EPLUS INC, S-3/A, 2000-04-11

EPLUS INC
S-3/A, 2000-04-11
FINANCE LESSORS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 11, 2000

REGISTRATION NO. 333-31102
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 3

TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

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ePLUS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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DELAWARE 54-1817218
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>

400 HERNDON PARKWAY
HERNDON, VIRGINIA 20170
(703) 834-5710
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF THE
COMPANY'S PRINCIPAL EXECUTIVE OFFICES)

STEVEN J. MENCARINI
CHIEF FINANCIAL OFFICER
ePLUS INC.
400 HERNDON PARKWAY
HERNDON, VIRGINIA 20170
(703) 834-5710
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)

COPIES TO:

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<S> <C>
JONATHAN H. TALCOTT RICHARD J. SANDLER
ALSTON & BIRD LLP DAVIS POLK & WARDWELL
601 PENNSYLVANIA AVENUE, N.W. 450 LEXINGTON AVENUE
NORTH BUILDING, 11TH FLOOR NEW YORK, NEW YORK 10017
WASHINGTON, D.C. 20004 PHONE: (212) 450-4000
PHONE: (202) 756-3300 FACSIMILE: (212) 450-4800
FACSIMILE: (202) 756-3333
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effectiveness of the Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ________________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ] ________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION COVERING THESE SECURITIES IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, AND
WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE
THE OFFER OR SALE IS NOT PERMITTED.

PROSPECTUS

Subject to Completion,

Dated April 11, 2000

1,500,000 Shares

[company logo]

Common Stock
(Par value $0.01 per share)

ePlus inc. is selling 1,500,000 shares of its common stock. Our common stock is
quoted on the Nasdaq National Market under the symbol "PLUS." On April 7, 2000,
the reported last sale price of our common stock on Nasdaq was $32.50 per share.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 6.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS EPLUS
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<S> <C> <C> <C>
Per share $ $ $
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Total $ $ $
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</TABLE>

We have granted the underwriters the right to purchase up to an additional
225,000 shares of common stock to cover over-allotments. It is expected that
delivery of the shares will be made to investors on or about April , 2000.

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J.P. MORGAN & CO.
U.S. BANCORP PIPER JAFFRAY
FIRST UNION SECURITIES, INC.
FRIEDMAN BILLINGS RAMSEY

April , 2000

<PAGE> 3
Front inside cover

[ePlus provides internet-based supply chain solutions that enable e-commerce.]

[Photograph of customer service representative.]

[ - E-procurement
- Workflow and Business Rule Automation
- Order Tracking and Management
- Asset Management
- Content Management
- Order Fulfillment
- Asset Disposition
- Data Integration
- Supplier Management
- Financing

e-business made easy]
<PAGE> 4

TABLE OF CONTENTS

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PAGE
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Prospectus Summary......................... 1
The Offering............................... 3
Summary Consolidated Financial Data........ 4
Risk Factors............................... 6
Special Note Regarding Forward-Looking
Statements............................... 13
Use of Proceeds............................ 14
Price Range of Common Stock................ 14
Dividend Policy............................ 14
Capitalization............................. 15
Selected Consolidated Financial Data....... 16
Unaudited Pro Forma Consolidated Financial
Statements............................... 19
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PAGE
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Management's Discussion and Analysis of
Results of Operations and Financial
Condition................................ 22
Business................................... 29
Certain Transactions....................... 40
Management................................. 42
Principal Stockholders..................... 44
Underwriting............................... 46
Legal Matters.............................. 47
Experts.................................... 47
Where You Can Find More Information About
Us....................................... 47
Index to Financial Statements.............. F-1
</TABLE>

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You should rely on the information contained or incorporated by reference in
this prospectus only. We have not, and our underwriters have not, authorized any
person to provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it. We are not,
and our underwriters are not, making an offer to sell our common stock in any
jurisdiction where the offer or sale is not permitted.

You should assume that the information appearing in this prospectus is accurate
as of the date on the front cover of this prospectus only.

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We have adopted, and filed applications with the U.S. Trademark and Patent
Office concerning, the following service marks: ePlus, ePlusSuite, Procure(+),
Manage(+), Finance(+), Service(+), EPLUS LEASING, EPLUS ONLINE, EPLUS ADVANTAGE
and others. We have also registered the domain names eplus and eplusonline, and
we own various copyrights for material used in connection with our business.
<PAGE> 5

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. This
summary is not complete and does not contain all the information you should
consider before buying shares in the offering. You should carefully read the
entire prospectus including the risk factors beginning on page 6.

ePLUS INC.

We provide Internet-based, business-to-business supply chain management
solutions for information technology and other operating resources. On November
2, 1999, we introduced our remotely-hosted electronic commerce solution,
ePlusSuite, which combines Internet-based tools with dedicated customer service
to provide a comprehensive outsourcing solution for the automated procurement,
management, financing and disposition of operating resources.

ePlusSuite allows customers to automate and customize their existing business
rules and procurement processes using an Internet-based workflow tool. We offer
a remotely-hosted solution with a transaction-based fee structure that reduces
upfront costs for customers, facilitates quick adoption, and eliminates the need
for customers to maintain and update software. In addition, ePlusSuite
integrates effectively with existing legacy systems. We believe our solution can
be implemented faster with less customer training than many competing
software-based solutions.

The ePlusSuite solution consists of four modules which can be operated
independently or integrated to provide a full suite of services:

- Procure(+) is an electronic procurement and content management solution
which allows customers to automate their internal workflow procedures for
the procurement of operating resources.

- Manage(+) is an electronic infrastructure management solution which
provides asset management through an asset repository and tracking
database.

- Finance(+) facilitates automated financing solutions for assets procured
through Procure(+) or Manage(+).

- Service(+) provides implementation and customization services,
fulfillment and asset disposition.

Internet-based procurement provides businesses with a competitive advantage by
creating cost savings and long-term efficiencies. Forrester Research, Inc.
estimates that, in the United States alone, business-to-business electronic
commerce transactions will grow from $109 billion in 1999 to $1.3 trillion in
2003. Within this large market, we primarily target middle-market companies with
revenues between $25 million and $1 billion. We believe there are over 60,000
customers in our target market.

We have been in the business of selling, leasing, financing and managing
information technology and other assets for nearly ten years and currently
derive most of our revenues from such activities. The introduction of ePlusSuite
reflects our transition to a business-to-business electronic commerce solutions
provider from our historical sales and financing business. Over time, we plan to
use our ePlusSuite platform to facilitate sales and financing transactions
between our customers and third parties rather than originate these transactions
as principal. As a result, we expect our electronic commerce revenues to
substantially increase and represent a greater portion of our total revenues.

As part of our strategy to become a leading provider of business-to-business
electronic commerce solutions, we intend to leverage our financing relationships
and supply chain management expertise to aggressively grow our ePlusSuite
business. We believe our years of experience in developing supply chain
management solutions, including financing, asset management, and information
technology sales and services, give us significant competitive advantages in
implementing our strategy.

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The key elements of our strategy include:

- Converting our existing client base of approximately 1,500 customers to
users of ePlusSuite;

- Expanding our sales and marketing activities to take advantage of
middle-market opportunities;

- Expanding the functionality of our Internet-based solution to include a
broader range of goods and services;

- Expanding our use of strategic relationships to enhance ePlusSuite and
accelerate the market acceptance of our electronic commerce business
solutions; and

- Increasing our role as an intermediary rather than as a principal in
sales and financing transactions.

As of March 2, 2000, we had 14 fully-implemented ePlusSuite customers, including
MicroStrategy, Inc., Logicon, Inc. (a subsidiary of Northrop Grumman
Corporation) and Proxicom, Inc. We are currently implementing ePlusSuite with 11
additional customers, including Corning Incorporated.

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We are a Delaware corporation, and we were founded in 1990. Our former name was
MLC Holdings, Inc., which was legally changed to ePlus inc. on October 18, 1999.
We announced our name change on October 25, 1999 and changed our ticker symbol
from "MLCH" to "PLUS" effective November 1, 1999. Our executive offices are
located at 400 Herndon Parkway, Herndon, Virginia 20170. Our telephone number at
our executive offices is (703) 834-5710.

2
<PAGE> 7

THE OFFERING

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COMMON STOCK OFFERED................................. 1,500,000 shares
COMMON STOCK OUTSTANDING AFTER THIS OFFERING......... 10,175,687 shares
USE OF PROCEEDS BY ePLUS............................. For general corporate purposes, including, but not limited
to, sales and marketing of ePlusSuite, research and
development and potential acquisitions. Pending such use,
we intend to invest the net proceeds in interest-bearing,
investment grade securities or to pay down our working
capital line of credit.
NASDAQ NATIONAL MARKET SYMBOL........................ PLUS
</TABLE>

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Unless otherwise indicated, the share information in the table above is based on
7,954,009 shares of common stock outstanding as of April 7, 2000 and excludes up
to 225,000 shares that may be sold by the underwriters on our behalf to cover
over-allotments.

The table excludes 1,590,802 shares reserved for future issuance under ePlus'
stock option and stock purchase plans. As of April 7, 2000, we had granted
options to purchase 1,289,962 of such shares. The table also excludes shares of
common stock underlying warrants to purchase an additional 107,500 shares of
common stock. The table includes an additional 721,678 shares of common stock to
be issued pursuant to the exercise of a warrant held by TC Plus, LLC. The number
of shares into which the warrant is exercisable depends upon the price per share
of the common stock to be sold in this offering and is based on an assumed
public offering price of $32.50 (the last sale price as reported by Nasdaq on
April 7, 2000). The number of shares that will be issued pursuant to the
cashless exercise of the warrant will increase if the public offering price
increases and decrease if the public offering price decreases. On December 23,
1999, we gave notice to TC Plus, LLC requiring it to exercise the warrant it
holds to purchase shares of our common stock. Pursuant to the terms of an
agreement dated February 25, 2000, TC Plus, LLC intends to exercise the warrant
on a cashless basis subject to the completion of this offering.

3
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL DATA

You should read the information set forth below together with our consolidated
financial statements and the related notes, our "Unaudited Pro Forma
Consolidated Financial Statements" and "Management's Discussion and Analysis of
Results of Operations and Financial Condition." The historical financial
information presented below may not be indicative of our future operating
results as a result of our transitioning to a business-to-business electronic
commerce solutions provider from our traditional sales and financing business.

The pro forma data for the year ended March 31, 1999 and the nine months ended
December 31, 1999 reflects the acquisition of CLG, Inc., which we completed on
September 30, 1999, and accounted for as a purchase, as if such acquisition was
completed at the beginning of fiscal 1999 for the statement of earnings
information presented below. For more detailed information, see "Unaudited Pro
Forma Consolidated Financial Statements."

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<CAPTION>
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PRO FORMA
PRO FORMA NINE MONTHS ENDED NINE MONTHS
YEAR ENDED MARCH 31, YEAR ENDED DECEMBER 31, ENDED
------------------------------------ MARCH 31, ----------------------- DECEMBER 31,
1997 1998 1999 1999 1998 1999(1) 1999
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<S> <C> <C> <C> <C> <C> <C> <C>
Dollar amounts in thousands,
except per share data
STATEMENT OF EARNINGS DATA:
Revenues $ 86,212 $ 118,442 $ 193,970 $ 232,345 $ 149,531 $ 191,803 $ 208,458
Costs and expenses 81,361 109,712 182,675 220,110 141,528 181,866 199,039
---------- ---------- ---------- ------------ ---------- ---------- ------------
Earnings before provision for
income taxes 4,851 8,730 11,295 12,235 8,003 9,937 9,419
Provision for income taxes 1,360 2,691 4,579 4,966 3,201 3,975 3,768
---------- ---------- ---------- ------------ ---------- ---------- ------------
Net earnings $ 3,491 $ 6,039 $ 6,716 $ 7,269 $ 4,802 $ 5,962 $ 5,651
========== ========== ========== ============ ========== ========== ============
Net earnings per common
share--basic $ 0.67 $ 1.00 $ 0.99 $ 1.01 $ 0.73 $ 0.78 $ 0.72
========== ========== ========== ============ ========== ========== ============
Net earnings per common
share--diluted(2) $ 0.66 $ 0.98 $ 0.98 $ 1.01 $ 0.72 $ 0.70 $ 0.64
========== ========== ========== ============ ========== ========== ============
Pro forma net earnings(2) $ 3,133 $ 5,426 $ 4,802
========== ========== ==========
Pro forma net earnings per
common share--basic(2) $ 0.60 $ 0.90 $ 0.73
========== ========== ==========
Pro forma net earnings per
common share--diluted(2) $ 0.60 $ 0.88 $ 0.72
========== ========== ==========
Weighted average common shares
outstanding--basic 5,184,261 6,031,088 6,769,732 7,162,722 6,540,359 7,618,700 7,877,359
Weighted average common shares
outstanding--diluted 5,262,697 6,143,017 6,827,528 7,220,518 6,648,754 8,554,461 8,813,120
</TABLE>

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(1) The summary consolidated statement of earnings and balance sheet data
include financial data of CLG, Inc. only since its acquisition by us on
September 30, 1999.

(2) The pro forma net earnings for the years ended March 31, 1997 and 1998 and
the nine months ended December 31, 1998, are presented as if companies which
were subchapter S corporations prior to their business combinations with us
had been subject to federal income tax throughout the periods presented.
During the year ended March 31, 1998, these business combinations were
accounted for under the pooling-of-interests method.

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<TABLE>
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AS OF MARCH 31, AS OF DECEMBER 31, 1999
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1997 1998 1999 ACTUAL(1) AS ADJUSTED(2)
------- ------- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
Dollar amounts in thousands
BALANCE SHEET DATA:
Accounts receivable $ 8,846 $16,383 $ 44,090 $ 63,388 $ 63,388
Investment in direct financing and sales type leases, net 17,473 32,496 83,371 204,281 204,281
Total assets 49,024 83,196 154,359 319,860 365,125
Accounts payable 7,953 28,149 30,567 48,708 48,708
Non-recourse notes payable 19,705 13,028 52,429 179,102 179,102
Total liabilities 32,547 59,652 110,545 265,853 265,853
Stockholders' equity 16,477 23,544 43,814 54,007 99,272
Total liabilities and stockholders' equity 49,024 83,196 154,359 319,860 365,125
</TABLE>

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(1) The summary consolidated statement of earnings and balance sheet data
include financial data of CLG, Inc. only since its acquisition by us on
September 30, 1999.

(2) Adjusted to reflect the issuance of (a) 1,500,000 shares of common stock in
this offering at an assumed offering priced of $32.50 per share (the last
sale price as reported by Nasdaq on April 7, 2000) and (b) 721,678 shares of
common stock pursuant to the cashless exercise of a warrant held by TC Plus,
LLC at an exercise price of $11.00 per share. The number of shares into
which the warrant is exercisable depends upon the price per share of the
common stock to be sold in this offering and is based on an assumed public
offering price of $32.50 (the last sale price as reported by Nasdaq on April
7, 2000). The number of shares that will be issued pursuant to the cashless
exercise of the warrant will increase if the public offering price increases
and decrease if the public offering price decreases.

5
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RISK FACTORS

Before you invest in our common stock, you should be aware that there are
various risks, including those described below. You should consider carefully
these risk factors together with all of the other information included in this
prospectus before you decide to purchase shares of our common stock.

RISKS RELATED TO ePLUS

THE LIMITED OPERATING HISTORY OF OUR EPLUSSUITE BUSINESS MAKES IT DIFFICULT FOR
YOU TO EVALUATE OUR BUSINESS AND OUR PROSPECTS.

Our ePlusSuite solution, introduced on November 2, 1999, has an extremely
limited operating history. Although we have been in the business of financing
and selling information technology equipment since 1990, over the longer term we
expect to derive most of our revenues from our ePlusSuite service. As a result,
we 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
our ability to:

- increase the total number of users of our ePlusSuite services;

- adapt to meet changes in our markets and competitive developments;

- hire sufficient sales and technical personnel to accommodate the expected
growth in our customer base; and

- continue to update our technology to enhance the features and
functionality of our suite of products.

We cannot be certain that our business strategy will be successful or that we
will successfully address these and other challenges, risks and uncertainties.

WE EXPECT TO INCUR INCREASED EXPENSES WHICH MAY NEGATIVELY IMPACT OUR
PROFITABILITY.

We expect to incur significant sales and marketing, research and development,
and general and administrative expenses in order to develop our electronic
commerce business. As a result, we may incur significant losses in our
ePlusSuite business which may result in operating losses for the company as a
whole.

WE HAVE NOT ESTABLISHED OUR PRICING, EXPENSE AND REVENUE MODEL FOR OUR
ePlusSuite SERVICES.

Although we expect to derive most of our revenue over the longer-term from our
ePlusSuite business, we have not yet established the pricing, expense and
revenue model associated with these services. Also, we have not established the
manner in which we will charge customers and vendors for the ePlusSuite
solution. If we are unable to establish a pricing, expense and revenue model
acceptable to our customers, our ePlusSuite business may not be commercially
successful. Broad and timely acceptance of ePlusSuite is critical to our future
success.

OUR FUTURE REVENUES DEPEND ON OUR ABILITY TO INCREASE TRANSACTION VOLUME ON
PURCHASES THROUGH EPLUSSUITE.

We expect most of our revenues in the future to be derived from amounts charged
for transactions completed through EPlusSuite. Accordingly, our future revenues
will depend significantly on the number of transactions that are successfully
completed on ePlusSuite. If we are unable to develop and increase transaction
volume on ePlusSuite, it is unlikely that we will achieve or maintain
profitability in this business.

Our ability to increase our transaction volume will depend largely on our
ability to increase our customer base. Some of our potential customers already
have business relationships with our competitors. Some of our
business-to-business electronic commerce competitors charge their customers
large sums of money upon the execution of customer agreements. Businesses that
have made substantial up-front payments for electronic commerce solutions may be
reluctant to replace their current solution and adopt our solution. As a result,
our efforts to create a larger customer base may be more difficult than expected
even if we

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are deemed to offer products and services superior to those of our competitors.
Other factors that could prevent us from attaining a critical mass of customers
include:

- a reluctance to use new technology instead of traditional asset
management and procurement methods;

- concerns about the security and reliability of online transactions; and

- opposition from procurement professionals whose roles could be diminished
if the use of our electronic asset management systems becomes widespread.

WE MAY NOT BE ABLE TO IMPLEMENT OUR STRATEGY TO REDUCE OR ELIMINATE OUR CREDIT
AND RESIDUAL RISKS.

We currently derive most of our revenue from sales of information technology
assets and providing lease and other financing directly to our customers. Our
strategy is also to reduce or eliminate our credit and residual risks over time
by:

- arranging all lease and other financing between our customers and
third-party financial institutions in exchange for an origination fee;
and

- arranging sales of information technology and other equipment for a fee,
rather than purchasing and reselling such equipment ourselves.

We may not be successful in outsourcing financing activities and equipment
sales, or it may take us much longer to do so than we would like, and we may not
be able to charge origination or arrangement fees in amounts that allow us to
maintain our historical margins from those business activities. We have not yet
received any origination or arrangement fees of this kind.

CAPACITY CONSTRAINTS AND SYSTEM FAILURES COULD HARM OUR BUSINESS.

The performance of our systems infrastructure is critical to our ability to
process transactions, provide high quality customer service, and attract and
retain customers, suppliers, users and strategic partners. Our system's ability
to support large numbers of buyers and sellers is unproven. If our ePlusSuite
solution cannot be expanded to cope with increased demand or fails to perform,
we could experience:

- unanticipated disruptions in service;

- slower response time; or

- decreased customer service and customer satisfaction.

Our ability to facilitate transactions successfully and provide high quality
customer service also depends on the efficient and uninterrupted operation of
our computer and communications hardware systems. We have experienced periodic
system interruptions, which we believe will continue to occur from time to time.
Currently our infrastructure and systems are located at one site in Herndon,
Virginia. We anticipate adding a mirror site at a different, distant location.
Until then, we depend on our single-site infrastructure. In addition, we rely on
a third party for our back-up site, and we do not currently have alternative
providers of hosting services. We do not carry sufficient business interruption
insurance to compensate for losses that could occur. Any disruption to our
infrastructure resulting from a natural disaster or other event could result in
an interruption in our service, fewer transactions and, if sustained or
repeated, could impair our reputation and the attractiveness of our services.

If we are unable to accommodate additional users on our system, slow transaction
processing time would result, making it difficult to provide high-quality,
real-time services. If the number of users of our system increases
substantially, we will need to significantly expand and upgrade our transaction
processing systems and network infrastructure. We do not know whether we will be
able to accurately project the rate or timing of such increases, or expand and
upgrade our systems and infrastructure to accommodate such increases in a timely
manner.

OUR CURRENT EPLUSSUITE CUSTOMER BASE IS LIMITED AND OUR SUCCESS DEPENDS ON OUR
ABILITY TO RETAIN EXISTING CUSTOMERS AND ATTRACT NEW CUSTOMERS.

We introduced ePlusSuite in November 1999 and we currently only have a limited
number of ePlusSuite customers. Our current ePlusSuite customers have no
obligation to conduct their procurement or other activities using ePlusSuite and
may terminate their relationships with us with little or no advance notice and
without any penalty to them. As a result, our current customers may not continue
to be customers in future periods and may not actively use ePlusSuite. In
addition, regardless of

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<PAGE> 12

whether we retain our current ePlusSuite customers, we need to attract new
customers for our ePlusSuite business to succeed since our future revenues will
depend significantly on the number of transactions that are completed on
ePlusSuite.

OUR LENGTHY SALES AND IMPLEMENTATION CYCLE COULD CAUSE DELAYS IN REVENUE GROWTH.

The period between our initial contact with a potential customer and the
purchase of our products and services may be long and subject to delays. A
customer's decision to purchase our products and services is discretionary,
involves a significant commitment of resources and is influenced by customer
budgetary cycles. To successfully sell our electronic commerce products and
services, we generally must educate our potential customers regarding the use
and benefit of our products and services. In addition, they must generally
consider a wide range of other issues before committing to use our product,
including product benefits, ability to work with existing computer systems,
ability to support a larger user base, functionality and reliability. It may
take several months at a number of management levels within the customer
organization to secure approval of the use of the ePlusSuite. Our total sales
and implementation cycle ranges from one to six months and averages
approximately two months.

THE ELECTRONIC COMMERCE BUSINESS-TO-BUSINESS SOLUTIONS MARKET IS HIGHLY
COMPETITIVE AND WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO EFFECTIVELY
COMPETE.

The market for Internet-based, business-to-business electronic commerce
solutions is extremely competitive. We expect competition to intensify as
current competitors expand their product offerings and new competitors enter the
market. We cannot assure you that we will be able to compete successfully
against current or future competitors, or that competitive pressures faced by us
will not harm our business, operating results or financial condition. In
addition, the market for electronic procurement solutions is relatively new and
underdeveloped. Our strategy of providing an Internet-based electronic commerce
solution may not be successful, or it may not be executed effectively by us.
Accordingly, our solution may not be widely adopted by businesses.

Our current and potential competitors in the market include, among others,
Ariba, Inc., Commerce One, Inc., Comdisco, Inc., Clarus Corporation, Concur
Technologies, Inc., Connect, Inc., Harbinger Corporation, i2 Technologies, Inc.,
International Business Machines Corporation, Intellisys Group, Inc., Microsoft
Corporation, Netscape Communications Corporation, Oracle Corporation,
PeopleSoft, Inc. and SAP Corporation Systems. Because there are relatively low
barriers to entry in the electronic commerce market, competition from other
established and emerging companies may develop in the future. In addition, our
customers may become competitors in the future. Increased competition is likely
to result in reduced margins, longer sales cycles and loss of market share, any
of which could materially harm our business, operating results or financial
condition. The business-to-business electronic commerce solutions offered by our
competitors now or in the future may be perceived by buyers and suppliers as
superior to ours. Many of our competitors have, and potential competitors may
have, more experience developing Internet-based software and end-to-end
purchasing solutions, larger technical staffs, larger customer bases, greater
brand recognition and greater financial, marketing and other resources than we
do. In addition, competitors may be able to develop products and services that
are superior to our products and services, that achieve greater customer
acceptance or that have significantly improved functionality as compared to our
existing and future products and services.

WE RELY AND EXPECT TO RELY ON THIRD PARTIES TO DEVELOP AND CUSTOMIZE EPLUSSUITE.

We rely, and expect to rely on a number of third parties to assist in the
development and customization of our ePlusSuite services. ePlusSuite has been
developed in part by licensing software from several vendors and retaining
outside companies to develop, modify and implement the software. If we are
unable to establish and maintain effective, long-term relationships with such
third parties, our business will be seriously harmed. As a result of the limited
resources and capacities of many third-party providers, we may be unable to
establish or maintain relationships with third parties having sufficient
resources to provide the necessary services to support our needs. If these
resources are unavailable, we will be required to provide these services
internally, which may significantly limit our ability to meet our customers'
needs. In addition, we cannot control the level and quality of service provided
by third parties.

IF OUR ELECTRONIC COMMERCE PRODUCTS DO NOT CONTAIN THE FEATURES AND
FUNCTIONALITY OUR CUSTOMERS WANT, OUR CUSTOMERS WILL NOT USE THEM AND OUR
BUSINESS WILL SUFFER.

The market for business-to-business electronic commerce is characterized by
rapidly changing technology, evolving industry standards and frequent new
product announcements. To be successful, we must adapt by continually improving
the performance, features and reliability of our products and services. We
cannot assure you that we will successfully determine customer requirements or
that the features and functionality of our future products and services will
adequately satisfy current

8
<PAGE> 13

or future customer demands. If we fail to accurately determine customer feature
and functionality requirements or enhance our existing products or develop new
products, our business, operating results and financial condition will suffer.

IF OUR PRODUCTS CONTAIN DEFECTS, OUR BUSINESS COULD SUFFER.

Products as complex as those used to provide our electronic commerce solutions
often contain known and undetected errors or performance problems. Many serious
defects are frequently found during the period immediately following
introduction of new products or enhancements to existing products. Although we
attempt to resolve all errors that we believe would be considered serious by our
customers, our products are not error-free. Undetected errors or performance
problems may not be discovered in the future and known errors considered minor
by us may be considered serious by our customers. This could result in lost
revenues, delays in customer acceptance or unforeseen liability which would be
detrimental to our reputation and to our business.

WE MAY NOT BE ABLE TO HIRE AND RETAIN SUFFICIENT SALES, MARKETING AND TECHNICAL
PERSONNEL THAT WE NEED TO SUCCEED.

To increase market awareness and sales of ePlusSuite and the related services we
offer, we need to substantially expand our sales operations and marketing
efforts. These products and services require a sophisticated sales effort and
significant technical support. Hiring technical personnel and finding
third-party technical support is very competitive in the electronic commerce
market due to the limited number of people available with the necessary
technical skills and understanding of the Internet. Competition for qualified
sales, marketing and technical personnel is intense, and we might not be able to
hire and retain sufficient numbers of such personnel to grow our electronic
commerce business.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, OUR BUSINESS WILL SUFFER.

The success of our business strategy depends, in part, upon proprietary
technology and other intellectual property rights. To date, we have relied
primarily on a combination of copyright, trade secret and service mark laws to
protect our proprietary technology. We have not applied for any patents on our
proprietary technology or processes. We have filed applications in the U.S.
Patent and Trademark Office to register the service marks ePlus, ePlusSuite,
Procure(+), Manage(+), Finance(+), Service(+), EPLUS LEASING, EPLUS ONLINE and
EPLUS ADVANTAGE. The applications for EPLUS LEASING, EPLUS ONLINE and EPLUS
ADVANTAGE are currently based on intent-to-use. The grant of registrations for
these intent-to-use marks is conditioned upon each mark being used in commerce,
assuming the mark is found to be allowable.

We have entered into certain software licensing agreements in connection with
the development of ePlusSuite, but such licenses are non-exclusive. It may be
possible for unauthorized third parties to copy certain portions of our products
or reverse engineer or obtain and use information that we regard as proprietary.
Some of our agreements with our customers and technology licensors contain
residual clauses regarding confidentiality and the rights of third parties to
obtain the source code for our products. These provisions may limit our ability
to protect our intellectual property rights in the future which could seriously
harm our business, operating results and financial condition. We cannot assure
you that our means of protecting our intellectual property rights will be
adequate. If any of these events happen, our business, operating results and
financial condition could be harmed.

WE FACE RISKS OF CLAIMS FROM THIRD PARTIES FOR INTELLECTUAL PROPERTY
INFRINGEMENT THAT COULD HARM OUR BUSINESS.

Although we believe that our intellectual property rights are sufficient to
allow us to market our existing products without incurring liability to third
parties, we cannot assure you that our products and services do not infringe on
the intellectual property rights of third parties.

In addition, because patent applications in the United States are not publicly
disclosed until the patent is issued, we may not be aware of applications that
have been filed which relate to our products or processes. We could incur
substantial costs in defending ourselves and our customers against infringement
claims. In the event of a claim of infringement, we and our customers may be
required to obtain one or more licenses from third parties. We cannot assure you
that such licenses could be obtained from third parties at a reasonable cost or
at all. Defense of any lawsuit or failure to obtain any such required license
could harm our business, operating results and financial condition. In addition,
in certain instances, third parties licensing software to us have refused to
indemnify us for possible infringement claims.

9
<PAGE> 14

IF WE ARE UNABLE TO LICENSE CERTAIN TECHNOLOGY FROM THIRD PARTIES IN THE FUTURE,
OUR BUSINESS WILL SUFFER.

We license and will continue to license certain technology integral to our
electronic commerce products and services from third parties, including
value-added commerce-related products and services which may be integrated with
internally developed products and used with our products to provide key content
and services. We also expect to require new licenses in the future as our
business grows and technology evolves. While we have perpetual licensing rights
with respect to certain technology, we cannot assure you that all of our
third-party product licenses will continue to be available to us on commercially
reasonable terms, if at all. Our inability to maintain or acquire any necessary
licenses, or to integrate the related third-party products into our products,
could result in delays in product development until equivalent products can be
developed, identified, licensed and integrated. Any such delays in product
development could cause our business, operating results and financial condition
to suffer.

IF WE PUBLISH INACCURATE CATALOG CONTENT DATA, OUR BUSINESS COULD SUFFER.

Any defects or errors in catalog content data could harm our customers or deter
businesses from participating in ePlusSuite, damage our business reputation,
harm our ability to attract new customers and potentially expose us to legal
liability. In addition, from time to time some participants in ePlusSuite could
submit to us inaccurate pricing or other catalog data. Even though such
inaccuracies are not caused by our work and are not within our control, such
inaccuracies could deter current and potential customers from using our products
and could harm our business, operating results and financial condition.

WE DEPEND ON HAVING CREDITWORTHY CUSTOMERS.

Our leasing business requires sufficient amounts of debt and equity capital to
fund our equipment purchases. If the credit quality of our customer base
materially decreases, or if we experience a material increase in our credit
losses, we may find it difficult to continue to obtain the capital we require
and our business, operating results and financial condition may be harmed. In
addition to the impact on our ability to attract capital, a material increase in
our delinquency and default experience would itself have a material adverse
effect on our business, operating results and financial condition.

WE DEPEND ON SIGNIFICANT CUSTOMER RELATIONSHIPS.

Most of our revenues to date have come from our lease financing activities. As
of March 31, 1999, our leasing portfolio consisted of 335 customers. Our largest
leasing customer, Sprint Communications Company, L.P. and its affiliates
accounted for 42% of our leasing volume for the year ended March 31, 1999. Our
ten largest customers accounted for approximately 65% of the aggregate purchase
price of equipment we leased to those 335 customers. The failure of any of our
major customers to continue leasing additional equipment, or at least to
maintain the current level of equipment it leases from us, could have a material
adverse effect on our business, operating results and financial condition.

In addition, through MLC/CLC LLC, we have a formal joint venture arrangement
with an institutional investor which historically provided the necessary cash
required to finance the equity portion of selected leases. For the fiscal year
1999, approximately 41.8% of our total revenue was attributable to sales of
lease transactions to MLC/CLC LLC. For the nine months ended December 31, 1999,
approximately 8.8% of our total revenue was attributable to sales of lease
transactions to MLC/ CLC LLC. We have received notice that Firstar Equipment
Finance Corporation, which owns 95% of MLC/CLC LLC, intends to discontinue its
investment in new lease acquisitions effective May 2000. The failure to find
alternative purchasers of our leased equipment may have a material adverse
effect on our business, operating results and financial condition.

WE MAY NOT BE ABLE TO REALIZE OUR ENTIRE INVESTMENT IN THE EQUIPMENT WE LEASE.

We lease various types of equipment to customers through two distinct types of
transactions: direct financing leases and operating leases. A direct financing
lease passes substantially all of the risks and rewards of owning the related
equipment to the customer. Lease payments during the initial term of a direct
financing lease cover approximately 90% of the underlying equipment's cost at
the inception of the lease. The duration of an operating lease, however, is
shorter relative to the equipment's useful life. We bear greater risk in
operating leases in that we may not be able to remarket the equipment on terms
that will allow us to fully recover our investment.

At the inception of each lease, we estimate the fair market value of the item as
a residual value for the leased equipment based on the terms of the lease
contract. Residual values are determined and approved by our investment
committee. A decrease in the market value of such equipment at a rate greater
than the rate we expected, whether due to rapid technological obsolescence or
other factors, would adversely affect the residual values of such equipment. Any
such loss which is considered by management to be permanent in nature would be
recognized in the period of impairment in accordance with Statement of

10
<PAGE> 15

Financial Accounting Standard No. 13, "Accounting for Leases." Consequently,
there can be no assurance that our estimated residual values for equipment will
be realized.

