 10 %.

This rating includes accounts that have marginal credit risk such that the customer’s ability to make repayment is impaired or may likely become impaired.

The loss rates in this category in the normal course are generally in the range of 10 % to 100 %.

The following table provides the amortized cost basis of our financing receivables by CQR and by credit origination year as of March 31, 2021 (in thousand s):

Amortized cost basis by origination year ending March 31 ,

Notes receivable:

Lease receivables:

Total amortized cost (1)

Unguaranteed residual values of $ 9,453 thousand that we retained after selling the related lease receivable and initial direct costs of notes receivable of $ 425 thousand are excluded from amortized cost.

Transfers consist of receivables that have been transferred to third-party financial institutions on a non-recourse basis and receivables that are in the process of being transferred to third-party financial institutions.

The following table provides an aging analysis of our financing receivables as of March 31, 2021 (in thousands):

Notes receivable

Lease receivables

The following table provides an aging analysis of our lease receivables by CQR as of March 31, 2020 (in thousand s):

The following table provides an aging analysis of our notes receivable by CQR as of March 31, 2020 (in thousand s):

Our financial assets on nonaccrual status were not significant as of March 31, 2021 , and March 31, 2020.

PROPERTY, EQUIPMENT, AND OTHER ASSETS AND LIABILITIES

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Property and equipment—net consists of the following (in thousands):

March 31, 2020

March 31, 2019

Furniture, fixtures and equipment

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OTHER ASSETS AND LIABILITIES

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

March 31, 2020

March 31, 2019

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

Other current assets:

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Other liabilities :

Deferred revenue

Contingent consideration - long-term

Deferred revenue - non-current

Long-term lease liability

1 unchanged sentence

In conjunction with those sales, a portion of the proceeds were placed in escrow and were released during the current fiscal year upon payment of outstanding invoices related to the underlying financing arrangements that were sold.

In September 2019, we reached a settlement in full for one of our contingent consideration arrangements in the amount of $ 9.6 million, which was paid in October 2019.

This settlement is the primary factor behind the decrease in short-term and long-term contingent consideration.

NOTES PAYABLE AND CREDIT FACILITY

Recourse Notes Payable

Recourse notes payable consist of borrowings that, in the event of default, the lender has recourse against the assets serving as collateral, and against us.

As of March 31, 2020, recourse notes payable included $ 35.0 million outstanding under our revolving credit facility with Wells Fargo, which had a weighted average interest rate of 3.49 % .

There were no amounts outstanding as of March 31, 2019.

As of March 31, 2020, and March 31, 2019, we had $ 2.3 million and $ 28 thousand, respectively, of borrowings that were collateralized by investments in notes and leases.

Principal and interest payments are generally due monthly in amounts that are approximately equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable.

The weighted average interest rate for our recourse notes payable was 2.55 % and 4.00 % , as of March 31, 2020, and March 31, 2019, respectively.

Non-recourse Notes Payable

Non-recourse notes payable consist of borrowings that, in the event of a default by a customer, the lender generally only has recourse against the customer, and the assets serving as collateral, but not against us.

As of March 31, 2020, and March 31, 2019, we had $ 35.5 million and $ 48.6 million, respectively, of nonrecourse borrowings that were collateralized by investments in notes and leases.

The weighted average interest rate for our non-recourse notes payable was 3.84 % and 4.68 % , as of March 31, 2020, and March 31, 2019, respectively.

Credit Facility

Within our technology segment, e Plus Technology, inc.

and certain of its subsidiaries finance their operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC or WFCDF.

and certain of its subsidiaries finance their operations with funds generated from operations, and with a credit facility with Wells Fargo Commercial Distribution Finance, LLC (“WFCDF”) .

This facility provides short-term capital for our technology segment.

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(1) a floor plan component and (2) an accounts receivable component.

Under the floor plan component, we had outstanding balances of $ 127.4 million and $ 116.1 million as of March 31, 2020, and 2019, respectively.

