NOTE 7 — LEASES

Operating leases as lessee

The Company leases space under non-cancelable operating leases for office and manufacturing locations and production equipment. These leases do not have significant rent escalation holidays, concessions, leasehold improvement incentives, or other build-out clauses. Further, the leases do not contain contingent rent provisions.

Most leases include option to renew in condition that it is agreed by the landlord before expiry. Therefore, the majority of renewals to extend the lease terms are not included in its right-of-use assets and lease liabilities as they are not reasonably certain of exercise. The Company regularly evaluates the renewal options and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term.

As most of the Company’s leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of the lease payments.

The components of the Company’s lease expense are as follows:

 SCHEDULE OF LEASE EXPENSE

Supplemental cash flow information related to its operating leases was as follows for the year ended March 31, 2024, 2025 and 2026:

UTIME LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share data and per share data, or otherwise noted)

NOTE 7 — LEASES (cont.)

Maturities of its lease liabilities for all operating leases are as follows as of March 31, 2026:

 SCHEDULE OF MATURITIES OF LEASE LIABILITIES

Financing with Sale-Leaseback

On January 31, 2024, UTime Guangxi entered into a sale and leaseback arrangement (the “Lease Financing Agreement”) with Chailease International Financial Leasing Corp. (“CIFLC”). Under the arrangement, certain production equipment was transferred to CIFLC for proceeds of RMB6.5 million (approximately US$0.9 million) and simultaneously leased back by UTime Guangxi for a lease term of five years.

At the commencement date, the leased equipment was recognized as a finance lease right-of-use asset and the present value of the lease payments was recognized as a lease liability using the implicit interest rate of 10.7% per annum.

As of March 31, 2026, the carrying amount of the finance lease right-of-use asset was RMB190 thousand. The corresponding lease liability amounted to RMB190 thousand, of which RMB61 thousand was classified as current and RMB129 thousand as non-current.

Amortization of the finance lease right-of-use asset amounted to RMB3.92 million for the year ended March 31, 2026. Interest expense related to the finance lease arrangement amounted to RMB0.8 million for the year ended March 31, 2026.

As of March 31, 2026, the unamortized deferred loss arise in a from the sale and leaseback transaction was RMB 0.4 million. The deferred loss is amortized over the lease term as an adjustment to the amortization expense of the related right-of-use asset.

The future minimum lease payments of the capital lease as of March 31, 2026 were as follows:

 SCHEDULE OF MINIMUM LEASE PAYMENTS

UTIME LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share data and per share data, or otherwise noted)