NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The interim unaudited condensed consolidated balance sheet as of June 30, 2026 and the related interim unaudited condensed consolidated statements of operations and cash flows for the three and nine months ended June 30, 2026 and 2025 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations.

These interim unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s audited consolidated financial statements and related notes for the fiscal year ended September 30, 2025 included in the Company’s Annual Report on Form 20-F, filed with the SEC on December 23, 2025. The Company completed its redomiciliation from the British Virgin Islands to the State of Delaware on October 2, 2025 and, in connection therewith, transitioned from a foreign private issuer to a U.S. domestic issuer.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation of the Company’s financial position as of June 30, 2026 and the results of operations and cash flows for the interim periods presented have been included. Interim results are not necessarily indicative of results for the full fiscal year or any future period.

Principles of consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of UMeWorld Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company consolidates all entities in which it holds a controlling financial interest, typically through ownership of a majority voting interest. Subsidiaries are included in the consolidated financial statements from the date control is obtained through the date control ceases.

In October 2025, Dagola Hong Kong Limited and its wholly owned subsidiary, Guangzhou Duokanglong Special Medical Nutrition Technology Co., Ltd., became wholly owned subsidiaries of the Company through a reorganization involving entities under common control. From that date forward, both entities have been included in the Company’s consolidated financial statements.

On January 16, 2026, Verdant Sustainable Fuel Malaysia Sdn. Bhd. was incorporated in Malaysia. The entity was initially formed by the Company’s Chief Executive Officer and was subsequently transferred to the Company in a reorganization involving entities under common control, after which it became a wholly owned subsidiary of the Company.

The Company does not consolidate any entities under the variable interest entity model and does not utilize a variable interest entity structure.

Use of estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the balance sheet date, and the reported amounts of revenues and expenses during the periods presented.

Significant estimates reflected in the Company’s unaudited condensed consolidated financial statements include, but are not limited to, the allowance for expected credit losses on accounts receivable, inventory valuation and obsolescence reserves, impairment of long-lived assets, realizability of deferred tax assets, and other valuation allowances, where applicable. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. Actual results could differ materially from those estimates.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, demand deposits with financial institutions, and highly liquid investments with original maturities of three months or less at the time of purchase.

Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. Revenue is recognized when control of goods is transferred to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods.

The Company’s revenue consists primarily of sales of DAG-based cooking oil and related health and wellness products through online marketplace platforms and distributor channels in the United States and Asia-Pacific. Revenue is recognized at a point in time when control of the product transfers to the customer, which is generally upon shipment or delivery, depending on contractual terms and the nature of the sales channel.

The Company applies the five-step model under ASC 606 to its customer contracts: (i) identify the contract with the customer, (ii) identify the performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when the performance obligation is satisfied. For product sales, the Company’s contracts generally contain a single performance obligation.

The transaction price is generally based on the fixed amount specified in the applicable sales agreement or purchase order. The Company does not provide material rebates, discounts, price concessions, promotional allowances, or rights of return. Accordingly, variable consideration was not material during the periods presented.

Payments received in advance of shipment are recorded as contract liabilities and recognized as revenue when control of the goods is transferred. Shipping and handling amounts charged to customers are included in revenue, and the related costs are included in cost of revenue.

Accounts Receivable and Allowance for Expected Credit Losses

Accounts receivable are recorded at invoiced amounts and are non-interest bearing. The Company estimates expected credit losses based on historical collection experience, the aging of accounts receivable, customer-specific creditworthiness, current economic conditions, and reasonable and supportable forecasts.

The increase in accounts receivable as of June 30, 2026 primarily resulted from sales made during the period. As of August 8, 2026, approximately 36% of the accounts receivable outstanding as of June 30, 2026 had been subsequently collected, and the remaining balance continued to be within its contractual payment terms. Management also considered the contractual payment terms, aging of the remaining balance, customer payment history, and other available credit information. Based on this evaluation, management determined that no allowance for expected credit losses was required as of June 30, 2026.

Inventory

Inventory consists of finished goods and is stated at the lower of cost or net realizable value, with cost determined using the first-in, first-out (FIFO) method.

The Company records write-downs for excess, slow-moving, or obsolete inventory based on forecasted demand, product shelf life, and market conditions. Such write-downs are included in cost of revenue. No inventory write-offs were recorded during the nine months ended June 30, 2026. For the year ended September 30, 2025, the Company recorded inventory write-offs totaling $29,493.

Cost of Revenue

Cost of revenue consists primarily of product acquisition costs, contract manufacturing and bottling costs, packaging materials, freight and import charges, fulfillment fees, and platform distribution costs associated with product sales.

Foreign Currency Translation

The Company’s reporting currency is the U.S. dollar. The functional currencies of certain foreign subsidiaries are their respective local currencies. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars using exchange rates in effect at the balance sheet date. Revenues and expenses are translated using average exchange rates for the reporting period, and stockholders’ equity accounts are translated using historical exchange rates. Resulting foreign currency translation adjustments are recorded in accumulated other comprehensive income (loss).

