10q10k10q10k.net

What changed in Grove Collaborative Holdings, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Grove Collaborative Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+434 added−516 removedSource: 10-K (2024-03-20) vs 10-K (2023-03-16)

Top changes in Grove Collaborative Holdings, Inc.'s 2023 10-K

434 paragraphs added · 516 removed · 330 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

75 edited+28 added−40 removed48 unchanged
Biggest changeCombined with our mission, we believe that our direct relationship with consumers gives us a durable competitive advantage in building the brands to lead that change. All our product innovation work leverages our three pillars of development: consumer centricity, efficacy, and sustainability. To date, we have leveraged this to build the largest DTC natural HPC brand in Grove Co.
Biggest changeThe shift away from plastic in Home and Personal Care (“HPC”) products is a clear consumer and industry trend. Combined with our mission, we believe that our Table of Content s direct relationship with consumers gives us a durable competitive advantage in building the brands to lead that change.
These brand relationships provide customers with breadth across product categories, while reinforcing Grove’s position as the destination for discovery and providing us with valuable data on customer purchasing behavior and preferences. We carry a wide range of clean and natural products within home, beauty and personal care, including products aimed at baby and pet care.
These brand relationships provide customers with breadth across product categories, while reinforcing Grove’s position as a destination for discovery and providing us with valuable data on customer purchasing behavior and preferences. We carry a wide range of clean and natural products within home, beauty and personal care, including products aimed at baby and pet care.
While the distribution of Grove Brand products through our omnichannel retail partners was not material to our financial results in 2021 or 2022, we expect retail expansion to be a significant driver of growth and revenue in future years. Supply Chain and Operations Freight Our freight strategy focuses on inbound and outbound transportation.
While the distribution of Grove Brand products through our omnichannel retail partners was not material to our financial results in 2021, 2022 or 2023, we expect retail expansion to be a significant driver of growth and revenue in future years. Supply Chain and Operations Freight Our freight strategy focuses on inbound and outbound transportation.
Since our inception, we have attracted and maintained strong relationships with a diverse group of clean and natural brands within home care, beauty and personal care, from emerging brands such as Aunt Fannie’s, Hello, and Terra Beauty Bars to globally recognized brands such as Mrs. Meyers, Seventh Generation, Method, Burt’s Bees and Babyganics.
Since our inception, we have attracted and maintained strong relationships with a diverse group of clean and natural brands within home care, beauty and personal care, from emerging brands such as Aunt Fannie’s, Hello, and Terra Beauty Bars to globally recognized brands such as Mrs. Meyers, Seventh Generation, Method, and Burt’s Bees.
The labeling of cosmetic products is also subject to the requirements of the FDCA, the Fair Packaging and Labeling Act, the Poison Prevention Packaging Act and other FDA regulations. Cosmetics are not subject to pre-market approval by the FDA, however certain ingredients, such as color additives, must be pre-authorized.
The labeling of cosmetic products is also subject to the requirements of the FDCA, the Fair Packaging and Labeling Act, the Poison Prevention Packaging Act and other FDA and state regulations. Cosmetics are not subject to pre-market approval by the FDA, however certain ingredients, such as color additives, must be pre-authorized.
While we continue to believe that there are long term growth trends in the zero-plastic waste industry and that we will be able to continue to grow our business in the long run, post-pandemic consumer behavior patterns and macro-economic factors will continue to be a risk to our business and will continue to adversely impact our financial performance for at least the near to medium term.
While we continue to believe that there are long term growth trends in the reduced-plastic waste industry and that we will be able to continue to grow our business in the long run, post-pandemic consumer behavior patterns and macro-economic factors will continue to be a risk to our business and will continue to adversely impact our financial performance for at least the near to medium term.
Customers can call, chat, text, or email our Grove Guides team to modify orders, ask about new products, request a refund, or learn more about our sustainability practices. All of our shipments are carbon neutral and all plastic sold is offset through our partnerships with rePurpose Global.
Customers can call, chat, text, or email our Grove Guides team to modify orders, ask about new products, request a refund, or learn more about our sustainability practices. All of our shipments are offset so they are carbon neutral and all plastic sold is offset through our partnerships with rePurpose Global.
Grove’s line of tree-free paper products is made entirely from Forest Stewardship Council certified bamboo, a sustainable and fast-regenerating fiber. Not only do Grove’s paper products offer a high-quality alternative to traditional paper products that contribute to deforestation, but they support our goals around forest protection.
Grove’s line of tree-free paper products is made entirely from Forest Stewardship Council certified bamboo, a sustainable and fast-regenerating fiber. Not only do Grove’s paper products offer a high-quality alternative to traditional paper products that contribute to deforestation, but they support our goals around forest conservation.
The Table of Contents EPA is authorized to take enforcement action to prevent the sale or distribution of non-compliant disinfectant products, including to prevent the sale or distribution of unregistered disinfectants and to prevent the sale or distribution of registered pesticides that are not permitted to make claims permitted by the terms of their registration, among other areas of non-compliance.
The EPA is authorized to take enforcement action to prevent the sale or distribution of non-compliant disinfectant products, including to prevent the sale or distribution of unregistered disinfectants and to prevent the sale or distribution of registered pesticides that are not permitted to make claims permitted by the terms of their registration, among other areas of non-compliance.
Our products offer low-risk, incremental revenue stemming from our DTC proof points and the benefit of association with our earth-friendly market positioning. Retailers understand the importance of offering consumers zero-waste options, and Grove’s assortment is a market leader.
Our products offer low-risk, incremental revenue stemming from our DTC proof points and the benefit of association with our earth-friendly market positioning. Retailers understand the importance of offering consumers reduced waste options, and Grove’s assortment is a market leader.
Item 1. Business Unless the context otherwise requires, all references in this subsection to the “Company,” “Grove,” “we,” “us” or “our” refer to Grove Collaborative Holdings, Inc. and its consolidated subsidiary following the Business Combination, other than certain historical information that refers to the business of Grove Collaborative, Inc. prior to the consummation of the Business Combination.
Item 1. Business Unless the context otherwise requires, all references in this subsection to the “Company,” “Grove,” “we,” “us” or “our” refer to Grove Collaborative Holdings, Inc. and its consolidated subsidiary following the Business Combination (as defined below), other than certain historical information that refers to the business of Grove Collaborative, Inc. prior to the consummation of the Business Combination.
On June 17, 2022, the Company's Class A common stock and public warrants began trading on (“NYSE”), under the symbols “GROV” and “GROV.WS,” respectively. Our Purpose We believe that the consumer products industry has contributed to the current environmental crises, specifically around the proliferation of single-use plastic.
On June 17, 2022, the Company's Class A common stock and public warrants began trading on the NYSE under the symbols “GROV” and “GROV.WS,” respectively. Our Purpose We believe that the consumer products industry has contributed to the current environmental crises, specifically the proliferation of single-use plastic.
Third-Party Brands In addition to Grove Brands, we offer a curated portfolio of third-party brands on our DTC platform, providing consumers with a selection of over 3,000 SKUs across more than 200 brands.
Third-Party Brands In addition to Grove Brands, we offer a curated portfolio of third-party brands on our DTC platform, providing consumers with a selection of over 3,000 products across more than 200 brands.
If the safety of the products or ingredients has not been adequately substantiated, a specific warning label is required. Other warnings may also be mandated pursuant to FDA regulations.
If the safety of the products or ingredients has not been adequately substantiated, a specific warning label is required. Other warnings may also be mandated pursuant to FDA and certain regulations.
MOCRA, when fully implemented by FDA, will require, among other things, the reporting to FDA of serious adverse events associated with the use of a cosmetic product in the United States, cosmetic facility registration and product listing, the maintenance of safety substantiation files and the establishment of good manufacturing practices for cosmetics.
MOCRA, when fully implemented by FDA, will require, among other things, the reporting to FDA of serious adverse events associated with the use of a cosmetic product in the United States, cosmetic facility registration and product listing, Table of Content s the maintenance of safety substantiation files and the establishment of good manufacturing practices for cosmetics.
In addition, Grove is a Certified B Corporation, meaning we adhere to rigorous third-party standards for prioritizing social, environmental and community wellbeing, and our performance is periodically independently audited against this framework. Value Proposition to Consumers We believe that sustainability should not require a tradeoff.
In addition, Grove is a Certified B Corporation, meaning we adhere to rigorous third-party standards for prioritizing social, environmental and community well-being, and our performance is periodically independently audited against this framework. Value Proposition to Consumers We believe that sustainability should not require a tradeoff.
We operate an online direct-to-consumer website and mobile application (“DTC platform”) where we both sell our Grove-owned brands (“Grove Brands”) and partner with other leading natural and mission-based CPG brands, providing consumers the best selection of curated products across many categories and brands.
We operate an online direct-to-consumer website and mobile application (“DTC platform”) where we both sell our Grove-owned brands (“Grove Brands”) and partner with other leading natural and mission-based CPG brands, providing consumers a selection of curated products across many categories and brands.
We can then improve the products where possible and relaunch or drop underperforming SKUs at relatively little cost. • We can launch products on our DTC platform at any point, without the constraints of retailer shelf reset timelines. • We have a deep understanding of our consumers based on historical purchasing behavior, demographic information, and the ways in which they engage with our community and platform.
We can then improve the products where possible and relaunch or drop underperforming products at relatively little cost. • We can launch products on our DTC platform at any point, without the constraints of retailer shelf reset timelines. • We have an understanding of our consumers based on historical purchasing behavior, demographic information, and the ways in which they engage with our community and platform.
The CCPA requires companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices, allows consumers to opt out of the sale of personal information with third parties and prohibits covered businesses from discriminating against California residents (for example, charging more for services) for exercising any of their rights under the CCPA.
The California Consumer Privacy Act (“CCPA”) requires companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices, allows consumers to opt out of the sale of personal information with third parties and prohibits covered businesses from discriminating against California residents (for example, charging more for services) for exercising any of their rights under the CCPA.
Many of these laws and regulations are still evolving and being tested in courts, and could be Table of Contents interpreted in ways that could harm our business.
Many of these laws and regulations are still evolving and being tested in courts, and could be interpreted in ways that could harm our business.
Government Regulation The vitamins/dietary supplements, foods, OTC drugs, cosmetic products and medical device products we sell under our own brands and from third-party brands are subject to regulation by the Food and Drug Administration (the “FDA”).
Government Regulation The vitamins/dietary supplements, foods, over-the-counter drugs, cosmetic products and medical device products we sell under our own brands and from third-party brands are subject to regulation by the Food and Drug Administration (the “FDA”).
Our principal trademark assets include the trademarks “Grove,” “Grove Co.,” and “Grove Collaborative,” which are registered in the U.S. and targeted foreign jurisdictions, as well as our logos, taglines and multiple product brand names.
Our principal trademark assets include the trademarks “Grove,” “Grove Co.,” and “Grove Collaborative,” which are registered or pending registration in the U.S. and targeted foreign jurisdictions, as well as our logos, taglines and multiple product brand names.
In Table of Contents addition to the protection provided by our intellectual property rights, we enter into confidentiality and proprietary rights agreements with our employees, consultants, contractors and business partners. Our employees are also subject to invention assignment agreements.
In addition to the protection provided by our intellectual property rights, we enter into confidentiality and proprietary rights agreements with our employees, consultants, contractors and business partners. Our employees are also subject to invention assignment agreements.
In addition, the FTC regulates the use of endorsements and testimonials in advertising as well as relationships between advertisers and social media influencers pursuant to principles described in the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (the “Endorsement Guides”).
Table of Content s In addition, the FTC regulates the use of endorsements and testimonials in advertising as well as relationships between advertisers and social media influencers pursuant to principles described in the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising (the “Endorsement Guides”).
In addition, our research and product development team brings both HPC product experience as well as digital channel know-how to our innovation road map. We believe the combination of best-in-class data along with our innovation capabilities allows us to consistently produce high-quality, efficacious products with a speed to market unmatched in our industry.
In addition, our research and product development team brings both HPC product experience as well as digital channel know-how to our innovation road map. We believe the combination of our data along with our innovation capabilities allows us to consistently produce high-quality, efficacious products with speed to market.
Carbon Our goal is to decouple the growth of our business from our carbon footprint through a focus on mitigation and supplier engagement. For our remaining emissions, we are committed to the highest standard of offset purchases, with a focus on nature-based projects which prioritize habitat protection, biodiversity and supporting local and indigenous communities. CarbonNeutral Certified Company .
Carbon Our goal is to decouple the growth of our business from our carbon footprint through a focus on mitigation and supplier engagement. For our remaining emissions, we are committed to offset purchases, with a focus on nature-based projects which prioritize habitat protection, biodiversity and supporting local and indigenous communities.
In 2021, we expanded into brick-and-mortar retail distribution. We continue to actively pursue opportunities to develop our brick-and-mortar retail distribution platform and expand our sales to third-party ecommerce channels. On June 16, 2022 (the “Closing Date”), we became a publicly traded company as a result of the consummation of Grove Collaborative, Inc.’s (“Legacy Grove”) merger with Virgin Group Acquisition Corp.
We continue to actively pursue opportunities to develop our brick-and-mortar retail distribution platform and expand our sales on third-party ecommerce platforms. On June 16, 2022 (the “Closing Date”), we became a publicly traded company as a result of the consummation of Grove Collaborative, Inc.’s (“Legacy Grove”) merger with Virgin Group Acquisition Corp.
Instead, we believe that lifting the industry towards zero plastic waste will be the “new normal” and will materially benefit Grove. Table of Contents Product Development and Innovation We believe we have a durable competitive advantage in product development, based on the data and consumer insights garnered through our DTC platform.
Instead, we believe that lifting the industry towards reduced plastic waste will be the “new normal” and will materially benefit Grove. Product Development and Innovation We believe we have a durable competitive advantage in product development, based on the data and consumer insights garnered through our DTC platform.
Our industry has historically addressed the plastic pollution crisis by setting unrealistic goals about recycled content that will be impossible to achieve given the realities of recycling infrastructure.
Our industry has historically addressed the plastic pollution crisis by setting unrealistic goals about recycled plastic content that will be impossible to achieve given the realities of recycling infrastructure. Today, only about 5% of plastic is recycled.
We offer a highly compelling proposition to our third-party brands by providing access to more than 1.3 million environmentally-conscious and digitally-savvy customers who shopped on our DTC platform in 2022. We consider these third-party brands to be important long-term partners both in serving our customers on our digital platform and in changing the industry for the better.
We offer a highly compelling proposition to our third-party brands by providing access to more than 900,000 environmentally-conscious and digitally-savvy customers who shopped on our DTC platform in 2023. We consider these third-party brands to be important long-term partners both in serving our customers on our digital platform and in changing the industry for the better.
Our products are currently sold in over 4,000 stores across these retail partnerships as of December 31, 2022. We believe our retail strategy will generate additional brand awareness, especially as consumer concerns about single-use plastic continue to rise. Our Grove Brand products that are sold at retail outlets offer an attractive value proposition to our omnichannel retail partners.
Our products were sold in over 7,500 stores across these retail partnerships as of December 31, 2023. We believe our retail strategy will generate additional brand awareness, especially as consumer concerns about single-use plastic continue to rise. Our Grove Brand products that are sold at retail outlets offer an attractive value proposition to our omnichannel retail partners.
We have applied to register or registered many of our trademarks in the U.S. and other jurisdictions, and we will pursue additional trademark registrations to the extent we believe they would be beneficial and cost-effective. Worldwide, we have 16 issued patents and 11 patent applications pending. Our issued patents will begin expiring in December 2028.
We have applied to register or registered many of our trademarks in the U.S. and other jurisdictions, and we will pursue additional trademark registrations to the extent we believe they would be beneficial and cost-effective. Worldwide, we have 18 issued patents and 8 patent applications pending. Our issued patents will begin expiring in March 2034.
After building a robust portfolio of highly efficacious, good-for-the-world products, we have recently pushed into an omnichannel model to reach consumers where and how they shop. We continue to operate our DTC platform where we maintain direct relationships with consumers who enjoy our best-in-class assortment of natural home, beauty and personal care products.
After building a robust portfolio of efficacious, good-for-the-world products, we have recently pushed into an omnichannel model to reach consumers where and how they shop. We continue to operate our DTC platform where we maintain direct relationships with consumers who enjoy our assortment of natural home, beauty and personal care products. We also expanded into brick-and-mortar retail distribution in 2021.
These laws and regulations principally relate to the ingredients or components, proper labeling, advertising, packaging, marketing, manufacture, registration, safety, shipment and disposal of our products.
The applicable laws and regulations principally relate to the ingredients or components, proper labeling, advertising, packaging, marketing, manufacturing, warehousing, registration, safety, shipment and disposal of our products.
