Welcome to the Ondas Holdings Incorporated fourth quarter and full year 2022 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two.
Before we begin, the company would like to remind you that this call may contain forward-looking statements. While these forward-looking statements reflect Ondas' best current judgment, they are subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward-looking statements. These risk factors are discussed are on Ondas' periodic SEC filings and in the earnings press release issued today, which are both available on the company's website.
Ondas undertakes no obligation to revise or update any forward-looking statements to reflect future events or circumstances except as required by law. Please note, this event is being recorded. I would now like to turn the presentation over to Eric Brock, Chairman and CEO. Please go ahead.
Well, thank you, operator, and good morning. I want to get started by welcoming everyone to our quarterly conference call. We appreciate the time you're spending with us and for your interest in our company. Today's call will be a bit shorter than we're used to for these quarterly updates since we just met a few weeks back at our virtual investor event. At that time, we provided both a comprehensive business development review and a detailed outlook for 2023 for both our Ondas Networks and Ondas Autonomous Systems business units. Today we plan to review our financial performance in a bit more detail and provide updates on recent activity with both Ondas Networks and Ondas Autonomous Systems business units. In that conversation, we'll focus on current activity in the field with customers and partners. As you continue to see, Ondas is picking up momentum.
We have had a strong start to the year and look forward to sharing details of this customer activity with you. Let's go. I'm happy to be joined today by our CFO, Derek Reisfield, and our President, Reese Mozer. In addition, we will hear from Stewart Kantor, the Founder and President of Ondas Networks, and Meir Kliner, Airobotics Founder and CEO. Recall that in connection with the closing of the Airobotics acquisition, we established a new business unit we call Ondas Autonomous Systems, or OAS, which combines the drone operations of American Robotics, Airobotics, and now Iron Drone. Meir is the President of OAS, and it's my pleasure to have him join us today on his initial investor call with Ondas. Let's turn to the agenda. We will start the call with some brief comments about the state of our business entering 2023.
I will then hand the call over to Derek for a financial review, and we will briefly recap the 2023 outlook. We will provide a business update for Ondas Networks and our OAS business units, where I will ask Stewart and Meir to provide commentary around current business activity. Again, since we have previously provided a deep dive at the virtual investor event in February, these updates will be mainly focused on recent events and on-the-ground activity we are driving here in the first quarter. We'll then wrap the call and open the floor for investor questions. We expect 2023 to be a very good year for Ondas, both with our Ondas Networks and OAS business units.
We entered the year with momentum, fresh on successes in 2022, where we secured our initial commercial orders signifying the validation of our technology platforms and their scalability with customers. At Ondas Networks, the volume order from Siemens in the 900 MHz network was a significant event because rail networks are large and strategically important. This adoption is beginning. The strategic value of the 900 MHz network in all private networks, frankly, is becoming more and more apparent today. We have outlined in a number of occasions how private wireless networks enable safe and efficient train operations, and specifically how new industrial broadband capabilities like Ondas' dot16-compliant system we call FullMAX, and the value that provides rail customers with the ability to adopt new and advanced safety technologies.
The 900 MHz network has come into focus with the national attention today on rail safety. With this attention, the technologies that will be implemented to make our railways efficient and safe are becoming ever more clear. Through all this conversation, again, which is happening nationally, one thing is obvious: you need robust wireless networks to implement and enhance safety systems along the track, on locomotives and rail cars, and at highway crossings. Ondas Networks' FullMAX wireless platform is well-positioned to help address these challenges around connecting these technologies that the rail industry is facing today. We believe the rail sector, which always has large capital spender budgets, is poised to accelerate investment in safety technologies. Ondas and Siemens are active in the conversations around how this will happen, and we will talk a lot more about that today.
