Artificial intelligence company Dragontail Systems (ASX: DTS) will have an extra $20 million in cash after executing a term-sheet with US-based Eldridge Industries, as well as Goudy Park Capital and Alceon Liquid Strategies.
As a cornerstone investor, Eldridge will lead the round by investing $10.5 million.
With experience in the food and beverage industry, Eldridge will also assist Dragontail with its entry in the US market.
Goudy Park plans to invest $5.5 million, Dragontail’s largest Australian-based shareholder Alceon will contribute $4 million under the term-sheet.
Similar to Eldridge, Goudy Park as has connections in the US food and beverage market, which are expected to be an advantage to Dragontail as it attempts to break into the country.
The term-sheet will involve Dragontail issuing the investors with convertible preference shares at $0.1406.
This represents a 26% premium to Dragontail’s 30-day volume weighted average price.
Use of proceeds
Dragontail will use the proceeds to advance its expansion into the US and other global markets including establishing a dedicated sales and marketing department.
According to Dragontail, to date all of its new customers have come from inbound enquiries resulting from positive world of mount and the “inherent strength” of its proprietary technology, which includes the Algo Dispatch Platform and QT quality control camera system.
Dragontail will also boost its operations teams to support new projects as well as funding ongoing research and development activities in the AI space.
Part of the proceeds will also be funnelled towards repaying Dragontail’s $4.3 million corporate loan with Alceon.
With the deal remaining subject to due diligence, binding legal agreements and shareholder approval, it has been proposed that Eldridge will provide Dragontail with a US$2 million short-term bridging loan.
This will give Dragontail financial liquidity until the term-sheet has been made binding.
Dragontail managing director Ido Levanon said the agreement will give the company the “strong financial resources” it needs to pursue its growth ambitions.
“Undoubtedly, the US market holds great potential for Dragontail, and we are confident that the strategic partners in this fundraising will help us achieve this goal.”
“On the current timetable, legal documents for preference shares are expected to be executed in February 2020, with a shareholder vote to be in March and the company receiving the proceeds shortly thereafter,” he added.
Dragontail has developed its AI-based Algo Platform and computer-vision QT quality system to “revolutionise” the quick service restaurant and food service industry.
Using Dragontail’s patented algorithm, the Algo Platform fully automates and streamlines the kitchen flow to deliver what Dragontail claims is an immediate and significant return on investment to fast food and quick service restaurants.
Meanwhile, the QT system’s sensor and camera monitor preparation and cooking in the kitchen to improve quality and consistency in meals.
Dragontail claims its AI machine learning technology keeps improving the system’s diagnostics – leading to more efficiency.
Late last month, Dragontail revealed its Algo Platform roll-out across more than 250 Pizza Hut Australia stores will be accelerated, with the technology to be in stores by the end of the June quarter.
The news follows uptake by KFC, Recipe Unlimited, Burger King, and Dominos in various other regions, including Asia, Cyprus, New Zealand, Israel and Singapore.
News of the cash injection spurred Dragontail’s shares up more than 33% to close at $0.18.