Ladies and gentlemen, thank you for standing by. Welcome to Nano Labs First Half of 2023 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, Tuesday, August 15, 2023. Joining us today from Nano Labs are the company's Chairman and Chief Executive Officer; Mr. Jianping Kong; and the company's Chief Financial Officer, Mr. Bing Chen. On our call today, Mr. Kong will give you an overview of the company's performance. Mr. Chen will share the details of the company's financial results. After that, we will conduct a question-and-answer session to take your questions. Before we continue, I would like to remind you that some information discussed on this call will contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors that -- of all which are difficult to predict and may -- of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the company's filings with the Securities and Exchange Commission. During today's call, Mr. Kong and Mr. Chen will deliver their remarks in Chinese, and the company's representative will provide corresponding English translation. With that, I will now turn the call over to Mr. Kong, the company's Chairman and Chief Executive Officer. Mr. Kong, please go ahead.

[Foreign Language]

Thank you, operator, and everyone, for joining Nano Labs first half of 2023 earnings conference call today. On our call today, I will provide an overview of our recent developments and our strategic initiatives in the future.

[Foreign Language]

The first 6 months of 2023 proved to be challenging, not just for us but for the entire cryptocurrency sector. We did see a dip in cryptocurrency values, and it had an effect on ourselves. But our priority remains unchanged: to deliver the high-quality products our customers expect from us. And in response to these market shifts, we took proactive measures. Our leadership has been traveling extensively, connecting firsthand with industry frontrunners and looking into meaningful global partnerships. We hummed in on several key regions: North America, Northern Europe, Middle East and Southeast Asia. And the good news is these efforts are paying off. We witnessed a commendable uptick in our overseas sales during this period. As we navigate the second half of the year, we will continue our drive to explore new markets and solidify our presence stronger than ever.

[Foreign Language]

Moving on, I'd like to share some exciting updates about iPollo and the advancements related to iPollo's capability in the AI reasoning and the real-time rendering of the 3D metaverse. The power of iPollo's blockchain, combined with lightning fast data network between the nodes, is revolutionizing the GPU computing. Think of it as a massive unified pool that's tailormade for the GPU-heavy tasks. And speaking of capacity, we are ramping up, adding more iPollo computing nodes with configurations of 4-core and 8-core. We're also expanding support for model training for data sets below 10 bytes. And when it comes to AI graphics computing, or AIGC, iPollo stands out. We are enabling the inference of Stable Diffusion models. In simpler terms, it's an impressive tool that can take text and transfer it into visual patterns, which can be mined directly as NFT. Also, in the digital human landscape, we are pushing boundaries. Imagine in generating 2.5D and 3D digital humans and even short videos all from a single photo. This has massive potential, especially for live streaming e-commerce. As we delve deeper into the AI space, we are developing a Web 3 AI training platform, and this is our answer to the diverse need of the Web 3 era. Plus with iPollo's capacity in a digital human face, we are unlocking new digital applications for various intellectual properties. And then when paired with 3D printing, it means these digital entities can be beautiful representative in our tangible world, truly bringing the metaverse to life for those passionate about cultural trends. And to wrap it up, we firmly believe that iPollo will be a landmark offering in our industry, setting new benchmarks and continuously elevating the Web 3 experience.

[Foreign Language]

Thank you for your unwavering support and trust in our company. Next, I will turn the call over to our Chief Financial Officer, Mr. Chen, for a closer review of our financial results. Mr. Chen, please go ahead.

[Foreign Language]

Thank you, Mr. Kong Jianping. A very good morning to you all. I'm here to share a concise financial update for the first half of 2023 on behalf of our dedicated management team. Net revenue was RMB52.3 million or $7.2 million for the first half of 2023 compared to RMB380.1 million for the same period of 2022. The decrease in net revenue was primarily due to the decrease in sales volume of Z and B series, plus a dip in service revenue for the first half of 2023. On a brighter note, our 3D products have begun to contribute to our revenue stream. The cost of revenue was RMB115.2 million or $15.9 million for the first half of 2023 compared to RMB203.8 million for the same period of 2022.

[Foreign Language]

The total operating expenses were RMB73.5 million or $10.2 million for the first half of 2023 compared to RMB68.7 million in the same period of 2022. And selling and marketing expenses decreased by 6.5% to RMB9.5 million or $1.3 million for the first half of 2023, down from RMB10.2 million in the prior year. The decrease was primarily due to the decrease in advertising and marketing promotion expenses.

