Launch Tech Company Limited — Annual Report 2020

Mar 31, 2021

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document.

深圳市元征科技股份有限公司

LAUNCH TECH COMPANY LIMITED *

(a joint stock limited company incorporated in the People’s Republic of China with limited liability) (Stock Code: 2488)

2020 ANNUAL RESULTS

The board of directors (the “Board”) of Launch Tech Company Limited (the “Company”) hereby announces the audited consolidated results of the Company and its subsidiaries (the “Group”) for the year ended 31 December 2020 prepared in accordance with China Accounting Standards for Business Enterprises:

I. FINANCIAL INFORMATION

(All amounts in RMB unless otherwise stated)

CONSOLIDATED BALANCE SHEET

Note Current assets: Bank balances and cash Trading financial asset Bills receivable Accounts receivable 4 Accounts receivable financing Prepayments Other receivables 5 Inventories 6 Other current assets Total current assets	2020 396,936,278.13 – 45,073,109.36 125,731,287.93 25,009,778.78 40,074,512.74 21,328,217.30 159,383,049.28 18,774,729.38 832,310,962.90	2019 479,434,623.64 20,000.00 – 191,886,124.47 33,626,210.19 61,689,994.46 29,026,828.95 167,850,981.97 21,476,188.39
		985,019,952.07

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CONSOLIDATED BALANCE SHEET (CONTINUED)

Note Non-current assets: Long-term equity investment Investment in other equity instruments Investment Propenty Fixed assets Construction in progress Right-in-use assets Intangible assets Goodwill Deferred income tax assets Other non-current assets Total non-current assets Total assets Current liabilities: Short-term borrowings Bills payable Accounts payable 7 Contract liabilities Employee remuneration payable Tax payables Other payables Non-current liabilities due within one year Other current liabilities Total current liabilities	2020 2,179,780.15 3,110,736.90 63,752,935.43 212,939,923.58 190,604,603.70 5,120,957.22 84,223,514.62 1,139,412.80 5,136,323.13 470,155.00 568,678,342.53 1,400,989,305.43 275,837,641.62 132,856,923.79 135,088,247.99 101,318,189.50 10,793,537.87 4,271,098.56 16,652,328.48 2,906,685.82 53,575,250.29 733,299,903.92	2019 – 7,946,587.70 68,726,930.06 230,878,047.81 154,815,133.82 7,766,034.71 167,391,569.66 1,139,412.80 5,997,096.39 5,000,000.00
		649,660,859.43
		1,634,680,811.50
		485,396,607.58 108,000,000.00 140,531,794.10 66,965,012.27 2,453,446.49 5,388,954.37 21,205,958.12 2,802,016.54 7,587,655.24
		840,331,444.71

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CONSOLIDATED BALANCE SHEET (CONTINUED)

Note Non-current liabilities: Non-current liabilities due within one year Deferred income Deferred tax liabilities Total non-current liabilities Total liabilities Shareholders’ equity: Share capital Capital reserve Other comprehensive income Surplus reserve Undistributed profit Total owners’ equity attributable to parent company Minority shareholders’ equity Total shareholders’ equity Total liabilities and shareholders’ equity	2020 2,605,018.48 11,268,142.28 188,014.06 14,061,174.82 747,361,078.74 432,216,600.00 410,457,153.64 -6,603,868.55 41,036,682.03 -224,189,399.81 653,399,310.14 228,916.55 653,628,226.69 1,400,989,305.43	2019 5,279,622.40 16,253,670.58 295,178.70
		21,828,471.68
		862,159,916.39
		432,216,600.00 409,992,867.94 -6,847,151.63 41,036,682.03 -103,878,103.23
		772,520,895.11 –
		772,520,895.11
		1,634,680,811.50

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CONSOLIDATED INCOME STATEMENT

