Huan Yue Interactive Holdings Limited provided consolidated earnings and impairment guidance for the year ended December 31, 2018. The Group is expected to record a significant decline in its net profit for the year ended 31 December 2018 as compared to the net profit for the year ended 31 December 2017, which is mainly attributable to: (1) a decrease in gross margin of the copper manufacturing business due to an increase in raw material costs; (2) an impairment loss on goodwill related to the acquisition of 100% interest in Funnytime Limited (Funnytime) in August 2016 as disclosed in the announcement dated 21 June 2016. Such impairment loss is primarily attributable to the fact that Funnytime's financial performance is lower than previously forecast for the year ended 31 December 2018 and Funnytime did not meet the performance target of net profit of RMB 30 million for year 2018. During the year of 2018, Funnytime's existing game products experienced a slow down in revenue growth, and the development progress of certain new game products was behind schedule. This is mainly because the authority supervising the online gaming industry in China had stopped issuing permits for new games since March 2018, which affected the whole industry. As the business environment remain uncertain, the future revenue growth of the operation of online games will be lower than forecasted.

Therefore, impairment of goodwill will be recorded for the year ended 31 December 2018. The exact amount of the goodwill impairment is yet to be determined but is estimated to be in the range of RMB 90 million to RMB 100 million. The Board would like to emphasise that the impairment loss on goodwill is a non-cash item and has no effect on the cash flow of the Group's operations; (3) a net loss on foreign exchange of approximately RMB 15.5 million.