Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to TRxADE Health's quarter one 2023 earnings conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. The earnings press release accompanying this conference call was issued at the close of the market today. The company's quarterly report, which includes additional information regarding the company's results of operations for the three months ended March 31st, 2023, was filed with the SEC earlier today. On our call today is TRxADE Health's Founder, Chairman, and Chief Executive Officer, Suren Ajjarapu, and Prashant Patel, its Interim Chief Financial Officer. The replay of this call and webcast will be available for the next 30 days on the company's website under the NASDAQ: MEDS link. The company's website also includes more supporting industry information.
At this time, I'd like to turn the call over to Prashant Patel, the company's Interim Chief Financial Officer. Prashant, the floor is yours.
Thank you, operator. Thank you for joining us today. I'd like to welcome you to our Q1 2023 financial results conference call. Our press release announcing our Q1 2023 financial results was issued after the close of market today and is posted on our website. We have also furnished that press release to the SEC on Form 8-K. Statements made on this call and webcast will include forward-looking statements. These statements include, but are not limited to, our outlook for the company and statements that estimate or project future results of operations or the performance of the company, including the potential continuing impact of COVID-19, increased interest rates, and inflation of the company's business and results of operations.
These statements speak only as of the date hereof. The company assumes no obligation, except as required by law, to review any forward-looking statements that may be made in today's press release, call, or webcast. These statements do not guarantee future performance and are subject to risks, uncertainties, and assumptions. Information on risks, uncertainties, and assumptions that may cause actual results to differ materially from forward-looking statements, please refer to the press release, risk factors, and documents we file with the Securities and Exchange Commission. These documents include, but are not limited to, our most recent annual report on Form 10-K and subsequently filed periodic reports or current reports on Form 8-K. In addition, during today's call and webcast, we will discuss non-GAAP financial measures which we believe are useful as supplemental measures of TRxADE's performance.
These non-GAAP measures should be considered in addition to and not as substitute for or in isolation from GAAP results. You can find additional disclosures regarding these non-GAAP measures, including reconciliations with comparable GAAP results, at the end of our earnings press release. Unless otherwise stated, all financial comparisons in this call will be to our results for the comparable period of fiscal 2022. During the question and answer portion of today's call, please limit yourself to no more than one question and one follow-up. At this time, I'd like to turn the call over to Suren Ajjarapu, the company's Chief Executive Officer. Suren, the floor is yours.
Thank you, Prashant. We continue to see improvement in 2023 for our core TRxADE pharmaceutical exchange platform. Our nationwide footprint continues to grow, we remain committed to the focus of exciting new ways to support our large, growing network of registered users. With the development of technology and products for our local pharmacies, we are dedicated to supporting these pharmacies with new innovative products that better enable them to service their customers and strengthen loyalty to their local retail pharmacy. Before we do a more detailed walkthrough of financial and operational results for the first quarter of 2023, for those of you who are new to the company, I'd like to walk you through who we are, how we are digitalizing the retail pharmacy experience through the optimization of drug procurement, the prescription journey, and patient engagement.
Prior to the launch of TRxADE, obtaining drug codes as an independent pharmacy was an extremely laborious and time-inefficient process with no insight or transparency into a fair market price or what others are paying for the same drug. Traditional wholesalers would provide unfavorable payment terms, slow delivery, and create a difficult conundrum for approximately 19,400 independent pharmacies nationwide. We identified this market inefficiency as well as the incredible potential in these independent pharmacies, which together maintain an estimated approximately $67.1 billion in annual purchasing power and proceeded to launch TRxADE. We design, own, and operate a B2B web-based market platform, bringing together the nation's independent pharmacies with accredited national pharmaceutical suppliers to provide a uniquely efficient and transparent buying and selling process.
