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Form 424B3 Sonder Holdings Inc.

August 12, 2022 4:37 PM EDT

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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-262438


PROSPECTUS SUPPLEMENT
(To Prospectus dated April 1, 2022)

159,207,329 Shares of Common Stock
5,500,000 Warrants to Purchase Shares of Common Stock
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This prospectus supplement (this “Prospectus Supplement”) supplements the prospectus dated April 1, 2022 (as supplemented to date, the “Prospectus”), which forms a part of our Registration Statement on Form S-1 (Registration Statement No. 333-262438) filed with the Securities and Exchange Commission (the “Commission”) on January 31, 2022 and declared effective by the Commission on February 9, 2022, as amended by Post-Effective Amendment No. 1 to Form S-1 filed with the Commission on March 28, 2022 and declared effective by the Commission on April 1, 2022.

The Prospectus and this Prospectus Supplement relate to the offer by us of, and the resale by Selling Securityholders of: (i) 5,500,000 shares of Common Stock issuable upon the exercise of an aggregate of 5,500,000 warrants held by GM Sponsor II, LLC and HRM Holdings II, LLC, each of which is exercisable at a price of $11.50 per share (the “Private Placement Warrants”), (ii) 9,000,000 shares of Common Stock issuable upon the exercise of an aggregate of 9,000,000 warrants, each of which is exercisable at a price of $11.50 per share (the “Public Warrants”), (iii) 2,475,000 shares of Common Stock issuable upon the exercise of an aggregate of 2,475,000 warrants issued in connection with the funding of certain delayed draw subordinated secured notes, each of which is exercisable at a price of $12.50 per share (the “Delayed Draw Warrants”), (iv) 425,706 shares of Common Stock issuable upon exercise of warrants assumed by us in connection with the business combination transaction (the “Business Combination”) among us, Sunshine Merger Sub I Inc., Sunshine Merger Sub II, LLC and Sonder Operating Inc. (formerly known as Sonder Holdings Inc., “Legacy Sonder”) (the “Assumed Warrants” and together with the Private Placement Warrants, Public Warrants, Delayed Draw Warrants, the “Warrants”), and (v) 20,336 shares of Common Stock issuable upon the exercise of certain outstanding options to purchase Common Stock held by individuals who terminated their employment with Legacy Sonder prior to the Business Combination (the “Former Employee Options”).

The Prospectus and this Prospectus Supplement also relate to the resale from time to time by Selling Securityholders of: (i) 32,216,785 shares of Common Stock purchased at the Business Combination Closing Date by a number of subscribers pursuant to separate subscription agreements (the “PIPE Shares”), (ii) 9,972,715 shares of Common Stock held by GM Sponsor II, LLC, HRM Holdings II, LLC and certain former independent directors, (iii) an aggregate of 68,107,380 shares of Common Stock beneficially owned by certain former stockholders of Legacy Sonder; (iv) up to 7,272,691 shares which are issuable to certain former stockholders of Legacy Sonder upon the achievement of certain trading price targets for our Common Stock (the “Earn Out Shares”); (v) an aggregate of 22,387,448 shares of Common Stock issuable upon exchange of Canada Exchangeable Shares to certain former stockholders of Legacy Sonder; (vi) an aggregate of 1,829,268 shares of Common Stock transferred by Francis Davidson pursuant to a stock transfer agreement dated April 2021; and (vii) 5,500,000 Private Placement Warrants.

We will not receive any of the proceeds from the sale of the securities by the Selling Securityholders. We will receive proceeds from the exercise of the Warrants and Former Employee Options if the Warrants and Former Employee Options are exercised for cash. We will pay the expenses associated with registering the sales by the Selling Securityholders, as described in more detail in the section titled “Use of Proceeds” appearing elsewhere in the Prospectus.

This Prospectus Supplement should be read in conjunction with the Prospectus, which is to be delivered with this Prospectus Supplement. This Prospectus Supplement updates, amends and supplements the information included or incorporated by reference in the Prospectus. If there is any inconsistency between the information in the Prospectus and this Prospectus Supplement, you should rely on the information in this Prospectus Supplement.

This Prospectus Supplement is not complete without, and may not be delivered or utilized except in connection with, the Prospectus, including any amendments or supplements to it.

Current Report on Form 8-K

On August 12, 2022, we filed a Quarterly Report on Form 10-Q with the Commission. The portion of the text of such Form 10-Q that is treated as “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, is attached hereto.

