The following discussion and analysis of Embark's financial condition and
results of operations should be read in conjunction with Embark's financial
statements and related notes and other information included elsewhere in this
Annual Report on Form 10-K. This discussion contains forward-looking statements
that involve risks and uncertainties. Embark's actual results could differ
materially from such forward-looking statements. Factors that could cause or
contribute to those differences include, but are not limited to, those
identified below and those discussed in the sections titled "Risk Factors" and
"Cautionary Statement Regarding Forward-Looking Statements" included elsewhere
in this Annual Report on Form 10-K. Additionally, Embark's historical results
are not necessarily indicative of the results that may be expected in any future
period.

Overview

Embark develops technologically advanced autonomous driving software for the
truck freight industry and offers a carefully constructed business model that is
expected to provide the industry with the most attractive path to adopting
autonomous driving. Specifically, Embark has developed a Software as a Service
("SaaS") platform designed to interoperate with a broad range of truck OEM
platforms, forgoing complicated and logistically challenging truck building or
hardware manufacturing operations in favor of focusing on a superior driving
technology. At scale, domestic shippers and carriers will be able to access
Embark technology via a subscription software license selected as an option at
the time they specify the build of new semi-trucks.

Headquartered in San Francisco, California, Embark's history as the industry's
longest running autonomous truck driving program is replete with technological
firsts that include, but are not limited to:

? the first coast-to-coast autonomous truck drive,

? the first to reach 100,000 autonomous miles on public roads, and

? the first to successfully open autonomous transfer points for human- autonomous

vehicle ("AV") handoff.




Embark's founding team includes roboticists and its broader team includes
numerous computer scientists, many with advanced degrees and experience at other
leading robotics and autonomous vehicle companies and academic programs. Through
this business combination, Embark intends to rapidly scale its engineering team
to build on its industry-leading technology position.

Embark has also spent considerable time and effort refining its business model.
Embark is initially deploying its technology in a very focused manner, targeting
freight highway miles between transfer points located next to metropolitan areas
in the lower "Sunbelt" region of the U.S., leaving the "last mile" of driving to
and from the transfer points to the industry's highly skilled human drivers.
Embark's strategy is distinct from other industry players which seek to provide
more complicated "end to end" autonomous driving that would entirely displace
human drivers and potentially place these companies in competition with the
industry's carriers. Unlike those competitors, Embark anticipates working with
the industry's existing players to help them bring autonomous driving technology
to market on their own terms. In addition, Embark believes its solution will be
the safest and most reliable in the industry because of its disciplined
geographic focus and emphasis on software development, which stands in contrast
to Embark's competitors that focus on multiple domestic markets simultaneously,
manufacturing autonomous trucks and/or competing directly with semi-truck OEMs
or legacy carriers.

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Embark's business model focus does not come at any significant commercial
expense for Embark's stockholders because the serviceable market Embark is
targeting is significant. Embark currently targets the rapidly growing $730
billion U.S. truck freight market, and its initial commercial phase targets
236 billion serviceable miles within this market. The industry has had to face
significant pressures from the growth of e-commerce and the well-documented
shortage of skilled drivers, and therefore has powerful incentives to adopt
autonomous driving solutions to both improve capacity and reduce costs. In
addition, Embark's cooperative model has already had traction with many of the
industry's leading shippers and carriers.

The Business Combination



We entered into the Merger Agreement with NGA, a special purpose acquisition
company, on June 22, 2021. On November 10, 2021, pursuant to the Merger
Agreement, Merger Sub, a newly formed subsidiary of NGA, merged with and into
Embark Trucks (the "Business Combination"). 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. ("Embark")

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
"acquired" company for financial reporting 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 our 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 our reported financial position and
results as a consequence of the reverse recapitalization. The most significant
changes in Embark's reported financial position and results are a net increase
in cash of $243.9 million, net of transaction costs for the Business Combination
of $70.2 million, and an increase in warrant liabilities of $49.4 million.

As a result of the Business Combination, we became an SEC-registered and
Nasdaq-listed company, which will require us to hire additional personnel and
implement procedures and processes to address public company regulatory
requirements and customary practices. We expect to incur additional annual
expenses as a public company for, among other things, directors' and officers'
liability insurance, director fees, and additional internal and external
accounting, legal and administrative resources.