Our platform lets independent pharmacies know that they're receiving a fair price from competing suppliers and fair payment terms, often with next-day delivery. We believe this radical price transparency, economy of scale, and competition among suppliers leads to up to a 10% reduction in a pharmacy's total annual drug purchasing cost, with a drug-level savings of up to 90% on certain pharmaceutical products. Our platform saves pharmacies from having to manually compare prices across distributors, saving hundreds of hours of unnecessary labor annually and eliminating negative reimbursement or fulfilling a prescription at a loss. Our revenue model is simple. We provide an administrative fee of up to 6% of the buying price on generic pharmaceuticals and up to 1% on brand pharmaceuticals that pass through our pharmaceutical marketplace, similar to a PayPal or Visa-like model.
To date, we have seen incredible success in garnering attention from independent pharmacies nationwide, validating our business model. We currently have over 14,500+ registered members on our platform, with approximately 1,100 new registered members added in the first quarter of 2023 compared to the first quarter of 2022. Another exciting growth metric on TRxADE platform includes a 7% increase in the volume of sales processed across our platform for the same comparable quarters. On January 20th, 2023, we entered into agreements to sell 100% of the outstanding member-membership interest in our subsidiary companies, Community Specialty Pharmacy and Alliance Pharma Solutions. The company will receive $245,000 in consideration for both the companies and agreed to enter into a master services agreement, which it is currently supporting.
We expect the transactions to complete closing by June 30th, 2023. The full details on information regarding the transaction can be found on our Form 8-K filed with the Securities and Exchange Commission on January 23, 2023. The sale of these subsidiary companies is part of our plan to focus on our core B2B revenue model. I'd like to now turn the call over to our interim Chief Financial Officer, Prashant Patel, to walk through more key financial highlights of our first quarter of 2023.
Thank you, Suren. Let us discuss first quarter 2023 financial results. Consolidated revenues for the first three months of 2023 decreased 31% to $2.2 million, compared to revenue of $3.2 million for the first three months of 2022. This year-over-year decrease in revenue was caused by a decreased revenue in TRxADE Prime of approximately 70%. The TRxADE platform revenue increased 4% in 2023 compared to the same period in 2022. Our Community Specialty Pharmacy revenue increased 16% in 2023 compared to 2022. Consolidated, there was a 70% improvement in gross margin for the same three-month periods ending March 31st, 2023 and 2022.
As a percentage of revenue, TRxADE Prime reported a gross margin of 12% for the first quarter of 2023, compared to 1% for the same period in 2022. Initiatives to improve gross margin included improved vendor pricing, vendor contracts, and drop shipping. Our Community Specialty Pharmacy recorded an increase in gross margin as a percentage of revenue, rising from a -30.7% in 2022 to 13.1% for 2023. Moving forward, the company is working to grow TRxADE Prime revenues with the foundation of reduced overhead and improved gross margins. Consolidated gross profit for the first three months of 2023 compared to 2022 improved $221,000, but increased year-over-year at 69% as a percentage of revenue.
Operating expenses in the first three months of 2023 were $1.9 million compared to $2.3 million for the same period in 2022. There were decreases in wages and salaries, technology costs for research and development, and general and administrative costs of approximately $463,000. Also recorded are increased expenses of approximately $64,000 related to accounting and legal, professional fees, and warrants and options expenses. Net loss for the period ending March 31, 2023 was $678,000, or $0.07 per basic and diluted share outstanding, compared to $960,000 loss or $0.12 per basic and diluted share outstanding for the period ended March 31, 2022. Included in the net loss is a one-time loss on discontinued operations of approximately $352,000.
This loss was caused by the voluntary withdrawal agreement that was signed with Exchange Health to dissolve the partnership with SOSRx due to its lack of performance. Year-over-year comparison for the first quarter periods of 2023 and 2022 for the Adjusted EBITDA, our non-GAAP financial measures reflect -$0.6 million for the first quarter of 2023 compared to -$0.7 million for the same period in 2022. Looking at our balance sheet, cash was $1.2 million as of March 31st, 2023, compared with $1.1 million as of December 31st, 2022. The increase in cash is mainly driven by $850,000 received for an accounts receivable advance in March that will help fund operations. With that, I will turn the call back to Suren for closing remarks.