For inbound shipments, we utilize state-of-the-art transportation management systems that optimize time and costs. For outbound fulfillment parcel shipping, we partner with national as well as regional carriers to ensure timely and efficient delivery to our customers. We utilize a rate-shop service to identify best pricing and time in transit for our delivery points.
For inbound shipments, we utilize state-of-the-art transportation management systems that optimize time and costs. For outbound fulfillment parcel shipping, we partner with national as well as regional carriers. We utilize a rate-shop service to identify best pricing and time in transit for our delivery points. Freight costs represent a significant portion of our operating expenses.
In the year ended December 31, 2022, we generated approximately 48% of our net revenue from Grove Brands, with 61% of that net revenue from home care products. As we grow our product assortment and distribution in beauty and personal care, we expect the contribution of sales from these categories to increase.
In the year ended December 31, 2023, we generated approximately 46% of our net revenue from Grove Brands, with 76% of that net revenue from home care products. As we grow our product assortment and distribution in our other categories including health and wellness, beauty, and personal care, we expect the contribution of sales from these categories to increase.
We use our connection with consumers to create and curate authentic, disruptive brands and products. Grove builds natural products that perform as well as or better than many leading CPG brands (both conventional and natural), while being healthier for consumers and the planet. Grove’s omnichannel distribution strategy enables us to reach consumers where they want to shop.
Grove builds natural products that perform as well as or better than many leading consumer packaged goods, or CPG, brands (both conventional and natural), while being healthier for consumers and the planet. Grove’s omnichannel distribution strategy enables us to reach consumers where they want to shop.
We also regularly work to optimize and automate our operations to improve our margin profile while ensuring a seamless shopping experience for customers. Supply Chain We maintain a diversified global supply chain for sourcing our Grove Brand products to ensure product quality and integrity.
We fulfill orders for our retail partners through third-party logistics partnerships. We also regularly work to optimize and automate our operations to improve our margin profile while ensuring a seamless shopping experience for customers. Supply Chain We maintain a diversified global supply chain for sourcing our Grove products to help ensure product quality and integrity.
Since inception, we have grown rapidly and invested heavily in building out both our Grove ecommerce platform and our Grove Brands, and over this period we have operated at a loss and have an accumulated deficit of $577.9 million as of December 31, 2022.
Since inception, we have invested heavily in building out both our Grove DTC platform and our Grove Brands. Over this period we have operated at a loss with an accumulated deficit of $621.1 million as of December 31, 2023.
Our products are in all Target stores across the United States, in over 1,900 retail doors and we doubled our assortment in 2022. We also expanded our retail partners to include Kohl’s, Giant Eagle, Harris Teeter, Meijer, CVS and HEB with additional major national retailers including Walmart and Costco expected to launch in 2023.
Our products are in all Target stores across the United States, in over 1,900 retail doors and we doubled our assortment in 2022. We also expanded our retail partners to include Amazon, CVS, Meijer, and Kroger with additional major national retailers expected to launch in 2024.
Diversity, Equity and Inclusion We believe that a more inclusive and equitable HPC industry starts with a strong commitment within our workplace, as well as on our virtual shelves. From the beginning, we have been focused on building a team where all employees and customers are seen, heard and feel valued.
Approximately 68% of our total employee population is located in our fulfillment centers. Diversity, Equity and Inclusion We believe that a more inclusive and equitable HPC industry starts with a strong commitment within our workplace, as well as on our virtual shelves. We have been focused on building a team where employees and customers are seen, heard and feel valued.
As part of that value proposition, we pride ourselves on our industry-leading work in sustainability around the areas most material to our business: plastic, carbon and forests. Plastic The HPC industry has been built on seemingly cheap and disposable single-use plastic packaging.
As part of that value proposition, we pride ourselves on our industry-leading sustainability work in areas relevant to our business: plastic, forests, and carbon. Plastic The HPC industry has been built on seemingly cheap and disposable single-use plastic packaging. As consumers awaken to the reality of the plastic pollution crisis, they are urgently and increasingly demanding new solutions.
Our aim is to restore forests through our business, both by avoiding use of paper products that contribute to deforestation as well as by actively funding reforestation, both directly and through our carbon offset program. Two Million Acres of Forest . Through the Arbor Day Foundation, we met our goal of one million trees planted in April of 2022.
Our aim is to conserve forests through our business, both by avoiding use of paper products that directly contribute to deforestation as well as by actively funding forest conservation, both directly and through our carbon offset programs. Two Million Acres of Forest. In 2022, we reached our goal to plant 1 million trees.
We also lease three fulfillment center locations in Reno, Nevada; St. Peters, Missouri; and Elizabethtown, Pennsylvania, which we use for inbound and receiving, packing and shipping, transportation, operations technology, warehouse IT, operations management, and human resources.
Our workforce outside of our fulfillment centers generally works remotely, and we have right-sized our headquarters office footprint accordingly. We lease three fulfillment center locations in Reno, Nevada; St. Peters, Missouri; and Elizabethtown, Pennsylvania, which we use for inbound and receiving, packing and shipping, transportation, operations technology, warehouse IT, operations management, and human resources.
Our data privacy practices are designed to ensure security, compliance, and privacy while collecting, storing, and creating insights from the data. Trademarks and Other Intellectual Property We protect our intellectual property through a combination of trademarks, domain names, copyrights, trade secrets and patents, as well as contractual provisions and restrictions on access to our proprietary technology.
Trademarks and Other Intellectual Property We protect our intellectual property through a combination of trademarks, domain names, copyrights, trade secrets and patents, as well as contractual provisions and restrictions on access to our proprietary technology.
Sustainability and Environmental Health and Safety Our corporate sustainability ethos and sustainable product offering are Grove’s primary differentiator. Our customers demonstrate a prioritization for our carefully curated and screened products that align with their values around environmental health and safety.
Table of Content s Sustainability and Environmental Health and Safety Grove’s corporate sustainability ethos and sustainable product offering are our primary differentiators. Our customers seek carefully created and curated products that align with their values around environmental health and safety.
Facilities Our corporate headquarters is located in San Francisco, California, and we use this facility for engineering, finance, marketing, human resources, legal, information technology and security, physical product development, research and science, supply chain, and other administrative functions. We are committed to utilizing a hybrid workforce and as such, we are actively marketing a portion of this space for sublease.
Table of Content s Facilities Our corporate headquarters is located in San Francisco, California, and we have used this facility for engineering, finance, marketing, human resources, legal, information technology and security, physical product development, research and science, supply chain, and other administrative functions.
We provide a dedicated channel that enables brands to reach customers whose values are aligned with our brand partners directly, which our partners may be unable to Table of Contents reach through typical brick-and-mortar channels. Our DTC platform also provides a channel for our partners to launch and scale plastic-free or low-plastic packaging.
For our third-party brand partners, our DTC platform provides a unique way for our partners to tell their brand and product stories to consumers at scale. We provide a dedicated channel that enables brands to reach customers whose values are aligned with our brand partners directly, which our partners may be unable to reach through typical brick-and-mortar channels.
Public Benefit Corporation and Certified B Corporation We believe that authentic commitment to our vision, and to “doing well by doing good,” is a durable competitive advantage. As a way to codify our values, Grove became a public benefit corporation (“PBC”) in 2021.
We also believe that our mission is a competitive advantage in attracting and retaining top talent in a competitive market. Public Benefit Corporation and Certified B Corporation We believe that authentic commitment to our vision, and to “doing well by doing good,” is a durable competitive advantage.
Congress, various state legislative bodies and foreign governments concerning privacy and data protection which could affect us. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States, which could increase our potential liability and adversely affect our business, results of operations, and financial condition.
Some observers have noted the growing trend toward more stringent privacy legislation in the United States, which could increase our potential liability and adversely affect our business, results of operations, and financial condition.
The passion of our employees is evident in the design and delivery of our products, the support we provide to our consumers and the impact we are making in our community and industry.
The passion of our employees is evident in the design and delivery of our products, the support we provide to our consumers and the impact we are making in our community and industry. As of December 31, 2023, we had approximately 408 full-time employees, as well 152 part-time and temporary employees.
We are devoted to the development, promotion and distribution of consumer products as a positive force for human and environmental health.
As a way to codify our values, Grove became a public benefit corporation (“PBC”) in 2021. We are devoted to the development, promotion and distribution of consumer products as a positive force for human and environmental health.
We began our diversity, equity and inclusion journey by engaging our employees and leaders in trainings that require critical thinking, programs that inspire grassroots action, and conversations that open us up to diversity of thought.
We uphold our diversity, equity and inclusion values by engaging our employees and leaders in trainings that promote critical thinking, inspire grassroots action, and invoke conversations that open us up to diversity of thought. This foundational framework is critical for us in our journey to help our employees, customers and communities thrive.
The law also provides a private right of action and statutory damages for certain data breaches that result in the loss of personal information. In addition, California voters recently approved the CPRA, which went into effect on January 1, 2023.
The law also provides a private right of action and statutory damages for certain data breaches that result in the loss of personal information.
We expanded into brick-and-mortar retail in April 2021, with the launch of a curated assortment of Grove Co. best sellers in cleaning, hand and dish categories at Target, and have since established additional retail partnerships with Kohl’s, Giant Eagle, Harris Teeter, Meijer, CVS and HEB.
We expanded into brick-and-mortar retail in April 2021 with the launch of a curated assortment of Grove Co. best sellers in cleaning, hand and dish categories at Target, and have since established additional retail partnerships with Amazon, CVS, Meijer, and Kroger. Our products were sold in over 7,500 stores across these retail partnerships as of December 31, 2023.
Our Vision Grove Collaborative Holdings, Inc. is transforming the consumer products industry into a force for human and environmental good by relentlessly creating and curating planet-first, high-performance brands and products. Because sustainability is the only future, and what we do now matters. Overview Grove is a digital-first, sustainability-oriented consumer products innovator.
Our Vision Grove Collaborative Holdings, Inc.’s mission is to transform the consumer products industry into a force for human and environmental good by creating and curating planet-first, high-performance brands and products. Overview Grove is a sustainability-oriented consumer products innovator. We use our connection with consumers to create and curate authentic, disruptive brands and products.
We paired this insight with best-in-class product innovation capabilities, and in 2016 we launched Grove Co., our flagship home care brand. We have since brought more than 400 Grove Brand products to customers across our portfolio of brands, and Grove Co. has grown into the largest brand by revenue on our DTC platform.
We have since brought more than 700 Table of Content s Grove Brand products to customers across our portfolio of brands, and Grove Co. has grown into the largest brand by revenue on our DTC platform.
Grove Co. products allow consumers to care for their homes, live more sustainably and fully recycle our packaging and formats where such facilities are available to consumers. With an assortment of products ranging from household cleaners to hand and dish soaps to paper-free home tissues and laundry, Grove Co. is the largest brand on our DTC platform.
With an assortment of products ranging from household cleaners to hand and dish soaps to tree-free home tissues and laundry detergent, Grove Co. is the largest brand on our DTC platform.
We expect that revenue will further decline in 2023 as we eliminate unprofitable revenue and reduce marketing spending, with retail sales representing a greater proportion of our revenue compared to 2022, before returning to growth beginning in 2024.
We expect that revenue will further decline in 2024 as we eliminate unprofitable revenue and maintain current levels of marketing spending before returning to growth.
Our direct connection to consumers aids our partners by providing valuable product feedback at a rate typically much faster than retail channels. As a result of our scale and strict product standards, we believe placement on our platform provides a positive brand association for our partners.
Our DTC platform also provides a channel for our partners to launch and scale plastic-free or low-plastic packaging. Our direct connection to consumers aids our partners by providing valuable product feedback at a rate typically much faster than retail channels.
We offer customers our flexible monthly subscribe-and-save shipment service to help them stay on top of their home care regimen, as well as non-subscription options to ship as needed. Customers can subscribe to individual products at appropriate cadences to make sure they never run out.
Through the website, we offer customers exclusive deals and offers, share newly launched products and display our wide array of seasonal bundles. We offer customers our flexible monthly subscribe-and-save shipment service to help them stay on top of their home care regimen, as well as non-subscription options to ship as needed.
We need to create business models and products that meet the environmental needs of our time and the growing demand of consumers who are aware of the importance of making environmentally conscious decisions. Sustainability and conscientious business practices are fundamental to our business and are our key differentiators, from our brands, to the products we carry.
We need to create business models and products that meet the environmental needs of our time and the growing demand of consumers who are aware of the importance of making environmentally conscious decisions. Sustainability is our core differentiator. We are addressing single-use plastic, carbon emissions, and forest degradation as the most material issues to our business and our industry.
Grove is a public benefit corporation and a Certified B Corporation, meaning we adhere to third party standards for prioritizing social, environmental, and community wellbeing. We have a history of doing well by doing good, which is supported by our flywheel: as we have grown, our product development capabilities and data have improved.
We believe our retail strategy will generate additional brand awareness, especially as consumer concerns about single-use plastic continue to rise. Grove is a public benefit corporation and a Certified B Corporation, meaning we adhere to third party standards for prioritizing social, environmental, and community well-being. We have a history of doing well by doing good.
Motivated by a desire to learn and discover, they are spending more time engaging with the natural HPC category and making sustainable choices as part of their environmentally conscious lifestyle. Of note, we see success in geographies across political and demographic groups, not just with a niche of “dark green” consumers.
Motivated by a desire to learn and discover, they are spending more time engaging with the natural HPC category and making sustainable choices as part of their environmentally conscious lifestyle. Our Omnichannel Distribution Strategy We reach consumers through both DTC and retail channels. Our omnichannel approach enables us to reach more customers with differentiated offerings.
We leveraged our ecommerce platform to learn about the industry, gain significant insight into consumer preferences and determine how we might drive change. Early on, it became clear that the current carbon, plastic, and ingredient footprint of our industry is unsustainable, and that there will be massive share shift to products that perform while supporting human and environmental health.
Early on, it became clear that the current carbon, plastic, and ingredient footprint of our industry is unsustainable, and that there will be massive share shift to products that perform while supporting human and environmental health. Our key long-term strategic advantage comes from a combination of our authentic mission and our direct relationships with customers.
We believe that the depth and authenticity of our mission is a sustainable competitive advantage in a world where consumers urgently demand more conscientious products. We also believe that our success is driven by our exceptional team, and we believe that our mission is a competitive advantage in attracting and retaining top talent in a competitive market.
We believe these objectives also intersect areas of growing consumer interest and demand, and we have set ambitious goals to lead across these three objectives. We believe that the depth and authenticity of our mission is a sustainable competitive advantage in a world where consumers urgently demand more conscientious products.
Table of Contents Our Brands Brand Strategy Increasingly, consumers are demanding brands that are thoughtfully designed with a focus on consumer needs and preferences, and that meet higher standards than ever in sustainability and health. The shift away from plastic in Home and Personal Care (“HPC”) products is a clear consumer and industry trend.
In addition to prioritizing plant-based ingredients, the Grove standard lists all the anti-ingredients you’ll never find in our products, from parabens to phosphates and triclosan. Our Brands Brand Strategy Increasingly, consumers are demanding brands that are thoughtfully designed with a focus on consumer needs and preferences, and that meet higher standards than ever in sustainability and health.
After several years of annual revenue growth, our revenues in the year ended December 31, 2022 were approximately 16% lower than in the prior year period, reflecting the challenges that the industry faces as a result of customers buying behaviors that skewed heavily towards DTC platforms during the COVID-19 pandemic reverting to pre-pandemic levels as well as the pressures of inflation on consumer spending.
This decline reflects the challenges that the industry faces as a result of customers buying behaviors that skewed heavily towards DTC platforms during the COVID-19 pandemic reverting to pre-pandemic levels, as well as the pressures of inflation on consumer spending. The decline also results from the Company’s reductions in advertising spend and our strategic shift toward achieving profitability.
Table of Contents Our key long-term strategic advantage comes from a combination of our authentic mission and our direct relationships with customers. We gained differentiated insights on consumer preferences and provided a platform for them to tell us what they value in each product category we carried.
We gained differentiated insights on consumer preferences and provided a platform for them to tell us what they value in each product category we carried. We paired this insight with our product innovation capabilities, and in 2016 we launched Grove Co., our flagship home care brand.
DTC Platform Our website enables consumers to view our entire product portfolio including Grove Brand and third-party products across a variety of categories. Through the website, we offer customers exclusive deals and offers, share newly launched products and display our wide array of seasonal bundles.
Our channels are complementary to each other and learnings from each further enhance the entire Grove community. Table of Content s DTC Platform Our website enables consumers to view our entire product portfolio including Grove Brand and third-party products across a variety of categories.