WE MAY NOT RESERVE ADEQUATELY FOR OUR CREDIT LOSSES.

We maintain a consolidated reserve for credit losses on finance receivables. Our
consolidated reserve for credit losses reflects management's judgment of the
loss potential. Our management bases its judgement on the nature and financial
characteristics of our obligors, general economic conditions and our charge-off
experience. It also considers delinquency rates and the value of the collateral
underlying the finance receivables.

We cannot be certain that our consolidated reserve for credit losses will be
adequate over time to cover credit losses in our portfolio because of
unanticipated adverse changes in the economy or events adversely affecting
specific customers, industries or markets. If our reserves for credit losses are
not adequate, our business, operating results and financial condition may
suffer.

CHANGES IN TAX LAWS COULD HARM OUR INFORMATION TECHNOLOGY LEASING BUSINESS.

Our leasing activities generate significant depreciation allowances that provide
us with substantial tax deductions on an ongoing basis. Many of our lessees
currently enjoy favorable tax treatment by entering into operating leases. In
addition, parties financing certain leases to state and local governments enjoy
favorable tax treatment based upon their interest income not being subject to
certain income taxes. Any change to current tax laws that makes existing
operating lease financing or municipal lease financing less attractive could
materially adversely affect our business, operating results and financial
condition.

OUR QUARTERLY EARNINGS MAY FLUCTUATE.

Our quarterly earnings are susceptible to fluctuations for a number of reasons,
including the seasonal nature of our ePlusSuite customers' procurement patterns
or the development of new technologies that affect the use of ePlusSuite by our
customers. While we anticipate that more of our future revenues will be derived
from our ePlusSuite services, our quarterly earnings will continue to be
affected by fluctuations in our historical business, such as reductions in
realized residual values, lower sales of equipment and lower overall leasing
activity. Also, sales of leased 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. In
the event our revenues or earnings for any quarter are less than the level
expected by securities analysts or the market in general, such shortfall could
have an immediate and significant adverse impact on our common stock's market
price.

WE ARE DEPENDENT UPON OUR CURRENT MANAGEMENT TEAM.

Our operations and future success depend on the efforts, abilities and
relationships of our Chairman, Chief Executive Officer and President, Phillip G.
Norton; our founder and Executive Vice President, Bruce M. Bowen, who also
serves as a director; Steven J. Mencarini, Senior Vice President and Chief
Financial Officer; Kleyton L. Parkhurst, Senior Vice President, Secretary and
Treasurer; Vincent Marino, President of ePlus Technology of PA, inc.; David
Rose, President of ePlus Technology of NC, inc.; and Nadim Achi, President of
ePlus Technology, inc. The loss of any of these key management officers or
personnel could have a material adversely effect on our business, operating
results and financial condition. Each of these officers has entered into an
employment agreement with us. We maintain key-man life insurance only on Mr.
Norton.

WE HAVE ENTERED INTO AGREEMENTS WITH A MAJOR STOCKHOLDER THAT PERMITS IT TO
APPOINT TWO MEMBERS OF OUR BOARD OF DIRECTORS.

On October 23, 1998, we sold 1,111,111 shares of common stock to TC Plus, LLC
and issued a warrant to TC Plus, LLC to purchase an additional 1,090,909 shares
of our common stock at an exercise price of $11.00 per share. In connection with
the transaction, we entered into a stock purchase agreement and a stockholders
agreement each of which contained restrictive provisions. On February 25, 2000,
we entered into an agreement with TC Plus, LLC, which agreement was amended as
of April 10, 2000, amending the warrant, which permits TC Plus, LLC to exercise
the warrant on a cashless basis in exchange for waiving the restrictive
provisions of the stock purchase agreement and amending the stockholders
agreement to eliminate most of the more restrictive provisions. However, the
amended and restated stockholders agreement provides that TC Plus, LLC will
continue to have the right to appoint two of our six directors and to nominate
one of two individuals who will serve on a nominating committee to select two of
the four other directors. TC Plus, LLC retains these rights as long as it owns
at least five percent of the issued and outstanding common stock of the company.
As a result, TC Plus, LLC will have a large amount of influence

11
<PAGE> 16

over the direction of the affairs of the company.

RISKS RELATED TO THE INTERNET

CONTINUED ADOPTION OF THE INTERNET AS A METHOD OF CONDUCTING BUSINESS IS
NECESSARY FOR OUR FUTURE GROWTH.

The market for Internet-based, business-to-business electronic commerce products
is relatively new and is evolving rapidly. As a result of our decision to
reposition our business strategy to emphasize our electronic commerce business
solutions, much of our future revenues and future profits depend upon the
widespread acceptance and use of the Internet as an effective medium of
business-to-business commerce, particularly as a medium to perform indirect
goods procurement and fulfillment functions. The failure of the Internet to
continue to develop as a commercial or business medium or of significant numbers
of buyers and suppliers of indirect goods to conduct business-to-business
commerce on the Internet would harm our business, operating results and
financial condition.

FAILURE OF THE INTERNET INFRASTRUCTURE TO EXPAND COULD LIMIT OUR FUTURE GROWTH.

The recent growth in Internet traffic has caused frequent periods of decreased
performance, and if Internet usage continues to grow rapidly, the infrastructure
of the Internet may not be able to support these demands and the Internet's
performance and reliability may decline. If outages or delays on the Internet
occur frequently or increase in frequency, overall Internet usage including
usage of our electronic commerce products and services could grow more slowly or
decline. Our ability to increase the speed and scope of our electronic commerce
services to customers is ultimately limited by and depends upon the speed and
reliability of both the Internet and our customers' internal networks.
Consequently, the emergence and growth of the market for our electronic commerce
services depends upon improvements being made to the entire Internet as well as
to our individual customers' networking infrastructures to alleviate overloading
and congestion. If these improvements are not made, the ability of our customers
to utilize our electronic commerce solutions will be hindered, and our business,
operating results and financial condition may suffer.

INCREASED SECURITY RISKS OF ONLINE COMMERCE MAY DETER FUTURE USE OF OUR PRODUCTS
AND SERVICES.

A fundamental requirement to conduct Internet-based, business-to-business
electronic commerce is the secure transmission of confidential information over
public networks. We cannot be certain that advances in computer capabilities,
new discoveries in the field of cryptography, or other developments will not
result in a compromise or breach of the algorithms we use to protect content and
transactions on ePlusSuite or proprietary information in our databases. Anyone
who is able to circumvent our security measures could misappropriate
proprietary, confidential customer information or cause interruptions in our
operations. We may be required to incur significant costs to protect against
security breaches or to alleviate problems caused by breaches. Further, a
well-publicized compromise of security could deter people from using the
Internet to conduct transactions that involve transmitting confidential
information. Our failure to prevent security breaches, or well publicized
security breaches affecting the Internet in general, could significantly harm
our business, operating results and financial condition.

ADDITIONAL GOVERNMENT REGULATIONS MAY INCREASE OUR COSTS OF DOING BUSINESS.

The laws governing Internet transactions remain largely unsettled, even in areas
where there has been some legislative action. The adoption or modification of
laws or regulations relating to the Internet could harm our business, operating
results and financial condition by increasing our costs and administrative
burdens. It may take years to determine whether and how existing laws such as
those governing intellectual property, privacy, libel, consumer protection and
taxation apply to the Internet.

Laws and regulations directly applicable to communications or commerce over the
Internet are becoming more prevalent. We must comply with new regulations in
both Europe and the United States, as well as any other regulations adopted by
other countries where we may do business. The growth and development of the
market for online commerce may prompt calls for more stringent consumer
protection laws, both in the United States and abroad, as well as new laws
governing the taxation of Internet commerce. Compliance with any newly adopted
laws may prove difficult for us and may harm our business, operating results and
financial condition.

12
<PAGE> 17

RISKS RELATED TO THIS OFFERING

INTERNET-RELATED STOCK PRICES ARE ESPECIALLY VOLATILE AND THIS VOLATILITY MAY
DEPRESS OUR STOCK PRICE.

The stock market and specifically the stock prices of Internet-related companies
have been very volatile. This volatility is often not related to the operating
performance of the companies. This broad market volatility and industry
volatility may reduce the price of our common stock, without regard to our
operating performance. Due to this volatility, the market price of our common
stock could significantly decrease.

SHARES HELD ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET PRICE OF
OUR COMMON STOCK.

Future sales of substantial amounts of our common stock in the public market or
the perception that such sale could occur could adversely affect the market
price of our common stock. Upon the completion of this offering, assuming the
underwriters' over-allotment option is not exercised, we will have 10,175,687
shares of common stock issued and outstanding. All of these shares will be
freely tradable without restriction or further registration under the Securities
Act, except for 4,455,789 shares that may only be resold in compliance with the
provisions of Rule 144. Upon completion of this offering, Centura Banks, Inc.
will hold 392,990 shares for which it has the one-time right to demand
registration and unlimited piggyback registration rights. Upon completion of
this offering, after giving effect to the cashless exercise of the warrant it
holds, TC Plus, LLC will hold 1,652,789 shares for which it has unlimited
piggyback registration rights, shelf registration rights and the right to demand
registration of its shares on three occasions at any time its shares are not
included in our shelf registration statement or our shelf registration statement
is not effective.

We and our directors, executive officers and certain stockholders have also
agreed not to sell or otherwise dispose of any shares of our common stock
without the prior written consent of J.P. Morgan Securities Inc. for a period of
90 days after the date of this prospectus.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the information in this prospectus may contain forward-looking
statements. You can identify such statements by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements discuss future expectations,
contain projections of results of operations or of financial condition or state
other forward-looking information. When considering such forward-looking
statements, you should keep in mind the risk factors and other cautionary
statements in this prospectus. The risk factors noted in this section and other
factors noted throughout this prospectus, including certain risks and
uncertainties, could cause our actual results to differ materially from those
contained in any forward-looking statement.

13
<PAGE> 18

USE OF PROCEEDS

We estimate that our net proceeds from the sale of the 1,500,000 shares of
common stock at an assumed offering price of $32.50 per share (the last sale
price as reported by Nasdaq on April 7, 2000) will be $45.3 million, after
deducting the underwriting discount and estimated offering expenses.

We expect to use the proceeds from this offering for general corporate purposes,
including sales and marketing of ePlusSuite, research and development and
potential acquisitions purposes. We currently have no commitments or agreements
for acquisitions of complementary businesses, products or technologies. Pending
use of the net proceeds of this offering, we intend to invest the net proceeds
in interest-bearing, investment-grade securities or to pay down our working
capital line of credit.

As of April 7, 2000, we had a principal balance of $25.0 million outstanding
under our working capital line of credit with First Union National Bank, N.A.
which was accruing interest at LIBOR plus 1.5% or Prime minus .5% depending on
the term of the borrowing. We use the borrowings under this line for general
corporate purposes, and it expires on December 19, 2000.

PRICE RANGE OF COMMON STOCK

Our common stock traded on the Nasdaq National Market from November 20, 1996
until October 29, 1999 under the symbol "MLCH." Since November 1, 1999, our
stock has traded on the Nasdaq National Market under the symbol "PLUS." The
following table sets forth the range of high and low sale prices for our common
stock for the fiscal quarters ended on the date indicated.

<TABLE>
<CAPTION>
-----------------
PRICE RANGE
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR 1998
June 30, 1997............................................. $14.000 $10.750
September 30, 1997........................................ 14.750 12.750
December 31, 1997......................................... 14.750 11.750
March 31, 1998............................................ 13.750 11.500
FISCAL YEAR 1999
June 30, 1998,............................................ $15.750 $12.750
September 30, 1998........................................ 14.500 7.250
December 31, 1998......................................... 10.250 6.625
March 31, 1999............................................ 9.250 8.250
FISCAL YEAR 2000
June 30, 1999............................................. $ 9.500 $ 7.500
September 30, 1999........................................ 11.250 7.000
December 31, 1999......................................... 46.000 8.750
March 31, 2000............................................ 74.625 27.125
</TABLE>

On April 7, 2000, the last sale price of our common stock was $32.50 per share.
As of April 7, 2000, there were approximately 97 stockholders of record of our
common stock. We believe there are approximately 400 beneficial holders of our
common stock.

DIVIDEND POLICY

We have never paid a cash dividend to our stockholders. The current policy of
our board of directors is to retain our earnings for use in our business.
Therefore, we are unlikely to pay cash dividends on the common stock we are
offering in the foreseeable future.

14
<PAGE> 19

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1999 (1) on
an actual basis and (2) on an as adjusted basis to reflect the issuance of (a)
1,500,000 shares of common stock in this offering at an assumed public offering
price of $32.50 per share (the last sale price as reported by Nasdaq on April 7,
2000), after deducting underwriting discounts and estimated offering expenses
and (b) 721,678 shares of common stock pursuant to the cashless exercise of a
warrant held by TC Plus, LLC. The number of shares into which the warrant is
exercisable depends upon the price per share of the common stock to be sold in
this offering and is based on an assumed public offering price of $32.50 (the
last sale price as reported by Nasdaq on April 7, 2000). The number of shares
that will be issued pursuant to the cashless exercise of the warrant will
increase if the public offering price increases and decrease if the public
offering price decreases. You should read this table together with our
consolidated financial statements and the related notes included in this
prospectus and the information included under "Management's Discussion and
Analysis of Results of Operations and Financial Condition." Also see "Selected
Consolidated Financial Data." This table excludes the following shares: (1)
1,590,802 shares of common stock reserved for issuance under our stock option
and stock purchase plans, of which, as of April 7, 2000, we have granted options
to purchase 1,289,962 shares and (2) 107,500 shares of common stock issuable
upon exercise of outstanding warrants.

<TABLE>
<CAPTION>
-----------------------
AS OF DECEMBER 31, 1999
-----------------------
ACTUAL AS ADJUSTED
------ -----------
<S> <C> <C>
Dollar amounts in thousands, except per share data
Notes payable............................................... $209,811 $209,811
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares
authorized;
None issued or outstanding............................. -- --
Common stock, $.01 par value; 25,000,000 authorized;
7,904,544 and 10,126,222 issued and outstanding at
December 31, 1999 and as adjusted...................... 79 101
Additional paid-in capital................................ 29,226 74,469
Retained earnings......................................... 24,702 24,702
-------- --------
Total stockholders' equity........................ 54,007 99,272
-------- --------
Total capitalization.............................. $263,818 $309,083
======== ========
</TABLE>

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<PAGE> 20

SELECTED CONSOLIDATED FINANCIAL DATA

We derived the selected consolidated financial data below as of and for each of
the five years ended March 31, 1995, 1996, 1997, 1998 and 1999 from our audited
consolidated financial statements. Our consolidated balance sheets as of March
31, 1998 and 1999, and the consolidated statements of earnings, stockholders'
equity, and cash flows for each of the three years in the period ended March 31,
1999, have been audited by Deloitte & Touche LLP, independent auditors and are
included elsewhere in this prospectus. We derived the selected consolidated
financial data presented below as of and for the nine months ended December 31,
1998 and 1999 from our unaudited consolidated financial statements. We prepared
the unaudited financial statements on substantially the same basis as our
audited financial statements and, in our opinion, the unaudited financial
statements include all adjustments necessary for a fair presentation of the
results of operations for those periods. The historical financial information
presented below may not be indicative of our future operating results as a
result of our transitioning to a business-to-business electronic commerce
solutions provider from our traditional sales and financing business.

You should read this selected consolidated financial information together with
our consolidated financial statements and the related notes included in this
prospectus, the discussion under "Unaudited Pro Forma Consolidated Financial
Statements" and "Management's Discussion and Analysis of Results of Operations
and Financial Condition."

On September 30, 1999, we completed the acquisition of CLG, Inc. and accounted
for such acquisition as a purchase. For additional information about the CLG,
Inc. acquisition, see the information included under "Unaudited Pro Forma
Consolidated Financial Statements," our Current Report on Form 8-K/A that we
filed with the SEC on December 20, 1999 and CLG, Inc.'s consolidated financial
statements and related notes included in this prospectus.

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
FOR THE NINE MONTHS
FOR THE YEAR ENDED MARCH 31, ENDED DECEMBER 31,
--------------------------------------------------------- ---------------------
1995 1996 1997 1998 1999 1998 1999(1)
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Dollar amounts in thousands, except per share
data
STATEMENT OF EARNINGS DATA:
Revenue:
Sales of equipment......................... $ 50,471 $ 47,591 $ 52,167 $ 47,419 $ 83,516 $ 55,740 $ 118,850
Sales of leased equipment.................. 9,958 16,318 21,634 50,362 84,379 74,613 44,882
Lease revenues............................. 3,245 5,928 9,908 14,882 20,611 14,995 21,817
Fee and other income....................... 690 1,877 2,503 5,779 5,464 4,183 5,957
ePlusSuite revenues........................ -- -- -- -- -- -- 297
--------- --------- --------- --------- --------- --------- ---------
Total revenues...................... 64,364 71,714 86,212 118,442 193,970 149,531 191,803
--------- --------- --------- --------- --------- --------- ---------
Costs and Expenses:
Cost of sales of equipment................. 44,157 38,782 42,180 37,423 71,367 47,157 106,363
Cost of sales of leased equipment.......... 9,463 15,522 21,667 49,669 83,269 73,630 42,969
Direct lease costs......................... 841 2,697 4,761 5,409 6,184 5,221 5,409
Professional and other costs............... 657 709 577 1,073 1,222 895 1,388
Salaries and benefits...................... 5,679 6,682 8,241 10,357 11,880 8,508 13,688
General and administrative expenses........ 1,673 2,040 2,286 3,694 5,152 3,619 4,817
Interest and financing costs............... 1,111 1,702 1,649 1,837 3,601 2,498 7,232
Nonrecurring acquisition costs............. -- -- -- 250 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total costs and expenses............ 63,581 68,134 81,361 109,712 182,675 141,528 181,866
--------- --------- --------- --------- --------- --------- ---------
Earnings before provision for income taxes
and extraordinary item..................... 783 3,580 4,851 8,730 11,295 8,003 9,937
Provision for income taxes................... 198 881 1,360 2,691 4,579 3,201 3,975
--------- --------- --------- --------- --------- --------- ---------
Net earnings before extraordinary item....... 585 2,699 3,491 6,039 6,716 4,802 5,962
Extraordinary gain........................... -- 117 -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net earnings................................. $ 585 $ 2,816 $ 3,491 $ 6,039 $ 6,716 $ 4,802 $ 5,962
========= ========= ========= ========= ========= ========= =========
</TABLE>

- ---------------

(1) The selected consolidated statements of earnings and balance sheet data
include financial data of CLG, Inc. only since its acquisition by us on
September 30, 1999.

16
<PAGE> 21

- ---------------

(1) The selected consolidated statements of earnings and balance sheet data
include financial data of CLG, Inc. only since its acquisition by us on
September 30, 1999.

(2) The pro forma net earnings for the years ended March 31, 1995, 1996, 1997
and 1998 and the nine months ended December 31, 1998 are presented as if
companies which were subchapter S corporations prior to their business
combinations with us had been subject to federal income tax throughout the
periods presented. During 1998, these business combinations were accounted
for under the pooling-of-interests method.

17
<PAGE> 22

<TABLE>
<CAPTION>
---------------------------------------------------------------
AS OF
AS OF MARCH 31, DECEMBER 31,
------------------------------------------------ ------------
1995(1) 1996 1997 1998 1999 1999(2)
------- ------- ------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dollar amounts in thousands
BALANCE SHEET DATA:
Assets:
Cash and cash equivalents..................... $ 276 $ 651 $ 6,654 $18,684 $ 7,892 $ 11,687
Accounts receivable........................... 4,852 4,526 8,846 16,383 44,090 63,388
Notes receivable.............................. 37 92 2,154 3,802 547 4,952
Inventories................................... 1,294 965 1,278 1,214 658 1,837
Investment in direct financing
and sales type leases, net................. 12,124 16,273 17,473 32,496 83,371 204,281
Investment in operating lease
equipment, net............................. 1,874 10,220 11,065 7,296 3,530 11,684
Other assets.................................. 587 1,935 741 2,137 12,232 19,416
All other assets.............................. 672 522 813 1,184 2,039 2,615
------- ------- ------- ------- -------- ------------
Total assets.......................... $21,716 $35,184 $49,024 $83,196 $154,359 $ 319,860
======= ======= ======= ======= ======== ============
Liabilities:
Accounts payable--trade....................... $ 1,890 $ 2,215 $ 3,007 $ 6,865 $ 12,518 $ 30,193
Accounts payable--equipment................... 3,014 4,973 4,946 21,284 18,049 18,515
Salaries and commissions payable.............. 316 153 672 390 536 961
Recourse notes payable........................ 2,597 2,106 439 13,037 19,081 30,709
Nonrecourse notes payable..................... 10,162 18,352 19,705 13,028 52,429 179,102
All other liabilities......................... 936 2,153 3,778 5,048 7,932 6,373
------- ------- ------- ------- -------- ------------
Total liabilities............................. 18,915 29,952 32,547 59,652 110,545 265,853
Stockholders' equity.......................... 2,801 5,232 16,477 23,544 43,814 54,007
------- ------- ------- ------- -------- ------------
Total liabilities and stockholders'
equity.............................. $21,716 $35,184 $49,024 $83,196 $154,359 $ 319,860
======= ======= ======= ======= ======== ============
</TABLE>

- ---------------

(1) The balance sheet of ePlus as of March 31, 1995 (prior to certain
acquisitions) and the balance sheets of ePlus Technology of NC, inc.
(formerly MLC Network Solutions, Inc.) and ePlus Technology of PA, inc.
(formerly Educational Computer Concepts, Inc.) as of March 31, 1995 have
been audited, but we prepared the consolidated balance sheet as of March 31,
1995 without audit.

(2) The selected consolidated statements of earnings and balance sheet data
include financial data of CLG, Inc. only since its acquisition by us on
September 30, 1999.

18
<PAGE> 23

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma consolidated statements of earnings for the
nine months ended December 31, 1999, and the year ended March 31, 1999, reflect
the acquisition of CLG, Inc. by ePlus, which we completed on September 30, 1999
and accounted for as a purchase as if the purchase occurred on April 1, 1998.
The unaudited pro forma consolidated statement of earnings for the nine months
ended December 31, 1999, includes the results for the ePlus nine-month period
ended December 31, 1999, which includes the CLG, Inc. results for the months of
October to December 1999, and the CLG, Inc. results for the six months of April
to September 1999. The unaudited pro forma consolidated statement of earnings
for the fiscal year ended March 31, 1999, includes the financial data for the
ePlus twelve-month fiscal year ended March 31, 1999, and the CLG, Inc.
twelve-month fiscal year ended December 31, 1998. The pro forma adjustments are
based upon preliminary estimates, available information and certain assumptions
that we believe appropriate.

The unaudited pro forma consolidated financial data presented herein does not
purport to represent the result that ePlus inc. would have obtained had the
transactions, which are the subject of pro forma adjustments, been completed as
of the assumed dates and for the periods presented, or which may be obtained in
the future. The pro forma adjustments are described in the accompanying notes
and are based upon available information and certain assumptions that we believe
are reasonable. A preliminary allocation of the purchase price has been made.
The actual allocation of the purchase price and the resulting effect on income
from operations may differ significantly. For information with respect to the
pro forma effect of the acquisition of CLG, Inc. on the balance sheet of ePlus,
see our Current Report on Form 8-K/A, filed with the SEC on December 17, 1999.
See "Where You Can Find More Information About Us."

19
<PAGE> 24

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
-----------------------------------------------------------
EPLUS CLG, INC.
NINE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, SEPTEMBER 30, PRO FORMA
1999 1999 ADJUSTMENTS PRO FORMA
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Sales of equipment.............................. $118,850,359 $ 3,867,750 $122,718,109
Sales of leased equipment....................... 44,882,169 44,882,169
------------ ----------- ------------
Total sales................................... 163,732,528 3,867,750 167,600,278
------------ ----------- ------------
Lease revenues.................................. 21,816,694 12,328,253 34,144,947
Fee and other income............................ 5,956,374 459,444 6,415,818
------------ ----------- ------------
ePlusSuite revenues............................. 297,453 -- 297,453
------------ ----------- ------------
Total other revenue........................... 28,070,521 12,787,697 40,858,218
------------ ----------- ------------
Total revenues.................................. 191,803,049 16,655,447 208,458,496
------------ ----------- ------------
Cost of sales, equipment........................ 106,363,250 3,603,292 109,966,542
Cost of sales, leased equipment................. 42,969,242 -- 42,969,242
------------ ----------- ------------
Total cost of sales........................... 149,332,492 3,603,292 152,935,784
------------ ----------- ------------
Direct lease costs.............................. 5,408,846 5,429,393 10,838,239
Professional and other fees..................... 1,387,540 282,941 1,670,481
Salaries and benefits........................... 13,688,322 3,227,749 16,916,071
General and administrative expenses............. 4,817,067 984,865 $ 258,333(1) 6,060,265
Interest and financing costs.................... 7,231,746 2,210,289 1,176,284(2) 10,618,319
------------ ----------- ----------- ------------
Total expenses................................ 32,533,521 12,135,237 1,434,617 46,103,375
------------ ----------- ----------- ------------
Total costs and expenses........................ 181,866,013 15,738,529 1,434,617 199,039,159
------------ ----------- ----------- ------------
Earnings before income taxes.................... 9,937,036 916,918 (1,434,617) 9,419,337
Provision for income taxes...................... 3,974,847 366,737 (573,846)(3) 3,767,738
------------ ----------- ----------- ------------
Net income...................................... $ 5,962,189 $ 550,181 $ (860,771) $ 5,651,599
============ =========== =========== ============
Net earnings per common share--basic............ $ 0.78 $ 0.72
Net earnings per common share--diluted.......... $ 0.70 $ 0.64
Weighted average common shares
outstanding--basic............................ 7,618,700 258,659(4) 7,877,359
Weighted average common shares
outstanding--diluted.......................... 8,554,461 258,659(4) 8,813,120
</TABLE>

- ---------------
(1) Represents the goodwill amortization related to the acquisition of CLG, Inc.
This intangible asset is estimated at a value of $7,750,000 and amortized
over a 15-year period. Actual amortization may differ depending on the final
allocation of the total consideration. Represents six months of
amortization.

(2) Represents the adjustment for the acquisition financing. The amount is based
on the estimated portfolio balance financed on non-recourse basis of
approximately $27,799,500 at an interest rate of 7.25% and the subordinated
debt of $3,064,575 at an interest rate of 11%.

(3) Reflects adjustment necessary to reach an effective tax rate of 40%, and
represents the average rate for the prior two annual periods which are
appropriate for presentation.

(4) The increase in shares represents the 392,990 shares of stock issued to the
seller in the acquisition of CLG, Inc. less 134,331 shares already included
in the ePlus inc. weighted average common shares outstanding (basic and
diluted) as of December 31, 1999.

20
<PAGE> 25

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED MARCH 31, 1999

<TABLE>
<CAPTION>
----------------------------------------------------------
EPLUS CLG, INC.
YEAR ENDED YEAR ENDED
MARCH 31, DECEMBER 31, PRO FORMA
1999 1998 ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sales of equipment................................ $ 83,516,254 $ 1,524,071 $ 85,040,325
Sales of leased equipment......................... 84,378,800 84,378,800
------------ ----------- ------------
Total sales..................................... 167,895,054 1,524,071 169,419,125
------------ ----------- ------------
Lease revenues.................................... 20,610,542 36,031,319 56,641,861
Fee and other income.............................. 5,464,242 819,538 6,283,780
------------ ----------- ------------
Total other revenue............................. 26,074,784 36,850,857 62,925,641
------------ ----------- ------------
Total revenues.................................... 193,969,838 38,374,928 232,344,766
------------ ----------- ------------
Cost of sales, equipment.......................... 71,367,090 1,232,064 72,599,154
Cost of sales, leased equipment................... 83,269,110 83,269,110
------------ ----------- ------------
Total cost of sales............................. 154,636,200 1,232,064 155,868,264
------------ ----------- ------------
Direct lease costs................................ 6,183,562 18,304,182 24,487,744
Professional and other fees....................... 1,222,080 169,413 1,391,493
Salaries and benefits............................. 11,880,062 6,580,602 18,460,664
General and administrative expenses............... 5,151,494 2,606,300 $ 516,666(1) 8,274,460
Interest and financing costs...................... 3,601,348 5,861,168 2,164,230(2) 11,626,746
------------ ----------- ----------- ------------
Total expenses.................................. 28,038,546 33,521,665 2,680,896 64,241,107
------------ ----------- ----------- ------------
Total costs and expenses.......................... 182,674,746 34,753,729 2,680,896 220,109,371
------------ ----------- ----------- ------------
Earnings before income taxes...................... 11,295,092 3,621,199 (2,680,896) 12,235,395
Provision for income taxes........................ 4,578,625 1,459,749 (1,072,359)(3) 4,966,015
------------ ----------- ----------- ------------
Net income........................................ $ 6,716,467 $ 2,161,450 $(1,608,537) $ 7,269,380
============ =========== =========== ============
Net earnings per common share--basic.............. $ 0.99 $ 1.01
Net earnings per common share--diluted............ $ 0.98 $ 1.01
Weighted average common shares
outstanding--basic.............................. 6,769,732 392,990(4) 7,162,722
Weighted average common shares
outstanding--diluted............................ 6,827,528 392,990(4) 7,220,518
</TABLE>

- ---------------

(1) Represents the goodwill amortization related to the acquisition of CLG, Inc.
This intangible asset is estimated at a value of $7,750,000 and amortized
over a 15-year period. Actual amortization may differ depending on the final
allocation of the total consideration. Represents twelve months of
amortization.

(2) Represents the adjustment for the acquisition financing. The amount is based
on the estimated portfolio balance financed on a non-recourse basis of
approximately $25,200,000 at an interest rate of 7.25% and the subordinated
debt of $3,064,575 at an interest rate of 11%.

(3) Reflects adjustment necessary to reach an effective tax rate of 40%, and
represents the average rate for the prior two annual periods which are
appropriate for presentation.

(4) The increase in shares represents the shares of stock issued to the seller
in the acquisition of CLG, Inc.

21
<PAGE> 26

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION

The following discussion and analysis of results of our operations and financial
condition should be read together with the consolidated financial statements and
the related notes thereto included in this prospectus beginning on page F-1.

OVERVIEW

In November 1999, we introduced ePlusSuite, a comprehensive business-to-business
electronic commerce supply chain management solution for information technology
and other operating resources. We currently derive most of our revenue from
sales and financing of information technology and other assets. The introduction
of ePlusSuite reflects our transition to a business-to-business electronic
commerce solutions provider from our historical sales and financing business.
Our strategy is to reduce or eliminate our balance sheet risk over time by
outsourcing lease and other financing to third-party financial institutions,
while charging a transaction fee and arranging the sales of information
technology and other assets for a transaction fee, rather than purchasing and
reselling such assets ourselves.

We expect our electronic commerce revenues to be derived primarily from (1)
amounts charged to customers with respect to procurement activity executed
through Procure(+), (2) fees from third-party financing sources that provide
leasing and other financing for transactions that we arrange through
Procure(+)on behalf of our customers, (3) fees from third-party vendors for
sales in transactions that we arrange through Procure(+) on behalf of our
customers and (4) amounts charged to customers for the Manage(+) service. We
expect to generate increased revenues from our electronic commerce business
unit, while revenues from our leasing and sales business may decrease over time.
Because revenues for the sale of leased and other equipment include the full
purchase price of the item sold, total revenues may decline to the extent
leasing and sales revenues begin to represent a smaller portion of our total
revenues. However, in the near term, as we seek to implement our electronic
commerce business strategy, we will continue to derive most of our revenues from
our traditional businesses.

We expect to incur substantial increases in the near term in our sales and
marketing, research and development, and general and administrative expenses. In
particular, we expect to significantly expand the marketing of our electronic
commerce business solution and increase spending on advertising and marketing.
To implement this strategy, we plan to hire additional sales personnel, open new
sales locations and retain an outside advertising, marketing and public
relations firm. We also plan to hire additional technical personnel and third
parties to assist in the implementation and upgrade of ePlusSuite and to develop
complementary electronic commerce business solutions. As a result of these
increases in expenses, we expect to incur significant losses in our ePlusSuite
business which may, in the near term, have a material adverse effect on
operating results for the company as a whole.

To the extent we successfully implement this strategy, we expect our business to
become less capital intensive over time. We expect that as a result, our total
assets and total liabilities will decrease. We expect to significantly reduce
our receivables and lease assets along with the associated liabilities including
debt and equipment payables.

We have added new classifications to our financial statement presentation in
order to reflect the changes in our business. We have added a line item,
ePlusSuite revenues, to our statement of earnings which includes the revenues
associated with the electronic commerce business unit. We have also added for
segment reporting purposes a new business segment, electronic commerce, to
present separately electronic commerce business unit revenues.

As a result of the foregoing, our historical results of operations and financial
position may not be indicative of our future performance over time. However, our
results of operations and financial position will continue to primarily reflect
our traditional sales and financing businesses for at least the next twelve
months.

SELECTED ACCOUNTING POLICIES

Amounts charged for the electronic commerce business unit's Procure(+) service
are recognized as services are rendered. Amounts charged for the
Manage(+)service will be recognized on a straight line basis over the period the
services are provided.

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.

22
<PAGE> 27

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 collectability 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 finance 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
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 which 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 which is recognized at
lease inception, is included in net margin on sales-type leases. For equipment
sold through our technology 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 operating 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 recorded in 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
recorded in 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 and price changes 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.

Initial Direct Costs. Initial direct costs related to the origination of direct
financing, sales-type 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; and (3) sales of off-lease equipment
to the secondary market.