Thank you, Prashant. In summary, we're focusing on exciting new innovation and partnerships to drive forward our core business-to-business strategy while diversifying our revenue base. Taken as a whole, I think we're building an incredible compelling ecosystem. I look forward to seeing what the future holds as we continue our rapid pace of operational execution, creating sustainable long-term value for my fellow shareholders. With that, I'll turn it over to the operator to begin the question and answer sessions. Operator?
Thank you, sir. We will now begin the question-and-answer session. As a reminder, if you have a question, please press the star followed by the one on your touch-tone phone. If you would like to withdraw your question, press the star followed by the two. If you're using speaker equipment, you will need to lift the handset before making your selection. One moment please, while we pull for questions. Thank you. Our first question is from Allen Klee with Maxim Group. Please proceed with your question.
Yes, hello. It's good to see the volumes remaining positive. Starting off. I'm sorry, I meant the platform volumes. Question on Prime. Why the decline? You mentioned in your conversation about a desire to grow Prime, but tell me if that's strategic or just explain why, you know, what's the strategy there? Thank you.
Sure. No problem, Allen. Thank you. Appreciate your guys' time today. The price in Prime, we are looking for a better catalog, better pricing on our platform to offer that solution. As you're aware, our tech margins are high. That's the reason when the reduction in TRxADE Prime, you see that automatically our gross margin shot up to 69%. The strategy is to find a right partner to do a drop shipment so that we don't incur double-dipping in the shipping charges, coming to our warehouse and then going back to the same day to the pharmacy, even though it's a convenient. We would like to offer that drop shipping services directly to our customer base, which will reduce our burden of the G&A and still maintain the enough margins out there and increase the sales.
That was the reason we saw the drop in the sales. We are picking up. We're negotiating with the better contracts with our suppliers. Hope that answered the question, Allen.
Okay. Then in the Prime business, would you comment on the mix? Any commentary on the mix of generics versus branded relative to kind of the normal mix?
Yeah. As I mentioned, TRxADE Prime is still at a nascent stage. I would like to comment more on the marketplace. The mix is still close to around 70% generics to 30% brand we want to maintain. We're not there yet. That's probably around 55%-60% generics and 40% brand. That's eventually we want to grow that towards 70/30 split.
Okay. Then, the sale. You've mentioned the sale of two of your businesses that is coming up. That should be by June, right? Could you just explain a little more the details of that, if you're completely getting out of that and what that impact could have on kind of getting rid of some burn?
Sure. As we mentioned last quarter of 2022, we want to focus on our core business, which is nothing but B2B. The assets that are up for sale are more of a B2C side business to consumer aspect of it, and that's what we are trying to jettison and focus on the core business. The burden can say it was anywhere between $150,000 to $200,000, because that was draining into the R&D effort. The Alliance Pharma Solutions and the Community Specialty Pharmacy is not that much burn, but it's anything that's consumer-focused, we are trying to jettison and focus on business to business, which is nothing but the Marketplace. That's what where we see the tremendous growth potential coming forward, both the Marketplace as well as TRxADE Prime.
The $150,000 to $200,000 of burn that would go away, is that, What's the time period that for $150,00 to $200,000 you're referring to?
Like even on the per month basis, because we were spending it mostly on the R&D in the last few quarters, that will go away going after June of this year.
Oh, okay. That's great. What would you say that the state of the independent pharmacies is right now and when your salespeople talk to them of what they're really looking for from you guys?
There's still a bit the transparency that other wholesalers that are not offering, plus any technology advancement for them to see their efforts to reach out to their consumer base and the competition, as we are seeing, mostly they still pack volume stuff. That's the advantage these guys are looking up to the TRxADE. What is out there, whether it's a drug pricing, whether how can they address their consumer needs, can we able to offer any healthcare IT solutions? That's what they look for. Our focus is primarily on the marketplace, give them the knowledge base that's coming out of our analytics, data analytics piece, whether it's a pricing, volume.
Those are the areas that these pharmacies always look for in the purchasing efforts, as well as any details on as well as any manufacturing issues that are out there. Because as I mentioned, these are mom-and-pop shops . They don't have the big IT infrastructure like the big box chains. Those are the aspects these guys look us up to.