We are an “emerging growth company,” as defined under the federal securities laws, and, as such, may elect to comply with certain reduced public company reporting requirements for future filings.




Investing in our securities involves a high degree of risk. In reviewing the Prospectus and this Prospectus Supplement, you should carefully consider the matters described under the heading “Risk Factors” beginning on page 18 of the Prospectus.

You should rely only on the information contained in the Prospectus, this Prospectus Supplement or any prospectus supplement or amendment hereto. We have not authorized anyone to provide you with different information.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus Supplement is August 12, 2022.




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-Q
___________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 001-39907
___________________________________
Sonder Holdings Inc.
___________________________________
(Exact name of registrant as specified in its charter)
Delaware
85-2097088
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
101 15th Street
San Francisco, California
94103
(Address of principal executive offices)
(Zip Code)
(617) 300-0956
(Registrant’s telephone number, including area code)
___________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareSOND
The Nasdaq Stock Exchange LLC
Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50 per shareSONDW
The Nasdaq Stock Exchange LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  No 

The registrant had 217,458,738 shares of common stock outstanding as of August 9, 2022.


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risk and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
•    our plans to achieve positive quarterly Free Cash Flow within 2023 without additional fundraising and to target “capital light” lease signings, as part of our Cash Flow Positive Plan announced on June 9, 2022;
•    our financial, operating and growth forecasts and projections;
•    expectations for our business, revenue, expenses, operating results, and financial condition;
•    our ability to achieve or maintain profitability in the future;
•    trends in the travel and hospitality industries, including the anticipated timing and nature of any travel recovery;
•    our pricing and revenue management strategies, pricing and occupancy forecasts and anticipated trends, and expectations about demand elasticity;
•    our expectations concerning future transaction structures and the anticipated rent, rent abatement, capital expenditure provisions, and other terms of our future leases;
•    potential ancillary revenue opportunities and our ability to improve our revenue management capabilities;
•    anticipated capital expenditure obligations, including expectations for real estate owners’ funding of capital expenditures and other pre-opening costs at our leased properties;
•    the expected adequacy of our capital resources, and the anticipated use of proceeds from any financings;
•    trends in corporate travel and the potential for additional group and corporate travel revenue;
•    anticipated occupancy rates;
•    our expectations about extended stay bookings and our guests’ average length of stay (LOS);
•    our ability to anticipate and satisfy guest demands, including through the introduction of new features, amenities or services;
•    expectations about our geographic market mix and product mix between hotels and apartments, and their impact on our financial results;
•    our plans to roll out additional features, amenities and technologies, and our beliefs about the positive impact of our technology investments on our brand and financial results;
•    our future competitive advantages and anticipated differentiation in cost structure and guest experience compared to other accommodation providers;
•    expectations for increased cost efficiencies and technological improvements;
•    expectations and plans for expanding in existing and new markets and accommodation categories;
•    the anticipated growth in our portfolio of Live Units and Contracted Units, including the anticipated scope and timing of any removals of units from our portfolio;
•    expectations about our relationships with third-party distribution channels and indirect channels, and the percentage of future revenue attributable to bookings through indirect channels;
•    anticipated seasonality and other variations in our results of operations from period-to-period, including statements about anticipated RevPARs in specified quarters;
•    the anticipated effects of the COVID-19 pandemic or other public health crises on our business, operating results and financial condition;
•    our ability to continue meeting the listing standards of Nasdaq;
•    our assessments and beliefs regarding the timing and outcome of pending legal proceedings and any liability that we may incur as a result of those proceedings;
•    our assessments and estimates that determine our effective tax rate and regarding any tax-related audits or other tax proceedings; and
•    other expectations, beliefs, plans, strategies, anticipated developments, and other matters that are not historical facts.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, operating results, financial condition and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.
2

Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. You should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
3

SUMMARY OF RISK FACTORS

Below is a summary of the principal factors that could materially harm our business, operating results and/or financial condition, impair our future prospects or cause the price of our publicly traded securities to decline. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (the “SEC”) before making an investment decision regarding our securities.