Under the accounts receivable component, we had an outstanding balance as of March 31, 2020, of $ 35.0 million and no outstanding balance as of March 31,2019.

As of March 31, 2020, the facility agreement had an aggregate limit of the two components of $ 300 million, and the accounts receivable component had a sub-limit of $ 75 million, which bears interest assessed at a rate of the One Month LIBOR plus two and one-half percent .

As of March 31, 2020, except during a temporary uplift, the facility had an aggregate limit of $ 250 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 had an election beginning July 1 in each year to temporarily increase the aggregate limit of the two components to $ 350 million ending the earlier of 90 days following the election or October 31 of that same year.

On March 31, 2020, we executed an additional amendment to the WFCDF credit facility that temporarily increased the aggregate limit of the two components from $ 250.0 million to $ 300.0 million through May 5, 2020.

Similarly, the amendment temporarily increased the limit on the accounts receivable component of the WFCDF credit facility to $ 75.0 million through April 14, 2020.

The credit facility has full recourse to e Plus Technology, inc.

and certain of its subsidiaries and is secured by a blanket lien against all its assets, such as receivables and inventory.

Availability under the facility may be limited by the asset value of equipment we purchase or accounts receivable and may be further limited by certain covenants and terms and conditions of the facility.

These covenants include but are not limited to a minimum excess availability of the facility and minimum earnings before interest, taxes, depreciation and amortization (“EBITDA”) of e Plus Technology, inc.

We are in compliance with these covenants as of March 31, 2020.

In addition, the facility restricts the ability of e Plus Technology, inc.

to transfer funds to its affiliates in the form of dividends, loans or advances with certain exceptions for dividends to e Plus inc.

More specifically, ePlus Technology, inc.

may make loans or advances in the ordinary course of business up to $ 30.0 million, if (i) we are not in default under the terms and conditions of the agreement, and (ii) our available borrowing as defined in the credit facility is not less than $ 20.0 million.

Loans or advances to affiliates outside of normal course of business are not permitted without prior written consent.

In addition, ePlus Technology, inc.

may make a dividend to ePlus inc.

if, after giving effect to such dividend and as of the date of the dividend;

(i) we are not in default under the terms and conditions of the agreement, (ii) our available borrowing as defined in the credit facility is not less than $ 20.0 million, and (iii) we do not have any outstanding borrowings under the accounts receivable component of the credit facility.

In the amendment executed on March 31, 2020, the restriction on borrowings under the accounts receivable component of the credit facility was removed as of March 31, 2020.

Accordingly, as of March 31, 2020, there were no restricted net assets of ePlus Technology inc.

The facility also requires that financial statements of e Plus Technology, inc.

and certain of its subsidiaries be provided within 45 days of each quarter and 90 days of each fiscal year end and also includes that other operational reports be provided on a regular basis.

Under the floor plan component, we had outstanding balances of $ 98.7 million and $ 127.4 million as of March 31, 2021, and March 31, 2020, respectively, and are presented as accounts payable – floorplan.

The fair value of the outstanding balance under the credit facility was equal to its carrying value as of March 31, 2021, and March 31, 2020.

On May 18, 2020, we executed an amendment to the WFCDF credit facility that increased the aggregate limit of the two components, except during a temporary uplift, to $ 275 million.

Additionally, we have an election to temporarily increase the aggregate limit to $ 350 million for a period of not less than 30 days, provided that all such periods shall not exceed 150 days in the aggregate in any calendar year.

Further, the amendment increased the limit on the accounts receivable component of the WFCDF credit facility to $ 100 million, changed the interest rate to two percent ( 2.00 %) plus the greater of one month LIBOR or seventy-five hundredths of one percent ( 0.75 % ), and modified certain restrictions on e Plus Technology, inc.’s ability to pay dividends to e Plus inc .

