Company: DDC
Filing Date: 2025-01-28
Form Type: 20-F
Source: 0001213900-25-007160
Chunk: 114

Company: DDC Enterprise Ltd
Filing Date: 2025-01-28
Form: 20-F
Item: Item 5
Chunk 114
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24.0 million to RMB10.6 million (US$1.5 million) for the year ended December 31, 2021 and 2022. The cost reduction was a result
of the decline in online consumer product sales since the second quarter of 2022. During that period, nationwide strict lockdown measures
were imposed by the Chinese government in response to the outbreak of the COVID-19 Omicron variant, which led to disruption to social
and economic activities. As a result, fewer shipping locations were open and our daily logistics volume was adversely affected.

Sales and marketing expenses

The sales and marketing expenses
were RMB59.2 million and RMB20.8 million (US$2.9 million) for the years ended December 31, 2021 and 2022. The decrease in sales and marketing
expenses was due to a renewed focus on improving return-on-marketing investment by optimizing marketing spend across one or more customer
acquisition, and/or sales distribution channels.

General and administrative expenses

The general and administrative
expenses decreased by 19.7%, from RMB66.6 million for the year ended December 31, 2021, to RMB53.5 million (US$7.4 million) for the year
ended December 31, 2022. The decrease in general and administrative expenses was attributed to management’s efforts to streamline
costs.

Share-based compensation

The cost for share-based compensation
were nil and RMB39.0 million (US$5.4 million) for the years ended December 31, 2021 and 2022. The increase was due to certain
share options became fully vested as the performance condition of occurrence of a qualified IPO was removed upon the Company’s modification
of these share options for some senior management members.

Critical Accounting Policies and Estimates

We prepare our financial statements
in conformity with U. S. GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these estimates
and assumptions based on the most recently available information, our own historical experience and various other assumptions that we
believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process,
actual results could differ from our expectations as a result of changes in its estimates. Some of our accounting policies require a higher
degree of judgment than others in their application and require us to make significant accounting estimates.

The following descriptions
of critical accounting policies, judgments and