Recent Developments Affecting Comparability

COVID-19 Impact



In March 2020, the World Health Organization declared the 2019 novel coronavirus
("COVID-19") a global pandemic. In the United States, as part of
government-imposed restrictions, Embark was forced to temporarily pause fleet
testing and operations in 2020. Embark also implemented a work-from-home policy
for most of its non-operations team. However, a select group of workers remained
on-site to continue advancing testing work for its test fleet. Since then,
Embark has resumed its fleet testing and operations and has increased headcount
to match its research and development requirements.

The future impact of the COVID-19 pandemic on Embark's operational and financial
performance will depend on certain developments, including the duration and end
of the pandemic, the occurrence of future outbreaks from new variants, including
the ongoing outbreak of the Omicron variant, impact on Embark's research and
development efforts, and effect on Embark's suppliers, all of which are
uncertain and cannot be predicted. Public and private sector policies and
initiatives to reduce the transmission of COVID-19 and disruptions to Embark's
operations and the operations of Embark's third-party suppliers, along with the
related global slowdown in economic activity, may result in increased costs. It
is possible that the COVID-19 pandemic, the measures that have been taken or
that may be taken by the federal, state, local authorities and businesses
affected by government-mandated business closures, vaccination mandates and the
resulting economic impact may materially and adversely affect Embark's business,
results of operations, cash flows and financial positions.

See "Risk Factors - Pandemics and epidemics, including the ongoing COVID-19
pandemic, natural disasters, terrorist activities, political unrest, and other
outbreaks could have a material adverse impact on Embark's business, results of
operations, financial condition, cash flows or liquidity, and the extent to
which Embark will be impacted will depend on future developments, which cannot
be predicted." for further discussion of the possible impact of COVID-19 on

Embark's business.

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Key Factors Affecting Embark's Operating Performance



Embark's financial condition, results of operations, and future success depend
on several factors that present significant opportunities for us but also pose
risks and challenges, including those set forth in the section entitled "Risk
Factors"in this Annual Report on Form 10-K and the following:

Embark's Ability to Achieve Key Technical Milestones and Deliver a Commercial Product


Embark's growth will depend on the introduction of Embark Driver and Embark
Guardian, products which will drive demand from potential customers. Embark has
developed a platform agnostic interface, Embark Universal Interface, which will
serve as the foundation to utilize Embark Driver and Guardian products in trucks
manufactured by a broad range of OEMs. Embark's ability to introduce its
products will be driven by a variety of factors including Embark's research and
development fleet size, the number of autonomous miles driven (measured as the
number of miles driven by Embark's research & development fleet as well as
partner fleet autonomous miles), and the ability to provide a safe and
sustainable solution based on information gathered from the operation of
Embark's research and development fleet. Embark develops most key technologies
in-house to achieve a rapid pace of innovation and tests it extensively through
operating Embark's fleet. Embark expects an increase in research and development
fleet size in the foreseeable future to allow Embark to strategically focus on
innovations, which it believes will help solidify Embark's overall solution to
customers and partners. To date, Embark has not generated any revenue and until
Embark's products reach commercialization, autonomous miles driven will be
comprised solely of autonomous miles driven by Embark's research and development
fleet. Embark believes that as the number of autonomous miles driven increases,
the data will continually feed improvements to the platform, leading to Embark's
ability to innovate and introduce new products to the market and increase
adoption of Embark's products in the future.

Embark's Ability to Expand its Coverage Map Across the United States



Embark's long-term growth potential will benefit from strategic network
expansion across the United States. Network breadth is measured by the number of
transfer points on Embark's coverage map, the number of cities in which the
Embark Driver can support, and the number of direct-to-customer freight lanes in
operation. Embark expects to achieve significant network growth by partnering
with key real-estate partners which will enable Embark to quickly bring their
truck stops into its coverage map. Additionally, Embark will partner with
shippers who already move a significant amount of freight on Embark's network to
establish direct-to-customer freight lanes. Embark believes that expanding its
network will enable Embark to create a significant and sustainable competitive
advantage. Embark believes that the continued growth of Embark's partnerships
will improve user experience and drive more users to Embark's platform, which it
believes will allow Embark to further densify its coverage map and reinforce
rapid network growth. Embark will apply a highly scalable model nationally, with
a tailored approach to each state, driven by the regulatory environment and
local market dynamics. Embark believes that this will allow Embark to expand
rapidly and efficiently across different geographies, while maintaining a high
level of control over the specific strategy within each state.