As of March 31, 2021, the limit of the two components of the credit facility was $ 275 million, and the accounts receivable component had a sub-limit of $ 100 million.

Our borrowing availability under the credit facility varies based upon the value of the receivables and inventory of e Plus Technology, inc., and certain of its subsidiaries.

Under the accounts receivable component, we had no outstanding balance as of March 31, 2021 and $ 35 million outstanding as of March 31, 2020.

The accounts receivable component is presented as recourse notes payable – current .

The WFCDF credit facility is secured by the assets of e Plus Technology, inc.

and certain of its subsidiaries.

Additionally, the credit facility requires a guaranty of $ 10.5 million by e Plus inc.

The credit facility restricts the ability of e Plus Technology, inc.

and certain of its subsidiaries to pay dividends to e Plus inc.

unless their available borrowing meets certain thresholds.

As of March 31, 2021, their available borrowing met the threshold such that there were no restricted net assets of ePlus Technology, inc.

The credit facility requires that financial statements of e Plus Technology, inc.

and certain of its subsidiaries be provided within 45 days of each quarter and 90 days of each fiscal year end and requires that other operational reports be provided on a regular basis.

Either party may terminate with 90 days’ advance notice.

We are not, and do not believe that we are reasonably likely to be, in breach of the WFCDF credit facility.

In addition, we do not believe that the covenants of the WFCDF credit facility materially limit our ability to undertake financing.

The facility provided by WFCDF 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 certain dates.

The loss of the WFCDF credit facility could have a material adverse effect on our future results as we currently rely on this facility and its components for daily working capital and liquidity for our technology segment and as an operational function of our accounts payable process.

On May 18, 2020, we executed an additional amendment to the WFCDF credit facility that increased the aggregate limit of the two components, except during a temporary uplift, to $ 275.0 million.

Additionally, we have an election to temporarily increase the aggregate limit to $ 350.0 million for a period of not less than 30 days, provided that all such periods shall not exceed 150 days in the aggregate in any calendar year.

Further, the amendment increased the limit on the accounts receivable component of the WFCDF credit facility to $ 100.0 million, reduced the interest rate to LIBOR plus 2.00 %, and removed certain restrictions on e Plus Technology, inc.’s ability to pay dividends to e Plus inc.

Recourse and non-recourse notes payable as of March 31, 2020, mature as follows (in thousands):

Recourse Notes

Notes Payable

Year ending March 31, 2021

2025 and thereafter

Recourse Notes Payable

Recourse notes payable consist of borrowings that, in the event of default, the lender has recourse against us in addition to the assets serving as collateral.

We had $ 18.1 million and $ 2.3 million as of March 31, 2021 and March 31, 2020, respectively in recourse borrowings that were collateralized by investments in notes receivable and leases.

Our principal and interest payments are generally due periodically at the same time payments are due from the customer under the leases or notes receivable that collateralize the notes payable.

The weighted average interest rate for these borrowings was 3.50 % as of March 31, 2021 and 2.55 % as of March 31, 2020.

Non-recourse Notes Payable

Non-recourse notes payable consists of borrowings that, in the event of a default by a customer, the lender generally only has recourse against the customer, and the assets serving as collateral, but not against us.

As of March 31, 2021, and March 31, 2020, we had $ 56.1 million and $ 35.5 million, respectively, of non-recourse borrowings that were collateralized by investments in notes and leases.

Principal and interest payments are generally due periodically in amounts that are approximately equal to the total payments due from the customer under the leases or notes receivable that collateralize the notes payable.

The weighted average interest rate for our non-recourse notes payable was 3.35 % and 3.84 % , as of March 31, 2021, and March 31, 2020, respectively.

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

From time to time, the Company may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business.

The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect the Company’s financial condition, results of operations and liquidity.

From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business.

The ultimate amount of liability and expenses, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity.

In addition, the ultimate outcome of any litigation is uncertain.

