ePlus Announces Financial Restatements Relating to Stock Option Grants

Business Wire, August 11, 2006

HERNDON, Va. -- ePlus inc. (Nasdaq GM: PLUS), announced today that its previously issued financial statements for the fiscal years ended March 31, 2004 and 2005, as well as for the quarters ended June 30, September 30 and December 31, 2005, will be restated. The Company further announced that the financial statements included in the Company's quarterly reports on Form 10-Q and annual reports on Form 10-K for the periods commencing with the fiscal year ended March 31, 1998 should no longer be relied upon because of incorrect accounting for stock-based compensation expense described therein. The Company has filed a Form 8-K, which describes these matters, with the Securities and Exchange Commission ("SEC") today.

As previously reported on Form 12b-25 filed with the SEC on June 30, 2006, and as further reported on Form 8-K filed with the SEC on July 17, 2006, ePlus' Chief Executive Officer, Phillip G. Norton, received a letter dated June 20, 2006 from an ePlus stockholder raising concerns regarding certain options issued to the Company's four senior officers in 2004 (the "2004 Options"). The Chief Executive Officer forwarded the June 20, 2006 letter to the Chairman of the Company's Audit Committee. The Audit Committee commenced a review and assessment of the matters raised in the June 20, 2006 letter and engaged independent legal counsel and outside accounting advisors to assist in this effort. The Audit Committee's review and assessment is ongoing.

The Audit Committee's review and assessment included, among other things, review of a large volume of company documents, emails, and other electronic documents; interviews of the Company's senior management, certain other Company employees whom the Audit Committee believed may have relevant information, the Company's outside securities counsel, and the members of the Company's Compensation Committee; and, with the assistance of its outside accounting advisors, analysis of accounting rules and regulations. The Audit Committee's review and assessment initially focused on the matters raised in the June 20, 2006 letter regarding the 2004 Options and subsequently was expanded to cover all options granted to the Company's four senior officers, and then was expanded again to cover all options granted by the Company since its initial public offering in 1996.

Based on its review and assessment, the Audit Committee preliminarily has concluded that the actual measurement dates for certain stock options granted by the Company in the fiscal years ended March 31, 1998 through March 31, 2005 differ from the recorded measurement dates. As a result, non-cash stock-based compensation expense should have been recorded with respect to these stock option grants, and the amount of such expense is expected to be material. The Audit Committee has further determined that certain stock option grants that were not in accordance with the Company's stock-based compensation plans should have been accounted for using variable plan accounting for the duration of the options. Under variable plan accounting, stock-based compensation expense is recognized based on the difference between the market price of the stock as of the end of each fiscal quarter and the exercise price of the option. Accordingly, the Company will restate its previously issued financial statements for the fiscal years ended March 31, 2004 and 2005, as well as previously reported interim financial information, to reflect additional non-cash charges for stock-based compensation expense in certain reported periods commencing with the fiscal year ended March 31, 1998. In addition, the Company's financial statements as of and for the fiscal year ended March 31, 2006, to be included in the Company's annual report on Form 10-K for the fiscal year ended March 31, 2006, will include non-cash charges for stock-based compensation expense.

The Audit Committee has not determined the final amounts of additional stock-based compensation expense to be recorded in prior periods or the impact in any future periods. However, based on the review and assessment performed to date, the aggregate amount of stock-based compensation expense to be recorded from April 1, 1997 to March 31, 2006 is presently estimated to be approximately $3 million, which represents approximately 2% of the Company's cumulative earnings before taxes over the nine-year period. This estimate is preliminary, unaudited and subject to change. There can be no assurance that the final amount of the restatement will not differ materially from this estimate. The stock-based compensation expense in certain years may be greater than the aggregate net impact over the entire period, and in other years may result in negative stock-based compensation expense, depending on the market price of the Company's common stock. In periods where negative stock-based compensation expense is recorded, the restatement will have the effect of increasing reported amounts of earnings before income taxes, net earnings, net earnings per share and retained earnings, and decreasing paid in capital. The cumulative stock-based compensation expenses incurred as a result of the restatement will have the effect of decreasing reported amounts of earnings before income taxes, net earnings, net earnings per share and retained earnings, and increasing paid in capital. The Company presently believes that the restatement related to stock-based compensation expense will not affect its revenues, cash flows, or cash balances.