Filing identity and business context
Important: Although the request identifies Grove Collaborative Holdings, Inc., this is Virgin Group Acquisition Corp. II’s Form 10-Q, filed May 16, 2022, for the quarter ended March 31, 2022. It reports the SPAC’s pre-combination finances, not Grove’s operating results. The companies had agreed to a proposed business combination; the SPAC had not yet begun operating or generating operating revenue.
Financial results and position
| Metric | Q1 2022 / March 31, 2022 | Comparable period / December 31, 2021 |
|---|---|---|
| Operating revenue | None | None |
| Net loss | $23.552 million; $0.47 per Class A and Class B share | $0.732 million loss for Jan. 13–Mar. 31, 2021; $0.06 per share |
| Operating costs | $1.008 million | $27,356 for inception-to-quarter-end 2021 period |
| Cash from operations | $(427,410) | $(5,000) for inception-to-quarter-end 2021 period |
| Cash outside trust | $79,823 | $507,233 |
| Trust investments | $402.566 million | $402.531 million |
| Total assets | $403.262 million | $403.808 million |
| Current liabilities | $3.847 million | $3.421 million |
| Total liabilities | $53.854 million | $30.849 million |
| Related-party promissory note | $1.000 million outstanding | $1.000 million outstanding |
Working capital deficit was $3.151 million. The $402.5 million of redeemable public shares is presented as temporary equity, separate from liabilities. No operating margin is applicable because the SPAC had no operating revenue. No conventional operating cash flow, profit margin, or business debt trend is provided.
Material changes, transaction, and outlook
- Net loss widened substantially from the 2021 inception-period loss. Q1 2022 included a $30.234 million initial charge for the backstop derivative liability, partly offset by a $7.654 million gain from changes in warrant fair value; these non-cash valuation items drove results more than operating costs.
- On March 31, 2022, the SPAC amended its merger agreement with Grove and entered a backstop agreement with a Sponsor affiliate. The affiliate committed $27.5 million for Grove shares and agreed to invest at closing an amount tied to the SPAC’s available cash, up to a stated $22.5 million framework. The agreement also includes potential additional shares and penny warrants, which create dilution and valuation exposure.
- Management expected the business combination to close early in Q2 2022, subject to shareholder approval and other customary conditions. The SPAC had until March 25, 2023 to complete a combination; otherwise, it would be required to liquidate.
- Management said it believed working capital and borrowing capacity would meet needs through the earlier of a business combination or one year from filing, but also disclosed substantial doubt about going concern because of the deadline and possible liquidity shortfall.
- Cash outside the trust was limited. The Sponsor amended the working-capital note after quarter-end from $1.0 million to $1.5 million, and the SPAC received an additional $500,000 on April 14, 2022.
Risks, controls, and contingencies
- Management reported a material weakness in internal control over financial reporting involving complex financial instruments and share classification; disclosure controls were deemed ineffective as of March 31, 2022. Remediation was underway, with no assurance it would be sufficient.
- The filing identifies uncertainty from the COVID-19 pandemic and Russia-Ukraine war, including potential effects on markets and the search or transaction process. The impact was not readily determinable.
- The filing discusses proposed SEC SPAC rules that could increase transaction disclosure, cost, timing, and liability risks if adopted.
- The $14.088 million deferred underwriting fee is payable only if a business combination closes. If no combination is completed by the deadline, public shares are subject to redemption and warrants expire worthless.
- No legal proceedings were reported. The filing states there were no off-balance-sheet financing arrangements.
Most important facts for investors to verify
- Confirm the issuer: this is Virgin Group Acquisition Corp. II’s SPAC filing, not Grove Collaborative Holdings, Inc.’s operating-company quarterly report.
- Review the final merger terms, closing status, shareholder redemptions, and cash available at transaction closing.
- Assess the backstop’s dilution, contingent share issuance, penny warrants, and the $30.234 million derivative valuation and assumptions.
- Monitor cash needs, related-party borrowing, the March 25, 2023 deadline, and management’s going-concern disclosure.
- Track remediation of the material weakness and any subsequent reporting or restatement developments.