We believe that we compete favorably across these factors. Human Capital We strive to make our workplace, our products, and our services more equitable and inclusive. We believe an inclusive culture contributes to Grove’s success in spreading healthy habits. Our People We value our employees.
The Internet facilitates competitive entry and comparison shopping, which enhances the ability of new, smaller, or lesser-known businesses to compete against us. We strive to make our workplace, our products, and our services more equitable and inclusive. We believe an inclusive culture contributes to Grove’s success. Our People We value our employees.
Our efforts to eliminate unprofitable revenue and drive improved margins are central to operations in order to reach our goal of profitable growth in 2024. Company History Grove started in 2012 under the name “ePantry” as an online retailer for third-party natural household, beauty and personal care brands.
Grove started in 2012 under the name “ePantry” as an online retailer for third-party natural household, beauty and personal care brands. We leveraged our ecommerce platform to learn about the industry, gain significant insight into consumer preferences and determine how we might drive change.
Freight costs represent a significant portion of our operating expenses. Fulfillment We have three fulfillment centers dedicated to our DTC platform, which are capable of reaching approximately 91% of our consumers with two-day or faster shipping. We fulfill orders for our retail partners through third-party logistics partnerships.
Fulfillment We have three fulfillment centers dedicated to our DTC platform, which are capable of reaching approximately 91% of our customers with two-day or faster shipping. We will close one fulfillment center location in the second quarter of 2024 upon which we expect to reach approximately 88% of customers with two-day or faster shipping.
The CPRA significantly modifies the CCPA, and imposes additional data protection obligations on companies doing business in California, potentially resulting in further complexity.
The CCPA was recently amended by the California Privacy Rights Act (“CPRA”), and several states have also enacted or approved policy legislation imposing additional data protection obligations on companies doing business in those states, resulting in further complexity.
The law, among other things, gives California residents the ability to limit the use of their sensitive information, provide for penalties for CPRA violations concerning California residents under the age of 16, and establishes a new California Privacy Protection Agency to implement and enforce the law. There are also a number of legislative proposals pending before the U.S.
These laws, among other things, give state residents the ability to limit the use of their sensitive information, introduce increased consent and restriction requirements for the processing of personal data of minors, provide for penalties for violations, and establish state enforcement powers (such as those vested in the California Privacy Protection Agency) to implement and enforce these new laws.
Removed
Our products are currently sold in over 4,000 stores across these retail partnerships as of December 31, 2022. We believe our retail strategy will generate additional brand awareness, especially as consumer concerns about single-use plastic continue to rise.
Added
After several years of annual revenue growth, our revenues in the years ended December 31, 2023 and 2022 were approximately 19% and 16% respectively lower than in the previous year.
Removed
That improved innovation grows both topline and, over the longer term, can expand margins as our innovation has historically tended to be both market expanding and margin accretive.
Added
Our efforts to scale advertising, spend efficiently, re-engage with dormant customers, expand our category assortment and drive improved margins are central to operations in order to reach our goal of achieving adjusted EBITDA profitability and sequential quarterly revenue growth by the end of 2024.
Removed
In light of these dynamics, our revenue declined in 2022 compared to 2021, with our retail expansion partially offsetting contraction in our direct-to-consumer business.

… 63 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

125 edited+39 added−61 removed344 unchanged
Biggest changeOur marketing strategies and channels will evolve and our efforts may or may not be successful. • Our brand and reputation may be diminished due to real or perceived quality, safety, efficacy or environmental impact issues with our products, which could have an adverse effect on our business, financial condition, results of operations and prospects. • Failure to introduce new products that meet the expectations of our customers may adversely affect our ability to continue to grow. • Government regulation of the Internet and ecommerce is evolving, and unfavorable changes or failure by us to comply with these regulations could have an adverse effect on our business, financial condition, results of operations and prospects. • We may become subject to product liability claims, which could materially harm our reputation, financial condition, and liquidity if we are not able to successfully defend or insure against such claims. • We are subject to a number of other laws and regulations, which could impact our business. • The COVID-19 global pandemic and related government, private sector and individual consumer responsive actions may adversely affect our business operations, employee availability, financial performance, liquidity and cash flow for an unknown period of time. • We have pursued and may intend to pursue acquisitions to expand our business, and if any of those acquisitions are unsuccessful, our business may be harmed. • We may experience damage or destruction to our distribution centers, which may harm our business, results of operations and financial condition. • We are dependent on our management team, and the loss of one or more key employees or groups could harm our business and prevent us from implementing our business plan in a timely manner. • Labor-related matters, including labor disputes, may adversely affect our operations. • If we cannot successfully manage the unique challenges presented by international markets, we may not be successful in expanding our operations outside of the United States.
Biggest changeIf we are unable to achieve profitable growth in the future, our business could be adversely affected. • Our quarterly operating results fluctuate, which could cause our stock price to decline. • We have incurred significant losses since inception, we expect to incur losses in the future, and we may not be able to generate sufficient revenue to achieve and maintain profitability. • We will require additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could adversely impact us. • Success of our retail and product innovation strategies depends on a variety of factors. • We may not be able to compete successfully • If we fail to cost-effectively acquire new consumers or retain our existing consumers, our business could be adversely affected. • Our reduction in spending to achieve profitability may adversely affect us. • Our brand and reputation may be diminished due to real or perceived quality, safety, efficacy or environmental impact issues with our products. • Failure to introduce new products that meet the expectations of our customers may adversely affect us. • Government regulation of the Internet and ecommerce is evolving, and unfavorable changes or failure by us to comply with these regulations could have an adverse effect on our business. • We may become subject to product liability claims, which could materially harm our business and liquidity. • We are subject to a number of other laws and regulations, which could impact our business. • We may experience damage or destruction to our distribution centers, which may harm our business. • We are dependent on our management team, and the loss of one or more key employees or groups could harm our business. • Labor-related matters, including labor disputes, may adversely affect our operations. • Our business, including our costs and supply chain, is subject to risks associated with sourcing, manufacturing, warehousing, distribution, infrastructure and logistics to third-party providers, and the loss of any of our key suppliers or logistical service providers could negatively impact our business. • Shipping is a critical part of our business and any changes in our shipping arrangements or any interruptions in shipping could adversely affect our operating results. • Risks associated with the outsourcing of our fulfillment process and other technology-related functions could materially and adversely affect our business. • We are seeking to expand the offering of our own branded products in retail stores and our inability to secure, maintain and increase our presence in retail stores could adversely impact our revenue.
We do not have employment agreements with any our executive officers or key management personnel and, therefore, they could terminate their employment with us at any time. We do not maintain key person life insurance policies on any of our employees. The loss of one or more of our key employees or groups could seriously harm our business.
We do not have employment agreements with any of our executive officers or key management personnel and, therefore, they could terminate their employment with us at any time. We do not maintain key person life insurance policies on any of our employees. The loss of one or more of our key employees or groups could seriously harm our business.
For example: we may choose to revise our policies in ways that we believe will be beneficial to our stakeholders, including customers, suppliers, employees and local communities, even though the changes may be costly; we may be influenced to pursue programs and services to demonstrate our commitment to the communities to which we serve even though there is no immediate return to our stockholders; or in responding to a possible proposal to acquire the Company, our board of directors may be influenced by the interests of our stakeholders, including suppliers, crew members and local communities, whose interests may be different from the interests of our stockholders.
For example, we may choose to revise our policies in ways that we believe will be beneficial to our stakeholders, including customers, suppliers, employees and local communities, even though the changes may be costly; we may be influenced to pursue programs and services to demonstrate our commitment to the communities we serve even though there is no immediate return to our stockholders; or in responding to a possible proposal to acquire the Company, our board of directors may be influenced by the interests of our stakeholders, including suppliers, crew members and local communities, whose interests may be different from the interests of our stockholders.
Even if these investments do result in the growth of our business, if we do not effectively manage our growth, we may not be able to execute on our business plan, respond to competitive pressures, take advantage of market opportunities, satisfy consumer requirements or maintain high-quality product offerings, any of which could adversely affect our business, financial condition, results of operations and prospects.
Even if our investments do result in the growth of our business, if we do not effectively manage our growth, we may not be able to execute on our business plan, respond to competitive pressures, take advantage of market opportunities, satisfy consumer requirements or maintain high-quality product offerings, any of which could adversely affect our business, financial condition, results of operations and prospects.
As we move into new markets and expand our products or services offerings, incumbent participants in such markets may assert their intellectual property and other proprietary rights against us as a means of slowing our entry into such markets or as a means to extract substantial license and royalty payments from us.
If we move into new markets and expand our products or services offerings, incumbent participants in such markets may assert their intellectual property and other proprietary rights against us as a means of slowing our entry into such markets or as a means to extract substantial license and royalty payments from us.
We have the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A Common Stock equals or exceeds $18.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations, and the like) for any 20 trading days within a 30-trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders.
We have the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A Common Stock equals or exceeds $90.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations, and the like) for any 20 trading days within a 30-trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders.
In addition, we and our manufacturing partners are subject to additional regulatory requirements, including environmental, health and safety laws and regulations administered by the EPA, state, local and foreign environmental, health and safety legislative and regulatory authorities and the National Labor Relations Board, covering such areas as discharges and emissions to air and water, the use, Table of Contents management, disposal and remediation of, and human exposure to, hazardous materials and wastes, and public and worker health and safety, and Current Good Manufacturing Practice requirements, or GMPs, enforced by the FDA.
In addition, we and our manufacturing partners are subject to additional regulatory requirements, including environmental, health and safety laws and regulations administered by the EPA, state, local and foreign environmental, health and safety legislative and regulatory authorities and the National Labor Relations Board, covering such areas as discharges and emissions to air and water, the use, management, disposal and remediation of, and human exposure to, hazardous materials and wastes, and public and worker health and safety, and Current Good Manufacturing Practice requirements, or GMPs, enforced by the FDA.
If these services become unavailable due to extended outages or interruptions or because they are no longer available on commercially reasonable terms or prices or for any other reason, or if we fail to migrate successfully to new services, our expenses could increase, our ability to manage our finances could be interrupted, our processes for managing sales of our offerings and supporting our consumers could be impaired, our ability to communicate with our suppliers could be weakened and our ability to access or save data stored to the cloud may be impaired until equivalent services, if available, are identified, obtained and implemented, all of which could have an adverse effect on our business, financial condition, results of operations and prospects.
If these services become unavailable due to extended outages or interruptions or because they are no longer available on commercially reasonable terms or prices or for any other reason, or if we fail to migrate successfully to new services, our expenses could increase, our ability to manage our finances could be interrupted, our processes for managing sales of our offerings and supporting our consumers could be impaired, our ability to communicate with our suppliers could be weakened and our ability to access or save data stored to the cloud may be impaired until equivalent services, if available, are identified, Table of Content s obtained and implemented, all of which could have an adverse effect on our business, financial condition, results of operations and prospects.
Table of Contents Our brand and reputation may be diminished due to real or perceived quality, safety, efficacy or environmental impact issues with our products, which could have an adverse effect on our business, financial condition, results of operations and prospects. We believe our consumers rely on us to provide them with clean, sustainable, well-designed, and effective products.
Our brand and reputation may be diminished due to real or perceived quality, safety, efficacy or environmental impact issues with our products, which could have an adverse effect on our business, financial condition, results of operations and prospects. We believe our consumers rely on us to provide them with clean, sustainable, well-designed, and effective products.
We rely and expect to continue to rely on a combination of confidentiality, invention assignment and other agreements with our employees, consultants and third parties with whom we have relationships and who may have access to confidential or patentable aspects of our research and development output, as well as trademark, copyright, patent and Table of Contents trade secret protection laws, to protect our proprietary rights.
We rely and expect to continue to rely on a combination of confidentiality, invention assignment and other agreements with our employees, consultants and third parties with whom we have relationships and who may have access to confidential or patentable aspects of our research and development output, as well as trademark, copyright, patent and trade secret protection laws, to protect our proprietary rights.
An increase in our marketing and advertising efforts may not maintain our current reputation, lead to increased brand awareness, or attract new customers. If we are unable to maintain and promote a favorable perception of our brand and products on a cost-effective basis, our business, financial condition, results of operations and prospects could be adversely affected.
Any increase in our marketing and advertising efforts may not maintain our current reputation, lead to increased brand awareness, or attract new customers. If we are unable to maintain and promote a favorable perception of our brand and products on a cost-effective basis, our business, financial condition, results of operations and prospects could be adversely affected.
Although we strive to adapt our marketing efforts to evolving legal and regulatory requirements and related guidance, we may not always anticipate or timely identify changes in regulation or official guidance that could impact our business, with the result that we could be subjected to litigation and enforcement actions that could adversely affect our business, financial condition, results of operations and prospects.
We strive to adapt our marketing efforts to evolving legal and regulatory requirements and related guidance; however, we may not always anticipate or timely identify changes in regulation or official guidance that could impact our business, with the result that we could be subjected to litigation and enforcement actions that could adversely affect our business, financial condition, results of operations and prospects.
Although our ability to amend the terms of the Public Warrants with the consent of at least 65% of the then-outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Warrants, convert the Warrants into cash, shorten the exercise period, or decrease the number of shares of our Class A Common Stock purchasable upon exercise of a Warrant.
Our ability to amend the terms of the Public Warrants with the consent of at least 65% of the then-outstanding Public Warrants is unlimited; however, examples of such amendments could be amendments to, among other things, increase the exercise price of the Warrants, convert the Warrants into cash, shorten the exercise period, or decrease the number of shares of our Class A Common Stock purchasable upon exercise of a Warrant.
Table of Contents 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.
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.
We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of noncompliance with any such laws or Table of Contents regulations. As a result, adverse developments with respect to these laws and regulations could have an adverse effect on our business, financial condition, results of operations and prospects.
We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of noncompliance with any such laws or regulations. As a result, adverse developments with respect to these laws and regulations could have an adverse effect on our business, financial condition, results of operations and prospects.
Table of Contents Our reputation and our consumers’ willingness to purchase our products depend in part on our suppliers’, manufacturers’, and retail partners’ compliance with ethical employment practices, such as with respect to child labor, wages and benefits, forced labor, discrimination, safe and healthy working conditions, and with all legal and regulatory requirements relating to the conduct of their businesses.
Our reputation and our consumers’ willingness to purchase our products depend in part on our suppliers’, manufacturers’, and retail partners’ compliance with ethical employment practices, such as with respect to child labor, wages and benefits, forced labor, discrimination, safe and healthy working conditions, and with all legal and regulatory requirements relating to the conduct of their businesses.
If we or our vendors fail (or are perceived to have failed) to comply with applicable Data Protection Laws, Privacy Policies and Data Protection Obligations, or if our Privacy Policies are, in whole or part, found to be inaccurate, incomplete, deceptive, unfair, or Table of Contents misrepresentative of our actual practices, our business, financial condition, results of operations and prospects could be adversely affected.
If we or our vendors fail (or are perceived to have failed) to comply with applicable Data Protection Laws, Privacy Policies and Data Protection Obligations, or if our Privacy Policies are, in whole or part, found to be inaccurate, incomplete, deceptive, unfair, or misrepresentative of our actual practices, our business, financial condition, results of operations and prospects could be adversely affected.
If our information technology networks and systems or data processing (or those of our third-party service providers) suffers damage, security breaches, vulnerabilities, disruption or shutdown (including, for example, cyberattacks or other attacks on global networking infrastructure carried out by Russia following its invasion of Ukraine in February 2022), and we do not effectively resolve the issues in a timely manner, we could experience a material adverse impact to our business, reputation and financial condition.
If our information technology networks and systems or data processing (or those of our third-party service providers) suffers damage, security breaches, vulnerabilities, disruption or shutdown (including, for example, cyberattacks or other attacks on global networking infrastructure carried out by Russia following its invasion of Ukraine in February 2022), and we do not effectively resolve the issues in a timely manner, we could experience a material adverse impact to our business, reputation Table of Content s and financial condition.
We also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology or other intellectual property rights. In addition, any of our intellectual Table of Contents property rights may be challenged or circumvented by others or invalidated or held unenforceable through administrative process or litigation in the U.S. or in foreign jurisdictions.
We also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology or other intellectual property rights. In addition, any of our intellectual property rights may be challenged or circumvented by others or invalidated or held unenforceable through administrative process or litigation in the U.S. or in foreign jurisdictions.
Although we attempt to contractually limit our liability with respect to such indemnity obligations, we are not always successful and we may still incur substantial liability related to them. We may be required to cease use of certain functions of our platform or cease selling certain products as a result of any such claims.
