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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022.
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 001-39881
EMBARK TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware85-3343695
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
321 Alabama St,
San Francisco, California
94110
(Address of Principal Executive Offices)
(Zip Code)
(415) 671-9628
Registrant's telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, par value $0.0001 per shareEMBKThe Nasdaq Global Market
Warrants, each whole warrant exercisable for 1/20th share of Class A common stock at an exercise price of $11.50 per shareEMBKWThe Nasdaq Global Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x   No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated fileroAccelerated filero
Non-accelerated filer  xSmaller reporting companyx
Emerging growth companyx
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes   o     No  x
As of November 2, 2022, the number of shares of the issuer’s Class A common stock outstanding was 19,067,925 and the number of outstanding shares of the issuer’s Class B common stock was 4,353,948.
As used in this Quarterly Report on Form 10-Q, unless the context requires otherwise, references to “Embark,” the “Company,” “we,” “us,” and “our,” and similar references refer to Embark Technology, Inc. and its wholly owned subsidiaries following the Business Combination (as defined herein) and to Embark Trucks, Inc. prior to the Business Combination.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains statements that are forward‑looking and as such are not historical facts. This includes, without limitation, statements regarding the financial position, business strategy and the plans and objectives of management for future operations. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward‑looking statements, but the absence of these words does not mean that a statement is not forward‑looking.
Forward‑looking statements in this Quarterly Report on Form 10-Q may include, for example, statements about:
Embark’s public securities’ potential liquidity and trading;
Embark’s ability to raise financing in the future;
Embark’s success in retaining or recruiting, or changes required in, its officers, key employees or directors;
the impact of the regulatory environment and complexities with compliance related to such environment;
factors relating to the business, operations and financial performance of Embark and its subsidiaries, including:
the impact of the COVID‑19 pandemic;
overall macroeconomic conditions and the impact on the capital markets;
the ability of Embark to maintain an effective system of internal controls over financial reporting;
the nature of autonomous driving as an emerging technology;
Embark’s limited operating history;
the acceptance of Embark’s technology by users and stakeholders in the freight transportation industry;
the expected success of Embark’s business model, including its ability to maintain and develop customer relationships;
the ability of Embark to maintain a successful manufacturer‑agnostic approach to its technology;
the ability of Embark to achieve and maintain profitability in the future; and
other factors detailed under the section entitled “Risk Factors” in this Quarterly Report on Form 10-Q and the section entitled “Risk Factors” in Embark’s Annual Report on Form 10-K for the year ended December 31, 2021,


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as filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 21, 2022 (the “Annual Report”).

These forward‑looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward‑looking statements should not be relied upon as representing Embark’s views as of any subsequent date, and Embark does not undertake any obligation to update forward‑looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, Embark’s actual results or performance may be materially different from those expressed or implied by these forward‑looking statements. You should not place undue reliance on these forward‑looking statements.


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Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
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Embark Technology, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
(unaudited)

September 30,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents
$191,040 $264,615 
Restricted cash, short-term
65 130 
Prepaid expenses and other current assets
9,416 12,746 
Total current assets
200,521 277,491 
Restricted cash, long-term
812 275 
Property, equipment and software, net
17,686 9,637 
Operating lease right-of-use assets22,941  
Other assets
6,365 3,596 
Total assets
$248,325 $290,999 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
$2,758 $2,497 
Accrued expenses and other current liabilities
9,226 3,142 
Current portion of operating lease liabilities3,251  
Short-term notes payable
492 358 
Total current liabilities
15,727 5,997 
Long-term notes payable1,421 722 
Warrant liability1,621 49,419 
Non-current portion of operating lease liabilities20,090  
Other long-term liability110 50 
Long-term deferred rent
 177 
Total liabilities
38,969 56,365 
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized, none issued and none outstanding as of September 30, 2022 and December 31, 2021
  