Embark's Ability to Expand its Partner Network


The growth of Embark's business model is focused on driving the adoption of its
technical products and maximizing their use across Embark's partners'
operations. This is achieved by enabling pilot testing of Embark's products
throughout customers' operations. In April 2021, Embark formally announced the
Embark Partner Development Program, which serves as the basis of its partnership
network. The PDP comprises shippers and carriers from across the freight
ecosystem working with Embark to refine and scale Embark's offerings.Most
recently, Embark announced the industry-first Truck Transfer Program to place
Embark technology in the hands of Knight-Swift drivers.

Embark estimates that these existing partners operate approximately 33,000
trucks and purchase approximately 8,000 trucks annually. Embark believes that
its current carriers reflect a small fraction of the overall demand for its
technology and is in discussions with other carriers representing 50% of the top
100 carriers measured by truck count, which represent a dramatically larger
addressable market. Embark plans to increase PDP membership by providing network
assessments for prospective members and constructing business cases to support
Embark's product integration into their operations. Over time, it is expected
that these partners will convert into long-term Embark customers.

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Adoption and Support of Autonomous Technology in the Freight Industry



Embark's business model is supported by a large addressable market that Embark
believes will benefit from the introduction of autonomous trucking technology.
The freight industry is currently facing significant challenges, notably driver
shortages and utilization limitations, which Embark believes it will address
through its product offerings. Embark has identified participants from across
the freight ecosystem who have expressed support for Embark's offerings and the
potential solutions they provide to the challenges they are facing.

While Embark has confirmed general market support, the long-term success of its
business model is dependent on broadscale adoption and support of autonomous
trucking technology. Embark has engaged with notable partners in the freight
industry who Embark believes will lead the industry in adopting autonomous
vehicle technology. As Embark onboards more partners, it will increase miles
driven by partners, which Embark believes will serve to validate its product
offerings and generate interest and confidence from other partners. Embark
believes customers will be motivated to integrate Embark's technology to be
price competitive with other freight participants who have achieved efficiencies
with Embark.

Key Components of Embark's Results of Operations

The following discussion describes certain line items in Embark's statements of operations.



Operating Expenses

Operating expenses consist of research and development expenses and general and
administrative expenses. Personnel-related costs are the most significant
component of Embark's operating expenses and include salaries, benefits, and
stock-based compensation expenses.

Embark's full-time employee headcount in research and development has grown from
84 as of December 31, 2020 to 172 as of December 31, 2021, and Embark expects to
continue to hire new employees to support Embark's growth. Embark's full-time
employee headcount in general and administrative functions has grown from 17 as
of December 31, 2020 to 59 as of December, 2021, and Embark expects to continue
to hire new employees to support Embark's growth. The timing of these additional
hires could materially affect Embark's operating expenses in any particular
period.

Embark expects to continue to invest substantial resources to support Embark's growth and anticipates that each of the following categories of operating expenses will increase in absolute dollar amounts for the foreseeable future.

Research and Development Expenses



Research and development expenses consist primarily of salaries, employee
benefits, stock-based compensation expenses and travel expenses related to
Embark's engineers performing research and development activities to originate,
develop and enhance Embark's products. Additional expenses include consulting
charges, component purchases and other costs for performing research and
development on Embark's software products.

General and Administrative Expenses


General and administrative expenses consist primarily of salaries, employee
benefits, stock-based compensation expenses, and travel expenses related to
Embark's executives, finance team, and the administrative employees. It also
consists of legal, accounting, consulting, and professional fees, rent and lease
expenses pertaining to Embark's offices, business insurance costs and other
costs.We expect our general and administrative expenses to increase for the
foreseeable future as we scale headcount with the growth of our business, and as
a result of operating as a public company, including compliance with the rules
and regulations of the SEC, legal, audit, tax and other administrative and

professional services.

