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EMBARK ALERT: Bragar Eagel & Squire, P.C. is Investigating Embark Technology, Inc. on Behalf of Long-Term Stockholders and Encourages Investors to Contact the Firm

NEW YORK, Dec. 19, 2022 (GLOBE NEWSWIRE) -- Bragar Eagel & Squire, P.C., a nationally recognized shareholder rights law firm, is investigating potential claims against Embark Technology, Inc. (NASDAQ: EMBK) on behalf of long-term stockholders following a class action complaint that was filed against Embark on December 13, 2022 with a Class Period from January 15, 2021 through January 5, 2022. Our investigation concerns whether the board of directors of Embark have breached their fiduciary duties to the company.

Headquartered in San Francisco, California, Embark is a Delaware corporation that builds software for carriers to enable autonomous trucks within their fleets. The autonomous vehicle company offers software as a service product ecosystem, such as Embark driver, Embark universal interface, and Embark guardian.

Originally, the Company was a special purpose acquisition company (“SPAC”) called Northern Genesis Acquisition Corp. II (“NGA”), and its purpose for forming was to effect a merger, stock exchange, acquisition, reorganization, or similar business combination with one or more businesses. It had its initial public offering (“IPO”) on January 15, 2021.

The Company filed with the SEC its prospectus in connection with the IPO, where it reassured the stockholders that the Company’s management team had significant experience identifying, evaluating and acquiring businesses, and would conduct a sufficient due diligence review before making any such determinations.

On June 22, 2021, the Company filed a merger agreement with the SEC where it stated that it would be merging with Embark Trucks, a Delaware Corporation (“Legacy Embark”). Legacy Embark was a startup company that developed self-driving truck technology designed for freight and logistic services.

On June 23, 2021, the Company and Legacy Embark issued a joint press release where the Company announced that it would merge with Legacy Embark (the “Merger”). The Company ensured that it would work with Legacy Embark and make sure it transitions to a “great public company.”

On July 2, 2021, the Company filed a Form S-4 registration statement with the SEC that became effective on October 18, 2021 (the “Registration Statement”). Included in the Registration Statement was a preliminary proxy statement and prospectus for a special meeting with Company shareholders to vote on the Merger (the “Preliminary Proxy Statement”). The Preliminary Proxy Statement was filed as definitive on October 19, 2021. The Preliminary Proxy Statement contained NGA’s condensed financial statements for the three and six months ending on June 30, 2021 and included materially false and misleading statements.

The Company sent the Preliminary Proxy Statement to its shareholders on October 6, 2021 for the shareholders to approve the Merger proposed during a November 9, 2021 special meeting. The Merger was subsequently approved by NGA shareholders during the special meeting.

On November 10, 2021, the Company merged with Legacy Embark and changed its name from “Northern Genesis Acquisition Corp. II” to “Embark Technology, Inc.”

Before the market opened on the same day that the Merger closed, the Company filed a Form 10-Q with the SEC on November 10, 2021 for the quarter ended September 30, 2021 (“3Q21”). In the 3Q21, the Company disclosed a “revision” to its previously issued financial statements, admitting that there was a “reclassification error” for the statements as of September 30, 2021. The Company noted that the errors were related to the temporary equity and permanent equity for stockholders.

However, the reclassification error was more significant than initially presented. The error ended up requiring the Company to disclose more than it did in the partial disclosure in the 3Q21. It should have included the impact of the error on the Company’s financials as of and for the three and six months ended June 30, 2021, or on the Company’s financials as of for the three and nine months ended September 30, 2021.

Moreover, the disclosure failed to state that the errors would require the Company to issue a restatement in the future. The disclosure also failed to address that the Company violated U.S. Generally Accepted Accounting Principles (“GAAP”), which have been around since 2009. In addition, the Company did not maintain effective internal controls over financial reporting.

The Company filed a Form 8-K with the SEC on November 17, 2021 (“November 2021 8- K”). The November 2021 8-K disclosed that the Company’s “audited balance sheet as of January 15, 2021 and the Company’s unaudited financial statements as of March 31, 2021 and for the three months ended March 31, 2021 should no longer be relied upon.” The Company admitted that those statements would need to be restated and were unreliable because of the reclassification of all the Company’s public shares as temporary equity.

As a result of this news, Embark’s share price fell to $7.17 per share at the close of November 18, 2021, falling $0.72 per share (or approximately 9%).

On November 24, 2021, the Company filed an amended Form 10-Q/A with the SEC to its 3Q21 (“Amended 3Q21”). In the Amended 3Q21, the Company announced that it issued a restatement for its condensed financial statements as of January 15, 2021, as of and for the three months ended March 31, 2021, as of and for the three and six months ended June 30, 2021, and for three and nine months ended September 30, 2021 (the “Restatement”). The Restatement was due to the Company’s accounting error made in classifying the redeemable common stock.

As a SPAC, the Company had to maintain its stockholders’ equity above $5,000,000, as the Company could only complete its Merger if the Company had net tangible assets of at least $5,000,001 according to the Company’s charter. In order to continue to exist as a SPAC company, the Company incorrectly classified some of its public shares as “shares not subject to redemption.”

Importantly, at the time when the financial statements were issued, the misclassification of the shares was completely in error according to GAAP. GAAP provides guidance which SPACs must consider in determining whether to classify shares issued in the legal form of equity if they are redeemable at: (a) a fixed/determinable price on a fixed/determinable date; (b) the holder’s option; or (c) when an event outside the control of the issuer occurs. After re-evaluating, Company’s management determined that the public shares included a set of provisions that required the Company to reclassify the public shares as temporary equity, despite that the Company was required to hold a threshold of $5,000,000 in order to complete the Merger.