Class A common stock, $0.0001 par value; 4,000,000,000 shares authorized, 18,848,766 shares issued as of September 30, 2022; 4,000,000,000 shares authorized, 18,141,649 shares issued as of December 31, 2021
2 36 
Class B common stock, $0.0001 par value; 100,000,000 shares authorized, 4,353,948 shares issued as of September 30, 2022 and December 31, 2021
 9 
Additional paid-in capital
460,440 417,492 
Accumulated deficit
(251,086)(182,903)
Total stockholders’ equity
209,356 234,634 
Total liabilities and stockholders’ equity
$248,325 $290,999 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Embark Technology, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Operating expenses:
Research and development
$21,691 $11,481 $59,427 $26,823 
General and administrative
16,050 4,593 56,741 11,585 
Total operating expenses
37,741 16,074 116,168 38,408 
Loss from operations
(37,741)(16,074)(116,168)(38,408)
Other income (expense):
Change in the fair value of derivative liability (1,010) (5,783)
Change in fair value of warrant liability
1,390  47,799  
Other income (expense)
181 12 (413)18 
Interest income
758 13 931 83 
Interest expense
 (2,058)(332)(3,735)
Loss before provision for income taxes
(35,412)(19,117)(68,183)(47,825)
Provision for income taxes    
Net loss
$(35,412)$(19,117)$(68,183)$(47,825)
Net loss attributable to common stockholders, basic and diluted
$(35,412)$(19,117)$(68,183)$(47,825)
Net loss per share attributable to common stockholders:
Basic and diluted, Class A and Class B$(1.53)$(2.69)$(2.98)$(6.73)
Weighted-average shares used in computing net loss per share attributable to common stockholders:
Basic and diluted23,145,180 7,111,106 22,880,503 7,111,106 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Embark Technology, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net loss
$(35,412)$(19,117)$(68,183)$(47,825)
Other comprehensive loss (net of tax):
Unrealized losses on available-for-sale securities, net
 (3) (45)
Comprehensive loss
$(35,412)$(19,120)$(68,183)$(47,870)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Embark Technology, Inc.
Condensed Consolidated Statements of Preferred Stock and Stockholder’s Equity
(in thousands, except number of shares)
(unaudited)

Preferred StockFounders Preferred StockCommon StockClass AClass BWarrantsAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance at
June 30, 2021
13,029,115$1 24,245$ 7,125,342$ $  $  $132,182 $(87,398)$3 $44,788 
Shares issued upon exercise of stock options— — 18,487— — — — — 51 — — 51 
Shares repurchased— — (167)— — — — — — — — — 
Vesting of early exercised options
— — — — — — — 28 — — 28 
Stock-based compensation
— — — — — — — 630 — — 630 
Issuance of common stock warrants— — — — — — — 342 — — 342 
Other comprehensive loss— — — — — — — — — (3)(3)
Net loss
— — — — — — — — (19,117)— (19,117)
Balance at
September 30, 2021
13,029,115$1 24,245$ 7,143,662$ $  $  $133,233 $(106,515)$ $26,719 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.














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Embark Technology, Inc.
Condensed Consolidated Statements of Preferred Stock and Stockholder’s Equity
(in thousands, except number of shares)
(unaudited)

Preferred StockFounders Preferred StockCommon StockClass AClass BWarrantsAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance at
June 30, 2022
 $  $  $ 18,654,458 $2 4,353,948 $ 23,153,266 $449,197 $(215,674)$ $233,525 
Shares issued upon exercise of stock options
— — — — — — 70,464 — — — — 156 — — 156 
Shares issued upon vesting of common stock units— — — — — — 13,322 — — — — — — — — 
Shares issued upon vesting of restricted stock units— — — — — — 110,522 — — — — — — — — 
Vesting of early exercised options— — — — — — — — — — — 22 — — 22 
Stock-based compensation— — — — — — — — — — — 11,065 — — 11,065 
Net loss— $— — $— — $— — $— — $— — $— $(35,412)$— $(35,412)
Balance at
September 30, 2022
 $  $  $ 18,848,766 $2 4,353,948 $ 23,153,266 $460,440 $(251,086)$ $209,356 



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.












