Grove Collaborative Holdings, Inc.

Description of Business

Grove Collaborative Holdings, Inc., a public benefit corporation, and its wholly owned subsidiaries (collectively, the “Company” or “Grove”) is a digital-first, sustainability-oriented consumer products innovator specializing in the development and sale of household, personal care, beauty and other consumer products with an environmental focus and headquartered in San Francisco, California. The Company does not have any operations outside the United States. The Company sells its products through two channels: a direct-to-consumer (“DTC”) platform at www.grove.co and the Company’s mobile applications, where the Company sells products from Grove-owned brands (“Grove Brands”) and third-parties, and the retail channel into which the Company sells products from Grove-owned brands at wholesale. The Company recently made the strategic decision to wind down sales through the retail channel. The Company develops and sells natural products that are free from the harmful chemicals identified in the Company’s “anti-ingredient” list and designs form factors and product packaging that reduces plastic waste and improves the environmental impact of the categories in which the Company operates. The Company also purchases environmental offsets that have made it the first plastic neutral retailer in the world. Grove Collaborative, Inc. (herein referred to as “Legacy Grove”), the Company’s accounting predecessor, was incorporated in Delaware in 2016.

Reverse Stock Split

On May 24, 2023, the Company’s board of directors and stockholders approved a five-for-one reverse split (the “Reverse Split”) of the Company’s issued and outstanding Class A Common Stock and Class B Common Stock. Unless otherwise noted herein, the number of shares underlying stock options and other equity instruments was proportionately adjusted for the Reverse Split, including any exercise prices. The Class A Common Stock began trading on a split adjusted basis on the NYSE at the market open on June 6, 2023. No fractional shares were issued in connection with the reverse stock split.

2. Summary of Significant Accounting Policies

Basis of Presentation and Liquidity

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The Company has historically incurred losses and negative cash flows from operations and had an accumulated deficit of $648.5 million as of December 31, 2024. The Company’s existing sources of liquidity as of December 31, 2024 include unrestricted cash and cash equivalents of $19.6 million and availability of debt from the Siena Revolver (defined in Note 5, Debt). The Company believes that its current cash, cash equivalents, and interim borrowing capacity under the Siena Revolver, available until its maturity, will be sufficient to fund operations for at least one year from the date the financial statements are issued. Over the longer-term, the Company will need to raise additional capital through debt or equity financing to fund future operations until it generates positive cash flows from operations. There can be no assurance that such additional debt or equity financing will be available on terms acceptable to the Company, or at all.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. The JOBS Act permits companies with emerging growth company status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. Following the closing of the Business Combination, the Company uses this extended transition period to enable it to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date the Company (1) is no longer an emerging growth company or (2) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the Company’s consolidated financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.

Comprehensive Loss

Comprehensive loss represents all changes in stockholders’ deficit or equity. The Company’s net loss was equal to its comprehensive loss for all periods presented.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. These estimates made by management include the determination of reserve amounts for the Company’s inventories on hand, useful life of intangible assets, sales returns and allowances, certain assumptions used in the valuation of equity awards and the Company’s Preferred Stock, the estimated fair value of common stock liability classified Public and Private Placement Warrants, certain assumptions related to the Company’s contingent liabilities, the fair value of Earn-Out liabilities and the fair value of the Structural Derivative Liability. Actual results could differ from those estimates, and such estimates could be material to the Company’s financial position and the results of operations.

Net Loss Per Share Attributable to Common Stockholders

Net loss per share attributable to common stockholders is computed using the two-class method required for multiple classes of common stock and participating securities. The rights, including the liquidation and dividend rights and sharing of losses, of the Company’s Class A Common Stock and Class B Common Stock are identical, other than voting rights. As the liquidation and dividend rights and sharing of losses are identical, the undistributed earnings are allocated on a proportionate basis and the resulting net loss per share will, therefore, be the same for both the Company’s Class A Common Stock and Class B Common Stock on an individual or combined basis.

The Company’s participating securities include the Company’s redeemable convertible preferred stock, as the holders are entitled to receive cumulative dividends in the event that a dividend is paid on common stock. The Company also considers any shares issued on the early exercise of stock options subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is declared on common stock. Neither the holders of redeemable convertible preferred stock nor the holders of the Company’s common stock warrants have a contractual obligation to share in losses.

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss, as adjusted for any accumulated dividends on outstanding Preferred Stock (Note 9, Redeemable Convertible Preferred Stock) for the period, attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, adjusted for outstanding shares that are subject to repurchase or outstanding shares that are contingently returnable by the holder. Contingently issuable shares, including shares that are issuable for little or no cash consideration, are considered outstanding common shares and included in net loss per share as of the date that all necessary conditions have been satisfied. Such shares include the Backstop Warrants (Note 10, Common Stock and Warrants) and Volition Penny Warrants (Note 9, Redeemable Convertible Preferred Stock).

Diluted net loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. For periods in which the Company reports net losses, diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Cash, Cash Equivalents and Restricted Cash

Cash consists primarily of demand deposit bank accounts including amounts in transit from banks for customer credit card transactions. The Company considers all highly liquid investments with anoriginal maturity from date of purchase of three months or less, or that are readily convertible into known amounts of cash, to be cash equivalents. As of December 31, 2024 and 2023, cash equivalents are comprised of money market funds.

Short-term restricted cash represents cash on deposit with financial institutions to collateralize Company credit cards and to collateralize letters of credit that are short-term in nature. Long-term restricted cash represents cash on deposit with financial institutions to collateralize letters of credit related to the Company’s non-cancellable operating leases.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows (in thousands):

Concentration of Risks

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. The Company maintains the majority of its cash, cash equivalents and restricted cash in accounts with one financial institution within the United States, generally in the form of money market funds or demand deposit accounts. Deposits may exceed federally insured limits. Cash and cash equivalents are held with highly rated institutions.

For the years ended December 31, 2024 and 2023, no individual customers represented more than 10% of total revenue.

The Company depends on a limited number of vendors to supply products sold by the Company. The Company’s top five suppliers combined represented approximately 40% of the Company’s total inventory purchases for the years ended December 31, 2024 and 2023.

Inventory

Inventory is recorded at the lower of weighted average cost and net realizable value. The cost of inventory consists of merchandise costs, net of vendor allowances, and inbound freight. Inventory valuation requires the Company to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers or liquidations, and expected recoverable values of each disposition category.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded on a straight-line basis over the estimated useful lives of the respective assets. The estimated useful lives of the Company’s assets are as follows:

Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the consolidated balance sheets and any resulting gain or loss is reflected in the statement of operations in the period realized.

Capitalized Software Development Costs

The Company capitalizes qualifying internally developed software costs that are incurred during the application development stage. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Once an application has reached the development stage, management has authorized and committed to the funding of the software project, it is probable the project will be completed and the software will be used to perform the function intended, internal and external costs, if direct and incremental, are capitalized until the application is substantially complete and ready for its intended use. Capitalized software development costs are amortized on a straight-line basis to product development expense over the estimated useful life, which is generally four years.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets, inclusive of its right-of-use assets, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated from the use of the asset and its eventual disposition. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount exceeds the fair value of the impaired assets. Assets to be disposed of are reported at the lower of their carrying amount or fair value less cost to sell.

Leases

The Company determines if an arrangement is or contains a lease at inception. An arrangement is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If a lease is identified, classification is determined at lease commencement. Operating lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. As the implicit rate in the Company’s lease is generally unknown, the Company estimates its incremental borrowing rate to discount lease payments. The incremental borrowing rate reflects the interest rate that the Company would have to pay to borrow on a collateralized basis an amount equal to the lease payments in a similar economic environment over a similar term. Operating lease right-of-use (“ROU”) assets are based on the corresponding lease liability adjusted for any lease payments made at or before commencement, initial direct costs, and lease incentives. Certain leases also include options to renew or terminate the lease at the election of the Company. The Company evaluates these options at lease inception and on an ongoing basis. Renewal and termination options that the Company is reasonably certain to exercise are included when classifying leases and measuring lease liabilities and ROU assets. Operating lease expense is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component. Lease payments for short-term leases with a term of twelve months or less are expensed on a straight-line basis over the lease term, such expense was not material in any of the periods presented. The Company elected to not record operating lease right-of-use assets or operating lease liabilities for leases with an initial term of twelve months or less. Operating leases are included in operating lease right-of-use assets, operating lease liabilities, current, and operating lease liabilities, non-current on the Company’s consolidated balance sheets.

