Company: DDC
Filing Date: 2025-01-28
Form Type: 20-F
Source: 0001213900-25-007160
Chunk: 223

Company: DDC Enterprise Ltd
Filing Date: 2025-01-28
Form: 20-F
Item: Item 19
Chunk 223
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 using interest rates of debt issued with a similar risk profile as the Company and a duration
similar to the lease term. Some of the Company’s lease contracts include options to extend or terminate the leases. Such options
are accounted for only when it is reasonably certain that the Company will exercise the options. Lease cost is recognized on a straight-line
basis over the lease term and is included in cost of revenues and general and administrative expenses in the Company’s consolidated
statements of operations and comprehensive loss.

The Company’s operating leases contain both
lease components and non-lease components. Non-lease components are distinct elements of a contract that are not related to securing the
use of the underlying assets, such as common area maintenance and other management costs. As a practical expedient, the Company has elected
that for all leases, where it is the lessee, not to separate non-lease components from lease components and instead to account for all
lease and non-lease components associated with each lease as a single lease component.

The Company has elected not to recognize Right-of-use
assets and lease liabilities for short-term leases (i. e. leases that, at the commencement date, have a lease term of 12 months or less
and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise).

The Company’s subleases with escalated rent
provisions are recognized on a straight-line basis commencing with the beginning of the lease term.

If the nature of a sublease is such that the original
lessee is not relieved of the primary obligation under the original operating lease, the original lessee (as sublessor) shall account
for both the original lease and the new lease as operating leases.

F-35

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(cont.)

(s) Warrant Liabilities and Option
Liability

The warrants and option to purchase redeemable
convertible preferred shares at a future date were determined to be freestanding instruments that were accounted for as liabilities. At
initial recognition, the Company recorded the warrant liabilities and option liability on the consolidated balance sheets at their estimated
fair value. The warrant liabilities and option liability are subject to remeasurement at each reporting period and the Company adjusted
the carrying value of the warrant liabilities and option liability to fair value at the end of each reporting period utilizing the binominal
option pricing model, with changes in estimated fair value included in the “changes in fair value of financial instruments”
on the consolidated statement