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Non-Operating Expenses and Other Items

Other Income (expense)



Other income (expense) consists of income generated from transporting freight on
behalf of counterparties using Embark's own research and development truck fleet
equipped with its self-driving systems through various Transportation Service
Agreements ("TSAs"), the change in fair value of derivative liabilities and the
change in fair value of Public, Private, Working Capital and Forward Purchase
Agreement ("FPA") Warrants. The primary purpose of TSAs is to support Embark's
research and development and proof of concept efforts. Accordingly, income
generated from such TSA arrangements is not expected to be the primary revenue
generating activity of Embark. Change in fair value of derivative liabilities
represents the increase or decrease in the fair value of the embedded conversion
and redemption features, which are presented as a derivative liability, related
to the convertible note payable, which was converted to Embark Class A common
stock upon consummation of the Business Combination. Change in fair value of
warrants represents the increase or decrease in the estimated fair value of such
warrant. For each reporting period, the Company will determine the fair value of
the derivative liability and warrants, and record a corresponding non-cash
benefit or non-cash charge, due to a decrease or increase, respectively, in the
calculated derivative liability or warrants.

Interest Income



Interest income consists of interest earned on Embark's investments classified
as available for sale securities as well as cash equivalents. Embark invests in
highly liquid securities such as money market funds, as well as treasury bills.

Interest Expense



Interest expense primarily consists of non-cash interest incurred on Embark's
convertible note. The interest expense is related to the accretion of the debt
discount offered upon the issuance of the convertible note.

Results of Operations


The results of operations presented below should be reviewed in conjunction with
the financial statements and notes included elsewhere in this Annual Report on
Form 10-K. The following table sets forth Embark's results of operations data
for the periods presented (in thousands):

Comparisons for the years ended December 31, 2021 and 2020:



The following table sets forth Embark's statement of operations for the years
ended December 31, 2021 and 2020 and the dollar and percentage change between
the two periods:

                                                          Years Ended
                                                         December 31,                $             %
                                                      2021           2020         Change         Change
Operating expenses:
Research and development                           $    55,276    $   18,831    $    36,445           194 %
General and administrative                              48,387        

3,595         44,792         1,246 %
Total operating expenses                               103,663        22,426         81,237           362 %
Loss from operations                                 (103,663)      (22,426)       (81,237)           362 %
Other income (expense):
Other income (expense)                                (12,485)          

107       (12,592)      (11,768) %
Interest income                                             98           788          (690)          (88) %
Interest expense                                       (8,163)             -        (8,163)            NM
Loss before provision for income taxes               (124,213)      (21,531)      (102,682)           477 %
Provision for income taxes                                   -            

-              -           N.M
Net loss                                           $ (124,213)    $ (21,531)    $ (102,682)           477 %

N.M. - Percentage change not meaningful



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Research and Development Expenses



Research and development expenses increased by $36.4 million in the year ended
December 31, 2021, compared to the year ended December 31, 2020. The increase
was primarily due to $25.9 million increase in higher headcount expense,
including stock-based compensation, salaries and employee benefits, related to
the continued expansion of Embark's research and development team, a $4.0
million increase in research and development costs, a $1.0 million increase in
administrative expenses related to research and development activities, a $0.9
million increase in technical infrastructure costs, a $0.6 million increase in
prototype truck hardware expense, a $0.5 million increase in fleet operations
cost, a $0.5 million increase in travel and events expense, a $0.4 million
increase in recruiting expenses, a $0.1 million increase in computers and office
equipment and a $2.3 million increase in overhead allocation.

General and Administrative Expenses


General and administrative expenses increased by $44.8 million in the year ended
December 31, 2021 compared to the year ended December 31, 2020. The increase was
primarily due to $36.2 million increase in higher headcount expense, including
stock-based compensation, salaries and employee benefits, related to growth in
the business, increase in administrative expenses of $7.0 million, increase of
$0.6 million in rent, increase of $0.8 million in insurance expenses, increase
of $0.7 million in travel and events, increase in marketing of $0.6 million,
increase in computer and office equipment of $0.3 million, increase in
recruiting expenses of $0.5 million, increase in office expenses of $0.3
million, increase in policy expenses of $0.1 million, offset by a $2.3 million
overhead allocation.

Other Income (Expense)

Other income (expense) decreased $12.6 million in the year ended December 31,
2021 compared to the year ended December 31, 2020. The decrease was primarily
due to the increase in the estimated fair value of Public, Private, Working
Capital and FPA Warrants of $8.2 million and the increase in the fair market
value of the Company's derivative liability of $4.3 million, which was converted
to Embark Class A common stock upon consummation of the Business Combination.

