Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2025

Basis of Presentation and Principles of Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements are stated in United States Dollars and have been prepared in accordance with U.S. GAAP. The unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. Prior to the Closing Date, the unaudited Condensed Consolidated Financial Statements include the accounts of the DePalma Companies. The unaudited Condensed Consolidated Financial Statements reflect all adjustments consisting of normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position and results of operations as of and for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. All intercompany transactions and balances have been eliminated in the consolidation.

The following is a summary of the significant accounting policies followed by the Company in the preparation of its unaudited Condensed Consolidated Financial Statements. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes for the year ended December 31,

2024 included in our Annual Report on Form 10-K (“Form 10-K”) filed with the SEC on April 7, 2025, including the annual financial statements of the DePalma Companies for the year ended December 31, 2024 included in the Form 10-K, and the unaudited pro forma condensed combined financial information of the Company as of and for the year ended December 31, 2024 filed as Exhibit 99.1 to our Current Report on Form 8-K filed with the SEC on April 11, 2025.

Emerging Growth Company

Emerging Growth Company Status

The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). The JOBS Act, as defined, provides emerging growth companies with certain exemptions from public company reporting requirements for up to five fiscal years while a company remains an emerging growth company. As part of these exemptions, the Company has reduced disclosure obligations such as for executive compensation, and it is not required to comply with auditor attestation requirements from Section 404(b) of the Sarbanes-Oxley Act of 2002, as amended, regarding its internal control over financial reporting. Additionally, the JOBS Act has allowed the Company to delay adoption of new or revised financial accounting standards until private companies are required to comply with new or revised financial accounting standards. The Company intends to take advantage of the benefits of the JOBS Act.

Use of Estimates

Financial statements prepared in conformity with U.S. GAAP require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. Management evaluates its estimates, assumptions, and judgments on an ongoing basis using historical experience and other factors, including the current economic environment, Management believes these estimates, assumptions and judgments to be reasonable under the circumstances. The Company’s significant estimates and assumptions include the estimation of the testing of impairment for the indefinite-lived taxi medallion intangible assets, the fair value of loans held for investment, the fair value of indefinite-lived taxi medallion intangible assets acquired in loan foreclosures, deferred taxes and income tax provisions, and the incremental borrowing rate to determine the present value of lease payments. Actual results could differ from these estimates.

Cash and Cash Equivalents

The Company considers money market accounts and highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company’s cash and cash equivalents are held by major financial institutions, for which accounts are insured by the Federal Deposit Insurance Corporation up to $250,000 per legal entity. At times, cash and cash equivalents balances may exceed federally insured limits, and this potentially subjects the Company to concentration of credit risk. The Company has not experienced any losses in such accounts. Furthermore, the Company reduces risk by maintaining accounts with high quality financial institutions that management believes are creditworthy, and by monitoring this credit risk and adjusting when necessary.

Intangible Assets

The Company’s taxi medallions are determined to be indefinite-lived intangible assets in accordance with the Accounting Standards Codification (“ASC”) 350, Intangibles-Goodwill and Other. The Company acquires taxi medallions by purchase, or by foreclosure on loans collateralized by taxi medallions. If medallion collateral is foreclosed on, the Company recognizes the medallion at fair value on the foreclosure date, less foreclosure related costs. The fair value of a medallion acquired in foreclosure is a nonrecurring Level 3 measurement and is measured consistent with the Company’s policy in determining market medallion prices to measure underlying collateral value for its loans held for investment, at fair value, as further detailed in Note 4. Costs incurred for renewal of taxi medallions are included within general and administrative expenses in the Condensed Consolidated Statements of Operations.

Indefinite-lived intangible assets are not amortized but instead tested for impairment. The Company evaluates indefinite-lived intangible assets for impairment annually on October 1st of each year or more frequently whenever events or changes in circumstances indicate that it is more likely than not that the asset is impaired. The Company evaluates its taxi medallions as a single unit of accounting for purposes of testing for impairment, as taxi medallions are homogeneous assets within each jurisdiction, which are interchangeable and have identical characteristics. In the Company’s evaluation of indefinite-lived intangible assets for impairment, a qualitative assessment is typically performed prior to performing the quantitative analysis. If, after assessing the qualitative factors, the Company determines that it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value, a quantitative assessment is performed. The fair value of the indefinite-lived intangible asset is compared to its carrying amount and if the carrying value exceeds its fair value, an impairment loss will be recognized. Determining the fair value of these assets is judgmental in nature and involves the use of significant estimates and assumptions. No impairment losses were recognized for the three and nine months ended September 30, 2025 and 2024.