At OAS, we have also seen fleet adoption begin as Airobotics secured initial commercial orders for the Optimus System from customers and partners in the UAE, where we are beginning citywide deployments of urban drone infrastructure in Dubai and Abu Dhabi. This is a development in the drone industry that is nothing short of groundbreaking. Flying autonomous unmanned systems in a densely populated urban setting is an unparalleled achievement and demonstrates the massive lead we have in defining these UAS markets. In short, we believe Ondas entered 2023 positioned to drive significant increase in revenue, which we believe will help support the scaling of our company and put us on a path to profitability. Again, we believe 2023 is going to be an excellent year for Ondas and the beginning of a long investment cycle in our mission-critical IoT and drone businesses.
I am now going to hand the call over to Derek for the financial review.
Thanks, Eric. As I get started, I want to remind our investors that our financial statements reflect investment and preparation for larger commercial rollouts within our Ondas Networks and Ondas Autonomous Systems business units. As we outlined in our investor update last month, we believe we will see that commercial adoption in 2023. Revenues for the periods presented have been primarily generated by FullMAX product sales and service revenues for customers, including Class I railroads. In addition to product development programs with Siemens and field activity with autonomous drone installations. Of course, we believe this activity has been valuable, serving to establish the broader opportunity, which we expect to lead to significant growth in FullMAX-based wireless systems and Optimus deployments in 2023 and in the coming years. For the fourth quarter of 2022, revenues were approximately $500,000.
This was a decrease from $600,000 for Q4 last year. Revenues during the recent quarter were generated by FullMAX product sales, driven by orders from Siemens, as well as development revenues as we advanced the HOT and European product development programs with Siemens. Based upon the low level of revenues in the pre-commercialization period, gross profits remained low during the fourth quarter of 2022 at roughly $300,000. Operating expenses increased to $34.8 million for the fourth quarter of 2022, as compared with $7.2 million the prior year. The rise in operating expenses was primarily due to an increase in research and development expenses, professional fees associated with the Airobotics acquisition, along with an increase in depreciation, amortization, and stock-based compensation expense. We consider the acquisition-related expenses to be non-recurring.
We also recorded a $19.4 million non-cash charge for impairment of goodwill. The goodwill impairment is an accounting charge reflecting the write-down in the carrying value of the American Robotics acquisition. We perform regular analysis related to goodwill and given the dramatic decline in valuations of comparable small emerging technology and the decline in our share price, we believe the write-down is prudent. While we understand the accounting treatment, we remain very positive on the strength of our IP portfolio and the business outlook across both our business units and do not believe the goodwill write-down has a significant impact on our business. Aside from the $19.4 million goodwill impairment charge, non-cash expenses totaled $2.5 million for the fourth quarter of 2022. Stock-based compensation was approximately $1.5 million in the fourth quarter.
That increased by approximately $200,000 from the prior year. Depreciation and amortization expenses increased from $700,000 in the fourth quarter of 2021 to approximately $1 million in the fourth quarter of 2022. Operating expenses in the fourth quarter of 2022 also included professional and advisory fees related to the Airobotics acquisition. Once again, we consider these acquisition-related expenses to be non-reoccurring. Excluding non-cash expenses and non-reoccurring professional fees related to the Airobotics transaction, operating expenses were equal to approximately $12.3 million, which were higher than expected due to accelerated spending on customer-related activities at American Robotics. With the completion of Airobotics acquisition, we restructured our activities in the autonomous drone segment. We believe this will lead to significantly lower operating costs going forward at the combined entity.
We believe the additional investments we made were prudent and necessary for the expansion of our services and capabilities to ultimately drive larger revenue opportunities over the long term. The company realized an operating loss of approximately $34.5 million for the fourth quarter of 2022, as compared to $7 million for the fourth quarter of 2021. This loss includes the aforementioned non-cash and non-reoccurring expenses. We generated an adjusted EBITDA loss of $12.6 million in the fourth quarter, excluding these non-cash expenses, as compared with a $5 million EBITDA loss for the fourth quarter of 2021. Noted the increase in both cash and non-cash expenses related to the business development activity in preparation to meet the demands of a growing business. Let's look at our full-year results.