23
<PAGE> 28

Other Sources of Revenue. Fee and other income results from (1) income from
events that occur after the initial sale of a financial asset such as
escrow/prepayment income, (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 statements of
earnings.

RESULTS OF OPERATIONS

Three and Nine Months Ended December 31, 1999 Compared to Three and Nine Months
Ended December 31, 1998

We generated total revenues of $76,240,195 during the three-month period ended
December 31, 1999 compared to revenues of $69,946,693 during the comparable
period in the prior fiscal year, an increase of 9.0%. During the nine-month
period ended December 31, we generated total revenues of $191,803,049 and
$149,530,588 in 1999 and 1998, respectively, an increase of 28.3%. During the
three-month period, the increase in equipment sales was largely offset by a
decrease in sales of leased equipment, thereby yielding a lower overall increase
in total revenues of 9.0%. In comparison, the increase in equipment sales for
the nine-month period significantly outpaced the decrease in sales of leased
equipment, which contributed to the 28.3% increase in total revenues. The
increase in total revenues for the three- and nine-month periods, without the
inclusion of the operations of CLG, Inc., would have been 8.3% and 24.9%,
respectively. Our revenues are composed of sales and other revenue, and may vary
considerably from period to period. See "Potential Fluctuations In Quarterly
Operating Results" on page 36.

Sales revenue, which includes sales of equipment and sales of leased equipment,
decreased .2% to $63,549,650 during the three-month period ended December 31,
1999, as compared to $63,688,706 in the corresponding period in the prior fiscal
year. For the nine-month period ended December 31, 1999, sales increased 25.6%
to $163,732,528 over the corresponding period in the prior year.

The majority of sales of equipment are generated through our technology business
unit subsidiaries. Sales of used or off-lease equipment are also generated from
our brokerage and re-marketing activities. For both the three-and nine-month
periods ended December 31, 1999, equipment sales through our technology business
unit subsidiaries accounted for 99.7% of sales of equipment, with the remainder
being sales from brokerage and re-marketing activities. Sales of equipment
increased significantly during both the three- and nine-month periods, primarily
a result of increased technology sales through our technology business unit
subsidiaries. For the three-month period, sales of equipment increased 84.1% to
$47,188,893. For the fiscal year to date through December 31, equipment sales
increased 113.2% to $118,850,359. The acquisition of CLG, Inc. on September 30,
1999, did not materially contribute to the increase in sales of equipment for
the periods presented.

We realized a gross margin on sales of equipment of 10.3% and 10.5% for the
three- and nine-month periods ended December 31, 1999, respectively, as compared
to a gross margin of 13.6% and 15.4% realized on sales of equipment generated
during the three- and nine-month periods, respectively, in the prior fiscal
year. This decrease in net margin percentage can be primarily attributed to our
July 1, 1998 acquisition of ePlus Technology, inc., formerly PC Plus, Inc.,
which has a concentration of higher volume customers with lower gross margin
percentages. Our gross margin on sales of equipment may be affected by the mix
and volume of products sold.

We also recognize revenue from the sale of leased equipment. During the
three-and nine-month periods, sales of leased equipment decreased 57.0% and
39.8% to $16,360,757 and $44,882,169, respectively. 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. 125. The decrease in sales of leased
equipment can be primarily attributed to the decline in the volume of leases
sold to MLC/CLC, LLC, a joint venture in which we own a 5% interest. During the
three months ended December 31, 1999 and 1998, sales to MLC/CLC, LLC, accounted
for 67.5% and 93.1% of sales of leased equipment, respectively. During the
nine-month periods ended December 31, sales to MLC/CLC, LLC accounted for 37.8%
and 96.5% of 1999 and 1998 sales of leased equipment, respectively. Sales to the
joint venture require the consent of the relevant joint venture partner. We have
received notice that Firstar Equipment Finance Corporation, which owns 95% of
MLC/CLC, LLC, intends to discontinue their continued investment in new lease
acquisitions effective May, 2000. We have developed and will continue to develop
relationships with additional lease equity investors and financial
intermediaries to diversify our sources of equity financing.

During the three-month period ended December 31, 1999, we recognized a gross
margin of 6.4% on leased equipment sales of $16,360,757 as compared to a gross
margin of 1.5% on leased equipment sales of $38,053,115 during the same period
in the prior fiscal year. For the fiscal year to date through December 31, 1999,
we recognized a gross margin of 4.3% on leased equipment sales of $44,882,169,
as compared to a gross margin of 1.3% on leased equipment sales of $74,612,679
during the

24
<PAGE> 29

same period in the prior fiscal year. The increase in gross margin is due
primarily to increased origination fees charged to the equity purchasers of
leased equipment.

Our lease revenues increased 99.5% to $9,467,586 for the three-month period
ended December 31, 1999, compared with the corresponding period in the prior
fiscal year. For the fiscal year to date through December 31, lease revenues
increased 45.5% to $21,816,694 for the 1999 period compared to the same period
in 1998. This increase consists of increased lease earnings and rental revenues
reflecting a higher average investment in direct financing and sales type
leases. The investment in direct financing and sales type leases at December 31,
1999 and March 31, 1999 were $204,280,675 and $83,370,950, respectively. The
December 31, 1999 balance represents an increase of $120,909,725 or 145.0% over
the balance as of March 31, 1999. The increase in the net investment in direct
financing and sales type leases, as well as the corresponding lease revenues was
due in large part to the acquisition of CLG, Inc. The increases in lease
revenues for the three- and nine-month periods, without the operations of CLG,
Inc., would have been 10.0% and 17.2%, respectively.

For the three and nine months ended December 31, 1999, fee and other income
increased 93.4% and 42.4%, respectively, over the comparable periods in the
prior fiscal year. This increase is attributable to increases in revenues from
adjunct services and fees, including broker fees, support fees, warranty
reimbursements, and learning center revenues generated by our technology
business unit subsidiaries. Included in our fee and other income are earnings
from certain transactions which are in our normal course of business but there
is no guarantee that future transactions of the same nature, size or
profitability will occur. Our ability to consummate such transactions, 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 acquisition of CLG, Inc. did not materially affect the increases for the
periods presented.

For the three and nine months ended December 31, 1999, we recorded $297,453 in
ePlusSuite revenues. These revenues consisted of amounts charged for the
arrangement of procurement transactions executed through Procure(+), a component
of ePlusSuite. There were no ePlusSuite revenues recorded prior to this quarter,
as ePlusSuite was introduced on November 2, 1999.

During the three months ended December 31, 1999, the selling, general, and
administrative expenses allocated to the electronic commerce business unit
consisted primarily of overhead allocation.

Our direct lease costs increased 3.6% during the nine-month period ended
December 31, 1999 as compared to the same period in the prior fiscal year. There
was an increase of 100.9%, in direct lease costs for the three-month period
ended December 31, 1999 as compared to December 31, 1998. The largest component
of direct lease costs is depreciation expense on operating lease equipment. The
increase for the three-month period is attributable to the acquisition of CLG,
Inc., which has a higher percentage of operating leases, and as a result, added
$1.9 million in direct lease costs. For the nine months ended December 31, 1999,
the increase attributable to CLG, Inc. was offset by a $1.2 million reduction in
depreciation on our operating lease equipment prior to the CLG, Inc.
acquisition.

Salaries and benefits expenses increased 64.2% during the three-month period
ended December 31, 1999 over the same period in the prior year. For the fiscal
year to date through December 31, 1999, salaries and benefits increased 60.9%
over the prior year. These increases reflect the increased number of personnel
we employed, the higher commission expenses in the technology businesses unit
and the acquisition of CLG, Inc.

Our interest and financing costs for the three and nine months ended December
31, 1999 increased 254.1% and 189.5%, respectively, and relate to interest costs
on our indebtedness. In addition to increased borrowing under our lines of
credit, our lease related non-recourse debt portfolio increased significantly.
See "--Liquidity and Capital Resources" below. Payment for interest costs on the
majority of non-recourse and certain recourse notes are typically remitted
directly to the lender by the lessee.

Our provision for income taxes increased to $1,580,340 for the three months
ended December 31, 1999 from $1,131,934 for the three months ended December 31,
1998, reflecting effective income tax rates of 40% for both periods. For the
nine months ended December 31, 1999, our provision for income taxes was
$3,974,847 as compared to $3,201,099 during the comparable prior year period,
reflecting effective income tax rates of 40% for both periods.

The foregoing resulted in a 39.6% and 24.2% increase in net earnings for the
three- and nine-month periods ended December 31, 1999, respectively, as compared
to the same periods in the prior fiscal year. The increases in net earnings for
the three- and nine-month periods, exclusive of the operations of CLG, Inc.,
would have been 10.4% and 13.8%.

Basic and diluted earnings per common share were $.30 and .26 for the three
months ended December 31, 1999, as compared to $.24 for both methods for the
three months ended December 31, 1998, based on weighted average common shares
25
<PAGE> 30

outstanding of 7,885,729 and 9,092,317, respectively, for 1999, and 7,189,324
and 7,220,060, respectively, for 1998. For the fiscal year to date through
December 31, 1999, our basic and diluted earnings per common share were $.78 and
$.70, respectively, as compared to $.73 and $.72, respectively, for the same
period in 1998, based on weighted average common shares outstanding of 7,618,700
and 8,554,461, respectively, for 1999, and 6,540,359 and 6,648,754 respectively,
for 1998.

LIQUIDITY AND CAPITAL RESOURCES

During the nine-month period ended December 31, 1999, we used cash flows in
operations of $743,351, and used cash flows from investing activities of
$87,057,093. Cash flows generated by financing activities amounted to
$91,596,123 during the same period. The net effect of these cash flows was a net
increase in cash and cash equivalents of $3,795,679 during the nine-month
period. During the same period, our total assets increased $165,501,260, or
107.2%, primarily the result of increases in direct financing leases and the
acquisition of CLG, Inc. on September 30, 1999. Our net investment in operating
lease equipment increased during the period, primarily due to the acquisition of
operating lease assets from CLG, Inc.

Our debt financing activities typically provide approximately 80% to 100% of the
purchase price of the equipment we purchased for lease to our customers. Any
balance of the purchase price (our equity investment in the equipment) must
generally be financed by cash flow from its operations, the sale of the
equipment lease to third parties, or other internal means of financing. Although
we expect that the credit quality of our leases and our residual return history
will continue to allow us to obtain such financing, no assurances can be given
that such financing will be available, at acceptable terms, or at all. The
financing necessary to support our leasing activities has principally been
provided from non-recourse and recourse borrowings. Historically, we have
obtained recourse and non-recourse borrowings from money centers and regional
banks, insurance companies, finance companies and financial intermediaries. We
have formal programs with Key Corporate Capital, Inc., Fleet Business Credit
Corporation, Centura Bank, Wachovia Bank & Trust, Norwest Equipment Finance,
Inc. and Synovus Leasing Company. These programs require that each transaction
is specifically approved and done solely at the lender's discretion.

During the nine-month period ended December 31, 1999, our lease related
non-recourse debt portfolio increased 241.6% to $179,102,322. This increase is
due to the acquisition of CLG, Inc., as well as increased on balance sheet debt
fundings on our existing lease portfolio.

On March 12, 1997, we established a $10,000,000 credit facility agreement with
Heller Financial, Inc., or Heller. Under the terms of the Heller facility, a
maximum amount of $10.0 million was available to borrow provided that each draw
was subject to the approval of Heller. On March 12, 1998, the formal commitment
from Heller to fund additional advances under the line was allowed to expire,
however, we are still transacting business as if the formal agreement terms are
in place. The primary purpose of the Heller facility was for the permanent
fixed-rate discounting of rents for commercial leases of information technology
assets with our middle-market customers. As of December 31, 1999, the balance on
this account was $3,148,520. Originally, each advance under the facility bore an
annual interest rate equal to the sum of the weekly average U.S. Treasury
Constant Maturities for a Treasury Note having approximately an equal term as
the weighted average term of the contracts subject to the advance, plus an index
ranging from 1.75% to 3.00%, depending on the amount of the advance and the
credit rating (if any) of the lessee. Thereafter, the annual interest rate was
fixed by Heller each month and adjusted each subsequent month. The Heller
facility contains a number of contractual covenants and is a limited recourse
facility, secured by a first-priority lien in the lease contracts and chattel
paper relating to each loan advance, the equipment under the lease contracts, a
10% cross-collateralized first loss guarantee, and all books, records and
proceeds. The Heller facility was made to ePlus Group, inc., formerly MLC Group,
and is guaranteed by us. The Heller facility is subject to their sole
discretion, and is further subject to our compliance with certain conditions and
procedures.

Through MLC/CLC, LLC, we have a joint venture agreement that has historically
provided the equity investment financing for certain of our transactions.
Firstar Equipment Finance Company, or Firstar Finance, formerly Cargill Leasing
Corporation, is an unaffiliated investor which owns 95% of MLC/CLC, LLC. Firstar
Finance's parent company, Firstar Corporation, is a $20 billion bank holding
company. This joint venture arrangement enables us to invest in a significantly
greater portfolio of business than our limited capital base would otherwise
allow. A significant portion of our revenue generated by the sale of leased
equipment is attributable to sales to MLC/CLC, LLC. See "--Results of
Operations." We have received notification of Firstar Finance's intent to
discontinue their investment in new lease transactions effective May 2000.

Our "Accounts payable--equipment" represents equipment costs that have been
placed on a lease schedule, but for which the we have not yet paid. The balance
of unpaid equipment cost can vary depending on vendor terms and the timing of
lease originations. As of December 31, 1999, we had $18,515,180 of unpaid
equipment cost, as compared to $18,049,059 at March 31, 1999.

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<PAGE> 31

Working capital financing in our leasing business is provided by a $65.0 million
committed line of credit which is a short-term, secured, recourse facility
provided through First Union National Bank, N.A. and which has syndicated the
facility to the following participants and in the following amounts: City
National Bank ($15.0 million); Summit Bank ($10.0 million); Bank Leumi USA
($10.0 million); and Key Bank ($10.0 million). This line of credit has been in
place since December 1998, was renewed for another one-year period on December
19, 1999, has full recourse to us, and is secured by a blanket lien against all
of our assets. In addition, we have entered into pledge agreements to pledge the
common stock of all of our wholly-owned subsidiaries. The interest rates charged
under the facility are LIBOR plus 1.5% or Prime minus .5%, depending on the term
of the borrowing. The facility expires on December 19, 2000. As of December 31,
1999, we had an outstanding balance of $29.5 million on the First Union
facility.

ePlus Technology of NC, inc., formerly MLC Network Solutions of North Carolina,
Inc., ePlus Technology of PA, inc., formerly Educational Computer Concepts, Inc.
and ePlus Technology, inc., formerly PC Plus, Inc., have separate credit sources
to finance their working capital requirements for inventories and accounts
receivable. Their traditional business as sellers of PCs and related network
equipment and software products is financed through agreements known as "floor
planning" financing where interest expense for the first thirty to forty days is
not charged to us but is paid for by the supplier/distributor. These floor plan
liabilities are recorded as accounts payable-trade as they are normally repaid
within the thirty- to forty-day time frame and represent an assigned accounts
payable originally generated with the supplier/distributor. If the thirty- to
forty-day obligation is not paid timely, interest is then assessed at stated
contractual rates.

As of December 31, 1999, the floor planning agreements are as follows:

<TABLE>
<CAPTION>
----------------------------------------------------------
BALANCE AT
DECEMBER 31,
ENTITY FLOOR PLAN SUPPLIER CREDIT LINE 1999
------ ------------------------------ ----------- ------------
<S> <C> <C> <C>
ePlus Technology of NC, inc. Finova Capital Corporation $ 4,000,000 $1,992,631
IBM Credit Corporation 250,000 --
ePlus Technology of PA, inc. Finova Capital Corporation 7,000,000 4,579,513
IBM Credit Corporation 750,000 48,199
ePlus Technology, inc. BankAmerica Credit Corporation 15,000,000 5,401,064
</TABLE>

All of the above credit facility limits have been increased during the year to
provide the credit capacity to increase sales on account. ePlus Technology of
PA, inc. also has a line of credit in place with PNC Bank, N.A. that expires on
July 31, 2000. This asset based line has a maximum credit limit of $2,500,000
and interest charges are set at the bank's prime rate. There was no outstanding
balance on this line of credit at December 31, 1999. The credit facilities
provided by Finova Capital Corporation and PNC Banks, N.A., are required to be
guaranteed by us.

Availability under the revolving lines of credit may be limited by the asset
value of equipment we purchase and may be further limited by certain covenants
and terms and conditions of the facilities.

The successful implementation of our electronic commerce business strategy will
require a significant amount of cash beyond what we currently have available or
are likely to generate from our current operations. In addition, we may
selectively acquire other companies that have attractive customer relationships
and skilled sales forces. We may also acquire technology companies to expand and
enhance the platform of ePlusSuite to provide additional functionality and
value-added services. As a result, we expect to require additional financing to
fund our strategy implementation and potential future acquisitions, which may
include additional debt and equity financing.

POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

Our future quarterly operating results and the market price of our stock may
fluctuate. In the event our revenues or earnings for any quarter are less than
the level expected by securities analysts or the market in general, such
shortfall could have an immediate and significant adverse impact on the market
price of our 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 our major customers or vendors.

Our quarterly results of operations are susceptible to fluctuations for a number
of reasons, including, without limitation, our entry into the electronic
commerce market, any reduction of expected residual values related to the
equipment under our leases, timing of specific transactions and other factors.
See "Risk Factors" beginning on page 6. Quarterly operating results could also
fluctuate as a result of our sale of equipment in our lease portfolio, at the
expiration of a lease term or prior to such

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<PAGE> 32

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.

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

INFLATION

We do not believe that inflation has had a material impact on our results of
operations during the first three quarters of fiscal 2000.

YEAR 2000 ISSUE

We have substantially completed the Year 2000 compliance modification to our
information-technology and non-information technology based applications. To
date, we have not experienced any disruptions in any aspect of our operations.
We continue to monitor our infrastructure, the products we offer, and our
critical business partners to ensure continued success. We do not anticipate any
significant future costs related to maintaining our Year 2000 compliance.
------------------------

Certain statements contained in this prospectus 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 those forward-looking statements. Our
ability to consummate anticipated transactions and achieve anticipated events or
results is subject to certain risks and uncertainties. See "Risk Factors"
beginning on page 6.

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<PAGE> 33

BUSINESS

OVERVIEW AND BACKGROUND OF THE COMPANY

The ePlusSuite solution consists of four modules which can be operated
independently or integrated to provide a full suite of services:

- Procure(+) is an electronic procurement and content management solution
which allows customers to automate their internal workflow procedures for
the procurement of operating resources.

- Manage(+) is an electronic infrastructure management solution which
provides asset management through an asset repository and tracking
database.

- Finance(+) facilitates automated financing solutions for assets procured
through Procure(+) or Manage(+).

- Service(+) provides implementation and customization services,
fulfillment and asset disposition.

We have been in the business of selling, leasing, financing, and managing
information technology and other assets for nearly ten years and currently
derive most of our revenues from such activities. The introduction of ePlusSuite
reflects our transition to a business-to-business electronic commerce solutions
provider from our historical sales and financing business. Over time, we plan to
use our ePlusSuite platform to facilitate sales and financing transactions
between our customers and third parties rather than originate these transactions
as principal. As a result, we expect our electronic commerce revenues to
substantially increase and represent a greater portion of our total revenues.

INDUSTRY BACKGROUND

Growth of the Internet as a Platform for Efficient Business-to-Business
Electronic Commerce.

The Internet is rapidly becoming the preferred channel for business-to-business
transactions. It has fundamentally changed how companies of all sizes
communicate and share information. In the intensely competitive global business
environment, businesses have increasingly adopted the Internet to streamline
their business processes, lower costs and make their employees more productive.

Traditional Areas of Business Process Automation

Businesses have traditionally attempted to reduce costs through the automation
of internal processes. In particular, these efforts focused on the procurement
of direct goods such as raw materials and unfinished products. Similar efforts
have been made to improve the procurement process for operating resources, which
include information technology and telecommunications equipment, office
equipment and supplies, travel and entertainment, professional services and
other repeat purchase items. The purchase and sale of these goods comprise a
large portion of business-to-business transactions.

Many organizations conduct procurement and management of operating resources
through costly paper-based processes that require actions by many individuals
both inside and outside the organization. We estimate that replacing a
traditional paper-based procurement system with an Internet-based system can
reduce the cost of processing a purchase request by at least two-thirds.
Traditional processes also do not generally feature automated spending and
procurement controls and, as a result, may fail to direct spending to preferred
vendors and may permit spending on unapproved goods and services.

Many large companies have installed enterprise resource planning and supply
chain automation systems and software to increase their procurement efficiency
for operating resources. These systems are often complex and are designed to be
used by a relatively small number of sophisticated users. They may not provide
the necessary interactivity with the vendor. In addition, a variety of
point-to-point solutions such as electronic data interchange have been
developed. However, the expense and complexity associated with licensing,
implementing and managing these solutions can make them unsuitable for all but
the largest organizations.

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<PAGE> 34

Certain providers of business-to-business electronic commerce solutions have
attempted to link purchasers and vendors of operating resources and services
into trading communities over the Internet. Their solutions are software-based
and enable development of marketplaces to operate among participants with
similar systems and primarily cater to larger firms.

Opportunity for Business-to-Business Electronic Commerce and Supply Chain
Management Solutions

We believe that an opportunity exists to provide Internet-based supply chain
management solutions which are remotely-hosted. Our end-to-end business process
solutions integrate the procurement and management of assets with financing,
fulfillment and other asset services. These solutions streamline processes
within an organization and provide integrated access to third-party content,
commerce and services. Our comprehensive approach also facilitates relationships
with preferred vendors.

Our target customers are primarily middle-market companies, with revenues
between $25 million and $1 billion per year. We believe there are over 60,000
customers in our target market.

Our target customer has one or more of the following business characteristics
that we believe make ePlusSuite a preferred solution:

- seeks a lower cost alternative to enterprise software solutions;

- will benefit from the cost savings and efficiency gains that can be
obtained from an Internet-based procurement solution;

- prefers to retain the flexibility to negotiate prices with designated
vendors or buying exchanges;

- wants to lower its total cost of ownership of information technology
assets by standardizing configurations and proactively managing its fixed
asset base over the life of the asset; and

- seeks a comprehensive solution for its entire asset management supply
chain.

THE ePLUS SOLUTION

We provide an integrated suite of Internet-based business-to-business supply
chain management solutions designed to improve productivity and enhance
operating efficiency on a company-wide basis. Our ePlusSuite currently includes
Internet-based applications for the procurement and management of operating
resources that can be integrated with financing and other asset services. In
addition, our solution uses the Internet as a gateway between employees and
third-party content, commerce and service providers. We believe our solution
makes our customers' companies more efficient, while providing better
information to management.

ePlusSuite allows customers to automate and customize their existing business
rules and procurement processes using an Internet-based workflow tool. We offer
a remotely-hosted solution with a transaction-based fee structure that reduces
up-front costs for customers, facilitates quick adoption, and eliminates the
need for customers to maintain and update software. In addition, ePlusSuite
integrates effectively with existing legacy systems. We believe our solution can
be implemented faster with less customer training than many competing
software-based solutions.

STRATEGY

Our goal is to become a leading provider of Internet-based supply chain
management solutions. The key elements of our strategy include the following:

Convert our existing customer base to become users of ePlusSuite

We have an existing client base of approximately 1,500 customers. We believe our
years of experience in developing supply chain management solutions, including
financing, asset management and information technology sales and service, give
us significant advantages over our competitors. Consequently, we believe we are
well-positioned to offer a comprehensive Internet-based supply chain management
solution tailored to meet our customers' specific needs.

We introduced ePlusSuite on November 2, 1999, and, as of March 2, 2000, we had
implemented or are in the process of implementing the EPlusSuite solution with
25 customers, 9 of which were our existing customers.

Expand our sales force and marketing activities

As of March 2, 2000 we had approximately 68 salespersons in 16 locations, and we
plan to substantially increase the number of salespersons and locations in the
next 12 months. We intend to expand our presence in locations that have a high

30
<PAGE> 35

concentration of fast-growing middle market companies. In addition, we plan to
add sales staff to some of our existing offices. We will seek to hire
experienced personnel with established customer relationships and with
backgrounds in hardware and software sales, telecommunications sales, and supply
chain management. We also plan to create a national brand to increase market
awareness of ePlusSuite through advertising and public relations campaigns. We
may also selectively acquire companies that have attractive customer
relationships and skilled sales forces. For example, as a result of our recent
acquisition of CLG, Inc. we added 448 additional customers.

Expand the functionality of our Internet-based solutions

We intend to continue to modify ePlusSuite to expand its functionality to serve
customer needs. In addition, we intend to use the flexibility of our platform to
offer additional products and services through ePlusSuite. For example, we
believe that EPlusSuite can be expanded to include outsourcing of human
resources services and other non-core activities. As part of this strategy, we
may also acquire technology companies to expand and enhance the platform of
ePlusSuite to provide additional functionality and value added services.

Expand our strategic relationships to market and enhance ePlusSuite

We intend to expand and develop strategic relationships to accelerate market
acceptance of our electronic commerce business solutions. We believe these
strategic relationships will allow us to access a wider customer base and expand
the functionality of ePlusSuite. We recently entered into joint marketing
arrangements with finance subsidiaries of Chase Manhattan, Inc. and Wachovia
Corporation that enable them to market ePlusSuite to their customers. We have
also entered into a marketing and distribution agreement with PSINet, Inc. which
will enable it to market ePlusSuite to its customers. We believe these marketing
relationships can be a substantial source of growth.

Increase our role as intermediary in sales and financing transactions

Over time, we plan to use our ePlusSuite platform to facilitate sales and
financing transactions between our customers and third parties, rather than
originate these transactions as principal. We currently buy and sell information
technology assets and provide financing directly to our customers. We plan to
use our ePlusSuite platform to facilitate sales and financing transactions
between our customers and third parties rather than originate these transactions
as principal. We believe we can leverage our financing expertise and
relationships to arrange programs with specific institutions to provide
financing directly to our electronic commerce customers.

DESCRIPTION OF ePLUSSUITE

ePlusSuite consists of four modules, Procure(+), Manage(+), Finance(+) and
Service(+). These components are fully integrated in that each component links
with and shares information with the other components. Procure(+) and Manage(+)
are remotely-hosted electronic commerce solutions, and Finance(+) and Service(+)
are services provided by us.

Procure(+). Procure(+) offers Internet-based procurement capabilities that
enable companies to reduce their purchasing costs while increasing their overall
supply chain efficiency. Cost reductions are achieved through user-friendly
application functionality designed to reduce off-contract, or unauthorized
purchases, automate unnecessary manual processes, improve leverage with
suppliers and provide links to a sophisticated asset information repository,
Manage(+). Procure(+) is a remotely-hosted solution with no applets or
executables to download. Its core technology is based on the Microsoft SQL
server and it uses XML and cXML software technology to permit scalability,
flexibility and open architecture standards.

Procure(+) provides the following features and functions for the customer:

- Electronic Catalogs--combines multiple vendor catalogs including item
pricing and availability information which can be updated as required.
Catalog content can be viewed in customized formats and can include
detailed product information.

- Workflow and Business Rules--graphically displays complex business rules
to build the internal workflow process to mirror the customer's
organization. Multiple business rules can be used, and changes can be
made by the customer or EPlus. Approval thresholds and routing rules can
be set by dollar amount, quantity, asset type or other criteria. No
coding or expensive programming is required.

- Order Tracking--provides detailed information online about every order,
including date and time stamps from requestors, approvers, purchasers,
vendors and shippers enabling customers to track orders and to create
detailed order audit trails.

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<PAGE> 36

- Order Information--contains multiple data fields which can be easily
customized to provide complete information to the customer, such as
accounting codes, budget costs, cost center information, notes, and
shipping and billing information.

The key benefits of Procure(+) include:

- easy to use, Internet-based interface that requires limited training;

- easy implementation without the assistance of consultants, no upfront
license fees and no ongoing maintenance or upgrade costs;

- integration of multiple vendor catalogs and advanced search, filtering
and viewing capabilities that allow the customer to control views by user
groups;

- an easily configured workflow module that automates and controls each
customer's existing business processes for requisition or order routing,
approval and preparation;

- order status reporting throughout the requisition process as well as
real-time connections to suppliers for pricing and availability and other
critical information; and

- controls unauthorized purchasing and enables usage of preferred vendors
for volume discounts.

Manage(+). Manage(+) offers Internet-based asset management capabilities that
are designed to provide customers with comprehensive asset information to enable
them to proactively manage their fixed assets and lower the total cost of
ownership of the assets. Assets procured using Procure(+) or from other sources
populate the Manage(+) database to provide a seamless link. Manage(+) is a
remotely-hosted solution with no applets or executables to download. Its core
technology is an Oracle relational database system.

Manage(+) provides the following information to the customer:

- Asset Information--contains descriptive information on each asset
including serial number, tracking number, purchase order number,
manufacturer number, model number, vendor, category, billing code, order
date, shipping date, delivery date, install date, equipment status and,
if applicable, lease number, lease schedule, lease start date, lease end
date, lease term, remaining term and information on any options ordered
with the equipment.

- Location Information--provides asset location information including an
address, building or room number, or other information required by the
customer.

- Cost Center Information--invoices assets to cost center or budget
categories. One asset can be billed to multiple cost centers and all
information will be listed under that asset record.

- Maintenance Information--maintains a history of the asset. As maintenance
and warranty repairs are made, information may be updated. The
information includes the date, a description of the service performed and
the cost.

- Invoice Information--maintains information from the original invoice on
the asset for warranty and tracking purposes.

- Financial Information--tracks all financial information on the asset,
including purchase price or lease cost, software licensing costs and
warranty and maintenance information.

- Customized Information--user specific information can also be maintained.

The key benefits of Manage(+) include:

- an easy to use Internet-based interface that requires limited training;

- easy implementation without the assistance of consultants and entails no
upfront license fee or ongoing maintenance or upgrade costs;

- providing the information necessary to proactively manage the fixed asset
base, including property and sales tax calculations, upgrade and
replacement planning, technological obsolescence and total cost of
ownership calculations;

- automating invoice reconciliation to reduce errors and track vendor
performance, including evaluating scheduled delivery versus actual
delivery performance;

- management of warranty and maintenance information to reduce redundant
maintenance fees and charges on equipment no longer in use;

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<PAGE> 37

- tracking of all pertinent financial, contractual, location, cost center,
configuration, upgrade and usage information for each asset enabling
customers to calculate the return of their investment by model, vendor,
department or other factors; and

- reducing overruns and assists with application rollouts and the annual
budgeting process.

Finance(+). Finance(+) is a service that facilitates the financing of purchases
on terms previously negotiated by a customer with a financing provider while
automating the accumulation of data to assist in the financing process.

Finance(+) allows customers to order equipment when desired and aggregate an
unlimited number of orders onto one or more financing transactions at the end of
a pre-determined order period (usually one to three months). The transactions
can then be invoiced by location, division, or business unit if so desired by
the customer. Finance(+) helps a customer simplify the process thereby, lowering
costs and increasing productivity.

We can assist customers in structuring loans, leases, sales/leasebacks,
tax-exempt financing, vendor programs, private label programs, off-balance sheet
leases and federal government financing in order to meet their requirements.

Service(+) is our technology business unit which provides implementation and
customization services for the rapid implementation of ePlusSuite, as well as
fulfillment and asset disposition services. Service(+) allows customers to
obtain high-quality services which can be seamlessly linked with other
components of our ePlusSuite solution. Assets which are procured through
Procure(+) can be configured, imaged, staged, and installed by us on the
customer site. Our services also assist our customers in managing their existing
information technology asset base, including maintenance, reverse logistics,
engineering, and other technology services.

ePLUSSUITE CUSTOMERS

We have approximately 1,500 customers in all of our businesses. We formally
introduced our ePlusSuite solution on November 2, 1999, and, as of March 2,
2000, we had fully-implemented ePlusSuite with the following customers:

<TABLE>
<S> <C>
Aatlas Commerce, LLC National Railroad Passenger Corporation
BlueStone Software, Inc. (AMTRAK)
Dain Rausher Corporation OneSoft Corporation
Forte Systems, LLC Pharmaceutical Product Development, Inc
Logicon, Inc. (a subsidiary of Northrop Proxicom, Inc.
Grumman Corporation) SAGA SOFTWARE, Inc.
Martin Marietta Materials, Inc. The Ellerbe Becket Company
MicroStrategy, Incorporated WebMethods, Inc.
</TABLE>

As of March 2, 2000, we were implementing ePlusSuite with the following
customers:

<TABLE>
<S> <C>
Catalytica Pharmaceuticals, Inc. MBM Corporation
Christian Broadcasting Network, Inc. PSINet, Inc.
Corning Incorporated Promotions.com inc.
Interpath Communications, Inc. Serviceco LLC (dba Road Runner)
Lincoln National Management Corporation Robroy Industries, Inc.
(a subsidiary of Lincoln National Womble Carlyle Sandridge & Rice, PLLC
Corporation)
</TABLE>

TECHNOLOGY

General. Our Procure(+) and Manage(+) applications are fully standards-based,
designed for the Internet and built upon an underlying architecture that is
based on Microsoft's and Sybases' distributed Internet application frameworks.
These Internet-based frameworks provide access security, load balancing,
resource pooling, message queuing, distributed transaction processing and
reusable components and services. We use XML software to enhance the
business-to-business transfer of data and documents between multiple systems.
Our development strategy relies on object-oriented programming and stresses
modularity, inheritance and reuse when feasible.