•    Our actual results may differ materially from our forecasts and projections.
•    Our plan to reach positive quarterly Free Cash Flow within 2023 without additional fundraising may be unsuccessful, and restructuring initiatives may not provide the expected benefits and could adversely affect us.
•    Our results could be negatively affected by changes in travel, hospitality, real estate and vacation markets.
•    We may be unable to negotiate satisfactory leases or other arrangements to operate new properties, onboard new properties in a timely manner, or renew or replace existing properties on satisfactory terms or at all.
•    Delays in real estate development and construction projects could adversely affect our ability to generate revenue from the related leased buildings.
•    Newly leased properties may generate revenue later than we estimated, and may be more difficult or expensive to integrate into our operations than expected.
•    Our limited operating history and evolving business make it difficult to evaluate our future prospects and challenges.
•    We may be unable to effectively manage our growth.
•    Costs relating to the opening, operation and maintenance of our leased properties could be higher than expected.
•    We depend on landlords to deliver properties in a suitable condition and to manage and maintain them.
•    Our long-term and fixed-cost leases limit our flexibility.
•    Under certain circumstances, our leases may be subject to termination prior to the scheduled expiration of the term, which can be disruptive and costly.
•    The COVID-19 pandemic and efforts to reduce its spread have had, and will likely continue to have, a negative impact on us.
•    We may be unable to attract new guests or generate repeat bookings.
•    We may be unable to introduce upgraded amenities, services or features for our guests in a timely and cost-efficient manner.
•    We operate in the highly competitive hospitality market.
•    We use third-party distribution channels to market our units, which have historically accounted for a substantial percentage of our bookings.
•    Our results of operations vary from period-to-period, and historical performance may not be indicative of future performance.
•    Our long-term success depends, in part, on our ability to expand internationally, and our business is susceptible to risks associated with international operations.
•    Our business depends on our reputation and the strength of our brand, and any deterioration could adversely impact our market share, revenues, business, financial condition, or results of operations.
•    Claims, lawsuits, and other proceedings could adversely affect our business and financial condition.
•    We may be subject to liability or reputational damage for guests’ activities or other incidents at our properties.
•    We are subject to claims and liabilities associated with potential health and safety issues and hazardous substances at properties.
•    We must attract and retain sufficient, highly skilled personnel and are subject to risks associated with the employment of hospitality personnel, including unionized labor.
•    We have identified and may in the future identify material weaknesses in our internal control over financial reporting or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements.
•    We rely on third parties for important services and technologies, and their availability and performance are uncertain.
•    Our processing, storage, use and disclosure of personal data expose us to risks of internal or external security breaches and could give rise to liabilities and/or damage to reputation.
•    Failure to comply with privacy, data protection, consumer protection, marketing and advertising laws could adversely affect us.
We face risks related to our intellectual property.
•    Our business is highly regulated across multiple jurisdictions, including evolving and sometimes uncertain short-term rental regulations and tax laws, which may limit our growth or otherwise negatively affect us.
•    We may require additional capital, which might not be available in a timely manner or on favorable terms.
•    We may fail to continue to meet Nasdaq’s listing standards.
4

Our indebtedness and credit facilities contain financial covenants and other restrictions that may limit our operational and financial flexibility or otherwise adversely affect us.
5

TABLE OF CONTENTS
6

Part I - Financial Information
Item 1. Financial Statements
SONDER HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except for number of shares and par value information)
(unaudited)
June 30,
2022
December 31,
2021
Assets
Current assets
Cash$359,500 $69,726 
Restricted cash1,244 215 
Accounts receivable, net of allowance of $255 and $4,127 at June 30, 2022 and December 31, 2021 respectively
7,307 4,638 
Prepaid rent2,316 2,957 
Prepaid expenses9,854 5,029 
Other current assets18,996 16,416 
Total current assets399,217 98,981 
Property and equipment, net35,605 27,461 
Operating lease right-of-use assets1,109,208 — 
Other non-current assets15,384 22,037 
Total assets$1,559,414 $148,479 
Liabilities, mezzanine equity and stockholders’ equity (deficit)
Current liabilities
Accounts payable$15,423 $19,096 
Accrued liabilities25,780 19,557 
Sales tax payable12,533 8,412 
Deferred revenue37,749 18,811 
Current portion of long-term debt— 13,116 
Convertible notes— 184,636 
Current operating lease liabilities152,064 — 
Total current liabilities243,549 263,628 
Non-current operating lease liabilities1,050,285 — 
Deferred rent— 66,132 
Long-term debt, net161,285 10,736 
Other non-current liabilities2,033 3,906 
Total liabilities1,457,152 344,402 
Commitments and contingencies (Note 8)
Mezzanine equity:
Redeemable convertible preferred stock— 518,750 
Exchangeable preferred stock— 49,733 
Total mezzanine equity— 568,483 
Stockholders’ equity (deficit):
Common stock20 
Additional paid-in capital924,054 43,106 
Cumulative translation adjustment14,383 7,299 
Accumulated deficit(836,195)(814,812)
Total stockholders’ equity (deficit)102,262 (764,406)
Total liabilities, mezzanine equity and stockholders’ equity (deficit)$1,559,414 $148,479 
See Notes to Condensed Consolidated Financial Statements.
7

