Company: DDC
Filing Date: 2025-01-28
Form Type: 20-F
Source: 0001213900-25-007160
Chunk: 229

Company: DDC Enterprise Ltd
Filing Date: 2025-01-28
Form: 20-F
Item: Item 19
Chunk 229
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ivables are recorded when the Company recognizes
revenue upon fulfilment of the performance obligations.

For products sales to individual customers or
small retailers through third-party E-commerce platforms, those customers pay through the payment channels of the platforms before the
Company delivers the products. The platforms will then transfer the payment (after deducting platform service charges) to the Company
based on pre-agreed days after the Company delivers products, or when the customers confirm the receipts of products, whichever is
earlier.

A contract liability is recorded when the obligation
to transfer goods or service to a customer is not yet fulfilled but for which the Company has received consideration from the customer.

Practical Expedients

The Company applies the practical expedient to
not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less and
contracts for which revenue is recognized at the amount to which the Company has the right to invoice services performed.

Payment terms with the customers require settlement
within one year or less. The Company applies the practical expedient and does not adjust any of the transaction price for the time value
of money. The Company generally expenses sales commissions when incurred because the amortization period would be one year or less. These
costs are recorded within sales and marketing expenses.

(v) Cost of Revenues

Cost of revenues primarily consists of the purchase
price of merchandise, lease costs, costs of publishing advertisement, personnel costs for cooking classes, and cost of fresh products.

F-39

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(cont.)

(w) Fulfilment Expenses

Fulfilment expenses relate to product delivery
and packaging.

(x) Sales and Marketing Expenses

Sales and marketing expenses mainly include app download promotion, social media platform and short video platform content marketing expenses,
E-commerce platform promotion and channel promotion, including the commission of key opinion leader (“ KOL”), payroll and related
expenses for personnel engaged in sales and marketing activities, depreciation expenses relating to facilities and equipment used by those
employees, lease costs of stores and facilities. The amount of advertising expenses incurred were RMB15.3million, RMB2.9million and
RMB1.7million for the years ended December 31, 2021, 2022 and 2023, respectively.

(y) Research and development expenses

Research and development expenses are primarily
of expenses for consulting work performed by third party involved in the development of new products innovation. Research and development
expenses are expensed as