We attempt to contractually limit our liability with respect to indemnity obligations; however, we are not always successful and we may still incur substantial liability related to them. We may be required to cease use of certain functions of our platform or cease selling certain products as a result of any such claims.
Additionally, actions we may take to mitigate the impact Table of Contents of any disruption or potential disruption in our supply of materials or finished inventory, including increasing inventory in anticipation of a potential supply or production interruption, could have an adverse effect on our business, financial condition, results of operations and prospects.
Additionally, actions we may take to mitigate the impact of any disruption or potential disruption in our supply of materials or finished inventory, including increasing inventory in anticipation of a potential supply or production interruption, could have an adverse effect on our business, financial condition, results of operations and prospects.
Because there are no current plans to pay cash dividends on our Class A Common Stock for the foreseeable future, holders of our Class A Common Stock may not receive any return on investment unless such holders sells their Class A Common Stock for a price greater than that which such holder paid for it.
Because there are no current plans to pay cash dividends on our Class A Common Stock for the foreseeable future, holders of our Class A Common Stock may not receive any return on investment unless such holders sell their Class A Common Stock for a price greater than that which such holder paid for it.
Additionally, some providers of consumer devices, web browsers and application stores have implemented, or announced plans to implement, means to make it easier for Internet users to prevent the placement of cookies or to block other tracking technologies, require additional consents, or limit the ability to track user activity, which could if widely adopted result in the use of third-party cookies and other methods of online tracking becoming significantly less effective.
Additionally, some providers of consumer devices, web browsers and application stores have implemented, or announced plans to implement, means to make it easier for Internet users to prevent the placement of cookies or to block other tracking technologies, require additional consents, or limit the ability to track user activity, which could if widely adopted result in the use of third-party Table of Content s cookies and other methods of online tracking becoming significantly less effective.
Additionally, the success of our retail expansion and product development will depend on our ability to compete effectively against established and emerging competitors, some of whom may have greater financial, marketing, and other resources than us. Table of Contents We may not be able to compete successfully.
Additionally, the success of our retail expansion and product development will depend on our ability to compete effectively against established and emerging competitors, some of whom may have greater financial, marketing, and other resources than us. We may not be able to compete successfully.
See below risk factor, “ The Public Warrants may never be in the money, and they may expire worthless and the terms of the Public Warrants may be amended in a manner adverse to a holder if holders of at least 65% of the then-outstanding Public Warrants approve of such amendment. ” Outstanding warrants to purchase an aggregate of 568,905 shares of Class B Common Stock may become exercisable in accordance with the terms of the warrant agreements governing those securities, the forms of which have been filed as Exhibit 4.5 through Exhibit 4.12 of the Company’s Current Report on Form 8-K filed with the SEC on June 23, 2022.
See below risk factor, “ The Public Warrants may never be in the money, and they may expire worthless and the terms of the Public Warrants may be amended in a manner adverse to a holder if holders of at least 65% of the then-outstanding Public Warrants approve of such amendment. ” Outstanding warrants to purchase an aggregate of 113,776 shares of Class B Common Stock may become exercisable in accordance with the terms of the warrant agreements governing those securities, the forms of which have been filed as Exhibit 4.5 through Exhibit 4.12 of the Company’s Current Report on Form 8-K filed with the SEC on June 23, 2022.
Our current and potential competitors include: (1) companies that sell household and personal care products online and in physical stores; (2) physical, e-commerce, and omnichannel retailers, vendors, distributors, and manufacturers of the products we offer and sell to consumers; and (3) web search engines, comparison shopping websites, social networks, and other online and app-based means of discovering, using, or acquiring goods, either directly or in collaboration with other retailers.
Our current and potential competitors include: (1) companies that sell household and personal care products online and in physical stores; (2) physical, e-commerce, and omnichannel retailers, vendors, distributors, and manufacturers of the products we offer and sell to consumers; and (3) web search engines, comparison shopping websites, social networks, and other online and app-based Table of Content s means of discovering, using, or acquiring goods, either directly or in collaboration with other retailers.
Any such derivative litigation may be costly and have an adverse impact on our financial condition and results of operations. Table of Contents We and our directors and executive officers may be subject to litigation for a variety of claims, which could harm our reputation and adversely affect our business, results of operations and financial condition.
Any such derivative litigation may be costly and have an adverse impact on our financial condition and results of operations. We and our directors and executive officers may be subject to litigation for a variety of claims, which could harm our reputation and adversely affect our business, results of operations and financial condition.
Moreover, in the event of a significant disruption in the supply of the materials used to manufacture the products we offer, we and the vendors that Table of Contents we work with might not be able to locate alternative suppliers of materials of comparable quality at an acceptable price.
Moreover, in the event of a significant disruption in the supply of the materials used to manufacture the products we offer, we and the vendors that we work with might not be able to locate alternative suppliers of materials of comparable quality at an acceptable price.
Consequently, there is a risk that the owners of the copyrights in such open source software may claim that the open source licenses governing their use Table of Contents impose certain conditions or restrictions on our ability to use the software that we did not anticipate.
Consequently, there is a risk that the owners of the copyrights in such open source software may claim that the open source licenses governing their use impose certain conditions or restrictions on our ability to use the software that we did not anticipate.
We are or may also be subject to the terms of our external and internal privacy and security policies, codes, representations, certifications, industry standards, publications and frameworks (which we collectively refer to as “Privacy Policies”) and contractual obligations to third parties related to privacy, information security and processing, including contractual obligations to indemnify and hold harmless third parties from the costs or consequences of non-compliance with Data Protection Laws or Data Protection Obligations.
Table of Content s We are or may also be subject to the terms of our external and internal privacy and security policies, codes, representations, certifications, industry standards, publications and frameworks (which we collectively refer to as “Privacy Policies”) and contractual obligations to third parties related to privacy, information security and processing, including contractual obligations to indemnify and hold harmless third parties from the costs or consequences of non-compliance with Data Protection Laws or Data Protection Obligations.
In addition, third parties may oppose our trademark and service mark applications or trademark registrations, or otherwise challenge our use of the trademarks and service marks. In certain countries outside of the U.S., trademark registration is required to enforce trademark rights.
In addition, third parties may oppose our trademark and service mark applications or trademark registrations, or Table of Content s otherwise challenge our use of the trademarks and service marks. In certain countries outside of the U.S., trademark registration is required to enforce trademark rights.
Many products that we sell are labeled and advertised with claims as to their origin, ingredients or health, wellness, environmental or other benefits, including, by way of example, the use of the term “natural”, “organic”, “clean conscious”, or “sustainable”, or similar synonyms or implied statements relating to such benefits. Grove’s brand as a whole is marketed using similar environmental language.
Many products that we sell are labeled and advertised with claims as to their origin, ingredients or health, wellness, environmental or other benefits, including, by way of example, the use of the term “natural”, “organic”, “clean”, or “sustainable”, or similar synonyms or implied statements relating to such benefits. Grove’s brand as a whole is marketed using similar environmental language.
If the impact of a security incident or breach or the successful assertion of one or more large claims against us exceeds our available insurance coverage or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), it could have an adverse effect on our business, financial condition, reputation and results of operations.
If the impact of a security incident or breach or the successful assertion of one or more large claims against us exceeds our available insurance coverage or results in changes to our Table of Content s insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), it could have an adverse effect on our business, financial condition, reputation and results of operations.
If we continue to add fulfillment and warehouse capabilities, add new businesses or categories with different fulfillment requirements or change the mix in products that we sell, our fulfillment network will become increasingly complex and operating it will become more challenging.
If we add fulfillment and warehouse capabilities, add new businesses or categories with different fulfillment requirements or change the mix in products that we sell, our fulfillment network will become increasingly complex and operating it will become more challenging.
The Sarbanes-Oxley Act of 2002 or the Sarbanes-Oxley Act, including the requirements of Section 404, to the extent applicable to us, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges, impose additional reporting and other obligations on public companies.
The Sarbanes-Oxley Act of 2002 or the Sarbanes-Oxley Act, including the requirements of Section 404, to the extent applicable to us, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges, impose additional reporting and Table of Content s other obligations on public companies.
Table of Contents Should we become subject to actions regarding our branding or product marketing, consumers may avoid purchasing products from us or seek alternatives, even if the basis for the claim is unfounded. Moreover, any regulatory or government enforcement actions may trigger class action lawsuits under state consumer protection laws.
Table of Content s Should we become subject to actions regarding our branding or product marketing, consumers may avoid purchasing products from us or seek alternatives, even if the basis for the claim is unfounded. Moreover, any regulatory or government enforcement actions may trigger class action lawsuits under state consumer protection laws.
Failure to successfully address any of these or other unforeseen challenges would adversely affect our business. Table of Contents We may experience damage or destruction to our distribution centers, which may harm our business, results of operations and financial condition.
Failure to successfully address any of these or other unforeseen challenges would adversely affect our business. We may experience damage or destruction to our distribution centers, which may harm our business, results of operations and financial condition.
Because the purchase price per share to be paid by Yorkville for the shares of common stock that we may elect to sell under the Equity Purchase Agreement will fluctuate based on the market prices of our common stock during the applicable pricing period for each of those sales, it is not possible for us to predict, as of the date of this Form 10-K and prior to any such sales, the number of shares of common stock that we will sell under the Equity Purchase Agreement, the purchase price per share or the aggregate gross proceeds that we will receive from those purchases under the Equity Purchase Agreement.
Because the purchase price per share to be paid by Yorkville for the shares of common stock that we may elect to sell under the Equity Purchase Agreement will fluctuate based on the market prices of our common stock during the applicable pricing period for each of those sales, it is not possible for us to predict, as of the date of this report and prior to any such sales, the number of shares of common stock that we will sell under the Equity Purchase Agreement, the purchase price per share or the aggregate gross proceeds that we will receive from those purchases under the Equity Purchase Agreement.
If we (or a third party processing payment card transactions on our behalf) suffer a security breach affecting payment card information, we may have to pay onerous and significant fines, penalties and assessments arising out of the major card brands’ rules and regulations, contractual indemnifications or liability contained in merchant agreements and similar contracts, and we may lose our ability to accept payment cards for payment for our goods and services, which could materially impact our operations and financial performance.
If we (or a third party processing payment card transactions on our behalf) suffer a security breach affecting payment card information, we may be subject to lawsuits, have to pay onerous and significant fines, penalties and assessments arising out of the major card brands’ rules and regulations, contractual indemnifications or liability contained in merchant agreements and similar contracts, and we may lose our ability to accept payment cards for payment for our goods and services, any of which could materially impact our operations and financial performance.
If our products are found to be, or perceived to be, defective or unsafe, or if they otherwise fail to meet our consumers’ expectations, our relationships with consumers could suffer, the appeal of our brand could be diminished, we may need to recall some of our products and/or become subject to regulatory action, and we could lose sales or market share or become subject to boycotts or liability claims.
Table of Content s If our products are found to be, or perceived to be, defective or unsafe, or if they otherwise fail to meet our consumers’ expectations, our relationships with consumers could suffer, the appeal of our brand could be diminished, we may need to recall some of our products and/or become subject to regulatory action, and we could lose sales or market share or become subject to boycotts or liability claims.
Table of Contents The loss of our relationship with Target or other current or future large retail partners could have a significant impact on our revenue. In addition, we may be unable to secure adequate shelf space in new markets, or any shelf space at all, until we develop relationships with the retailers that operate in such markets.
The loss of our relationship with Target or other current or future large retail partners could have a significant impact on our revenue growth. In addition, we may be unable to secure adequate shelf space in new markets, or any shelf space at all, until we develop relationships with the retailers that operate in such markets.
Table of Contents Consumer purchases of discretionary items, including the merchandise that we offer, generally decline during recessionary periods or periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence.
Consumer purchases of discretionary items, including the merchandise that we offer, generally decline during recessionary periods or periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence.
Among other things, our governing documents include provisions regarding: • a classified board of directors; • the dual-class structure that provides for Class B Common Stock being entitled to ten votes per share; • the ability of the Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of, our directors and officers; • the requirement that a special meeting of stockholders may only be called by a majority of the entire Board, the Chairman of the Board, or our Chief Executive Officer, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of Board and stockholder meetings; • the ability of the Board to amend the Bylaws, which may allow the Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to the Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Board, and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
Among other things, our governing documents include provisions regarding: • a classified board of directors; • the dual-class structure that provides for Class B Common Stock being entitled to ten votes per share; • the ability of the Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the limitation of the liability of, and the indemnification of, our directors and officers; • the requirement that a special meeting of stockholders may only be called by a majority of the entire Board, the Chairman of the Board, our Chief Executive Officer or when requested in writing by the holders of not less than 20% of all votes entitled to be cast at the meeting, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors; • controlling the procedures for the conduct and scheduling of Board and stockholder meetings; • the ability of the Board to amend the Bylaws, which may allow the Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to the Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Board, and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
We will require additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce our investments in advertising and other strategic initiatives planned for future growth. We expect to continue to incur significant expenses and operating losses for the foreseeable future.
We will require additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, or reduce our investments in advertising and other strategic initiatives planned for future growth. We expect to continue to incur significant expenses for the foreseeable future.
Charge-backs result not only in our loss of fees earned with respect to the payment, but also leave us liable for the underlying money transfer amount. If our charge-back rate becomes excessive, card associations also may require us to pay fines or refuse to process our transactions.
Charge-backs result not only in our loss of fees earned with respect to the payment, but also leave us liable for the Table of Content s underlying money transfer amount. If our charge-back rate becomes excessive, card associations also may require us to pay fines or refuse to process our transactions.
Furthermore, many of our current and potential competitors may be in a position to dedicate substantially greater resources to enforce their intellectual property and proprietary rights than us. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing, misappropriating or otherwise violating our intellectual property and proprietary rights.
Furthermore, many of our current and potential competitors may be in a position to dedicate substantially greater resources to enforce their intellectual property and proprietary rights than us. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing, Table of Content s misappropriating or otherwise violating our intellectual property and proprietary rights.
We may be unable or slow to realize the benefits we expect from actions taken to benefit our stakeholders, including suppliers, crew members and local communities, which could adversely affect our business, financial condition and results of operations, which in turn could cause our stock price to decline.
Table of Content s We may be unable or slow to realize the benefits we expect from actions taken to benefit our stakeholders, including suppliers, crew members and local communities, which could adversely affect our business, financial condition and results of operations, which in turn could cause our stock price to decline.
Table of Contents Our Charter designates a state or federal court located within the State of Delaware as the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders, employees, or agents.
Table of Content s Our Charter designates a state or federal court located within the State of Delaware as the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, stockholders, employees, or agents.
Fluctuations in our results could also cause other problems, including, for example, analysts or investors changing their models for valuing our common stock, particularly post-pandemic. We could experience short-term liquidity issues, our ability to retain or attract key personnel may diminish, and other unanticipated issues may arise.
Fluctuations in our results could also cause other problems, including, for example, analysts or investors changing their models for valuing our common stock. We could experience short-term liquidity issues, our ability to retain or attract key personnel may diminish, and other unanticipated issues may arise.
We believe that our existing cash and cash equivalents will be sufficient to fund our planned operations for at least the next 12 months. However, our operating plan may change as a result of many factors, and we may need additional funds sooner than planned.
We believe that our existing cash and cash equivalents will be sufficient to fund our planned operations for at least the next 12 months. However, our operating plan may change as a result of many factors, and we may need or decide to seek additional funds sooner than planned.
In addition, our operating expenses fluctuate from period to period, in part in anticipation of their seasonality. Fluctuations in our quarterly operating results may cause those results to fall below our financial guidance or other projections, or the expectations of analysts or investors, which could cause the price of our common stock to decline.
In addition, our operating expenses fluctuate from period to period, in part in anticipation of their seasonality. Table of Content s Fluctuations in our quarterly operating results may cause those results to fall below our financial guidance or other projections, or the expectations of analysts or investors, which could cause the price of our common stock to decline.
Customer acquisition costs may fluctuate and rise on the channels that have been successful for us historically and on new channels that we are introducing. Rising costs may limit our ability to expand or maintain our acquisition efforts which could negatively affect our results of operations.
Table of Content s Customer acquisition costs may fluctuate and rise on the channels that have been successful for us historically and on new channels that we are introducing. Rising costs may limit our ability to expand or maintain our acquisition efforts which could negatively affect our results of operations.
Further, the resale by Yorkville of a significant amount of shares at any given time, or the perception that these sales may occur, could cause the market price of our common stock to decline and to be highly volatile.
Further, the resale by Yorkville of a significant amount of shares at any given time, or the Table of Content s perception that these sales may occur, could cause the market price of our common stock to decline and to be highly volatile.