HGI Additional Shares Liabilities

The Company initially recorded a liability related to the HGI Additional Shares, defined in Note 10, Common Stock and Warrants. The Company accounted for this instrument at fair value within derivative liabilities on its consolidated balance sheets with changes in fair value until settlement being recorded in its consolidated statement of operations. The HGI Additional Shares were settled in August 2023.

Earn-Out Liabilities

The Company has recorded a liability related to the Earn-Out Shares, defined in Note 10, Common Stock and Warrants. The Company accounts for this instrument at fair value within derivative liabilities on its consolidated balance sheets with changes in fair value until settlement being recorded in its consolidated statement of operations.

Warrant Liabilities

The Company classifies Private Placement Warrants and Public Warrants (both defined and discussed in Note 10, Common Stock and Warrants) as liabilities within derivative liabilities on its consolidated balance sheets. At the end of each reporting period, changes in fair value during the period are recognized within the consolidated statements of operations. The Company will continue to adjust the warrant liability for changes in the fair value until the earlier of a) the exercise or expiration of the warrants or b) the redemption of the warrants, at which time the warrants will be reclassified to additional paid-in capital.

The Structural Derivative Liability is a compound embedded derivative related to features within the Structural Facility, defined in Note 5, Debt. The Company accounts for this instrument at fair value within derivative liabilities on its consolidated balance sheets with changes in fair value until settlement being recorded in its consolidated statement of operations. The Structural Derivative Liability was settled in full in November 2024.

Revenue Recognition

The Company primarily generates revenue from the sale of both third-party and Grove Brands products through its DTC platform. Customers purchase products through the website or mobile application through a combination of directly selecting items from the catalog, items that are suggested by the Company’s recommendation engine, and features that appear in marketing on-site, in emails and on the Company’s mobile application. Most customers purchase a combination of products recommended by the Company 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 products are subsequently packaged and shipped to fill the order. Beginning the fourth quarter of fiscal year 2024, the Company began collecting payments upon shipment. Prior to this change, the Company collected payment upon finalization of each order by the customer.

The Company also offers a VIP membership to its customers for an annual fee which includes the ability to receive free shipping, free gifts and early access to exclusive sales, all of which are available at the customers’ option, should they elect to make future purchases of the Company’s products within their annual VIP membership benefit period. Many customers receive a free 75-day VIP membership for trial purposes, typically upon their first qualifying order. After the expiration of this free trial VIP membership period, customers may proactively enroll in a VIP membership via their account settings and pay an annual VIP membership fee. After a customer enrolls in VIP membership, the membership automatically renews until cancelled. The customer is alerted before any VIP membership renews.

In accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when the customer obtains control of promised goods, in an amount that reflects the consideration that it expects to receive in exchange for those goods. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration, if any, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration to which it is entitled in exchange for the goods it transfers to a customer.

A contract with a customer exists when the customer submits an order online for the Company’s products. Under this arrangement, there is one performance obligation which is the obligation for the Company to fulfill the order. Product revenue is recognized when control of the goods is transferred to the customer, which occurs upon the Company’s delivery to a third-party carrier.

The VIP membership provides customers with a suite of benefits that are only accessible to them at their option, upon making a future qualifying order of the Company’s products. The VIP membership includes free shipping, a select number of free products, and early access to exclusive sales. Under ASC 606, sales arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options; therefore the Company must assess whether these options provide a material right to the customer and if so, they are considered a performance obligation. The Company concluded that its VIP membership benefits include two material rights, one related to the future discount (i.e. free shipping) on the price of the customer’s qualifying order(s) over the membership period and the second one relating to a certain number of free products provided at pre-set intervals within the VIP membership benefit period, that will only ship with a customer’s next qualifying order (i.e. bundled).

At inception of the VIP membership benefit period, the Company allocates the VIP membership fee to each of the two material rights using a relative standalone selling price basis. Generally, standalone selling prices are determined based on the observable price of the good or service when sold separately to non-VIP customers and the estimated number of shipments and free products per benefit period. The Company also considers the likelihood of redemption when determining the standalone selling price for free products. To date, customers buying patterns closely approximate a ratable revenue attribution method over the customers VIP Membership period. Due to these factors, the Company typically recognizes VIP membership revenue ratably over the VIP membership period.

The Company deducts discounts, sales tax, customer service credits and estimated refunds to arrive at net revenue. Sales tax collected from customers is not considered revenue and is included in accrued liabilities until remitted to the taxing authorities. The Company has made the policy election to account for shipping and handling as activities to fulfill the promise to transfer the good. Outbound shipping, handling and packaging expenses are recognized upon shipment and classified within selling, general and administrative expenses. Discounts are recorded as a reduction to revenue when revenue is recognized. The Company records a refund reserve based on historical refund patterns. As of December 31, 2024 and 2023, the refund reserve, which is included in accrued liabilities in the consolidated balance sheets, was nominal.

Disaggregation of Revenue

The following table sets forth revenue by product type (in thousands):

Contractual Liabilities

The Company has three types of contractual liabilities from transactions with customers: (i) cash collections for products which have not yet shipped, which are included in deferred revenue and are recognized as revenue upon the Company’s delivery to a third-party carrier, (ii) cash collections of VIP membership fees, which are included in deferred revenue and (iii) customer service credits, which are recognized in other current liabilities and as a reduction in revenue when provided to the customer. As of December 31, 2024, the Company does not have liabilities related to cash collections for products which have not yet shipped as payment is now collected upon shipment. Contractual liabilities included in deferred revenue were $6.3 million, $7.2 million and $10.9 million, respectively, as of December 31, 2024, 2023 and 2022. Contractual liabilities included in other current liabilities were immaterial as of December 31, 2024, 2023 and 2022. The contractual liabilities included in deferred revenue are generally recognized as revenue within twelve months from the end of each reporting period. Revenue recognized during the year ended December 31, 2024 that was previously included in deferred revenue and other current liabilities as of December 31, 2023 was $7.2 million and $0.1 million, respectively. Revenue recognized during the year ended December 31, 2023 that was previously included in deferred revenue and other current liabilities as of December 31, 2022 was $10.9 million and $0.2 million, respectively.

Cost of Goods Sold

Cost of goods sold consists of the product costs of merchandise, inbound freight costs, vendor allowances, costs associated with inventory shrinkage, damages and inventory write-offs and changes to the Company’s inventory reserves.

Vendor Allowances

The Company receives discounts and other product related reimbursements from certain vendors through a variety of programs intended to offset the purchase prices of inventory and for the promotion and selling of that vendor’s inventory. Discounts and other reimbursements are recorded as a reduction in the cost of the associated inventory purchased.

Advertising Expenses

Advertising expenses, other than production costs, are expensed as incurred and consist primarily of the 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.

Product Development Expenses

Product development expenses relates to the ongoing support and maintenance of the Company’s proprietary technology, including the Company’s website and mobile device application, as well as amortization of capitalized internally developed software, and relate to the product and packaging innovation in the Company’s Grove Brands products. Product development expenses consist primarily of personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expense. Product development costs also include allocated facilities, equipment, depreciation and overhead costs.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of compensation and benefit costs for personnel involved in general corporate functions, including stock-based compensation expense, and certain fulfillment costs, as further outlined below. Selling, general and administrative expenses also include the allocated facilities, equipment, depreciation and overhead costs, marketing costs including qualified cost of credits issued through the Company’s referral program, costs associated with the Company’s customer service operation and costs of environmental offsets.