Our applications are designed to be scalable, due to our multi-tier architecture
employing thin client, multi-threaded application servers and relational
databases. We use standard software programming languages, packages and
protocols, including Visual Basic, PowerBuilder, PowerDynamo, JavaScript, ASP,
C++, HTTP, HOP, DCOM, CORBA, Native and OBDC Data constructs. Our applications
are provided to our customers over any standard Internet browser, and there are
no applets or executables to download.
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We use a component-based application infrastructure composed of
readily-configurable business rules, a workflow engine, advanced data management
capabilities and an electronic cataloging system. Each of these core elements
plays a crucial role in deploying enterprise-wide solutions that can capture a
customer's unique policies and processes and manage key business functions.

Business Rules. Our business rules engine allows Procure(+) to be configured so
that our customers can effectively enforce their requisition approval policies
while providing flexibility so that the business rules can be edited and
modified as our customer's policies change. Users of the system are presented
with appropriate guidance to facilitate adherence to corporate policies. The
business rules dramatically reduce reworking of procedures, track and resolve
policy exceptions online and eliminate re-keying of data into back-end systems.
The business rules permit management by exception, in which items requiring
managerial attention are automatically highlighted.

Workflow Engine. Our workflow engine permits that information flows through the
organization in a timely, secure and efficient manner. For example, in addition
to incorporating policy-based business rules, it incorporates time-based
standards to reroute purchase requisitions if the original recipient does not
respond within the allocated performance timeframe. Robust enterprise
applications require database-driven workflow, with e-mail-based messaging, to
provide increased security and reliability, data and transaction integrity,
real-time availability, optimization for high performance and usage reporting.
Our application also provides e-mail notification to users of the status of a
procedure or of events requiring attention, alteration and action, such as
notifying the creator of a purchase requisition of its location in the
purchasing cycle or notifying a manager of a requisition requiring attention.

Content Management. Our electronic catalog allows multiple vendor information
to be linked to customized customer catalogs. Information can be updated when
required by the customer. Our electronic cataloging system accepts XML, EDI and
other industry data standards for information transfer.

Asset Management. Manage(+) is an Oracle-based data management system that is
designed to be scalable and can be easily customized to provide
customer-specific fields and data elements. New functionality can also be
assigned to existing controls, or new controls, with little application
modification and minimal programming.

ePlusSuite can integrate with enterprise systems such as ERP systems, financial
management systems, human resource systems (for user information and
organizational structure), project accounting systems and corporate credit card
systems. These interfaces allow for the automatic exchange of data between
ePlusSuite and other enterprise systems and for the downloading of data managed
by these enterprise systems into ePlusSuite. These integration processes are
scheduled according to the needs of our customer's information services and
finance departments.

Data Accuracy. Data input from internal departments is quality controlled
within the entering department before it is released for use to other functions.
Customer input is also quality controlled before it is released for use to other
functions.

System Security. Our security design provides multiple layers of
security--ranging from the Portal level (initial user contact occurs) to the
database level where users and roles are authenticated to the socket/protocol
layer. On the browser side (customer access), our software makes use of SSL
connections and 128-bit encryption technology. We currently use Check Point
Security software to protect our internal network systems from unauthorized
access. Check Point Firewall-1 is a comprehensive, security suite providing:
access control, content security, authentication, network address translation,
auditing and state table synchronization.

RESEARCH AND DEVELOPMENT

To date, the majority of our software development has been outsourced to
third-party software companies. We have obtained perpetual license rights and
object code from these third-party software companies. Subject to certain
exceptions, we generally retain the object code and intellectual property rights
of the customized software. To accelerate the development of our EPlusSuite, we
are building an internal software development team. We have recently hired four
software developers, two of whom previously worked for the companies which
licensed the software to us. In addition, since December 1998, we have retained
a consultant who has worked full time in the capacity of Chief Technology
Officer.

To successfully implement our business strategy, we have to provide hosted
software functionality and related services that meet the demands of our
customers and prospective customers. We expect that competitive factors will
create a continuing need for us to improve and add to our ePlusSuite. The
addition of new products and services will also require that we continue to
improve the technology underlying our applications. We intend to maintain our
competitive advantage by investing significantly greater resources in our
internal development efforts, including adding a significant number of in-house
software

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<PAGE> 39

engineers, and executives. In addition, to complement our in-house development
efforts, we expect significant future expenditures on software licenses and
third-party software development and consulting costs.

SALES AND MARKETING

We focus our marketing efforts on achieving brand recognition, market awareness,
lead generation, and converting our existing customer base to our ePlusSuite
solution. The target market for our ePlusSuite is primarily middle market
companies with revenues between $25 million and $1 billion. We believe there are
over 60,000 customers in our target market. Our sales representatives are paid
on commission, with specific incentives for generating new ePlusSuite customers
and revenues.

We typically market to the senior financial officer or the senior information
officer in an organization. To date, the majority of our customers have been
generated from our direct sales. As part of our strategy to grow our electronic
commerce business, we intend to hire additional sales personnel and open new
sales locations. In the future, we plan to conduct public relations campaigns to
create brand and market awareness of product benefits, developments and major
initiatives. We anticipate that these will include advertising in business and
financial publications, Internet advertising, trade shows, seminars, and direct
mail. We also intend to develop strategic relationships to expand market
acceptance of our electronic commerce business solutions. We recently entered
into joint marketing arrangements with the finance subsidiaries of Chase
Manhattan, Inc. and Wachovia Corporation. We believe these strategic
relationships can be a substantial source of growth.

Our sales force is organized under three regional directors located in our
headquarters in Herndon, Virginia and our Pottstown, Pennsylvania and Raleigh,
North Carolina regional operating centers. We have sales locations in: Herndon,
Virginia; Dallas, Texas; Sacramento and San Diego, California; Greenville,
Wilmington and Raleigh, North Carolina; Pittsburgh, Pottstown and West Chester,
Pennsylvania; Golden, Colorado; and Baltimore, Maryland. As of March 2, 2000,
our sales organization included 68 direct sales representatives and additional
sales support personnel.

IMPLEMENTATION AND CUSTOMER SERVICE

We use a project management approach to the implementation of ePlusSuite with
each new ePlusSuite customer. Our multidisciplinary team consists of an
ePlusSuite implementation specialist, who is responsible for the customer audit
and implementation of the solution, a customer relationship manager, who leads
the customer's long-term support team, and the appropriate Service(+) staff
members to provide technology services, if required, to the customer.

Our implementation of ePlusSuite is a multi-step process that requires, on
average, approximately four weeks and involves the following steps:

- We conduct an extensive operational audit to understand the customer's
business processes across multiple departments, existing ERP and
outsourced applications, future plans, procurement approval processes and
business rules and internal control structure.

- We design a customized procurement, management and service program to fit
the customer's organizational needs.

- We implement an Internet-based supply chain management system including:
customer workflow processes and business rules using our graphical
route-builder, custom catalogs linking to chosen vendors, including
ePlus, custom reporting and querying, and data capture parameters for the
Manage(+) asset repository.

- We beta test the site and train the customer's personnel.

We provide ePlusSuite as a service solution to our customers, and the ongoing
support of the customer and our commitment to the highest possible customer
satisfaction is fundamental to our strategy. We use a team approach to providing
customer care and assign each customer to a specific team so that they are able
to continue to interact with the same ePlus personnel who have experience and
expertise with the customer's specific business processes and requirements.

INTELLECTUAL PROPERTY RIGHTS

Our success depends in part upon proprietary business methodologies, and
technologies which we have licensed and modified. We rely on a combination of
copyright, service mark and trade secret protection, confidentiality and
nondisclosure agreements and licensing arrangements to establish and protect
intellectual property rights. We seek to protect our software, documentation and
other written materials under trade secret and copyright laws, which afford only
limited protection.

We currently have no patents, although we have filed applications in the U.S.
Patent and Trademark Office to register the service marks ePlus, ePlusSuite,
Procure(+), Manage(+), Finance(+), Service(+), EPLUS LEASING, EPLUS ONLINE and
EPLUS

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<PAGE> 40

ADVANTAGE. The applications for EPLUS LEASING, EPLUS ONLINE and EPLUS ADVANTAGE
are currently based on intent-to-use. The grant of registrations for these
intent-to-use marks is conditioned upon each mark being used in commerce,
assuming the mark is found to be allowable. We also may file provisional patent
applications with the U.S. Patent and Trademark Office relating to various
features and processes embodied in our applications. A provisional patent
application is a type of application under which a patent will not be issued,
but which provides a priority date for a regular patent application that is
filed within a one year period following the filing of the provisional patent
application. We cannot assure you that any regular patents will be filed based
on our provisional applications, or that any patents will issue on our pending
provisional applications from any such regular applications. Further, we cannot
provide any assurance that any patents, if issued, will prevent the development
of competitive products or that our patents will not be successfully challenged
by others or invalidated through administrative process or litigation.

We have entered into three software licensing agreements in connection with the
development of ePlusSuite. Each of these agreements grants us a perpetual
license to the object code or gives us the right to obtain such a license upon
payment of an additional fee. Each of these licenses is nonexclusive. The
agreements permit us to modify the software source code in conjunction with
normal use or upon payment of an additional fee. Generally, the agreements
provide that any software developed to interface with licensed software is our
property if such work is based on our proprietary information. The licensing
agreements provide the payment of initial and on going fees. In addition,
certain of our licensing agreements provide for additional fees based on
transaction volume. If we commit a material breach of any one of the agreements,
it may be terminated. These agreements do not provide any indemnification for
intellectual property infringement.

Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy aspects of our products or to obtain and use information that we
regard as proprietary. Policing unauthorized use of our products is difficult,
and while we are unable to determine the extent to which piracy of our software
products exists, software piracy can be expected to be a persistent problem. Our
means of protecting our proprietary rights may not be adequate and our
competitors may independently develop similar technology, duplicate our products
or design around our proprietary intellectual property.

FINANCING AND SALES ACTIVITIES

We have been in the business of selling, leasing, financing, and managing
information technology and other assets for nearly ten years and currently
derive most of our revenues from such activities. Over time, we plan to use our
ePlusSuite platform to facilitate sales and financing transactions between our
customers and third parties rather than originate these transactions as
principal. We believe we can develop formal contractual arrangements with our
current as well as new financing sources to provide equipment financing and
leasing for our ePlusSuite customers.

Leasing and Financing. Our leasing and financing transactions generally fall
into three categories, direct financing, sales-type or operating leases. Direct
financing and sales-type leases transfer substantially all of the benefits and
risks of equipment ownership to the customer. Operating leases consist of all
other leases that do not meet the criteria to be direct financing or sales-type
leases. Our lease transactions include true leases and installment sales or
conditional sales contracts with corporations, not-for-profit entities and
municipal and federal government contracts. Substantially all of our lease
transactions are net leases with a specified non-cancelable lease term. These
non-cancelable leases have a provision which requires the lessee to make all
lease payments regardless of any lessee dissatisfaction with its equipment. A
net lease requires the lessee to make the full lease payment and pay any other
expenses associated with the use of equipment, such as maintenance, casualty and
liability insurance, sales or use taxes and personal property taxes.

In anticipation of the expiration of the initial term of a lease, we initiate
the remarketing process for the related equipment. Our goal is to maximize
revenues on the remarketing effort by either: (1) releasing or selling the
equipment to the initial lessee; (2) renting the equipment to the initial lessee
on a month-to-month basis; (3) selling or leasing the equipment to a different
customer; or (4) selling the equipment to equipment brokers or dealers. The
remarketing process is intended to enable us to recover or exceed the residual
value of the leased equipment. Any amounts received over the estimated residual
value less any commission expenses becomes profit margin to us and can
significantly impact the degree of profitability of a lease transaction.

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<PAGE> 41

Our top ten commercial financing customers for the nine months ended December
31, 1999 were:

<TABLE>
<S> <C>
The American National Red Cross SAGA SOFTWARE, Inc.
BlueCross BlueShield of North Carolina Sandia Corporation
Burlington Industries, Inc. Sprint Communications Company, L.P.
Checkfree Corporation and its affiliates
Georgetown University U.S. Office Products Company
Hooper Holmes, Inc.
</TABLE>

We aggressively manage the remarketing process of our leases to maximize the
residual values of our leased equipment portfolio. To date, we have realized a
premium over our original booked residual assumption. The majority of these
gains are attributable to early termination fees as a direct result of our
remarketing strategy.

Sales. We have been providing technology sales and services since 1997. We are
an authorized reseller or have the right to resell products and services from
over 150 manufacturers, distributors, resellers, content management solution
providers and sourcing organizations. Our largest vendor relationships include
Ingram Micro, Inc., Dell Computer Corporation, MicroSoft Corporation, and Sun
Microsystems, Inc. We expect the number of vendor relationships to grow
significantly as we expand Procure(+) beyond its traditional information
technology and telecommunications products. Our flexible platform and
customizable catalogs facilitate the addition of new vendors with little
incremental effort. Our value added reseller product transactions have varying
sales on account terms from net 45 days to collect on delivery, depending on the
customer's credit and payment term requirements.

Our top ten sales customers for the nine months ended December 31, 1999 were:

<TABLE>
<S> <C>
America Online, Inc. National Association of Securities Dealers,
AstraZeneca LP Inc.
Corning, Incorporated Pharmaceutical Products & Development, Inc.
DC Public Schools PSINet Inc.
Geico Corporation Serviceco LLC (dba Road Runner)
UUNet Technologies Incorporated
</TABLE>

Financing and Bank Relationships. We have a number of bank and finance company
relationships which we use to provide working capital for all of our businesses
and long term financing for our lease financing businesses. Our finance
department is responsible for maintaining and developing relationships with a
diversified pool of regional commercial banks, money-center banks, finance
companies, insurance companies and financial intermediaries with varying terms
and conditions.

Working capital financing in our leasing business is provided by a $65 million
committed line of credit provided through First Union National Bank, N.A. This
line of credit has been in place since December 1998, was renewed for another
one-year period on December 19, 1999, has full recourse to the company, and is
secured by a blanket lien against all of our assets. In addition, we have
entered into pledge agreements to pledge the common stock of each of our
wholly-owned subsidiaries. The interest rates charged under this facility are
LIBOR plus 1.5% or Prime minus .5%, depending on the term of the borrowing. The
facility expires on December 19, 2000.

In general, we use this 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 line is collateral based and our ability to borrow is limited to
the amount of eligible collateral at any given time. Collateral is eligible
under the line for up to a year. However, we generally finance the underlying
contracts on a non-recourse basis as soon as practical.

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 a default under a lease by the lessee, is
against the lessee and the specific equipment under lease.

Non-recourse debt and debt that is partially recourse is provided by various
lending institutions. We have formal programs with Heller Financial, Inc., Key
Corporate Capital, Inc., and Fleet Business Credit Corporation. These programs
require that each transaction is specifically approved and done solely at the
lender's discretion.
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<PAGE> 42

We sell our leases to a number of financial institutions. In particular, through
MLC/CLC LLC, we have a formal joint venture arrangement with an institutional
investor, that purchases a substantial portion of our total equipment under
lease. Firstar Equipment Finance, a subsidiary of Firstar Corporation, a bank
holding company, is an unaffiliated investor that owns 95% of MLC/CLC LLC.
MLC/CLC LLC represented approximately $81.1 million of our leased equipment
sales of $84.4 million or 96.1% for the year ended March 31, 1999. It
represented approximately $17.0 million of our leased equipment sales of $44.9
million or 37.8% for the nine months ended December 31, 1999. We have received
notice that Firstar Equipment Finance Corporation intends to discontinue its
investment in new lease acquisitions effective May 2000.

When we sell a lease, we generally retain little or no residual risk, and we
usually preserve 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 obtain working capital for the financing of accounts receivables and
inventory in our technology sales subsidiaries from various floor planning
agreements in place between the subsidiaries with BankAmerica Credit ($15
million), Finova Capital Corporation ($11.0 million), IBM Credit Corporation
($750,000), and PNC Banks, N.A. ($2.5 million). These facilities are fully
recourse to our subsidiary companies and have various levels of recourse to us.
Interest charges under the floor planning facilities are paid by the
manufacturers of the products through the distributor for up to 40 days after
the sale, and we are responsible for interest charges thereafter.

Risk Management and Process Controls. It is our goal to minimize our on-balance
sheet financial asset risk. To accomplish this goal we use and maintain
conservative underwriting policies and disciplined credit approval processes. We
also have strong internal control processes, including contract origination and
management, cash management, servicing, collections, remarketing and accounting.
Whenever possible, we use non-recourse financing for which we try to obtain
lender commitments before asset origination. We have over 35 non-recourse
financing sources that we use regularly, including GE Capital Corporation, Key
Corporate Capital, Inc., Fleet Business Credit Corporation, Citizens Banking
Corporation and BancOne Leasing Corporation.

Whenever possible and desirable we sell assets, including the residual portion
of leases, to third-parties rather than maintaining them on our balance sheet.
We try to obtain commitments for these asset sales before asset origination in a
financing transaction. We regularly sell assets to GE Capital Corporation,
Firstar Equipment Finance Company, Fleet Business Credit Corporation, Bombardier
Capital, Inc. and John Hancock Leasing Corp., among others. We also use agency
purchase orders to procure equipment as an agent, not a principal, and otherwise
take measures to minimize our inventory. Additionally, we use match funding to
reduce interest rate risk and issue proposals that adjust for material adverse
interest rate movements as well as material adverse changes of the customer.

We have an executive management review process and other internal controls in
place to protect against entering into lease transactions that may have
undesirable financial terms or unacceptable levels of risk. Our leases and sales
contracts are reviewed by senior management for pricing, structure,
documentation and credit quality. Due in part to our strategy of focusing on a
few equipment categories, we have extensive product knowledge, historical
re-marketing information and experience on the products we lease, sell and
service. We rely on our experience in setting and adjusting our sale prices,
lease rate factors and the residual values.

Default and Loss Experience. During the first nine months of this fiscal year we
reserved for $385,000 in credit losses and incurred actual credit losses of
$72,473. During the fiscal year ended March 31, 1999, we reserved for $810,565
in credit losses and incurred actual credit losses of $12,452. Until the fiscal
year ended March 31, 1998, when we incurred a $17,350 credit loss, we had not
taken any write-offs due to credit losses with respect to lease transactions
since our inception.

During the quarter ended December 31, 1999, a customer of CLG, Inc., which we
recently acquired, filed for voluntary bankruptcy protection. During our due
diligence process prior to the acquisition, we had identified the customer,
Tultex, as well as several other potential problem credits, and we required
Centura Bank, the seller of CLG, Inc., to provide financing on a non-recourse
basis for a portfolio of identified bad credit customers. The interest costs and
principal for this non-recourse debt is paid solely from amounts collected from
customers, and the only costs to us are the costs of collection and managing the
accounts. Therefore, should these accounts need to be written-off, there would
be a corresponding write-off of the underlying non-recourse debt and there would
be no loss of income to us. The book value of Tultex is less than $52,000, and
the total non-recourse debt associated with these identified potential bad
credits is approximately $1,608,000.

During the fiscal year ended March 31, 1999, two customers filed for voluntary
bankruptcy protection. The largest was Allegheny Health, Education & Research
Foundation, or AHERF, which was a Pittsburgh based not-for-profit hospital
entity. As of December 31, 1999, our net book value of leases to AHERF was
approximately $415,000 and receivable balance was approximately $478,000. We
will probably sustain a loss, and have accordingly provided for such loss in the
statement of earnings for the year ended March 31, 1999. The undetermined status
of our claims in the bankruptcy court and amount and
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<PAGE> 43

timing of such loss cannot be accurately estimated at this time due to the size
and nature of this bankruptcy. During the quarter ended December 31, 1998, PHP
Healthcare, Inc. a lessee of ours, was placed in receivership by the New Jersey
Insurance Commission which led to them filing for voluntary bankruptcy
protection. As of December 31, 1999, we have a net book value of assets totaling
approximately $421,000 at risk with this lessee. We believe that as of December
31, 1999, our reserves are adequate to provide for the potential losses
resulting from these customers.

COMPETITION

The market for our electronic commerce products is intensely competitive,
subject to rapid change and significantly affected by new product introductions
and other market activities of industry participants. Our primary source of
direct competition comes from independent software vendors of procurement
applications. We also face indirect competition from potential customers'
internal development efforts and have to overcome potential customers'
reluctance to move away from existing legacy systems and processes.

Our current and potential competitors in the electronic commerce market include,
among others, Ariba, Inc., Commerce One, Inc., Comdisco, Inc., Clarus
Corporation, Concur Technologies, Inc., Connect, Inc., Harbinger Corporation, i2
Technologies, International Business Machines Corporation, Intellisys Group,
Inc., Microsoft Corporation, Netscape Communications Corporation, Oracle
Corporation, PeopleSoft, Inc. and SAP Corporation Systems. In addition, there
are a number of companies developing and marketing business-to-business
electronic commerce solutions targeted at specific vertical markets. Some of
these competitors offer Internet-based solutions that are designed to enable an
enterprise to buy more effectively from its suppliers. Other competitors are
also attempting to migrate their technologies to an Internet-enabled platform.
Some of these competitors and potential competitors include ERP vendors, that
are expected to sell their procurement products along with their application
suites. These ERP vendors have a significant installed customer base and have
the opportunity to offer additional products to those customers as additional
components of their respective application suites.

We believe that the principal competitive factors for business-to-business
electronic commerce solutions are scalability, functionality, ease-of-use,
ease-of-implementation ability to integrate with existing legacy systems,
experience in business-to-business supply chain management and knowledge of a
business' asset management needs. We believe we compete favorably with our
competitors in these areas.

In addition, we expect to continue to compete in the information technology and
telecommunications equipment leasing and financing market. We compete directly
with various independent leasing companies, such as El Camino Resources, Ltd.,
Comdisco, Inc. and GE Capital Corporation as well as captive finance companies
such as IBM Credit Corporation. Many of these competitors are well established,
have substantially greater financial, marketing, technical and sales support
than we do and have established reputations for success in the purchase, sale
and lease of computer-related products. In addition, many computer manufacturers
may sell or lease directly to our customers, and our continued ability to
compete effectively may be affected by the policies of such manufacturers.

EMPLOYEES AND FACILITIES

As of December 31, 1999, we employed 337 full-time and part-time employees who
operated through our 16 locations, including our principal executive offices and
regional sales offices. We believe our relationships with our employees are
good.

Our 12 leased offices are located in the following metropolitan and suburban
locations: Herndon, Virginia; Dallas, Texas; Sacramento and San Diego,
California; Greenville, Wilmington and Raleigh, North Carolina; Pittsburgh,
Pottstown and West Chester, Pennsylvania; Golden, Colorado; and Baltimore,
Maryland. All of our office facilities are leased, and our monthly rental for
all of our office space is approximately $65,925.

LITIGATION

We are not involved in any legal proceedings, and are not aware of any pending
or threatened legal proceedings, that would have a material adverse effect on
our business, operating results and financial condition.

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<PAGE> 44

CERTAIN TRANSACTIONS

RELATIONSHIP WITH MAJOR INVESTOR

On October 23, 1998, we sold 1,111,111 shares of common stock at a price of
$9.00 per share and a warrant to acquire an additional 1,090,909 shares of our
common stock at an exercise price of $11.00 per share, subject to certain
anti-dilution adjustment, to TC Plus, LLC, formerly named TC Leasing, LLC, for
total consideration of $10 million. TC Plus, LLC is controlled by Thayer Equity
Investors III, L.P., a private equity investment fund. TC Equity Partners,
L.L.C. is the sole general partner of Thayer Equity Investors III, L.P.

The stock purchase agreement entered into in connection with this transaction
imposed certain super-majority voting requirements on our board of directors and
restricted our ability to engage in mergers or other material transactions. We
also entered into a stockholders agreement with TC Plus, LLC, Phillip G. Norton,
Bruce M. Bowen, J.A.P. Investment Group, L.P., Kevin M. Norton and Patrick J.
Norton. The stockholders agreement as originally entered into provided for
restrictions on transfers of shares, restriction on the issuance of shares,
board representation, the forced sale of ePlus by TC Plus, LLC in certain
circumstances and registration rights.

The warrant gave us the right to require TC Plus, LLC to exercise the warrant if
our common stock closes at or above $11.00 per share for 20 consecutive days. On
December 23, 1999, this condition was satisfied, and we gave notice to TC Plus,
LLC to require exercise.

On February 25, 2000, we entered into an agreement with TC Plus, LLC, which
agreement was amended on April 10, 2000, to defer the obligation of TC Plus, LLC
to exercise the warrant and to permit TC Plus, LLC to exercise the warrant at
the time of this offering on a cashless basis in exchange for a commitment by TC
Plus, LLC to waive certain provisions of the stock purchase agreement and amend
the stockholders agreement. Assuming a public offering price of $32.50 (the last
sale price as reported by Nasdaq on April 7, 2000), upon the cashless exercise
of the warrant, we would issue to TC Plus, LLC 721,678 shares of our common
stock. The number of shares that will be issued pursuant to the cashless
exercise of the warrant will increase if the public offering price increases and
decrease if the public offering price decreases.

The agreement, as amended, provides for the waiver of all super-majority voting
requirements and restrictions on mergers and material transactions contained in
the stock purchase agreement. The stockholders agreement, as amended, will
provide as follows:

- - Our board of directors will have six members with two directors designated by
TC Plus, LLC, two directors designated by the management stockholders party to
the agreement and two directors designated by a nominating committee comprised
of one individual designated by TC Plus, LLC and one individual designated by
the management stockholders party to the agreement. The two directors named by
TC Plus, LLC will continue to be Carl J. Rickertsen, who has served as a
director since November 1996, and Paul G. Stern. Phillip G. Norton and Bruce
M. Bowen serve as the directors designated by the management stockholders.

- - TC Plus, LLC has the right to have the shares of our common stock that it has
purchased and that it has acquired through exercise of the warrant included in
our shelf registration statement. If those shares are not included in our
shelf registration statement or if our shelf registration statement is not
effective, TC Plus, LLC has the right to demand registration of its shares on
three separate occasions. TC Plus, LLC also has the right to include its
shares in any other registration by us of our common stock, such as this
offering. We are responsible for all of the registration expenses incurred in
connection with TC Plus, LLC's exercise of these registration rights. TC Plus,
LLC has used its registration rights under the stockholders agreement to
register shares in this offering.

- - If we agree to purchase any shares of our common stock held by the management
stockholders party to the agreement, we must give notice to TC Plus, LLC. If
TC Plus, LLC wishes to participate, we must purchase its shares on the same
terms and conditions.

- - Shares held by stockholders party to the stockholders agreement are no longer
subject to the terms of the agreement when they are transferred in a
registered offering or pursuant to Rule 144 under the Securities Act.

- - All rights and obligations under the stockholders agreement terminate when TC
Plus, LLC no longer holds 5% of our outstanding stock and shall remain
terminated even if TC Plus, LLC later acquires 5% or more of our outstanding
stock.

Under the terms of the agreement, if for any reason the offering is not
completed, TC Plus LLC has agreed to exercise the warrant pursuant to its
original terms within thirty days of receiving notice from us that the offering
will not be consummated in the next six months.

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MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

Our board of directors is divided into three classes: (1) Class I, with a term
ending after the 2000 annual stockholders meeting; (2) Class II, with a term
ending after the 2001 annual stockholders meeting; and (3) Class III, with a
term ending after the 2002 annual stockholders meeting. Each director serves for
a term ending after the third annual meeting following the annual meeting at
which he is elected or until his successor is elected. Each officer is chosen by
the board of directors and holds his office until his successor has been chosen
and qualified, until his death, or until he resigns or is removed as provided by
our bylaws.

The following table sets forth the name, age and position with us of each person
who served as an executive officer, director or significant employee as of the
date of this prospectus.

<TABLE>
<CAPTION>
NAME AGE POSITION CLASS
- ---- --- -------- -----
<S> <C> <C> <C>
Phillip G. Norton 55 Chairman of the Board, President and Chief Executive Officer III
Bruce M. Bowen 48 Director and Executive Vice President III
Steven J. Mencarini 44 Senior Vice President and Chief Financial Officer
Kleyton L. Parkhurst 36 Senior Vice President, Secretary and Treasurer
C. Thomas Faulders, III 49 Director I
Terrence O'Donnell 55 Director II
Carl J. Rickertsen 39 Director II
Dr. Paul G. Stern 61 Director I
</TABLE>

The name and business experience during the past five years of each person who
served as an executive officer, director or significant employee as of the date
of this prospectus are described below.

Phillip G. Norton joined us in March 1993 and has served since then as our
Chairman of the Board and Chief Executive Officer. Since September 1996, Mr.
Norton has also served as our President. Mr. Norton is a 1966 graduate of the
U.S. Naval Academy.

Bruce M. Bowen founded our company in 1990 and served as our President until
September 1996. Since September 1996, Mr. Bowen has served as our Executive Vice
President, and from September 1996 to June 1997 also served as our Chief
Financial Officer. Mr. Bowen has served on our board of directors since our
founding. He is a 1973 graduate of the University of Maryland and in 1978
received a Masters of Business Administration from the University of Maryland.

Steven J. Mencarini joined us in June of 1997 as Senior Vice President and Chief
Financial Officer. Prior to joining us, Mr. Mencarini was Controller of the
Technology Management Group of Computer Sciences Corporation, one of the
nation's three largest information technology outsourcing organizations. Mr.
Mencarini joined Computer Sciences Corporation in 1991 as Director of Finance
and was promoted to Controller in 1996. Mr. Mencarini is a 1976 graduate of the
University of Maryland and in 1985 received a Masters of Taxation from American
University.

Kleyton L. Parkhurst joined us in May 1991 as Director of Finance and, since
September 1996, has also served as our Secretary and Treasurer. In July 1998,
Mr. Parkhurst was made Senior Vice President for Corporate Development. Mr.
Parkhurst is currently responsible for all of our investor relations, mergers
and acquisitions and corporate financing activities. Mr. Parkhurst has
syndication expertise in commercial non-recourse debt, federal government
leases, state and local taxable and tax-exempt leases, and computer lease equity
placements. Mr. Parkhurst is a 1985 graduate of Middlebury College.

C. Thomas Faulders, III joined our board of directors in July 1998. Mr. Faulders
is the Chairman, President and Chief Executive Officer of LCC International,
Inc. From July 1998 to December 1999, Mr. Faulders served as Chairman of the
Board of Telesciences, Inc., an information services company. From 1995 to 1998,
Mr. Faulders was Executive Vice President, Treasurer and Chief Financial Officer
of BDM International, Inc., a prominent systems integration company which is a
wholly owned subsidiary of TRW, Inc. Mr. Faulders is a member of the board of
directors of James Martin & Co., Universal Technology and Systems, Inc. and the
Ronald Reagan Institute for Emergency Medicine. He is a 1971 graduate of the
University of Virginia and in 1981 received a Masters of Business Administration
from the Wharton School of the University of Pennsylvania.

Terrence O'Donnell joined our board of directors in November 1996 upon the
completion of our initial public offering. Mr. O'Donnell is a partner with the
law firm of Williams & Connolly in Washington, D.C., where he has practiced law
since

41
<PAGE> 46

1977, with the exception of the period from 1989 through 1992 when he served as
general counsel to the U.S. Department of Defense. Mr. O'Donnell presently also
serves as a director of IGI, Inc. which manufactures and markets a broad range
of animal health products used in poultry production and pet care as well as
cosmetics, consumer products and human pharmaceuticals. Mr. O'Donnell also
serves on the governing boards of the Air Force Academy Falcon Foundation and
the Gerald R. Ford Foundation. Mr. O'Donnell is a 1966 graduate of the U.S. Air
Force Academy and in 1971 received a Juris Doctor from Georgetown University Law
Center.

Carl J. Rickertsen joined our board of directors in November 1996 upon the
completion of our initial public offering. Mr. Rickertsen is a member of TC
Equity Partners, L.L.C., the general partner of a $364 million institutional
private equity fund based in Washington, D.C. and TC Equity Partners IV, L.L.C.,
the general partner of an $880 million institutional private equity fund based
in Washington, D.C. An affiliate of TC Equity Partners, L.L.C., TC Plus, LLC,
owns 22.41% of the shares of our issued and outstanding common stock. Mr.
Rickertsen has been with TC Equity Partners, L.L.C. since September 1994. Mr.
Rickertsen is a 1983 graduate of Stanford University and in 1987 received a
Masters of Business Administration from Harvard Business School.

Dr. Paul G. Stern joined our board of directors in October 1998. Dr. Stern is a
member and co-founder of TC Equity Partners, L.L.C. and a partner and co-founder
of Arlington Capital Partners, L.L.P. Dr. Stern has been with TC Equity
Partners, L.L.C. since January 1995 and with Arlington Capital Partners, L.L.P.
since January 1999. An affiliate of TC Equity Partners, L.L.C., TC Plus, LLC,
owns 22.40% of the shares of our issued and outstanding common stock. Prior to
joining TC Equity Partners, L.L.C., Dr. Stern was a Special Partner at Forstmann
Little & Co. from 1993 to 1995. Dr. Stern is a Co-Chairman and director of Aegis
Communications, Inc., Whirlpool Corporation, the Dow Chemical Company and SAGA
Systems, Inc. He is a board member of the Lauder Institute and the University of
Pennsylvania's School of Engineering and Applied Science and the Wharton School.
He also serves on the Madison Council of the Library of Congress and the
Treasurer of the John F. Kennedy Center for the Performing Arts. Dr. Stern is a
1961 graduate of Steven's Institute of Technology and in 1963 received a Masters
of Science from Steven's. In 1965, he also received his Ph.D. in solid state
physics from Britain's University of Manchester England.

None of our executive officers, directors, affiliates or beneficial or record
owners of more than five percent of any class of our voting securities, or any
affiliate of those parties is party to a proceeding in which it has a material
interest adverse to us or any of our subsidiaries.

