I can’t tell you which quarter, we’re going to have that change. But when we do, the numbers are going to start growing, I believe they’re going to start growing dramatically every quarter sequentially thereafter. Both businesses are going to explode in revenues, and profitability and therefore earnings next year. I can’t tell you which quarter exactly right now, and I don’t want you to hold me to it. But the point is the amount of money we’re losing, when you look at our adjusted EBITDA, it’s minimal compared to the opportunity and what we’re building and managing the cash flow. So it’s not an issue. So we have exciting times ahead and just matter of patience for when we get out of the bear market. But last point and then I’ll hand it over the Q&A.
It doesn’t matter if we’re in a bull market or a bear market, we’re building the underlying value of the company. Bull markets and bear markets are have no effect on our ability to build the capacity and generate revenues and earnings for Pharmaloz. And the same is true for Nebula Genomics. So if you look at it from that perspective, the underlying value of our company, I believe, is growing every single day. At some point, the stock market will recognize it next year, if not later this year. But whether it does or doesn’t, I will bring out the value in other ways regardless of whether we’re in a bull market or bear market. So I just want to give you all that perspective. And with that, Nick, I’d love to hand it over, I hit the 30 minute mark.
And I’d love to hand it over for Q&A.
Q – Adam Waldo : Good day, Ted, I hope you can hear me. Okay. Thanks for taking my questions.
Ted Karkus : Yes, sir.
Adam Waldo : So when we met last quarter, in second week, in August, you outline for the market a couple of different ways that you could access near term bridge liquidity from your existing balance sheet capacity to bridge the modest free cash flow negative performance that you expect over the next couple of quarters until Pharmaloz. And the other businesses really start to generate significant free cash flow, which based on your commentary this quarter looks like it’s going to be in the second half of 24. So right now, we’re kind of run rate, $3 million to $4 million a quarter in negative free cash flow, forget adjusted EBITDA. You have $38 million in accounts receivable on your balance sheet that you indicate last quarter, very high quality and could be securitized.
You have the ability to take a mortgage on the Pharmaloz business and you have various public market and private equity opportunities to raise capital on any of the different subsidiaries. We’re in a bear market, we’re in a bear market where typically the only way you get your stock to kind of move in the right direction relative to the underlying fundamental value that you’re creating, as you know, as a private and public markets guy is by deploying liquidity to change the trajectory of your stock price. So what steps should we expect you to take over the next quarter so on the accounts receivable securitization front to free up liquidity there, both for funding up operations, operational cash flow needs as well as deploying for share repurchase.
And what kind of capital do you think you can raise from a mortgage on the Pharmaloz fixed asset base, separate from any capital markets activities? Thanks.
Ted Karkus : Well, that was a mouthful.
Adam Waldo : Yeah, sorry about that.
Ted Karkus : That’s all right. No, no, I love it. And the truth of the matter, I may have said this on the last call, I don’t remember. But if you ever want to come work for ProPhase Labs, I think you will really well.
Adam Waldo : I don’t have a day job. Thank you.
Ted Karkus : Okay, the answer your question is, you really, to some extent answered your own question. I would just say that in terms of profitability of the company, I think that the profitability, I want to speak out of line, the profitability of the company is going to start improving. It’s just a question of how much it improves in which quarter for which subsidiary, but any subsidiary that improves in profitability, will improve the bottom line as well. So for example, Pharmaloz we actually have the automation equipment coming in this month, and we have pricing creases that will start to kick in in December, and January. The automation equipment should be up and running by the end of the month. So in the month of December, all of a sudden, the profitability, the revenues and profitability of Pharmaloz are going to improve, actually significantly.
And so you look at the first quarter, we’re going to have, we’re going to be at a run rate, that’s probably 50% higher than what we’re doing right now and improve gross profit margins, not only on the existing business, from increasing pricing to everyone, but the new business, which has even higher gross profit margin. So our Pharmaloz business is going to improve and profitability, short term. And then once we get that second line, it improves dramatically, right. Because then we’re going to double so we’re our business can be a 50%, look, December January. So let me answer your question. Well, you asked the last question, I’m going to give you the fully after I heard every word of you.
Adam Waldo : Fair, fair enough. Fair enough.
Ted Karkus : Okay, so you’re going to see those numbers improve every quarter, which means that the drag from negative cashflow is going to be less and less each quarter. The same is true of Nebula, I just don’t know the timing. But we have some monster business opportunities that Jason and the Nebula team are developing right now. I can’t tell you which month actually, maybe I can’t tell you which month. I can’t tell you which week they’re going to kick in. But it’s short term. Once these businesses start to kick in, our revenues are going to improve for Nebula and our profitability. Doesn’t mean we will be profitable, but our losses will be less. What I don’t know is that turning point where we actually have bottom line profits in both subsidiaries actually in formalized should be in December.