For the full year of 2022, revenues were $2.1 million. This was a decrease from $2.9 million during the full year of 2021. Revenues during the 2022 period were generated by product sales driven by our order from Siemens, as well as development revenues as we advanced the HOT and European product development programs with Siemens. Gross profit increased to approximately $1 million for 2022. This was roughly equal to the gross profit of $1 million last year on higher sales. Gross margin improved significantly to 52% for 2022, compared with a gross margin of 38% in the prior year period. Again, this low level of gross profit reflects a period of pre-commercial adoption of our technology platforms.
As we have described in our prior calls, due to the historically lumpy nature of development programs and customer product sales and services, gross margins can be volatile on a quarterly basis. The margin improvement is primarily due to a larger proportion of high margin product sales and services in the revenue mix during 2022. Operating expenses increased to $70.5 million for all of 2022, as compared to $19.1 million the prior year. $19.4 million of the operating expense was due to the non-cash charge related to goodwill impairment. The rise in operating expenses was primarily due to an increase in research and development expenses, professional fees associated with the Airobotics acquisition, along with an increase in depreciation, amortization, and stock-based compensation expense.
Aside from the $19.4 million goodwill impairment charge, non-cash expenses totaled $9.9 million for the full year of 2022, including stock-based compensation of $5.9 million. That increased by approximately $2.6 million from the prior year. Depreciation and amortization expenses increased from $1.5 million in 2021 to approximately $4 million in 2022. Operating expenses in 2022 also included professional and advisory fees related to the Airobotics acquisition of approximately $2.1 million. Once again, we consider these acquisition-related expenses to be non-reoccurring. Excluding non-cash expenses and non-reoccurring professional fees related to the Airobotics transaction, operating expenses were equal to approximately $39 million, which were higher than expected due to accelerated spending on customer-related activity at American Robotics. With the completion of the Airobotics acquisition, we restructured our activities in the autonomous drone segment.
We believe this will lead to significantly lower operating costs going forward at the combined entity. We believe the additional investments we made were prudent and necessary for the expansion of our services and capabilities to ultimately drive larger revenue opportunities over the long term. The company realized an operating loss of approximately $70.5 million for 2022, as compared to $19 million for 2021. This loss includes the aforementioned non-cash and non-recurring expenses. We generated an adjusted EBITDA loss of approximately $40 million for the full year 2022, excluding these non-cash expenses, as compared with $13.2 million EBITDA loss in the prior year. As noted, the increase in both cash and non-cash expenses related to business development activity and preparation to meet the demands of a growing business. Let's turn to the balance sheet.
We ended the fourth quarter of 2022 with a $29.8 million of cash. Our cash position was aided by the convertible note offering. Outside of the new convertible notes, we maintain a minimal long-term debt and a $58.2 million equity position. Of course, our equity position reflects the substantial investments made in our technology platforms. I will now hand the call back to Eric.
Well, thank you, Derek. As you know, we believe 2023 will be the year when Ondas begins to monetize the substantial investments we have made in our business development. We expect to generate significant revenue growth in our reaffirming our outlook from February and our target for $26 million-$30 million of revenue for the full year. We expect adjusted EBITDA losses to narrow to $19 million-$24 million for the year. Our outlook is supported by over $13 million in backlog and visibility into expected demand from our existing customers as we move through 2023. We expect cash utilization to improve significantly. Improved cash efficiency comes from operating expense leverage at Ondas Networks with expected growth in revenue and gross profit.
A similar dynamic exists at OAS, where we believe the integrated companies will operate with dramatically lower costs as a combined company focused on optimizing the Optimus platform in the field with customers. Now we will transition to business unit review and ask Stewart Kantor and Meir Kliner to share updates on recent activity in the field with customers and industry partners. We're gonna start with Stewart, who will update us on the current status with the rails on 900 MHz and share some details around the value of our technology in the context of the national conversation around rail safety. Stewart?
Great. thank you, Eric. We believe Ondas Networks, along with our strategic partner, Siemens Mobility, is well-positioned to accelerate the adoption of our FullMAX wireless technology and our dot16 platform. Over the past few years, we, Siemens, the Class I rails, the Association of American Railroads, and their technical arm, MXV Rail.