Any outcome, whether favorable or unfavorable, may materially and adversely affect the Company due to legal costs and expenses, diversion of management attention and other factors.

The Company expenses legal costs in the period incurred.

The Company cannot assure that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against the Company in the future, and these matters could relate to prior, current or future transactions or events.

Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors.

We expense legal costs in the period incurred.

We cannot assure that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current or future transactions or events.

EARNINGS PER SHARE

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Share Repurchase Plan

On April 26, 2018, our board of directors authorized the repurchase up to 500,000 shares of our outstanding common stock over a 12-month period beginning on May 28, 2018 through May 27, 2019.

The plan authorized purchases to be made from time to time in the open market, or in privately negotiated transactions, subject to availability.

Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

On May 24, 2019, our board of directors authorized the repurchase up to 500,000 shares of our outstanding common stock over a 12-month period beginning on May 28, 2019 through May 27, 2020.

The plan authorized purchases to be made from time to time in the open market, or in privately negotiated transactions, subject to availability.

On May 20, 2020, our board of directors authorized the repurchase of up to 500,000 shares of our outstanding common stock over a 12-month period beginning May 28, 2020 and ending on May 27, 2021.

On March 18, 2021, our board of directors authorized the repurchase of up to 500,000 shares of our outstanding common stock over a 12-month period beginning May 28, 2021 and ending on May 27, 2022.

These plans authorized purchases to be made from time to time in the open market, or in privately negotiated transactions, subject to availability.

Any repurchased shares will have the status of treasury shares and may be used, when needed, for general corporate purposes.

During the year ended March 31, 2021, we purchased 59,101 shares of our outstanding common stock at an average cost of $ 71.83 per share for a total purchase price of $ 4.2 million under the share repurchase plan;

we also purchased 41,817 shares of common stock at a value of $ 3.0 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

we also acquired 37,640 shares of common stock at a value of $ 2.7 million to satisfy tax withholding obligations relating to the vesting of employees’ restricted stock.

During the year ended March 31, 2020, we purchased 161,976 shares of our outstanding common stock at an average cost of $ 70.39 per share for a total purchase price of $ 11.4 million under the share repurchase plan.

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In each of the years ended March 31, 2021, 2020 and 2019, we issued share-based payment awards and had outstanding share-based payment awards under the following plans:

(1) the 2008 Non-Employee Director Long-Term Incentive Plan (“2008 Director LTIP”), (2) the 2012 Employee Long-Term Incentive Plan (“2012 Employee LTIP”), and (3) the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”).

2008 Director LTIP

On September 15, 2008, our stockholders approved the 2008 Director LTIP that was adopted by the Board on June 25, 2008.

Under the 2008 Director LTIP, 500,000 shares had been authorized for grant to non-employee directors.

The purpose of the 2008 Director LTIP is to align the economic interests of the directors with the interests of stockholders by including equity as a component of pay and to attract, motivate and retain experienced and knowledgeable directors.

Each director receives an annual grant of restricted stock having a grant-date fair value equal to the cash compensation earned by an outside director during our fiscal year ended immediately before the respective annual grant-date.

Directors may elect to receive their cash compensation in restricted stock.

These restricted shares are prohibited from being sold, transferred, assigned, pledged or otherwise encumbered or disposed of.

The shares vest half on the one-year anniversary and half on the second-year anniversary from the date of the grant.

Upon shareholder approval of the 2017 Director LTIP, which occurred on September 12, 2017, the 2017 Director LTIP replaced the 2008 Director LTIP, and no new awards were made under the 2008 Director LTIP.

However, any outstanding awards previously granted under the 2008 Director LTIP continued in effect.

As of March 31, 2020, there are no further unvested awards from this plan.

(1) the 2012 Employee Long-Term Incentive Plan (“2012 Employee LTIP”), and (2) the 2017 Non-Employee Director Long-Term Incentive Plan (“2017 Director LTIP”).