Note Operating income 3 Less: Operating costs Tax and surcharge Selling expenses Administrative expenses Research and development expenses Finance costs Add: Other revenue Gain on investments Impairment loss on credit Impairment loss on assets Gain on disposals of assets Operating profit Add: Non-operating income Less: Non-operating expenses Total profit Less: Income tax expenses 9 Net profit (loss “-”) Profit from continued operation Other comprehensive income Total comprehensive income Earnings per share: Basic earnings per share 10	2020 1,068,653,993.45 590,106,457.78 7,985,791.64 133,201,320.58 68,204,277.96 269,494,455.76 39,182,147.73 30,951,712.56 1,746,659.56 -94,122,214.35 -25,349,260.52 8,386,973.46 -117,906,587.29 1,440,229.84 2,828,763.26 -119,295,120.71 1,166,175.87 -120,461,296.58 -120,461,296.58 243,283.08 -120,218,013.50 -0.2787	2019 941,709,327.84 532,405,019.55 8,110,075.46 129,838,861.41 84,550,885.61 261,744,203.22 24,570,482.49 39,020,106.91 5,341.54 -51,643,339.57 -22,490,957.50 -737,196.83
		-135,356,245.35 1,330,373.75 1,543,449.59 -135,569,321.19 1,362,354.28
		-136,931,675.47
		-136,931,675.47
		-8,429,091.21
		-145,360,766.68
		-0.3140

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CONSOLIDATED CASH FLOW STATEMENT

Note Net cash flows from operating activities Net cash flows from investing activities Net cash flows from investing activities Impact on cash by changes in foreign exchange rates Net increase in cash and cash equivalents Add: Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period	2020 203,840,464.25 -42,782,820.52 -249,129,491.72 -8,745,574.66 -96,817,422.65 470,434,623.64 373,617,200.99	2019 126,394,449.08
		-95,189,539.07
		119,163,856.35
		678,123.90
		151,046,890.26 319,387,733.38
		470,434,623.64

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CONSOLIDATED STATEMENT OF MOVEMENT ON EQUITY

Opening balance of current year Comprehensive income Other Ending balance for current period	2020 772,520,895.11 -119,839,096.95 946,428.53
	653,628,226.69

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENT

1. BASIS OF PREPARATION OF FINANCIAL STATEMENT

Financial information in this announcement was extracted from the audited financial statements (the “Financial Statements”) in 2020.

The financial statements of the Company were prepared according to the transactions and matters actually occurred, and recognitions and measurements were made in accordance with the Accounting Standards for Enterprises – Basic Standards published by the Ministry of Finance and specific accounting standards, guidance on application of accounting standards for enterprises, interpretations to accounting standards for enterprises and other relevant requirements (hereinafter collectively referred to as the “Accounting Standards for Enterprises”) on this basis, in conjunction with the provisions of the China Securities Regulatory Commission, “Regulations on Information Disclosure and Compilation of Companies Offering Securities to the Public No. 15-General Provisions on Financial Reporting” (revised in 2014).

The Company carried out assessment on the going concern for the 12 months’ period after the report date, and did not recognize any matters or situation which leading to material doubt on the continuity of operation. Therefore this financial report is based on recognition and measurement on a going concern basis.

In addition, the Financial Statements have also complied with the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities issued by The Stock Exchange of Hong Kong Limited.

2. SIGNIFICANT ACCOUNTING POLICIES, ACCOUNTING ESTIMATES AND COMPILATION METHOD OF CONSOLIDATED FINANCIAL STATEMENTS

(1) Accounting period

The accounting period is from 1 January to 31 December.

(2) Reporting currency

Renminbi was adopted as the reporting currency. The Company’s foreign subsidiaries choose their reporting currencies the basing on the primary economic environment in which they operate and converted into when preparing financial statements.

(3) Method of preparing consolidated financial statements

The scope of consolidation of the consolidated financial statements of the Company is determined on the basis of control. All subsidiaries are included in the consolidated financial statements.

Based on the financial statements of the Company and its subsidiaries, the consolidated financial statements are prepared by the Company according to other relevant information.

All subsidiaries within the scope of consolidation of the consolidated financial statements shall adopt accounting policies and financial period consistent with the Company. When there is any inconsistency on the accounting policies or financial period adopted by the subsidiaries and the Company, the financial statements of subsidiaries are adjusted according to the accounting policies or financial period adopted by the Company as necessary.