Fulfillment Costs

Fulfillment costs represent those costs incurred in operating and staffing the Company’s fulfillment centers, including costs attributable to receiving, inspecting and warehousing inventories, picking, packaging and preparing customer orders for shipment (“Fulfillment Labor”), outbound shipping and handling expenses, packaging materials costs (“Shipping and Handling”) and payment processing and related transaction costs (“Payment Processing”). These costs are included within selling, general and administrative expenses in the consolidated statements of operations; therefore, the Company’s gross profit may not be comparable to other retailers or distributors. The Company’s fulfillment costs consist of the following (in thousands):

Income Taxes

The Company accounts 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 statement 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. The Company recognizes 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. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. The Company recognizes interest and penalties related to unrecognized tax benefits, if any, as income tax expense.

Stock-Based Compensation

The Company’s stock-based compensation relates to stock options, restricted stock units (“RSU”) and stock purchase rights under an Employee Stock Purchase Plan (“ESPP”). The Company recognizes the cost of share-based awards granted to employees and non-employees based on the estimated grant-date fair value of the awards.

For stock option awards with service-only vesting conditions, expense is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the award. The Company estimates the grant-date fair value of the stock option awards with service only vesting conditions using the Black-Scholes option-pricing model.

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, the Company’s stock-based compensation could be materially different. 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 the Company was privately held prior to the Business Combination and did not have an active trading market for its common stock, the expected volatility was estimated based on the average volatility for publicly traded companies that the Company considers to be comparable, over a period equal to the expected term of the stock option grants.

Risk-Free Interest Rate – The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.

Expected Dividend – The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.

For RSUs with service-only vesting conditions, expense is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the award. The fair value of RSU awards is determined using the price of the Company’s common stock on the grant date.

For awards with both market and service vesting conditions, expense is recognized over the derived service period using an accelerated attribution method. The fair value of stock option awards with both market and service conditions is estimated using inputs and assumptions which involve inherent uncertainties and generally require significant judgment, including the Company’s stock price, contractual terms, maturity and risk-free interest rates, as well as volatility.

The fair value of each purchase under the ESPP is estimated at the beginning of the offering period using the Black-Scholes option pricing model and recorded as expense over the service period using the straight-line method.

The Company accounts for forfeitures as they occur.

Recently Adopted Accounting Standards

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 enhances public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. Disclosure requirements under ASU 2023-07 are required for all public entities, including those with a single reportable segment. The Company adopted ASU 2023-07 beginning January 1, 2024 for annual periods and January 1, 2025 for interim periods. Refer to Note 8, Segments. The adoption of ASU 2023-07 did not impact the Company’s results of consolidated statements of operations, consolidated statements of cash flows, or consolidated balance sheets.

Recently Issued Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which will require incremental income tax disclosures on an annual basis for all public entities. The amendments require that public business entities disclose specific categories in the rate reconciliation and provide additional information for reconciling items meeting a quantitative threshold. The amendments also require disclosure of income taxes paid to be disaggregated by jurisdiction, and the disclosure of income tax expense disaggregated by federal, state, and foreign. ASU 2023-09 is effective for annual reporting beginning with the fiscal years starting after December 15, 2024. Early adoption is permitted. The Company does not expect to early adopt ASU 2023-09 and is currently evaluating the impact ASU 2023-09 will have on its consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU No. 2024-03, Income Statement—Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures. This update requires entities to disaggregate operating expenses into specific categories, such as salaries and wages, depreciation, and amortization, to provide enhanced transparency into the nature and function of expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. ASU 2024-03 may be applied retrospectively or prospectively. The Company is currently evaluating the impact of this standard on its financial statement presentation and disclosures.

3. Fair Value Measurements and Fair Value of Financial Instruments

The Company measures certain financial assets and liabilities at fair value on a recurring basis. The Company determines fair value based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy. These levels are:

Level 1 – Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2 – Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3 – Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

Financial instruments consist of cash equivalents, accounts payable, accrued liabilities, debt, HGI Additional Shares, Earn-Out Shares (defined in Note 10, Common Stock and Warrants), Public Warrants and Private Placement Warrants and Structural Derivative Liability. Cash equivalents, Earn-Out Shares, Structural Derivative Liability and Public and Private Placement Warrant are stated at fair value on a recurring basis. Accounts payable and accrued liabilities are stated at their carrying value, which approximates fair value due to the short period time to the expected receipt or payment. The carrying amount of the Company’s outstanding debt approximates the fair value as the debt bears interest at a rate that approximates prevailing market rate.

On June 12, 2023, the NYSE delisted the Public Warrants from trading due to their low price levels. See Note 10, Common Stock and Warrants for additional details. The Private Placement Warrants are identical to the Public Warrants, with certain exceptions as defined in Note 10, Common Stock and Warrants. As the number of outstanding Public Warrants and Private Placement Warrants did not change as a result of the reverse split, five Public Warrants orfive Private Placement Warrants must be bundled together to receive one share of the Company’s Class A Common Stock. The Private Placement Warrants and Public Warrants are classified as Level 3 and their value was determined by using a Black-Scholes Model with the following assumptions on a pre-reverse split basis:

The Earn-Out Shares are classified as Level 3 and their fair values were estimated using a Monte Carlo options pricing model utilizing assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimated the expected volatility assumption using an average of the implied volatility of its common stock and an implied volatility based on its peer companies.

The Structural Derivative Liability was a compound embedded derivative related to features within the Structural Debt Facility, including an increase in interest rate upon an event of default and the contingent issuance of the Structural Subsequent Shares as defined in Note 5, Debtand mandatory and voluntary prepayment features. This liability was classified as Level 3 and was valued using a risk-neutral income approach related to an event of default occurring and expected cash flows in such a scenario and an income and Black-Scholes pricing model for the contingent issuance of the Structural Subsequent Shares utilizing assumptions related to expected stock price volatility, expected life, risk-free interest rate and dividend yield. The Company estimated the expected volatility assumption using an average of the implied volatility of its common stock and an implied volatility based on its peer companies.

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis as of December 31, 2024 and December 31, 2023 by level within the fair value hierarchy (in thousands):

HGI Additional Shares Liability

At the closing of the HGI Subscription Agreement discussed in Note 10, Common Stock and Warrants, the Company recorded a liability related to the potential issuance of additional shares of its Class A Common Stock. Subsequent changes in fair value of the HGI Additional Shares liability until settlement were recognized in the consolidated statements of operations. The HGI Additional Shares Liability was settled in August 2023 (refer to Note 10, Common Stock and Warrants).

Earn-Out Shares

At closing of the Business Combination, certain Earn-Out Shares were accounted for as a liability, Note 10, Common Stock and Warrants. Subsequent changes in fair value, until settlement or until equity classification is met, is recognized in the consolidated statements of operations.

Private Placement Warrant and Public Warrant Liabilities

As of December 31, 2024, the Company has Private Placement and Public Warrants defined and discussed in Note 10, Common Stock and Warrants. Such warrants are measured at fair value on a recurring basis. Subsequent changes in fair value, until settlement, is recognized in the statement of operations.

Upon closing the Structural Debt Facility, the Company recorded a liability related to the features that are required to be bifurcated and accounted for as a compound derivative at fair value. Subsequent changes in fair value of the Structural Derivative Liability until settlement is recognized in the statement of operations. The Structural Derivative Liability was settled in full in November 2024.

The following table provides a summary of changes in the estimated fair value of these liabilities (in thousands):

4. Other Balance Sheet Information

Property and Equipment

Property and equipment, net consisted of the following (in thousands):

Depreciation expense for the years ended December 31, 2024 and 2023 was $2.8 million and $1.7 million, respectively. The Company capitalized software development costs of $1.0 million and $3.0 million for the years ended December 31, 2024 and 2023, respectively. Amortization of capitalized software development costs was $7.0 million and $4.1 million for the years ended December 31, 2024 and 2023, respectively.