SONDER HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except number of shares and per share information)
(unaudited)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Revenue$121,322 $47,269 $201,788 $78,827 
Cost of revenue (excluding depreciation and amortization)79,187 43,745 153,083 82,950 
Operations and support54,003 34,889 102,270 60,312 
General and administrative31,277 24,615 68,258 56,764 
Research and development8,088 4,066 15,713 7,385 
Sales and marketing12,414 4,888 21,875 7,399 
Restructuring and other charges4,033 — 4,033 — 
Total costs and expenses189,002 112,203 365,232 214,810 
Loss from operations(67,680)(64,934)(163,444)(135,983)
Interest expense, net and other expense (income), net:
Interest expense, net4,382 12,522 12,584 16,349 
Change in fair value of SPAC Warrants(11,310)— (37,634)— 
Change in fair value of Earn Out liability(23,345)— (96,522)— 
Change in fair value of share-settled redemption feature and gain on conversion of Convertible Notes— — (29,512)— 
Other expense (income), net6,251 (3,577)8,875 65 
Total interest expense, net and other expense (income), net(24,022)8,945 (142,209)16,414 
Loss before income taxes(43,658)(73,879)(21,235)(152,397)
Provision for income taxes117 70 148 93 
Net loss$(43,775)$(73,949)$(21,383)$(152,490)
Less: Net loss attributable to convertible preferred stock and exchangeable preferred stockholders— — 1,180 — 
Net loss attributable to common stockholders$(43,775)$(73,949)$(20,203)$(152,490)
Net loss per share, basic and diluted$(0.20)$(6.41)$(0.10)$(13.74)
Weighted average shares outstanding of common stock, basic and diluted215,085,516 11,538,790 197,658,542 11,099,760 
Other comprehensive loss:
Net loss$(43,775)$(73,949)$(21,383)$(152,490)
Change in foreign currency translation adjustment5,085 1,689 7,084 2,834 
Comprehensive loss $(38,690)$(72,260)$(14,299)$(149,656)
See Notes to Condensed Consolidated Financial Statements.
8

SONDER HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND
STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except number of shares and par amount information)
(unaudited)


Three Months Ended June 30, 2022
Common StockPost-Combination Exchangeable Common SharesAdditional
Paid-in
Capital
Accumulated
Translation
Adjustment
Accumulated
Deficit
Total
Stockholders’
Equity
SharesPar
Amount
SharesAmount
Balances as of March 31, 2022184,678,577 $20 32,296,539 $— $918,369 $9,298 $(792,420)$135,267 
Exercise of common stock options375.891— — — 574— — 574
Vesting of restricted stock units29,742 — — — 57— — 57
Conversion of Exchangeable stock4,259,343 — (4,259,343)— — — — — 
Stock-based compensation— — — — 5,054 — — 5,054 
Components of comprehensive loss:
Net Loss— — — — — — — (43,775)(43,775)
Change in Cumulative Translation Adjustment— — — — — — 5,085 — 5,085 
Balances as of June 30, 2022189,343,553 $20 28,037,196 $— $924,054 $14,383 $(836,195)$102,262 
Note: Amounts may not recalculate due to rounding
See Notes to Condensed Consolidated Financial Statements.
9

SONDER HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND
STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except number of shares and par amount information)
(unaudited)

Three Months Ended June 30, 2021
Redeemable
Convertible Preferred
Stock
Exchangeable
Preferred Stock
Common StockExchangeable
AA Stock
Post-Combination Exchangeable Common SharesAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
SharesAmountSharesAmountSharesPar
Amount
SharesAmountSharesAmount
Balances as of March 31, 2021111,257,435 518,750 18,474,628 49,733 10,908,802 13,859,669 — — — 28,797 6,811 (598,966)(563,357)
Issuance of common stock upon exercise of stock options— — — — 938,128 — — — — — 1,377 — — 1,377 
Issuance of common stock upon exercise of common stock warrants— — — — 82,352 — — — — — 120 — — 120 
Stock-based compensation— — — — — — — — — — 2,448 — — 2,448 
Net loss— — — — — — — — — — — (73,949)(73,949)
Other comprehensive income— — — — — — — — — — — 1,689 — 1,689 
Balances as of June 30, 2021111,257,435 $518,750 18,474,628 $49,733 11,929,282 $13,859,669 $— — $— $32,742 $8,500 $(672,915)$(631,672)
Note: Amounts may not recalculate due to rounding
See Notes to Condensed Consolidated Financial Statements.



