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When consolidating the financial statements, the effects of intra-transactions between the Company and its subsidiaries, and among subsidiaries on the consolidated balance sheet, the consolidated income statement, the consolidated cash flow statement and the consolidated statement of changes in equity shall be offset.

3. REVENUE

Revenue from main operations includes the net value of the received and receivable for the sales of different types of vehicle maintenance equipment, and provision of internet upgrade service as follows:

Revenue from main operations Revenue from other operations: rent	Current year 1,026,460,172.10 42,193,821.35 1,068,653,993.45	Previous year 902,369,666.58 39,339,661.26
		942,709,327.84

4. ACCOUNTS RECEIVABLE

The Company basically used credit terms when dealing with customers and normally offered credit period from 30 days to 210 days. Should a customer possessed long and good records or in case of being a major customer, or under the circumstances that the Company would like to maintain prolong operational relationship, and then a different credit period might be considered.

At the period end Accounts receivables 210,121,914.25 Less: provision for bad debts 84,390,626.32 Net amount 125,731,287.93 Ageing At the period end Within 1 year 113,723,621.55 Includes: Within 90 days 101,116,188.74 91-180 days 7,587,984.77 181-270 days 2,312,731.87 271-365 days 2,706,716.17 1-2 years 35,387,694.88 2-3 years 45,385,412.31 3-4 years 1,663,989.59 4-5 years 1,813,547.25 Over 5 years 12,147,648.67 Subtotal 210,121,914.25 Less: provision for bad debts 84,390,626.32 Total 125,731,287.93	At the beginning of the period 252,688,710.65 60,802,586.18
	191,886,124.47
	At the beginning of the period 112,582,219.35 75,321,853.37 6,573,090.68 3,345,868.95 27,341,406.35 83,296,473.51 10,596,703.39 8,307,698.71 7,675,993.84 30,229,621.85 252,688,710.65
	60,802,586.18
	191,886,124.47

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The aging of the not-past-due and overdue accounts receivable are as follows:

Items Carring balance Not past due 83,669,204.31 overdue 126,452,709.94 Total 210,121,914.25	Ending balance Provision 4,183,460.22 80,207,166.10 84,390,626.32	Book value 79,485,744.09 46,245,543.84 125,731,287.93	Beginning balance Carring balance Provision 57,372,828.38 2,868,641.42 195,315,882.27 57,933,944.76 252,688,710.65 60,802,586.18	Book value 54,504,186.96 137,381,937.51
				191,886,124.47

5. OTHER RECEIVABLES

Aging Within 1 year 1-2 years 2-3 years 3-4 years 4-5 years Over 5 years Subtotal Less: provision for bad debts Total	Ending balance 16,141,818.42 10,757,223.41 2,741,167.09 946,806.52 155,418.00 1,942,508.97 32,684,942.41 11,356,725.11 21,328,217.30	Beginning balance 31,658,965.36 6,791,896.63 2,374,738.02 4,339,490.77 1,282,693.19 1,799,395.27 48,247,179.24 19,220,350.29
		29,026,828.95

6. INVENTORIES

Item Raw materials Work in progress Finished goods Total	Carrying balance 21,975,766.43 7,436,948.78 152,579,503.88 181,992,219.09	Ending balance Provision for impairment 4,632,079.21 4,239,177.05 13,737,913.55 22,609,169.81	Book value 17,343,687.22 3,197,771.73 138,841,590.33 159,383,049.28	Beginning balance Carrying balance Provision for impairment 18,562,052.95 2,537,439.58 7,282,773.04 3,202,457.09 159,948,960.82 12,202,908.17 185,793,786.81 17,942,804.84	Book value 16,024,613.37 4,080,315.95 147,746,052.65
					167,850,981.97