[Foreign Language]

The general and administrative expenses increased by 83.8% to RMB31 million or $4.3 million for the first half of 2023 from RMB16.9 million for the same period of 2022. And the surge was primarily attributed to the increase in employee salary expenses, professional fees and rental fees due to the development and expansion of our business.

[Foreign Language]

Research and development expenses decreased by 21% to RMB33 million or $4.6 million for the first half of 2023 from RMB41.7 million for the same period of 2022. The decline is largely due to reduced design, service and material costs alongside with a decrease in share-based payout, offset by the increasing equipment rental fees. Please note that we are committed to our robust R&D investment to support our future development, product iteration and competitive strength.

[Foreign Language]

Loss from operations were RMB136.4 million or $18.9 million for the first half of 2023 compared with profit from operations of RMB107.6 million for the same period of 2022. Net loss was RMB134.3 million or $18.6 million for the first half compared to a net income of RMB111.4 million for the same period of 2022. Basic and diluted loss per share was RMB1.2 or $0.17 for the first half of 2023 compared with RMB1.07 for the same period of 2022. As of June 30, 2023, the company had cash and cash equivalents of RMB16.8 million or $2.3 million compared with RMB87.8 million as of December 31, 2022.

[Foreign Language]

We remain confident in our ability to add value in the future development of our business. We will continue to leverage the strength of our technology to drive long-term growth and create additional value for our shareholders. Now I will turn the call over to the operator for a question-and-answer session.

[Operator Instructions] Our first question comes from [Iva Ross], private investor.

I got two questions today. The first one is, the financial result decreased from December 2022 to June 2023. Could you please explain the main reason behind the drop in revenue?

[Foreign Language]

[Foreign Language]

The main reasons were the issuance transition to the proof-of-stake, which is the POS in the latter half of the last year, also coupled with the continuous downturn of the cryptocurrency prices during the first half of this year. All of these factors significantly impacted our results.

And my next question will be, we've noticed the company is currently exploring various new developments, which seems to have less association with B and V series product. Could you explain the rationale behind picturing this development?

[Foreign Language]

[Foreign Language]

So in a world of Web 3, from the foundational infrastructure to a more higher-level applications, there are various main segments including but not limited to like the infrastructure, the human computer interaction, decentralization, et cetera. And you can see that our past computational devices were large powerhouses supporting the massive demand of those high-level Web 3 applications. For example, you can see our earlier products, which is the iPollo elemental computing. The unit helps to unify the edge computing into a consolidated powerhouse, and with the infrastructure continues to evolve, we can see more and more opportunities to come. And that's why we've been launching products that cater to the multiple facets of the Web 3 evolution.

Our next question comes from [Erina Robano], private investor.

So I have two questions. My first question is, what are the company's expectations for the market and the financial results in the second half of this year and next year?

[Foreign Language]

[Foreign Language]

We anticipate that while we will maintain the sales of our existing V and B series products in the second half of this year, we will also start to see contribution from our new product lineup. And looking ahead to the next year, we expect a noticeable uptick in sales from these new product offerings.

Okay. My next question here is, are there any new plans for the existing products or plans for the product iterations?

[Foreign Language]

[Foreign Language]

Sure. Absolutely. So as hinted in our outlook, we've got a slew of Web 3 products that should level out in the coming months, such as the iPollo.ai. And our iPollo 3D printing for the metaverse also partnered up with major IPs and exhibition centers, so we are expecting some promising results this year. In addition, we are currently developing our Cuckoo 3 product, which we believe will offer a substantial performance boost over its predecessor.

[Operator Instructions] Our next question comes from [Cathleen Smith], private investor.

I have a question today. So the performance for the first half of this year was not impressive. So does the company's management team have any solutions to drive business development?

[Foreign Language]

[Foreign Language]

Yes. So apart from sticking to our road map for upgrading our existing product line and waiting for the market recovery, we're also positioning ourselves to -- like across the entire value chain of the Web 3. And this includes venture into higher-level applications like AIGC, VK computation, trending AR gadgets and peripherals for the 3D printing. We aim to diversify our products and cater to the demand anticipated in the Web 3 landscape.

That concludes the question-and-answer session. Let me turn the call over to Mr. Chen for our closing remarks.

[Foreign Language]

Thank you very much for joining this conference call. If you have any questions, please contact us through the e-mail at ir@nano.cn or reach our IR council, Ascent Investor Relations, at tina.xiao@ascent-ir.com. Management will respond to your questions as soon as possible. We appreciate your interest and support in Nano Labs and look forward to speaking with you again next time.

Thank you again for attending Nano Labs' First Half of 2023 Earnings Conference Call. This concludes our call today, and we thank you all for listening in. Goodbye.