42
<PAGE> 47

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of our common stock as of April 7, 2000, and as adjusted to (a) give
effect to the sale of common stock in this offering by us and (b) give effect to
the issuance of 721,678 shares upon the cashless exercise of a warrant by TC
Plus, LLC, with respect to (1) each of our directors, (2) each of our named
executive officers, (3) all directors and executive officers as a group, and (4)
each person who we know beneficially owns 5% or more of our common stock.

<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF SHARES
SHARES BENEFICIALLY OWNED
BENEFICIALLY --------------------------------
NAME OF BENEFICIAL OWNER(1)(2) OWNED BEFORE OFFERING AFTER OFFERING
------------------------------ ------------ --------------- --------------
<S> <C> <C> <C>
Phillip G. Norton(3)........................................ 2,182,500 27.00% 21.15%
Bruce M. and Elizabeth D. Bowen(4).......................... 742,500 9.31 7.28
Steven J. Mencarini(5)...................................... 19,780 * *
Kleyton L. Parkhurst(6)..................................... 158,000 1.96 1.54
C. Thomas Faulders, III(7).................................. 13,507 * *
Terrence O'Donnell(8)....................................... 30,000 * *
Carl J. Rickertsen(9)(10)................................... 2,042,020 22.53 16.41
Dr. Paul G. Stern(9)........................................ 2,022,020 22.36 16.24
Eric D. Hovde(11)........................................... 468,124 5.89 4.60
Steven D. Hovde(12)......................................... 411,300 5.17 4.04
TC Plus, LLC(9)............................................. 2,022,020 22.36 16.24
Centura Banks, Inc.......................................... 392,990 4.94 3.86
All directors and named executive officers as a group (8
individuals).............................................. 5,188,307 55.15 45.73
</TABLE>

- ---------------

* Less than 1%.

(1) The business address of Messrs. Norton, Bowen, Parkhurst, and Mencarini is
400 Herndon Parkway, Herndon, Virginia 20170. The business address of Mr.
Rickertsen, Dr. Stern and TC Plus, LLC is 1455 Pennsylvania Avenue, N.W.,
Suite 350, Washington, D.C. 20004. The business address of Mr. Faulders is
7925 Jones Branch Drive, McLean, VA 22102. The business address of Mr.
Hovde is 1826 Jefferson Place, N.W., Washington, D.C. 20036. The business
address of Centura Banks, Inc. is 134 North Church Street, Rocky Mount,
North Carolina 27804.

(2) Unless otherwise indicated and subject to community property laws where
applicable, each of the stockholders named in this table has sole voting
and investment power with respect to the shares shown as beneficially owned
by such stockholder. A person is deemed to be the beneficial owner of
securities that can be acquired by such person within 60 days from the date
of this prospectus upon exercise of options or warrants. Each beneficial
owner's percentage ownership is determined by assuming options or warrants
that are held by such person (but not by any other person) and that are
exercisable within 60 days from the date of this prospectus have been
exercised. The ownership amounts reported for persons who we know own 5% or
more of our common stock but who are not selling stockholders are based on
the Schedules 13D and 13G filed with the SEC by such persons.

(3) Includes 2,040,000 shares held by J.A.P. Investment Group, L.P., a Virginia
limited partnership, of which J.A.P., Inc., a Virginia corporation, is the
sole general partner. The limited partners are: Patricia A. Norton, trustee
for the benefit of Phillip G. Norton, Jr., u/a dated as of July 20, 1983;
Patricia A. Norton, the spouse of Phillip G. Norton, trustee for the
benefit of Andrew L. Norton, u/a dated as of July 20, 1983; Patricia A.
Norton, trustee for the benefit of Jeremiah O. Norton, u/a dated as of July
20, 1983; and Patricia A. Norton. Patricia A. Norton is the sole
stockholder of J.A.P., Inc., and Phillip G. Norton is the sole director and
President of J.A.P., Inc. Also includes 142,500 shares of common stock
issuable to Phillip G. Norton under currently exercisable options. Phillip
G. Norton and J.A.P. Investment Group, L.P. are parties to a stockholders
agreement with TC Plus, LLC, Bruce M. Bowen, Kevin M. Norton and Patrick J.
Norton. See "Certain Transactions--Relationship with Major Investor" on
page 56.

(4) Includes 560,000 shares held by Mr. and Mrs. Bowen, as tenants by the
entirety, and includes 160,000 shares held by Bowen Holdings L.C., a
Virginia limited liability company, composed of Mr. Bowen and three minor
children of whom Mr. Bowen is legal guardian and for which shares Mr. Bowen
serves as manager. Also includes 22,500 shares of common stock issuable to
Mr. Bowen under currently exercisable options. Mr. Bowen is party to a
stockholders agreement with TC Plus, LLC, Phillip G. Norton, Kevin M.
Norton and Patrick J. Norton. See "Certain Transactions--Relationship with
Major Investor" on page 56.

(5) Includes 19,780 shares of common stock issuable to Mr. Mencarini under
currently exercisable options.

43
<PAGE> 48

(6) Includes 13,000 shares held by Kleyton L. Parkhurst; 30,000 shares held by
three minor children of Kleyton L. Parkhurst, all of which shares are voted
by Kleyton L. Parkhurst, Custodian, under the Virginia Uniform Gift to
Minors Act; and 115,000 shares of common stock issuable to Mr. Parkhurst
under currently exercisable options.

(7) Includes 13,507 shares of common stock issuable to Mr. Faulders under
currently exercisable options.

(8) Includes 30,000 shares of common stock issuable to Mr. O'Donnell under
currently exercisable options.

(9) Includes 931,111 shares of our common stock owned by TC Plus, LLC. Also
includes 1,090,909 shares issuable upon a warrant issued to TC Plus, LLC
that is currently exercisable at an exercise price of $11.00 per share and
which we have required to TC Plus, LLC to exercise under the terms of the
warrant. On February 25, 2000, TC Plus, LLC and ePlus entered into an
agreement, which agreement was amended on April 10, 2000, providing for the
deferral of the required exercise of the warrant and the consent by ePlus
to a cashless exercise of the warrant. Assuming a public offering price of
$32.50 (the last sale price as reported by Nasdaq on April 7, 2000), upon
the cashless exercise of the warrant, we will issue to TC Plus, LLC 721,678
shares. The cashless exercise of the warrant is conditioned on the
completion of this offering. Thayer Equity Investors III, L.P. is the
managing member of TC Plus, LLC. TC Equity Partners, L.L.C. is the sole
general partner of Thayer Equity Investors III, L.P., and has sole voting
and investment power with respect to the shares of our common stock held by
TC Plus, LLC. Messrs. Frederic V. Malek and Carl J. Rickertsen and Dr. Paul
G. Stern are members of TC Equity Partners, L.L.C. and share power to vote
and dispose of shares of our common stock, except for the 20,000 shares of
our common stock underlying the options over which Mr. Rickertsen has sole
voting and dispositive power. TC Plus, LLC is party to a stockholders
agreement with Phillip G. Norton, J.A.P. Investment Group, L.P., Bruce M.
Bowen, Kevin M. Norton and Patrick J. Norton which, among other things,
grants TC Plus, LLC authority to effectively appoint two members of our
board of directors. Both Mr. Rickertsen and Dr. Stern are directors of
ePlus and serve pursuant to appointment by TC Plus, LLC under the terms of
the stockholders agreement. See "Certain Transactions--Relationship with
Major Investor."

(10) Includes 20,000 shares of common stock issuable to Mr. Rickertsen under
currently exercisable options.

(11) Includes 376,300 shares beneficially owned as a managing member of Hovde
Capital, L.L.C; 25,000 shares beneficially owned as a trustee for the Hovde
Financial, Inc. Profit Sharing Plan and Trust; 10,000 shares beneficially
owned as managing member of Hovde Acquisition, L.L.C.; 20,000 shares
beneficially owned as a trustee for The Eric D. Hovde Foundation; and
36,824 shares held directly by Eric D. Hovde.

(12) Includes 376,300 shares beneficially owned as a managing member of Hovde
Capital, L.L.C.; 25,000 shares beneficially owned as a trustee for the
Hovde Financial, Inc. Profit Sharing Plan and Trust; and 10,000 shares
beneficially owned as a managing member of Hovde Acquisition, L.L.C.

44
<PAGE> 49

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom J.P. Morgan Securities Inc., U.S. Bancorp Piper Jaffray Inc., First Union
Securities, Inc. and Friedman, Billings, Ramsey & Co., Inc. are acting as
representatives, have severally agreed to purchase, and ePlus has agreed to sell
to them, the respective number of shares of common stock set forth opposite
their names below.

<TABLE>
<CAPTION>
---------
NUMBER OF
UNDERWRITERS SHARES
- ------------ ---------
<S> <C>
J.P. Morgan Securities Inc..................................
U.S. Bancorp Piper Jaffray Inc..............................
First Union Securities, Inc.................................
Friedman, Billings, Ramsey & Co., Inc.......................
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase shares of common stock are subject to the approval of
certain legal matters by counsel and to certain other conditions. Under the
terms and conditions of the underwriting agreement, all of the underwriters are
obligated to take and pay for all such shares of common stock, if any are taken.

The underwriters propose initially to offer the shares of common stock directly
to the public at the public offering price set forth on the cover page of this
prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After the
public offering of the common stock, the offering price and other selling terms
may be changed from time to time by the underwriters.

According to the terms of the underwriting agreement, we have granted to the
underwriters an option, exercisable for 30 days from the date hereof, to
purchase up to 225,000 additional shares of common stock, on the same terms and
conditions as set forth on the cover page hereof. If such option is exercised in
full, the total price to the public, underwriting discounts and commissions, and
proceeds to ePlus will be , and , respectively.
The underwriters may exercise such option solely to cover over-allotments, if
any, made in connection with the sale of shares of common stock offered hereby.
To the extent that option is exercised, each of the underwriters will have a
commitment, subject to certain conditions, to purchase approximately the same
percentage of those additional shares as the number of shares of common stock
initially to be purchased by it as shown in the table above bears to the total
number of shares of common stock offered hereby. The following table shows the
per share and total underwriting discounts to be paid to the underwriters. The
table also shows per share and total underwriting discounts to be paid if the
underwriters' over-allotment option is exercised.

<TABLE>
<CAPTION>
---------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
By ePlus....................................................
Per share.................................................
Total.....................................................
</TABLE>

ePlus, its officers and directors, and certain stockholders of ePlus have agreed
that during the period beginning on the date of this prospectus and continuing
to and including the date 90 days after the date of this prospectus they will
not (1) offer, pledge, announce the intention to sell, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any shares of common stock or any securities
of ePlus, which are substantially similar to the common stock, including but not
limited to any securities that are convertible into or exercisable or
exchangeable for, or that represent the right to receive common stock or any
such substantially similar securities or (2) enter into any swap, option,
future, forward or other agreement that transfers, in whole or in part, any of
the economic consequences of ownership of common stock or any securities
substantially similar to the common stock (other than, in the case of ePlus, (x)
pursuant to employee stock option plans existing on, or upon the conversion or
exchange of convertible or exchangeable securities outstanding as of, the date
of this prospectus and (y) the issuance of common stock in connection with the
transactions described in this prospectus), without the prior written consent of
J.P. Morgan Securities Inc.

ePlus estimates that the total expenses of this offering, excluding underwriting
discounts and commissions will be approximately $560,000.

45
<PAGE> 50

ePlus has agreed to indemnify the underwriters against specified liabilities,
losses and expenses, including liabilities under the Securities Act, or to
contribute to payments that the underwriters may be required to make in
connection with such liabilities.

In connection with this offering, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the common stock.
Specifically, the underwriters may over-allot in connection with this offering,
creating a syndicate short position. In addition, the underwriters may bid for,
and purchase, shares of common stock in the open market to cover syndicate short
positions or to stabilize the price of the common stock. Finally, the
underwriting syndicate may reclaim selling concessions allowed for distributing
the common stock in this offering, if the syndicate repurchases previously
distributed common stock in syndicate covering transactions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the
market price of the common stock above independent market levels. The
underwriters are not required to engage in these activities, and may end any of
these activities at any time.

It is expected that delivery of the shares sold in this offering will be made to
investors on or about , 2000.

The common stock is traded on the Nasdaq National Market under the symbol
"PLUS."

In the ordinary course of their respective businesses, certain of the
underwriters and their affiliates have engaged, are engaging and may in the
future engage in commercial banking, financial advisory or investment banking
transactions with us and our affiliates for which they have received or will
receive customary compensation. ePlus may use a portion of the proceeds from
this offering to refinance or otherwise repay a portion of the indebtedness
incurred under its working capital credit facility. As a result, more than 10%
of the net proceeds of the offering may be paid to affiliates of members of the
National Association of Securities Dealers, or NASD. Accordingly, this offering
is being made pursuant to Rule 2710(c)(8) of the Conduct Rules of the NASD.

LEGAL MATTERS

Alston & Bird LLP, Washington, D.C., our counsel, has passed upon the legality
of the common stock being offered by this prospectus. Certain legal matters will
be passed upon for the underwriters by Davis Polk & Wardwell, New York, New
York.

EXPERTS

The consolidated financial statements and financial statement schedule of ePlus
inc. (formerly known as MLC Holdings, Inc.) as of March 31, 1998 and 1999 and
for each year of the three years in the period ended March 31, 1999 included and
incorporated by reference in this prospectus have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are included
and incorporated by reference herein and have been so included and incorporated
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.

The financial statements of CLG, Inc. as of December 31, 1998 and 1997 and for
the two years ended December 31, 1998 and for the eleven months ended December
31, 1996 have been included and incorporated by reference in this prospectus in
reliance upon the report of KPMG LLP, independent certified public accountants,
included elsewhere herein, and upon authority of said firm as experts in
accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION ABOUT US

We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document we file with the Securities and Exchange Commission at the public
reference facilities maintained by the Securities and Exchange Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. Our Securities and Exchange
Commission file number is 0-28926. Our filings with the Securities and Exchange
Commission also are available to the public from the Securities and Exchange
Commission's website at http://www.sec.gov. Please call the Securities and
Exchange Commissions at 1-800-SEC-0330 for further information. Our common stock
is listed on the Nasdaq National Market under the symbol "PLUS."

This prospectus is part of a registration statement we filed with the Securities
and Exchange Commission and does not contain all of the information set forth in
the registration statement. You should consult the registration statement for
further information with respect to us and these securities.

The Securities and Exchange Commission allows us to "incorporate by reference"
the information we file with them, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by

46
<PAGE> 51

reference is considered to be part of this prospectus, and later information
that we file with the Securities and Exchange Commission will automatically
update and supersede this information and information in this prospectus. We
incorporate by reference the documents listed below and any future filings made
with the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 until all of the securities are
sold.

- - Annual Report on Form 10-K for the fiscal year ended March 31, 1999, as
amended by the Annual Report on Form 10-K/A, filed on July 28, 1999;

- - Quarterly Report on Form 10-Q for the quarter ended June 30, 1999;

- - Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, as
amended by the Quarterly Report on Form 10-Q/A filed on January 20, 2000;

- - Quarterly Report on Form 10-Q for the quarter ended December 31, 1999;

- - Current Report on Form 8-K filed September 14, 1999;

- - Current Report on Form 8-K filed October 18, 1999, as amended by Current
Report on Form 8-K/A filed December 17, 1999, Current Report on Form 8-K/A
filed December 20, 1999 and Current Report on Form 8-K/A filed February 24,
2000;

- - Current Report on Form 8-K filed November 4, 1999;

- - Current Report on Form 8-K filed December 10, 1999;

- - Current Report on Form 8-K filed January 3, 2000;

- - Current Report on Form 8-K filed March 9, 2000;

- - Current Report on Form 8-K filed March 21, 2000; and

- - The description of our common stock set forth in the Registration Statement on
Form 8-A, dated October 21, 1996.

You may request a copy of these filings, at no cost, by writing or calling us at
the following address: Steven J. Mencarini, Chief Financial Officer, ePlus inc.,
400 Herndon Parkway, Herndon, Virginia 20170, (703) 834-5710.

You should rely only on the information contained or incorporated by reference
in this prospectus. We have not authorized anyone to provide you with
information different from that contained or incorporated by reference in this
prospectus. This prospectus is an offer to sell, or a solicitation of offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock.

47
<PAGE> 52

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
EPLUS INC. AND SUBSIDIARIES (FORMERLY MLC HOLDINGS, INC.) PAGE
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of March 31, 1998 and 1999... F-3
Consolidated Statements of Earnings for the Years Ended
March 31, 1997, 1998 and 1999............................. F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended March 31, 1997, 1998 and 1999................. F-5
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1997, 1998 and 1999............................. F-6
Notes to Consolidated Financial Statements.................. F-8
Condensed Consolidated Balance Sheets as of March 31, 1999
and December 31, 1999 (Unaudited)......................... F-23
Condensed Consolidated Statements of Earnings for the Three
Months Ended December 31, 1998 and 1999 (Unaudited)....... F-24
Condensed Consolidated Statements of Earnings for the Nine
Months Ended December 31, 1998 and 1999 (Unaudited)....... F-25
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended December 31, 1998 and 1999 (Unaudited)....... F-26
Notes to Condensed Consolidated Financial Statements
(Unaudited)............................................... F-27
CLG, INC.
Independent Auditors' Report................................ F-31
Balance Sheets as of December 31, 1998 and 1997............. F-32
Statements of Income for the Years Ended December 31, 1998
and 1997, and for the Eleven Months Ended December 31,
1996...................................................... F-33
Statements of Stockholder's Equity for the Years Ended
December 31, 1998 and 1997, and for the Eleven Months
Ended December 31, 1996................................... F-34
Statements of Cash Flows for the Years Ended December 31,
1998 and 1997 and for the Eleven Months Ended December 31,
1996...................................................... F-35
Notes to Financial Statements............................... F-36
Condensed Balance Sheet as of September 30, 1999
(Unaudited)............................................... F-44
Condensed Statements of Income for the Nine Months Ended
September 30, 1999 and 1998 (Unaudited)................... F-45
Condensed Statements of Cash Flows for the Nine Months Ended
September 30, 1999 and 1998 (Unaudited)................... F-46
Notes to Financial Statements (Unaudited)................... F-47
</TABLE>

F-1
<PAGE> 53

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
ePlus inc.
Herndon, Virginia

We have audited the consolidated balance sheets of ePlus inc. (formerly known as
MLC Holdings, Inc.) and subsidiaries as of March 31, 1998 and 1999, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for each of the three years in the period ended March 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ePlus inc. and
subsidiaries as of March 31, 1998 and 1999, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1999 in conformity with generally accepted accounting principles.

/s/DELOITTE & TOUCHE LLP

McLean, Virginia
June 11, 1999

F-2
<PAGE> 54

EPLUS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
AS OF MARCH 31,
--------------------------
1998 1999
----------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................. $18,683,796 $ 7,891,661
Accounts receivable....................................... 16,383,314 44,090,101
Notes receivable(1)....................................... 3,801,808 547,011
Employee advances......................................... 53,582 20,078
Inventories............................................... 1,213,734 658,355
Investment in direct financing and sales type
leases -- net.......................................... 32,495,594 83,370,950
Investment in operating lease equipment -- net............ 7,295,721 3,530,179
Property and equipment -- net............................. 1,131,512 2,018,133
Other assets(2)........................................... 2,136,554 12,232,130
----------- ------------
Total Assets...................................... $83,195,615 $154,358,598
=========== ============
LIABILITIES
Accounts payable -- trade................................. $ 6,865,419 $ 12,518,533
Accounts payable -- equipment............................. 21,283,582 18,049,059
Salaries and commissions payable.......................... 390,081 535,876
Accrued expenses and other liabilities.................... 3,560,181 4,638,708
Recourse notes payable.................................... 13,037,365 19,081,137
Nonrecourse notes payable................................. 13,027,676 52,429,266
Deferred taxes............................................ 1,487,000 3,292,210
----------- ------------
Total Liabilities................................. 59,651,304 110,544,789
Commitments and contingencies (Note 7)...................... -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 2,000,000 shares
authorized; none issued or outstanding................. -- --
Common stock, $.01 par value; 25,000,000 authorized at
March 31, 1998 and 1999; 6,071,505 and 7,470,595 issued
and outstanding at March 31, 1998 and 1999
respectively........................................... 60,715 74,706
Additional paid-in capital................................ 11,460,331 24,999,371
Retained earnings......................................... 12,023,265 18,739,732
----------- ------------
Total Stockholders' Equity........................ 23,544,311 43,813,809
----------- ------------
Total Liabilities and Stockholders' Equity........ $83,195,615 $154,358,598
=========== ============
</TABLE>

- ---------------

(1) Includes amounts with related parties of $3,709,508 and $518,955 as of March
31, 1998 and 1999, respectively.

(2) Includes amounts with related parties of $732,051 and $1,281,474 as of March
31, 1998 and 1999, respectively.

See Notes to Consolidated Financial Statements.

F-3
<PAGE> 55

EPLUS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-----------------------------------------
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
REVENUES
Sales of equipment........................................ $52,166,828 $ 47,419,115 $ 83,516,254
Sales of leased equipment................................. 21,633,996 50,362,055 84,378,800
----------- ------------ ------------
73,800,824 97,781,170 167,895,054
Lease revenues............................................ 9,908,469 14,882,420 20,610,542
Fee and other income...................................... 2,503,381 5,778,685 5,464,242
----------- ------------ ------------
12,411,850 20,661,105 26,074,784
----------- ------------ ------------
Total Revenues(1)................................. 86,212,674 118,442,275 193,969,838
----------- ------------ ------------
COSTS AND EXPENSES
Cost of sales, equipment.................................. 42,179,823 37,423,397 71,367,090
Cost of sales, leased equipment........................... 21,667,197 49,668,756 83,269,110
----------- ------------ ------------
63,847,020 87,092,153 154,636,200
Direct lease costs........................................ 4,761,227 5,409,338 6,183,562
Professional and other fees............................... 576,855 1,072,691 1,222,080
Salaries and benefits..................................... 8,241,405 10,356,456 11,880,062
General and administrative expenses....................... 2,285,878 3,694,309 5,151,494
Nonrecurring acquisition costs............................ -- 250,388 --
Interest and financing costs.............................. 1,648,943 1,836,956 3,601,348
----------- ------------ ------------
17,514,308 22,620,138 28,038,546
----------- ------------ ------------
Total Costs and Expenses(2)....................... 81,361,328 109,712,291 182,674,746
----------- ------------ ------------
Earnings Before Provision for Income Taxes.................. 4,851,346 8,729,984 11,295,092
----------- ------------ ------------
Provision for Income Taxes.................................. 1,360,000 2,690,890 4,578,625
----------- ------------ ------------
Net Earnings................................................ $ 3,491,346 $ 6,039,094 $ 6,716,467
=========== ============ ============
Net Earnings Per Common Share -- Basic...................... $ 0.67 $ 1.00 $ 0.99
=========== ============ ============
Net Earnings Per Common Share -- Diluted.................... $ 0.66 $ 0.98 $ 0.98
=========== ============ ============
Pro Forma Net Earnings (Note 8)............................. $ 3,133,436 $ 5,425,833 $ 6,716,467
=========== ============ ============
Pro Forma Net Earnings Per Common Share -- Basic............ $ 0.60 $ 0.90 $ 0.99
=========== ============ ============
Pro Forma Net Earnings Per Common Share -- Diluted.......... $ 0.60 $ 0.88 $ 0.98
=========== ============ ============
Weighted Average Shares Outstanding -- Basic................ 5,184,261 6,031,088 6,769,732
Weighted Average Shares Outstanding -- Diluted.............. 5,262,697 6,143,017 6,827,528
</TABLE>

- ---------------

(1) Includes amounts from related parties of $21,051,453, $46,710,190 and
$82,652,623 for the fiscal years ended March 31,1997, 1998 and 1999,
respectively.

(2) Includes amounts from related parties of $20,566,924, $44,831,701 and
$80,966,659 for the fiscal years ended March 31, 1997, 1998, and 1999,
respectively.

See Notes to Consolidated Financial Statements.

F-4
<PAGE> 56

EPLUS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK ADDITIONAL
--------------------- ------------------- PAID-IN RETAINED
SHARES PAR VALUE SHARES COST CAPITAL EARNINGS TOTAL
--------- --------- -------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE MARCH 31, 1996....... 4,754,390 48,661 111,716 28,854 744,485 4,467,223 5,231,515
Compensation to outside
directors................ -- -- -- -- 9,500 -- 9,500
Distributions to owners.... -- -- -- -- -- (859,378) (859,378)
Sale of common shares...... 1,150,000 11,500 -- -- 8,592,262 -- 8,603,762
Issuance of shares to
owners................... 5,586 56 -- -- (56) -- --
Retirement of treasury
shares................... -- (1,117) (111,716) (28,854) 23 (27,760) --
Net earnings............... -- -- -- -- -- 3,491,346 3,491,346
--------- ------- -------- -------- ----------- ----------- -----------
BALANCE MARCH 31, 1997....... 5,909,976 $59,100 -- $ -- $ 9,346,214 $ 7,071,431 $16,476,745
========= ======= ======== ======== =========== =========== ===========
Compensation to outside
directors................ -- -- -- -- 113,982 -- 113,982
Distributions to owners.... -- -- -- -- -- (1,087,260) (1,087,260)
Sale of common shares...... 161,329 1,613 -- -- 1,998,387 -- 2,000,000
Issuance of shares for
option exercise.......... 200 2 -- -- 1,748 -- 1,750
Net earnings............... -- -- -- -- -- 6,039,094 6,039,094
--------- ------- -------- -------- ----------- ----------- -----------
BALANCE, MARCH 31, 1998...... 6,071,505 $60,715 -- $ -- $11,460,331 $12,023,265 $23,544,311
========= ======= ======== ======== =========== =========== ===========
Sale of common shares...... 1,111,111 11,111 -- -- 9,714,630 -- 9,725,741
Issuance of shares for
option exercise.......... 10,500 105 -- -- 91,770 -- 91,875
Issuance of shares to
employees................ 14,001 140 -- -- 112,452 -- 112,592
Issuance of shares
in business
combination.............. 263,478 2,635 -- -- 3,620,188 -- 3,622,823
Net earnings............... -- -- -- -- -- 6,716,467 6,716,467
--------- ------- -------- -------- ----------- ----------- -----------
BALANCE, MARCH 31, 1999...... 7,470,595 $74,706 -- $ -- $24,999,371 $18,739,732 $43,813,809
========= ======= ======== ======== =========== =========== ===========
</TABLE>

See Notes to Consolidated Financial Statements.

F-5
<PAGE> 57

EPLUS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.............................................. $ 3,491,346 $ 6,039,094 $ 6,716,467
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Depreciation and amortization.......................... 3,650,248 4,628,272 4,720,241
Abandonment of assets.................................. 10,049 -- --
Provision for credit losses............................ 66,000 (1,000) 500,000
Loss (Gain) on sale of operating lease equipment(1).... 83,754 (55,881) 57,984
Adjust of basis to fair market value of operating lease
equipment and investments............................. 153,434 -- 306,921
Payments from leases directly to lenders............... (1,590,061) (1,788,611) (970,483)
(Gain) Loss on disposal of property and equipment...... (9,124) -- 26,246
Compensation to outside directors -- stock options..... 9,500 113,982 --
Changes in:
Accounts receivable.................................. (4,343,319) (7,536,888) (19,809,403)
Notes receivable(2).................................. (2,062,393) (1,647,558) 3,316,261
Employee advances.................................... 28,537 17,030 33,028
Inventories.......................................... (400,046) 64,410 1,293,081
Other assets(3)...................................... 457,169 (893,959) (4,094,505)
Accounts payable -- equipment........................ (26,557) 16,337,160 (3,964,145)
Accounts payable -- trade............................ 796,740 3,858,482 528,181
Deferred taxes....................................... 121,000 897,000 1,805,210
Salaries and commissions payable, accrued expenses
and other liabilities............................... 2,286,921 629,380 1,097,776
------------ ------------ ------------
Net cash provided by (used in) operating
activities...................................... 2,723,198 20,660,913 (8,437,140)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of operating equipment................. 4,992,050 726,714 138,003
Purchase of operating lease equipment(4).................. (24,800,360) (2,065,079) (487,418)
Increase in investment in direct financing and sales-type
leases(5).............................................. (6,825,873) (18,833,704) (80,744,494)
Proceeds from sale of property and equipment.............. 9,124 800 2,000
Insurance proceeds received............................... 512,044 -- --
Purchases of property and equipment....................... (266,061) (1,032,243) (1,249,214)
Cash used in acquisitions, net of cash acquired........... -- -- (3,485,279)
Decrease (Increase) in other assets(6).................... 226,530 (472,962) (788,856)
------------ ------------ ------------
Net cash used in investing activities............. (26,152,546) (21,676,474) (86,615,258)
------------ ------------ ------------
</TABLE>

F-6
<PAGE> 58
EPLUS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings:
Nonrecourse............................................ $ 26,825,118 $ 4,511,517 $ 79,941,563
Recourse............................................... 220,768 174,894 415,606
Repayments:
Nonrecourse............................................ (3,199,626) (4,872,557) (10,200,352)
Recourse............................................... (434,867) (307,819) (195,892)
Repayments of loans from stockholders..................... (275,000) (10,976) --
Distributions to shareholders of combined companies prior
to business combination................................ (859,378) (1,087,260) --
Proceeds from issuance of capital stock, net of
expenses............................................... 8,603,762 2,001,750 9,930,209
Purchase of treasury stock................................ -- -- --
(Repayments) Proceeds from lines of credit................ (1,448,370) 12,635,599 4,369,129
------------ ------------ ------------
Net cash provided by financing activities......... 29,432,407 13,045,148 84,260,263
------------ ------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents........ 6,003,059 12,029,587 (10,792,135)
Cash and Cash Equivalents, Beginning of Period.............. 651,150 6,654,209 18,683,796
------------ ------------ ------------
Cash and Cash Equivalents, End of Period.................... $ 6,654,209 $ 18,683,796 $ 7,891,661
============ ============ ============
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest.................................... $ 140,081 $ 347,757 $ 1,475,497
============ ============ ============
Cash paid for income taxes................................ $ 315,137 $ 2,681,867 $ 2,913,818
============ ============ ============
</TABLE>

- ---------------

(1) Includes amounts provided by (used by) related parties of $3,930, $(35,540),
and $-0- for the fiscal years ended March 31, 1997, 1998 and 1999.

(2) Includes amounts (used by) provided by related parties of $(1,897,094) and
$3,291,681 for the fiscal years ended March 31, 1998 and 1999.

(3) Includes amounts provided by related parties of $285,943, $51,482, and
$329,275 for the fiscal years ended March 31, 1997, 1998 and 1999.

(4) Includes amounts provided by related parties of $2,707,213, $935,737, and
$-0- for the fiscal years ended March 31, 1997, 1998 and 1999.

(5) Includes amounts (used by) provided by related parties of $(23,417),
$43,418,347, and $80,510,214 for the fiscal years ended March 31, 1997, 1998
and 1999.

(6) Includes amounts provided by (used by) provided by related parties of
$73,338, $(473,621), and $652,701 for the fiscal years ended March 31, 1997,
1998 and 1999.

See Notes to Consolidated Financial Statements.

F-7
<PAGE> 59

EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED MARCH 31, 1997, 1998, AND 1999

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation -- Effective October 18, 1999, MLC Holdings, Inc. changed
its name to ePlus inc. Effective January 31, 2000, MLG Group, Inc., MLC Federal,
Inc., MLC Capital, Inc., PC Plus, Inc., MLC Network Solutions, Inc. and
Educational Computer Concepts, Inc. changed their names to ePlus Group, inc.,
ePlus Government, inc., ePlus Capital, inc., ePlus Technology, inc., ePlus
Technology of NC, inc. and ePlus Technology of PA, inc., respectively. Effective
September 1, 1996, MLC Holdings, Inc., (incorporated August 27, 1996) became the
holding company for MLC Group, Inc., and MLC Capital, Inc. (MLC Holdings, Inc.,
together with its subsidiaries collectively, "MLC" or the "Company"). The
accompanying consolidated financial statements include the accounts of the
wholly owned subsidiary companies (MLC Network Solutions, Inc. and MLC
Integrated, Inc.) at historical amounts as if the combination had occurred on
March 31, 1996 in a manner similar to a pooling of interest. The accompanying
financial statements also include the accounts of the wholly owned subsidiary
(PC Plus, Inc.) from July 1, 1998, accounted for as a purchase.

All significant intercompany balances and transactions have been eliminated.

Business Combinations -- On July 24, 1997, the Company, through a new wholly
owned subsidiary, MLC Network Solutions, Inc., issued 260,978 common shares,
valued at $3,384,564, in exchange for all outstanding common shares of
Compuventures of Pitt County, Inc. ("Compuventures"), a value-added reseller of
PC's and related network equipment and software products a provider of various
support services to its customers from facilities located in Greenville, Raleigh
and Wilmington, North Carolina. On September 29, 1997, the Company issued
498,998 common shares, valued at $7,092,000, in exchange for all outstanding
common shares of Educational Computer Concepts, Inc. (dba "ECC
Integrated")("ECCI"), a network systems integrator and computer reseller serving
customers in eastern Pennsylvania, New Jersey and Delaware. ECC Integrated
subsequently changed its name to MLC Integrated ("MLCI"). These business
combinations have been accounted for as pooling of interests, and accordingly,
the consolidated financial statements for periods prior to the combinations have
been restated to include the accounts and results of operations of the pooled
companies. See Note 12.