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7. ACCOUNTS PAYABLE

Item Ending balance Under 1 year 129,528,458.83 1-2 years 3,075,124.95 2-3 years 315,484.54 Over 3 years 2,169,179.67 Total 135,088,247.99 8. UNDISTRIBUTED PROFITS As at the beginning of the period Add: net (loss) profit attributable to shareholders of the parent company in the current year Internal transfer As at the end of the period 9. INCOME TAX EXPENSE Current year Income tax for the current period 305,356.13 Adjustment of deferred tax 860,819.74 Total 1,166,175.87 The Company Launch Software Shanghai Launch Launch Europe Gmbh Golo IOV Xi’an Launch PJS Launch International Nanjing Launch SLH NJG Hainan Launch Launch Italy Gmbh

Beginning balance 137,094,798.38 1,038,836.99 881,483.82 1,516,674.91 140,531,794.10 Current year -103,878,103.23 -120,461,296.58 150,000 -224,189,399.81 Previous year 1,746,883.00 -384,528.72 1,362,354.28 Applicable tax rate 15% 15% 25% 19% 15% 25% 15% 16.5% 25% 25% 25% 25% 24%

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10. EARNINGS PER SHARE (-LOSS)

(1) Basic earnings (-loss) per share

Basic earnings (-loss) per share is calculated by dividing the consolidated net profit (-loss) for holder of ordinary share of the parent company by average weighted number of outstanding ordinary share of the parent company.

Items	Current year	Previous year
Consolidated net profit (-loss) for holder of ordinary share
of the parent company	-120,461,296.58	-136,931,516.46
Average weighted number of outstanding ordinary share
of the parent company	432,216,600.00	436,036,475
Basic earnings (-loss) per share (RMB/share)	-0.2787	-0.3140

(2) Diluted earnings (-loss) per share

As there was no ordinary shares with dilutive potential for the year 2020 and 2019, thus no diluted earnings (-loss) per share was presented.

11. DIVIDEND

The Board do not recommend distribution of final dividend.

12. SUBSIDIARIES

Name of the corporation	Shareholding	Business nature	Registered capital
Shanghai Launch Mechanical Equipment Co., Ltd.	100%	Manufacturing of equipment and	USD18,000,000
(“Shanghai Launch”)		machines for maintenance of
		automobiles
Launch Software Development Co., Ltd. (“Launch Software”)	100%	Software development	RMB40,000,000
Launch Europe GmbH	100%	Sales of LAUNCH products	EURO25,564.59
Xi’an Launch Software Technology Co., Ltd. (“Xi’an Launch”)	100%	Software development	RMB100,000,000
Shenzhen Golo Internet of Vehicle Data Technology Co., Ltd.	100%	Automotive warranty equipment	RMB10,000,000
(“Golo Internet”)		industry
Shenzhen PengJuShu Information Technology Co., Ltd. (“PJS”)	100%	Technology development	RMB2,000,000
Launch Tech International Co., Ltd. (“Launch International”)	100%	Automotive warranty equipment	HKD50,000
		industry
Nanjing Launch Intelligent Technology Co., Ltd.	100%	Technology development	RMB50,000,000
(“Nanjing Launch”)
Shenzhen Shunlihang Auto Techonology Sharing Co., Ltd.	100%	Technology research and	RMB1,000,000
(“SLH”)		development
Nanjing Golo Big Data Technology Co., Ltd. (“NJG”)	100%	Software and information	RMB10,000,000
		technology services
Launch Italy GmbH	100%	Software and information	EURO50,000.00
		technology services
Hainan Launch Education Technology Co., Ltd.	70%	Software and information	RMB10,000,000
(“Hainan Launch”)		technology services

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13. CONTINGENT LIABILITY

At the end of the reporting period, the Company did not have any significant contingent liability.

14. PLEDGE OF ASSETS

As at 31 December 2020, the Company pledged properties and buildings and land use rights with original value approximately amounted to 285,000,000 (2019: 285,000,000) for certain bank borrowings.

15. CAPITAL COMMITMENTS

As at 31 December 2020, the Company there is no material unsettled capital commitments.