Have worked diligently to lay the groundwork for the wide adoption of our dot16-based technology in the 900 MHz band. That adoption is happening now. In this quarter, we've begun to deliver on our initial volume orders to Siemens on behalf of BNSF and CSX, and look for deliveries to accelerate in the next quarter. We're also working closely with Siemens and the rail customers to expand the order book, and we expect follow-on orders from BNSF and CSX, as well as new launch orders from additional Class 1s. Currently, we are actively engaged with all 7 of the North American Class 1s on various aspects of network adoption, including having established inroads in the 160 MHz frequency band for data applications. This is also a safety-critical network.
Internationally, we have our ongoing activity with Siemens for Indian Railways, as well as a new locomotive radio program for the European market. Lastly, we have ongoing business development activities with the passenger and transit rails in North America and in international markets, and we anticipate new activity in these markets. We'd also like to emphasize that rail safety is not new to us or to our customers, and we will outline in a few moments here specifically how the recent national focus on rail safety aligns with our core strengths. We want to emphasize that mission-critical networks are fundamental to train operations and their integrated safety systems. The North American rails operate continent-wide train systems and require modern wireless technology to implement large-scale connectivity, edge computing, and automation technologies.
The rail sector has invested and continues to invest heavily in their train operations, and safety is front and center to everything they do. However, the integration of safety technologies has many challenges, often the core of which is reliance on reliable railroad-wide communications. Most of the geography they traverse is highly remote with challenging terrain. This is where our 802.16 technology and licensed radio spectrum comes into play. Also, you may recall that in May 2020, when the FCC awarded the rail's new 900 MHz greenfield spectrum, one of the primary reasons cited for the award was the expected implementation of safety-based applications, including increased support for rail integrity applications, continuous crossing monitoring, and advanced defect detection, which includes the hot bearing detectors, also known as hot box detectors, that we've been hearing a lot about recently.
It also provides redundancy for Positive Train Control. Over the last 2 years, the rail industry has worked with Ondas, Siemens, and other ecosystem vendors to develop a standards-based wireless system that would be robust and secure and would provide higher data capacity and flexibility in order to upgrade the private wireless communications network they own and operate, starting with the 900 MHz. Some of this work has taken place inside the IEEE process, where the 802.16 wireless standard is evolving to incorporate additional capabilities that will support long-term adoption by the railroads. We're also working cooperatively with the AAR through MXV Rail in Pueblo, Colorado, as they determine how 802.16 will be implemented as a rail standard.
You may recall that MXV has been operating their own dot16 rail line, implementing use cases and focused on integrating existing and new applications into rail operations. Let's turn our attention to detail on some of the safety systems and applications that rails operate and where our 802.16 wireless communications technology comes into play. On this slide, you can see a whole host of applications and devices that the rails use today or plan to use in the future to address safety and operational purposes. Most of the current applications operate on frequency-specific networks owned by the rails at 900 MHz, 450 MHz, 160 MHz, and 220 MHz. Why is it like this?
Well, most of these networks evolved over time and were introduced to meet certain needs at certain times to address certain problems. With the advancement in digital wireless technology like 802.16 and Internet Protocol, the same protocol we all use today in our home and enterprise networks, the rails are seizing on the opportunity to move away from application and frequency-specific networks to what we call general purpose IP data networks. These networks can support multiple applications at the same time, offering redundancy and expansion of current and planned applications. As we know right now at your home or in your office, you really don't care or don't even know whether you're on one Wi-Fi frequency or another as long as your applications work and whether that connectivity occurs over Wi-Fi, a cell phone network, or an Ethernet cable.
This is the same direction the rails must go in order to build their own private networks and expand capacity. Remember, they need private networks because they are addressing nationwide connectivity and have to travel from the most urban dense areas to the most remote areas, illustrated by their need for connectivity even in places like the Mojave Desert, with not a cell tower anywhere to be seen. What you see on this slide with the implementation of the 802.16 standard at 900 MHz, the rails can now host multiple of these applications on the same network with high quality of service and reliability, and importantly, get to set those levels. Let's just take one example that has been in the news lately. hot box defect detectors.