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

5. Debt

The Company’s outstanding debt, net of debt discounts, consisted of the following (in thousands):

Structural Debt Facility

In December 2022, the Company entered into a Loan and Security Agreement (“Structural Debt Facility”) with Structural Capital Investments III, LP, Structural Capital Investments IV, LP and Series PCI Grove series of Structural Capital Primary Co-Investment Fund, LLC (collectively, “Structural Funds”) and Avenue Sustainable Solutions Fund, L.P. (“Avenue”) (collectively “Structural Lenders”) to borrow $72.0 million which was used primarily to settle previously outstanding obligations with a prior lender. The Structural Debt Facility bore an annual rate of interest at the greater of 15.00% or 7.50% plus the prime rate, payable monthly. Under the agreement, when amounts were prepaid or repaid in full at the maturity date, the Company was contingently obligated to pay additional fees which would allow for Structural Funds and Avenue to reach a Minimum Return, as defined by the agreement.

On July 16, 2024, the Company entered into Amendment No. 2 to the Loan and Security Agreement with Structural Lenders (“Structural Amendment”). The terms of the Structural Amendment provided for certain amendments to the Structural Debt Facility, which were conditioned upon the Company to making a voluntary prepayment upon execution on the outstanding principal balance of the Structural Debt Facility of $42.0 million. The terms of the Structural Amendment also provided for a reduction of the amount of unrestricted cash required to be maintained by the Company. The original maturity date of December 21, 2026 did not change under the Structural Amendment. As the terms of the Structural Debt Facility after the Structural Amendment were not deemed to be substantially different from the original agreement, the Company accounted for the Structural Amendment with debt modification accounting. Issuance costs related to the Structural Amendment were nominal. In November 2024, the Company paid the remaining outstanding balance on the Structural Debt Facility in full, which included a $0.3 million payment to settle the Structural Derivative Liability in full. In connection with the repayment the Company recognized a loss on extinguishment of $5.0 million on the consolidated statement of operations.

On December 21, 2022, in connection with the initial closing of the Structural Debt Facility, the Company issued to Structural Funds, including certain affiliates, and to Avenue a total of 990,000 shares of the Company’s Class A common stock (the “Structural Closing Shares”). The Company recorded a debt discount of $1.1 million related to the issuance of these shares, with a corresponding offset to the Company’s Class A Common Stock and additional paid-in capital. Further, had there been outstanding obligations relating to the Structural Debt Facility on July 21,

2025, the Company was to issue to Structural Funds, including certain affiliates, and to Avenue, additional shares of the Company’s Class A Common Stock (the “Structural Subsequent Shares”).

The Company identified several features within the Structural Debt Facility consisting of the contingent obligation to issue the Structural Subsequent Shares, mandatory and voluntary prepayment features and default interest rate (“Structural Derivative Liability”), which were required to be bifurcated and accounted for as a compound embedded derivative at fair value. The fair value of the Structural Derivative Liability was $7.1 million as of the debt issuance date. Changes in fair value are recognized through the consolidated statements of operations.

Closing costs consisted of $3.3 million in costs directly related to the issuance of the Structural Facility to third parties, issuance of certain Structural Closing Shares amounting to $1.1 million and incurrence of the Structural Derivative Liability amount of $7.1 million.

Siena Revolver

In March 2023, the Company entered into a Loan and Security Agreement (the “Siena Revolver”) with Siena Lending Group, LLC (“Siena”) which permits the Company to receive funding through a revolving line of credit with an initial commitment of $35.0 million. The Company’s borrowing capacity under the Siena Revolver is subject to certain conditions, including the Company’s eligible inventory and accounts receivable balances among other limitations as specified in the agreement. In connection with this facility the Company incurred $1.1 million of debt issuance costs which have been included in other assets on the Company’s consolidated balance sheets and are being amortized through the Siena Revolver’s scheduled maturity date. On July 16, 2024, the Company entered into Amendment No. 1 to Loan and Security Agreement with Siena (“Siena Amendment No. 1”). The Siena Amendment modifies certain terms related to how the Company’s available borrowing capacity is determined and when appraisals are required. The Siena Amendment No. 1 did not modify any other terms related to the Siena Revolver, including maturity date or maximum borrowing capacity. On November 21, 2024, the Company entered into Amendment No. 2 to Loan and Security Agreement with Siena (“Siena Amendment No. 2”, and together with Siena Amendment No. 1, collectively, the “Siena Amendments”). The Siena Amendment No. 2 modifies certain terms related to how the Company’s available borrowing capacity is determined, when appraisals are required and conditions that must be satisfied to consummate acquisitions and pay earn-outs. The Siena Amendment No. 2 also modifies the maturity date to eliminate the requirement that the Siena Revolver be coterminous with the Structural Debt Facility. The Siena Amendment No. 2 did not modify any other terms related to the Siena Revolver, including maximum borrowing capacity. The Company accounted for the Siena Amendment No. 1 and Siena Amendment No. 2 (together, the “Siena Amendments”) under debt modification accounting due to the terms being deemed not substantially different. The Company paid an aggregate$0.3 million of issuance costs related to the Siena Amendments which are included within other assets on the Company’s consolidated balance sheets and are being amortized through the Siena Revolver’s scheduled maturity date.

The interest rates applicable to borrowings under the Siena Revolver are based on a fluctuating rate of interest measured by reference to either, at the Company’s option, (i) a Base Rate, plus an applicable margin, or (ii) the Term Secured Overnight Financing Rate (“Term SOFR”) then in effect, plus 0.10% and an applicable margin. The Base Rate is defined as the greatest of: (1) Prime Rate as published in the Wall Street Journal, (2) Federal Funds Rate plus 0.50% and (3)5.00% per annum. The applicable margin for Siena Revolver borrowings is based on the Company’s monthly average principal balance outstanding and ranges from 2.75% to 4.50% per annum in the case of Base Rate Borrowings, as defined by the Siena Revolver, and 3.75% to 5.50% per annum in the case of Term SOFR Borrowings, as defined by the Siena Revolver. The Siena Revolver also contains various financial covenants the Company must maintain to avoid an Event of Default, as defined by the agreement. In accordance with the agreement, Siena has been provided with the Company’s periodic financial statements and updated projections to facilitate their ongoing assessment of the Company. As of December 31, 2024, the Company was in compliance with these debt covenants.

The Siena Revolver matures on March 10, 2026 and is collateralized by the Company’s accounts receivable and inventory balances. As of December 31, 2024, the Company has an outstanding principal balance of $7.5 million under the Siena Revolver with an interest rate of 8.40%. As of December 31, 2024, additional borrowing capacity from the Siena Revolver was $5.2 million.

A schedule of the Company’s future debt maturities is as follows (in thousands):

6. Commitments and Contingencies

Merchandise Purchase Commitments

As of December 31, 2024 and 2023, the Company had obligations to purchase $9.1 million and $14.1 million, respectively, of merchandise.

Letters of Credit

The Company had irrevocable standby letters of credit in the amount of $2.1 million and $3.4 million as of December 31, 2024 and 2023, respectively, primarily related to the Company’s operating leases. No amounts have been drawn related to these letters of credit. The letters of credit have expiration dates from January 2025 through August 2029.

Contingencies

From time to time, the Company is subject to various claims, charges and litigation matters that arise in the ordinary course of business. The Company records a provision for a liability when it is both probable that the loss has been incurred and the amount of the loss can be reasonably estimated. If the Company determines that a loss is reasonably possible and the loss or range of loss can be reasonably estimated, it discloses the possible loss or range of loss. Any potential gains associated with legal matters are not recorded until the period in which all contingencies are resolved and the gain is realized or realizable. Depending on the nature and timing of any such proceedings that may arise, an unfavorable resolution of a matter could materially affect the Company’s future consolidated results of operations, cash flows or financial position in a particular period. Except if otherwise indicated, it is not reasonably possible to determine the probability of loss or estimate damages for any of the matters discussed below, and therefore, the Company has not established reserves for any of these matters.

