Hong Kong Pharma Digital Technology Holdings Ltd. (HKPD) Risk Analysis

Cayman Islands law provides shareholders with only limited rights to convene a general meeting and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company's articles of association. Our amended and restated memorandum and articles of association do not provide its shareholders with any right to requisition a general meeting or to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders.

As a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: - the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;- Section 14 of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;- Section 16 of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time;- the selective disclosure rules by issuers of material nonpublic information under Regulation FD; and - the rules under the Exchange Act that require U.S. domestic public companies to issue financial statements prepared under U.S. GAAP. We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. We plan to take advantage of the exemptions available to us as a foreign private issuer. We may publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the Nasdaq Stock Market. Press releases relating to financial results and material events will also be furnished to the SEC in reports on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.

We are required to publicly report on an ongoing basis as an "emerging growth company" (as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not emerging growth companies, including but not limited to: - not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;- being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and - being exempt from the requirement to hold a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. As a result of our election to take advantage of such extended transition period, our financial statements may not be comparable to companies that comply with public company effective dates. We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We would remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of the Class A Ordinary Shares that is held by non-affiliates exceeds $700 million as of the prior September 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. Because we will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, the shareholders could receive less information than they might expect to receive from more mature public companies. We cannot predict if investors will find the Class A Ordinary Shares less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of the Class A Ordinary Shares.

The trading market for the Class A Ordinary Shares depends in part on the research and reports that securities or industry analysts publish about us. We do not have any control over these analysts. If an analyst downgrades the Class A Ordinary Shares or publishes unfavorable research about our business, the price of Class A Ordinary Shares would likely decline. If an analyst ceases coverage of us or fails to publish reports on us regularly, we could lose visibility in the financial markets and demand for the Class A Ordinary Shares could decrease, which could cause the share price or trading volume to decline.

Cellyan Biotechnology's amended and restated memorandum and articles of association contain provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving Cellyan Biotechnology's shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. For example, Cellyan Biotechnology's board of directors has the authority, without further action by its shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with the Ordinary Shares. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If Cellyan Biotechnology's board of directors decides to issue preferred shares, the price of the Class A Ordinary Shares may fall and the voting and other rights of the holders of the Ordinary Shares may be materially and adversely affected. In addition, Cellyan Biotechnology's amended and restated memorandum and articles of association contain other provisions that could limit the ability of third parties to acquire control of our company or cause us to engage in a transaction resulting in a change of control.

Cellyan Biotechnology is an exempted company incorporated under the laws of the Cayman Islands. Its corporate affairs are governed by its memorandum and articles of association, as amended, the Companies Act and the common law of the Cayman Islands. The rights of the shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of the shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands have a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed, judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States. Shareholders of Cayman Islands exempted companies like ours have no general rights under Cayman Islands law to inspect corporate records or to obtain copies of lists of shareholders of these companies. Cellyan Biotechnology's amended and restated memorandum and articles of association have provisions that provide our shareholders with the right to inspect the register of members without charge, and to receive the annual audited financial statements of the Company. Subject to the foregoing, our directors have discretion under our amended and restated memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder resolution or to solicit proxies from other shareholders in connection with a proxy contest. As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of our board of directors or our controlling shareholder than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Act and the laws applicable to companies incorporated in the United States and their shareholders. See "Description of Share Capital - Differences in Corporate Law."

Cellyan Biotechnology is a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. Substantially all our current operations are conducted in Hong Kong. Our non-independent director, Lap Sun Wong, as well as our independent director Dr. Kam Leung Chan, are nationals or residents of Hong Kong. Chenyu Liang, our Chief Executive Officer and a director, Shu Liu, our Chief Financial Officer, and Zifeng Wang, our Chief Strategy Officer, are nationals or residents of the People's Republic of China. In addition, our independent directors, Mike Yao Zhou and Jingyan Wu, are nationals or residents of Canada and the U.S., respectively. Additionally, all of the Selling Shareholders are nationals and residents of countries other than the United States. All or a substantial portion of their assets are located outside the U.S. As a result, it may be difficult for investors to effect service of process within the U.S. upon us or these persons, or to enforce against us or them judgments obtained in U.S. courts, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws or securities laws of any U.S. state. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands, Hong Kong and the People's Republic of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.