The rails with the new network capacity based on our modern wireless standard, can conduct more hot box detectors onto the same network without the ongoing telecoms operating costs. It's an exciting time for Ondas, we appreciate the vision and foresight the AAR and the rails have had to see the value of our technology come to the forefront when national attention is so focused on the safety of critical infrastructure. I'll now hand this back over to Eric. Eric?
Well, thank you, Stewart. I want to re-emphasize your final comment. The purpose of our work with the rails has been to introduce wireless technology that enables the ongoing improvements to safety and efficiency that the rails are always pursuing but are difficult to implement. Indeed, it is an exciting time for us to see the value of our technology come to the forefront when national attention is so focused on the safety of critical infrastructure. I want to now transition to an update on activity at Ondas Autonomous Systems. When I hand to Meir, he will share some updates on our work with customers and partners. He will expand upon our relationships in the UAE with the Dubai Police and SkyGo, and also touch on the recent announcement we made highlighting a deployment we have with Intel.
We will start with some commentary around the World Police Summit, where our Optimus platform and Iron Drone Counter-UAS systems are generating tremendous interest amongst growing awareness of our capabilities in both public safety and homeland security. Before I hand to Meir, I want to play a brief video. This video was created by the Dubai Police and demonstrates the vision for how they are integrating Optimus into their public safety operations. Of course, this is a vision we share and are implementing in the real world today with the Dubai Police. Let's play the video now.
Release.
Meir, please proceed.
Thank you, Eric. I want to start by saying it's a pleasure to be here for my first investor call with Ondas. Before I proceed, I want to take a brief moment and share how excited our team at Airobotics is to join forces with Ondas and American Robotics. We worked extremely hard to get to where we are today. Together, we have the ability to achieve great things. We have hit the ground running after closing the acquisition in January and establishing the Ondas Autonomous Systems global business unit. We are seeing tremendous momentum with customers, and the combination with Ondas has put us in a strong position to expand our current relationships and bring our technology to global markets, including the United States.
The recent orders in the UAE for fleet deployment of our Optimus System for urban public safety, homeland security, and smart city use cases validate the safety and reliability as well as the value of our Optimus platform to customers. This was quite evident last week in Dubai, where we attended the World Police Summit, which is widely attended by the largest and most sophisticated leaders in public safety and homeland security across the globe. As Eric showed in the video, the Optimus platform was highlighted in multiple video segments by the Dubai Police as they outlined their vision for smart police infrastructure. We share their vision and believe we are here today with real scalable technology as urban drone infrastructure that is setting the pace for the future of public safety and homeland security. At the summit, we also presented our counter UAS system from Iron Drone.
In a moment, I will share more details about the Iron Drone system. I want to highlight the huge interest in Counter-UAS solutions and specifically on the capabilities of our system. It's an exciting product. The early feedback after the public launch is promising. We announced an expanded relationship with the Dubai Police at the end of the summit. As part of this agreement, the Dubai Police expressed an intent to purchase Iron Drone systems. This came after a successful system demonstration. In addition, Airobotics and the Dubai Police agreed to work together on further technology development around our AI capabilities and to continue to enhance the solutions that Ondas Autonomous Systems can provide to global public safety markets. We expect orders and installations to grow in Dubai as we move through 2023. We continue to scale up the urban drone infrastructure within this important partnership.
At the summit, it was quite clear that there is extensive and growing interest globally in both Optimus and Iron Drone systems. That interest is coming from both potentially large customers and blue-chip industry vendors, which we aim to establish partnerships with. We have previously announced that the Dubai Police has begun a program to adopt the Optimus platform across the city to support enhanced public safety across the city. We have installed systems and are operating on a regular daily basis with high reliability and availability of the system. We are off to a great start and look forward to the Optimus fleet footprint expanding in the coming years. Similarly, we announced a $3.5 million order from Abu Dhabi-based SkyGo in addition to the intent to enter into joint venture to provide aerial data services for smart city use cases in the UAE.