Interest Income


Interest income decreased $0.7 million in the year ended December 31, 2021
compared to the year ended December 31, 2020. The decrease in interest income
was driven by a decrease in the average investment balance during fiscal year
2021 compared to fiscal year 2020, as well as a lower interest environment

in
fiscal year 2021.

Interest Expense


Interest expense decreased $8.2 million in the year ended December 31, 2021
compared to the year ended December 31, 2020. The decrease in interest expense
is driven by the extinguishment of the Company's Convertible Note in connection
with the Business Combination.

Liquidity and Capital Resources

Since Embark's inception, Embark has financed Embark's operations primarily through the sale of shares of common stock and preferred stock.


In connection with the Business Combination, a convertible promissory note (the
"Convertible Note") issued by Embark in April 2021 was converted in exchange for
3,774,951 shares of Embark Class A common stock. As of December 31, 2021, Embark
had outstanding debt of $1.1 million from a financing of freight trucks that
Embark utilizes for research and development. Embark makes monthly installment
payments on truck financing. The truck financings have varying maturities
between March 2023 and January 2027. Embark's principal uses of cash in recent
periods have been to fund Embark's operations, invest in research and
development, repay borrowings, and make investments in accordance with Embark's
investments policy.

Embark believes existing cash and other components of working capital will be
sufficient to meet Embark's needs for at least the next 12 months. Embark's
long-term capital requirements will depend on many factors including timing and
extent of spending to support research and development efforts as well as
general and administrative activities for the business. Embark may in the future
enter into arrangements to acquire or invest in related products, technologies,
software and services, and Embark may need to seek

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additional equity or debt financing, which may not be available on terms acceptable to Embark. As of December 31, 2021, there were future minimum lease payments of $27.0 million.



Embark currently transports shipments using its research and development truck
fleet, demonstrating proof of concept and paving the way for commercialization
and revenue generating operations in the future. However, Embark has not earned
any revenue to date, and has incurred net losses of $21.5 million and $124.2
million for the years ended December 31, 2020 and 2021, respectively. To the
extent Embark is unable to commercialize its technology as expected, its
liquidity may be negatively impacted.

Embark'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. Demonstrating ongoing technical progress will enable Embark to
obtain funds from outside sources of financing, including financing from equity
interest investors and borrow funds to fund its general operations, research and
development activities and capital expenditures.

The following table shows Embark's cash flows from operating activities, investing activities and financing activities for the stated periods:



                                                           Years Ended
                                                          December 31,
                                                         2021         2020
Net cash used in operating activities                $ (64,909)  $

(19,130)


Net cash provided by investing activities            $   49,533  $

20,416

Net cash provided by (used in) financing activities $ 268,936 $ (154)




Operating Activities

Net cash used in operating activities for the year ended December 31, 2021 was
$64.9 million, an increase of $45.8 million from $19.1 million for the year
ended December 31, 2020. The increase was primarily due to an increase of $102.7
million net loss for the year ended December 31, 2021 compared to the year ended
December 31, 2020. This was partially offset by $67.8 million of non-cash
adjustments to net loss, including depreciation and amortization, change in fair
value of derivative liability, as well as stock-based compensation, and $10.9
million net cash reduction by changes in Embark's operating assets and
liabilities, which was primarily attributable to accounts payable, accrued
expenses and other current liabilities.

Investing Activities



Net cash provided by investing activities for the year ended December 31, 2021
was $49.5 million, an increase of $29.1 million from $20.4 million for the year
ended December 31, 2020. The increase was primarily due to a decrease in
purchases of marketable securities of $52.4 million, offset by a $21.0 million
decrease in proceeds received from maturities of investments, an increase in
purchase of property, equipment, and software of $1.2 million, and an increase
of $1.1 million in deposits for trucks.

Financing Activities



Net cash provided by financing activities for the year ended December 31, 2021
was $268.9 million compared to $0.2 million for the year ended December 31,
2020. The increase of $269.1 million was primarily due to proceeds received

from
the Business Combination.

Financing Arrangements

Convertible note

On April 16, 2021, we issued the Convertible Note with a principal amount of
$25.0 million resulting in net proceeds of $16.8 million, after $8.2 million of
debt discount attributable to the conversion and redemption features. The
Convertible Note had a stated interest rate of 10% with the unpaid principal and
accrued interest being due upon maturity at April 2022. The Convertible Note did
not contain any voluntary prepayment clause unless consented by the note holder,
as defined in the agreement. In connection with the Business Combination, the
Convertible Note was extinguished and converted in exchange for 3,774,951 shares
of our Class A common stock.

