Company: DDC
Filing Date: 2025-01-28
Form Type: 20-F
Source: 0001213900-25-007160
Chunk: 115

Company: DDC Enterprise Ltd
Filing Date: 2025-01-28
Form: 20-F
Item: Item 5
Chunk 115
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 estimates should be read in conjunction with our consolidated financial statements
and accompanying notes and other disclosures included in this proxy statement.

Revenue recognition

Our revenue is recognized
when control of the promised good or service is transferred to the customer in an amount that reflects the consideration expected to receive
in exchange for those goods or services, after considering estimated sales return allowances, and value added tax (“ VAT”).
We follow five steps for revenue recognition: (i) identify the contract(s) with a customer, (ii) identify the performance
obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations
in the contract, and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

Revenue is primarily derived
from (i) online products sales to individual customers or small retailers through third-party E-commerce platforms (ii) offline
products sales to various distributors, e. g. offline retail chains or supermarkets who then sell to end customers, (iii) advertising
services to customers with well-known brand names in lifestyle-related industries, (iv) cooking classes in the branded experience
stores operated by us and (v) providing management services in collaborative arrangements.

We evaluate whether it is
appropriate to record the gross amount of products sales and, advertising services and related costs or the net amount earned as commissions.
When we are a principal, that we obtain control of the specified goods or services before they are transferred to the customers, revenue
should be recognized in the gross amount of consideration to which it expects to be entitled in exchange for the specified goods or services
transferred. When we are an agent and our obligation is to facilitate third parties in fulfilling their performance obligation of specified
goods or services, revenue should be recognized in the net amount for the amount of commission which we earn in exchange for arranging
for the specified goods or services to be provided by the third parties.

Share-based compensation

We measure our employee share-based
awards that are subject to both service conditions and the occurrence of an initial public offering (“ IPO”) as performance
condition, at the fair value on grant date. Cumulative share-based compensation expenses for the awards that have satisfied the service
condition will be recorded upon the completion of the IPO, using the graded-vesting method.

In 2022, we modified certain
employees’ share-based awards to remove the performance condition conditional upon the occurrence of IPO. Such employee share-based
awards were measured at the fair value on modification