We are exempted from certain corporate governance requirements of Nasdaq by virtue of being a foreign private issuer. As a foreign private issuer, we are permitted to follow the governance practices of our home country, the Cayman Islands, in lieu of certain corporate governance requirements of Nasdaq. As result, the standards applicable to us are considerably different than the standards applied to domestic U.S. issuers. For instance, we are not required to: - have a majority of the board be independent (although all of the members of the audit committee must be independent under the Exchange Act);- have a compensation committee and a nominating committee to be comprised solely of "independent directors"; or - hold an annual meeting of shareholders no later than one year after the end of our fiscal year. Nasdaq listing rules may require shareholder approval for certain corporate matters, such as requiring that shareholders be given the opportunity to vote on all equity compensation plans and material revisions to those plans, as well as certain Class A Ordinary Share issuances. We are in compliance with the requirements of Nasdaq listing rules to have a majority of the board be independent and to appoint a compensation committee and a nominating and corporate governance committee comprised solely of independent directors. We may, however, in the future consider following home country practice in lieu of the requirements under Nasdaq listing rules with respect to certain corporate governance standards which may afford less protection to investors than they would otherwise enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.

As of the date of this Annual Report, Ms. Liying Wang, the beneficial owner of 7,150,000 Class B Ordinary Shares  of the Company, held approximately 95.63% of the voting power of our outstanding share capital. Therefore, Ms. Liying Wang is able to control all matters requiring approval by shareholders. Ms. Liying Wang's interests may not be the same as or may even conflict with your interests. For example, she could attempt to delay or prevent a change in control of us, even if such change in control would benefit our other shareholders, which could deprive our shareholders of an opportunity to receive a premium for their Ordinary Shares as part of a sale of us or our assets, and might affect the prevailing market price of the Class A Ordinary Shares due to investors' perceptions that conflicts of interest may exist or arise. As a result, Ms. Liying Wang's majority voting power over our outstanding share capital may not align with the best interests of our other shareholders.

In the future, we may attempt to increase our capital resources by entering into additional debt or debt-like financing that is secured by all or up to all of our assets, or issuing debt or equity securities, which could include issuances of commercial paper, medium-term notes, senior notes, subordinated notes or shares. In the event of our liquidation, our lenders and holders of our debt securities would receive a distribution of our available assets before distributions to our shareholders. In addition, any additional preferred shares, if issued by our company, may have a preference with respect to distributions and upon liquidation, which could further limit our ability to make distributions to our shareholders. Because our decision to incur debt and issue securities in our future offerings will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings and debt financing. Further, market conditions could require us to accept less favorable terms for the issuance of our securities in the future. Thus, you will bear the risk of our future offerings reducing the value of your Class A Ordinary Shares and diluting your interest in our company.

We must meet certain financial and liquidity criteria to maintain our listing on Nasdaq. If we fail to meet Nasdaq's continued listing requirements, the Class A Ordinary Shares may be delisted. In addition, our board of directors may determine that the cost of maintaining our listing on a national securities exchange outweighs the benefits of such listing. A delisting of the Class A Ordinary Shares from Nasdaq may materially impair our shareholders' ability to buy and sell the Class A Ordinary Shares and could have an adverse effect on the market price of, and the efficiency of the trading market for, our Class A Ordinary Shares. The delisting of the Class A Ordinary Shares could significantly impair our ability to raise capital and the value of your investment.

The market price for the Class A Ordinary Shares has been volatile. The wide fluctuation of our share price could be due to multiple factors, many of which are beyond our control, including: - actual or anticipated fluctuations in the operating results of the Company due to factors related to the Company's business;- success or failure of the strategy of the Company;- the interim or annual earnings of the Company, or those of other companies in the Company's industry;- the Company's ability to obtain third-party financing as needed;- announcements by us or the Company's competitors of significant acquisitions or dispositions;- changes in accounting standards, policies, guidance, interpretations or principles;- the operating and stock price performance of other comparable companies;- investor perception of the Company;- natural or environmental disasters that investors believe may affect the Company;- overall market fluctuations;- a large sale of the Class A Ordinary Shares by a significant shareholder;- results from any material litigation or government investigation;- changes in laws and regulations affecting the Company or any of the principal products and services sold by the Company; and - general economic and political conditions and other external factors. In addition, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. Share prices of many companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. In the past, shareholders have filed securities class litigation following periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business. We have experienced stock price volatility unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of the Class A Ordinary Shares. Historically, the US stock market has witnessed instances of extreme stock price surges followed by rapid declines for small-cap issuers, and such volatility seemed unrelated to the issuers' performance subsequent to their initial public offerings, especially among companies with relatively small public floats. As a relatively small-capitalized company with a small public float, the share price of the Class A Ordinary Shares may continue to experience extreme volatility, lower trading volume and less liquidity than large-capitalized companies. Although the specific cause of such volatility is unclear, our small public float may amplify the impact the actions taken by a few shareholders have on the price of Class A Ordinary Shares, which may cause the share price to deviate, potentially significantly, from a price that better reflects the underlying performance of our business. The potential extreme volatility may confuse public investors regarding the value of the shares, distort the market perception of the share price and our company's financial performance and public image, and negatively affect the long-term liquidity of the Class A Ordinary Shares, regardless of our actual or expected operating performance. As a result, investors may have difficulty assessing the rapidly changing value of the Class A Ordinary Shares and our ability to access the capital market may be materially adversely affected. In addition, when the trading volumes of the Class A Ordinary Shares are low, holders of the Class A Ordinary Shares may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. As a result of this volatility, investors may experience losses on their investment in the Class A Ordinary Shares.