Gains and losses on the disposal of taxi medallions are recorded within gains from disposal of medallions in the Condensed Consolidated Statements of Operations and reported as the difference between the sale proceeds and the carrying value of a taxi medallion on an average cost basis.

Property and Equipment, net

Property and equipment, net are stated at cost, less accumulated depreciation. Maintenance and repairs are charged to expense when incurred. Additions and improvements that extend the economic useful life of the asset are capitalized and depreciated over the remaining useful lives of the assets. The cost and accumulated depreciation of assets sold or retired are removed from the respective accounts, and any resulting gain or loss is reflected in current earnings as income or loss from operations. Depreciation is recognized using the straight-line method in amounts considered to be sufficient to allocate the cost of the assets to operations over the estimated useful lives, as follows:


Asset Category		Depreciable Life
Taxi vehicles		3 - 5 years
Furniture and fixtures		7 years
Leasehold improvements		Lesser of useful life and lease term

Property and equipment are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable through the estimated undiscounted future cash flows derived from such assets. Factors that the Company considers in deciding when to perform an impairment review include significant changes in the Company’s forecasted projections for the asset or asset group for reasons including, but not limited to, significant changes, or planned changes in the Company’s use of the long-lived assets and significant negative industry or economic trends. If the Company determines that the carrying amount of such assets may not be recoverable, recoverability is measured based on the undiscounted cash flows expected to be generated by the related asset or asset group. If impairment is indicated, the long-lived asset is written down by the amount by which the carrying value of the asset exceeds the related fair value of the asset with the related impairment charge recognized. For the three and nine months ended September 30, 2025 and 2024, there were no indicators of impairment of the value of long-lived assets and no impairment losses were recognized.

Loans Held for Investment, at Fair Value

The Company holds loans for investment that are generally collateralized by taxi medallions in various jurisdictions, primarily New York City. In certain instances, the Company may take other forms of collateral in addition to taxi medallions, such as commercial and residential real estate.

Certain of the Company’s loans are subject to a certain Medallion Relief Program established by the City of New York in March 2021, or the Medallion Relief Program+ established in March 2022 (together the “MRP+”). The MRP+ was established to assist economically distressed individual taxi medallion owners and to support the recovery of the taxi industry in the City of New York. The MRP+ was established between the City of New York, the New York Taxi Workers Alliance (“TWA”), a labor union representing taxi drivers, and the Manager. The MRP+ program included a NYC-funded deficiency credit support mechanism (the “Reserve Fund”) to achieve greater principal reduction and lower monthly payments for taxi medallion loans that were restructured through the MRP+. The Reserve Fund also serves both to make loan payments for a period to participating lenders following the occurrence of a payment default by a participating borrower, as well as to satisfy any deficiency realized upon foreclosure of medallion collateral. Under the MRP+, eligible medallion loans with a principal balance of $200,000 or more were reduced to an initial principal balance of $200,000 and further reduced to $170,000 per medallion (after a $30,000 per medallion principal reduction payment from the Reserve Fund). Existing medallion loans with a principal balance of $200,000 or less had a principal balance equal to the existing principal balance reduced by (i) $30,000 per medallion and (ii) further reduced by 5% of the post-paydown principal balance per medallion resulting from (i) above. In no event does the principal balance of any MRP+ medallion loan exceed $170,000 per medallion after restructuring. Further, MRP+ loans have a maturity date of 25 years from the date of restructuring, accrue interest at an annual rate of 7.3%, and require fixed monthly payments. The Company also holds loans that are not subject to the MRP+ program (“Non-MRP+” loans), which have varying maturity dates and interest rates.

The Company has elected the fair value option and measures these collateralized loans at fair value with changes in fair value recorded in the Condensed Consolidated Statements of Operations in the period of the change. The Company made this accounting election pursuant to ASC 825, Financial Instruments (“ASC 825”), to better align reported results with the underlying economic changes in the value of the loans on the Condensed Consolidated Balance Sheets. After the initial adoption, the election is made at the acquisition of eligible loans or when certain specified reconsideration events occur.