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Embark Technology, Inc.
Condensed Consolidated Statements of Preferred Stock and Stockholder’s Equity
(in thousands, except number of shares)
(unaudited)
Preferred StockFounders Preferred StockCommon StockClass AClass BWarrantsAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance at
December 31, 2020
13,029,115 $1 24,245 $ 7,060,822 $  $  $  $129,449 $(58,690)$45 $70,805 
Shares issued upon exercise of stock options— — — — 83,007 — — — — — — 149 — — 149 
Shares repurchased— — — — (167)— — — — — — — — — — 
Vesting of early exercised options
— — — — — — — — — — — 39 — — 39 
Stock-based compensation
— — — — — — — — — — — 1,821 — — 1,821 
Issuance of common stock warrants— — — — — — — — — — — 1,775 — — 1,775 
Other comprehensive loss— — — — — — — — — — — — — (45)(45)
Net loss
— — — — — — — — — — — — (47,825)— (47,825)
Balance at
September 30, 2021
13,029,115 $1 24,245 $ 7,143,662 $  $  $  $133,233 $(106,515)$ $26,719 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Embark Technology, Inc.
Condensed Consolidated Statements of Preferred Stock and Stockholder’s Equity
(in thousands, except number of shares)
(unaudited)

Preferred StockFounders Preferred StockCommon StockClass AClass BWarrantsAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance at
December 31, 2021
 $  $  $ 18,141,649 $2 4,353,948 $ 23,153,266 $417,535 $(182,903)$ $234,634 
Shares issued upon exercise of stock options
— — — — — — 446,890 — — — — 1,298 — — 1,298 
Shares issued upon vesting of common stock units— — — — — — 26,643 — — — — — — — — 
Shares issued upon vesting of restricted stock units— — — — — — 211,084 — — — — — — — — 
Vesting of early exercised options— — — — — — — — — — — 43 — — 43 
Stock-based compensation— — — — — — — — — — — 40,898 — — 40,898 
Issuance of common stock for services— — — — — — 22,500 — — — — 666 — — 666 
Net loss
— — — — — — — — — — — — (68,183)— (68,183)
Balance at
September 30, 2022
 $  $  $ 18,848,766 $2 4,353,948 $ 23,153,266 $460,440 $(251,086)$ $209,356 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Embark Technology, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30,
20222021
Cash flows from operating activities
Net loss
$(68,183)$(47,825)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
1,438 756 
Amortization expense - right-of-use assets - operating leases1,841  
Stock-based compensation, net of amounts capitalized
39,942 1,661 
Issuance of warrants for services
 1,775 
Change in fair value of warrants(47,799) 
Net amortization of premiums and accretion of discounts on investments
 265 
Amortization of debt discount 3,735 
Change in the fair value of derivative liability 5,783 
Loss on sale of property, equipment and software(147) 
Issuance of common stock for services666  
Changes in operating assets and liabilities:
Prepaid expenses and other current assets3,144 (911)
Other assets(2,769)(3,229)
Accounts payable1,055 2,759 
Other long-term liabilities60 49 
Accrued expenses and other current liabilities4,482 2,324 
Net cash used in operating activities
(66,270)(32,858)
Cash flows from investing activities
Maturities of investments
 48,239 
Proceeds from sale of property, equipment and software399  
Purchase of property, equipment and software
(8,201)(2,380)
Deposit for purchase of trucks (400)
Refund of deposit for trucks 47 
Net cash provided by (used in) investing activities
(7,802)45,506 
Cash flows from financing activities
Cash proceeds received from convertible note payable 25,001 
Payment towards notes payable
(346)(140)
Proceeds from exercise of stock options
1,319 149 
 Repurchase of early exercised stock options(4) 
Deferred offering costs
 (827)
 Net cash provided by financing activities
969 24,183 
Net increase (decrease) in cash, cash equivalents and restricted cash
(73,103)36,831 
Cash, cash equivalents and restricted cash at beginning of period
265,020 11,460 
Cash, cash equivalents and restricted cash at end of period
$191,917 $48,291 
Supplemental disclosures of cash flow information:
Cash paid during the period for interest
$18 $ 
Supplemental schedule of noncash investing and financing activities
Acquisition of property, equipment and software in accounts payable
$1,038 $71 