There can be no assurance that our current suppliers will be able to accommodate our anticipated growth or continue to supply current quantities at preferential prices. In the past, we have experienced supply shortages of certain goods that have resulted in lost sales.
There can be no assurance that our current suppliers will be able to accommodate our demand or continue to supply current quantities at preferential prices. In the past, we have experienced supply shortages of certain goods that have resulted in lost sales.
Factors that could affect our ability to maintain or expand our sales and our current or any future retail distribution partners include: failure to accurately identify the needs of our customers; a lack of customer acceptance of new products or product expansions; unwillingness of our retail distribution partners and customers to attribute premium value to our new or existing products or product expansions relative to competing products; failure to obtain floor space from retail distribution partners, new, well-received product introductions by competitors; damage to our relationships with our retail distribution partners due to brand or reputational harm; delays or defaults on our retail distribution partners’ payment obligations to us; and store closures, decreased foot traffic, recession or other adverse effects resulting from public health crises such as the current COVID-19 pandemic (or other future pandemics or epidemics).
Factors that could affect our ability to maintain or expand our sales and our current or any future retail distribution partners include: failure to accurately identify the needs of our customers; a lack of customer acceptance of new products or product expansions; unwillingness of our retail distribution partners and customers to attribute premium value to our new or existing products or product expansions relative to competing products; failure to obtain floor space from retail distribution partners, new, well-received product introductions by competitors; damage to our relationships with our retail distribution partners due to brand or reputational harm; delays or defaults on our retail distribution partners’ payment obligations to us; and store closures, decreased foot traffic, recession or other adverse effects resulting from public health crises.
We have pursued and may intend to pursue acquisitions to expand our business, and if any of those acquisitions are unsuccessful, our business may be harmed. Our strategy may include the expansion of our business through the acquisition of other businesses, products or technologies, or through strategic alliances.
We have pursued and may in the future pursue acquisitions to expand our business, and if any of those acquisitions are unsuccessful, our business may be harmed. Our strategy may include the expansion of our business through the acquisition of other businesses, products or technologies, or through strategic alliances.
If and when the Public Warrants Table of Contents become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If and when the Public Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Furthermore, any increases in consumer discretionary spending during times of crisis may be temporary, such as those related to government stimulus programs or remote-work environments, and consumer spending may decrease when those programs or circumstances end.
Furthermore, any increases in Table of Content s consumer discretionary spending during times of crisis may be temporary, such as those related to government stimulus programs or remote-work environments, and consumer spending may decrease when those programs or circumstances end.
Failure by our network of retail and ecommerce partners, suppliers or manufacturers to comply with product safety, environmental or other laws and regulations, or with the specifications and requirements of our products, may disrupt our supply of products and adversely affect our business.
Table of Content s Failure by our network of retail and ecommerce partners, suppliers or manufacturers to comply with product safety, environmental or other laws and regulations, or with the specifications and requirements of our products, may disrupt our supply of products and adversely affect our business.
If the NYSE delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could Table of Contents be quoted on an over-the-counter market.
If the NYSE delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market.
Additionally, in no event may we sell more than 32,557,664 shares of our common stock to Yorkville under the Equity Purchase Agreement, which number of shares is equal to 19.99% of the shares of the Company's common stock outstanding immediately prior to the execution of the Equity Purchase Agreement (the “Exchange Cap”), unless we obtain stockholder approval to issue shares of common stock in excess of the Exchange Cap in accordance with applicable NYSE rules or comply with certain other requirements as described in the Equity Purchase Agreement.
Additionally, in no event may we sell more than 6,511,532 shares of our common stock to Yorkville under the Equity Purchase Agreement, which number of shares is equal to 19.99% of the shares of the Company's common stock outstanding immediately prior to the execution of the Equity Purchase Agreement (the “Exchange Cap”), unless we obtain stockholder approval to issue shares of common stock in excess of the Exchange Cap in accordance with applicable NYSE rules or comply with certain other requirements as described in the Equity Purchase Agreement.
Such laws and regulations generally have become more stringent over time and may become more so in the future, and we may incur (directly, or indirectly through our manufacturing partners) material costs to comply with current or future laws and regulations or in any required product recalls.
Such laws and regulations generally have become more stringent over time and may become more so in the future, and we may incur (directly, or indirectly through our manufacturing partners) material costs to comply with current or future laws and Table of Content s regulations or in any required product recalls.
The actual or perceived failure by us or our vendors to comply with applicable privacy and data protection laws, regulations or industry standards could have an adverse effect on our business, financial condition, results of operations and prospects.
Any of the foregoing could have a material adverse effect on our business, financial condition, prospects and results of operations. The actual or perceived failure by us or our vendors to comply with applicable privacy and data protection laws, regulations or industry standards could have an adverse effect on our business, financial condition, results of operations and prospects.
Indemnity provisions in various agreements to which we are party potentially expose us to substantial liability for infringement, misappropriation or other violation of intellectual property rights.
Table of Content s Indemnity provisions in various agreements to which we are party potentially expose us to substantial liability for infringement, misappropriation or other violation of intellectual property rights.
We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon, or diminish the value of our intellectual property. Worldwide, we have 16 issued patents and 11 patent applications pending.
We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon, or diminish the value of our intellectual property. Worldwide, we have 18 issued patents and 8 patent applications pending.
Although we maintain liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. In addition, some of our agreements with our vendors and sellers do not indemnify us from product liability.
We maintain liability insurance; however, we cannot Table of Content s be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. In addition, some of our agreements with our vendors and sellers do not indemnify us from product liability.
Other factors may reduce our ability to acquire, maintain and further engage with customers, including the effectiveness of our marketing efforts and other expenditures we make to continue to acquire new customers and maintain and increase engagement with existing customers; system updates to app stores and advertising platforms; changes in search algorithms by search engines; the development of new search engines or social media sites that reduce traffic on existing search engines and social media sites; and consumer behavior changes as a result of the COVID-19 pandemic, or otherwise.
Other factors may reduce our ability to acquire, maintain and further engage with customers, including the effectiveness of our marketing efforts and other expenditures we make to continue to acquire new customers and maintain and increase engagement with existing customers; system updates to app stores and advertising platforms; changes in search algorithms by search engines; the development of new search engines or social media sites that reduce traffic on existing search engines and social media sites; and changes in consumer behavior.
Our agreements with our customers and other third parties may include indemnification provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of infringement, misappropriation or other violation of intellectual property rights or other liabilities relating to or arising from our products, our acts or omissions under such agreements or other contractual obligations.
Our agreements may include indemnification provisions under which we agree to indemnify or otherwise be liable for losses suffered or incurred as a result of claims of infringement, misappropriation or other violation of intellectual property rights or other liabilities relating to or arising from our products, our acts or omissions under such agreements or other contractual obligations.
The price of our Class A Common Stock and our warrants may fluctuate due to a variety of factors, including: • changes in the industries in which we and our customers operate; • variations in our operating performance and the performance of our competitors in general; • material and adverse impact of the COVID-19 pandemic on the markets and the broader global economy; • actual or anticipated fluctuations in our quarterly or annual results of operation; • publication of research reports by securities analysts about us or our competitors or our industry; • the public’s reaction to our press releases, our other public announcements, and our filings with the SEC; • our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; • additions and departures of key personnel; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; Table of Contents • the volume of shares of our Class A Common Stock available for public sale; and • general economic and political conditions such as recessions, interest rates, fuel prices and general inflationary pressures, foreign currency fluctuations, international tariffs, social, political, and economic risks, and acts of war or terrorism.
The value of our securities, including our Class A Common Stock and our warrants, may fluctuate due to a variety of factors, including: • changes in the industries in which we and our customers operate; • variations in our operating performance and the performance of our competitors in general; Table of Content s • actual or anticipated fluctuations in our quarterly or annual results of operation; • publication of research reports by securities analysts about us or our competitors or our industry; • the public’s reaction to our press releases, our other public announcements, and our filings with the SEC; • our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; • additions and departures of key personnel; • changes in laws and regulations affecting our business; • commencement of, or involvement in, litigation involving us; • changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; • the volume of shares of our Class A Common Stock available for public sale; and • general economic and political conditions such as recessions, interest rates, fuel prices and general inflationary pressures, foreign currency fluctuations, international tariffs, social, political, and economic risks, and acts of war or terrorism.
The CCPA, which took effect on January 1, 2020, requires companies that process information of California residents to make new disclosures to consumers about their data collection, use and sharing practices, allows consumers to opt out of the sale of personal information with third parties and prohibits covered businesses from discriminating against California residents (for example, charging more for services) for exercising any of their rights under the CCPA.
The CCPA, requires companies that process information of California residents to make new disclosures to consumers about their data collection, use and sharing practices, allows consumers to opt out of the sale of personal information with third parties and prohibits covered businesses from discriminating against California residents (for example, charging more for services) for exercising any of their rights under the CCPA.
Changes to our DTC business designed to attract new customers and retain existing customers, including, but not limited to expanded shopping personalization, non-subscription options, and user generated and editorial content may not perform as well as our historical DTC platform which could negatively impact our results of operations.
Changes to our DTC business designed to attract new customers and retain existing customers, including, but not limited to expanded shopping personalization, non-subscription options, and user generated and editorial content may not perform as well as our historical DTC platform which could negatively impact our results of operations. We recently updated our e-commerce experience.
As a result, unless our stock price exceeds $3.07, we will be unable to sell the full $100.0 million commitment to Yorkville without seeking Table of Contents stockholder approval to issue additional shares in excess of the Exchange Cap.
As a result, unless our stock price exceeds $15.33, we will be unable to sell the full $100.0 million commitment to Yorkville without seeking stockholder approval to issue additional shares in excess of the Exchange Cap.
The Public Warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us.
Table of Content s The Public Warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us.
Our revenue has fluctuated for a variety of reasons, including as a result of adverse market conditions due to the COVID-19 pandemic and the associated imposition and easing of restrictions on retail and travel opportunities; the seasonality of market transactions; our success in attracting new and maintaining relationships with existing retail and ecommerce partners; our Table of Contents success in executing on our strategy and the impact of any changes in our strategy; the timing and success of product launches, including new products that we may introduce; the success of our marketing efforts; general market conditions; disruptions or defects in our technology platform, such as privacy or data security breaches, errors in our software or other incidents that impact the availability, reliability, or performance of our platform; the impact of competitive developments and our response to those developments; supply chain issues; and our ability to recruit and retain employees.
Our revenue has fluctuated for a variety of reasons, including the seasonality of market transactions; our success in attracting new and maintaining relationships with existing retail and ecommerce partners; our success in executing on our strategy and the impact of any changes in our strategy; the timing and success of product launches, including new products that we may introduce; the success of our marketing efforts; general market conditions; disruptions or defects in our technology platform, such as privacy or data security breaches, errors in our software or other incidents that impact the availability, reliability, or performance of our platform; the impact of competitive developments and our response to those developments; supply chain issues; and our ability to recruit and retain employees.
The continued growth and expansion of our business, if any, depends on a number of factors, including our ability to increase awareness of our brand and successfully compete with other companies; price our products effectively so that we are able to attract new consumers and expand sales to our existing consumers; expand distribution to new retail partners; continue to innovate and introduce new products; maintain and improve our technology platform supporting our e-commerce business; expand our supplier and fulfillment capacities; expand internationally; and maintain quality control over our product offerings.
Our ability to achieve profitable growth in the future depends on a number of factors, including our ability to increase awareness of our brand and successfully compete with other companies; price our products effectively so that we are able to attract new consumers and expand sales to our existing consumers; expand distribution to new retail partners; continue to innovate and introduce new products; maintain and improve our technology platform supporting our e-commerce business; expand our supplier and fulfillment capacities; drive operational efficiency; and maintain quality control over our product offerings.
We will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations. Following the consummation of the Business Combination, we now face increased legal, accounting, administrative and other costs and expenses as a public company that we did not incur as a private company.
We will face significant expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition and results of operations. As a publicly-traded company, we now face increased legal, accounting, administrative and other costs and expenses that we did not incur as a private company.
Some of the factors that may negatively influence consumer spending include high levels of unemployment; higher consumer debt levels; reductions in net worth, declines in asset values, and related market uncertainty; home foreclosures and reductions in home values; fluctuating interest rates and credit availability; global pandemics, including the COVID-19 pandemic and the loosening of restrictions as the pandemic conditions improve; fluctuating fuel and other energy costs; fluctuating commodity prices; the high rate of inflation and general uncertainty regarding the overall future political and economic environment.
Some of the factors that may negatively influence consumer spending include high levels of unemployment; higher consumer debt levels; reductions in net worth, declines in asset values, and related market uncertainty; home foreclosures and reductions in home values; fluctuating interest rates and credit availability; fluctuating fuel and other energy costs; fluctuating commodity prices; the high rate of inflation and general uncertainty regarding the overall future political and economic environment.
Our retail operations were established in 2021 and include sales to retail stores and their related websites. The success of our business is largely dependent on our continuing development of strong relationships with major retail chains. Despite our expansion into additional retailers, Target remains our largest retail partner, and our experience operating through the retail channel is limited.
Our retail operations were established in 2021 and include sales to retail stores and their related websites. Our future growth in initiatives depend in part on our continuing development of strong relationships with major retail chains. Despite our expansion into additional retailers, Target remains our largest retail partner, and our experience operating through the retail channel is limited.
Outstanding Public Warrants and Private Placement Warrants to purchase an aggregate of 14,750,000 shares of our Class A Common Stock may become exercisable in accordance with the terms of the warrant agreement governing those securities with an exercise price of $11.50 per share.
Outstanding Public Warrants and Private Placement Warrants to purchase an aggregate of 2,800,146 shares of our Class A Common Stock may become exercisable in accordance with the terms of the warrant agreement governing those securities with an exercise price of $57.50 per share.
We utilize cloud services from third-party data center facilities operated by AWS.
We utilize cloud services from third-party data center facilities operated by Amazon Web Services, or AWS.

… 145 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+1 added−0 removed0 unchanged
Biggest changeGiven our commitment to a hybrid workforce model and reductions in headcount, we are actively marketing a portion of this space for sublease. We also lease three fulfillment centers in Pennsylvania, Nevada and Missouri. These leases represent approximately a combined 657,000 square feet. We believe our current properties to be sufficient for our needs.
Biggest changeWe plan to close our Missouri location in the second quarter of 2024 to optimize for cost and operational efficiencies. The remaining leases represent approximately a combined 518,000 square feet of space. We believe our current properties are more than sufficient for our needs.
Item 2. Properties All of our physical properties are located within the United States. Our corporate headquarters are in San Francisco, California, where we lease approximately 38,800 rentable square feet of office space. The lease will expire on May 31, 2027.
Item 2. Properties All of our physical properties are located within the United States. Our corporate headquarters are in San Francisco, California where we leased approximately 38,800 square feet of office space.
Added
In March 2024, we terminated the old lease and entered into a new lease reducing the amount of office space we lease in the same building to approximately 7,800 rentable square feet. That lease will expire on May 31, 2027. We lease three fulfillment centers in Pennsylvania, Nevada and Missouri.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+3 added−3 removed0 unchanged
Biggest changeRisk Factors”, the Consumer Protection Division of the Santa Clara County District Attorney’s Office, in conjunction with other county and city prosecutors, is currently investigating our automatic renewal practices, and the Federal Trade Commission is currently investigating our billing and automatic renewal practices. As of the date of this filing, no legal proceeding has commenced regarding these investigations. Item 4.
Biggest changeAs noted in “Item 1A Risk Factors,” the Consumer Protection Division of the Santa Clara County District Attorney’s Office, in conjunction with other county and city prosecutors, is currently investigating our automatic renewal practices, and the Federal Trade Commission is currently investigating our billing and automatic renewal practices.
Removed
Item 3. Legal Proceedings From time to time, we are subject to various claims, charges and litigation matters that arise in the ordinary course of business. We believe these actions are a normal incident of the nature and kind of business in which we are engaged.
Added
Item 3. Legal Proceedings We have become, and may in the future become, subject to various legal claims, charges and litigation matters. If we are found to have violated laws, rules or regulations we could be subject to various fines, penalties and/or damages awards and our business, operating condition and financial results could be harmed.
Removed
While it is not feasible to predict the outcome of these matters with certainty, we do not believe that any asserted or unasserted legal claims or proceedings, individually or in the aggregate, will have a material adverse effect on our business, financial condition, results of operations or prospects. As noted in “Item 1A.
Added
In addition, as a part of litigation, we may be Table of Content s enjoined from certain business practices we have conducted historically, which could harm our business, operating results and financial condition.
