Fourth Quarter 2022 Financial Results

Revenue

Revenue decreased by 88.8% to RMB33.7 million (US$4.9 million) in the three months ended December 31, 2022, from RMB301.5 million in the three months ended December 31, 2021. Such decrease was primarily attributable to the continued broad decline of cryptocurrency market, which caused the decrease in the sales volume and average selling price of our ASIC chips that were primarily used in cryptocurrency mining machines.

Cost of Revenue

Cost of revenue decreased by 69.9% to RMB20.0 million (US$2.9 million) in the three months ended December 31, 2022, from RMB66.4 million in the three months ended December 31, 2021, which was in line with the decrease in the sales volume of our ASIC chips.

Operating Expenses

Total operating expenses decreased by 66.4% to RMB12.7 million (US$1.8 million) in the three months ended December 31, 2022, from RMB37.9 million in the three months ended December 31, 2021, primarily due to a decrease in research and development expenses for the design of ASIC chips.

• Research and development expenses decreased by 64.1% to RMB10.0 million (US$1.4 million) in the three months ended December 31, 2022, from RMB27.7 million in the three months ended December 31, 2021, primarily due to the reduction in direct materials and tape-out expenses in connection with our research and development projects.
• Sales and marketing expenses decreased by 6.8% to RMB1.1 million (US$0.2 million) in the three months ended December 31, 2022, from RMB1.2 million in the three months ended December 31, 2021.
• General and administrative expenses decreased by 81.2% to RMB1.7 million (US$0.2 million) in the three months ended December 31, 2022, from RMB9.0 million in the three months ended December 31, 2021, primarily due to a decrease in taxes surcharges and professional expenses.

Interest Income

Interest income increased by 153.2% to RMB3.5 million (US$0.5 million) in the three months ended December 31, 2022, from RMB1.4 million in the three months ended December 31, 2021, primarily due to an increase in our cash balances.

Other Income

Our other income increased by 4,697.7% to RMB10.6 million (US$1.5 million) in the three months ended December 31, 2022, from RMB0.2 million in the three months ended December 31, 2021, primarily due to an increase in government grants we received from local government. Such government grants were granted to us to support qualified projects of IC industry with no repayment obligations.

Net Income

As a result of the foregoing, net income decreased by 93.6% to RMB12.7 million (US$1.8 million) in the three months ended December 31, 2022, from RMB198.6 million in the three months ended December 31, 2021.

Basic and Diluted Net Earnings Per Ordinary Share

Basic and diluted net earnings per ordinary share decreased by 94.4% from RMB1.92 in the three months ended December 31, 2021 to RMB0.11 (US$0.02) in the three months ended December 31, 2022. Each ADS represents two of the Company's class A ordinary shares.