2012 Employee LTIP

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Shares issuable under the 2012 Employee LTIP may consist of authorized but unissued shares or shares held in our treasury.

Shares under the 2012 Employee LTIP will not be used to compensate our outside directors, who may be compensated under the separate 2008 Director LTIP, as discussed above.

Shares under the 2012 Employee LTIP will not be used to compensate our outside directors, who may be compensated under the separate 2017 Director LTIP, as discussed below.

Under the 2012 Employee LTIP, the Compensation Committee will determine the time and method of exercise or vesting of the awards.

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A summary of the non-vested restricted shares for year ended March 31, 2021, as follows:

Average Grant-

date Fair Value

Weighted Average

Grant-date Fair Value

Nonvested April 1, 2020

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Upon each vesting period of the restricted stock awards to employees, participants are subject to minimum tax withholding obligations.

The 2012 Employee LTIP and the 2017 Director LTIP allow the Company to withhold a sufficient number of shares due to the participant to satisfy their minimum tax withholding obligations.

The 2012 Employee LTIP and the 2017 Director LTIP allows us to withhold a sufficient number of shares due to the participant to satisfy their minimum tax withholding obligations.

For the year ended March 31, 2021, we withheld 37,640 shares of common stock, at a value of $ 2.7 million, which was included in treasury stock.

For the year ended March 31, 2019, the Company had withheld 40,092 shares of common stock, at a value of $ 3.9 million, which was included in treasury stock.

For the year ended March 31, 2020, we withheld 41,817 shares of common stock, at a value of $ 3.0 million, which was included in treasury stock.

Compensation Expense

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For the years ended March 31, 2021, 2020 and 2019, our employer contributions for the plan were approximately $ 3.0 million, $ 2.8 million, and $ 2.4 million, respectively.

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted on March 27, 2020.

The purpose of the CARES Act is to provide emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic.

We evaluated the potential impacts to the tax amounts recorded in these financial statements and there is no significant impact.

We account for our tax positions in accordance with Codification Topic 740.

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

As a result of the adoption of Codification Topic 842, we recorded a deferred tax asset related to the lease liabilities and recorded a deferred tax liability related to the right-of-use assets.

Significant components of our deferred tax assets and liabilities were as follows (in thousands):

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Deferred revenue

Reserve for credit losses

Allowance for credit losses

Restricted stock

Other accruals and reserves

Other deferred tax assets

Accrued bonus

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Total deferred tax liabilities

Net deferred tax liabilities

As of March 31, 2020, we have state capital loss carryforwards of approximately $ 1.3 million, which have been fully reserved.

The valuation allowance resulted from management’s determination, based on available evidence, that it was more likely than not that the state capital loss deferred tax asset balance may not be realized.

If not realized, the state capital loss carryforwards will generally expire in 5 years.

Net deferred tax asset (liability)

On March 31, 2016, we established a deferred tax asset for state capital loss carryforwards which expired on March 31, 2021.

We believed that it was more likely than not that the benefit from this deferred tax asset would not be realized and a full valuation allowance was provided.

As the carryforward period for these state capital losses expired as of March 31, 2021, we reversed the deferred tax asset and valuation allowance.

FAIR VALUE MEASUREMENTS

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Money market funds

Contingent consideration

March 31, 2020

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Contingent consideration

During the years ended March 31, 2020, and March 31, 2019, we recorded adjustments of $ 1.4 million and $ 1.6 million to reflect increases in the fair value of our existing contingent consideration liabilities, respectively, and paid $ 10.1 million and $ 6.1 million , respectively, to satisfy the obligations of our contingent consideration arrangements.

During the year ended March 31, 2018, we recorded $ 12.0 million in initial contingent consideration due to business acquisitions and recorded adjustments of $ 1.5 million that increased the fair value of our liability for contingent consideration.

We recognized the adjustments to our contingent consideration within general and administrative expenses in our consolidated statement of operations.