SkyGo is an excellent partner, bringing leadership and application expertise in addition to incredible vision as to where we can take drone services in the UAE. SkyGo is connected with multiple customers across the UAE. We look forward to sharing more details about our activity here in the near future. Lastly, we recently announced an extension of our service agreement with a global semiconductor manufacturing firm, where we have been providing both aerial security and safety services in addition to surveying, mapping, and other inspection applications. We believe the construction project management market is well-suited for adoption of our Optimus System and the data services embedded in our insightful data platform. From a central data portal provided via insightful, construction project manager, their clients, in addition to vendors and suppliers, are able to track project progress.
The information and analytics help to keep a project on a track from a time and budget standpoint, offering the potential for significant efficiencies and cost savings. We believe this market is large and growing strongly and are developing strategies to further expand in construction markets. Lastly, I want to focus on Iron Drone, the Counter-UAS system. We announced the Iron Drone acquisition last summer and formally closed the transaction last week. Iron Drone has unique insights into solutions required to counter hostile drones. The threat of hostile drones in both military and civilian markets has grown dramatically in recent years. The threat is particularly acute with small, low-cost drones that are being used as weapons and are capable of causing significant damage. Iron Drone has introduced the Raider, which is an autonomous platform as you can see here on this slide.
The Raider system is a module that is deployed in a container or pod which houses 3 small UAVs. When a hostile drone is identified near a sensitive location, the Raider drones can be deployed at extremely high speeds to intercept the threat. The Raider is equipped with a netting system that can capture the hostile drone. A parachute ensures that the hostile drone is safely landed, so it can be secured as evidence while safely protecting assets and people on the ground. The physical capture method of counter-UAS is differentiated by other counter-UAS methods, which use jamming of radio frequencies or GPS signals to disable the drone mid-operation. Jamming methods or countering hostile drone have significant drawbacks near sensitive civilian locations such as airports, government buildings, and business areas as they can disrupt critical communications. We see significant market potential for Iron Drone.
It has obvious use cases protecting high-valued civilian infrastructure and public services in addition to home and security. We also see military potential and expect this to be revenue-generating product in 2023. Eric, I'm going to hand the call back to you so you can provide some closing remarks.
Well, thank you, Meir. Let's wrap this up with a couple of closing remarks before we shift to questions. I want to reiterate, management is committed to delivering for investors. We believe we are on the right track to build a large, successful company that defines the large, high-value end markets we are addressing. We are well-positioned to monetize our valuable proprietary platform technologies, which have been funded by you, our investors, and the substantial efforts of our team. We are particularly excited at Ondas Networks as the hard work we have put in to create valuable next-generation wireless technology for safety-critical networks is poised to be recognized as a critical component of rail safety upgrades. We believe that activity around safety at the national level creates upside for Ondas.
Similarly, fleet deployments of Optimus are off to a great start with our initial customers launching urban drone infrastructure in major cities. As we build inventory and advance marketing efforts with our customers globally, including in important sectors such as oil and gas and public safety in the United States, we expect to drive an S-curve adoption highlighting the long-term value of our Optimus System to both customers and investors.
We expect revenue growth and a focus on efficiency will demonstrate our ability to drive shareholder value, which we believe will be reflected in our share price. That is an important focus for our team, as I know it is for you. Again, I think this is gonna be a great year for Ondas. With that, let's see if there are any questions. Operator?
We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Mike Latimore with NCM. Please go ahead.
Great. Morning. Thank you. I guess, Eric, the $13 million in backlog, how do you think about when will that get recognized? Is it more first half-weighted, second half-weighted?
I think you're gonna see it build through the year, firstly, in terms of the revenue target. The backlog we have today is gonna be largely recognized over the first couple of quarters. We'll be shipping some of the systems that Siemens has ordered on behalf of rail starting this quarter, as Stewart mentioned. That'll be larger in the second quarter. Then you'll see a similar ramp in terms of re-recognized revenue on the orders we've announced at Dubai and Abu Dhabi for the drone platforms.
Okay. Then in terms of cash OpEx, you know, what level should we think about in the first and second quarter?
It's comparable to what you've been expecting, Mike.
Okay.
One of the things we've done with the restructuring, is putting Airobotics and American Robotics together, is we've been able to take a lot of cost out of the business.