Thank you. Can you give us an update on your strategy towards group purchasing organizations for your marketplace platform?
I'm sorry, can you repeat that question, Allen? Sorry.
Basically, I know that you've had some interest to work with group purchasing organizations for TRxADE to become essentially the big three company with a pharmacy where you would be the, hopefully the majority of their drug purchasers. Could you just talk about how you're thinking about today and, you know?
We're not competing with those big three. We want to add value to our independent pharmacies, so that they can have a transparency in looking at into their contract, that's signed, they signed with these big three. Can I bring that transparency to these pharmacies? What is the their generic ratios that I'm buying from these big three, and still able to deviate from and come onto our platform and buy. That's the technology that we would like to offer so that way they can see the visibility and at the same time able to use the secondary suppliers that are out there.
Right. Specifically, are there group purchasing organizations that you're talking to today?
Yeah. Yes, we're trying to, but as I mentioned, we need to have a better catalog, so we're still able to offer that solution. We're still doing the piloting as we speak. Those continuously the efforts are going towards the group purchasing organizations, yes.
Your Prime offering is what gets you the better platform. Is that the way to think about it?
The Prime platform will give a better logistical solution to my pharmacies, but the marketplace will always be there to offer them look for the better pricing and better catalog.
Okay. I think that's my questions. Thank you so much. Appreciate it.
Thank you, Allen.
As a reminder, if you would like to ask a question, it is star one on your touch tone phone. Our next question comes from Howard Halpern with Taglich Brothers. Please proceed with your question.
Well, good afternoon, guys. In terms of what you're seeing, this quarter seemed like a large number of community pharmacies signed up on the platform. What do you attribute that to? Should we think about that now in terms of increasing transaction volume on the platform?
Sure. No, good afternoon, Howard. Thanks for that question. We call it as a registered member. We don't just identify as independent pharmacies alone. There are independent pharmacies, 19,400. The break of the ones that we signed up, 1,100, will attribute towards to some of the clinics, podiatrists, dermatologists. Those are the ones that we're trying to bring onto platform where they have a similar situation like in these independent pharmacies, like one nurse that's handling purchasing doesn't have the bandwidth or the resources to shop around. Those are the areas that we are slowly inching and expanding, but they have the same need, let's just say independent pharmacy for some of these products for their in-house use, not just to dispense, but for their in-house use.
That's what where the registered members are increasing.
Okay. In terms of going forward, are you pretty much set now at this $1.9 million-$2 million, you know, operation expense level, do you think, for until you generate, you know, more platform and Prime revenue?
I think so, yeah. Our overhead is pretty much locked up at this time. From now on, as you can see, tech margins will grow. If I can squeeze more juice out of the same lemon with the same existing expenses, yes, that will fall into our bottom line.
Okay. One final one. With you talked about negotiating with better shipping, should we expect that really any, from your point of view, you're gonna look at increasing prime revenue, but you're going to want to drive, even if it's small, you wanna drive incremental gross margin improvement as time goes on?
That's correct, Howard. That's the reason. Yes, it's a chicken and egg situation. We want to help the customers, the independent pharmacies grow marketplace. At the same time, I wanna give them the solution. We are here to help the independent pharmacies drive their end customer base as well as the service level to our customers.
Okay. Keep up the good work.
Thank you, Howard.
Thank you. There are no further questions at this time. I'd like to turn the floor back over to Suren Ajjarapu for closing remarks.
Thank you, operator. I would like to thank you, all of you, for joining our earnings conference call. We look forward to continuing to update you on our ongoing progress and growth. If we are unable to answer any of your questions, please reach out to our IR department. We'll be more than happy to assist. For any of you who may have joined the call in progress, remember that the replay of this call and webcast will be available for the next 30 days on the company's website under the NASDAQ: MEDS link, and that more information regarding the financial information disclosed on this call and webcast, including the non-reconciliation of non-GAAP financial information, can be found in our press release, which we filed after the close of the market today. Thank you all.
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.