Company: DDC
Filing Date: 2025-01-28
Form Type: 20-F
Source: 0001213900-25-007160
Chunk: 113

Company: DDC Enterprise Ltd
Filing Date: 2025-01-28
Form: 20-F
Item: Item 5
Chunk 113
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 2022, the unaudited pro forma revenue of the Company for the year ended December 31, 2022 will be RMB231.9 million (or US$32.0
million).

Cost of Revenues

Product Costs

The product cost reduced by
17.3% from RMB158.9 million for the year ended December 31, 2021 to RMB131.4 million (US$18.1 million) for the year ended December 31,
2022. The decrease in product cost was in line with management’s focus on improving the overall cost structure of the business.
Product costs were 77.5% and 73.2% of consumer product sales revenues (including both online & offline) for the years ended December
31, 2021 and 2022 respectively. Due to an increase in competitors during COVID-19, the fierce competition affected our online sales during
the period of early 2022. The Group offered discounts to customers to maintain and grow its market share, but at the same time was able
to transfer part of that cost to suppliers who offered more competitive product costs.

Personnel Costs

“ Personnel Costs”
represents the costs directly related to the revenue such as operation employee of experience store and retail shops. Due to COVID-19,
we had to close all our experience stores in 2022. This resulted in a reduction in personnel costs by 51.7% from RMB5.0 million in 2021
to RMB2.4 million (US$0.3 million) in 2022.

Lease expenses

Our total lease expenses for
the year ended December 31, 2021 and 2022 were RMB3.4 million and RMB0.6 million (US$0.1 million) respectively. The decrease was mainly
attributable to the closure of all experience store during the year, and the termination of all contractual arrangements with City Modern.

Others

“ Others” primarily
includes depreciation and amortization expenses for equipment directly related to revenue. For the years ended December 31, 2021 and 2022,
other costs represented less than 1% of total costs.

Operating Expenses

Operating expenses decreased
by 17.5% to RMB123.9 million (US$17.2 million) in 2022 from RMB150.1 million in 2021.

Fulfilment expenses

The fulfilment expenses decreased
from RMB