The Company recognizes gains and losses upon sale, or foreclosure, of loans held for investment, at fair value. Gains and losses on loans held for investment, at fair value are recorded within gains (losses) on loans held for investment, net in the Condensed Consolidated Statements of Operations and reported as the difference between the sale proceeds and the carrying value of a loan. For foreclosed loans, the difference between fair value of the collateral less foreclosure costs compared to the loan carrying value is recorded as a gain or loss. Prior period changes in fair value have been reflected in the carrying value of such loans up until foreclosure. Changes in fair value of loans are reported within gains (losses) on loans held for investment, net on the Condensed Consolidated Statements of Operations.

Interest income on loans is generally recorded on the accrual basis. Interest income on non-accrual loans is recognized within interest income when cash is received. Interest income previously accrued but not paid on loans that have been placed on non-accrual status is reversed.

Loans are placed on non-accrual status when, based on current information and events, there is doubt as to the collectability of interest or principal due according to the contractual terms of the original loan agreement, unless management has determined that they are both well-secured and in the process of collection. Generally, loans are placed on non-accrual status when they are greater than 90 days past due. MRP+ loans in which payments are being received from the Reserve Fund are placed on non-accrual status. During the three months ended March 31, 2025, the Company changed its general methodology for placing loans on non-accrual status from 30 days past due to 90 days past due to align with industry practice. The effect of this change in accounting policy did not have an impact on amounts previously reported in the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, or Condensed Consolidated Statements of Cash Flows.

Warrants

The Company accounts for warrants as either equity or liability classified instruments based on an assessment of the warrant’s specific terms pursuant to the guidance of ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, that meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815.

As of September 30, 2025, warrants to purchase approximately 304,982 shares of the Company’s Common Stock are liability-classified and warrants to purchase 15,000,000 shares of the Company’s common stock are equity-classified.

Loan Payments Received in Advance

Under the MRP+, eligible borrowers reduced their loan balances as described above. Payments received for loans that were not restructured as of September 30, 2025, were considered to be received in advance as payment was not yet due on the restructured loan contract and are reported in loan payments received in advance in the Condensed Consolidated Balance Sheets. In addition, partial payments received from borrowers that are not yet applied to the loan balance are reported in loan payments received in advance.

Business Combinations

Business combinations are accounted for under ASC 805, Business Combinations (“ASC 805”) using the acquisition method of accounting. Under the acquisition method of accounting, all assets acquired, identifiable intangible assets acquired, liabilities assumed, and applicable non-controlling interests are recognized at fair value as of the acquisition date. Costs incurred associated with the acquisition of a business are expensed as incurred. The allocation of purchase price requires management to make significant estimates and assumptions, especially with respect to tangible assets, any intangible assets identified and non-controlling interests.

Leases

As lessee, the Company determines if an arrangement is a lease at inception in accordance with ASC 842, Leases (“ASC 842”). Operating lease assets are presented net of accumulated amortization as operating lease right-of-use asset, net and the corresponding lease liabilities are included in operating lease liabilities on the Condensed Consolidated Balance Sheets. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset, and lease liabilities represent the Company’s obligation for lease payments in exchange for the ability to use the asset for the duration of the lease term.

The Company has lease agreements that contain both lease and non-lease components, which it has elected to account for as a single lease component when the payments are fixed. As such, variable lease payments that are not dependent on an index or rate, such as real estate taxes, utility charges, and other costs that are subject to fluctuation from period to period, are not included in lease measurement. Renewal options are included in the lease term only when it is reasonably certain that the Company will elect that renewal option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Additionally, the Company does not recognize short-term leases that have a term of twelve months or less at lease commencement date as ROU assets or lease liabilities.

ROU assets and lease liabilities are recognized at lease commencement and determined using the present value of the future minimum lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at commencement date to determine the present value of a lease when the rate implicit in the lease is not readily determinable.

Revenue Recognition

In accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”), revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration that an entity expects to receive in exchange for those goods or services. The Company generates revenue from the following sources: (1) interest earned on loans held for investment which is not subject to ASC 606; (2) lease revenues from leases of its vehicle fleet and medallions to licensed New York City Taxi and Limousine Commission (“TLC”) drivers; (3) consulting arrangements to lease taxicab vehicles; and (4) other revenues primarily from fees and restructuring activity of the Company’s loan portfolio.