New Subsidiaries -- On July 1, 1998, the Company, through a new wholly owned
subsidiary, MLC Network Solutions of Virginia, Inc., issued 263,478 common
shares, valued at $3,622,823, and cash of $3,622,836 for all the outstanding
common shares of PC Plus, Inc., a value-added reseller of PC's, related network
equipment and software products and provider of various support services to its
customers from its facility in Reston, Virginia (relocated to Herndon, Virginia
in October 1998). Subsequent to the acquisition, MLC Network Solutions of
Virginia, Inc. changed its name to PC Plus, Inc. This business combination has
been accounted for using the purchase method of accounting, and accordingly, the
results of operations of PC Plus, Inc. have been included in the Company's
consolidated financial statements from July 1, 1998. The Company's other assets
include goodwill calculated as the excess of the purchase price over the fair
value of the net identifiable assets acquired of $6,045,330, and is being
amortized on a straight-line basis over 27.5 years. See Note 12.

On September 17, 1997, the Company established MLC Federal, Inc., a wholly owned
subsidiary of MLC Holdings, Inc. The new subsidiary will concentrate on the
origination of leases to federal, state, and local government entities. On
October 22, 1997, the Company formed MLC Leasing, S.A. de C.V., a wholly owned
subsidiary of MLC Group, Inc. and MLC Network Solutions, Inc., based in Mexico
City, Mexico. To date, no business has been conducted through MLC Leasing, S.A.
de C.V.

Revenue Recognition -- The Company sells information technology equipment to its
customers and recognizes revenue from equipment sales at the time equipment is
accepted by the customer. The Company is the lessor in a number of its
transactions and these are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 13, "Accounting for Leases." Each
lease is classified as either a direct financing lease, sales-type lease, or
operating lease, as appropriate. Under the direct financing and sales-type lease
methods, the Company records the net investment in leases, which consists of the
sum of the minimum lease term payments, initial direct costs, and unguaranteed
residual value (gross investment) less the unearned income. The difference
between the gross investment and the cost of the leased equipment for direct
finance leases is recorded as unearned income at the inception of the lease. The
unearned income is amortized over the life of the lease using the interest
method. Under sales-type leases, the difference between the fair value and cost
of the leased property (net margins) is recorded as revenue at the inception of
the lease. No sales type leases have been consummated during the three years
ended March 31, 1998. The Company adopted SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities"
effective January 1, 1997. This standard establishes new criteria for
determining whether a transfer of financial assets in exchange for cash or other
consideration should be accounted for as a sale or as a pledge of

F-8
<PAGE> 60
EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

collateral in a secured borrowing. Certain assignments of direct finance leases
made on a nonrecourse basis by the Company after December 31, 1996 meet the
criteria for surrender of control set forth by SFAS No. 125 and have therefore
been treated as sales for financial statement purposes. SFAS No. 125 prohibits
the retroactive restatement of transactions consummated prior to January 1, 1997
which would have otherwise met the requirements of a sale under the standard.

Sales of leased equipment represents revenue from the sales of equipment subject
to a lease in which the Company is the lessor. If the rental stream on such
lease has nonrecourse debt associated with it, sales revenue is recorded at the
amount of consideration received, net of the amount of debt assumed by the
purchaser. If there is no nonrecourse debt associated with the rental stream,
sales revenue is recorded at the amount of gross consideration received, and
costs of sales is recorded at the book value of the lease.

Lease revenues consist of rentals due under operating leases and amortization of
unearned income on direct financing and sales-type leases. Equipment under
operating leases is recorded at cost and depreciated on a straight-line basis
over the lease term to the Company's estimate of residual value.

The Company assigns all rights, title, and interests in a number of its leases
to third-party financial institutions without recourse. These assignments are
accounted for as sales since the Company has completed its obligations at the
assignment date, and the Company retains no ownership interest in the equipment
under lease.

Residuals -- Residual values, representing the estimated value of equipment at
the termination of a lease, are recorded in the financial statements at the
inception of each sales-type or direct financing lease as amounts estimated by
management based upon its experience and judgment. The residual values for
operating leases are included in the leased equipment's net book value.

The Company evaluates residual values on an ongoing basis and records any
required adjustments. In accordance with generally accepted accounting
principles, no upward revision of residual values is made subsequent to the
period of the inception of the lease. Residual values for sales-type and direct
financing leases are recorded at their net present value and the unearned
interest is amortized over the life of the lease using the interest method.

Reserve for Credit Losses -- The reserve for credit losses (the "reserve") 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.
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 nonrecourse or recourse basis).

Cash and Cash Equivalents -- Cash and cash equivalents include short-term
repurchase agreements with an original maturity of three months or less.

Inventories -- Inventories are stated at the lower of cost (specific
identification basis) or market.

Property and Equipment -- Property and equipment are stated at cost, net of
accumulated depreciation and amortization. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
related assets, which range from three to seven years.

Income Taxes -- Deferred income taxes are accounted for in accordance with SFAS
No. 109, "Accounting for Income Taxes." Under this method, deferred income tax
liabilities and assets are based on the difference between financial statement
and tax bases of assets and liabilities, using tax rates currently in effect.
The Company acquired two companies which were accounted for under the pooling of
interests method. Prior to their business combinations with the Company, the two
companies had elected to be taxed under the provisions of Subchapter "S" of the
Internal Revenue Code. Under this election, each company's income or loss was
included in the taxable income of the stockholders. See Note 8.

Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-9
<PAGE> 61
EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Reclassifications -- Certain items have been reclassified in the March 31, 1997
and 1998 financial statements to conform to the March 31, 1999 presentation.

Initial Public Offering -- During November and December 1996, MLC consummated an
initial public offering ("the Offering") of 1,150,000 shares of its common stock
including the over allotment. The Company received proceeds of $9.4 million
(gross proceeds of $10.1 million less underwriters expense of $0.7 million), and
incurred $0.8 million in expenses. Of the net proceeds of approximately $8.6
million, $0.3 million was used to repay outstanding stockholder loans and the
related accrued interest and the balance of $8.3 million was used for general
corporate purposes.

Earnings Per Share -- Earnings per share have been calculated in accordance with
SFAS No. 128, "Earnings per Share." In accordance with SFAS No. 128, basic EPS
amounts were calculated based on weighted average shares outstanding of
5,184,261 in fiscal 1997, 6,031,088 in fiscal 1998, and 6,769,732 in fiscal
1999. Diluted EPS amounts were calculated based on weighted average shares
outstanding and common stock equivalents of 5,262,697 in fiscal 1997, 6,143,017
in fiscal 1998, and 6,827,528 in fiscal 1999. Additional shares included in the
diluted earnings per share calculations are attributable to incremental shares
issuable upon the assumed exercise of stock options.

Capital Structure -- On October 23, 1998, the Company sold 1,111,111 shares of
common stock for a price of $9.00 per share to TC Leasing LLC, a Delaware
limited liability company. In addition, the Company granted TC Leasing LLC stock
purchase warrants granting the right to purchase an additional 1,090,909 shares
of common stock at a price of $11.00 per share, subject to certain anti-dilution
adjustments. The warrant is exercisable through December 31, 2001, unless it is
extended under the terms of the warrant. Pursuant to a purchase agreement, the
Company's ability to pay dividends is restricted through October 23, 1999.

On July 1, 1997, the Company sold 161,329 shares of common stock to a single
investor for $12.40 per share.

2. INVESTMENT IN DIRECT FINANCING AND SALES-TYPE LEASES

The Company's investment in direct financing and sales-type leases consists of
the following components:

<TABLE>
<CAPTION>
AS OF MARCH 31,
------------------
1998 1999
------- --------
(IN THOUSANDS)
<S> <C> <C>
Minimum lease payments...................................... $29,968 $ 75,449
Estimated unguaranteed residual value....................... 7,084 17,777
Initial direct costs, net of amortization(1)................ 760 1,606
Less: Unearned lease income................................. (5,270) (10,915)
Reserve for credit losses.............................. (46) (546)
------- --------
Investment in direct finance and sales type leases, net..... $32,496 $ 83,371
======= ========
</TABLE>

- ---------------

(1) Initial direct costs are shown net of amortization of $1,592 and $2,590 at
March 31, 1998 and 1999, respectively.

Future scheduled minimum lease rental payments as of March 31, 1999 are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
--------------------- (IN THOUSANDS)
<S> <C>
2000........................................................ $35,189
2001........................................................ 26,168
2002........................................................ 12,723
2003........................................................ 1,021
2004 and thereafter......................................... 348
-------
$75,449
=======
</TABLE>

The Company's net investment in direct financing and sales-type leases is
collateral for nonrecourse and recourse equipment notes. See Note 5.

F-10
<PAGE> 62
EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. INVESTMENT IN OPERATING LEASE EQUIPMENT

Investment in operating leases primarily represents equipment leased for two to
three years. The components of the net investment in operating lease equipment
are as follows:

<TABLE>
<CAPTION>
AS OF MARCH 31,
-----------------
1998 1999
------- -------
(IN THOUSANDS)
<S> <C> <C>
Cost of equipment under operating leases.................... $13,990 $ 8,742
Initial direct costs........................................ 51 21
Less: Accumulated depreciation and
Amortization.......................................... (6,745) (5,233)
------- -------
Investment in operating lease equipment, net................ $ 7,296 $ 3,530
======= =======
</TABLE>

As of March 31, 1999, future scheduled minimum lease rental payments are as
follows:

<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
--------------------- (IN THOUSANDS)
<S> <C>
2000........................................................ $1,790
2001........................................................ 88
2002........................................................ 43
2003........................................................ 19
------
$1,940
======
</TABLE>

Based on management's evaluation of estimated residual values included within
the Company's operating lease portfolio, certain recorded residuals were written
down to reflect revised market conditions. In accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To
Be Disposed Of," an impairment loss of $153,435 was recognized in the year ended
March 31, 1997. Impairment losses are reflected as a component of direct lease
costs in the accompanying consolidated statements of earnings.

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
AS OF MARCH 31,
----------------
1998 1999
------ -------
(IN THOUSANDS)
<S> <C> <C>
Furniture, fixtures and equipment........................... $1,157 $ 2,333
Vehicles.................................................... 138 139
Capitalized software........................................ 477 635
Leasehold improvements...................................... 24 193
Less: Accumulated depreciation and
Amortization.......................................... (664) (1,282)
------ -------
Property and equipment, net................................. $1,132 $ 2,018
====== =======
</TABLE>

F-11
<PAGE> 63
EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. RECOURSE AND NONRECOURSE NOTES PAYABLE

Recourse and nonrecourse obligations consist of the following:

<TABLE>
<CAPTION>
AS OF MARCH 31,
-----------------
1998 1999
------- -------
(IN THOUSANDS)
<S> <C> <C>
Recourse equipment notes secured by related investments in
leases with varying interest rates ranging from 7.50% to
9.74% in fiscal years 1998
and 1999.................................................. $ 272 $ 497
Recourse line of credit with a maximum balance of
$50,000,000 bearing interest at the LIBOR rate plus 150
basis points, or, at the Company's option, prime less 1/2%
expiring December, 1999................................... $ 0 $18,000
Recourse line of credit with a maximum balance of $2,500,000
bearing interest at prime................................. $ 0 $ 175
Recourse equipment notes with varying interest rates ranging
from 7.13% to 8.61%, secured by related investment in
equipment................................................. $ 0 $ 409
Recourse line of credit with a maximum balance of
$25,000,000, bearing interest at the LIBOR rate plus 1.1%,
or, at the Company's option, the prime rate less 100 basis
points, replaced by $50,000,000 line of credit in
December, 1998............................................ $12,750 $ 0
Term bank obligations with interest rates ranging from 8.25%
to prime plus 75 basis points............................. $ 10 $ 0
Loans from related parties with interest rates ranging from
8% to 10%................................................. $ 5 $ 0
------- -------
Total recourse obligations.................................. $13,037 $19,081
======= =======
Non-recourse equipment notes secured by related investments
in leases with interest rates ranging from 6.30% to 9.99%
in fiscal years 1998 and 1999............................. $13,028 $52,429
======= =======
</TABLE>

Principal and interest payments on the recourse and nonrecourse notes payable
are generally due monthly in amounts that are approximately equal to the total
payments due from the lessee under the leases that collateralize the notes
payable. Under recourse financing, in the event of a default by a lessee, the
lender has recourse against the lessee, the equipment serving as collateral, and
the borrower. Under nonrecourse financing, in the event of a default by a
lessee, the lender generally only has recourse against the lessee, and the
equipment serving as collateral, but not against the borrower.

Borrowings under the Company's $50 million line of credit are subject to certain
covenants regarding minimum consolidated tangible net worth, maximum recourse
debt to worth ratio, cash flow coverage, and minimum interest expense coverage
ratio. The borrowings are secured by the Company's assets such as leases,
receivables, inventory, and equipment. Borrowings are limited to the Company's
collateral base, consisting of equipment, lease receivables and other current
assets, up to a maximum of $50 million. In addition, the credit agreement
restricts, and under some circumstances prohibits the payment of dividends.

Recourse and nonrecourse notes payable as of March 31, 1999, mature as follows:

<TABLE>
<CAPTION>
RECOURSE NONRECOURSE
YEAR ENDING MARCH 31, NOTES PAYABLE NOTES PAYABLE
- --------------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C>
2000........................................................ $18,567 $43,025
2001........................................................ 231 4,333
2002........................................................ 151 4,418
2003........................................................ 102 607
2004 and thereafter......................................... 30 46
------- -------
$19,081 $52,429
======= =======
</TABLE>

6. RELATED PARTY TRANSACTIONS

The Company provided loans and advances to employees and/or stockholders, the
balances of which amounted to $53,582 and $20,078 as of March 31, 1998 and 1999,
respectively. Such balances are to be repaid from commissions earned on
successful sales or financing arrangements obtained on behalf of the Company, or
via scheduled payroll deductions.

F-12
<PAGE> 64
EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of March 31, 1998 and 1999, $85,020 and $(100,602) was receivable (payable)
from United Federal Leasing, which is owned in part by an individual related to
a Company executive. As of March 31, 1998 and 1999, the Company had fully
reserved for the receivable. During the year ended March 31, 1998, the Company
recognized re-marketing fees of $561,000 from United Federal Leasing.

At March 31, 1998 and 1999, accrued expenses and other liabilities include
$9,599 and $19,416, respectively, due to a company in which an
employee/stockholder has a 45% ownership interest. During the years ended March
31, 1998 and 1999, respectively, the Company recognized remarketing fees from
the company amounting to $216,828 and $88,180.

During the years ended March 31, 1997 and 1998, the Company sold leased
equipment to MLC/GATX Limited Partnership I (the "Partnership"), which amounted
to 0.3% and 0% of the Company's revenues, respectively. The Company has a 9.5%
limited partnership interest in the Partnership and owns a 50% interest in the
corporation that owns a 1% general partnership interest in the Partnership.
Revenue recognized from the sales was $3,452,902 and $406,159, the basis of the
equipment sold was $3,309,186 and $372,306 during the years ended March 31, 1997
and 1998, respectively. Other assets include $75,981, $136,664, and $(6,989) due
to (from) the Partnership as of March 31, 1997, 1998, 1999, respectively. Also
reflected in other assets is the Company's investment balance in the
Partnership, which is accounted for using the cost method, and amounts to
$226,835, $132,351, and $-0- as of March 31, 1997, 1998, and 1999 respectively.
In addition, the Company received $148,590, $104,277 and $-0- for the years
ended March 31, 1997, 1998 and 1999, respectively, for accounting and
administrative services provided to the Partnership.

During the years ended March 31, 1998 and 1999 the recoverability of certain
capital contributions made by the Company to the Partnership was determined to
be impaired. As a result, the Company recognized a write-down of its recorded
investment balance of $105,719 and $161,387 to reflect the revised net
realizable value. These write-downs are included in cost of sales in the
accompanying consolidated statements of earnings.

During the years ended March 31, 1997, 1998, and 1999, the Company sold leased
equipment to MLC/CLC LLC, a joint venture in which the Company has a 5%
ownership interest, that amounted to 20%, 38% and 42% of the Company's revenues,
respectively. Revenue recognized from the sales was $16,923,090, $44,784,727,
and $81,089,883, respectively. The basis for the equipment sold was $16,917,840,
$44,353,676, and $80,510,214, respectively. Notes receivable includes $3,709,508
and $518,955 due from the partnership as of March 31, 1998 and 1999. Other
assets reflects the investment in the joint venture of $736,364 and $1,389,065,
as of March 31, 1998 and 1999, respectively, accounted for using the cost
method. The Company receives an origination fee on leased equipment sold to the
joint venture. In addition, the Company recognized $170,709 and $301,708 for the
years ended March 31, 1998 and 1999 for accounting and administrative services
provided to MLC/CLC LLC.

During the year ended March 31, 1997, the Company recognized $250,000 in broker
fees for providing advisory services to a company which is owned in part by one
of the Company's outside directors.

The Company leases certain office space from entities which are owned, in part,
by executives of subsidiaries of the Company. During the years ended March 31,
1997, 1998, and 1999, rent expense paid to these related parties was $124,222,
$306,479, and $269,558, respectively.

The Company is reimbursed for certain general and administrative expenses by a
company owned, in part, by an executive of a subsidiary of the Company. The
reimbursements totaled $176,075, $81,119, and $25,500 for the years ended March
31, 1997, 1998 and 1999.

F-13
<PAGE> 65
EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. COMMITMENTS AND CONTINGENCIES

The Company leases office space and certain office equipment for the conduct of
its business. Rent expense relating to these operating leases was $347,553,
$505,032, and $629,456 for the years ended March 31, 1997, 1998, and 1999,
respectively. As of March 31, 1999, the future minimum lease payments are due as
follows:

<TABLE>
<CAPTION>
YEAR ENDING MARCH 31,
- ---------------------
<S> <C>
1999........................................................ $ 760,330
2000........................................................ 633,831
2001........................................................ 337,986
2002........................................................ 251,345
2003 and thereafter......................................... 350,303
----------
$2,333,795
==========
</TABLE>

As of March 31, 1998, the Company had guaranteed $172,565 of the residual value
for equipment owned by the MLC/GATX Limited Partnership I. No guarantee was made
for the year ended March 31, 1999.

8. INCOME TAXES

A reconciliation of income tax computed at the statutory Federal rate to the
provision for income tax included in the consolidated statements of earnings is
as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Statutory Federal income tax rate........................... 34% 34% 34%
Income tax expense computed at the statutory Federal rate... $1,649,458 $2,968,195 $3,840,331
Income tax expense based on the statutory Federal rate for
subsidiaries which were Sub-S prior to their combination
with the Company.......................................... (343,658) (568,893) (0)
State income tax expense, net of Federal tax................ 48,641 250,692 528,447
Non-taxable interest income................................. (33,023) (35,350) (16,137)
Non-deductible expenses..................................... 38,582 76,246 225,984
---------- ---------- ----------
Provision for income taxes.................................. $1,360,000 $2,690,890 $4,578,625
========== ========== ==========
Effective tax rate.......................................... 28.0% 30.8% 40.5%
========== ========== ==========
</TABLE>

The components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
----------------------------
1997 1998 1999
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................... $1,152 $1,669 $ 2,519
State..................................................... 87 125 255
------ ------ -------
1,239 1,794 2,774
------ ------ -------
Deferred:
Federal................................................... $ 113 $ 802 $ 1,259
State..................................................... 8 95 546
------ ------ -------
121 897 1,805
------ ------ -------
$1,360 $2,691 $ 4,579
====== ====== =======
</TABLE>

F-14
<PAGE> 66
EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the deferred tax expense (benefit) resulting from net
temporary differences are as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
MARCH 31,
----------------------
1997 1998 1999
----- ---- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Alternative minimum tax..................................... $ 369 $ 18 $(1,207)
Lease revenue recognition................................... (248) 797 2,740
Other....................................................... -- 82 272
----- ---- -------
$ 121 $897 $ 1,805
===== ==== =======
</TABLE>

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. The tax effects of items
comprising the Company's deferred tax liability consists of the following:

<TABLE>
<CAPTION>
AS OF MARCH 31,
-----------------
1998 1999
------- -------
(IN THOUSANDS)
<S> <C> <C>
Alternative minimum tax..................................... $ 232 $ 1,539
Lease revenue recognition................................... (1,637) (4,720)
Other....................................................... (82) (111)
------- -------
$(1,487) $(3,292)
======= =======
</TABLE>

During the year ended March 31, 1998, the Company entered into business
combinations with companies which, prior to their combination with the Company,
had elected to be treated as Sub-chapter "S" ("Sub-S") corporations. As Sub-S
corporations, taxable income and losses were passed through the corporate entity
to the individual shareholders. These business combinations were accounted for
using the pooling of interests method. Therefore, the consolidated financial
statements do not reflect a provision for income taxes relating to the pooled
companies for the periods prior to their combination with the Company.

In accordance with Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes," the following pro forma income tax information is
presented as if the pooled companies had been subject to federal income taxes
throughout the periods presented.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Net earnings before pro forma adjustment.................... $3,491,346 $6,039,094 $6,716,467
Additional provision for income taxes....................... (357,910) (613,261) 0
---------- ---------- ----------
Pro forma net earnings...................................... $3,133,436 $5,425,833 $6,716,467
========== ========== ==========
</TABLE>

9. NONCASH INVESTING AND FINANCING ACTIVITIES

The Company recognized a reduction in recourse and nonrecourse notes payable
(Note 5) associated with its direct finance and operating lease activities from
payments made directly by customers to the third-party lenders amounting to
$4,214,444, $5,258,955 and $10,733,555 for the years ended March 31, 1997, 1998,
and 1999, respectively. In addition, the Company realized a reduction in
recourse and nonrecourse notes payable from the sale of the associated assets
and liabilities amounting to $18,057,569, $1,057,389 and $10,231,793 for the
years ended March 31, 1997, 1998, and 1999, respectively.

10. BENEFIT AND STOCK OPTION PLANS

The Company provides its employees with contributory 401(k) profit sharing
plans. To be eligible to participate in the plan, employees must be at least 21
years of age and have completed a minimum service requirement. Full vesting in
the plans vary from after the fourth to the sixth consecutive year of plan
participation. Employer contributions percentages are determined by

F-15
<PAGE> 67
EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Company and are discretionary each year. The Company's expense for the plans
was $56,291, $80,291 and $104,617 for the years ended March 31, 1997, 1998 and
1999, respectively.

The Company has established a stock incentive program (the "Master Stock
Incentive Plan") to provide an opportunity for directors, executive officers,
independent contractors, key employees, and other employees of the Company to
participate in the ownership of the Company. The Master Stock Incentive Plan
provides for the award to eligible directors, employees, and independent
contractors of the Company, of a broad variety of stock-based compensation
alternatives under a series of component plans. These component plans include
tax advantaged incentive stock options for employees under the Incentive Stock
Option Plan, formula length of service based nonqualified options to nonemployee
directors under the Outside Director Stock Plan, nonqualified stock options
under the Nonqualified Stock Option Plan, a program for employee purchase of
Common Stock of the Company at 85% of fair market value under a tax advantaged
Employee Stock Purchase Plan approved by the Board of Directors and effective
September 16, 1998, as well as other restrictive stock and performance based
stock awards and programs which may be established by the Board of Directors.
The aggregate number of shares reserved for grant under all plans which are a
part of the Master Stock Incentive Plan represent a floating number equal to 20%
of the issued and outstanding stock of the Company (after giving effect to pro
forma assumed exercise of all outstanding options and purchase rights). The
number that may be subject to options granted under the Incentive Stock Option
Plan is also further capped at a maximum of 4,000,000 shares to comply with IRS
requirements for a specified maximum. As of March 31, 1999 a total of 1,650,100
shares of common stock have been reserved for issuance upon exercise of options
granted under the Plan, which encompasses the following component plans:

a) the Incentive Stock Option Plan ("ISO Plan"), under which 265,900
options are outstanding or have been exercised as of March 31, 1999;

b) the Nonqualified Stock Option Plan ("Nonqualified Plan"), under
which 265,000 options are outstanding as of March 31, 1999;

c) the Outside Director Stock Option Plan ("Outside Director Plan"),
under which 63,507 are outstanding as of March 31, 1999;

d) the Employee Stock Purchase Plan ("ESPP") under which 185,500
shares have been issued as of March 31, 1999.

The exercise price of options granted under the Master Stock Incentive Plan is
equivalent to the fair market value of the Company's stock on the date of grant,
or, in the case of the ESPP, not less than 85% of the lowest fair market value
of the Company's stock during the purchase period, which is generally six
months. Options granted under the plan have various vesting schedules with
vesting periods ranging from one to five years. The weighted average fair value
of options granted during the years ended March 31, 1997, 1998 and 1999 was
$5.10, $4.84 and $3.69 per share, respectively.

F-16
<PAGE> 68
EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of stock option activity during the three years ended March 31, 1999
is as follows:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF EXERCISE PRICE AVERAGE EXERCISE
SHARES RANGE PRICE
--------- --------------- ----------------
<S> <C> <C> <C>
Outstanding, April 1, 1996............................ -- -- --
Options granted....................................... 353,800 $6.40 - $10.75 $ 8.20
Options exercised..................................... -- -- --
Options forfeited..................................... -- -- --
-------
Outstanding, March 31, 1997........................... 353,800
=======
Exercisable, March 31, 1997........................... 66,250
=======
Outstanding, April 1, 1997............................ 353,800 -- --
Options granted....................................... 277,200 $10.75 - $13.25 $11.94
Options exercised..................................... (200) $ 8.75 $ 8.75
Options forfeited..................................... (18,900) $8.75 - $13.00 $11.18
-------
Outstanding, March 31, 1998........................... 611,900
=======
Exercisable, March 31, 1998........................... 199,540
=======
Outstanding, April 1, 1998............................ 611,900 -- --
Options granted....................................... 275,507 $7.25 - $13.63 $ 9.89
Options exercised..................................... (10,500) $ 8.75 $ 8.75
Options forfeited..................................... (97,000) $8.75 - $13.50 $12.57
-------
Outstanding, March 31, 1999........................... 779,907
=======
Exercisable, March 31, 1999........................... 326,566
=======
</TABLE>

Additional information regarding options outstanding as of March 31, 1999 is as
follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------------------------- --------------------------------
WEIGHTED AVERAGE
NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
779,907 8.0 years $9.53 326,566 $9.30
</TABLE>

Effective April 1, 1996, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." This Statement gave the Company the option of either
(1) continuing to account for stock-based employee compensation plans in
accordance with the guidelines established by Accounting Principles Board
("APB") No. 25, "Accounting for Stock Issued to Employees" while providing the
disclosures required under SFAS No. 123, or (2) adopting SFAS No. 123 accounting
for all employee and non-employee stock compensation arrangements. The Company
opted to continue to account for its stock-based awards using the intrinsic
value method in accordance with APB No. 25. Accordingly, no compensation expense
has been recognized in the financial statements for employee stock arrangements.
Option grants made to non-employees, including outside directors, which have
been accounted for using the fair value method resulted in $113,982 in
compensation expense during the year ended

F-17
<PAGE> 69
EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

March 31, 1998. The following table summarizes the pro forma disclosures
required by SFAS No. 123 assuming the Company had adopted the fair value method
for stock-based awards to employees as of the beginning of fiscal year 1998:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Net earnings, as reported................................... $3,491,346 $6,039,094 $6,716,467
Net earnings, pro forma..................................... 3,198,669 5,346,761 5,687,667
Basic earnings per share, as reported....................... $ 0.67 $ 1.00 $ 0.99
Basic earnings per share, pro forma......................... 0.62 0.89 0.84
Diluted earnings per share, as reported..................... $ 0.66 $ 0.98 $ 0.98
Diluted earnings per share, pro forma....................... 0.61 0.87 0.83
</TABLE>

Under SFAS No. 123, the fair value of stock-based awards to employees is derived
through the use of option pricing models which require a number of subjective
assumptions. The Company's calculations were made using the Black-Scholes option
pricing model with the following weighted average assumptions:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Options granted under the Incentive Stock Option Plan:
Expected life of option................................... 5 years 5 years 5 years
Expected stock price volatility........................... 44.00% 30.95% 37.02%
Expected dividend yield................................... 0% 0% 0%
Risk-free interest rate................................... 5.81% 5.82% 5.46%
Options granted under the Nonqualified Stock Option Plan:
Expected life of option................................... 8 years 8 years 5 years
Expected stock price volatility........................... 44.00% 30.95% 37.02%
Expected dividend yield................................... 0% 0% 0%
Risk-free interest rate................................... 6.05% 5.62% --
Options granted under the Outside Director Stock Option
Plan:
Expected life of option................................... -- -- 8 years
Expected stock price volatility........................... -- -- 37.02%
Expected dividend yield................................... -- -- 0%
Risk-free interest rate................................... -- -- 4.95%
Options granted under the Employee Stock Purchase Plan:
Expected life of option................................... -- -- 5 years
Expected stock price volatility........................... -- -- 37.02%
Expected dividend yield................................... -- -- 0%
Risk-free interest rate................................... -- -- 4.74%
</TABLE>

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of the Company's financial
instruments is in accordance with the provisions of SFAS No. 107, "Disclosures
About Fair Value of Financial Instruments." The valuation methods used by the
Company are set forth below.

The accuracy and usefulness of the fair value information disclosed herein is
limited by the following factors:

- - These estimates are subjective in nature and involved uncertainties and
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.

- - These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holding of a particular
financial asset.

F-18
<PAGE> 70
EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- - SFAS No. 107 excludes from its disclosure requirements lease contracts and
various significant assets and liabilities that are not considered to be
financial instruments.

Because of these and other limitations, the aggregate fair value amounts
presented in the following table do not represent the underlying value of the
Company.

The carrying amounts and estimated fair values of the Company's financial
instruments are as follows:

<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF MARCH 31,
1998 1999
------------------ ------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- --------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents................................ $18,684 $18,684 $7,892 $7,892
Liabilities:
Nonrecourse notes payable................................ 13,028 12,973 52,429 55,341
Recourse notes payable................................... 13,037 13,033 19,081 19,092
</TABLE>

12. BUSINESS COMBINATIONS

During the year ended March 31, 1998, the Company acquired Compuventures of Pitt
County, Inc. ("Compuventures") and Educational Computer Concepts, Inc. ("ECCI"),
both value added resellers of personal computers and related network equipment
and software products. These business combinations have been accounted for as
pooling of interests, and accordingly, the consolidated financial statements for
periods prior to the combinations have been restated to include the accounts and
results of operations of the pooled companies. The results of operations
previously reported by the Company and the pooled companies and the combined
amounts presented in the accompanying consolidated financial statements are
presented below.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
MARCH 31,
------------------
1997 1998
------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
MLC Holdings, Inc. ....................................... $55,711 $ 77,178
Pooled companies.......................................... 30,502 41,264
------- --------
Combined.................................................. $86,213 $118,442
======= ========
Net earnings:
MLC Holdings, Inc. ....................................... $ 2,481 $ 3,785
Pooled companies.......................................... 1,010 2,254
------- --------
Combined.................................................. $ 3,491 $ 6,039
======= ========
</TABLE>

During the year ended March 31, 1999, the Company acquired PC Plus, Inc., a
value-added reseller of personal computers, related network equipment and
software products and provider of various support services. This business
combination has been accounted for as a purchase.

The following pro forma financial information presents the combined results of
operations of PC Plus, Inc. as if the acquisition had occurred as of the
beginning of the twelve months ended March 31, 1998 and 1999, after giving
effect to certain

F-19
<PAGE> 71
EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

adjustments, including amortization of goodwill. The pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had the Company and PC Plus, Inc. constituted a single entity
during such periods.

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------
1998 1999
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Total Revenues.............................................. $156,321 $205,944
Net Earnings................................................ 6,885 6,956
Net Earnings per Common Share -- Basic...................... 1.09 1.03
Net Earnings per Common Share -- Diluted.................... 1.07 1.02
</TABLE>

13. PRIVATE PLACEMENTS OF COMMON STOCK

On July 1, 1997, the Company sold 161,329 shares of common stock to a single
investor for a price of $9.00 per share.

On October 23, 1998, the Company sold 1,111,111 shares of common stock to TC
Leasing, LLC, a Delaware limited liability company, for a price of $9.00 per
share. In addition, the Company granted to TC Leasing, LLC, a stock purchase
warrant granting the right to purchase an additional 1,090,909 shares of common
stock at a price of $11.00 per share, subject to certain anti-dilution
adjustments. The warrant is exercisable through December 31, 2001, unless
extended pursuant to the terms of the warrant. Pursuant to the terms of this
private placement, the Company agreed to expand its' Board of Directors to six
persons, four of whom shall be appointed, in whole or in part, by TC Leasing,
LLC. Additionally, the terms of the private placement restrict the Company's
ability to pay dividends until October 23, 1999 without the consent of TC
Leasing, LLC.

14. 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 lease
financing and value-added re-seller business units. The lease financing business
unit offers lease financing solutions to corporations and governmental entities
nationwide. The value-added re-seller business unit sells information technology
equipment and related services primarily to corporate customers in the eastern
United States. The Company's management evaluates segment performance on the
basis of segment earnings.

The accounting policies of the segments are the same as those described in Note
1, "Organization and Summary of Significant Accounting Policies." 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.