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Notes Payable for Equipment Purchases



On January 5, 2021 and February 18, 2021, Embark entered into financing
agreements to finance the purchase of trucks that Embark utilizes for research
and development. The financing agreements consisted of a loan of $0.1 million
and $0.1 million at an interest rate equal to 6.99% and 7.50% per annum, with a
maturity date of April 1, 2026 and January 19, 2027, respectively. Embark makes
equal monthly installment payments over the term of each financing arrangement
which are allocated between interest and principal.

Embark entered into financing agreements on February 19, 2018, January 28, 2019,
and May 23, 2019 to finance the purchase of trucks that Embark utilizes for
research and development. The financing agreements consisted of loans of
$0.3 million, $0.4 million, and $0.5 million at an interest rate equal to 8.25%
per annum, with a maturity date of March 5th, 2023, February 14, 2024, and
June 12, 2024, respectively. Embark makes equal monthly installment payments
over the term of each financing arrangement which are allocated between interest
and principal.

On August 2, 2016, Embark entered into a financing agreement consisting of a
loan of $0.1 million at an interest rate equal to 12.5% per annum, which matured
on August 9, 2020. Embark made equal monthly installment payments over the term
which was allocated between interest and principal.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of December 31, 2021.

Critical Accounting Policies and Significant Management Estimates



Embark prepares its financial statements in accordance with GAAP. The
preparation of financial statements also requires Embark to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
costs and expenses and related disclosures. Embark bases Embark's estimates on
historical experience and on various other assumptions that Embark believes to
be reasonable under the circumstances. Actual results could differ significantly
from the estimates made by Embark's management. To the extent that there are
differences between Embark's estimates and actual results, Embark's future
financial statement presentation, financial condition, results of operations and
cash flows will be affected. Embark believes that the accounting policies
discussed below are critical to understanding Embark's historical and future
performance, as these policies relate to the more significant areas involving
Embark management's judgments and estimates. Critical accounting policies and
estimates are those that Embark considers the most important to the portrayal of
Embark's financial condition and results of operations because they require
Embark's most difficult, subjective or complex judgments, often as a result of
the need to make estimates about the effects of matters that are inherently
uncertain.

Embark believes that the accounting policies described below involve a
significant degree of judgment and complexity. Accordingly, Embark believes
these are the most critical to aid in fully understanding and evaluating
Embark's financial condition and results of operations. For further information,
see Note 2 to Embark's financial statements included elsewhere in this Annual
Report on Form 10-K.

Stock-Based Compensation Expense

Stock Options



Embark estimates the fair value of stock options granted to employees and
directors using the Black-Scholes option-pricing model. The grant date fair
value of stock options is recognized as compensation expense on a straight-line
basis over the requisite service period. Forfeitures are accounted for when they
occur.

The Black-Scholes model considers several variables and assumptions in estimating the fair value of stock-based awards. These variables include:

Fair value of common stock: Because Embark's common stock was not publicly

traded prior to the closing of the Business Combination, Embark estimated the

? fair value of Embark's common stock in 2020 and 2021. Embark's board of

directors considers numerous objective and subjective factors to determine the

fair value of Embark's common stock as discussed in "- Common Stock Valuations"


   below.


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   Expected Term:  The expected term represents the period that Embark's

stock-based awards are expected to be outstanding and was calculated as the

? average of the option vesting and contractual terms, based on the simplified


   method. The simplified method deems the term to be the average of the
   time-to-vesting and the contractual life of the options.

Expected Volatility: Because Embark does not have a trading history of its

common stock, the expected volatility was derived from the average historical

? stock volatilities of several public companies within Embark's industry that

Embark considers to be comparable to its business over a period equivalent to

the expected term of the stock option grants.

Risk-Free Interest Rate: The risk-free interest rate is based on the implied

? yield available on U.S. Treasury zero-coupon issues, with the remaining term

equivalent to the expected term.

Expected Dividend: Embark has not issued any dividends in its history and does

? not expect to issue dividends over the life of the options and, therefore, has

estimated the dividend yield to be zero.