Due to the improper classification, the Company issued the Restatement to disclose the material errors made in the Company’s prior financial statements. The material errors were associated with the reported stockholders’ equity, which was essential to determining if the Company could continue to operate as a SPAC as a public company. The Company also had to adjust the reported earnings per share (“EPS”) and other metrics that impacted the additional paid in capital with stockholders’ equity on the balance sheet as a result of the Company’s material errors.

As a result of this news, Embark’s shares fell to a close at $8.01 per share on November 24, 2021, falling $0.51 (or approximately 6%) from the previous close.

The misclassification resulted in the Company’s financial statements reporting the incorrect EPS and were, therefore, critical to investors. Furthermore, the errors resulted in the Company incorrectly reporting other material financial information. Such information is significant and essential facts that investors consider before deciding to invest into a Company and it is crucial for this information to be correctly reported. The basis on which the SPAC was continuing to operate was also misstated on the financial statements.

EPS is an essential metric to determine the health and profitability of a corporation. EPS is a financial ratio that calculates how much profit the company is generating per share, and it informs the shareholders how much money they would receive if the company were to be liquidated.

On January 6, 2022, soon after the Merger, The Bear Cave published a report titled “Problems at Embark Technology” (the “Bear Cave Report”). The Bear Cave Report stated that “Embark appears to lack true economic substance,” and that the “company holds no patents, has only a dozen or so test trucks, and may be more bark than bite.”

During the Relevant Period, the Individual Defendants breached their fiduciary duties by personally making and/or causing the Company to make a series of materially false and misleading statements about Embark. Specifically, they willfully or recklessly made and/or caused the Company to make to the investing public certain statements that were materially false and misleading in the Registration Statement and documents related thereto, which contained material errors that required the Company to issue the Restatement for such financial statements to be in accordance with GAAP, and failed to disclose, inter alia, that: (1) the error had a negative impact on the Company’s financials as of and for the three and six months ended June 30, 2021, or as of and for the three and nine months ended September 30, 2021; (2) treating this error as a restatement instead of a revision would result in the Company making adjustments to, and the reissuance of, the amounts reflected in the prior financial statements, as compared to making a revision only to the January 15, 2021 financial statements; (3) the Company violated GAAP relating to the accounting of temporary and permanent equity, principles which had been in practice since 2009; and (4) the Company failed to maintain adequate internal controls. As a result, Embark’s public statements were materially false and misleading at all relevant times.

In addition to this misconduct, the NGA Defendants breached their fiduciary duties by causing the Company to acquire Legacy Embark through the Merger, despite that: (1) Legacy Embark did not have patents or significant testing trucks; (2) Legacy Embark was working with autonomous driving technology, which is tremendously complex, and faced significant regulatory and technological challenges; and (3) Legacy Embark had an unproven business model with minimal operating experience. As such, the Merger was unfavorable to the NGA shareholders (the “Overpayment Misconduct”).

The Individual Defendants further made and/or caused the Company to make material accounting errors in its financial reports during the False & Misleading Statements Relevant Period and failed to correct and/or caused the Company to fail to correct these false and misleading statements and omissions of material fact until the Company was forced to restate its financial reports, rendering them personally liable to the Company for breaching their fiduciary duties.

Additionally, in breach of their fiduciary duties, the Individual Defendants willfully or recklessly caused the Company to fail to maintain adequate internal controls. The Company’s Amended 3Q21 admitted that “[t]he Company previously identified a material weakness in internal controls related to the accounting for warrants issued in connection with our initial public offering.” As a result of the restatement described in the First Amendment on Form 10-Q/A, the Company had concluded there was a material weakness in the Company’s internal control over financial reporting at the time the abovementioned financial statements were issued, and its disclosure controls and procedures were not effective at the time such financial statements were issued.

The Individual Defendants’ misconduct has subjected the Company, its current Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), its former CEO and CFO, and former and current members of its Board of Directors (“Board”) to being named as defendants in a federal securities fraud class action lawsuit pending in the United States District Court for the Northern District of California (the “Securities Class Action”).

In light of the breaches of fiduciary duty engaged in by the Individual Defendants, most of whom are the Company’s current directors, their collective engagement in fraud, the substantial likelihood of the directors’ liability in this derivative action and Defendants Rodrigues, Hawwa, and Roberston’s liability in the Securities Class Action, their being beholden to each other, their longstanding business and personal relationships with each other, and their not being disinterested and/or independent directors, a majority of Embark’s Board cannot consider a demand to commence litigation against themselves and the other Individual Defendants on behalf of the Company with the requisite level of disinterestedness and independence.

If you are a long-term stockholder of Embark, have information, would like to learn more about these claims, or have any questions concerning this announcement or your rights or interests with respect to these matters, please contact Brandon Walker or Melissa Fortunato by email at, by telephone at (212) 355-4648, or by filling out this contact form. There is no cost or obligation to you.

About Bragar Eagel & Squire, P.C.:

Bragar Eagel & Squire, P.C. is a nationally recognized law firm with offices in New York and California. The firm represents individual and institutional investors in commercial, securities, derivative, and other complex litigation in state and federal courts across the country. For more information about the firm, please visit Attorney advertising. Prior results do not guarantee similar outcomes.

Contact Information:

Bragar Eagel & Squire, P.C.
Brandon Walker, Esq.
Melissa Fortunato, Esq.
(212) 355-4648

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