On September 28, 2004, the Securities and Exchange Commission filed a civil complaint in the United States District Court for the District of Columbia charging Sushil K. Garg ("Garg") and Garg Data International, Inc. ("Garg Data") with aiding and abetting violations of the antifraud and other provisions of the federal securities laws. According to the complaint, the defendants aided and abetted a fraudulent scheme to artificially inflate the first quarter 2001 ("Q1 2001") revenues of PurchasePro.com, Inc. ("PurchasePro" or the "Company"), a Las Vegas-based Internet company now known as Pro-After, Inc. Defendants Garg and Garg Data have agreed to settle the charges against them by consenting to the entry of final judgments, without admitting or denying the allegations in the Commission's complaint, that will impose full injunctive relief and that will, in the case of Garg, also impose a civil penalty of $50,000.

The Commission's complaint against Garg and Garg Data alleges that the defendants aided and abetted PurchasePro's fraudulent inflation of its Q1 2001 reported revenues by knowingly: (i) engaging in a sham wash transaction with PurchasePro; (ii) signing a contract for the wash transaction after the close of Q1 2001 that used an earlier misleading effective date that Garg knew was designed to allow PurchasePro to improperly record the transaction in Q1 2001; and (iii) causing the return of a false and misleading confirmation of the transaction to PurchasePro's outside auditors.

The complaint alleges that in the second quarter of 2001, Garg completed negotiations with PurchasePro for, and then executed a contract to buy, a $3.5 million marketplace license for PurchasePro software that Garg had no intention to use and that Garg Data could not afford. In fact, the complaint alleges, Garg Data already owned a marketplace license for PurchasePro's software that it had purchased several months earlier. The complaint further alleges that PurchasePro effectively funded its own revenues by agreeing to buy approximately $10 million of goods and services from Garg and forwarding $4 million to Garg -- which Garg then used to cover Garg Data's payment for the $3.5 million marketplace license. As alleged in the complaint, this $3.5 million sham sale was improperly booked by PurchasePro in Q1 2001 and alone accounted for over 20% of PurchasePro's reported revenues for the quarter.

Based on these allegations, the Commission charged both Garg and Garg Data with aiding and abetting PurchasePro's violations of the antifraud provisions of the Securities Exchange Act of 1934 ("Exchange Act") (Section 10(b) and Rule 10b-5 thereunder), and the reporting, books and records, internal accounting controls, and lying-to-auditors provisions of the Exchange Act (Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B), and Rules 12b-20, 13a-13, and 13b2-2).

The Commission's investigation in this matter is continuing.