Restricted Stock Units



We grant Restricted Stock Units ("RSUs") that vest based on a service and
performance condition. Restricted stock awards issued with these conditions vest
based on the occurrence of a defined liquidity event and an explicit service
period. We recognize compensation expense for RSU awards based on the fair value
of the award and on a graded vesting basis over the requisite service period.
Our board of directors determines the fair value of RSUs based on the price of
our common stock on the date of grant.

Performance Stock Units



We grant performance-based RSUs ("PSUs"), that vest upon satisfaction of certain
market and performance-based conditions. The PSUs market conditions are based on
the Company achieving six different valuation tranches, as derived from the
Company's stock price, that can be achieved over ten years in relation to the
pre-money valuation prior to the Business Combination. The vesting of the PSUs
performance condition can be achieved on the occurrence of a defined liquidity
event. For PSU awards, the Company uses the graded vesting to allocate
compensation expense, as the PSU awards are associated with market conditions,
over the holder's derived service period, and estimates the fair value of the
PSU awards using the Monte Carlo simulation. The Company accounts for the effect
of forfeitures as they occur.

Common Stock Valuations

Prior to the closing of the Business Combination, given the absence of a public
trading market for Embark's common stock and in accordance with the American
Institute of Certified Public Accountants Accounting and Valuation Guide,
Valuation of Privately Held Company Equity Securities Issued as Compensation,
Embark's board of directors determined the best estimate of fair value of
Embark's common stock, exercising reasonable judgment and considering numerous
objective and subjective factors. These factors include:

? contemporaneous third-party valuations of Embark's common stock;

? the prices at which Embark or other holders sold Embark's common stock to

outside investors in arms-length transactions;

? Embark's financial condition, results of operations, and capital resources;




 ? the industry outlook;

? the fact that option awards involve rights in illiquid securities in a private

company;

? the valuation of comparable companies;

? the lack of marketability of Embark's common stock;

? the likelihood of achieving a liquidity event, such as an initial public

offering or a sale of Embark given prevailing market conditions;




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? the history and nature of Embark's business, industry trends, and competitive

environment; and

? general economic outlook including economic growth, inflation, unemployment,

interest rate environment and global economic trends.




Embark's board of directors determined the fair value of Embark's common stock
by first determining enterprise value of Embark's business, and then using that
to derive a per share value of Embark's common stock.

The enterprise value of Embark's business was estimated by considering several
factors, including estimates using the cost approach, market approach, and the
income approach. The cost approach estimates the fair market value of an
organization by utilizing the balance sheet to take the total fair market value
of assets minus the fair market value of liabilities. The market approach was
estimated based on the projected value of comparable public companies in a
similar line of business that are publicly traded. The income approach estimates
the enterprise value of the business based on the cash flows that it expects to
generate over its remaining life. These future cash flows are discounted to
their present values using a rate of return appropriate for the risk of
achieving the business' projected cash flows. The present value of the estimated
cash flows is then added to the present value equivalent of the residual value
of the business at the end of the projected period to calculate the business
enterprise value. In addition to the three approaches described above, Embark
factors in recent arms-length transactions such as the closest round of equity
financing preceding the date of valuation.

After determining Embark's enterprise value, an allocation of enterprise value
is made to Embark's various classes of equity to determine the value of common
stock. In allocating the enterprise value of Embark's business to common stock
through October 2020, Embark used the option pricing method ("OPM"), whereas
after October 2020, Embark used a combination of OPM and probability weighted
expected return method ("PWERM"). PWERM involves a forward-looking analysis of
the possible future outcomes of the enterprise. This method is particularly
useful when discrete future outcomes can be predicted at a relatively high level
of confidence with a probability distribution. Discrete future outcomes
considered under PWERM include an acquisition by a Special Purpose Acquisition
Company ("SPAC") of Embark's common stock, as well as other market-based
outcomes. Determining the fair value of the enterprise using PWERM requires
Embark to develop assumptions and estimates for both the probability of a
liquidity event and stay private outcomes, as well as the values Embark expects
those outcomes could yield.

A discount for lack of marketability ("DLOM") is applied to arrive at a fair
value of Embark's common stock. A DLOM is meant to account for the lack of
marketability of a stock that is not traded on public exchanges. In making the
final determination of common stock value, consideration is also given to recent
sales of common stock.

