HarvestRoad considers merger after talks fail

Perth-based HarvestRoad Ltd is considering a possible merger or sale of its educational software technology following the failure of commercial discussions with one of its major customers.

The company aims to raise $1.1 million through a convertible notes issue to help fund this new venture.

The full text of a company announcement is pasted below

The directors of HarvestRoad Limited ("HarvestRoad") wish to announce that they have received commitments to raise up to $1,120,000 on a Convertible Note and subject to finalisation of documentation expect to issue the Convertible Note within the next few days.

The key terms of the Convertible Note will be as follows:

• 10% per annum coupon payable monthly in arrears
• Convertible subject to prior shareholder approval
• Company to use reasonable endeavours to obtain shareholder approval
• If shareholder approval is not obtained, the Convertible Note is redeemable at 150% of face value
• Convertible at $0.07 per share ($0.05 per share in case of default by the Company)
• Repayable at the election of HarvestRoad at any time with 14 days written notice or convertible during this period at the election of the Noteholder
• Secured with a second ranked fixed and floating charge over the assets of the Company
• Standard anti-dilution rights entitling Convertible Note holder to participate in new issues of securities by the Company pro rata to the holder's deemed post-conversion shareholding in the Company, without being required to convert
• Maturity date of 31 December 2008

A General Meeting of Shareholders will be called shortly to seek the necessary approval for the conversion to equity under the Convertible Note.

Strategic Direction

The Board of HarvestRoad has been in commercial discussions over the past eight weeks with one its major customers. The Board advises that these commercially sensitive meetings and discussions were terminated on Thursday 23 August 2007 and as a result, the Board instigated a Trading Halt in order to reassess its strategic direction and funding requirements.

Those discussions have subsequently reopened and the Board will keep the market informed of the outcomes when known.

The funds raised under the Convertible Note will be used to assist in pursuing a revised strategic direction involving the commercialisation of the HarvestRoad Hive Intellectual Property Rights ('IPR') and identifying organisations globally that HarvestRoad may either merge with or sell it's HarvestRoad Hive IPR to. High level negotiations have already begun with likely buyers and the Board is confident that the HarvestRoad Hive IPR and tCMS IPR, branding and market positioning has significant value to shareholders which can be realised over the next six months.