Company: DDC
Filing Date: 2025-01-28
Form Type: 20-F
Source: 0001213900-25-007160
Chunk: 228

Company: DDC Enterprise Ltd
Filing Date: 2025-01-28
Form: 20-F
Item: Item 19
Chunk 228
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 entered into purchase agreements with the selling shareholders of Fujian Yujiaweng Food Co. Ltd (“ YJW”) and Fujian
Keke Food Co. Ltd (“ KeKe”) acquire the respective60% interests of YJW and KeKe’s product sales business, which primarily
included distribution contracts, the sales and marketing teams, procurement team and other supporting function personnel (“the Target
Assets”). The Company and the selling shareholders agreed to form an entity to which the Target Assets will be transferred specific
to each purchase agreement. The Company and one of the selling shareholders agreed to hold60% and40% equity interests of the respective
entities formed. During the period from July 1, 2021 until June 17, 2022 when the new entities were formed (“the transition period”),
the Company managed and operated the Target Assets and was entitled to60% of the net profit arising from the operation of the Target
Assets.

The Company has determined that the arrangements
during the transition period are collaborative arrangements between the Company and YJW and KeKe to jointly operate the product manufacturing
and distribution activities. Under the arrangements, YJW and KeKe owned and provided the customer relationships, brand use rights and
manufactured the products, and the Company is primarily responsible for managing and directing the daily operation of the sales and marketing
activities. Each party is entitled to60% and40% respectively of the net profit arising from the operation of the Target Assets during
the transition period. As both parties actively participate in the product manufacturing and distribution activities and are exposed to
significant risks and rewards of such joint operating activities, the Company considers these arrangements to be in the scope of ASC 808
 - Collaborative Arrangements. The Company determined that it provided distinct management services to its customers, YJW and KeKe,
and recognized60% of the net profit arising from the operation of the Target Assets as revenue from contracts with customers in accordance
with ASC 606.

Reconciliation of contract balance

A receivable is recorded when the Company has
an unconditional right to consideration. A right to consideration is unconditional if only the passage of time is required before payment
of that consideration is due.

A contract asset is recorded when the Company
has transferred products to the customer before payment is received or is due, and right to consideration is conditional on future performance
or other factors in the contract.

Product sales to platform distributors, offline
distributors and advertising services to corporate customers are on credit terms. Rece