Removed
Mine Safety Disclosures None Table of Contents Part II
Added
As of the date of this filing, no legal proceeding has commenced regarding these investigations. Item 4. Mine Safety Disclosures None Table of Content s Part II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 4. Mine Safety Disclosures 45 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 46 Item 6. Selected Financial Data 46 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 46 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 69 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 44 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 45 Item 6. Selected Financial Data 45 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 45 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 64 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−2 removed4 unchanged
Biggest changeRecent Sales of Unregistered Securities Our unregistered sales of equity securities during the year ended December 31, 2022 were previously included in our Quarterly Report on Form 10-Q filed on November 10, 2022 and our Current Report on Form 8-K filed on December 27, 2022.
Biggest changeSecurities Authorized For Issuance Under Equity Compensation Plans See Part III, Item 12 of this Annual Report for the required information. Recent Sales of Unregistered Securities Our unregistered sales of equity securities during the year ended December 31, 2023 were previously included in our Current Report on Form 8-K filed on August 14, 2023.
Holders of Record As of December 31, 2022, there were 402 and 332 stockholders of record of our Class A Common Stock and Class B common stock, respectively.
Holders of Record As of December 31, 2023, there were 366 and 335 stockholders of record of our Class A Common Stock and Class B common stock, respectively.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock and Public Warrants are currently listed on the NYSE under the ticker symbol “GROV” and “GROV.WS,” respectively.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A Common Stock are currently listed on the NYSE under the ticker symbol “GROV”. There is no public trading market for our Class B common stock. The Company’s public warrants trade on an over-the-counter exchange.
Removed
VGII's units, public shares, and public warrants were listed on the NYSE under the ticker symbols "VGII.U," “VGII,” and “VGII.WS.” respectively prior to the Business Combination. There is no public trading market for our Class B common stock.
Removed
Securities Authorized For Issuance Under Equity Compensation Plans See Part III, Item 12 of this Annual Report for the required information.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

122 edited+33 added−80 removed57 unchanged
Biggest changeWe recognize interest and penalties related to unrecognized tax benefits, if any, as income tax expense. 54 Table of Contents Results of Operations The following table sets forth our results of operations for each period presented: Year Ended December 31, 2022 2021 2020 (in thousands) Revenue, net $ 321,527 $ 383,685 $ 364,271 Cost of goods sold 166,875 195,181 188,267 Gross profit 154,652 188,504 176,004 Operating expenses: Advertising 66,269 107,313 55,547 Product development 22,503 23,408 18,655 Selling, general and administrative 206,863 186,638 168,295 Operating loss (140,983) (128,855) (66,493) Interest expense 9,685 5,202 5,607 Loss on extinguishment of debt 4,663 1,027 — Change in fair value of Additional Shares liability 727 — — Change in fair value of Earn-Out liability (66,359) — — Change in fair value of Public and Private Placement Warrants liability (5,900) — — Other expense, net 3,862 760 119 Interest and other expense (income), net (53,322) 6,989 5,726 Loss before provision for income taxes (87,661) (135,844) (72,219) Provision for income taxes 54 52 41 Net loss $ (87,715) $ (135,896) $ (72,260) The following table sets forth our statements of operations data expressed as a percentage of revenue: Year Ended December 31, 2022 2021 2020 (as a percentage of revenue) Revenue, net 100 % 100 % 100 % Cost of goods sold 52 51 52 Gross profit 48 49 48 Operating expenses: Advertising 21 28 15 Product development 7 6 5 Selling, general and administrative 64 49 46 Operating loss (44) (34) (18) Interest expense 3 1 2 Loss on extinguishment of debt 1 — — Change in fair value of Additional Shares liability — — — Change in fair value of Earn-Out liability (21) — — Change in fair value of Public and Private Placement Warrants liability (2) — — Other expense, net 1 — — Interest and other expense (income), net (17) 1 2 Loss before provision for income taxes (27) (35) (20) Provision for income taxes — — — Net loss (27) % (35) % (20) % 55 Table of Contents Comparisons of the Year Ended December 31, 2022 and December 31, 2021 Revenue, Net Year Ended December 31, Change 2022 2021 Amount % (in thousands) Revenue, net: Grove Brands $ 154,854 $ 187,055 $ (32,201) (17) % Third-party products 166,673 196,630 $ (29,957) (15) % Total revenue, net $ 321,527 $ 383,685 $ (62,158) (16) % Revenue decreased by $62.2 million, or 16% for the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily driven by a decrease in DTC Total Orders caused by a reduction in DTC Active Customers.
Biggest changeWe recognize interest and penalties related to unrecognized tax benefits, if any, as income tax expense. 52 Table of Contents Results of Operations The following table sets forth our results of operations for each period presented: Year Ended December 31, 2023 2022 2021 (in thousands) Revenue, net $ 259,278 $ 321,527 $ 383,685 Cost of goods sold 121,919 166,875 195,181 Gross profit 137,359 154,652 188,504 Operating expenses: Advertising 21,292 66,269 107,313 Product development 16,401 22,503 23,408 Selling, general and administrative 134,929 206,863 186,638 Operating loss (35,263) (140,983) (128,855) Non-operating expenses: Interest expense 16,077 9,685 5,202 Loss on extinguishment of debt — 4,663 1,027 Changes in fair value of derivative liabilities (216) (71,532) — Other expense (income), net (7,930) 3,862 760 Total non-operating expenses (income), net 7,931 (53,322) 6,989 Loss before provision for income taxes (43,194) (87,661) (135,844) Provision for income taxes 38 54 52 Net loss $ (43,232) $ (87,715) $ (135,896) The following table sets forth our statements of operations data expressed as a percentage of revenue: Year Ended December 31, 2023 2022 2021 (as a percentage of revenue) Revenue, net 100 % 100 % 100 % Cost of goods sold 47 52 51 Gross profit 53 48 49 Operating expenses: Advertising 8 21 28 Product development 6 7 6 Selling, general and administrative 52 64 49 Operating loss (13) (44) (34) Non-operating expenses: Interest expense 6 3 1 Loss on extinguishment of debt — 1 — Changes in fair value of derivative liabilities — (22) — Other expense (income), net (3) 1 — Total non-operating expenses (income), net 3 (17) 1 Loss before provision for income taxes (17) (27) (35) Provision for income taxes — — — Net loss (17) % (27) % (35) % 53 Table of Contents Comparisons of the Year Ended December 31, 2023 and December 31, 2022 Revenue, Net Year Ended December 31, Change 2023 2022 Amount % (in thousands) Revenue, net: Grove Brands $ 119,006 $ 154,854 $ (35,848) (23) % Third-party products 140,272 166,673 $ (26,401) (16) % Total revenue, net $ 259,278 $ 321,527 $ (62,249) (19) % Revenue decreased by $62.2 million, or 19% for the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily driven by a decrease in DTC Total Orders and in DTC Active Customers, which were due primarily to the reduction in advertising spend, partially offset by increases in DTC Net Revenue Per Order.
The change in active customers in a reporting period captures both the inflow of new customers as well as the outflow of customers who have not made a purchase in the last 364 days. We view the number of active customers as one of the key indicators of our growth of our DTC channel.
The change in active customers in a reporting period captures both the inflow of new customers as well as the outflow of customers who have not made a purchase in the last 364 days. We view the number of active customers as one of the key indicators of growth in our DTC channel.
We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue. Because Adjusted EBITDA excludes these elements that are otherwise included in our GAAP financial results, this measure has limitations when compared to net loss determined in accordance with GAAP. Further, Adjusted EBITDA is not necessarily comparable to similarly titled measures used by other companies.
We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net revenue. Because Adjusted EBITDA excludes these elements that are otherwise included in our GAAP financial results, this measure has limitations when compared to net loss determined in accordance with GAAP. Further, Adjusted EBITDA is not necessarily comparable to similarly titled measures used by other companies.
The shares of our common stock that may be issued under the SEPA may be sold by us to the Yorkville at our discretion from time to time and sales of our common stock under the SEPA will depend upon market conditions and other factors.
The shares of our common stock that may be issued under the SEPA may be sold by us to Yorkville at our discretion from time to time and sales of our common stock under the SEPA will depend upon market conditions and other factors.
Provision for Income Taxes We account for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are determined based on the difference between the consolidated financial statements and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
Provision for Income Taxes We account for income taxes under the asset and liability method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statements and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
Further, if there are outstanding obligations relating to the Structural Debt Facility on July 21, 2025, representing the thirty-month anniversary of such closing, we have agreed to issue to the third-party lenders and certain of their affiliates the aggregate number of shares of our Class A Common Stock equal to $9,900,000, divided by the lower of (i) $2.00 and (ii) the volume weighted average price of our Class A Common Stock for the sixty trading days prior to such date as further described in the related issuance agreements of our Class A Common Stock ("Structural Subsequent Shares”).
Further, if there are outstanding obligations relating to the Structural Debt Facility on July 21, 2025, representing the thirty-month anniversary of such closing, we have agreed to issue to the third-party lenders and certain of their affiliates the aggregate number of shares of our Class A Common Stock equal to $9,900,000, divided by the lower of (i) $10.00 and (ii) the volume weighted average price of our Class A Common Stock for the sixty trading days prior to such date as further described in the related issuance agreements of our Class A Common Stock ("Structural Subsequent Shares”).
Advertising Advertising expenses are expensed as incurred and consist primarily of our customer acquisition costs associated with online advertising, as well as advertising on television, direct mail campaigns and other media. Costs associated with the production of advertising are expensed when the first advertisement is shown.
Advertising Advertising costs are expensed as incurred and consist primarily of our customer acquisition costs associated with online advertising, as well as advertising on television, direct mail campaigns and other media. Costs associated with the production of advertising are expensed when the first advertisement is shown.
We recognize the benefits of tax-return positions in the consolidated financial statements when they are more likely than not to be sustained by the taxing authority, based on the technical merits at the reporting date.
We recognize the benefits of tax-return positions in the financial statements when they are more likely than not to be sustained by the taxing authority, based on the technical merits at the reporting date.
Ability To Grow our Brand Awareness Our brand is integral to the growth of our business and is essential to our ability to engage with our community. Our performance will depend on our ability to attract new customers and encourage consumer spending across our product portfolio.
Ability To Grow our Brand Awareness Our brand is integral to the growth of our business and is essential to our ability to engage with our community. Our performance will depend on our ability to profitably attract new customers and encourage consumer spending across our product portfolio.
Significant inputs and assumptions include: Fair value of Common Stock – The fair value of the shares of common stock underlying our stock options has been determined based on market prices 67 Table of Contents Expected Term – The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) Expected Volatility – Because we were privately held prior to the Business Combination and there was no active trading market for our common stock, the expected volatility is estimated based on the average volatility for publicly traded companies that we consider to be comparable, over a period equal to the expected term of the stock option grants.
Significant inputs and assumptions include: Fair value of Common Stock – The fair value of the shares of common stock underlying our stock options has been determined based on market prices Expected Term – The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term) Expected Volatility – Because we were privately held prior to the Business Combination and there was no active trading market for our common stock, the expected volatility is estimated based on the average volatility for publicly traded companies that we consider to be comparable, over a period equal to the expected term of the stock option grants.
The applicable margin for Siena Revolver borrowings is based on the Borrowers’ monthly average principal balance outstanding and ranges from 2.75% to 4.50% per annum in the case of Base Rate Borrowings and 3.75% to 5.50% per annum in the case of Term SOFR borrowings The Siena Revolver also contains various financial covenants we must maintain to avoid an Event of Default, as defined by the agreement, including a subjective acceleration clause in the event that Siena determines that a material adverse change has or will occur with the business.
The applicable margin for Siena Revolver borrowings is based on the Borrowers’ monthly average principal balance outstanding and ranges from 2.75% to 4.50% per annum in the case of Base Rate Borrowings and 3.75% to 5.50% per annum in the case of Term SOFR borrowings The Siena Revolver also contains various financial covenants we must maintain to avoid an Event of Default, as defined by the agreement, including a subjective acceleration clause in the event that Siena determines that a material 58 Table of Contents adverse change has or will occur with the business.
On March 31, 2022, VGAC II entered into the a Subscription Agreement with Corvina Holdings Limited (the “Backstop Investor”), where the Backstop Investor agreed to purchase, on the closing date of the Business Combination, certain shares of Class A Common Stock at a purchase price of $10.00 per share (“Backstop Tranche 2 Shares”) for aggregate gross proceeds in an amount equal to (x) $22.5 million minus (y) the amount of aggregate cash remaining in VGAC II’s trust account, after deducting any amounts paid to VGAC II shareholders who exercise their redemption rights in connection with the Business Combination.
On March 31, 2022, VGAC II entered into a Subscription Agreement with Corvina Holdings Limited (the “Backstop Investor”), where the Backstop Investor agreed to purchase, on the closing date of the Business Combination, certain shares of Class A Common Stock at a purchase price of $50.00 per share (“Backstop Tranche 2 Shares”) for aggregate gross proceeds in an amount equal to (x) $22.5 million minus (y) the amount of aggregate cash remaining in VGAC II’s trust account, after deducting any amounts paid to VGAC II shareholders who exercised their redemption rights in connection with the Business Combination.
To help induce first-time customers to purchase on our DTC platform, we generally offer higher discounts and free product offerings, and as a result our overall margins can be adversely affected in periods of rapid new customer acquisition.
To help motivate first-time customers to purchase on our DTC platform, we generally offer higher discounts and free product offerings, and as a result our overall margins can be adversely affected in periods of rapid new customer acquisition.
Our gross profit and gross margin may not be comparable with that of other retailers because we include certain fulfillment related costs in selling, general, and administrative expenses while other retailers may include these expenses in cost of merchandise sold. Operating Expenses Our operating expenses consist of advertising, product development, and selling, general and administrative expenses.
Our gross profit and gross margin may not be comparable with that of other retailers because we include certain fulfillment related costs in selling, general, and administrative expenses while other retailers may include these expenses in cost of goods sold. Operating Expenses Our operating expenses consist of advertising, product development, and selling, general and administrative expenses.
Such covenants include (i) maintaining a minimum of $57.0 million in unrestricted cash at all times and (ii) achieving certain revenue targets for the trailing four quarter period beginning with the fiscal quarter ending March 31, 2023.
Such covenants include (i) maintaining a minimum of $57.0 million in unrestricted cash at all times and (ii) achieving certain revenue targets for the trailing four quarter period beginning with the fiscal quarter ended March 31, 2023.
For information on our contractual obligations for operating leases, see “Leases” in Note 8 of the Notes to our audited consolidated financial statements as of and for the years ended December 31, 2022 and December 31, 2021 included in this filing on Form 10-K.
For information on our contractual obligations for operating leases, see “Leases” in Note 8 of the Notes to our audited consolidated financial statements as of and for the years ended December 31, 2023 and December 31, 2022 included in this filing on Form 10-K.
Under the terms of the HGI Subscription Agreement, the Company is required to file a registration statement for the Subscribed Shares upon the Company becoming eligible to file a registration statement on Form S-3 and in any event prior to July 15, 2023 (the “Subscribed Shares Registration Statement”).
Under the terms of the HGI Subscription Agreement, the Company was required to file a registration statement for the Subscribed Shares upon the Company becoming eligible to file a registration statement on Form S-3 and in any event prior to July 15, 2023 (the “Subscribed Shares Registration Statement”).
We expect to continue to opportunistically seek access to additional funds by utilizing the SEPA, through additional public or private equity offerings or debt financings, through partnering or other strategic arrangements, through the exercise of certain of our warrants, or a combination of the foregoing.
We expect to continue to opportunistically seek access to additional funds by utilizing the SEPA, Siena Revolver, through additional public or private equity offerings or debt financings, through partnering or other strategic arrangements, through the exercise of certain of our warrants, or a combination of the foregoing.
Our significant accounting policies are described in Note 2 to our audited consolidated financial statements as of and for the years ended December 31, 2022, 2021 and 2020 included in this Annual Report on Form 10-K.
Our significant accounting policies are described in Note 2 to our audited consolidated financial statements as of and for the years ended December 31, 2023, 2022 and 2021 included in this Annual Report on Form 10-K.
Changes in this assumption, including the selection of or quantities of companies with the peer company set, could materially affect the estimate of the fair value of these instruments and the related change in fair value of these instruments that will be recorded in the Company’s consolidated statements of operations.
Changes in this assumption, including the selection of or quantities of companies with the peer company set, could materially affect the estimate of the fair value of these instruments and the related change in fair value of these instruments that will be recorded in our consolidated statements of operations.
Our DTC platform remains a core part of our strategy and customer value proposition in addition to providing key data and customer feedback driving our innovation process. We kicked off our expansion into brick and mortar retail in April 2021 with the launch of a curated assortment of Grove Co. products at Target.