On January 12, 2026, the Company received a notification letter from the Listing Qualifications Department of Nasdaq indicating that the closing bid price of the Company's Class A Ordinary Shares had been below the minimum requirement of US$1.00 per share for 30 consecutive business days, and that the Company was therefore not in compliance with the minimum bid price requirement, or the Minimum Bid Price Requirement, set forth in Nasdaq Listing Rule 5550(a)(2). The notification letter does not result in the immediate delisting of the Company's Class A Ordinary Shares. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company had a compliance period of 180 calendar days, or until July 13, 2026, to regain compliance. On July 14, 2026, the Company received a written notice from the Listing Qualifications Staff, or the Staff granting an additional 180 days, or until January 11, 2027, to regain compliance with the Minimum Bid Price Requirement. The Company is currently evaluating available options to regain compliance. However, there can be no assurance that the Company will be able to maintain compliance with the Nasdaq Capital Market's continued listing requirements or regain compliance with the Minimum Bid Price Requirement. If we are unable to achieve and maintain compliance with such listing standards or other Nasdaq listing requirements in the future, our Class A Ordinary Shares could be delisted from Nasdaq. A delisting of our Class A Ordinary Shares and our inability to list on another national securities market could negatively impact us by: (i) reducing the liquidity and market price of our Class A Ordinary Shares; (ii) reducing the number of investors willing to hold or acquire our Class A Ordinary Shares, which could negatively impact our ability to raise equity financing; (iii) limiting our ability to use certain registration statements to offer and sell freely tradable securities, thereby limiting our ability to access the public capital markets; and (iv) impairing our ability to provide equity incentives to our employees.

On November 21, 2025, the compensation committee of the Company's board of directors adopted the Hong Kong Pharma Digital Technology Holdings Limited 2025 Equity Incentive Plan, pursuant to which the Company reserved up to 1,100,000 Class A Ordinary Shares, to be used to attract and retain key personnel and to provide a means for directors, officers, employees, consultants and advisors to acquire and maintain an interest in the Company. Such incentive plan was adopted and approved by the shareholders at the Company's annual general meeting of shareholders held on December 11, 2025 (Eastern Time). In addition, we may adopt additional share incentive plans in the future. We believe the granting of share-based compensation awards is important to our ability to attract and retain key personnel and employees, and we may grant share-based compensation awards in the future. As a result, we may incur expenses associated with share-based compensation, which may have a material and adverse effect on our financial condition and results of operations. Our ability to attract or retain highly skilled employees may be adversely affected by declines in the perceived value of our equity or equity awards. Furthermore, there are no assurances that the number of shares reserved for issuance under our share incentive plan will be sufficient to grant equity awards adequate to recruit new employees and to compensate existing employees. In case we decide to reserve and issue additional shares under our share incentive plan, your interests in our company will be further diluted by such issuance.

Cellyan Biotechnology registered for resale of up to 12,499,986 Class A Ordinary Shares pursuant to the Registration Statement on Form F-1 (File No. 333-294685), filed with the SEC on March 27, 2026 and declared effective on April 8, 2026. As of the date of this Annual Report, there are 41,349,958 Class A Ordinary Shares issued and outstanding, including shares issued in the March 2026 Private Placement. Sales of substantial amounts of the Class A Ordinary Shares in the public market, or the perception that such sales might occur, could adversely affect the market price of the Class A Ordinary Shares. Cellyan Biotechnology cannot predict if and when the Selling Shareholders may sell such Class A Ordinary Shares in the public market. Furthermore, in the future, Cellyan Biotechnology may issue additional Class A Ordinary Shares or other equity or debt securities convertible into Class A Ordinary Shares. Any such issuance could result in substantial dilution to our existing shareholders and could cause the price of the Class A Ordinary Shares to decline.

There can be no assurance that the total market capitalization of our Class A Ordinary Shares after the reverse share split will be equal to or greater than the total market capitalization before the reverse share split or that the per share market price of our Class A Ordinary Shares following the reverse share split will increase in proportion to the reduction in the number of Class A Ordinary Shares outstanding before the reverse share split. Furthermore, a decline in the market price of our Class A Ordinary Shares after the reverse share split may result in a greater percentage decline than would occur in the absence of a reverse share split, and the liquidity of our Class A Ordinary Shares could be adversely affected following such a reverse share split.