Business context and reporting period
This is Virgin Group Acquisition Corp. II’s (VGAC II) Form 10-K for the fiscal year ended December 31, 2021—not an operating-company 10-K for Grove Collaborative Holdings, Inc. VGAC II was a blank-check company with no operating revenue or operating business during the period. It entered into a merger agreement with Grove Collaborative, Inc. on December 7, 2021; the proposed combination was pending at year-end.
Grove is described in the filing as a digital-first consumer-products company focused on natural home and personal-care products, with direct-to-consumer and Target sales. The filing gives selected business context, including more than 1.5 million active customers, but does not include Grove’s financial statements or clearly provide its revenue, profit, cash flow, debt, or liquidity figures.
Financial results and liquidity
- Results, inception through December 31, 2021: Net income was $2.70 million. This comprised $30,526 of trust-account interest and a $6.81 million noncash gain from changes in warrant fair value, offset by $3.57 million of formation and operating costs and $570,496 of offering costs allocated to warrants. The filing reports no operating revenue.
- Cash flow: Net cash used in operating activities was $1.92 million. Cash outside the trust account was $507,233 at year-end.
- Assets and liquidity: Total assets were $403.81 million, including $402.53 million held in the trust account. Working capital deficit was $2.28 million.
- Liabilities and debt: Total liabilities were $30.85 million, including $13.34 million of derivative warrant liabilities, $14.09 million of deferred underwriting discount, and a $1.00 million sponsor promissory note. The company reported no long-term debt or off-balance-sheet financing arrangements.
- Equity and redemption: All 40.25 million public Class A shares were classified as temporary equity and carried at a redemption value of $402.50 million. The company reported a $29.54 million shareholders’ deficit.
- Margins and comparable period: Operating or gross margins are not meaningful for this pre-combination SPAC, and the filing provides no prior-year comparable results; the reported results cover the period from incorporation on January 13, 2021 through year-end.
Material changes and proposed business combination
- VGAC II raised $402.5 million for its trust account through its IPO and full over-allotment exercise; it also sold 6.7 million private-placement warrants for $10.05 million gross proceeds.
- The merger agreement values Grove at an implied equity value of $1.4 billion. A concurrent PIPE was agreed for 8,707,500 shares at $10 each, or $87.075 million gross proceeds.
- Closing was expected in late Q1 or early Q2 2022, subject to shareholder approvals and customary conditions. Grove’s stated closing condition included at least $175 million in combined trust-account and PIPE cash proceeds after redemptions. VGAC II also had to retain at least $5,000,001 of net tangible assets.
- The transaction contemplated a dual-class structure: Class A with one vote per share and Class B with ten votes per share, subject to specified conversion provisions. Grove equityholders were to receive Class B shares and potential earnout shares; 14 million Grove earnout shares were tied to share-price thresholds of $12.50 and $15.00.
- The filing describes Grove’s sustainability goals and retail progress, but these are company descriptions and targets, not independently established financial forecasts.
Outlook, risks, contingencies, and unusual items
- Management expected available working capital and borrowing capacity to fund needs through the earlier of a business combination or one year from filing. The sponsor was not obligated to provide further loans. The company’s deadline to complete a business combination was March 25, 2023; failure to do so would generally require liquidation and redemption of public shares, while warrants would expire worthless.
- The merger could fail to close because of approvals, closing conditions, redemptions, financing, regulatory matters, or other specified events. Grove’s minimum-cash condition makes redemption levels particularly relevant.
- Warrants were classified as derivative liabilities and remeasured at fair value each reporting period. The resulting noncash gains or losses can materially affect reported earnings without corresponding operating cash flows.
- Management identified a material weakness in internal control over financial reporting involving complex financial instruments and the accounting classification of public shares. It concluded disclosure controls were ineffective at December 31, 2021 and said remediation was underway. The filing refers to a prior restatement; the independent auditor gave an unqualified opinion on the financial statements but did not audit internal-control effectiveness.
- Other risks include potential claims against the trust account, the sponsor’s ability to meet its indemnity obligations, conflicts of interest among sponsor and management affiliates, dilution from equity and warrants, and COVID-19-related uncertainty. The filing reports no material pending litigation.
Most important facts for investors to verify
- Confirm the correct issuer and filing: this 10-K reports VGAC II, not Grove Collaborative Holdings’ post-combination operating results.
- Check subsequent filings for whether and when the merger closed, actual redemptions and cash proceeds, and whether the $175 million minimum-cash condition was met.
- Review the cited restatement and remediation disclosures, and assess whether the material weakness was subsequently remediated.
- Reconcile the reported warrant fair-value gain with cash generation; the gain was noncash, and the company had no operating revenue.
- Review the merger’s dilution, voting-control, earnout, PIPE, and warrant terms, along with Grove’s actual financial statements and any later guidance before drawing conclusions about the combined company.