16. LEASE COMMITMENTS

As at 31 December 2020, commitments for the Group in the future which brought by non-cancellable lease contracts are as follows:

Within 1 year 2 to 5 years	Current year 5,742,195.17 7,830,768.30 13,572,963.47	Previous Year 3,724,483.60 5,596,230.96
		9,320,714.57

17. POST-BALANCE SHEET EVENTS

In February 2021, the Company, Launch Software and Xi'an Hangyue Chengyi Industrial Co., Ltd. (hereinafter referred to as Xi'an HY) signed an agreement to transfer whole equity of Xi'an Launch held by the Company and Launch Software to Xi'an HY, with a trade consideration of RMB166 million. At the same time, as a precondition, Xi'an HY agreed to repay Xi’an Launch’s debt owed to the Company of RMB134 million. As of the date of disclosure of the report, the transaction has not been completed.

The Group does not have other material matters that should be disclosed under the Post-balance sheet events.

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II. MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW

For the year ended 31 December 2020, the Company’s revenue was RMB1,069,000,000, representing an increase of approximately 13.5% from RMB 942,000,000 in the corresponding period last year. Despite the year-over-year decline in revenue in the first half of the year due to the pandemic, revenue rebounded rapidly in the second half of the year as domestic and overseas pandemic was gradually brought under control and demand for orders increase with the online business in full gear. Of which, sales revenue from the e-commerce division increased by approximately 33% to RMB222,000,000 compared to RMB167,000,000 in the same period last year.

For the year ended 31 December 2020, the consolidated gross profit margin increased by 1.3% to approximately 44.8% (2019: approximately 43.5%), mainly attributed to an improvement in our product mix. The proportion of integrated diagnostics equipment which commanded higher margin increased from 63% to 66%, while the proportion of low margin lift products decreased from 26% to 21%.

For the year ended 31 December 2020, the Company’s net loss attributable to equity holders of the parent company was RMB120,000,000, compared to net loss of RMB137,000,000 in the same period last year. Despite our revenue increased significantly compared to last year, due to the pandemic and the adverse economic environment, the Company still recorded loss due to factors including additional provisions were made for impairment of financial assets, increased research and development expenses, and foreign exchange losses bought about by the appreciation of RMB.

BUSINESS REVIEW

2020 is an extraordinary year, the new coronavirus (Covid-19) pandemic has blown the world and its impact has become normalized. The continued geopolitical frictions and intensifying international trade disputes have caused critical challenges to the global economic growth. Other than China, the gross domestic product (GDP) of major economies of the world record declines, with high unemployment and severely impacted consumer confidence. This inevitably significantly affected the industry in which the Company operates. According to statistics from IHS Markit, global car sales in 2020 decreased by 15% year-on-year, among which, sales in the major markets including China, the United States and Europe decreased by 5%, 15% and 24.2% year-on-year respectively. Despite of the complex and volatile external environment, as the successful epidemic prevention and control measures taken by the Chinese government has brought the pandemic under control, China’s economy has been among the first to stabilise and resumed growth. According to the latest data released by the National Bureau of Statistics, China’s GDP in 2020 was RMB101.6 trillion, increased by 2.3% year-on-year, which made China the only major economy to achieve positive growth in the world. The overall stability of China’s economy was an important prerequisite for the Group to achieve steady revenue growth this year. In the first half of the year, product delivery slowed and demand for orders weakened due to lockdowns and work suspension. Nevertheless, in the second half of the year, the overall demand rebounded and e-commerce online business continuously strengthened, which boosted the Group's full-year sales revenue in 2020 to increase by 13.5% over the same period last year.