Acquisition of trucks by assuming notes payable
$1,420 $278 
Right-of-use assets obtained in exchange for lease obligations$24,782 $ 
Deferred offering costs in accrued liability$ $3,275 
Stock-based compensation capitalized into internally developed software
$1,144 $160 
Vesting of early exercised stock options
$43 $39 
Issuance of common stock for services$666 $ 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Notes to Condensed Consolidated Financial Statements (unaudited)
1.DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Embark Technology, Inc. (“Embark” or the “Company”) was originally incorporated in Delaware on September 25, 2020 under the name Northern Genesis Acquisition Corp. II (“NGA”). The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On November 10, 2021 (the “Closing Date”), the Company (at such time named Northern Genesis Acquisition Corp. II) consummated the business combination (the “Business Combination”) pursuant to the Agreement and Plan of Merger, dated June 22, 2021 with the pre-Business Combination company, Embark Trucks, Inc. (“Embark Trucks”). In connection with the consummation of the Business Combination, the Company changed its name from Northern Genesis Acquisition Corp. II to Embark Technology, Inc. and became the parent entity of Embark Trucks.
The Merger was accounted for as a reverse recapitalization with Embark as the accounting acquirer and NGA as the acquired company for accounting purposes. Accordingly, all historical financial information presented in the condensed consolidated financial statements represent the accounts of Embark as if Embark is the predecessor to the Company. The shares and net loss per common share, prior to the Merger, have been retroactively restated as shares reflecting the exchange ratio established in the Merger (approximately 2.98 shares of Company Class A common stock for 1 share of Embark Class A common stock).
The principal activities of Embark Technology, Inc. include design and development of autonomous driving software for the truck freight industry. The Company is headquartered in San Francisco, California and was incorporated in the State of Delaware in 2016. Other than Embark Trucks, the Company has no other subsidiaries as of September 30, 2022.
The Company has devoted substantially all of its resources to develop its autonomous truck technology, to enable and expand its route models - transfer point and direct-to-customer, to expand its partnerships with shippers and carriers and other potential consumers, to raising capital, and providing general and administrative support for these operations. The Company has not generated revenues from its principal operations from inception through September 30, 2022.
Prior to the Merger, NGA ordinary shares and warrants were traded on the New York Stock Exchange under the ticker symbols “NGAB” and “NGAB.WS”, respectively. On the Closing Date, the Company’s Class A common stock and warrants began trading on the NASDAQ under the ticker symbols “EMBK” and “EMBKW”, respectively. One of the primary purposes of the Merger was to provide a platform for Embark Trucks to gain access to the U.S. capital markets.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the regulations of the SEC. The condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiary. All intercompany transactions and balances have been eliminated upon consolidation.
Unaudited Interim Financial Information
These interim Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and notes thereto contained in Embark’s Annual Report. The condensed consolidated balance sheet at December 31, 2021, has been derived from the audited financial statements at that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements. In management’s opinion, the unaudited interim financial statements have been prepared on the same basis as the annual financial statements and include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of September 30, 2022 and the Company’s results of operations for the three and nine months ended September 30, 2022 and 2021, and cash flows for the nine months ended September 30, 2022 and 2021. The interim results are not necessarily indicative of the results for any future interim period or for the entire year.