The Company applies the following five-step model in relation to its revenue recognition: (i) identify the promised goods or services in the contract; (ii) determine whether the promised goods or services are performance obligations; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognize revenue when (or as) performance obligations are satisfied. In arrangements where another party is involved in providing specified services to a customer, the Company evaluates whether the performance obligation is a promise to transfer services to the customer (as the principal) or to arrange for services to be provided by another party (as the agent). In this evaluation, the Company considers if control is obtained of the specified services before they are transferred to the customer, as well as other indicators such as the party primarily responsible for discretion in establishing price. See Note 8 for additional information.

Lease Revenue

The Company generates revenue from the leases of its vehicle fleet and medallions to the licensed TLC drivers, in which the Company acts as the lessor. The Company collects all credit card fares, including tips and surcharges, charged by the point-of-sale system in each taxi. At the end of each week, the Company pays out to the drivers the credit card fares collected minus the weekly lease fee and any applicable "pass-through" charges owed by the drivers to third parties, including the TLC. The leases generally are short-term and operate on a weekly basis with drivers renewing each week and payments being settled between the point-of-sale system, the Company, and the drivers on weekly basis. The leases may either (i) specify the weekly rate between medallion cost, vehicle cost, and other fees, or (ii) include all costs in one weekly lease rate agreed upon with a driver, and these fees can vary by lease based on prevailing market rates at the time of agreement. In either scenario, the Company views these contracts as having one performance obligation to provide a fully operational taxicab to a driver over the lease term. The vehicles in the lease agreements are a lease component subject to ASC 842, which the Company has determined to be operating leases based on their short-term nature, and the medallions are subject to ASC 606 as medallions are intangible assets not subject to ASC 842 and therefore a non-lease component. These contracts qualify for a practical expedient available to lessors to combine the lease and non-lease components and account for the combined component in accordance with the accounting treatment for the predominant component. The Company elected to apply this practical expedient and therefore has one performance obligation and recognizes all income from these contracts in accordance with ASC 606 as the medallions are the predominant component of the contract. The Company's performance obligation is satisfied over time as the customer simultaneously receives and consumes the benefits provided over the weekly lease terms.

Other Revenue

Other revenue is comprised of restructuring fees paid by borrowers as part of the MRP+ program, payments received from the Reserve Fund that are not applied to a borrower’s loan balance, fees received in connection with the Non-MRP+ restructuring and settlements, the resolution of certain litigation and bankruptcy proceedings, and advertising revenue. Other revenue is primarily recognized when cash is received based on the non-accrual status of loans being restructured.

Income Taxes

Income taxes are accounted for using the asset and liability approach in accordance with ASC 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities reflect the impact of temporary differences between the carrying amount of assets and liabilities and their tax basis and are stated at the enacted tax rates expected to apply in the year when taxes are actually paid or recovered. Deferred tax assets are also recorded for net operating losses, capital losses and any tax credit carryforwards.

A valuation allowance is provided against a deferred tax asset when it is more likely than not that some or all of the deferred tax assets will not be realized. All available evidence, both positive and negative, is considered to determine whether a valuation allowance for deferred tax assets is needed. Items considered in determining the Company’s valuation allowance include expectations of future earnings of the appropriate tax character, recent historical financial results, tax planning strategies, the length of statutory carryforward periods and the expected timing of the reversal of temporary differences.

It is the Company's policy to provide for uncertain tax positions and the related interest and penalties based upon management's assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for the Company for annual periods beginning after December 15, 2024, with early adoption permitted. The new standard is expected to be applied prospectively, but retrospective application is permitted. The Company is currently evaluating the effect of this new guidance and does not expect this standard to have a material impact on the Company’s Condensed Consolidated Financial Statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025 issued ASU 2025-01, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). The amendments in ASU 2024-03 address investor requests for more detailed expense information and require additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 31, 2027, with early adoption permitted. The Company is currently evaluating the impact the adoption of ASU 2024-03, as clarified by ASU 2025-01, may have on the Company’s Condensed Consolidated Financial Statements and related disclosures.

Marblegate Capital Corp 10-Q