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Automotive diagnostic equipment segment

The automotive diagnostic equipment segment recorded a revenue of RMB678,000,000 this year, representing an increase of 20% over the same period last year, and the segment accounted for 66% of the total revenue of the Group. During this year, the sales of new generation high-end Pad V continued to increase with its features primarily on high-end applications including intelligent diagnosis, online programming, and remote diagnosis, as well as its extended functions such as oscilloscopes, sensors, multimeters, battery detection, and endoscopes. SmartLink, our strategic new product and super remote diagnosis equipment, has become the preferred equipment for remote diagnosis of automotive electronics experts in China and other countries. It is compatible with geographical and technical restrictions breakthrough that has achieved a cross service-oriented platform and remote real-time interaction of the protocols. TSGUN, the world's first portable tire pressure detection handheld terminal, integrates the activation, reading, learning and programming functions of the TPMS sensor, and connects directly to the X431 via Bluetooth/Wi-Fi that has effectively expanded into the TPMS-related functions of the comprehensive diagnostic equipment. The calibration tool X-431 ADAS Mobile launched by the Group, the first fully foldable and portable ADAS (advanced driver assistance system), was widely recognized by customers for its convenience, speed and accuracy.

Lift segment

The lift segment recorded a revenue of RMB216,000,000 this year, representing a decrease of 8% over the same period last year, and the segment accounted for 21% of the total revenue of the Group. Lifts were products of the Group with the lowest gross profit margin. Its average gross profit margin was approximately 11% for the year, representing an increase of 5% (2019: approximately 6%). The Group has made continued effort to streamline and optimise the lift business. In the future, the Group will reduce the segment’s production capacity further, decrease the types of product and increase the unit price of product, so as to improve the overall gross profit margin of the Group.

Diagnostic software business

The diagnosis software segment recorded a revenue of RMB45,000,000 this year, representing an increase of 41% over the same period last year, and the segment accounted for 4% of the total revenue of the Group. The software store was officially launched virtually on comprehensive diagnosis and DIY diagnosis equipment that facilitated purchase and payment convenience significantly for the end customers. Besides, the successful promotion and application of smart pricing and software granular application models also contributed to the Group’s diagnose software business throughout the year, with its software business revenue rising significantly.

Big data segment

The big data platform of the Group collected approximately 183 million vehicle diagnostic reports this year, and total of 650 million maintenance diagnostic reports were accumulated, representing an increase of 39% from the end of last year.

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Patent of core technologies

The Group has received 513 patents granted by the State this year, including 349 invention patents; 2,629 patents were pending in application, including 2,403 invention patents, 235 certified software copyrights; and 339 PCT patents.

Major Financial Data for the profit changes

In 2020, even the gross profit increased as a result of rise in sales, the administrative and selling expenses decreased as a result of tight control implemented, the research and development expenses also increased, which was mainly due to the addition of R & D projects at research stage, Exchange loss increased due to the fluctuation of the exchange rate of US dollar, with relatively large impairment on assets and credit under the adverse impact of covid-19 epidemic situation, the loss after tax for the year revealed a decrease of approximately 17,000,000 compared with last year.

Increase in gross profit Decrease in Administrative and Selling expenses Increase in R&D expenses Increase in Finance cost mainly the Exchange loss Impairment on assets and credit Others Increase in profit after tax Principal Sources and Usage of Fund Inflow from Operations Acquisition of fixed assets and investment in R&D Decrease in Loans Interest paid Deposit on bills Exchange loss Others Decrease in cash

RMB million 69 13 (8) (15) (45) 3 17 RMB million 204 (45) (210) (20) (14) (9) (3) (97)

Total net cash outflow for the year was of 97,000,000 and the year ended balances of cash and cash equivalents was 374,000,000.

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Capital Structure

The Company’s capital structure consists of interests and liabilities attributable to shareholders during the reporting period. Total liabilities amounted to 747,000,000, interests attributable to shareholders amounted to 654,000,000. Total assets amounted to 1,401,000,000. As at the end of the year, the Company’s gearing ratio calculated by total liabilities divided by interests attributable to shareholders was 1.14 (2019: 1.12). The overall gearing ratio is similar with last year, still reaching our satisfactory gearing ratio level.

Customers and suppliers

Total revenue from the top five customers of the Company was approximately 252,000,000 (2019: 209,000,000), accounting for approximately 25% (2019: 23%) of total revenue for the year. The largest customer accounted for approximately 7% (2019: 7%) of the total revenue for the year.

