Company: DDC
Filing Date: 2025-01-28
Form Type: 20-F
Source: 0001213900-25-007160
Chunk: 116

Company: DDC Enterprise Ltd
Filing Date: 2025-01-28
Form: 20-F
Item: Item 5
Chunk 116
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 dates and are recorded as compensation expense based on the vesting conditions.

The fair value of share options
at the time of grant are determined using the binomial-lattice option pricing model with the following key assumptions used.

                                               For the Year Ended                        
                                               December 31,                              
                                               2022                     2023             
  Risk-free rate of return                     1.65% – 3.90%            1.65% – 2.47%    
  Volatility                                   36.92% – 39.48%          37.11% – 37.32%  
  Expected dividend yield                      —                        —                
 ─────────────────────────────────────────────────────────────────────────────────────────
  Exercise multiple                            2.2 – 2.8                2.2              
  Fair value of underlying ordinary share      US$12.96 – US$15.04      US$15.04         
  Expected terms                               10 years                 10 years         

The expected volatility was
estimated based on the historical volatility of comparable peer public companies with a time horizon close to the expected term of the
Company’s options. The risk-free interest rate was estimated based on the yield to maturity of U. S. treasury bonds denominated in
US$ for a term consistent with the expected term of the Company’s options in effect at the option valuation date. Expected dividend
yield is zero as the Company does not anticipate any dividend payments in the foreseeable future. The expected exercise multiple was estimated
as the average ratio of the stock price to the exercise price of when employees would decide to voluntarily exercise their vested options.
Expected term is the contract life of the option.

Impairment of equity investment in PFI Food
Industries Limited (“ PFI”) accounted for using Measurement alternative

We acquired an investment
in the equity interests of PFI Food Industries Limited by issuing our own financial instruments including redeemable convertible preferred
shares and warrants to acquire those redeemable convertible preferred shares. These financial instruments were issued in August 2021 before
we obtained the equity investment in PFI and were determined as non-derivative forward contracts measured at fair value. As of December
31, 2023, we made a qualitative assessment and considered there to be impairment indicators that investment in PFI was impaired as it
was significantly behind the forecasted revenue growth target and there was a declining trend of the plant-based meat industry performance.
As a result, the investment in PFI was written down to