– KuangChi Science’s net profit reached 664 million, representing nearly 2100% increase yoy
– The Group will further enhance its product mixes with comprehensive services and solutions aiming to create future smart cities

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HONG KONG — KuangChi Science Limited (“KuangChi Science” or the “Company” and, together with its subsidiaries, the “Group”; stock code: 439), a company with disruptive technologies focusing on the future technology in the PRC, is pleased to announce the interim results for the year ended 31 December 2016 (“the Year”).

During the Year, benefited from the gain on the investments of the Group and the growth of the future technology business, the Group recorded a turnover of HK$290,492,000, representing an increase of 4.06% over last year. Gross profit was HK$198,446,000 and gross profit margin was 68.31%. During the Year, the Group also generated other gains of HK$816,969,000, which was mainly attributable to the gain on investments of the Group, amounting HK$808,628,000. Profit for the Year attributable to owners of the Company surged by 2,092% year on year to HK$664 million. Basic earnings per share from continuing operations increased to 11.34 HK cents.

Dr. Zhang Yang Yang, the CO-CHIEF EXECUTIVE OFFICER of KuangChi Science said, “In 2016, KuangChi Science deploys comprehensive layout to develop the future technology and enters the artificial intelligence technology industry. Through the development and study of future space technology and future artificial intelligence technology, KuangChi provides a comprehensive range of innovative products, services and solutions, so as to enhance service efficiency, satisfy residents’ needs, create better living quality and solve the environmental issues to promote cities to develop harmoniously and sustainably.”

Business Review for the Year

In recent years, ever-changing technology revolutions and industrial transformations worldwide have been pushing technology innovation to develop faster. Along with the in-depth integration and commercialisation of different innovative technologies, new tech products and services have gradually penetrated into human societies from all walks of life. Amongst all, smart cities are important to solving the long-standing problems in city development. Building smart cities will significantly reduce the cost of city governance, disaster prevention, and minimise monetary losses.

During the Year, the Group put its focus on the Future Technology Business. The Group is committed to creating future smart cities. To achieve this, the Group is now developing and integrating different future technologies, including “future space” technology and “future artificial intelligence (AI)” technology, to provide a comprehensive range of innovative products, services and solutions, so as to enhance service efficiency, satisfy residents’ needs, create better living quality and, in particular, solve the environmental and “global connection” issues that people are facing. Specifically, its objectives can be categorised into three aspects, namely safety, sustainability and space expansion. On safety, it emphasises on emergency response and disaster precaution and warning. On sustainability, it emphasises on emergency response and disaster precaution and warning. On sustainability, it emphasises on environmental protection. On space expansion, it emphasises in particular on providing services to connect the world and remote areas.

During the Year, revenue from the Future Technology Business was approximately HK$290,132,000, representing an increase of 4.06% over last year. Of the revenue, the Group’s fastest commercialised “Cloud” products accounted for HK$290,132,000. In respect of products of the Future Technology Business, the Group incurred selling and marketing expenses of HK$39,975,000 and research and development expenses of HK$11,027,000. Administrative expenses, including staff cost of the in-depth space business, amounted to HK$136,899,000.

Future Space

The Group’s “Cloud” project panned out and has since operated well, with base technological institute constructed.

In 2016, for the “future space” technology business, the Group devotes to develop new technology and products for future space at different altitudes, and provides a comprehensive range of space services. Its self-developed products include “Cloud”, “Traveller”, “KuangChi Martin Jetpack”, “KuangChi Solar Ship”, etc.

As one of the core commercialized products of the “future space” technology business, “Cloud” has been successfully put into operation in Dongguan, Zunyi and other cities. As an application platform for smart cities, “Cloud” integrates different smart applications, successfully forming an integrated space-earth networking platform.

Since the first global commercial flight at SongShan Lake Ecological Park in December 2015, the “Cloud” smart city space information platform in Dongguan has been running smoothly and put into service in Dongguan. In October 2016, the Group performed demonstrations of using “Cloud” in “smart environmental protection”, “emergency communication”, “fire surveillance” and others, which showed that “Cloud” can be used to provide round-the-clock services such as visible and infrared and other surveillances. Real-time environmental monitoring and other data is collected by sensors on ground and gathered in “Cloud”, which then sends the data to the control centre via optical fibre transmission. In addition, in regards to the “Cloud” space information platform project in Dongguan, the Group has entered into strategic cooperation agreements with well-known and leading enterprises in smart city participants, to jointly expand the smart city market. Through the synergistic collaboration among the parties, the Group seeks to upgrade smart city infrastructure for an improved industry chain and ecosystem of cities in the future.

Besides, the Group entered into cooperation with a number of new industrial city developers, to use “Cloud” in developing new industrial cities for the interest of governments and the societies in general. At the early stage of new industrial city development, “Cloud” was used in geometric and geomorphological observation, environmental monitoring, etc., which facilitated the overall planning and management of smart industrial parks.

The near space project develops “Traveller II” and completed test flight

During the Year, the Group formed a strong alliance with Haikou National Hi-tech Zone and established the Haikou Future Technology Institute and KuangChi Near Space Technology Research and Development Headquarters. The purpose of the institute is to enhance its own capability of developing special projects for the aviation and aerospace industry (such as near space flying apparatus) and technology for the strategic emerging industry, and thereby to develop itself as a research institute with internationally top-notch development capacity in aviation and aerospace. It also seeks to establish stable and close partnership with organisations and enterprises that are engaged in fields such as aviation and aerospace, electronic information and new materials in Hainan province, with the aim of becoming an important platform for the collaboration among industry, academia and research institutes in Hainan province. In the meantime, build upon its previous experience, the institute will undertake near space projects, to further advance the technology of “Traveller” near space flying platform, as well as to optimise its business operation model.

During the Year, “Traveller II” completed test flight in Xinjiang Province of China on 9 November 2016 and reached an altitude of 12,000 m. Compared to “Traveller I”, which was launched in New Zealand, “Traveller II” is able to carry additional cabins, and equipment with improved functionalities such as space-earth dialogue, hi-speed communication and propeller, which increased the flight test difficulty.

“KuangChi Martin Jetpack”‘s commercialization development

During the Year, the Group emphasised on upgrading the technology and performance of “KuangChi Martin Jetpack” products. It has done various testing and made product deliveries. In the first half of 2016, the Group finalised the P14 version of “KuangChi Martin Jetpack” and initiated the “weight-cutting program”. As a result, the Group developed the commercial Series 1 jetpack for users in special industries. “KuangChi Martin Jetpack” is mainly used for first response, disaster recovery and rescue purposes, including fire, police and ambulance services, anti-terrorism, hostage rescue, maritime defence, petroleum and natural gas platforms, etc.

The Group make important breakthrough of commercialisation and market promotion of Solar Ship

In the second quarter of 2016, the Group completed the overall planning and design of the Fossa version of Solar Ship under the terrorism, hostage reshe systems of Fossa Solar Ship on an individual basis. It is the plan of the Group to complete the maiden test flight of Fossa Solar Ship by the first quarter of 2017. In the first quarter of 2016, under the “Solar Ship” project, the Group and Royal Canadian Air Force entered into an aircraft leasing agreement in relation to aviation exercises and a letter of intent in relation to the sales for Chinese market. In the fourth quarter of 2016, the Group set up sales and operations offices in Uganda, South Africa and Zambia. The project has been progressing to a final stage of sales and market promotion.

Future AI technology

During the Year, the Company closely embraced its awareness of the future trends, including in-depth space, spiritual machines and ultimate connection, to deploy comprehensive layout to develop the “Future AI” business and technology. Spiritual machines are machines that have been empowered with souls, allowing the equipment to become human partners rather than simply tools. The management believes that such analytical solution and technology enable machines to be emotionally intelligent thereby can better serve all mankind.

Statistics indicate that the scale of AI market in China has reached RMB23.9 billion in 2016, and is forecasted to grow to RMB38.1 billion by 2018, representing a compound annual growth rate of 26.3%. Future AI technology is a key for establishing and developing smart cities in the future. Emotion recognition equipment, in particular of spiritual machines, will play an important role in the development of smart cities in areas of security, traffic control, healthcare and smart community. It is the source of intelligence for smart cities. The demand for application in the establishment and development of smart cities will drive growth of AI technology and industry.

During the Year, the Group deployed comprehensive layout for developing the “Future AI” business and technology. It invested in developing voice recognition-featured, open-structured, video analytic identification and the like products and solutions. Its investees include two Israeli-based companies, namely Beyond Verbal and Agent VI.

Beyond Verbal focuses on the decoding of human emotions and health condition through human voice. This world leading technology is a revolutionary breakthrough in the field of analysing health and emotions. The emotions analytical technology has undergone more than 20 years of research and development with a wide range of prospective applications, from improving call centre effectiveness to tracking health conditions overtime. Beyond Verbal has collected more than 2.5 million emotion-tagged voices in more than 40 languages and secured their technology with multiple patents.

Agent VI focuses on the provision of high quality video analytical solutions and achieving seamless matching with third party systems by its patented software systems, advanced computer visual and machine-enabled learning algorithm, as well as its experience in software development for major surveillance deployments accumulated over the years.

Developing incubators of the “Global Community of Innovation”

Being a key member of the “Global Community of Innovation” (GCI), KuangChi Science strives to promote the integration of innovative technologies and establishment of platforms for industrialisation. It also takes part in the direct investment in innovation projects of GCI incubators. The Future Technology Business is now focusing on the development of space application. The Group will strengthen its efforts on the planning and layout in the areas of future space, spiritual machines, smart equipment and ultimate connection, to facilitate the international headquarters of GCI in extending the coverage of development, testing and sales network worldwide, to incubate more products and businesses of higher quality.

Dr. Zhang Yang Yang, the CO-CHIEF EXECUTIVE OFFICER of KuangChi Science said, “The business of KuangChi well covers three characteristics of future trends: In-depth Space, Spiritual Machines, and Ultimate Connection, involving in industries such as aerospace, new space services, equipment with artificial intelligence, smart cities, as well as new wireless communication technology. KuangChi has become a world leader in developing and promoting a series of products such as “Cloud”, “Traveller”, “KuangChi Martin Jetpack Jet” “KuangChi Solar Ship”, etc. With the GCI initiative, KuangChi has created a network featuring a number of partners specialized in invention and innovation for the future. The Group is committed to creating the future. It also takes pride to shoulder the innovation mission of “designing, realising and sharing the future”. In the future, together with the diversification of innovative technologies, the strengthening of research and development capabilities, the expansion of sales network and the improvement of product design and performance of the “Global Community of Innovationsion of sales network and the improvement of product design and performance of the enhancement of profitability, the Group will be able to bring satisfied return to shareholders.”