Total purchases from top five suppliers of the Company amounted to approximately 205,000,000 (2019: 200,000,000), accounting for approximately 37% (2019: 37%) of the total purchases for the year. The largest supplier accounted for approximately 17% (2019: 17%) of the total purchases for the year.

None of the directors, their respective associates, or any shareholders (which to the knowledge of the directors own more than 5% of the share capital of listed issuer) had any interest in any of the customers or the suppliers disclosed above.

PROSPECTS AND FUTURE STRATEGIES

The year 2020 has come to an end in the midst of the pandemic and tremendous changes. Looking forward to 2021, the pandemic in most parts of the world is still beyond control, which remains a complicated and critical challenge to the global economy and enterprises will continue to face heavy pressure. Especially since the end of last year, due to the intensifying trade conflict between the PRC and the US, the global semiconductor shortage has brought severe challenges and tests to the Group’s order delivery. In such challenging external environment, the Group will watch closely the industrial news, focus on the market demand, adjust the strategy in time, actively explore the business strategy under the normalization of epidemic prevention and control, and make every effort to ensure the supply of products while grasp the opportunities arising from technological innovation, turning it into a business transformation opportunity and implementing our development strategy so as to achieve sustainable and stable development for the Company.

The Group will:

• i. establish an open and integrated automotive big data platform with car diagnostic equipment being core equipment. We will utilize big data, artificial intelligence, blockchain, 5G and other new technologies to explore innovative business models, build an automotive service ecosystem with partners for the development of automotive data business.

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• ii. plan actively for new energy business, expedite the nurturing and growth of new businesses with a focus on new growth areas.

• iii. continue to expand its global business, increase the proportion of overseas market revenue and market share.

• iv. maintain a high proportion of R&D investment, integrate internal and external resources, develop new technologies and new products and enhance core competitive advantages.

III. NOTES TO OTHER MATERIAL EVENTS

1. Scope of consolidation

During the reporting period, other than the establishment of two new subsidiaries which are Hainan Launch and Launch Italy GmbH, there was no other significant change in respect of the scope of consolidation.

2. Audit of financial statements for the reporting period by the audit committee

The 2020 audited financial statements is reviewed and confirmed by the audit committee of the Board of the Company.

3. Code on Corporate Governance Practices

During the reporting period, the Company was in compliance with the code provisions set out in the Code on Corporate Governance Practices as set out in Appendix 14 to the Rules Governing the Listing of Securities (the “Listing Rules”) on the Stock Exchange of Hong Kong Limited. Details of implementation of the Code on Corporate Governance Practices will be set out on the Corporate Governance Report in 2020 Annual Report.

4. Model Code for securities transactions by directors and supervisors

During the reporting period, the Company has adopted a set of code of practice regarding securities transactions by directors and supervisors on terms no less exacting than the standards set out in the Model Code in Appendix 10 to the Listing Rules. Having made specific enquiry to all directors and supervisors of the Company, the Company confirmed that, each of the Directors and supervisors has complied with the required standards regarding securities transactions by directors set out in the Model Code within the 12 months ended 31 December 2020.

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5. Share capital

• (1) During the reporting period, there is no change in the share capital.

• (2) During the reporting period, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company’s shares.

• (3) During the reporting period, the Company had no share options granted under the share option scheme.

IV. ANNUAL REPORT

This announcement is set out on the websites of the Company (www.cnlaunch.com) and the Stock Exchange (www.hkexnews.hk). Annual report will be dispatched to shareholders and will be published on the aforesaid websites in due course.

By Order of the Board Launch Tech Company Limited* Liu Xin Chairman

Shenzhen, the PRC 31 March 2020

As at the date of this announcement, the board of directors of the Company comprises Mr. Liu Xin (Chairman), Mr. Liu Jun, Ms. Huang Zhao Huan and Mr. Jiang Shiwen as executive Directors, Mr. Peng Jian as non-executive Director, and Ms. Zhang Yan, Mr. Liu Yuan and Mr. Ning Bo as independent nonexecutive Directors.

• for identification only

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