Application of these approaches involves the use of estimates, judgments and
assumptions that are highly complex and subjective, such as those regarding
Embark's expected future revenue, expenses and future cash flows, discount
rates, market multiples, the selection of comparable companies and the
probability of possible future events. Changes in any or all of these estimates
and assumptions, or the relationships between those assumptions, impact Embark's
valuations as of each valuation date and may have a material impact on the
valuation of Embark's common stock.

For valuations after the completion of the Business Combination, Embark's board
of directors the fair value of each share of underlying common stock based on
the closing price of Embark's common stock as reported on the date of grant.

Warrants



The Partner Development Program warrants were classified as equity on Embark's
balance sheet as the underlying shares of common stock are not considered to be
mandatorily redeemable, do not include an obligation of Embark to repurchase its
equity shares or to issue a variable number of equity shares. The warrants are
measured at fair value on the issuance date. The fair value of the underlying
common stock was measured using a Black-Scholes ("BSM") option-pricing model.
The following assumptions and inputs were utilized within the BSM option-pricing
model: exercise price, fair value of the underlying common stock, risk-free
interest rate, expected term, expected dividend yield and expected volatility,
which are all determined in the same manner with Embark's stock options as
detailed in the above "Stock-Based Compensation Expense" section. Pursuant to
the original terms of the warrant agreement, upon the completion of the Merger,
all outstanding Partner Development Program warrants were extinguished and
exercised in exchange for restricted common stock. The common stock is subject
to the same vesting conditions existing under the warrant agreement such that
unvested common stock is subject to forfeiture if the holder terminates its
services to Embark prior to vesting.

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The Public, Private, FPA and Working Capital warrants are recognized as
liabilities on Embark's balance sheet. Accordingly, we recognize the warrant
instruments as liabilities at fair value and adjust the instruments to fair
value at each reporting period. The liabilities are subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is
recognized in our statement of operations. The initial fair value of the Public,
Private, FPA and Working Capital warrants have been measured at fair value based
on observable listed prices for such public warrants. The fair value of the
Public and FPA warrants as of December 31, 2021 are based on observable listed
prices for such public warrants. The fair value of the Private and Working
Capital warrants as of December 31, 2021 are determined using the Black-Scholes
option valuation model.

Capitalization of Internally Developed Software



Embark capitalizes certain internal use software development costs associated
with creating and enhancing internal use software related to Embark's product
suite and technology infrastructure. These costs include personnel and related
employee benefits expenses for employees who are directly associated with and
who devote time to software projects. Embark expenses software development costs
that do not meet the criteria for capitalization as incurred and records them in
research and development expenses in Embark's statements of operations.

Software development activities generally consist of three stages: (i) the
planning stage; (ii) the application and infrastructure development stage; and
(iii) the post implementation stage. Costs incurred in the planning and post
implementation stages of software development, including costs associated with
the post configuration training and repairs and maintenance of the developed
technologies, are expensed as incurred. Embark capitalizes costs associated with
software developed for internal use when both the preliminary project stage is
completed and management has authorized further funding for the completion of
the project. Embark capitalizes costs incurred in the application and
infrastructure development stages, including significant enhancements and
upgrades. Capitalization ends once a project is substantially complete and the
software and technologies are ready for their intended purpose. Embark will
amortize internal use software development costs using a straight-line method
over their estimated useful life commencing when the software is ready for its
intended use. Embark estimates a useful life of three years for technology
infrastructure related software. As Embark's product suite is not yet ready for
its intended use, amortization has not yet begun.

All capitalized software requires the ongoing assessment for recoverability which requires judgment by management with respect to certain external factors including, but not limited to, anticipated future gross revenues, estimated economic useful life, and changes in competing software technologies.

New Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, the financial statements included elsewhere in this Annual Report on Form 10-K.

JOBS Act Accounting Election


Embark is an emerging growth company, as defined in the JOBS Act. Under the JOBS
Act, emerging growth companies can delay adopting new or revised accounting
standards until such time as those standards apply to private companies. Embark
intends to elect to adopt new or revised accounting standards under private
company adoption timelines. Accordingly, the timing of Embark's adoption of new
or revised accounting standards will not be the same as other public companies
that are not emerging growth companies or that have opted out of using such
extended transition period. See Note 1 to the financial statements for further
discussion.

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