For the year ended March 31, 2021, we did no t record significant adjustments to our liability for contingent consideration arising from a past business combination.

In August 2020, we paid $ 219 thousand to fully satisfy the obligations of a contingent consideration arrangement.

During the year ended March 31, 2020 we recorded adjustments of $ 1.4 million to reflect increases in the fair value of our existing contingent consideration liabilities and paid $ 10.1 million to satisfy the obligations of our contingent consideration arrangements.

BUSINESS COMBINATIONS

Systems Management Planning (SMP)

On December 31, 2020, our subsidiary, e Plus Technology, inc., acquired certain assets and liabilities of SMP, an established provider of technology solutions and services in upstate New York and the Northeast.

The acquisition enhances e Plus’ footprint across the region, broadens our technology solution offerings especially in the areas of collaboration and supporting virtual employees, and adds to e Plus’ set of commercial, enterprise and state, local, and education customers .

Our sum of consideration transferred was $ 27.0 million consisting of $ 29.0 million paid in cash at closing less $ 2.0 million that was paid back to us in our quarter ended March 31, 2021 related to a working capital adjustment.

Our allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

Acquisition Date

Accounts receivable

Identified intangible assets

Accounts payable and other current liabilities

Performance obligations

Total identifiable net assets

Total purchase consideration

The identified intangible assets of $ 14.3 million consists of customer relationships with an estimated useful life of seven years .

The fair value of acquired receivables equals the gross contractual amounts receivable.

We expect to collect all acquired receivables.

We recognized goodwill related to this transaction of $ 8.3 million, which was assigned to our technology reporting unit.

The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset.

The total amount of goodwill is expected to be deductible for tax purposes.

The amount of revenues and earnings of the acquiree since the acquisition date are not material.

Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period as though the acquisition date had been April 1, 2020, is not material.

ABS Technology

On August 23, 2019, our subsidiary, ePlus Technology, inc., acquired certain assets and liabilities of ABS Technology, a Virginia Beach, Virginia- headquartered solutions provider with deep expertise in managed services, networking, collaboration, and security solutions.

On August 23, 2019, our subsidiary, ePlus Technology, inc., acquired certain assets and liabilities of Innovative Systems & Solutions, Inc.

(“ABS Technology”), a Virginia Beach, Virginia- headquartered solutions provider with deep expertise in managed services, networking, collaboration, and security solutions.

ABS Technology enhances ePlus’ existing solutions portfolio and market position in Richmond and southern Virginia.

Our sum of consideration transferred is $ 15.3 million consisting of $ 13.8 million paid in cash at closing plus $ 1.7 million that is being paid primarily upon the collection of certain accounts receivable, of which $ 1.5 million was paid by March 31, 2020, and less $ 0.2 million that was repaid to us in December 2019 due to a working capital adjustment.

Our sum of consideration transferred was $ 15.3 million consisting of $ 13.8 million paid in cash at closing plus $ 1.7 million that was paid primarily during the year ended March 31, 2020, upon the collection of certain accounts receivable, and less $ 0.2 million that was repaid to us in December 2019 due to a working capital adjustment.

Our allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousand s):

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Total purchase consideration

The identified intangible assets of $ 5.7 million consist of customer relationships with an estimated useful life of 7 years.

The identified intangible assets of $ 5.7 million consist of customer relationships with an estimated useful life of seven years .

The fair value of acquired receivables equals the gross contractual amounts receivable.

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Likewise, the impact to the revenue and earnings of the combined entity for the current reporting period as though the acquisition date had been April 1, 2019, is not material.

SLAIT Consulting, LLC

On January 18, 2019, our subsidiary, e Plus Technology, inc., acquired 100 % of the stock of SLAIT, an IT consulting and solutions provider with a focus on security advisory and managed services, managed help desk, specialized IT, staffing, and data center solutions.