Mm-hmm.
It's a larger opportunity, but a more efficient operating spend. I'll also add that the Ondas Networks outlook continues to offer quite a substantial operating leverage, and we made that point again.
Mm-hmm.
We've essentially won a platform sale and, you know, it does start with 900 MHz, but the incremental operating expense need is fairly modest as we do grow the orders and shipments.
Yeah. On the drone business, I mean, is it fair to say that the best prospect for incremental orders comes from the Dubai Police here? If we're thinking about, you know, new orders you don't have, is that the most logical place it would come from?
That's the most logical place, but not the only place for sure.
Mm-hmm.
We do see opportunity more broadly in the region. We are working on some of the activities here in the U.S., which is obviously a very large market. You'll hear more about that as we're moving through the year, because those conversations continue, We're also building inventory to address what we think will ultimately be substantial demand in the U.S., so.
Great. Just last one on Iron Drone. Well, how do you charge for that? You know, what's sort of, I don't know, the average price per unit?
We haven't disclosed pricing yet, and so I guess I'm gonna defer. I do believe that the unit economics on the Iron Drone platform will be very attractive, but we haven't disclosed pricing yet.
Okay. Thank you.
Sure.
As a reminder, if you have a question, please press star then one to enter the question queue. The next question comes from Timothy Horan with Oppenheimer. Please go ahead.
Hey, guys. We've obviously had some horrific train derailments here, and learning more and more about them all the time. It sounds like you're kind of implying that this might accelerate the build-out of the 900 MHz network anyway and maybe other bands, and the build-out might be a little bit bigger. I guess could you give us an update on what the rails are thinking of when they will turn on the 900 MHz and when they can start utilizing that? Maybe just overall, you know, how much for the initial build, just any updated thoughts? When are they planning on shutting down the legacy spectrum?
Tim, you're right. We do believe that this, as we described it, the national conversation around rail safety does a couple of things. And we do think it is going to accelerate the spending on all the technologies relating to the safety upgrades. But it also does have an added benefit of building awareness around Ondas and the private network more generally, and it does start with 900. But we think all the private networks that they have are going to be part of a longer-term solution. You know, as it relates to retiring their legacy spectrum, they still have the deadlines we've discussed in the past that we believe are important, and that's in 2025.
That's the answer. I'll add, Tim, that as the conversations are taking place here, we talk to, as you would expect, the railroads every day. We also work with the AAR and of course MXV Rail. That's a very important relationship, and we're doing this all with Siemens as well. We're seeing a lot of activity in D.C., and I'm sure you are as well. Of course, folks like Congress, DOT, EPA, other agencies are all involved. And there's activity around legislations related specifically to rail safety. You know, we're doing what we can to make sure we're part of that conversation in D.C. so that there's awareness.
We wanna ensure that there's awareness around how these solutions come together. That legislation is likely to have new industry requirements, and it's likely to call for the densification of technologies like hot box detectors, which Stewart described a bit during his presentation. It'd be densifying this, also upgrading technology. We do believe that networks are gonna be the backbone of that. I'll recall that the Positive Train Control effort was a significant one for the rail industry. That Positive Train Control rollout, which the AAR says was in the billions of dollars of cost, many billions, that doesn't happen without the 220 MHz network, right?
That doesn't happen with a wireless backbone. That really highlights the value of what we're doing as an enabling technology, an enabling platform.
Any update on the total cost of the initial 900 MHz build out and when they would like to get that network up and running? Do you have any best guesstimates at this point?
No, I think that, you know, the fact of the matter is this network is a priority. It's always been important, and that's why you've seen the AAR, and it goes back to the AAR and FCC. They negotiated for the 900 MHz swap, and we shared some of the language from that report from the FCC, specifically talking about safety technologies. You've seen the AAR and the industry more broadly, very active with us in that 802.16 working group, and we put the folks on a slide so you see. That's all been public. Now they're also active in the rail lab, working on integrating our dot16 platform into many aspects of rail operations. The AAR has been active.