Related Party Transactions

The Company follows ASC Topic 850, Related Party, for the identification of related parties and the disclosure of related party transactions. Transactions with related parties are recorded at amounts agreed upon between the parties. Related party balances and transactions are disclosed separately in the accompanying notes to the unaudited condensed consolidated financial statements.

Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. Current income taxes are provided based on taxable income for the period using enacted tax rates applicable in the jurisdictions in which the Company operates.

Deferred tax assets and liabilities are recognized using the asset and liability method for temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the periods in which the temporary differences are expected to be realized or settled.

Deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized. A valuation allowance is recorded when management determines that it is more likely than not that some or all of a deferred tax asset will not be realized.

The Company recognizes the benefit of an uncertain tax position only if it is more likely than not that the position will be sustained upon examination by the relevant taxing authority. The amount recognized is the largest amount of tax benefit that is greater than 50 percent likely to be realized upon settlement. Interest and penalties related to income taxes, if any, are recognized as a component of income tax expense. No material interest or penalties were recognized for the nine months ended June 30, 2026 and September 30, 2025.

The Company operates in multiple tax jurisdictions, including the United States and the People’s Republic of China, and is subject to examination by taxing authorities in those jurisdictions.

Comprehensive Loss

Comprehensive loss consists of two components: net loss and other comprehensive loss. Net loss includes all revenues, expenses, gains, and losses recognized in the condensed consolidated statements of operations.

Other comprehensive loss includes gains and losses that are recorded directly in stockholders’ equity and are excluded from net income under U.S. GAAP. For the Company, other comprehensive (loss consists primarily of foreign currency translation adjustments arising from the translation of the financial statements of subsidiaries whose functional currencies are not the U.S. dollar.

Earnings Loss Per Share

The Company computes earnings loss per share in accordance with ASC Topic 260, Earnings Per Share. Basic earnings loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period.

Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as options, warrants, or convertible instruments, were exercised or converted into common shares. Diluted earnings loss per share is computed using the weighted average number of common shares outstanding plus the effect of potentially dilutive common shares, when dilutive.

Potential common shares are excluded from the diluted earnings loss per share calculation when their effect would be anti-dilutive, including periods in which the Company reports a net loss.

For the nine months ended June 30, 2026 and 2025, diluted loss per share is the same as basic loss per share because the inclusion of potential common shares would have been anti-dilutive.

Segment Reporting

The Company operates as a single operating and reportable segment. The Company’s Chief Executive Officer serves as the chief operating decision maker (“CODM”). The CODM regularly reviews the Company’s consolidated revenue, gross profit, operating expenses, and net loss to assess financial performance and make decisions regarding the allocation of resources. Because the Company’s operations constitute a single operating segment, the segment financial information is the same as the consolidated financial information presented in these unaudited condensed consolidated financial statements.

Commitments and Contingencies

The Company accounts for contingencies in accordance with ASC Topic 450-20, Contingencies. Certain conditions may exist as of the date the financial statements are issued that may result in a loss to the Company but will be resolved only when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves the exercise of judgment. In assessing loss contingencies related to legal proceedings pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of such proceedings or claims, as well as the perceived merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be reasonably estimated, the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is reasonably possible, or is probable but cannot be reasonably estimated, the nature of the contingent liability and an estimate of the range of possible loss, if determinable and material, are disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees are disclosed.

From time to time, the Company may be involved in legal proceedings and claims arising in the ordinary course of business. As of June 30, 2026, the Company is not a party to any material legal proceedings, and management is not aware of any pending or threatened claims that are expected to have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. However, there can be no assurance that future developments will not materially adversely affect the Company’s business, financial position, results of operations, or cash flows.

Fair Value of Financial Instruments

The Company accounts for fair value measurements in accordance with ASC Topic 820, Fair Value Measurement, which defines fair value, establishes a three-level hierarchy for inputs used in measuring fair value, and requires related disclosures.

The fair value hierarchy prioritizes the inputs used in valuation techniques as follows:

Financial assets and liabilities are classified as Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar valuation techniques in which at least one significant assumption or input is unobservable.

If the inputs used to measure the fair value of financial assets and liabilities fall within different levels of the hierarchy, the classification is based on the lowest level input that is significant to the fair value measurement.

The carrying amounts of financial instruments included in current assets and current liabilities, including cash, accounts receivable, accounts payable, and accrued liabilities, approximate fair value due to their short-term maturities.

Recently Issued Accounting Pronouncements

The Company has reviewed accounting standards issued by the Financial Accounting Standards Board (“FASB”) through the date of issuance of these condensed consolidated financial statements. The Company does not believe that any other recently issued, but not yet effective, accounting pronouncements will have a material impact on its condensed consolidated financial statements.