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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 27, 2000
PENN-AKRON CORPORATION
(Exact name of Registrant as Specified in its Charter)
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<S> <C> <C>
NEVADA 0-12597 11-1843262
(State or other jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation or organization)
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3455 PEACHTREE ROAD, NE
5TH FLOOR
ATLANTA, GEORGIA 30326
(404) 995-7026
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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Item 5. Other Events
I. On October 13, 2000, Penn-Akron Corporation ("Penn-Akron"),
entered into a Transaction Agreement whereby Penn-Akron purchased substantially
all of the assets of Children's Heroes.com, Inc., a Nevada corporation
("Children's Heroes"). The aggregate purchase price for the assets of Children's
Heroes is equal to 235,000 shares of Penn-Akron's common stock, par value $.01
per share, which was issued by Penn-Akron to Children's Heroes on October 27,
2000, the closing date of the transaction. Additionally, Penn-Akron has issued
approximately 1,260,750 shares of Penn-Akron's common stock to certain creditors
of Children's Heroes, Inc., a Washington corporation, and an affiliate of
Children's Heroes, in consideration for Penn-Akron becoming a beneficiary of
certain releases provided by the creditors to Children's Heroes. With the
purchase of Children's Heroes, Penn-Akron intends to deploy a nation-wide grass
roots and on-line marketing system to revolutionize K-12 fund raising and
E-learning. Children's Heroes will generate revenue through a subscription and
transaction based business model by enrolling local and Internet merchants as
well as school/youth sports parents in our proprietary card registration
program. While the merchants provide loyalty rebates, the parents shop at those
merchants to earn dollars for the school, the classroom, as well as specially
designed student college funds. In addition, through its partnership with AT&T
(NYSE: T), InfoSpace, Inc. (NASDAQ: INSP), N2H2, Inc. (NASDAQ: NTWO), Bidland
Systems and Frequent Friends, Children's Heroes will provide virtual ISP,
filtered VISP Subscription, and portal access to facilitate and drive e-commerce
fund raising.
II. In August 2000, Arthur Andersen, LLP, began an audit of the
Metropolitan Regional Educational Service Agency ("MRESA"). The MRESA contract
is currently funded by the Schools & Library Division ("SLD") of the Universal
Service Administrative Company. The audit is part of an ongoing program
integrity process initiated by the SLD to insure that applicants to and vendors
(beneficiaries) of the E-rate program comply fully with all Federal
Communications Commission and SLD program guidelines, rules and regulations. A
number of beneficiaries of the SLD program are audited annually. The
determination of which beneficiaries are audited is done both randomly and based
on the size of the beneficiary's award. As of the date of this report, the audit
of MRESA is still in progress. Penn-Akron, as the service provider of the
contract, is also being audited as part of this process. As of the date of this
report, Penn-Akron has invoiced a total of $3,595,647.60 for services performed
under our contract for Year 2 of this program to the SLD, with all invoices
being approved by MRESA. As of the date of this report, $3,595,647.60 remains
outstanding and unpaid by the SLD. We anticipate that payment from the SLD for
past services performed by Penn-Akron will be forthcoming at the conclusion of
the audit.
III. On September 7, 2000, Lynxus, Inc. ("Lynxus"), one of our
contractors, filed Civil Action No. 008872-1 ("Lynxus Suit") against Penn-Akron
in the State Court of Fulton County, Georgia. The Lynxus Suit seeks $484,943.13
plus interest, costs, and attorney fees. On October 10, 2000, we filed our
affirmative defenses, answer and counterclaim to the Lynxus Suit ("Penn-Akron
Counterclaim"). In the Penn-Akron Counterclaim, we deny liability to Lynxus,
seek damages in excess of $3,300,000, plus payment of all costs, expenses and
attorney fees. We have removed the case to federal court and discovery is just
beginning at the time of this filing. Lynxus has failed to perform its
obligations under its agreement with Penn-Akron, and has failed and refused to
cure its default within the time permitted by the agreement and, therefore, we
have formally terminated our agreement with Lynxus.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PENN-AKRON CORPORATION
Date: November 2, 2000 /s/ Christopher J.S. Baker
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By: Christopher J.S. Baker
Chief Financial Officer