This doesn't necessarily. I'd say as we outlined the TAM last on our last call in February, we did make a deliberate effort to say, "Okay, this is the initial build," and then of course there's the incremental build. Whether or not it increases the size of overall TAM, my sense is it does. Stewart also mentioned, you know, the, you know, sort of, you know, what we, our experience was in our homes, right? As we put Wi-Fi in, you have data capacity, you tend to use it, right? We started with one PC or one phone, and now we have all these other, you know, edge devices in our house, and that's the same thing. I think the TAM probably does increase.
I don't think we have to make any formal statements about that today, but it's likely to see that there's an acceleration in upgrades of technologies, and of course you need the networks to do that.
Great. Can you give us a sense on the cash burn per quarter the next few quarters? Do you have enough cash to make it to break even in your current model, or how much more, you know, do you need to raise? Thanks.
I'll give you the same answer as we did at the event in February. We believe our cash needs are modest, certainly relative to the opportunities we're attacking. They're largely around working capital build to of course fund growth. We do think we have, you know, access to capital ranging from, you know, non-dilutive sources, for example, prepayments or credit lines vis-a-vis the orders of we have and expect to get. There's other things. You know, we mentioned the joint venture and that sort of model as we're growing the distribution for the Optimus platform. You know, those joint ventures can fund certain operating expenses. So, you know, of course the equity markets are potential as well.
I think we are our cash needs will be modest, certainly relative to the growth and opportunities we have ahead of us and the strategic value of our technology, to really big customers and partners.
Great. Lastly, I didn't really understand the answer to Mike's question on your operating expenses, I think, were close to $13 million on the quarter. You've taken some steps here. Can you talk about what operating expenses will be maybe in the first and second quarter? I just don't know the order of magnitude on the expense reductions.
Yeah. They'll be lower, you know, probably call it in the $11 million range for OpEx.
Okay. Thanks a lot.
Yes. Yeah.
Once again, if you have a question, please press star then one to enter the question queue. The next question is from Mike Latimore with NCM. Please go ahead.
Nick, it's just two follow-up questions here. You talk about developing or working on artificial intelligence within your drone program. Can you just highlight a little bit more about what the end application is? Is it, you know, object detection? Is it insights and changes, or just exactly what might the result of that investment be?
You know, that's a great question. I'll ask Meir if he can shed some light on it. I'm not sure to extent what we'd wanna talk about 'cause I think you're addressing specifically the announcement with the Dubai Police. Meir, is there something you can say specific to what we're doing with AI and incorporating that into Optimus and/or the counter-drone system that the Dubai Police are interested in?
Yeah. I can say in high level that we try to take the application to the next level of automation. We're talking about application for the municipality to reduce the response time by triggering and by having alert if something changed in the picture, in the video, in the mapping and things like that. Specifically to take the next level to the application, to the next level of automation.
Okay, great. What would be the catalyst for the Dubai Police to further expand the use of your, you know, products throughout their city? Is it just kind of getting these first deployments up and running or, you know, what gets them to sort of that next level of expansion?
I'd say there's plans to do this citywide, which they've, which they've talked about, publicly. Meir, maybe you can share a little bit more color on kinda how we think this does work, in the field and the things we're doing.
Yeah. Again, I will say in high level, not specific on Dubai Police.
Mm-hmm.
The docking station that are already deployed over the city or on the city will give real-time video to command and control. It can be remote command and control and operated automatically, and just transfer the video to the command and control. It cover the whole city, and I remember to all of us that one docking station can cover 80 square kilometer. It's about, I think, 31 square mile.
Yeah. To that point, we've talked about this previously, but that, you know, the math around the coverage and the areas that they're looking at would indicate 24 systems. We think, you know, you should hear more about this as we're moving through the year.
Okay. Super. Thanks.
Great.
This concludes our question and answer session. I would like to turn the conference back over to Eric Brock for any closing remarks.
Okay. Well, thank you, operator. I wanna just close the call by thanking you again for attending. As always, we do have a lot of work to do, so we're gonna get back at it, and we look forward to keeping you informed of our progress. Have a great day, and thanks again.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.