The Santa Clara County District Attorney’s Office, in conjunction with other representatives from other California district and city attorneys’ offices, is currently investigating the Company’s compliance with California’s Automatic Renewal Law, California’s Unfair Competition Law, and False Advertising Law. The Company has met with this task force of multiple California district attorneys (called the California Autorenewal Task Force, or “CART”) and has provided documents and information upon request and discussed proposed remediation. Based on discussions with CART, it is probable that the Company will incur a loss with regard to this matter. However, based on the current information, the Company does not have enough information to make a reasonable estimate of the loss or range of loss at this time. An unfavorable outcome in this matter could result in a material loss in future periods.

The Federal Trade Commission (“FTC”) previously investigated the Company’s billing and automatic renewal practices under Section 5 of the Federal Trade Commission Act, the Restore Online Shoppers Confidence Act, the CAN-SPAM Rule, the Undeclared Merchandise Statute and other matters related to our historical subscription offerings. The Company responded to a Civil Investigative Demand issued by the FTC and certified its compliance with the Civil Investigative Demand in June 2023. The FTC notified the Company in June 2024 that the FTC had closed its investigation without any further action.

7. Leases

The Company has operating leases primarily for its offices and warehouses, including the lease for its office headquarters in San Francisco, CA (the “HQ Lease”). The HQ Lease originally commenced in February 2019, with an original term of approximately 8 years and an option to renew for an additional 5 years. In March 2024, the Company entered into an amendment to this lease agreement (the “Lease Amendment”) to provide for, among other things, a reduction of the amount of space being leased and of the monthly lease payments owed to the lessor. The Company concluded this was a partial termination of the existing lease agreement. Under the Lease Amendment, lease payments are made monthly and are subject to annual increases of approximately 1.5%.

In connection with the execution of the Lease Amendment, the Company paid an initial $4.8 million which was determined to be consideration for the remaining space being leased and was considered in remeasuring the Company's ROU asset and lease liability upon execution of the amendment. The Lease Amendment also requires the Company to make escalating undiscounted annual base rent payments of up to $0.4 million, payable monthly. The lease term under the Lease Amendment expires in May 2027. The Company previously recognized an impairment loss on the operating lease ROU asset related to this lease of $2.3 million in the year ended of December 31, 2023 due to ceasing use of certain portions of the underlying asset. Due to the remeasurement of the remaining operating lease liability and previously-impaired operating lease ROU asset, the Company recognized a gain of $3.1 million within selling, general and administrative expense within its consolidated statements of operations for the year ended December 31, 2024.

On July 2, 2024, the Company entered into a new lease agreement for a warehouse located in Reno, NV (the “Reno Lease”). Under the Reno Lease, the Company is required to make escalating undiscounted annual base rent payments of up to $2.0 million, payable monthly. The Reno Lease commenced on August 6, 2024 and expires on November 30, 2031. The Company has determined the Reno Lease qualifies as an operating lease.

The Company’s operating leases, including the leases previously mentioned, have remaining lease terms ranging between 2 and 7 years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. The components of lease expense included in the Company’s consolidated statements of operations for the years ended December 31, 2024 and 2023, include operating lease expense of $4.4 million and $6.3 million, respectively, and variable lease expense $1.1 million and $1.2 million, respectively. Variable lease expenses are primarily related to payments made to lessors for common area maintenance, property taxes, insurance, and other operating expenses and are classified as lease expense due to the Company’s election to not separate lease and non-lease components.

Cash paid for amounts included in the measurement of operating lease liabilities for the years ended December 31, 2024 and 2023 was $9.1 million and $6.6 million, respectively, which was included in net cash used in operating activities in the Company’s consolidated statements of cash flows. The Company obtained $6.5 million and $2.4 million of new operating lease right-of-use assets obtained in exchange for new operating lease liabilities during the year ended December 31, 2024 and 2023, respectively.

Maturities of operating lease liabilities were as follows (in thousands):

The following table summarizes additional information related to operating leases for the periods indicated:

Impairment

The Company recorded $1.3 million of impairment charges related to the Company’s leases during the year ended December 31, 2024. During the year ended December 31, 2023, the Company recorded $2.3 million of impairment charges on its operating lease right-of-use assets related to the Company’s corporate office space located in San Francisco, California with the impairment expense being recorded within selling, general, and administrative on the consolidated statements of operations. The Company applied a discounted cash flow method to estimate fair values of its leasehold improvements and right-of-use assets to estimate the fair value of these assets. These represented level 3 nonrecurring fair value measurements.

8. Segments

The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer. The Company has determined that it operates inone operating segment as it only reports operating results on an aggregate basis to the CODM. Segment revenues are described in Note 2, Significant Accounting Policies. All company assets are located within the United States and all revenues are generated within the United States. All business activities are managed on a consolidated basis.

The CODM uses net loss as reported in the consolidated statements of operations to evaluate the Company’s return on assets in deciding whether and how to invest into the Company’s consolidated operations, such as to expand its product offerings or increase advertising expenditures. The CODM reviews segment assets as presented on its consolidated balance sheets.

The Company does not have intra-entity sales or transfers.

The accounting policies of the segment is identical to those described in Note 2, Significant Accounting Policies.

Presented in the table below is segment information for the year ended December 31, 2024 (with retrospective presentation for comparative period) and a reconciliation of segment information, including significant expenses, to consolidated net loss (in thousands):

(1)Includes all product development and selling, general and administrative expenses, excluding fulfillment costs, stock-based compensation and depreciation and amortization.

(2)Includes stock-based compensation, depreciation and amortization and all non-operating expenses, except interest income.

9. Redeemable Convertible Preferred Stock

On August 11, 2023 (the “Series A Preferred Stock Closing Date”), the Company entered into a subscription agreement (the “Series A Preferred Stock Subscription Agreement”) with Volition Capital Fund IV, L.P. (“Volition”) where the Company received gross proceeds of $10.0 million in exchange for 10,000 shares of the Company’s Series A Redeemable Convertible Preferred Stock (the “Series A Preferred Stock”), the issuance of a warrant to purchase 1,579,778 shares of Grove’s Class A common stock at an exercise price of $6.33 per share (the “Volition Warrant”) and the issuance of a separate warrant to Volition to purchase 20,905 shares of Grove’s Class A common stock at an exercise price of $0.01 per share (the “Volition Penny Warrant”). The Volition Warrant and the Volition Penny Warrant each had expiration dates dated on thethree-year anniversary of the Series A Preferred Stock Closing Date and become exercisablesix months following the Series A Preferred Stock Closing Date. The Series A Preferred Stock was redeemable, at the option of the holder, for the original issuance price plus any declared but unpaid dividends following the seventh anniversary of the Series A Preferred Stock Closing Date (“Optional Redemption”).

The Company allocated the proceeds received on the Series A Preferred Stock Closing Date to the Series A Preferred Stock, Volition Warrant and Volition Penny Warrant (together the “Volition Warrants”) on a relative fair

value basis. The aggregate fair value of the Volition Warrants was $0.7 million and determined using a Black-Scholes Model with the following inputs:

Gross proceeds and transaction costs were allocated between the Series A Preferred Stock and Volition Warrants as follows:

On September 20, 2024, (the “Series A' Preferred Stock Closing Date”), the Company entered into another subscription agreement (the “Series A' Preferred Stock Subscription Agreement”) with Volition where the Company received gross proceeds of $15.0 million in exchange for 15,000 shares of the Company’s Series A' Redeemable Convertible Preferred Stock (the “Series A' Preferred Stock” and together with the Series A Preferred Stock, the “Preferred Stock”). In connection with the issuance of the Series A' Preferred Stock, Volition and the Company agreed to cancel the Volition Warrants and modified the redemption terms of the Series A Preferred Stock such that the Series A Preferred Stock is no longer subject to Optional Redemption.

The Company concluded that the issuance of the Series A' Preferred Stock, modification of terms to the Series A Preferred Stock and cancellation of the Volition Warrants should be accounted for as an extinguishment of the Series A Preferred Stock in exchange for new instruments. As such, the Company derecognized the $10.0 million carrying amount of the Series A Preferred Stock and the $0.3 million aggregate fair value of Volition Warrants and recorded both series of the Preferred Stock at their aggregate fair value of $24.8 million. On the Series A' Preferred Stock Closing Date, the Company recorded $0.5 million of transaction costs against the proceeds received for the Series A’ Preferred Stock.

Significant terms of the Series A Preferred Stock and Series A' Preferred Stock are identical except as noted below and are summarized as follows:

Dividends

The holders of the outstanding shares of Preferred Stock shall be entitled to receive, only when, as and if declared by the board of directors, out of any funds and assets legally available therefore, dividends at the rate of 6% per annum of the original issuance price for each share of Preferred Stock, prior and in preference to any declaration or payment of any other dividend (other than dividends on shares of Class A Common Stock payable in shares of Class A Common Stock). The dividends on shares of the Preferred Stock accrue from day to day, whether or not declared, and shall be cumulative, provided, however, such accruing dividends shall be payable only when, as, and if declared by the Board of Directors and the Company shall be under no obligation to pay such accruing dividends. Total cumulative undeclared dividends on the Preferred Stock as of December 31, 2024 was $1.1 million.

Liquidation

Upon any liquidation transaction, whether voluntary or involuntary, each holder of outstanding shares of Preferred Stock shall be entitled to be paid out of the assets of the Company legally available for distribution to stockholders, whether such assets are capital, surplus or earnings, prior and in preference to any distribution of any of the assets of the Company to the holders of the Class A Common Stock, Class B Common Stock or of any other stock

or equity security, an amount in cash, equal to the greater of (i) the Preferred Stock original issuance price held by such holder plus any declared but unpaid dividends to which such holder of outstanding shares of the Preferred Stock is then entitled, if any, or (ii) the amount each holder of a share of the Series A would be entitled on an as-converted into Class A common stock basis, based on the then effective Conversion Price, as defined by the Certificate of Designations of Series A Convertible Preferred Stock, as amended, (without regard to any restrictions or limitations on conversion) immediately prior to such liquidation transaction. If, upon any Liquidation Transaction, the funds legally available for distribution to all holders of the Preferred Stock shall be insufficient to permit the payment to all such holders of the full liquidation preference amount, then the entire funds legally available for distribution shall be distributed ratably among the holders of the Preferred Stock ratably in proportion to the full preferential amounts to which they are entitled to.

Voting

Each holder of Preferred Stock is entitled to the number of votes equal to the number of shares of Class A Common Stock into which such shares of the Preferred Stock are then convertible based on the Conversion Price as of the record date for determining stockholders entitled to vote on such matter and shall have voting rights and powers equal to the voting rights and powers of the Class A Common Stock (except as otherwise expressly provided herein or as required by law, voting together with the Class A Common Stock as a single class) and shall be entitled to notice of any such stockholders’ meeting in accordance with the Bylaws of the Company. For so long as an original purchaser of the Preferred Stock beneficially holds 20% or more of the shares of Class A Common Stock (calculated on as converted basis based on the Conversion Price (as adjusted for stock splits, combinations, stock dividends, recapitalizations and the like)) such purchaser acquired pursuant to the Preferred Stock Subscription Agreement, such purchaser shall have the right to designate up toone director for election to the Board of Directors as a Class I Director.

Conversion

At the option of the holder, each share of Preferred Stock is convertible into fully paid and non-assessable shares of Class A Common Stock equal to the sum of (i) the amount determined by dividing (x) the Preferred Stock original issuance price plus any declared but unpaid dividends to which such share of the Preferred Stock is then entitled by (y) $2.11, for shares of Series A Preferred Stock, or $1.93 for Series A' Preferred Stock (as adjusted for stock splits, combinations, stock dividends, recapitalizations and the like) in effect on the date the certificate is surrendered for conversion or notice is provided for non-certificated shares and (ii) the Subsequent Issuance Share Adjustment, as defined by the Certificate of Designations of Series A Convertible Preferred Stock, as amended.

The Company may, in its sole discretion, upon five business days prior written notice, force the conversion of all of the outstanding shares of the Preferred Stock (including any declared but unpaid dividends to which such shares of Preferred Stock are then entitled) at the conversion price upon certain events, as specified in the Certificate of Designations of Series A Convertible Preferred Stock, as amended.

The Company classifies the Preferred Stock as temporary, or mezzanine, equity because the shares contain deemed liquidation rights that are a contingent redemption feature not solely within the control of the Company. The Volition Warrants and Volition Penny Warrants were classified within additional paid-in capital on the Company’s consolidated balance sheets as of December 31, 2023.

10. Common Stock and Warrants

On June 16, 2022 (the “Closing Date”), the Company consummated the transactions contemplated by an Agreement and Plan of Merger, dated December 7, 2021, amended and restated on March 31, 2022 (the “Merger Agreement”), among Virgin Group Acquisition Corp. II, a blank check company incorporated as a Cayman Islands exempt company in 2020 (“VGAC II”), Treehouse Merger Sub, Inc., Treehouse Merger Sub II, LLC (“VGAC II Merger Sub II”), and Legacy Grove (“the Merger”). In connection with the Merger, VGAC II changed its jurisdiction of incorporation from the Cayman Islands to the State of Delaware and changed its name to Grove Collaborative Holdings, Inc (the “Domestication”), a public benefit corporation. On the Closing Date, VGAC Merger Sub II merged with and into Legacy Grove with Legacy Grove being the surviving corporation and a wholly-owned subsidiary of the Company (the “Initial Merger”), and, immediately following the Initial Merger, and as part of the same overall transaction as the Initial Merger, Legacy Grove merged with and into VGAC Merger Sub II, the separate corporate existence of Legacy Grove ceased, and VGAC Merger Sub II continued as the surviving company and a wholly-owned subsidiary of the Company and changed its name to Grove Collaborative, Inc. (together with the Merger and the Domestication, the “Business Combination”).

The Business Combination was accounted for as a reverse recapitalization with Legacy Grove being the accounting acquirer and VGAC II as the acquired company for accounting purposes.

Earn-Out Shares

On the Closing Date, Class B Common Stock shareholders (including Grove stock option, restricted stock unit, and warrant holders) were issued an aggregate 2,799,696 shares of the Company’s Class B Common Stock (“Earn-Out Shares”). Certain shareholders have since surrendered an aggregate 197,284 Earn-Out Shares, which per terms of the Merger Agreement, were cancelled by the Company and not reallocated among the remaining holders. The remaining 2,602,412 Earn-Out Shares can vest withina period of 10 years following the Business Combination (the “Earn-Out Period”) (i) with respect to 1,301,206 of the Earn-Out Shares, upon the closing price of the Company’s Class A Common Stock equaling or exceeding $62.50 per share for any 20 trading days within any 30-trading-day period and (ii) with respect to 1,301,206 of the Earn-Out Shares, upon the closing price of the Company’s Class A Common Stock equaling or exceeding $75.00 per share for any 20 trading days within any 30-trading-day period.

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.

If, upon the expiration of the Earn-Out Period, any Earn-Out Shares shall have not vested, then such Earn-Out Shares shall be automatically forfeited by the holders thereof and canceled by the Company. The settlement amount to be paid to the selling shareholders of the Earn-Out Shares can change and is not indexed to the Company’s stock. Due to the change in control event contingency and variable number of Earn-Out shares to be settled to the holders, the Earn-Out Shares fail the equity scope exception and are accounted for as a derivative in accordance with ASC 815, Derivatives and Hedging, and will be remeasured on a recurring basis at fair value, with changes in fair value recorded in the consolidated statements of operations. As of December 31, 2024, the Company did not meet any Earn-Out thresholds.

Class A Common Stock Warrants

On the Closing Date, the Company was deemed to have assumed 6,700,000 Private Placement Warrants for the Company’s Class A Common Stock that were held by Virgin Group Acquisition Sponsor II LLC (the “Sponsor”) and 8,050,000 of the Company’s Class A Common Stock Public Warrants that were held by VGAC II’s shareholders. The warrants will expire on July 16, 2027, or earlier upon redemption or liquidation. Five whole warrants must be bundled together in order to receive one share of the Company’s Class A Common Stock at an effective exercise price of $57.50.

The Private Placement Warrants and Public Warrants for shares of the Company’s Class A Common Stock meet liability classification requirements since the warrants may be required to be settled in cash under a tender offer. In addition, Private Placement Warrants are potentially subject to a different settlement amount as a result of being held by the Sponsor which precludes the Private Placement Warrants from being considered indexed to the entity's own stock, and therefore classified as liabilities and included in derivative liabilities on the Company's consolidated balance sheets as of December 31, 2024 and 2023.

As of December 31, 2024, the following warrants were outstanding on an as converted basis:

Public Warrants

The Public Warrants became exercisable into shares of the Company’s Class A Common Stock commencing on July 16, 2022 and expire on July 16, 2027, or earlier upon redemption or liquidation. At the Closing Date, the Company assumed 8,050,000 public warrants. On June 16, 2023, the Company agreed to cancel 749,291 Public Warrants from certain holders. Five whole warrants must be bundled together in order to receive one share of the Company’s Class A Common Stock at an effective exercise price of $57.50 per share, subject to certain adjustments.

The Company may redeem, with 30 days written notice, each whole outstanding Public Warrant for cash at a price of $0.01 per warrant if the Reference Value equals or exceeds $90.00 per share, subject to certain adjustments. The warrant holders have the right to exercise their outstanding warrants prior to the scheduled redemption date during the redemption period at an effective price of$57.50 per share, subject to certain adjustments. If the Company calls the Public Warrants for redemption, the Company will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis”, as described in the warrant agreement. For purposes of the redemption, “Reference Value” shall mean the last reported sales price of the Company’s Class A Common Stock for any 20 trading days within the 30 trading-day period ending on the third trading day prior to the date on which notice of the redemption is given.

Private Placement Warrants

The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants were not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants are exercisable on a cashless basis and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, then such warrants will be redeemable by the Company and exercisable by the warrant holders on the same basis as the Public Warrants. At closing, the Company assumed 6,700,000 Private Placement Warrants.

Backstop Warrants

In connection with the Business Combination, the Company issued to Corvina Holdings Limited (the “Backstop Investor”) equity-classified warrants to purchase 775,005 shares of the Company’s Class A Common Stock with an exercise price of $0.05 per share (such warrants, the “Backstop Warrants”). The Backstop Warrants are exercisable by the Backstop Investor at any time on or before June 16, 2027, and are on terms customary for warrants of such nature. None of these warrants have been exercised as of December 31, 2024.

Standby Equity Purchase Agreement

On July 18, 2022, the Company entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, LTD (“Yorkville” or “SEPA Investor”), pursuant to which Yorkville has agreed to purchase up to $100 million of common stock from time to time over a period of 36 months, subject to certain conditions. The shares of the Company’s 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 the Company’s common stock under the SEPA will depend upon market conditions and other factors. Additionally, in no event may the Company sell more than 6,511,532 shares of 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 stockholder approval is obtained 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 the Company’s stock price exceeds $15.33, the Company will be unable to sell the full $100 million commitment to Yorkville without seeking stockholder approval to issue additional shares in excess of the Exchange Cap. The purchase price per share for Class A Common Stock will be 97.55% of the Volume-Weighted Average Price (“VWAP”) of the Company’s Class A Common Stock over the Pricing Period, as defined by the agreement. The Company deferred $0.7 million of transaction costs related to the SEPA and will offset these costs against proceeds of any sales under the SEPA. As of December 31, 2024, the Company has sold 147,965 shares under the SEPA for total gross proceeds of $2.4 million. Issuance costs related to these shares are not material. As of December 31, 2024, there were 6,363,567 shares available to be sold to Yorkville under the Exchange Cap.

HGI Subscription Agreement

On November 10, 2022, the Company entered into a subscription agreement (the “HGI Subscription Agreement”) with HCI Grove LLC (“HGI”), pursuant to which, among other things, the Company issued to HGI 396,825 shares of the Company’s Class A Common Stock (“Subscribed Shares”) for aggregate proceeds of $2.5 million. 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”). The Subscribed Shares Registration Statement was filed on July 14, 2023.

The HGI Subscription Agreement also provided that the Company must issue additional shares (the “HGI Additional Shares”) of the Company’s Class A Common Stock to HGI in the event that the volume weighted average price of the Company’s Class A Common Stock is less than $6.30 during thethree trading days commencing on the first trading day after (i) the Company files the Subscribed Shares Registration Statement (the “Registration Date”), (ii) thethree-month anniversary of the Registration Date, (iii) thesix-month anniversary of the Registration Date, or (iv) thenine-month anniversary of the Registration Date (“Measurement Periods” and each “Measurement Period”) upon HGI’s election to receive such additional shares. Following the effectiveness of the Subscribed Shares Registration Statement, HGI exercised their right to receive all HGI Additional Shares issuable under the HGI Subscription Agreement. In August , 2023, the Company issued to HGI 714,285 shares of the Company’s Class A Common Stock which settled all obligations under the HGI Additional Shares liability.

Concurrent with the HGI Subscription Agreement, the Company also entered into a consulting services agreement (the “Consulting Agreement”) with HCI Grove Management LLC (the “Consultant”). In consideration for the services under the Consulting Agreement, the Company (i) paid the Consultant an upfront fee of $150,000 and (ii) issued the Consultant 905,000 warrants (the “HGI Warrant Shares”) to purchase shares of the Company’s Class A Common Stock (the “HGI Warrants”), at an exercise price per share of $6.30 (the “Exercise Price”). On November 10, 2022,40% of the HGI Warrant Shares vested and became issuable (the “Vested Warrants”), and the remaining HGI Warrant Shares (the “Unvested Warrants”) were to vest and become exercisable if, prior to December 31, 2024, the Company were to achieve at least $100.0 million in quarterly net revenue on a consolidated basis or if the Company consummates a Change of Control, as defined in HGI Warrants. If, as a result of the Change of Control, the Company’s equity holders own less than 25% of the equity securities of the surviving entity in such Change of Control, the Exercise Price shall be increased by 50%. As the Unvested Warrants did not achieve all of the required vesting criteria within the prescribed timeframe, they can no longer vest.

The Company determined the Vested Warrants and Unvested Warrants qualify as stock based compensation to a nonemployee. The Company recorded $1.2 million in stock based compensation expense on the execution date of the HGI Subscription Agreement related to the Vested Warrants. The Company didnot record any expenses related to the Unvested Warrants as the Company determined vesting conditions were not probable of being achieved.

The fair value of Vested Warrants and Unvested Warrants granted to HGI was estimated at the date of grant using the Black-Scholes option-pricing model, with the following assumptions:

Reserved for Issuance

The Company has the following shares of common stock reserved for future issuance, on an as-if converted basis:

11. Stock-Based Compensation

Equity Incentive Plan

In June 2022, the stockholders of the Company approved the Grove Collaborative Holdings, Inc. 2022 Equity and Incentive Plan (the “2022 Plan”). The Plan provides for the granting of stock-based awards to eligible participants, specifically officers, other employees, non-employee directors, consultants, independent contractors under terms and provisions established by the board of directors.

The 2022 Plan authorizes the issuance of the Company’s Class A Common Stock of up to 8,107,744 shares. The number of shares available shall increase annually on the first day of each calendar year continuing until (and including) calendar year December 31, 2032, with annual increases equal to lesser of (i)5% of the number of shares of the Company’s Class A and Class B Common Stock issued and outstanding on December 31 of the immediately preceding fiscal year, and (ii) an amount determined by the board of directors.

Stock option activity under the Company’s equity incentive plan is as follows (in thousands, except share and per share amounts):

No stock options were granted during the years ended December 31, 2024 and 2023. The total grant date fair value of stock options that vested during the years ended December 31, 2024 and 2023 was $0.1 million and $0.2 million, respectively. The aggregate intrinsic value of options exercised during the years ended December 31, 2024 and 2023 wasnominal. The aggregate intrinsic value is the difference between the current fair value of the underlying common stock and the exercise price for in-the-money stock options.

Market-Based Stock Options

In February 2021, the Company granted 203,434 stock options with market and liquidity event-related performance-based vesting criteria with an exercise price of $18.85 per share.100% of the stock options vest upon valuation of the Company’s stock at a stated price upon occurrence of specified transactions. Fair value was determined using the probability weighted expected term method (“PWERM”), which involves the estimation of future potential outcomes as well as values and probabilities associated with each potential outcome. Two potential scenarios were used in the PWERM that utilized 1) the value of the Company’s common equity, and 2) a Monte Carlo simulation to specifically value the award. The total grant date fair value of the award was determined to be $5.5 million. Since a liquidity event is not deemed probable until such event occurs, no compensation cost related to the performance condition was recognized prior to the Business Combination on June 16, 2022. Subsequently, the Company recorded stock-based compensation expense of $4.6 million for service periods completed prior to the Business Combination. As of December 31, 2024, the market-based vesting criteria had not been met.

Restricted Stock Units (RSUs)

The following table summarizes the activity for all RSUs under all of the Company’s equity incentive plans for the year ended December 31, 2024:

CEO Award

In August 2023, the Company’s Board of Directors granted its Chief Executive Officer an aggregate of 850,000 Class A Common Stock RSUs (the “CEO Award”) under the 2022 Plan. A portion of the CEO Award contains market based vesting requirements consisting offour tranches that vest separately upon the Company’s public stock price meeting certain price thresholds. Additionally, the CEO Award also contains a service requirement with 25% of the shares vesting each year from the grant date forfour years. The CEO Award has a total aggregate value of $2.0 million. During the years ended December 31, 2024 and 2023, the Company recorded $0.5 million and $0.3 million of stock-based compensation expense related to the CEO Award.

Executive Chair Award

In February 2024, the Company’s Board of directors granted its Executive Chairman of the board of directors 286,000 shares of market-based restricted stock units (the “Executive Chair Award”). The Executive Chair Award consists of thefour tranches that vest separately upon the Company’s public stock price meeting certain price thresholds. Additionally, the Executive Chair Award also contains a service requirement with 33% of the shares vesting each year from the grant date for 3 years. During the year ended December 31, 2024 stock-based compensation expense related to the Executive Chair Award was $0.2 million.

Employee Stock Purchase Plan

In May 2022, the Company’s board of directors adopted the 2022 Employee Stock Purchase Plan (the “ESPP”), which was subsequently approved by the Company’s stockholders. The ESPP went into effect on November 16, 2022. Subject to certain limitations contained therein, the ESPP allows eligible employees to contribute, through payroll deductions, up to 20% of their eligible compensation to purchase the Company’s Class A Common Stock at a discounted price per share. The Company recognized $0.6 million and $0.8 million of expense related to the ESSP for the years ended December 31, 2024 and 2023, respectively. There were 279,133 shares of Class A Common Stock purchased under the ESPP during the year ended December 31, 2024.

The following assumptions were used in estimating the fair values of shares under the ESPP for the period indicated:

Stock-Based Compensation Expense

For the years ended December 31, 2024 and 2023 the Company recognized a total of $12.0 million and $15.5 million of stock-based compensation expense, respectively, related to stock options and RSUs granted to employees and non-employees. Stock-based compensation expense was predominately recorded in selling, general and administrative expenses in the consolidated statements of operations for each period presented. As of December 31, 2024, the total unrecognized compensation expense related to unvested options and RSUs was $7.4 million, which the Company expects to recognize over an estimated weighted average period of 1.8 years. Equity award modifications during the presented periods werenot material.

12. Provision for Income Taxes

The Company is subject to U.S. federal, state, and local corporate income taxes.

The Company’s effective income tax rate reconciliation is composed of the following for the periods presented:

The components of net deferred tax assets are as follows (in thousands):

The following summarizes the activity related to valuation allowances on deferred tax assets:

As of December 31, 2024, the Company had federal and state net operating loss (“NOL”) carryforwards of $561.9 million and $245.9 million, respectively. Federal NOL carryforwards $536.9 million have no expiration and can only be used to offset 80% of the Company’s future taxable income. The state NOL carryforwards include $211.7 million with definitive expiration dates and $34.2 million with no expiration. The state NOLs are presented as an apportioned amount.

Valuation Allowance

The realization of deferred tax assets is based on historical tax positions and estimates of future taxable income. We evaluate both the positive and negative evidence that we believe is relevant in assessing whether we will realize the deferred tax assets. A valuation allowance is recorded when it is more likely than not that some portion of the deferred tax assets will not be realized. To the extent that a valuation allowance has been established and it is subsequently determined that it is more likely than not that the deferred tax assets will be recovered, the valuation allowance will be released.

The Company’s valuation allowance was $150.5 million as of December 31, 2024, which represents an increase of $4.8 million from the prior year. The increase in the valuation allowance primarily relates to the following: (i) an increase of $5.3 million relating to current year operating activity, and (ii) an increase of $0.6 million relating to changes to the state blended rate.

The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. We consider the scheduled reversal of deferred tax liabilities (including the effect of available carryback and carryforward periods), as well as projected pre-tax book income in making this assessment. To fully utilize the NOL and tax credits carryforwards we will need to generate sufficient future taxable income in each respective jurisdiction.

Uncertain Tax Positions

During the years ended December 31, 2024 and 2023, the Company didnot record any uncertain tax positions and the balances of unrecognized tax positions were nominal.

The amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing audits and/or the expiration of applicable statute of limitations. Although the outcomes and timing of such events are highly uncertain, the Company does not expect the unrecognized tax benefits to change significantly over the next 12 months.

The Company recognizes interest and penalties related to uncertain tax positions in its provision for income taxes. Accrued interest and penalties are included within the related tax liability.

The Company files income tax returns in the U.S. federal and various state and local jurisdictions. The Company has no ongoing tax examinations by the U.S. income tax authorities at this time.

13. Net Loss Per Share Attributable to Common Stockholders

The following table presents the calculation of basic and diluted income (loss) per share attributable to common stockholders (in thousands, except share and per share data):

The following potentially dilutive shares were excluded from the computation of diluted net loss per share attributable to common stockholders for the periods presented, because including them would have been anti-dilutive (on an as-converted basis):

14. Subsequent Events

On February 10, 2025, the Company completed the acquisition of substantially all of the assets and liabilities of Maddiebrit Products, LLC. The preliminary total gross consideration is $2.2 million of cash funded with the Company’s cash on hand. The Company’s initial accounting for this acquisition is in process.

On February 15, 2025, all of the Company’s outstanding shares of Class B Common Stock were automatically converted into Class A Common Stock. This conversion occurred because, as of December 31, 2024, the aggregate number of outstanding shares of Class B Common Stock (including securities exercisable or convertible into Class B Common Stock) represented less thanten percent of all outstanding shares of Common Stock. This calculation included both Class A Common Stock and Class B Common Stock, as well as securities exercisable for or convertible into common stock. After the conversion, the converted shares and securities carry identical rights, including voting rights, to those of Class A Common Stock or equivalent converted securities.

On March 10, 2025, the Company completed the acquisition of substantially all of the assets and liabilities of Tasty Greens LLC dba 8Greens. The preliminary gross consideration is not material to the Company’s financial statements. The Company’s initial accounting for this acquisition is in process.