SLAIT Consulting, LLC (SLAIT)

On January 18, 2019, our subsidiary, e Plus Technology, inc., acquired 100 % of the stock of SLAIT, Consulting, LLC (“SLAIT”), an IT consulting and solutions provider with a focus on security advisory and managed services, managed help desk, specialized IT, staffing, and data center solutions.

SLAIT is headquartered in Virginia Beach, Virginia and has locations in Richmond, Virginia, and Charlotte, North Carolina.

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Likewise, the impact to the revenue and earnings of the combined entity for the reporting period ending March 31, 2019, as though the acquisition date had been April 1, 2018, is not material.

The amounts above reflect a measurement period adjustment recorded in our fiscal ended March 31, 2020, that increased the purchase consideration related to a working capital adjustment by $ 8 thousand , increased identifiable net assets by $ 59 thousand and decreased goodwill by $ 51 thousand .

Integrated Data Storage, LLC

On September 15, 2017, our subsidiary e Plus Technology, inc.

acquired certain assets and assumed certain liabilities of Integrated Data Storage, LLC (“IDS”) though an asset purchase agreement.

Headquartered in Oak Brook, Illinois and with offices in downtown Chicago, Illinois and Indianapolis, Indiana, IDS brought us an advanced data center solutions provider focused on cloud enablement and managed services, including its proprietary IDS Cloud, which features enterprise-class technology infrastructure coupled with consulting services to support private, hybrid, and public cloud deployments.

The acquisition expanded e Plus’ footprint in the Midwest and enhanced its sales and engineering capabilities in cloud services, disaster recovery and backup as a service, storage, data center, and professional services.

Our sum of total consideration transferred was $ 38.4 million, consisting of $ 29.8 million paid in cash at closing, less $ 1.4 million paid back as a working capital adjustment, plus an additional $ 10.0 million equal to the acquisition date fair value of consideration that is contingent on the acquired business’ future gross profit.

The contingent consideration was calculated using the Monte Carlo simulation model based on our projections of future gross profits.

The maximum payout of the contingent consideration is $ 15.0 million paid over 3 years.

Our allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

Acquisition Date

Accounts receivable and other assets

Property and equipment

Identified intangible assets

Accounts payable and other current liabilities

Total identifiable net assets

Total purchase consideration

The identified intangible assets of $ 13.7 million consist of customer relationships with an estimated useful life of 8 years.

The fair value of acquired receivables equals the gross contractual amounts receivable.

We recognized goodwill related to this transaction of $ 21.1 million, which was assigned to our technology reporting unit.

The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset.

The total amount of goodwill is expected to be deductible for tax purposes.

The amount of revenues and earnings of the acquiree since the acquisition date are not material.

Likewise, the impact to the revenue and earnings of the combined entity for the year ended March 31, 2018 as though the acquisition date had been April 1, 2017, is not material.

OneCloud Consulting Inc.

On May 17, 2017, our subsidiary e Plus Technology, inc., acquired 100 % of the stock of OneCloud Consulting, Inc.

(“OneCloud”).

Based in Milpitas, California, and with locations in India, OneCloud brought us a versatile team of highly trained technology consultants, architects, developers and instructors.

Though OneCloud, we enable our customers’ cloud and application strategy via professional services, technical education and software development.

The acquisition provides us with additional ability to address customers’ need for cloud-based solutions and infrastructure, including DevOps, OpenStack, and other emerging technologies.

Our sum of total consideration transferred was $ 10.0 million consisting of $ 7.9 million paid in cash at closing, net of cash acquired, and $ 2.1 million equal to the fair value of contingent consideration, calculated using the Monte Carlo simulation model.

The maximum payout of the contingent consideration is $ 4.5 million paid over 3 years.

Our allocation of the purchase consideration to the assets acquired and liabilities assumed is presented below (in thousands):

Acquisition Date

Accounts receivable and other assets

Identified intangible assets

Accounts payable and other current liabilities

Total identifiable net assets

Total purchase consideration

The identified intangible assets of $ 4.1 million consist of customer relationships of $ 1.7 million with an estimated useful life of 8 years, and internally developed processes of $ 2.4 million with an estimated useful life of 5 years.