<TABLE>
<CAPTION>
LEASE VALUE-ADDED
FINANCING RE-SELLING TOTAL
--------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
YEAR ENDED AND AS OF MARCH 31, 1997
Revenues.................................................. $ 56,147 $30,066 $ 86,213
Interest expense.......................................... 1,581 68 1,649
Earnings before income taxes.............................. 3,841 1,010 4,851
Assets.................................................... 42,317 6,707 49,024
YEAR ENDED AND AS OF MARCH 31, 1998
Revenues.................................................. 77,178 41,264 118,442
Interest expense.......................................... 1,732 105 1,837
Earnings before income taxes.............................. 6,143 2,587 8,730
Assets.................................................... 66,960 16,236 83,196
YEAR ENDED AND AS OF MARCH 31, 1999
Revenues.................................................. 110,362 83,608 193,970
Interest expense.......................................... 3,367 234 3,601
Earnings before income taxes.............................. 8,649 2,646 11,295
Assets.................................................... 129,425 24,934 154,359
</TABLE>

F-20
<PAGE> 72
EPLUS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. QUARTERLY DATA -- UNAUDITED

Condensed quarterly financial information is as follows (amounts in thousands,
except per share amounts). Adjustments reflect the results of operations of
business combinations accounted for under the pooling of interests method and
the reclassification of certain prior period amounts to conform with current
period presentation.

F-21
<PAGE> 73

EPLUS INC. AND SUBSIDIARIES

CONDENSED QUARTERLY

<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER
----------------------------------- -----------------------------------
PREVIOUSLY ADJUSTED PREVIOUSLY ADJUSTED
REPORTED ADJUSTMENTS AMOUNT REPORTED ADJUSTMENTS AMOUNT
---------- ----------- -------- ---------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1998
Sales......................................... $35,273 $ -- $35,273 $22,407 $ -- $22,407
Total revenues................................ 40,146 -- 40,146 26,869 -- 26,869
Cost of sales................................. 31,892 -- 31,892 19,773 -- 19,773
Total costs and expenses...................... 37,499 -- 37,499 25,335 -- 25,335
Earnings before provision for income taxes.... 2,647 -- 2,647 1,534 -- 1,534
Provision for income taxes.................... 460 -- 460 412 -- 412
Net earnings........................ 2,187 -- 2,187 1,122 -- 1,122
------- ------- ------- -------
Net earnings per common
share -- Basic.................... $ 0.37 $ 0.37 $ 0.19 $ 0.19
======= ======= ======= =======
YEAR ENDED MARCH 31, 1999
Sales......................................... $35,185 -- $35,185 $31,479 -- $31,479
Total Revenues................................ 41,583 -- 41,583 38,001 -- 38,001
Cost of Sales................................. 33,097 -- 33,097 28,065 -- 28,065
Total Costs and Expenses...................... 39,143 -- 39,143 35,268 -- 35,268
Earnings before provision for income taxes.... 2,440 -- 2,440 2,733 -- 2,733
Provision for income taxes.................... 976 -- 976 1,093 -- 1,093
Earnings before extraordinary item............ 1,464 -- 1,464 1,640 -- 1,640
Net earnings........................ 1,464 -- 1,464 1,640 -- 1,640
------- ------- ------- -------
Net earnings per common share....... $ 0.24 $ 0.24 $ 0.26 $ 0.26
======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
THIRD QUARTER FOURTH QUARTER
----------------------------------- -----------------------------------
PREVIOUSLY ADJUSTED PREVIOUSLY ADJUSTED
REPORTED ADJUSTMENTS AMOUNT REPORTED ADJUSTMENTS AMOUNT
---------- ----------- -------- ---------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 31, 1998
Sales......................................... $18,097 $ -- $18,097 $22,004 $ -- $22,004
Total revenues................................ 23,276 -- 23,276 28,151 -- 28,151
Cost of sales................................. 15,625 -- 15,625 19,802 -- 19,802
Total costs and expenses...................... 21,148 -- 21,148 25,730 -- 25,730
Earnings before provision for income taxes.... 2,128 -- 2,128 2,421 -- 2,421
Provision for income taxes.................... 851 -- 851 968 -- 968
Earnings before extraordinary item............ 1,277 -- 1,277 -- -- --
Extraordinary gain............................ -- -- -- -- -- --
Net earnings........................ 1,277 -- 1,277 1,453 -- 1,453
------- ------- ------- -------
Net earnings per common
share -- Basic.................... $ 0.21 $ 0.21 $ 0.24 $ 0.24
======= ======= ======= =======
YEAR ENDED MARCH 31, 1999
Sales......................................... $63,689 -- $63,689 $37,542 -- $37,542
Total Revenues................................ 69,947 -- 69,947 44,439 -- 44,439
Cost of Sales................................. 59,625 -- 59,625 33,849 -- 33,849
Total Costs and Expenses...................... 67,117 -- 67,117 41,147 -- 41,147
Earnings before provision for income taxes.... 2,830 -- 2,830 3,292 -- 3,292
Provision for income taxes.................... 1,132 -- 1,132 1,378 -- 1,378
Earnings before extraordinary item............ 1,698 -- 1,698 1,914 -- 1,914
Net earnings........................ 1,698 -- 1,698 1,914 -- 1,914
------- ------- ------- -------
Net earnings per common share....... $ 0.24 $ 0.24 $ 0.25 $ 0.25
======= ======= ======= =======
</TABLE>

F-22
<PAGE> 74

EPLUS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
UNAUDITED

<TABLE>
<CAPTION>
AS OF AS OF
MARCH 31, 1999 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................. $ 7,891,661 $ 11,687,340
Accounts receivable....................................... 44,090,101 63,387,971
Notes receivable.......................................... 547,011 4,951,519
Employee advances......................................... 20,078 82,235
Inventories............................................... 658,355 1,837,161
Investment in direct financing and sales type
leases -- net.......................................... 83,370,950 204,280,675
Investment in operating lease equipment -- net............ 3,530,179 11,684,087
Property and equipment -- net............................. 2,018,133 2,533,112
Other assets.............................................. 12,232,130 19,415,758
------------ ------------
Total Assets...................................... $154,358,598 $319,859,858
============ ============

LIABILITIES
Accounts payable -- trade................................. $ 12,518,533 $ 30,192,860
Accounts payable -- equipment............................. 18,049,059 18,515,180
Salaries and commissions payable.......................... 535,876 960,781
Accrued expenses and other liabilities.................... 4,638,708 3,080,799
Recourse notes payable.................................... 19,081,137 30,709,254
Nonrecourse notes payable................................. 52,429,266 179,102,322
Deferred taxes............................................ 3,292,210 3,292,210
------------ ------------
Total Liabilities................................. 110,544,789 265,853,406
Commitments and Contingencies............................... -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 2,000,000 shares
authorized; none issued or outstanding................. -- --
Common stock, $.01 par value; 25,000,000 authorized;
7,470,595 and 7,904,544 issued and outstanding at March
31, 1999 and December 31, 1999, respectively........... 74,706 79,045
Additional paid-in capital................................ 24,999,371 29,225,488
Retained earnings......................................... 18,739,732 24,701,919
------------ ------------
Total Stockholders' Equity........................ 43,813,809 54,006,452
------------ ------------
Total Liabilities and Stockholders'
Equity.......................................... $154,358,598 $319,859,858
============ ============
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

F-23
<PAGE> 75

EPLUS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED

<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-------------------------
1998 1999
----------- -----------
<S> <C> <C>
REVENUES
Sales of equipment........................................ $25,635,591 $47,188,893
Sales of leased equipment................................. 38,053,115 16,360,757
----------- -----------
63,688,706 63,549,650
Lease revenues............................................ 4,745,035 9,467,586
Fee and other income...................................... 1,512,952 2,925,506
ePlusSuite(SM) revenues................................... -- 297,453
----------- -----------
6,257,987 12,690,545
----------- -----------
Total Revenues.................................... 69,946,693 76,240,195
----------- -----------
COSTS AND EXPENSES
Cost of sales, equipment.................................. 22,148,807 42,315,260
Cost of sales, leased equipment........................... 37,476,294 15,309,659
----------- -----------
59,625,101 57,624,919
Direct lease costs........................................ 1,550,955 3,116,460
Professional and other fees............................... 375,094 566,365
Salaries and benefits..................................... 3,106,179 5,101,722
General and administrative expenses....................... 1,318,912 1,841,111
Interest and financing costs.............................. 1,140,617 4,038,850
----------- -----------
7,491,757 14,664,508
----------- -----------
Total Costs and Expenses.......................... 67,116,858 72,289,427
----------- -----------
Earnings Before Provision for Income Taxes.................. 2,829,835 3,950,768
----------- -----------
Provision for Income Taxes.................................. 1,131,934 1,580,340
----------- -----------
Net Earnings................................................ $ 1,697,901 $ 2,370,428
=========== ===========
Net Earnings Per Common Share -- Basic...................... $ 0.24 $ 0.30
=========== ===========
Net Earnings Per Common Share -- Diluted.................... $ 0.24 $ 0.26
=========== ===========
Weighted Average Shares Outstanding -- Basic................ 7,189,324 7,885,729
Weighted Average Shares Outstanding -- Diluted.............. 7,220,060 9,092,317
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

F-24
<PAGE> 76

EPLUS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
UNAUDITED

<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
---------------------------
1998 1999
------------ ------------
<S> <C> <C>
REVENUES
Sales of equipment........................................ $ 55,740,476 $118,850,359
Sales of leased equipment................................. 74,612,679 44,882,169
------------ ------------
130,353,155 163,732,528
Lease revenues............................................ 14,994,505 21,816,694
Fee and other income...................................... 4,182,928 5,956,374
ePlusSuite(SM) revenues................................... -- 297,453
------------ ------------
19,177,433 28,070,521
------------ ------------
Total Revenues.................................... 149,530,588 191,803,049
------------ ------------
COSTS AND EXPENSES
Cost of sales, equipment.................................. 47,157,230 106,363,250
Cost of sales, leased equipment........................... 73,630,008 42,969,242
------------ ------------
120,787,238 149,332,492
Direct lease costs........................................ 5,221,414 5,408,846
Professional and other fees............................... 894,587 1,387,540
Salaries and benefits..................................... 8,508,006 13,688,322
General and administrative expenses....................... 3,618,588 4,817,067
Interest and financing costs.............................. 2,498,012 7,231,746
------------ ------------
20,740,607 32,533,521
------------ ------------
Total Costs and Expenses.......................... 141,527,845 181,866,013
------------ ------------
Earnings Before Provision for Income Taxes.................. 8,002,743 9,937,036
------------ ------------
Provision for Income Taxes.................................. 3,201,099 3,974,847
------------ ------------
Net Earnings................................................ $ 4,801,644 $ 5,962,189
============ ============
Net Earnings Per Common Share -- Basic...................... $ 0.73 $ 0.78
============ ============
Net Earnings Per Common Share -- Diluted.................... $ 0.72 $ 0.70
============ ============
Weighted Average Shares Outstanding -- Basic................ 6,540,359 7,618,700
Weighted Average Shares Outstanding -- Diluted.............. 6,648,754 8,554,461
</TABLE>

See Notes to Condensed Consolidated Financial Statements.

F-25
<PAGE> 77

EPLUS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED

<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
---------------------------
1998 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.............................................. $ 4,801,644 $ 5,962,189
Adjustments to reconcile net earnings to net cash used in
operating activities:
Depreciation and amortization.......................... 3,850,449 4,979,393
Increase in provision for credit losses................ 500,000 360,000
Gain on sale of operating lease equipment.............. (5,267) (402,036)
Loss on disposal of property and equipment............. 9,809 45,798
Adjustment of basis to fair market value of equipment
and investments....................................... 268,506 9,000
Payments from lessees directly to lenders.............. (771,465) (4,043,648)
Changes in assets and liabilities, net of effects of
purchase acquisitions:
Accounts receivable.................................. (5,837,220) (16,369,538)
Other receivables.................................... (2,811,095) (3,998,476)
Employee advances.................................... 26,630 (54,496)
Inventories.......................................... 1,036,507 4,087,197
Other assets......................................... (2,764,961) 341,043
Accounts payable -- equipment........................ (1,397,591) 466,121
Accounts payable -- trade............................ (2,032,538) 11,287,990
Salaries and commissions payable, accrued expenses
and other liabilities............................... 2,195,466 (3,413,888)
------------ ------------
Net cash used in operating activities............. (2,931,126) (743,351)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of operating lease equipment........... 22,151 781,599
Purchase of operating lease equipment..................... (1,824,989) (1,385,105)
Increase in investment in direct financing and sales-type
leases................................................. (66,557,986) (83,492,103)
Purchases of property and equipment....................... (915,346) (980,036)
Proceeds from sale of property and equipment.............. 2,000 --
Cash used in acquisitions, net of cash acquired........... (3,485,279) (1,845,730)
Increase in other assets.................................. (709,216) (135,718)
------------ ------------
Net cash used in investing activities............. (73,468,665) (87,057,093)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings:
Nonrecourse............................................ 53,236,003 82,444,589
Recourse............................................... 319,586 4,905,701
Repayments:
Nonrecourse............................................ (3,640,341) (6,727,946)
Recourse............................................... (136,833) (938,773)
Proceeds from issuance of capital stock, net of
expenses............................................... 177,931 330,030
Proceeds from sale of stock, net of underwriting costs.... 9,725,742 --
Proceeds from lines of credit............................. 5,440,157 11,582,522
------------ ------------
Net cash provided by financing activities......... 65,122,245 91,596,123
------------ ------------
Net (Decrease) Increase in Cash and Cash Equivalents........ (11,277,546) 3,795,679
Cash and Cash Equivalents, Beginning of Period.............. 18,683,796 7,891,661
------------ ------------
Cash and Cash Equivalents, End of Period.................... $ 7,406,250 $ 11,687,340
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest.................................... $ 990,676 $ 2,797,802
Cash paid for income taxes................................ $ 2,443,818 $ 4,463,357
</TABLE>

See Notes To Condensed Consolidated Financial Statements.

F-26
<PAGE> 78

EPLUS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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, 1999 (the "Company's
1999 Form 10-K"). Operating results for the interim periods are not necessarily
indicative of results for an entire year.

2. INVESTMENT IN DIRECT FINANCING AND SALES TYPE LEASES

The Company's investment in direct financing and sales type leases consists of
the following components:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1999
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Minimum lease payments...................................... $ 75,449 $197,366
Estimated unguaranteed residual value....................... 17,777 31,471
Initial direct costs -- net of amortization................. 1,606 2,419
Less: Unearned lease income................................. (10,915) (25,429)
Reserve for credit losses............................. (546) (1,546)
-------- --------
Investment in direct financing and sales type
leases -- net............................................. $ 83,371 $204,281
======== ========
</TABLE>

3. INVESTMENT IN OPERATING LEASE EQUIPMENT

The components of the net investment in operating lease equipment are as
follows:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1999
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Cost of equipment under operating leases.................... $ 8,742 $ 28,820
Initial direct costs........................................ 21 20
Less: Accumulated depreciation and amortization............. (5,233) (17,156)
------- --------
Investment in operating lease equipment -- net.............. $ 3,530 $ 11,684
======= ========
</TABLE>

4. BUSINESS COMBINATIONS

On July 12, 1999, the Company purchased certain assets and the sales operations
of Daghigh Software Company, Inc., which operated its technology sales business
as International Computer Networks and as ICN in the metropolitan Washington, DC
area. The total consideration of $751,452 consisted of $251,452 in cash and a
$500,000, 8% interest bearing, non-negotiable promissory note, payable monthly,
which matures on August 9, 2000. The assets and staff were merged into PC Plus,
Inc., a wholly-owned subsidiary of the Company. Goodwill in the amount of
$632,667 is being amortized on a straight-line basis over a fifteen year period.

On September 30, 1999, the Company purchased all of the stock of CLG, Inc., a
technology equipment leasing business, from Centura Bank. The acquisition added
approximately 400 customers and $93 million of assets to the Company's leasing
customer base in the Raleigh and Charlotte, North Carolina, Greenville, South
Carolina, and southern Virginia commercial markets. Total consideration for the
acquisition was $36.5 million, paid by the issuance of 392,990 shares of ePlus
inc. common stock valued at $3,900,425 (based on $9.925 per share), subordinated
debt of $3,064,574 and $29,535,001 in cash. The subordinated debt bears annual
interest at 11%, payable monthly, and the principal repayment is due on October
10, 2006. The note may be prepaid in whole at anytime at its par value. The cash
portion was partially financed by a non-recourse borrowing under an agreement
with Fleet Business Credit Corporation, which provided $27,799,499 of cash at
7.25% and is collateralized by certain CLG, Inc. leases. Initial goodwill of
$7,869,636 is being amortized on a straight line basis over a

F-27
<PAGE> 79
EPLUS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

fifteen year period. Concurrent with the acquisition, CLG, Inc. was merged into
MLC Group, Inc., a wholly-owned subsidiary of EPlus inc.

The following unaudited pro-forma financial information presents the combined
results of operations of the Company and CLG, Inc. as if the acquisition had
occurred as of the beginning of the nine months ended December 31, 1998 and
1999, after giving effect to certain adjustments, including amortization of
goodwill. The pro forma financial information does not necessarily reflect the
results of operations that would have occurred had the Company and CLG, Inc.
constituted a single entity during such periods.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
-------------------
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Total revenues.............................................. $187,470 $208,458
Net earnings................................................ 5,468 5,652
Net earnings per common share -- basic...................... 0.79 0.72
Net earnings per common share -- diluted.................... 0.78 0.64
</TABLE>

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 and technology business units (previously known as the lease financing
and value added re-selling segments), as well as its newly created electronic
commerce ("e-commerce") business unit. The financing business unit offers lease
financing solutions to corporations and governmental entities nationwide. The
technology business unit sells information technology equipment and related
services primarily to corporate customers in the eastern United States. The
e-commerce business unit 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.

Sales of equipment for the e-commerce business unit represent customer equipment
purchases executed through Procure(+), an element of the Company's e-commerce
business solution. The amounts charged for using Procure(+) are presented as
EPlusSuite(SM) revenues in the statement of earnings. The e-commerce business
unit's assets consist primarily of capitalized software costs.

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 1999 Form 10-K. Amounts charged for the
e-commerce business unit's Procure(+) service are recognized as services are
rendered. Amounts charged for the Manage(+) service will be recognized on a
straight line basis over the period the services are to be provided, though no
such amounts have been recognized to date. Selected Accounting Policies are
described in "Item 2 -- Management's Discussion and Analysis of Results of
Operations and Financial Condition." Corporate overhead expenses are allocated
to the three segments on the

F-28
<PAGE> 80
EPLUS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

basis of revenue volume, estimates of actual time spent by corporate staff, and
asset utilization, depending on the type of expense.

<TABLE>
<CAPTION>
E-COMMERCE
FINANCING TECHNOLOGY BUSINESS
BUSINESS UNIT BUSINESS UNIT UNIT TOTAL
------------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
THREE MONTHS ENDED DECEMBER 31, 1998
Sales of equipment............................... $ 541,800 $ 25,093,791 $ -- $ 25,635,591
Sales of leased equipment........................ 38,053,115 -- -- 38,053,115
Lease revenues................................... 4,745,035 -- -- 4,745,035
Fee and other income............................. 892,794 620,158 -- 1,512,952
------------ ------------ ---------- ------------
Total Revenues................................ 44,232,744 25,713,949 -- 69,946,693
Cost of sales.................................... 37,986,717 21,638,384 -- 59,625,101
Direct lease costs............................... 1,550,955 -- -- 1,550,955
Selling, general and administrative expenses..... 1,813,571 2,986,614 -- 4,800,185
------------ ------------ ---------- ------------
Segment earnings................................. 2,881,501 1,088,951 -- 3,970,452
Interest expense................................. 1,043,885 96,732 -- 1,140,617
------------ ------------ ---------- ------------
Earnings before income taxes.................. 1,837,616 992,219 -- 2,829,835
============ ============ ========== ============
Assets........................................ $111,681,619 $ 26,038,574 $ -- $137,720,193
THREE MONTHS ENDED DECEMBER 31, 1999
Sales of equipment............................... $ 247,372 $ 45,417,558 $1,523,963 $ 47,188,893
Sales of leased equipment........................ 16,360,757 -- -- 16,360,757
Lease revenues................................... 9,467,586 -- -- 9,467,586
Fee and other income............................. 531,043 2,394,463 -- 2,925,506
ePlusSuite(SM) revenues.......................... -- -- 297,453 297,453
------------ ------------ ---------- ------------
Total Revenues................................ 26,606,758 47,812,021 1,821,416 76,240,195
Cost of sales.................................... 15,648,614 40,747,917 1,228,388 57,624,919
Direct lease costs............................... 3,116,460 -- -- 3,116,460
Selling, general and administrative expenses..... 2,962,062 4,367,465 179,671 7,509,198
------------ ------------ ---------- ------------
Segment earnings................................. 4,879,622 2,696,639 413,357 7,989,618
Interest expense................................. 3,917,808 121,042 -- 4,038,850
------------ ------------ ---------- ------------
Earnings before income taxes.................. 961,814 2,575,597 413,357 3,950,768
============ ============ ========== ============
Assets........................................ $271,330,332 $ 47,967,618 $ 561,908 $319,859,858
NINE MONTHS ENDED DECEMBER 31, 1998
Sales of equipment............................... $ 1,783,698 $ 53,956,778 $ -- $ 55,740,476
Sales of leased equipment........................ 74,612,679 -- -- 74,612,679
Lease revenues................................... 14,994,505 -- -- 14,994,505
Fee and other income............................. 2,420,331 1,762,597 -- 4,182,928
------------ ------------ ---------- ------------
Total Revenues................................ 93,811,213 55,719,375 -- 149,530,588
Cost of sales.................................... 75,094,329 45,692,909 -- 120,787,238
Direct lease costs............................... 5,221,414 -- -- 5,221,414
Selling, general and administrative expenses..... 5,418,955 7,602,226 -- 13,021,181
------------ ------------ ---------- ------------
Segment earnings................................. 8,076,515 2,424,240 -- 10,500,755
Interest expense................................. 2,305,514 192,498 -- 2,498,012
------------ ------------ ---------- ------------
Earnings before income taxes.................. 5,771,001 2,231,742 -- 8,002,743
============ ============ ========== ============
Assets........................................ $111,681,619 $ 26,038,574 $ -- $137,720,193
</TABLE>

F-29
<PAGE> 81
EPLUS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
E-COMMERCE
FINANCING TECHNOLOGY BUSINESS
BUSINESS UNIT BUSINESS UNIT UNIT TOTAL
------------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
NINE MONTHS ENDED DECEMBER 31, 1999
Sales of equipment............................... $ 473,548 $116,852,848 $1,523,963 $118,850,359
Sales of leased equipment........................ 44,882,169 -- -- 44,882,169
Lease revenues................................... 21,816,694 -- -- 21,816,694
Fee and other income............................. 958,296 4,998,078 -- 5,956,374
ePlusSuite(SM) revenues.......................... -- -- 297,453 297,453
------------ ------------ ---------- ------------
Total Revenues................................ 68,130,707 121,850,926 1,821,416 191,803,049
Cost of sales.................................... 43,488,500 104,615,604 1,228,388 149,332,492
Direct lease costs............................... 5,408,846 -- -- 5,408,846
Selling, general and administrative expenses..... 7,997,014 11,716,244 179,671 19,892,929
------------ ------------ ---------- ------------
Segment earnings................................. 11,236,347 5,519,078 413,357 17,168,782
Interest expense................................. 7,010,940 220,806 -- 7,231,746
------------ ------------ ---------- ------------
Earnings before income taxes.................. 4,225,407 5,298,272 413,357 9,937,036
============ ============ ========== ============
Assets........................................ $271,330,332 $ 47,967,618 $ 561,908 $319,859,858
</TABLE>

F-30
<PAGE> 82

INDEPENDENT AUDITORS' REPORT

The Board of Directors
CLG, Inc.:

We have audited the accompanying balance sheets of CLG, Inc. (the "Company") (a
wholly-owned subsidiary of Centura Bank) as of December 31, 1998 and 1997, and
the related statements of income, stockholder's equity and cash flows for each
of the years then ended and for the eleven months ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CLG, Inc. as of December 31,
1998 and 1997, and the results of its operations and its cash flows for each of
the years then ended and for the eleven months ended December 31, 1996, in
conformity with generally accepted accounting principles.

By: /s/ KPMG LLP
------------------------------------------
KPMG LLP
October 13, 1999
Raleigh, North Carolina

F-31
<PAGE> 83

CLG, INC.

BALANCE SHEETS
DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................. $ 4,303,414 $ 1,510,373
Receivables:
Customers.............................................. 2,020,145 2,156,736
Net investment in sales-type and direct financing
leases (note 2)....................................... 82,434,003 92,923,040
Miscellaneous receivables.............................. -- 5,178
Less: Allowance for doubtful accounts.................. (1,156,997) (457,637)
------------ ------------
Net Receivables................................... 83,297,151 94,627,317
Inventory held for lease or sale.......................... 4,563,346 4,856,742
Equipment on operating leases, net (note 2)............... 11,605,987 14,771,247
Equipment and leasehold improvements, net (note 3)........ 1,011,520 1,143,847
Recoverable income taxes.................................. 1,331,785 298,191
Prepaid expenses and other................................ 195,054 241,583
------------ ------------
Total Assets...................................... $106,308,257 $117,449,300
============ ============

LIABILITIES:
Accounts payable.......................................... 3,922,264 1,213,849
Accrued expenses.......................................... 1,713,137 1,419,295
Discounted lease rentals (note 4):
Nonrecourse.......................................... 35,440,479 53,806,976
Recourse............................................. 34,741,317 29,997,155
Deferred income taxes (note 6)............................ 3,604,829 7,000,576
Other liabilities......................................... 1,523,471 1,861,523
------------ ------------
Total Liabilities................................. 80,945,497 95,299,374
------------ ------------
Commitments and contingent liabilities (note 7)

STOCKHOLDER'S EQUITY:
Common stock, $1 par value; 50,000,000
shares authorized; 5,100 shares issued and
outstanding........................................... 5,100 5,100
Additional paid-in-capital................................ 1,092,489 41,105
Retained earnings......................................... 24,265,171 22,103,721
------------ ------------
Total stockholder's equity........................ 25,362,760 22,149,926
------------ ------------
Total Liabilities and Stockholder's Equity........ $106,308,257 $117,449,300
============ ============
</TABLE>

See accompanying notes to financial statements.

F-32
<PAGE> 84

CLG, INC.

STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE ELEVEN MONTHS ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Leasing:
Sales-type revenue..................................... $ 8,977,046 $19,797,968 $13,453,956
Financing lease income................................. 7,693,136 9,456,107 9,696,396
Operating lease income................................. 16,317,354 16,445,110 13,917,959
Sublease income........................................ 26,324 84,764 284,903
Direct sales of equipment................................. 1,524,071 2,528,685 3,670,261
Gain on sales of assets and residuals..................... 3,017,459 1,573,183 729,874
Loss on inventory write-down........................... -- -- (348,550)
Other interest income.................................. 175,798 139,300 180,243
Other.................................................. 643,740 850,427 337,077
----------- ----------- -----------
Total revenues.................................... 38,374,928 50,875,544 41,922,119
----------- ----------- -----------
EXPENSES
Leasing:
Cost of sales-type lease............................... 6,791,461 16,243,079 11,272,949
Sublease expenses...................................... -- 113,600 367,612
Miscellaneous expenses................................. 169,413 89,597 277,652
Cost of equipment on direct sales......................... 1,232,064 2,248,088 3,548,381
Depreciation and amortization............................. 11,512,721 12,535,156 9,289,065
Interest.................................................. 5,861,168 7,274,977 6,703,370
Selling, general, and administrative...................... 9,186,902 7,814,561 6,697,377
----------- ----------- -----------
Total expenses.................................... 34,753,729 46,319,058 38,156,406
----------- ----------- -----------
Net income before income taxes.............................. 3,621,199 4,556,486 3,765,713
Income taxes (Note 6)....................................... 1,459,749 1,831,465 1,534,648
----------- ----------- -----------
Net income.................................................. $ 2,161,450 $ 2,725,021 $ 2,231,065
=========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-33
<PAGE> 85

CLG, INC.

STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
AND THE ELEVEN MONTHS ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 31, 1996................................. $5,000 $ -- $17,147,635 $17,152,635
Net income................................................ -- -- 2,231,065 2,231,065
Issuance of common stock.................................. 100 -- -- 100
------ ---------- ----------- -----------
BALANCE AT DECEMBER 31, 1996................................ 5,100 -- 19,378,700 19,383,800
Stock-based compensation.................................. -- 41,105 -- 41,105
Net income................................................ -- -- 2,725,021 2,725,021
------ ---------- ----------- -----------
BALANCE AT DECEMBER 31, 1997................................ 5,100 41,105 22,103,721 22,149,926
Stock-based compensation.................................. -- 950,408 -- 950,408
Tax benefit-exercise of stock options..................... -- 100,976 -- 100,976
Net income................................................ -- -- 2,161,450 2,161,450
------ ---------- ----------- -----------
BALANCE AT DECEMBER 31, 1998................................ $5,100 $1,092,489 $24,265,171 $25,362,760
====== ========== =========== ===========
</TABLE>

See accompanying notes to financial statements.

F-34
<PAGE> 86

CLG, INC

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997
AND THE ELEVEN MONTHS ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 2,161,450 $ 2,725,021 $ 2,231,065
Adjustments to reconcile net income to net cash flow from
operating activities:
Provision for doubtful accounts........................ 870,174 1,005,142 403,000
Net charge-offs........................................ (170,814) (643,850) (406,655)
Depreciation and amortization.......................... 11,512,721 12,535,156 9,289,065
Stock-based compensation............................... 950,408 41,105 --
Deferred income taxes.................................. (3,395,747) (394,023) 726,634
Gain on sale of equipment and inventory................ (5,606,750) (5,403,606) (3,032,760)
Loss on write down of inventory........................ 55,850 -- 348,550
Decrease in miscellaneous receivables.................. 141,769 4,345 136,791
(Increase) decrease in recoverable income taxes........ (1,033,594) 166,034 (581,607)
Decrease in prepaid expenses and other................. 46,529 126,396 254,326
Increase (decrease) in accounts payable................ 2,708,415 (3,698,003) 1,852,707
Increase (decrease) in accrued expenses................ 293,842 368,557 (1,178,193)
Decrease in accrued taxes.............................. -- -- (1,313,707)
(Decrease) increase in other liabilities............... (551,490) 727,580 (290,400)
------------ ------------ ------------
Net cash provided by operating activities......... 7,982,763 7,559,854 8,438,816
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of inventory and equipment for lease............. (52,615,955) (44,666,520) (65,602,827)
Proceeds from sales of inventory and equipment............ 20,336,921 8,651,001 4,652,938
Purchase of equipment and leasehold improvements.......... (265,482) (526,933) (220,935)
Proceeds from sale of equipment and leasehold
improvements........................................... 48,908 53,808 81,604
Principal payments received from finance leases........... 40,928,221 41,935,399 37,158,613
------------ ------------ ------------
Net cash provided (used) by investing
activities..................................... 8,432,613 5,446,755 (23,930,607)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (repayment) on line of credit................ -- (13,603,000) 13,603,000
Proceeds from discounted lease rentals.................... 38,652,819 65,180,590 66,525,838
Repayment of discounted lease rentals..................... (52,275,154) (63,761,468) (65,174,391)
Issuance of common stock.................................. -- -- 100
Accrued dividends paid.................................... -- -- (150,000)
------------ ------------ ------------
Net cash (used) provided by financing
activiites..................................... (13,622,335) (12,183,878) 14,804,547
------------ ------------ ------------
Net increase (decrease) in cash................... 2,793,041 822,731 (687,244)
Cash and cash equivalents at beginning of year.............. 1,510,373 687,642 1,374,886
------------ ------------ ------------
Cash and cash equivalents at end of year.................... $ 4,303,414 $ 1,510,373 $ 687,642
============ ============ ============
Supplemental disclosures:
Cash paid during the period for:
Interest expense....................................... $ 5,861,168 $ 7,274,977 $ 6,053,387
============ ============ ============
Income taxes........................................... $ 5,817,887 $ 1,960,975 $ 2,212,027
============ ============ ============
</TABLE>

See accompanying notes to financial statements.

F-35
<PAGE> 87

CLG, INC.

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

CLG, Inc. ("CLG" or the "Company") was incorporated in March 1980 under the laws
of the State of North Carolina. CLG is engaged in the business of buying,
leasing, refurbishing and selling computer and technology equipment to various
companies located throughout the United States. On November 1, 1996, CLG became
a wholly-owned subsidiary of Centura Bank ("Centura"), a wholly-owned subsidiary
of Centura Banks, Inc., in a transaction accounted for as a pooling of
interests. Subsequent to its acquisition by Centura, the Company changed its
fiscal year end from January 31 to a calendar year end.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and use assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported revenues and expenses during the reporting period. Actual results
could differ from those estimates.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash and interest-bearing balances due from
banks.

DESCRIPTION OF LEASING ARRANGEMENTS

CLG purchases computer and technology equipment which it then leases to
end-users under various noncancellable agreements with terms ranging generally
from six months to five years. CLG classifies these leases as either sales-type,
direct financing, or operating leases in accordance with provisions of Statement
of Financial Accounting Standards ("SFAS") No. 13, "Accounting for Leases."
Sales-type and direct financing leases are those leases which transfer
substantially all of the benefits and risks inherent in the ownership of
property to the lessee. Other leases are accounted for as operating leases.

LEASE ACCOUNTING

The lease accounting methods used by CLG are as follows:

Sales-type leases -- At lease inception, the present value of the minimum lease
payments is recorded as revenue. The cost of the leased equipment plus any
initial direct costs less the present value of the estimated residual value is
recorded as the cost of the sales-type lease and a dealer profit is recognized
representing the difference between the lease revenue at lease inception and the
cost of the leased equipment. The minimum lease payments plus the residual value
are recorded as the gross investment in the lease. The excess of the gross
investment in the lease over its present value is recorded as unearned income
and amortized to financing lease income over the lease term to produce a
constant percentage return on the investment in the lease.