Our DTC platform remains a core part of our strategy and customer value proposition in addition to providing key data and customer feedback driving our innovation process. We kicked off our expansion into brick and mortar retail in April 2021 with the launch of a 48 Table of Contents curated assortment of Grove Co. products at Target.
The Structural Derivative Liability is a compound embedded derivative related to features within the Structural Facility, including an increase in interest rate upon an event of default and the contingent issuance of Structural Subsequent Shares as defined in Note 6, Debt in our financial statements, included elsewhere in this Form 10-K.
The Structural Derivative Liability is a compound embedded derivative related to features within the Structural Facility, including an increase in interest rate upon an event of default and the contingent issuance of Structural Subsequent Shares as defined in Note 6, Debt in our financial statements, included elsewhere in this Annual Report on Form 10-K.
The Base Rate is defined as the greater of: (1) Prime Rate as published in the Wall Street Journal, (2) Federal Funds Rate plus 0.5% and (3) 5.0% per annum.
The Base Rate is defined as the greatest of: (1) Prime Rate as published in the Wall Street Journal, (2) Federal Funds Rate plus 0.5% and (3) 5.0% per annum.
In addition, we believe that Adjusted EBITDA, when taken together with our financial results presented in accordance with GAAP, 51 Table of Contents provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook.
GAAP (“GAAP”). In addition, we believe that Adjusted EBITDA, when taken together with our financial results presented in accordance with GAAP, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook.
Structural Derivative Liability On December 21, 2022, in connection with the closing of the Structural Debt Facility, we issued to the third-party lenders and certain of their affiliates a total of 4,950,000 shares of our Class A Common Stock (the “Structural Closing Shares”).
Structural Derivative Liability On December 21, 2022, in connection with the closing of the Structural Debt Facility, we issued to the third-party lenders and certain of their affiliates a total of 990,000 shares of our Class A Common Stock (the “Structural Closing Shares”).
Cash from operations could be affected by our customers and other risks detailed in the section of our titled “Risk Factors.” As a result, we will need additional capital resources to execute strategic initiatives and fund our operations, prior to achieving break even or positive operating cash flow.
Cash from operations could be affected by our customers and other risks detailed in the section of our titled “Risk Factors.” As a result, we expect to require additional capital resources to execute strategic initiatives and fund our operations, prior to achieving break even or positive operating cash flow.
In addition, our Class A Common Stock trading price may not exceed the respective exercise prices of our Public Warrants, Private Placement Warrants, warrants granted to HGI (as defined below) and/or our Legacy Grove Warrants before the respective warrants expire, and therefore we may not receive any proceeds 62 Table of Contents from the exercise of warrants to fund our operations.
In addition, our Class A Common Stock trading price may not exceed the respective exercise prices of our Public Warrants, Private Placement Warrants, warrants granted to HGI (as defined below), Volition Warrants, and/or our Legacy Grove Warrants before the respective warrants expire, and therefore we may not receive any proceeds from the exercise of warrants to fund our operations.
Most customers purchase a combination of products recommended by us based on previous purchases and new products discovered through marketing or catalog browsing. Customers can have orders auto-shipped to them on a specified date or shipped immediately through an option 52 Table of Contents available on the website and mobile application.
Most customers purchase a combination of products recommended by us based on previous purchases and new products discovered through marketing or catalog browsing. Customers can opt to have orders auto-shipped to them on a specified date or shipped immediately through an option available on the website and mobile application.
The Company estimated the expected volatility assumption using an average of the implied volatility of its publicly traded warrants and an implied volatility based on its peer companies. Inventories Inventory is recorded at the lower of weighted average cost and net realizable value. The cost of inventory consists of merchandise costs and inbound freight, net of any vendor allowances.
The Company estimated the expected volatility assumption using a weighted-average of the implied volatility of its publicly traded common stock and an implied volatility based on its peer companies. Inventories Inventory is recorded at the lower of weighted average cost and net realizable value. The cost of inventory consists of merchandise costs and inbound freight, net of any vendor allowances.
Additionally, in no event may we sell more than 32,557,664 shares of our common stock to Yorkville under the SEPA, which number of shares is equal to 19.99% of the shares of the Company's common stock outstanding immediately prior to the execution of the Equity Purchase Agreement (the “Exchange Cap”), unless we obtain stockholder approval to issue shares of common stock in excess of the Exchange Cap in accordance with applicable NYSE rules or comply with certain other requirements as described in the Equity Purchase Agreement.
Additionally, in no event may we sell more than 6,511,532 shares of our common stock to Yorkville under the SEPA, which number of shares is equal to 19.99% of the shares of the Company's common stock outstanding immediately prior to the execution of the Equity Purchase Agreement (the “Exchange Cap”), unless we obtain stockholder approval to issue shares of common stock in excess of the Exchange Cap in accordance with applicable NYSE rules or comply with certain other requirements as described in the Equity Purchase Agreement.
As a result, unless our average stock price under the SEPA exceeds $3.07, we will be unable to sell the full $100.0 million commitment to Yorkville without seeking stockholder approval to issue additional shares in excess of the Exchange Cap.
As a result, unless our average stock price under the SEPA exceeds $15.33, we will be unable to sell the full $100.0 million commitment to Yorkville without seeking stockholder approval to issue additional shares in excess of the Exchange Cap.
Due to higher interest rates on our Structural Debt Facility (as defined below) and increases in the prime rate, we anticipate cash payments for interest and interest expense to increase in the future.
Due to higher interest rates on our Structural Debt Facility (as defined below) and increases in the prime rate, we anticipate cash payments for interest and interest expense to fluctuate as interest rates change in the future.
Debt financing arrangements may require us to pledge certain assets or enter into covenants that could restrict our operations or our ability to pay dividends or other distributions on our common stock or incur further indebtedness.
Debt financing arrangements may require us to pledge certain assets or enter into covenants that could restrict our operations or our ability to pay dividends or other distributions on our common 57 Table of Contents stock or incur further indebtedness.
Investing Activities Net cash used in investing activities of $4.2 million, $5.8 million and $4.8 million for the years ended December 31, 2022, 2021, and 2020, respectively was due to purchases of property and equipment and capitalized software.
Investing Activities Net cash used in investing activities of $3.0 million, $4.2 million and $5.8 million for the years ended December 31, 2023, 2022, and 2021, respectively was due to purchases of property and equipment and capitalized software.
Additional Shares Liability On November 10, 2022, we entered into a subscription agreement (the “HGI Subscription Agreement”) with HCI Grove LLC (“HGI”), pursuant to which, among other things, we agreed to issue and sell, on November 15, 2022, to HGI 1,984,126 shares of our Class A Common Stock for aggregate proceeds of $2.5 million.
Additional Shares Liability On November 10, 2022, we entered into a subscription agreement (the “HGI Subscription Agreement”) with HCI Grove LLC (“HGI”), pursuant to which, among other things, we agreed to issue and sell, on November 15, 2023, to HGI 396,825 shares of our Class A Common Stock for aggregate proceeds of $2.5 million.
On December 7, 2021, concurrently with the execution of the Merger Agreement, VGAC II entered into subscription agreements with certain investors (the “PIPE Investors”) to which such investors collectively subscribed for an aggregate 47 Table of Contents of 8,707,500 shares of Class A Common Stock at $10.00 per share for aggregate gross proceeds of $87,075,000 (the “PIPE Investment”). 8,607,500 shares of Class A Common Stock have been issued for aggregate proceeds of $86,075,000, which consummated concurrently with the closing of the Business Combination.
On December 7, 2021, concurrently with the execution of the Merger Agreement, VGAC II entered into subscription agreements with certain investors (the “PIPE Investors”) to which such investors collectively subscribed for an aggregate of 1,741,500 shares of Class A Common Stock at $10.00 per share for aggregate gross proceeds of $87,075,000 (the “PIPE 46 Table of Contents Investment”). 1,721,500 shares of Class A Common Stock have been issued for aggregate proceeds of $86,075,000, which consummated concurrently with the closing of the Business Combination.
On March 10, 2023, we entered into the Siena Revolver (defined below) with Siena Lending Group, LLC (“Siena”) which permits us to receive funding through a revolving line of credit up to $35.0 million in aggregate principal amount.
Siena Revolver In March 2023, we entered into the Siena Revolver with Siena Lending Group, LLC which permits us to receive funding through a revolving line of credit up to $35.0 million in aggregate principal amount.
Other expense (income), net consists primarily of losses or gains on remeasurement of our convertible preferred stock warrant liabilities, changes in fair values of Additional Shares, Earn-Out Shares and Public and Private Placement Warrant liabilities, and transaction costs al located to derivative liabilities upon Business Combination.
Other income, net consists primarily of changes in fair values of Additional Shares, Earn-Out Shares, Public and Private Placement Warrant and Structural Derivative liabilities, transaction costs allocated to derivative liabilities upon Business Combination, interest income and losses or gains on remeasurement of our convertible preferred stock warrant liabilities.
Such shares are subject to vesting and forfeitures based upon certain triggering events that can occur during a period of ten years following the closing of the Business Combination (the “Earn-Out Period”).
The remaining 2,602,412 shares are subject to vesting and forfeitures based upon certain triggering events that can occur during a period of ten years following the closing of the Business Combination (the “Earn-Out Period”).
To date, we have funded our operations principally through convertible preferred stock and contingently redeemable convertible common stock financings, the incurrence of debt and the Closing of the Business Combination. We received cash proceeds, net of transaction costs from the Closing of the Business Combination on June 16, 2022 of $72.7 million.
To date, we have funded our operations principally through convertible preferred stock and common stock financings, the incurrence of debt and the Closing of the Business Combination. We received cash proceeds, net of transaction costs from the Closing of the Business Combination on June 16, 2022, of $86.0 million.
The expected volatility assumption is estimated using an average of the implied volatility of our publicly traded warrants and an implied volatility based on our peer companies estimated using the Monte Carlo simulation of the stock prices based on the implied market volatility. The Company has historically been a private company and has limited company-specific historical and implied volatility information.
The expected volatility assumption is estimated using an average of the implied volatility of our publicly traded common stock and an implied volatility based on our peer companies estimated using the Monte Carlo simulation of the stock prices based on the implied market volatility. We have historically been a private company with limited company-specific historical and implied volatility information.
Our ability to execute on these key value-driving areas for consumers, and to remain competitive and compelling in a post-pandemic landscape, are necessary for our future growth. Failure to achieve these things would materially impact our operating results and financial performance.
Our ability to execute on these key value-driving areas for consumers, and to remain competitive and compelling in a post-pandemic landscape, are necessary for our future growth. A lack of success in these areas would materially impact our operating results and financial performance.
Customers purchase products through the website or mobile application through a combination of directly selecting items from the catalog, items that are suggested by our recurring shipment recommendation engine, and featured products that appear in marketing on-site, in emails and on our mobile app.
Customers purchase products through the website or mobile application through a combination of directly selecting items from the catalog, items that are suggested by our recommendation engine, and featured products that appear 50 Table of Contents in marketing on-site, in emails and on our mobile application.
The triggering events that will result in the vesting of the Grove Earn-Out Shares during the Earn-Out Period are the following: • 7,000,173 shares will vest if the share price of our Class A Common Stock is greater than or equal to $12.50 over any 20 trading days within any consecutive 30 trading day period during the Earn-Out Period; • 6,999,787 shares will vest, including the shares subject to the $12.50 threshold if not previously vested, if the share price of our Class A Common Stock is greater than or equal to $15.00 over any 20 trading days within any 30 consecutive trading day period during the Earn-Out Period; and 65 Table of Contents • If, during the Earn-Out Period, there is a Change of Control Transaction (as defined in the Merger Agreement), then all remaining triggering events that have not previously occurred and the related vesting conditions shall be deemed to have occurred.
The triggering events that will result in the vesting of the Grove Earn-Out Shares during the Earn-Out Period are the following: 60 Table of Contents • 1,301,206 shares will vest if the share price of our Class A Common Stock is greater than or equal to $62.50 over any 20 trading days within any consecutive 30 trading day period during the Earn-Out Period; • 1,301,206 shares will vest, including the shares subject to the $62.50 threshold if not previously vested, if the share price of our Class A Common Stock is greater than or equal to $75.00 over any 20 trading days within any 30 consecutive trading day period during the Earn-Out Period; and • If, during the Earn-Out Period, there is a Change of Control Transaction (as defined in the Merger Agreement), then all remaining triggering events that have not previously occurred and the related vesting conditions shall be deemed to have occurred.
The Black-Scholes option-pricing model utilizes inputs and assumptions which involve inherent uncertainties and generally require significant judgment. As a result, if factors or expected outcomes change and significantly different assumptions or estimates are used, our stock-based compensation could be materially different.
The Black-Scholes option-pricing model utilizes inputs and assumptions which involve inherent uncertainties and generally require significant judgment. As a result, if factors or expected outcomes change and significantly different assumptions or estimates are used, our Public Warrant and Private Placement Warrant liabilities could be materially different.
Earn-Out Share Liability At the closing of the Business Combination, certain Legacy Grove shareholders were issued an aggregate of 13,999,960 shares of Grove Class B Common Stock (“Earn-Out Shares”).
Earn-Out Share Liability At the closing of the Business Combination, certain Legacy Grove shareholders were issued an aggregate of 2,799,696 shares of Grove Class B Common Stock (“Earn-Out Shares”).
In accordance with the loan agreement , Structural has been provided with the Company’s periodic financial statements and updated projections to facilitate their ongoing assessment of the Company. We believe the likelihood that lenders would exercise the subjective acceleration clause is remote.
In accordance with the loan agreement , Structural has been provided with the Company’s periodic financial statements and updated projections to facilitate their ongoing assessment of the Company. We believe the likelihood that lenders would exercise the subjective acceleration clause is remote. As of December 31, 2023, we were in compliance with the covenants under the Structural Debt Facility.
These costs are included within selling, general and administrative expenses in the statements of operations. We expect fulfillment costs to remain stable in the future on a per order basis, as compared to the 2022 fiscal year. Interest and Other Expense (Income), Net Interest expense consists primarily of interest expense associated with our debt financing arrangements.
These costs are included within selling, general and administrative expenses in the statements of operations. We expect fulfillment costs to be consistent with 2023 on a per order basis. Interest and Other Expense (Income), Net Interest expense consists primarily of interest expense associated with our debt financing arrangements.
The borrowing capacity under the Siena Revolver, which is subject to certain conditions, including our inventory and accounts receivable balances and other limitations as specified in the agreement, was $16.5 million on March 10, 2023, with an outstanding principal balance of $7.5 million.
The borrowing capacity under the Siena Revolver, which is subject to certain conditions, including our inventory and accounts receivable balances and other limitations as specified in the agreement. Additional borrowing capacity from the Siena Revolver was $8.1 million based on qualifying inventory and accounts receivable balances as of December 31, 2023, with an outstanding principal balance of $7.5 million.
We operate an online direct-to-consumer website and mobile application (“DTC platform”) where we both sell our Grove-owned brands (“Grove Brands”) and partner with other leading natural and mission-based CPG brands, providing consumers the best selection of curated products across many categories and brands.
Our omnichannel distribution strategy enables us to reach consumers where they want to shop. We operate an online direct-to-consumer website and mobile application (“DTC platform”) where we both sell our Grove-owned brands (“Grove Brands”) and partner with other leading natural and mission-based CPG brands, providing consumers with a selection of curated products across many categories and brands.
Ability to Drive Operating Efficiency and Leverage as We Scale We believe we are in the early stages of realizing a substantial opportunity to transform the consumer products industry into a force for human and environmental good by relentlessly creating and curating planet- first, high-performance brands and products.
Ability to Achieve Profitable Growth; Positive Cash Flow and Scale We believe we are in the early stages of realizing a substantial opportunity to transform the consumer products industry into a force for human and environmental good by relentlessly creating and curating planet-first, high-performance brands and products.
As of December 31, 2022, we had $18.7 million of enforceable and legally binding inventory purchase commitments predominantly due within one year.
As of December 31, 2023, we had $14.1 million of enforceable and legally binding inventory purchase commitments predominantly due within one year.
We expect product development costs as a percentage of revenue to be consistent with 2022 as we balance our investments in our proprietary technology, the expansion of our product line, innovative packaging and product improvements with revenue growth.
Product development costs also include allocated facilities, equipment, depreciation and overhead costs. We expect product development costs as a percentage of revenue to be consistent with 2023 as we balance our investments in our proprietary technology, the expansion of our product line, innovative packaging and product improvements with revenue growth.