We recognized goodwill related to this transaction of $ 7.2 million, which was assigned to our technology reporting unit.

The goodwill recognized in the acquisition is attributable to the acquired assembled workforce and expected synergies, none of which qualify for recognition as a separate intangible asset.

The total amount of goodwill is expected to be deductible for tax purposes.

The amount of revenues and earnings of the acquiree since the acquisition date are not material.

Likewise, the impact to the revenue and earnings of the combined entity for the year ended March 31, 2018, as though the acquisition date had the acquisition date been April 1, 2017, is not material.

SEGMENT REPORTING

The Company’s segment information is presented in accordance with a “management approach,” which designates the internal reporting used by the chief operating decision-maker (“CODM”) for deciding how to allocate resources and for assessing performance.

Our segment information is presented in accordance with a “management approach,” which designates the internal reporting used by the chief operating decision-maker (“CODM”) for deciding how to allocate resources and for assessing performance.

Our CODM is our Chief Executive Officer and President.

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Our reportable segment information was as follows (in thousands):

Fiscal Year Ended

March 31, 2020

March 31, 2019

March 31, 2018

Year Ended March 31,

Cost of Sales

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We analyze net sales for our technology segment by customer end market and by vendor, as opposed to discrete product and service categories, which are summarized below (in thousands):

Fiscal Year Ended March 31,

Year Ended March 31,

Customer end market:

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Financial Services

Financing and other

State and local government and educational institutions

Revenue from financing and other

Revenue from contracts with customers

Fiscal Year Ended March 31,

Year Ended March 31,

Cisco Systems

Arista Networks

Financing and other

Juniper Networks

Revenue from financing and other

Revenue from contracts with customers

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Year Ended March 31,

As of March 31,

Long-lived tangible assets:

Our long-lived tangible assets include property and equipment-net, operating leases-net, and equipment that has been returned to us at the termination of the lease.

Sales to a large telecom company represented 15 % of net sales for the year ended March 31, 2020, all of which related to our technology segment.

Sales to Verizon Communications Inc.

represented 19 % and 15 % of net sales for the year ended March 31, 2021 and March 31, 2020, all of which related to our technology segment.

Sales to no one customer exceeded 10% of net sales for the year ended March 31, 2019 .

Sales to a large technology company were approximately 12 % of net sales for the year ended March 31, 2018, all of which related to our technology segment.

QUARTERLY DATA —UNAUDITED

Condensed quarterly financial information is as follows (amounts in thousands, except per share amounts):

Year Ended March 31, 2020

Total net sales

Cost of Sales

Total cost of sales

Selling, general, and administrative expenses

Depreciation and amortization

Interest and financing costs

Operating expenses

Operating income

Other income and (expense)

Earnings before provision for income taxes

Provision for income taxes

Net earnings per common share— Basic (1)

Net earnings per common share— Diluted (1)

Basic and diluted earnings per share are computed independently for each of the quarters presented.

Therefore, the sum of quarterly basic and diluted per share information may not equal annual basic and diluted earnings per share.

Year Ended March 31, 2019

Total net sales

Cost of Sales

Total cost of sales

Selling, general, and administrative expenses

Depreciation and amortization

Interest and financing costs

Operating expenses

Operating income

Other income and (expense)

Earnings before provision for income taxes

Provision for income taxes

Net earnings per common share— Basic (1)

Net earnings per common share— Diluted (1)

Basic and diluted earnings per share are computed independently for each of the quarters presented.

Therefore, the sum of quarterly basic and diluted per share information may not equal annual basic and diluted earnings per share.

AND SUBSIDIARIES

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Year ended March 31, 2021

Reserve for Credit Losses:

Allowance for credit losses:

Year ended March 31, 2019

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures