CLARITY MEDICAL (01406): Two directors received several allegations.

CLARITY MEDICAL (01406) announces that two directors (receiving directors) recently received allegations from an anonymous director (anonymous source) regarding the company's executive team members (executives) including Mr. Jiang Bo (Chief Executive Officer, appointed as an executive director and CEO of the company since September 9, 2024) and Mr. Xu Yong (Joint Chief Executive Officer, appointed as an executive director of the company since June 30, 2022 (previously an independent non-executive director) and Joint Chief Executive Officer of the company since September 9, 2024). Subsequently, one of the receiving directors received various materials regarding the allegations from another anonymous source. Therefore, the company held a board meeting on December 30, 2024 (December 30 meeting) to allow the receiving directors to present the allegations. At the December 30 meeting, the receiving directors verbally outlined the alleged accusations and chose not to disclose the anonymous sources. In the absence of the executives, the receiving directors presented several related documents to the board. The summary of the allegations is as follows: Regarding the CEO, it is alleged that the CEO and Joint CEO attempted to replace the existing bank signatory of the company with the CEO and General Manager, but the replacement has not been implemented; it is alleged that they signed a consulting agreement with an entity allegedly connected to the CEO, which may constitute related party transactions, and transferred the company's interests and funds based on the consulting agreement. As of the date of this announcement, the company has paid a total of approximately HK$1.5 million under the consulting agreement, of which about HK$400,000 is related to a consulting agreement signed with the CEO after his appointment; it is alleged that the information regarding the CEO's relationship with certain shareholders of the company in the response letter sent to the HKEx on November 26, 2024 was incomplete and misleading; and it is alleged that the CEO was appointed as a director of a subsidiary of the company without board approval, effective from December 16, 2024. Depending on the findings of the special committee, the CEO will continue to serve as a director of the subsidiary. Regarding the Joint CEO, it is alleged that the CEO and Joint CEO attempted to replace the company's bank signatory with the CEO and General Manager, but the replacement has not been implemented; it is alleged that the information in the response letter sent to the HKEx on November 26, 2024 about the CEO's relationship with certain shareholders of the company was incomplete and misleading; and it is alleged that the Joint CEO was appointed as a director of a subsidiary of the company without board approval, effective from December 16, 2024. Depending on the findings of the special committee, the Joint CEO will continue to serve as a director of the subsidiary. In response to the allegations, the company was informed by the executives that they refute all the allegations and have provided a detailed written response, supporting evidence, and oral explanations to the board, questioning the motives behind the allegations. The executives also informed the company that the allegations are a result of their actions as the only two senior executives of the company, acting in the best interests of the company and diligently fulfilling their duties; they have always performed their duties in accordance with the company's usual practices since its listing on the HKEx; and any agreements entered into with the entities mentioned in the allegations have been properly authorized and entered into in the company's normal course of business. The response from the executives is collectively referred to as the "Executive Opinion." The CEO also informed the company of his opinion that since assuming his role as CEO of the company, the executives have made decisions that may not have been welcomed by certain long-term members of the board. These decisions include the executives refusing a request from a director to assist in legal proceedings that could potentially harm the company's interests. The receiving directors also informed the company that, according to the anonymous sources, some/all of the allegations have been reported to the police and the HKEx. As of the date of this announcement, the company has not received any notification from the police regarding any of the allegations, despite inquiries made by the HKEx. Considering the allegations, the board (including the executives) decided at the December 30 meeting to establish a Special Investigation Committee (Special Committee), initially composed of two independent non-executive directors, Ms. Zheng Yuling (as Chairman) and Mr. Wang Can, to investigate the allegations and report their findings and conclusions to the board. The Special Committee may also appoint professional advisors as necessary. In the interest of transparency and a fair review of the allegations, the executives voted in favor of the resolution to establish the Special Committee at the December 30 meeting. At the board meeting held on January 8, 2025 (January 8 meeting), the CEO questioned the necessity of establishing the Special Committee and its scope of work, but did not receive a response. To avoid any doubts, the board has not formed any opinion on the veracity, accuracy, and substance of the allegations or the Executive Opinion until the Special Committee presents its findings on the allegations. The executives have informed the company that they will provide further materials and documents to the Special Committee to support their investigation.