Item 1.01 Entry into a Material Definitive Agreement
As described in the current
report on form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on April 14, 2022, on April 14, 2022,
Code Chain New Continent Limited (the “Company”) entered into a Share Purchase Agreement (“SPA”) with Shanghai
Yuanma Food and Beverage Management Co., Ltd., a PRC company (“Yuan Ma”), and all the shareholders of Yuan Ma (“Yuanma
Shareholders”). Yuanma Shareholders are Wei Xu, the Chief Executive Officer and Chairman of the Board of the Company, and Jiangsu
Lingkong Network Joint Stock Co., Ltd., which is controlled by Wei Xu. Pursuant to the SPA, the Company agreed to issue an aggregate of
7,680,000 shares of common stock of the Company (the “Shares”), valued at $1.00 per share, to the Yuanma Shareholders, in
exchange for Yuanma Shareholders’ agreement to enter into and to cause Yuan Ma to enter into certain agreements (“VIE Agreements”)
with Makesi IoT Technology (Shanghai) Co., Ltd. (“WFOE”), the Company’s indirectly owned subsidiary, to establish a
VIE (variable interest entity) structure (the “Acquisition”). “Variable Interest Entity” does not describe a legal
relationship; it is an accounting concept. Under U.S. Generally Accepted Accounting Principles (U.S. GAAP), if through contractual arrangements,
Entity A will absorb the losses or receive potentially significant benefits from the operations of Entity B, then the financial results
and balance sheet of Entity B should be consolidated with the financial results and balance sheet in Entity A’s consolidated financial
statements. Therefore, as a result of the VIE Agreements, the Company will consolidate the financial results and balance sheet of Yuan
Ma in the consolidated financial statements under U.S. GAAP.
Also as disclosed in the current
report on form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on June 13, 2022, on June 13, 2022,
the Company held a special meeting of stockholders and approved the issuance of the Shares to Wei Xu.
On June 21, 2022, pursuant
to the SPA, WFOE entered into a series of VIE Agreements with Yuan Ma and Yuanma Shareholders, and the Shares were issued to Wei Xu. The
transaction completed in the SPA was completed.
Material terms of each of
the VIE Agreements are described below:
Technical Consultation
and Services Agreement. Pursuant to the technical consultation and services agreement between WFOE and
Yuan Ma dated June 21, 2022, WFOE has the exclusive right to provide consultation services to Yuan Ma relating to Yuan Ma’s business,
including but not limited to business consultation services, human resources development, and business development. WFOE exclusively owns
any intellectual property rights arising from the performance of this agreement. WFOE has the right to determine the service fees based
on Yuan Ma’s actual operation on a quarterly basis. This agreement will be effective for 20 years and can be extended by WFOE unilaterally
by prior written notice to the other parties. WFOE may terminate this agreement at any time by giving a 30 days’ prior written notice
to Yuan Ma. If any party breaches the agreement and fails to cure within 30 days from the written notice from the non-breach party, the
non-breach party may (i) terminate the agreement and request the breaching party to compensate the non-breaching party’s loss or
(ii) request special performance by the breaching party and the breaching party to compensate the non-breaching party’s loss.
The foregoing description
of the technical consultation and services agreement does not purport to be complete and is qualified in its entirety by reference to
the complete text of the technical consultation and services agreement, which is filed as Exhibit 10.1.
Equity Pledge Agreement. Under
the equity pledge agreement among WFOE, Yuan Ma and Yuan Ma Shareholders dated June 21, 2022, Yuan Ma Shareholders pledged all of their
equity interests in Yuan Ma to WFOE to guarantee Yuan Ma’s performance of relevant obligations and indebtedness under the technical
consultation and services agreement. In addition, Yuan Ma Shareholders will complete the registration of the equity pledge under the agreement
with the competent local authority. If Yuan Ma breaches its obligation under the technical consultation and services agreement, WFOE,
as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. This pledge will remain effective
until all the guaranteed obligations are performed or the Yuan Ma Shareholders cease to be shareholders of Yuan Ma.
The foregoing description
of the equity pledge agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the
equity pledge agreement, which is filed as Exhibit 10.2.
Equity Option Agreement.
Under the equity option agreement among WFOE, Yuan Ma and Yuan Ma Shareholders dated June 21, 2022, each of Yuan Ma Shareholders irrevocably
granted to WFOE or its designee an option to purchase at any time, to the extent permitted under PRC law, all or a portion of his equity
interests in Yuan Ma. Also, WFOE or its designee has the right to acquire any and all of its assets of Yuan Ma. Without WFOE’s prior
written consent, Yuan Ma’s shareholders cannot transfer their equity interests in Yuan Ma and Yuan Ma cannot transfer its assets.
The acquisition price for the shares or assets will be the minimum amount of consideration permitted under the PRC law at the time of
the exercise of the option. This pledge will remain effective until all options have been exercised.
The foregoing description
of the equity option agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of the
equity option agreement, which is filed as Exhibit 10.3.
Voting Rights Proxy
and Financial Support Agreement. Under the voting rights proxy and financial support agreement among WFOE,
Yuan Ma and Yuan Ma Shareholders dated June 21, 2022, each Yuan Ma Shareholder irrevocably appointed WFOE as its attorney-in-fact to exercise
on such shareholder’s behalf any and all rights that such shareholder has in respect of his equity interests in Yuan Ma, including
but not limited to the power to vote on its behalf on all matters of Yuan Ma requiring shareholder approval in accordance with the articles
of association of Yuan Ma. The proxy agreement is for a term of 20 years and can be extended by WFOE unilaterally by prior written notice
to the other parties.
The foregoing description
of the voting rights proxy and financial support agreement does not purport to be complete and is qualified in its entirety by reference
to the complete text of the voting rights proxy and financial support agreement, which is filed as Exhibit 10.4.