Direct financing leases -- At lease inception, the total lease payments
receivable plus the estimated residual value are recorded as the gross
investment in the lease. The difference between the gross investment in the
lease and the cost or carrying amount of the leased property is recorded as
unearned income. Unearned income is amortized to financing lease income over the
lease term to produce a constant percentage return on the investment.

Operating leases -- The monthly rentals are recorded as operating lease income.
The cost of the equipment is recorded as equipment on operating leases, net of
accumulated depreciation. The equipment on operating leases is depreciated over
the lease term to an estimated residual value.

Residual values -- The estimated residual values used in sales-type, direct
financing and operating leases are reviewed annually and reduced if necessary.
All residual values are unguaranteed.

Initial direct costs -- Direct costs incurred to originate direct financing and
operating leases are deferred and amortized over the applicable lease term.

F-36
<PAGE> 88
CLG, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

CONCENTRATION OF CREDIT RISK

Concentrations of credit risk with respect to direct financing leases and trade
receivables are limited due to the large number of customers comprising the
Company's customer base and their dispersion across different industries and
geographic areas.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The allowance for doubtful accounts is maintained at a level believed by
management to be adequate to absorb potential losses inherent in the Company's
receivables portfolio. In determining the allowance for doubtful accounts,
management relies on historical experience, adjusted for any known trends,
including industry trends, current economic, conditions and other factors. This
estimate is inherently subjective as it requires material estimates that may be
subject to change. Thus, future additions to the allowance may be necessary
based on the impact of changes in economic conditions on the Company's
customers.

DISCOUNTED LEASE RENTALS

CLG often assigns the rentals under leases to financial institutions either on a
nonrecourse or recourse basis. In the event of default by a lessee, the
financial institution has a security interest in the underlying equipment. If
the financing terms are on a nonrecourse basis, the institution has no recourse
against CLG, whereas with a recourse note, CLG is liable for amounts due in
excess of the equipment value.

Proceeds from the funding of leases are recorded on the balance sheet as
discounted lease rentals. Under sales-type and direct financing leases,
discounted lease rentals and the gross investments in leases are reduced as
lessees make payments under the leases. Under operating leases, lease revenue is
recorded monthly as lessees are billed.

INVENTORY

Inventory consists of equipment held pending lease or sale. Inventory is valued
at the lower of cost or market, on a specific unit identification basis.

DEPRECIATION AND AMORTIZATION

Equipment, including equipment on operating leases, and leasehold improvements
used by CLG are stated at cost and are depreciated on a straight-line basis over
the estimated useful lives of the assets. Equipment has useful lives up to ten
years. Leasehold improvements are amortized on a straight-line basis over the
shorter of their estimated useful lives or the terms of the leases. These assets
have depreciable lives ranging between five and forty years.

INCOME TAXES

The income of CLG is included in the consolidated federal income tax return of
Centura Banks, Inc. CLG's tax sharing arrangement with Centura Banks, Inc.
provides that current income tax expense (benefit) is provided on a separate
company basis at Centura Banks, Inc.'s federal and state statutory rates.

CLG uses the asset and liability method for recognizing the tax effects of
temporary differences between financial reporting and tax purposes at enacted
tax rates expected to be in effect when such amounts are recovered or settled.

SEGMENT DISCLOSURE

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"). The Statement requires management to report selected quantitative and
qualitative information about its reportable operating segments, including
profit or loss, certain revenue and expense items, and segment assets.
Generally, segments are reportable if their operating results are regularly
reviewed by an enterprise's chief operating decision maker. CLG has determined
that it has no reportable operating segments based on the criteria set forth in
SFAS 131.

F-37
<PAGE> 89
CLG, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

RECLASSIFICATIONS AND RESTATEMENT

Certain amounts in the 1996 financial statements have been reclassified to
conform to the current year presentation. Previously reported stockholder's
equity and net income for 1996 has been increased by approximately $200,000.
Previously reported stockholder's equity as of January 31, 1996 has been reduced
by approximately $925,000.

CURRENT ACCOUNTING MATTERS

In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). The Statement addresses accounting and
reporting requirements for derivative instruments and for hedging activities.
SFAS 133 requires that all derivatives be recognized as either assets or
liabilities in the consolidated balance sheet and that those instruments be
measured at fair value. If certain conditions are met, a derivative may be
designated as a hedge of exposure to changes in fair value of an asset or
liability, exposure to variable cash flows of a forecasted transaction or
exposure to foreign currency denominated forecasted transactions. The accounting
for changes in the fair value of a derivative depends on the intended use of the
derivatives and its resulting designation. In June 1999, the FASB issued SFAS
137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral
of the Effective Date of FASB 133." This Statement defers the effective date of
SFAS 133 for one year. SFAS 133, as amended, is now effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000. Management has not
quantified the impact of adopting SFAS 133 nor has the timing of the adoption
been determined.

2. LEASING ACTIVITIES

The components of net investment in leases under sales-type and direct financing
leases are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Minimum lease payments receivable........................... $ 87,444,388 100,104,477
Estimated residual values of leased equipment............... 4,790,615 5,055,240
Unamortized initial direct costs............................ 290,889 346,591
Less unearned income........................................ (10,091,889) (12,583,268)
------------ -----------
Net investment in sales-type and direct financing
leases................................................. $ 82,434,003 92,923,040
============ ===========
</TABLE>

Equipment leased under operating leases consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Equipment at cost........................................... $29,851,715 29,569,823
Less accumulated depreciation............................... (18,245,728) (14,798,576)
----------- -----------
Net equipment on operating leases......................... $11,605,987 14,771,247
=========== ===========
</TABLE>

Future minimum lease payments to be received on sales-type and direct financing,
noncancellable operating leases and subleases are due as follows for the years
ended December 31:

<TABLE>
<CAPTION>
SALES-TYPE AND
DIRECT FINANCING OPERATING SUBLEASE TOTAL
---------------- ---------- -------- ----------
<S> <C> <C> <C> <C>
1999................................................ $41,245,482 8,007,459 11,964 49,264,905
2000................................................ 27,497,722 2,580,840 3,988 30,082,550
2001................................................ 12,620,574 1,013,322 -- 13,633,896
2002................................................ 4,320,991 112,930 -- 4,433,921
2003................................................ 1,379,382 90,096 -- 1,469,478
Thereafter.......................................... 380,237 15,016 -- 395,253
----------- ---------- ------ ----------
$87,444,388 11,819,663 15,952 99,280,003
=========== ========== ====== ==========
</TABLE>

F-38
<PAGE> 90
CLG, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. EQUIPMENT AND LEASEHOLD IMPROVEMENTS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Software.................................................... $ 482,044 396,974
Computer equipment.......................................... 1,208,671 1,078,557
Furniture and fixtures...................................... 525,595 565,040
Automobiles................................................. 9,142 9,142
Leasehold improvements...................................... 171,119 171,119
----------- ----------
2,396,571 2,220,832
Less accumulated depreciation............................... (1,385,051) (1,076,985)
----------- ----------
Equipment and leasehold improvements, net................... $ 1,011,520 1,143,847
=========== ==========
</TABLE>

4. DISCOUNTED LEASE RENTALS

Equipment under leases is partially funded through the use of fixed rate
nonrecourse debt secured by future lease rentals to be received under certain
lease contracts and first liens on the related equipment. Generally, the terms
of these obligations are equal to the terms of the underlying lease contracts.

Nonrecourse discounted lease rentals represent the installment obligations for
which CLG is not liable (except for surrender of equipment pledged as collateral
in the event of nonpayment of rentals by the lessee) due to the assignment of
the noncancellable rentals of the related lease contracts, while the discounted
lease rentals with recourse are those under which CLG is liable for any default
by the lessee. All recourse obligations are payable to Centura Bank.

The weighted average interest rate of the installment obligations at December
31, 1998 was 7.31%. Principal maturities of these obligations for the periods
subsequent to December 31, 1998 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, NONRECOURSE RECOURSE TOTAL
------------------------ ----------- ---------- ----------
<S> <C> <C> <C>
1999...................................................... $18,444,760 13,382,529 31,827,289
2000...................................................... 11,822,648 10,241,307 22,063,955
2001...................................................... 3,680,197 8,301,561 11,981,758
2002...................................................... 1,259,691 2,687,893 3,947,584
2003...................................................... 233,183 108,889 342,072
Thereafter................................................ -- 19,138 19,138
----------- ---------- ----------
Total........................................... $35,440,479 34,741,317 70,181,796
=========== ========== ==========
</TABLE>

Interest expense on discounted lease rentals was $5,840,040, $7,266,420 and
$6,692,313 for the years ended December 31, 1998 and 1997 and the eleven months
ended December 31, 1996, respectively.

5. LINE OF CREDIT

CLG has a $20,000,000 unsecured line of credit with Centura at December 31,
1998. Advances on the credit line are payable on demand and carry an interest
rate that fluctuates with Centura's 30-day LIBOR. CLG had no obligations under
this line of credit at December 31, 1998 and 1997.

F-39
<PAGE> 91
CLG, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

6. INCOME TAXES

The provision (benefit) for income taxes for the years ended December 31, 1998
and 1997 and the eleven months ended December 31, 1996 are as follows:

<TABLE>
<CAPTION>
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
Current:
Federal................................................... $3,969,067 1,686,007 727,837
State..................................................... 886,429 539,481 80,177
---------- --------- ---------
4,855,496 2,225,488 808,014
---------- --------- ---------
Deferred:
Federal................................................... (2,775,813) (198,978) 586,103
State..................................................... (619,934) (195,045) 140,531
---------- --------- ---------
(3,395,747) (394,023) 726,634
---------- --------- ---------
$1,459,749 1,831,465 1,534,648
========== ========= =========
</TABLE>

The components of deferred income taxes are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Deferred tax assets:
Accrued commissions....................................... $ 92,859 57,551
Deferred compensation..................................... 281,183 117,101
Other..................................................... 610,166 294,108
---------- ---------
Total gross deferred tax assets................... 984,208 468,760
---------- ---------
Deferred tax liabilities:
Basis difference for leases and fixed assets.............. 4,589,037 7,469,336
---------- ---------
Total gross deferred tax liabilities.............. 4,589,037 7,469,336
---------- ---------
Net deferred tax liability........................ $3,604,829 7,000,576
========== =========
</TABLE>

No valuation allowance for deferred tax assets was required at December 31, 1998
and 1997 as management believes it is more likely than not that the deferred tax
assets can be recovered.

A reconciliation of income tax computed at the statutory Federal rate to the
provision for income tax for the years ended December 31, 1998 and 1997 and the
eleven months ended December 31, 1996.

<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Tax expense at statutory rate............................... 35.00% 35.00% 35.00%
State taxes, net of Federal benefit......................... 4.78 4.91 3.81
Other....................................................... 0.53 0.28 1.94
----- ----- -----
Effective tax rate.......................................... 40.31% 40.19% 40.75%
===== ===== =====
</TABLE>

7. COMMITMENTS AND CONTINGENCIES

CLG conducts its operations from offices that are leased under noncancellable
operating leases, some of which are with a related party (see note 10) and
expire at various dates through September, 2001. Other facilities and equipment
are rented on a month-to-month basis. Rent expense for the years ended December
31, 1998 and 1997 and the eleven months ended December 31, 1996 was $153,399,
$183,754 and $299,727, respectively.

F-40
<PAGE> 92
CLG, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

The following is a schedule of future minimum rental payments for the office
space:

<TABLE>
<CAPTION>
DECEMBER 31,
------------
<S> <C>
1999............................................... $140,700
2000............................................... 140,700
2001............................................... 105,525
2002 and thereafter................................ --
--------
Total.................................... $386,925
========
</TABLE>

CLG also leases certain computer equipment (as a lessee) and subleases this
equipment to third parties (as a lessor) under agreements classified as
operating leases. Rent expense under these lease was $-0-, $113,600 and $367,612
for the years ended December 31, 1998 and 1997 and the eleven months ended
December 31, 1996, respectively. Sublease income was $26,324, $84,764 and
$284,903 for the years ended December 31, 1998 and 1997 and the eleven months
ended December 31, 1996, respectively.

Various legal proceedings against CLG have arisen from time to time in the
normal course of business. Management believes liabilities arising from these
proceedings, if any, will have no material adverse effect on the financial
position or results of operations of CLG.

8. STOCK-BASED EMPLOYEE COMPENSATION

Certain employees of CLG participate in the Omnibus Equity Compensation Plan
("the Omnibus Plan") sponsored by Centura Banks, Inc. This plan allows for the
grant of a number of different types of equity-based compensation vehicles under
a single plan. CLG employees participate in either the Deferred Compensation
Plan or the Non-qualified Stock Option Plan, both of which allow the participant
to purchase Centura Banks, Inc. common stock. Options granted under the
Non-Qualified Stock Option Plan vest at various rates ranging from immediate
vesting to vesting at a rate of twenty percent per year from the date of grant
and have maximum terms ranging from 63 months to ten years. No options were
granted under this plan prior to 1997. Compensation expense relating to stock
options recognized for 1998 and 1997 was $950,408 and $41,105, respectively.

A summary of stock option transactions under the Non-Qualified Stock Option Plan
follows:

<TABLE>
<CAPTION>
1998 1997
------------------ -----------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
------- -------- ------ --------
<S> <C> <C> <C> <C>
Outstanding at January 1.................................... 77,756 $35.50 -- $ --
Granted..................................................... 42,259 35.50 77,756 35.50
Exercised................................................... (14,464) 35.50 -- --
Forfeited................................................... (900) 35.50 -- --
------- ------ ------ ------
Outstanding at December 31.................................. 104,651 $35.50 77,756 $35.50
======= ====== ====== ======
</TABLE>

The following table summarizes information related to stock options outstanding
and exercisable on December 31, 1998 under the Non-Qualified Stock Option Plan:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------- ----------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OF OPTIONS REMAINING AVERAGE OF OPTION AVERAGE
SHARES CONTRACTUAL EXERCISE SHARES EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
------------------------ ----------- ------------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$35.50.................................... 104,651 8.37 $35.50 12,645 $35.50
</TABLE>

Under the Deferred Compensation Plan, participants may elect to defer portions
of their salaries and/or bonuses in the form of non-qualified stock options. The
exercise price for each share is twenty-five percent of the fair market value of
Centura Banks, Inc. common stock on the date of grant. The remaining
seventy-five percent of the purchase price is "paid" from a participant's
previously deferred compensation. Shares outstanding under this plan and the
liability relating to deferred compensation

F-41
<PAGE> 93
CLG, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

amounted to 1,724 shares and $72,630, respectively, at December 31, 1998 and 246
shares and $43,475, respectively, at December 31, 1997.

Had CLG elected to recognize compensation cost for its stock-based compensation
plans in accordance with the fair value based accounting method of SFAS 123, net
income would have been reduced by approximately $215,000 and $137,000 for 1998
and 1997, respectively.

The weighted-average fair value of options granted during 1998 and 1997 were
$42.44 and $10.93 per share, respectively. In determining the pro forma
disclosures of net income, the fair value of options granted was estimated using
the Black-Scholes option-pricing model with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Risk-free interest rates.................................... 5.03% 6.14%
Dividend yield.............................................. 1.70 2
Volatility.................................................. 23.98 24.16
Expected lives (in years)................................... 3 3.30
</TABLE>

9. EMPLOYEE BENEFIT PLANS

CLG's discretionary profit sharing plan was amended to cease acceptance of any
new contributions effective January 1, 1997 pending a merger of that plan with a
401 (k) defined contribution plan (the "401(k) Plan") sponsored by Centura
Banks, Inc. The 401(k) Plan permits eligible employees to make contributions,
with CLG matching 50% of contributions up to 6% of employees' compensation. The
401 (k) Plan is available for full-time employees after completion of six months
consecutive service or for part-time employees after completion of 1,000 hours
of service during a consecutive 12-month period. During the years ended December
31, 1998 and 1997, 401(k) Plan expense for matching contributions of CLG totaled
$66,303 and $54,971, respectively. CLG incurred $305,000 of expense under the
discretionary profit sharing plan for the eleven months ended December 31, 1996.

CLG employees, beginning in 1997, also participate in a noncontributory,
qualified defined benefit pension plan (the "Pension Plan") sponsored by Centura
Banks, Inc. The Pension Plan covers substantially all full-time employees.
Benefits are determined by applying a benefit ratio to the employees' average
compensation for each year of participation. The Pension Plan is funded using
the Projected Unit Credit method. Annual contributions consist of a normal
service cost amount and an amortization amount of prior service costs. Net
periodic pension expense related to the Pension Plan is determined by an
independent actuary, and is allocated to CLG based on the relative cost of
providing the benefits to its employees. Pension expense for the years ended
December 31, 1998 and 1997 relating to the Pension Plan was $96,503 and
$101,252, respectively.

10. RELATED PARTY TRANSACTIONS

CLG leases office space from a director of CLG and Centura under noncancellable
operating leases. Rent expense was $130,800, $130,800 and $180,950 for the years
ended December 31, 1998 and 1997 and the eleven months ended December 31, 1996,
respectively.

As of and for the years ended December 31, 1998 and 1997, the following related
party transactions existed between CLG and Centura:

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Cash balances maintained at Centura......................... $1,608,594 1,203,736
Operating lease receivable from Centura..................... 3,857,270 8,709,686
Notes payable to Centura (discounted lease payments)........ 34,741,317 29,997,155
Lease income from Centura................................... 4,785,512 5,351,054
Depreciation expense on equipment leased to Centura......... 4,785,512 5,188,185
Interest expense on debt to Centura......................... 2,146,216 1,658,605
Interest income on cash balances at Centura................. 119,133 53,482
Management fee paid to Centura.............................. 120,000 319,000
Handling fees received from Centura......................... 460,047 630,081
</TABLE>

F-42
<PAGE> 94
CLG, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Income and expense amounts between CLG and Centura from the acquisition date to
December 31, 1996 were not significant.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

CLG's on-balance sheet financial instruments are cash, lease contracts,
discounted lease rentals, and various receivables and payables. Disclosures
about fair value of financial instruments are not required for lease contracts.
The carrying values of other on-balance sheet financial instruments approximate
fair value.

12. SUBSEQUENT EVENT

On August 31, 1999, Centura entered into a definitive agreement with MLC
Holdings, Inc. ("MLC") whereby MLC will acquire all of the outstanding shares of
common stock of CLG. The acquisition closed on September 30, 1999.

13. YEAR 2000 (UNAUDITED)

Management has assessed the impact of Year 2000 issues on the Company's computer
systems and applications and developed a remediation plan for all systems
considered mission critical. The remediation plan includes the Company's lease
accounting system which, if not remediated, will not accept new lease bookings
subsequent to December 31, 1999. Existing leases are not expected to be
affected. Management anticipates timely completion of its Year 2000 project
plan.

F-43
<PAGE> 95

CLG, INC.

CONDENSED BALANCE SHEET
UNAUDITED

<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1999
------------------
<S> <C>
ASSETS
Cash and cash equivalents................................. $ 145,322
Accounts receivable -- net of allowance for doubtful
accounts............................................... 3,096,187
Investment in DFL, net.................................... 70,470,020
Investment in OLE, net.................................... 11,272,447
Inventories............................................... 5,111,962
Property and equipment, net............................... 791,785
Other assets.............................................. 269,923
-----------
Total Assets...................................... $91,157,646
===========

LIABILITIES
Accounts payable -- equipment............................. $ 2,291,996
Accrued expenses.......................................... 10,199
Recourse notes payable.................................... 32,306,036
Non-recourse notes payable................................ 23,500,823
Other liabilities......................................... 3,270,229
Deferred taxes............................................ 1,801,165
-----------
Total Liabilities................................. 63,180,448
-----------
STOCKHOLDERS' EQUITY
Common stock.............................................. 5,100
Additional paid in capital................................ 3,527,111
Retained earnings......................................... 24,444,987
-----------
Total Stockholders' Equity........................ 27,977,198
-----------
Total Liabilities and Stockholders' Equity........ $91,157,646
===========
</TABLE>

See Notes to Unaudited Condensed Financial Statements

F-44
<PAGE> 96

CLG, INC.

CONDENSED STATEMENTS OF INCOME
UNAUDITED

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998
------------------ -------------
<S> <C> <C>
REVENUES
Sales of equipment........................................ $ 5,589,339 $15,979,818
Lease revenues............................................ 22,861,922 22,059,246
Fee and other income...................................... 575,545 617,457
----------- -----------
Total Revenues.................................... 29,026,806 38,656,521
----------- -----------
COSTS AND EXPENSES
Cost of sales, equipment.................................. 4,835,605 13,388,706
Cost of sales-type leases................................. 4,811,974 2,583,900
Direct lease costs........................................ 7,943,236 9,097,881
Professional and other fees............................... 403,365 385,858
Salaries and benefits..................................... 4,185,708 4,477,430
General and administrative expenses....................... 1,374,761 1,473,926
Interest and financing costs.............................. 3,489,798 4,544,143
----------- -----------
Total Costs and Expenses.......................... 27,044,447 35,951,844
----------- -----------
Earnings Before Provision For Income Taxes.................. 1,982,359 2,704,677
----------- -----------
Provision For Income Taxes.................................. 793,641 1,081,870
----------- -----------
Net Earnings................................................ $ 1,188,718 $ 1,622,807
=========== ===========
</TABLE>

See Notes to Unaudited Condensed Financial Statements

F-45
<PAGE> 97

CLG, INC.

CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED

<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 1,188,718 $ 1,622,807
Depreciation and amortization............................. 8,129,533 9,189,761
Deferred income taxes..................................... (1,803,664) (2,872,814)
Gain on sale of assets and residuals...................... (2,715,472) (3,221,822)
Stock-based compensation.................................. 900,990 712,806
(Increase) decrease in Accounts receivable................ (1,334,407) 4,688,630
Inventory, prepaids and other assets...................... 1,256,916 (2,105,653)
Decrease in Accounts payable.............................. (1,630,268) (3,356,150)
Other liabilities......................................... (452,138) (313,989)
------------ ------------
Net Cash From Operations.................................. 3,540,208 4,343,576
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of inventory for sale or lease................... (30,775,690) (39,390,678)
Purchase of fixed assets.................................. (207,985) (149,073)
Sales of inventory and equipment.......................... 5,940,750 14,676,229
Principal received from finance leases.................... 30,588,604 30,615,797
------------ ------------
Net Cash Provided By Investing Activities................. 5,545,679 5,752,275
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution...................................... 635,000 --
Proceeds (repayments) on line of credit................... 495,958 --
Proceeds from borrowings.................................. 14,153,441 34,149,321
Repayment of borrowings................................... (28,528,378) (42,713,280)
------------ ------------
Net Cash Flows Used In Financing Activities............... (13,243,979) (8,563,959)
Net Increase (Decrease) In Cash............................. (4,158,092) 1,531,892
Cash At Beginning Of Period................................. 4,303,414 1,510,373
------------ ------------
Cash At End Of Period....................................... $ 145,322 $ 3,042,265
============ ============
Supplemental disclosures:
Cash paid for interest...................................... $ 3,454,426 $ 4,008,838
Cash paid for income taxes.................................. $ 2,545,891 $ 3,967,051
Non-cash investing and financing activities:
Dividend of equipment to Centura.......................... $ 1,008,902 $ --
============ ============
Capital contribution by Centura relating to losses on
certain miscellaneous receivables and the assumption of
certain liabilities.................................... $ 1,226,532 $ --
============ ============
</TABLE>

See Notes to Unaudited Condensed Financial Statements

F-46
<PAGE> 98

CLG, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS
UNAUDITED

1. CONDENSED FINANCIAL STATEMENTS

The condensed interim financial statements of CLG, Inc. included herein have
been prepared 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.

2. INVESTMENT IN DIRECT AND SALES TYPE LEASES

The components of net investment in leases under sales-type and direct financing
leases are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
Minimum lease payments receivable........................... $74,218,919
Estimated residual values of leased equipment............... 4,115,778
Unamortized initial direct costs............................ 213,967
Less unearned income........................................ (8,078,644)
-----------
Net investment in sales-type and direct financing leases.... $70,470,020
===========
</TABLE>

Equipment leased under operating leases consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
1999
-------------
<S> <C>
Equipment at cost $20,686,178
Less accumulated depreciation (9,413,731)
-----------
Net equipment on operating leases $11,272,447
===========
</TABLE>

3. SUBSEQUENT EVENT

On September 30, 1999, CLG, Inc. was acquired by ePlus inc. and was then merged
into MLC Group, Inc. (a wholly-owned subsidiary of ePlus inc.) on October 1,
1999. The purchase price of $36.5 million was paid by the issuance of 392,990
shares of ePlus, inc. common stock valued at $3,900,425 (based on $9.925 per
share), subordinated debt of $3,064,574 and $29,535,001 in cash. The condensed
financial statements do not reflect the effects of the acquisition by ePlus inc.

4. SEGMENT REPORTING

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS
131"). The Statement requires management to report selected quantitative and
qualitative information about its reportable operating segments, including
profit or loss, certain revenue and expense items, and segment assets.
Generally, segments are reportable if their operating results are regularly
reviewed by an enterprise's chief operating decision maker. CLG, Inc. has
determined that it has no reportable operating segments based on the criteria
set forth in SFAS 131.

5. RELATED PARTY TRANSACTIONS

During 1999, CLG, Inc. entered into an agreement with it's sole shareholder,
Centura Bank, to make CLG, Inc. whole for any losses incurred in connection with
certain miscellaneous receivables and also assume certain liabilities which
resulted in recognition of $1,226,532 as a capital contribution. CLG, Inc. also
declared and paid a dividend, in the form of equipment, to Centura Bank, of
$1,008,902.

F-47
<PAGE> 99
Back inside cover

[Picture of man using computer in background]

[Three screen shots of Procure+ and Manage+ in foreground]

- - ePlus Suite

is a comprehensive one-stop solution which automates our customer's entire
supply chain including procurement, management, financing and disposition of
operating resources.
<PAGE> 100

[COMPANY LOGO]
<PAGE> 101

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses payable by the Registrant in connection with the issuance
and distribution of the securities being registered are as follows:

<TABLE>
<S> <C>
SEC filing fee.............................................. $ 22,296
NASD filing fee............................................. 8,945
Nasdaq listing fee.......................................... 17,500
Blue sky fees and expenses.................................. 10,000
Transfer agent expenses and fees............................ 1,500
Printing and engraving...................................... 70,000
Accounting fees and expenses................................ 125,000
Legal fees and expenses..................................... 200,000
Liability insurance premium................................. 100,000
Miscellaneous expenses...................................... 5,000
Total............................................. $560,241
</TABLE>

All of the fees and expenses set forth above will be paid by ePlus. Other than
the SEC filing fee and the NASD filing fee, all fees and expenses are estimated.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Ninth Article of the Certificate of Incorporation of the Registrant
provides:

"No person shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that the foregoing shall not eliminate or
limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit."

The Tenth Article of the Certificate of Incorporation of the Registrant
provides:

"The Corporation shall indemnify, in the manner and to the fullest
extent permitted by the Delaware General Corporation Law (and in the case
of any amendment thereto, to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), any person (or the estate of any person) who is or was a party
to, or is threatened to be made a party to, any threatened, pending or
completed action, suit or proceeding, whether or not by or in the right of
the Corporation, and whether civil, criminal, administrative, investigative
or otherwise, by reason of the fact that such person is or was a director
or officer of the Corporation, or is or was serving at the request of the
Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise including service with respect to
an employee benefit plan. The Corporation may, to the fullest extent
permitted by the Delaware General Corporation Law, purchase and maintain
insurance on behalf of any such person against any liability which may be
asserted against such person. To the fullest extent permitted by the
Delaware General Corporation Law, the indemnification provided herein may
include expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement and any such expenses may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the person seeking
indemnification to repay such amounts if it is ultimately determined that
he or she is not entitled to be indemnified. The indemnification provided
herein shall not be deemed to limit the right of the Corporation to
indemnify any other person for any such expenses to the fullest extent
permitted by the Delaware General Corporation Law, nor shall it be deemed
exclusive of any other rights to which any person seeking indemnification
from the Corporation may be entitled under any agreement, the Corporation's
Bylaws, vote of stockholders or disinterested directors, or otherwise, both
as to action in such person's official capacity and as to action in another
capacity while holding such office. The Corporation may, but only to the
extent that the Board of Directors may (but shall not be obligated to)
authorize from time to time, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article Tenth as they apply to the
indemnification and advancement of expenses of directors and officers of
the Corporation."

II-1
<PAGE> 102

Section 145 of the Delaware General Corporation Law empowers the Registrant to
indemnify its officers and directors under certain circumstances. The pertinent
provisions of that statute read as follows:

"(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.

(b) A corporation may indemnify any person who was or is a party or is
threatened to be a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.

(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.

(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.

(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final deposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.

(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.

(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.

II-2
<PAGE> 103

(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employer or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.

(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.

(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.

(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees)."

The Registrant has purchased a directors' and officers' liability insurance
contract which provides, within stated limits, reimbursement either to a
director or officer whose actions in his capacity result in liability, or to the
Registrant, in the event it has indemnified the director or officer.

The Registrant has entered into separate but identical indemnification
agreements with each director and executive officer and the Registrant expects
to enter into indemnification agreements with persons who become directors or
executive officers in the future. The indemnification agreements provide that
the Registrant will indemnify the director or officer against any expenses or
liabilities in connection with any proceeding in which such Indemnitee may be
involved because such indemnitee is or was a director or officer of the
Registrant or because of any action such indemnitee took or omitted to take
while acting as a officer or director of the Registrant. But such indemnity will
only apply if:

(1) the indemnitee was acting in good faith and in a manner the
indemnitee reasonably believed to be in the best interests of the
Registrant;

(2) with respect to any criminal action, the indemnitee must have had
no reasonable cause to believe his conduct was unlawful;

(3) the claim was not made to recover profits made by the indemnitee
in violation of Section 16(b) of the Exchange Act;

(4) the claim was not initiated by the indemnitee;

(5) the claim was not covered by applicable insurance; or

(6) the claim was not for an act or omission of a director from which
a director may not be relieved of liability under Section 103(b)(7) of the
Delaware General Corporation Law.

Each indemnitee has undertaken to repay the Registrant for any costs or expenses
the Registrant will pay if it is ultimately determined that the indemnitee is
not entitled to indemnification under the indemnification agreements.

II-3
<PAGE> 104

ITEM 16. EXHIBITS.

<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement(1)
4.1 Specimen Certificate for the Common Stock of ePlus inc.(1)
5.1 Opinion of Alston & Bird LLP(1)
23.1 Consent of Alston & Bird LLP (included in Exhibit 5.1)(1)
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of KPMG LLP
24.1 Power of Attorney relating to subsequent amendments(1)
</TABLE>

- ---------------

(1) Previously filed.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be initial
bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
maybe permitted to directors, officers or controlling persons pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For the purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registration pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective.

(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 105

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused Amendment No. 3 to this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Herndon, Virginia on the 10(th) day of April, 2000.

The Registrant:
ePLUS INC.

By: /s/ PHILLIP G. NORTON
---------------------------------------
Phillip G. Norton
Chairman of the Board,
President, and
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, Amendment No. 3 to
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE AND TITLE DATE
------------------- ----
<S> <C>

/s/ PHILLIP G. NORTON April 10, 2000
- --------------------------------------------------------
Phillip G. Norton
Chairman of the Board, President, and
Chief Executive Officer

* April 10, 2000
- --------------------------------------------------------
Steven J. Mencarini
Senior Vice President, Chief Financial Officer and
Senior Accounting Officer

* April 10, 2000
- --------------------------------------------------------
Bruce M. Bowen
Director and Executive Vice-President

* April 10, 2000
- --------------------------------------------------------
Terrence O'Donnell
Director

* April 10, 2000
- --------------------------------------------------------
Carl J. Rickertsen
Director

* April 10, 2000
- --------------------------------------------------------
C. Thomas Faulders, III
Director

* April 10, 2000
- --------------------------------------------------------
Dr. Paul G. Stern
Director

*By: /s/ PHILLIP G. NORTON April 10, 2000
---------------------------------------------------
Phillip G. Norton
Attorney-in-Fact
</TABLE>

II-5
<PAGE> 106

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1 Form of Underwriting Agreement (1)
4.1 Specimen Certificate for the Common Stock of ePlus inc. (1)
5.1 Opinion of Alston & Bird LLP (1)
23.1 Consent of Alston & Bird LLP (included in Exhibit 5.1) (1)
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of KPMG LLP
24.1 Power of Attorney relating to subsequent amendments (1)
</TABLE>

- ---------------

(1) Previously filed.

<PAGE> 1

EXHIBIT 23.2

INDEPENDENT AUDITOR'S CONSENT

We consent to the use in Amendment No. 3 to this Registration Statement No.
333-31102 of ePlus inc. (formerly known as MLC Holdings, Inc.) on Form S-3 of
our reports dated June 11, 1999, appearing in, and incorporated by reference in,
the Prospectus, which is a part of this Registration Statement.

We also consent to the reference to us under the headings "Selected Consolidated
Financial Data" and "Experts" in such Prospectus.

/s/ Deloitte & Touche LLP
McLean, Virginia

April 10, 2000

<PAGE> 1

EXHIBIT 23.3

The Board of Directors
ePlus inc.:

We consent to the use of our report included herein and to the reference of our
firm under the heading "Experts" in Amendment No. 3 to the
prospectus/registration statement.

/s/ KPMG
-----------------------------------------
KPMG

Raleigh, North Carolina

April 10, 2000