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Business Combination
The Company entered into the Merger Agreement with NGA, a special purpose acquisition company, on June 22, 2021. On November 10, 2021, as part of the Business Combination, NGAB Merger Sub Inc., a newly formed subsidiary of NGA (“Merger Sub”), merged with and into Embark Trucks. In connection with the consummation of the Business Combination, the separate corporate existence of Merger Sub ceased; Embark Trucks survived and became a wholly owned subsidiary of NGA, which was renamed Embark Technology, Inc.
The Business Combination was accounted for as a reverse recapitalization, in accordance with GAAP. Under the guidance in ASC 805, Embark was treated as the “acquirer” company for the accounting purposes. Embark Trucks was deemed the accounting predecessor of the combined business, and Embark Technology, Inc., as the parent company of the combined business, was the successor SEC registrant, meaning that Embark’s financial statements for previous periods will be disclosed in the registrant’s periodic reports filed with the SEC. The Business Combination had a significant impact on Embark’s reported financial position and results as a consequence of the reverse recapitalization. The most significant change in Embark’s reported financial position and results was a net increase in cash of $243.9 million, net of transaction costs for the Business Combination of $70.2 million.

Reverse Stock Split
On August 15, 2022, the directors of the Company approved an amendment to the Company’s second amended and restated certificate of incorporation (the “Certificate of Incorporation”) to effect a reverse stock split (the “Reverse Stock Split”) of the Company’s outstanding common stock, par value $0.0001 per share (the “Common Stock”), at the ratio of 1-for-20. Following the close of trading on the Nasdaq Global Market on August 16, 2022 (the “Effective Time”), the Company filed a certificate of amendment to the Certificate of Incorporation (the “Amendment”) with the Secretary of State of the State of Delaware to effect the Reverse Stock Split. All references in these financial statements to number of common shares issued or outstanding, price per share, outstanding equity awards as well as the applicable exercise price, and weighted average number of shares outstanding prior to the 1 for 20 reverse split have been adjusted to reflect the stock split on a retroactive basis as of the earliest period presented, unless otherwise noted. Warrants will be impacted by the same ratio upon exercise.
No fractional shares were issued in connection with the Reverse Stock Split. The Reverse Stock Split did not affect the number of authorized shares of Embark’s common stock, the par value of the common stock, the number of warrants issued and outstanding, or the exercise price of the warrants.
Liquidity and Capital Resources