The HGI Subscription Agreement also provides that we will issue additional shares (the “HGI Additional Shares”) of our Class A Common Stock to HGI in the event that the volume weighted average price of our Class A Common Stock is less than $1.26 during the three trading days commencing on the first trading day after (i) we file the Subscribed Shares Registration Statement (the “Registration Date”), (ii) the three-month anniversary of the Registration Date, (iii) the six-month anniversary of the Registration Date, or (iv) the nine-month anniversary of the Registration Date (“Measurement Periods” and each “Measurement Period”) upon HGI’s election to receive such additional shares, HGI may use all or a portion of each Subscribed Share once to determine the amount of any issuance of Additional Shares in connection with the Measurement Periods such that HGI may utilize, for example, half of the Subscribed Shares to receive further Additional Shares, and leave the remaining half of the Subscribed Shares available to utilize in connection with the remaining Measurement Periods.
The Subscribed Shares Registration statement was filed on July 14, 2023 and the Additional Shares liability was settled on August 1, 2023 (refer to Note 7, Common Stock and Warrants found in Item 8 of this Form 10-K) The HGI Subscription Agreement also provides that we would issue additional shares (the “HGI Additional Shares”) of our Class A Common Stock to HGI in the event that the volume weighted average price of our Class A Common Stock was less than $6.30 during the three trading days commencing on the first trading day after (i) we file the Subscribed Shares Registration Statement (the “Registration Date”), (ii) the three-month anniversary of the Registration Date, (iii) the six-month anniversary of the Registration Date, or (iv) the nine-month anniversary of the Registration Date (“Measurement Periods” and each “Measurement Period”) upon HGI’s election to receive such additional shares, HGI had the option to use all or a portion of each Subscribed Share once to determine the amount of any issuance of Additional Shares in connection with the Measurement Periods such that HGI could utilize, for example, half of the Subscribed Shares to receive further Additional Shares, and leave the remaining half of the Subscribed Shares available to utilize in connection with the remaining Measurement Periods.
To the extent our customers increasingly access our products through retail channels, we will need to innovate our modalities of customer engagement to maintain this important feedback loop.
To the extent our customers increasingly access our products through retail channels, we will need to find ways to maintain this important feedback loop.
(in thousands, except DTC Net Revenue Per Order and percentages) Year Ended December 31, 2022 2021 2020 Financial and Operating Data Grove Brands % Net Revenue 48 % 49 % 45 % DTC Total Orders 5,248 6,659 6,860 DTC Active Customers 1,377 1,640 1,732 DTC Net Revenue Per Order $ 59 $ 56 $ 53 Grove Brands % Net Revenue We define Grove Brands % Net Revenue as total net revenue across all channels attributable to Grove Brands, including: Grove Co., Honu, Peach, Rooted Beauty, and Superbloom divided by our total net revenue.
The following table presents our key operating metrics for the periods presented: (in thousands, except DTC Net Revenue Per Order and percentages) Year Ended December 31, 2023 2022 2021 Financial and Operating Data Grove Brands % Net Revenue 46 % 48 % 49 % DTC Total Orders 3,852 5,248 6,860 DTC Active Customers 920 1,377 1,640 DTC Net Revenue Per Order $ 64 $ 59 $ 56 Grove Brands % Net Revenue We define Grove Brands % Net Revenue as total net revenue across all channels attributable to Grove Brands, including: Grove Co., Honu, Peach, Rooted Beauty and Superbloom divided by our total net revenue.
We believe the core elements of continuing to grow our awareness, and thus increase our penetration, are highlighting our products’ qualities of being natural, sustainable and effective, the efficacy of our marketing efforts and the success of our continued retail rollout.
We believe the core elements of continuing to grow our brand awareness in a manner that increases our market penetration are highlighting our products’ qualities of being natural, sustainable and effective, the effectiveness of our marketing efforts and the success of our continued retail rollout.
The borrowing capacity under the Siena Revolver, which is subject to certain conditions, including our inventory and accounts receivable balances and other limitations as specified in the agreement, was $16.5 million on March 10, 2023.
The total borrowing capacity under the Siena Revolver is subject to certain conditions, including our inventory and accounts receivable balances and other limitations as specified in the agreement.
Product Development Product development expenses relate to costs related to the ongoing support and maintenance of our proprietary technology, including our DTC platform, as well as amortization of capitalized internally developed software, and relate to the product and packaging innovation in our Grove Brands products.
Product Development Product development expenses are related to the ongoing support and maintenance of our proprietary technology, including our DTC platform, as well as amortization of capitalized, internally developed software, and related to the product and packaging innovation in our Grove Brands products. Product development expenses consist primarily of personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expense.
We completed the Business Combination and PIPE Investment on June 16, 2022, pursuant to which we received total gross proceeds of $97.1 million, including proceeds from the issuance of Backstop Tranche 2 Shares. Key Factors Affecting Our Operating Performance We believe that the growth of our business and our future success are dependent on many factors.
We completed the Business Combination and PIPE Investment on June 16, 2022, pursuant to which we received total gross proceeds of $97.1 million, including proceeds from the issuance of Backstop Tranche 2 Shares.
We have successfully developed and launched over 500 individual products in recent years. The research, development, testing and improvement has been led by our R&D team, which includes chemists and formulators, who work closely with our Sustainability team.
Ability to Continue to Innovate in Products and Packaging Our continued product innovation is integral to our future growth. We have developed and launched over 500 individual products in recent years. The research, development, testing and improvement has been led by our research and development team, which includes experienced chemists and formulators, who work closely with our sustainability team.
Failure to effectively adapt to changes in online marketing dynamics or otherwise to attract customers on a cost- efficient basis would adversely impact our path to profitability and operating results.
Failure to effectively adapt to changes in online marketing dynamics or changes to our internet platform, or to otherwise attract customers on a cost-efficient basis would adversely impact our path to profitability and operating results. Recently, we have implemented a lower-spend strategy to optimize the cost of acquiring new customers.
To the extent we are successful in retail expansion over the next several years, we expect to see potential negative effects on gross margins resulting from the retail cost structure to be approximately offset by savings in fulfillment costs driven by bulk shipping to retailers versus individualized fulfillment to consumers, through our fulfillment centers. 48 Table of Contents Cost-Efficient Acquisition of New Customers and Retention of Existing Customers on our DTC Platform Our ability to attract new customers is a key factor for our future growth.
To the extent we are successful in retail expansion over the next several years, we expect to see potential negative effects on gross margins resulting from the retail cost structure to be approximately offset by savings in fulfillment costs driven by bulk shipping to retailers versus individualized fulfillment to consumers, through our fulfillment centers.
Historically, we have successfully acquired new customers through many online and offline marketing channels. In recent periods, changes in the algorithms used for targeting and purchasing online advertising, changes to privacy and online tracking, supply and demand dynamics in the market, and other factors have caused the cost of marketing on these channels to increase consistently.
In recent years, changes in the algorithms used for targeting and purchasing online advertising, changes to privacy and online tracking, supply and demand dynamics in the market, and other factors have caused the cost of marketing on these channels to increase consistently. We made changes in 2023 to our online purchase flow and subscription process.
Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2022 2021 2020 (in thousands) Net cash used in operating activities $ (96,261) $ (127,089) $ (83,656) Net cash used in investing activities (4,222) (5,768) (4,820) Net cash provided by financing activities 118,092 34,710 228,170 Net increase (decrease) in cash, cash equivalents and restricted cash $ 17,609 $ (98,147) $ 139,694 Operating Activities Net cash used in operating activities decreased by $30.8 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily attributable to an decrease in net loss, net of non-cash activities, of $22.6 million.
Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash used in operating activities $ (7,993) $ (96,261) $ (127,089) Net cash used in investing activities (2,985) (4,222) (5,768) Net cash provided by financing activities 9,856 118,092 34,710 Net increase (decrease) in cash, cash equivalents and restricted cash $ (1,122) $ 17,609 $ (98,147) Operating Activities Net cash used in operating activities decreased by $88.3 million for the year ended December 31, 2023, primarily attributable to a decrease in net loss, net of noncash activities, of $73.3 million.
We have incurred significant losses since inception and have an accumulated deficit of $577.9 million, working capital of $84.5 million and incurred negative cash flows from operating activities of $96.3 million for the year ended December 31, 2022.
We have incurred significant losses since inception. We have an accumulated deficit of $621.1 million and we incurred negative cash flows from operating activities of $8.0 million for the year ended December 31, 2023.
The Structural Debt Facility bears an annual rate of interest at the greater of 15.00% or 7.50% plus the prime rate, payable monthly. The principal repayment period commences on July 1, 2025 and continues until the maturity date of December 21, 2026. The Company may prepay all outstanding amounts under this facility at any time.
The principal repayment period commences on July 1, 2025 and continues until the maturity date of December 21, 2026. The Company may prepay all outstanding amounts under this facility at any time.
We calculate Adjusted EBITDA as net loss, adjusted to exclude: (1) stock-based compensation expense; (2) depreciation and amortization; (3) remeasurement of convertible preferred stock warrant liability; (4) changes in fair values of Additional Shares, Earn-out Shares and Public and Private Placement Warrant liabilities; (5) transaction costs allocated to derivative liabilities upon Business Combination; (6) interest expense; (7) interest income; (8) provision for income taxes, (9) restructuring expenses and (10) loss on extinguishment of debt.
We calculate Adjusted EBITDA as net income (loss), adjusted to exclude: stock-based compensation expense; depreciation and amortization; remeasurement of convertible preferred stock warrant liability; changes in fair values of derivative liabilities; transaction costs allocated to derivative liabilities upon closing of the Business Combination; interest income; interest expense; restructuring and severance related costs; loss on extinguishment of debt; provision for income taxes and certain litigation and legal settlement expenses.
We record inventory reserves based on the excess of the carrying value or average cost over the amount we expect to realize from the ultimate sale of the inventory. Stock-Based Compensation We recognize the cost of share-based awards granted to employees and non-employees based on the estimated grant-date fair value of the awards.
We record inventory reserves based on the excess of the carrying value or average cost over the amount we expect to realize from the ultimate sale of the inventory.
To achieve profitability over the longer term, we will need to leverage economies of scale in sourcing our products, generating brand awareness, acquiring customers, creating operating leverage over headcount and other overhead, and fulfilling orders.
To grow and achieve profitability over the longer term, we will need to expand our DTC business, continue to grow our retail presence and achieve scale that will allow us to drive efficiencies in generating brand awareness, acquiring customers, creating operating leverage over headcount and other overhead, and fulfilling orders.
Net cash used in operating activities increased by $43.4 million for the year ended December 31, 2021 compared to December 31, 2020 primarily attributable to an increase in net loss of $63.6 million.
Net cash used in operating activities decreased by $30.8 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily attributable to an decrease in net loss, net of non-cash activities, of $22.6 million.
Year Ended December 31, 2022 2021 2020 Reconciliation of Net Loss to Adjusted EBITDA (in thousands) Net loss $ (87,715) $ (135,896) $ (72,260) Stock-based compensation 45,660 14,610 7,762 Depreciation and amortization 5,716 4,992 4,115 Remeasurement of convertible preferred stock warrant liability (1,616) 1,234 964 Change in fair value of Additional Shares liability 727 — — Change in fair value of Earn-Out liability (66,359) — — Change in fair value of Public and Private Placement Warrants liability (5,900) — — Transaction costs allocated to derivative liabilities upon Business Combination 6,873 — — Interest income (521) — — Interest expense 9,685 5,202 5,607 Restructuring expenses (1) 8,879 — — Loss on extinguishment of debt 4,663 1,027 — Provision for income taxes 54 52 41 Total Adjusted EBITDA $ (79,854) $ (108,779) $ (53,771) Net loss margin (27.3) % (35.4) % (19.8) % Adjusted EBITDA margin (24.8) % (28.4) % (14.8) % (1) Restructuring expenses consist of $3.6 million of severance-related charges and $5.3 million related to right-of-use asset impairment charges in connection with our reorganizations.
Year Ended December 31, 2023 2022 2021 Reconciliation of Net Loss to Adjusted EBITDA (in thousands) Net loss $ (43,232) $ (87,715) $ (135,896) Stock-based compensation 15,513 45,660 14,610 Depreciation and amortization 5,824 5,716 4,992 Remeasurement of convertible preferred stock warrant liability — (1,616) 1,234 Changes in fair value of derivative liabilities (216) (71,532) — (Reduction of transaction costs) deferred offering costs allocated to derivative liabilities upon Business Combination (3,745) 6,873 — Interest income (3,773) (521) — Interest expense 16,077 9,685 5,202 Restructuring expenses (1) 3,811 8,879 — Loss on extinguishment of debt — 4,663 1,027 Provision for income taxes 38 54 52 Litigation and legal settlement expenses 520 — — Total Adjusted EBITDA $ (9,183) $ (79,854) $ (108,779) Net loss margin (16.7) % (27.3) % (35.4) % Adjusted EBITDA margin (3.5) % (24.8) % (28.4) % (1) Restructuring expenses for the year ended December 31, 2023 consisted of $1.3 million in severance-related charges and $2.5 million related to operating lease right-of-use and fixed asset impairment charges.
On July 18, 2022, we entered into the Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD. (“Yorkville”), whereby we have the right, but not the obligation, to sell to Yorkville up to $100.0 million of our shares of common stock at our request until July 18, 2025, subject to certain conditions.
(“Yorkville”), whereby we have the right, but not the obligation, to sell to Yorkville up to $100 million of our shares of common stock until July 18, 2025, subject to certain conditions.
Management estimated the expected volatility assumption using an average of the implied volatility of its publicly traded warrants and an implied volatility based on its peer companies.
Management estimated the expected volatility assumption using an average of the implied volatility of our publicly traded warrants (prior to their delisting by the NYSE) and an implied volatility based on a weighted-average of our publicly traded common stock and the publicly traded stock of our peer companies.
For stock option awards with service only vesting conditions, we recognize expenses on a straight-line basis over the requisite service period, which is generally the vesting period of the award. We estimate the grant-date fair value of the stock option awards with service only vesting conditions using the Black-Scholes option-pricing model.
Stock-Based Compensation We recognize the cost of share-based awards granted to employees and non-employees based on the estimated grant-date fair value of the awards. 62 Table of Contents For stock option awards with service only vesting conditions, we recognize expenses on a straight-line basis over the requisite service period, which is generally the vesting period of the award.
In 2022, we continued to expand into other retailers, including CVS, Kohl’s, Meijer, and Giant Eagle.
We continued to expand into other retailers, including Amazon, CVS, Meijer, and Kroger.
In the near-term, retail expansion will require partnerships with retailers on launches and we may choose to invest in promotions to drive sales and awareness over time.
Our ability to execute this strategy will depend on a number of factors, such as retailers’ satisfaction with the sales and profitability of our products. In the near-term, retail expansion will require partnerships with retailers on launches and we may choose to invest in promotions to drive sales and awareness over time.
We expanded into brick-and-mortar retail in April 2021, with the launch of a curated assortment of Grove Co. best sellers in cleaning, hand and dish categories at Target, and have since established additional retail partnerships with Kohl’s, Giant Eagle, Harris Teeter, Meijer, CVS and HEB.
We expanded into brick-and-mortar retail in April 2021 with the launch of a curated assortment of Grove Co. best sellers in cleaning, hand and dish categories at Target and have since established additional retail partnerships with Amazon, CVS, Meijer, and Kroger. Our products were sold in over 7,500 stores across these retail partnerships as of December 31, 2023.
In December 2022, we refinanced the SVB Revolver and SVB and Hercules Loan Facility with the Structural Debt Facility (as defined below) and will begin to make principal payments on the Structural Debt Facility beginning on July 1, 2025 over a period of 18 months.
In December 2022, we entered into the Structural Debt Facility (as defined below) and are scheduled to begin to make principal payments on the Structural Debt Facility beginning on July 1, 2025 over a period of 18 months. On July 18, 2022, we entered into the Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD.
Selling, General and Administrative Expenses Year Ended December 31, Change 2022 2021 Amount % (in thousands) Selling, general and administrative $ 206,863 $ 186,638 $ 20,225 11 % Selling, general and administrative expenses increased by $20.2 million, or 11% for the year ended December 31, 2022 as compared to the year ended December 31, 2021 .
Selling, General and Administrative Expenses Year Ended December 31, Change 2023 2022 Amount % (in thousands) Selling, general and administrative $ 134,929 $ 206,863 $ (71,934) (35) % Selling, general and administrative expenses decreased by $71.9 million, or 35% for the year ended December 31, 2023 as compared to the year ended December 31, 2022 .

… 155 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. 69 Table of Contents
Biggest changeItem 7A. Quantitative and Qualitative Disclosures about Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. 64 Table of Contents

Other GROV 10-K year-over-year comparisons