The Company has incurred losses from operations since inception. The Company incurred net losses of $68.2 million and $47.8 million for the nine months ended September 30, 2022 and 2021, respectively, and accumulated deficit amounts of $251.1 million and $182.9 million as of September 30, 2022 and December 31, 2021, respectively. Net cash used in operating activities was $66.3 million and $32.9 million for the nine months ended September 30, 2022 and 2021, respectively.
The Company’s liquidity is based on its ability to enhance its operating cash flow position, obtain capital financing from equity interest investors, and borrow funds to fund its general operations, research and development activities and capital expenditures. As of September 30, 2022 and December 31, 2021, the Company’s balance of cash and cash equivalents was $191.0 million and $264.6 million, respectively.
Based on cash flow projections from operating and financing activities and existing balance of cash and cash equivalents and investments, management is of the opinion that the Company has sufficient funds for sustainable operations, and it will be able to meet its payment obligations from operations and debt related commitments for at least one year from the issuance date of these financial statements. Based on the above considerations, the Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during the normal course of operations.
The Company’s ability to continue as a going concern is dependent on management’s ability to control operating costs and demonstrate progress against its technical roadmap. This involves developing new capabilities for the Embark Driver software and improving the reliability and performance of the software on public roads. The Company believes demonstrating ongoing technical and commercial progress will enable the Company to obtain funds from outside sources
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of financing, including financing from equity interest investors and borrow funds to fund its general operations, research and development activities and capital expenditures.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes- Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company that is either a) not an emerging growth company or b) an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Segment Information
Under Accounting Standards Codification (“ASC 280”), Segment Reporting, operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”), in deciding how to allocate resources and in assessing performance. The Company operates in one segment, the truck business unit, which is focused on enhancing self-driving truck software technology. Therefore, the Company’s chief executive officer, who is also the CODM, makes decisions and manages the Company’s operations as a single operating segment for purposes of allocating resources and evaluating financial performance. All long-lived assets are maintained in, and all losses are attributable to, the United States of America.
Concentration of Risks
Embark’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and restricted cash. Embark maintains its cash and cash equivalents and restricted cash with high-quality financial institutions with investment-grade ratings. A majority of the cash balances are with U.S. banks and are insured to the extent defined by the Federal Deposit Insurance Corporation.
Impact of COVID-19
The outbreak of the novel coronavirus COVID-19, which was declared a global pandemic by the World Health Organization on March 11, 2020 has led to adverse impacts on the U.S. and global economies and has impacted and continues to impact the Company’s supply chain, and operations. Even though the Company has taken measures to adapt to operating in this challenging environment, the pandemic could further affect the Company’s operations and the operations of, partners, suppliers and vendors due to additional shelter- in-place and other governmental orders, facility closures, travel and logistics restrictions, or other factors as circumstances continue to evolve. In response to this pandemic, many jurisdictions in which the Company operates issued stay-at-home orders and other measures aimed at slowing the spread of the virus. While the Company remains open in accordance with guidance from local authorities, the Company experienced a temporary pause in testing of its research and development truck fleet and operations in response to the stay- at-home orders in calendar year 2021. The impacts from stay-at-home orders and other updated local government indoor operation measures associated with COVID-19 and its variants are not currently impacting the Company’s operations, however, there remains continuing uncertainty around the potential disruptions the pandemic could cause looking forward. The Company has instituted policies across its offices to ensure compliance with the guidelines imposed by the applicable public health
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authorities from time to time. At current, these changes have not impacted the Company’s operations. In response to recent variants, local governments have updated and may continue to update their guidelines for indoor operations. Therefore, the related financial impact and duration cannot be reasonably estimated at this time.
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of expenses during the reporting period.
The Company’s most significant estimates and judgments involve the useful lives of long-lived assets, the recoverability of long-lived assets, the incremental borrowing rate (“IBR”) applied in lease accounting, the capitalization of software development costs, the valuation of the Company’s stock-based compensation, including the valuation of warrants to purchase the Company’s stock and the valuation allowance for income taxes. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. As of September 30, 2022 and December 31, 2021, the Company had $191.0 million and $264.6 million of cash and cash equivalents, respectively.
The Company maintains letters of credit to secure leases of the Company’s offices and facilities. A portion of the Company’s cash is collateralized in conjunction with the letter of credit and is classified as restricted cash on the Company’s condensed consolidated balance sheets. As of September 30, 2022 and December 31, 2021, the Company had $0.9 million and $0.4 million in restricted cash, respectively. At the end of each year of the lease, the face amount of the letter of credit is reduced by a fixed amount of approximately $0.1 million and reclassified into cash and cash equivalents on the Company’s condensed consolidated balance sheets. The Company determines short-term or long-term classification based on the expected duration of the restriction.
The reconciliation of cash and cash equivalents and restricted cash and cash equivalents to amounts presented in the condensed consolidated statements of cash flows are as follows (in thousands):

As of September 30, As of December 31,
202220212021
Cash and cash equivalents$191,040 $47,886 $264,615 
Restricted cash, short-term65 65 130 
Restricted cash, long-term812 340 275 
Total cash, cash equivalents and restricted cash$191,917 $48,291 $265,020 

Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents, restricted cash, prepaid expenses and other current assets, accounts payable and accrued expenses, short-term and long-term notes payable and other current liabilities. The assets and liabilities that were measured at fair value on a recurring basis are cash equivalents and warrant liabilities. The Company believes that the carrying values of the remaining financial instruments approximate their fair values. The Company applies fair value accounting in accordance with ASC 820, Fair Value Measurements for valuation of financial instruments. ASC 820 provides a framework for measuring fair value under GAAP that expands disclosures about fair value measurements, establishes a fair value hierarchy, and requires an entity to maximize the use of observable inputs and
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minimize the use of unobservable inputs when measuring fair value. The three levels of the fair value hierarchy are summarized as follows:
Level 1 — Fair value is based on observable inputs such as quoted prices for identical assets or liabilities in active markets.
Level 2 — Fair value is determined using quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in markets that are not active or are directly or indirectly observable.
Level 3 — Fair value is determined using one or more significant inputs that are unobservable in active markets at the measurement date, such as an option pricing model, discounted cash flow, or similar technique.

Public and Private Warrants
As part of NGA’s initial public offering on October 13, 2020, NGA issued to third party investors 41.4 million units, consisting of one share of Class A common stock of NGA and one-third of one warrant, at a price of $10.00 per unit. Each whole warrant entitles the holder to purchase one share of Class A common stock at an exercise price of $11.50 per share (the “Public Warrants”). Further, NGA completed the private sale of 6.7 million warrants to NGA's sponsor at a purchase price of $1.50 per warrant (the “Private Placement Warrants” or “Private Warrants”). Following the reverse stock split, each warrant allows the holder to purchase 1/20th of one share of Class A common stock at $11.50 per share. Subsequent to the Business Combination, 13.8 million Public Warrants and 6.7 million Private Warrants remained outstanding as of September 30, 2022.
Following the Reverse Stock Split effectiveness on August 16, 2022, warrants will be impacted by the same ratio upon exercise. The Reverse Stock Split did not affect the number of warrants issued and outstanding or the exercise price of the warrants. Each whole warrant exercisable is now for 1/20th share of Class A common stock at an exercise price of $11.50 per share.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon the exercise of the Private Placement Warrants did not become transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
The Company evaluated the Public and Private Warrants under ASC 815-40, Derivatives and Hedging-Contracts in Entity's Own Equity, and concluded that they do not meet the criteria to be classified in stockholders' equity. Since the Public and Private Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as liabilities on the balance sheet at fair value upon the closing of the Business Combination, with subsequent changes in their respective fair values recognized in the condensed consolidated statements of operations and comprehensive income (loss) at each reporting date.
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Property, Equipment and Software
Property, equipment and software is stated at cost less accumulated depreciation. Repair and maintenance costs are expensed as incurred. Depreciation and amortization are recorded on a straight-line basis over each asset’s estimated useful life.
Property, Equipment and Software
Useful life (years)
Machinery and equipment
5 years
Electronic equipment
3 years
Vehicles and vehicle hardware
3 – 7 years
Leasehold improvements
Shorter of useful life or lease term
Furniture and fixtures7 years
Developed software
2 – 4 years
Leases
The Company determines if a contract contains a lease at inception of the arrangement based on whether the Company has the right to obtain substantially all of the economic benefits from the use of an identified asset and whether the Company has the right to direct the use of an identified asset in exchange for consideration, which relates to an asset which the Company does not own. Right of use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are recognized as the lease liability, adjusted for lease incentives received. Lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company’s IBR, because the interest rate implicit in most of its leases is not readily determinable. The IBR is a hypothetical rate based on the Company’s understanding of what its credit rating would be to borrow and resulting interest we would pay to borrow an amount equal to the lease payments in a similar economic environment over the lease term on a collateralized basis. Lease payments may be fixed or variable; however, only fixed payments or in-substance fixed payments are included in the Company’s lease liability calculation. Variable lease payments may include costs such as common area maintenance, utilities, real estate taxes or other costs. Variable lease payments are recognized in operating expenses in the period in which the obligation for those payments are incurred.