10

SONDER HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND
STOCKHOLDERS’ EQUITY (DEFICIT)
(In thousands, except number of shares and par amount information)
(unaudited)

Six Months Ended June 30, 2022
Redeemable
Convertible Preferred
Stock
Exchangeable
Preferred Stock
Common StockExchangeable
AA Stock
Post-Combination Exchangeable Common SharesAdditional
Paid-in
Capital
Accumulated
Translation
Adjustment
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
SharesAmountSharesAmountSharesPar
Amount
SharesAmountSharesAmount
Balances as of December 31, 2021
75,767,082 $518,750 12,570,228 $49,733 8,684,246 $9,421,190 $— — $— $43,106 $7,299 $(814,812)$(764,406)
Retroactive adjustment to reflect the exchange ratio due to Business Combination35,504,342 — 5,890,381 — 4,067,416 — 4,414,740 — — — — — — — 
Balances as of December 31, 2021, as converted
111,271,424 518,750 18,460,609 49,733 12,751,662 13,835,930 — — — 43,106 7,299 (814,812)(764,406)
Exercise of common stock options— — — — 738,834 — — — — — 1,447 — — 1,447 
Vesting of restricted stock units29,742 57 57 
Conversion of Sonder Legacy Warrants from liabilities to equity— — — — — — — — — — 2,111 — — 2,111 
CEO promissory note settlement— — — — (2,725,631)— — — — — — — — — 
Conversion of Sonder Legacy Warrants— — — — 155,239 — — — — — 1,243 — — 1,243 
Conversion of Convertible Note— — — — 19,017,105 — — — — 159,172 — — 159,173 
Conversion of Preferred stock(111,271,424)(518,750)— — 111,271,424 11 — — — — 518,750 — — 518,761 
Conversion of Exchangeable stock— — (18,460,609)(49,733)4,259,343 — (13,835,930)— 28,037,196 — 49,733 — — 49,733 
Issuance of common stock in connection with Business Combination and PIPE offering— — — — 43,845,835 — — — — 267,355 — — 267,362 
Assumption of SPAC Warrants upon Business Combination(38,135)(38,135)
Earn Out liability recognized upon consummation of the merger— — — — — — — — — — (98,117)— — (98,117)
Issuance of Delayed Draw Warrants— — — — — — — — — — 5,598 — — 5,598 
Stock-based compensation— — — — — — — — — — 11,734 — — 11,734 
Components of comprehensive loss:
Net Loss— — — — — — — — — — — — (21,383)(21,383)
Change in Cumulative Translation Adjustment— — — — — — — — — — — 7,084 — 7,084 
Balances as of June 30, 2022— — — — 189,343,553 20 — — 28,037,196 — 924,054 14,383 (836,195)102,262 
Note: Amounts may not recalculate due to rounding
See Notes to Condensed Consolidated Financial Statements.
11


SONDER HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF MEZZANINE EQUITY AND
STOCKHOLDERS’ EQUITY (DEFICIT), continued
(In thousands, except number of shares and par amount information)
(unaudited)

Six Months Ended June 30, 2021
Convertible
Preferred Stock
Exchangeable
Preferred Stock
Common StockExchangeable
AA Stock
Post-Combination Exchangeable Common SharesAdditional
Paid-in
Capital
Accumulated
Translation
Adjustment
Accumulated
Deficit
Total
Stockholders’
Deficit
SharesAmountSharesAmountSharesPar
Amount
SharesAmountSharesAmount
Balances as of December 31, 2020
75,664,679 $517,730 12,579,755 $49,733 7,169,758 $9,437,358 $— — $— $13,898 $5,666 $(520,425)$(500,860)
Retroactive adjustment to reflect the exchange ratio due to Business Combination35,456,366 — 5,894,873 — 3,359,582 — 4,422,311 — — — — — — — 
Balances as of December 31, 2020, as converted
111,121,045 517,730 18,474,628 49,733 10,529,340 13,859,669 — — — 13,898 5,666 (520,425)(500,860)
Issuance of Series E Convertible Preferred Stock, net of issuance costs136,390 1,020 — — — — — — — — — — — — 
Issuance of common stock upon exercise of stock options— — — — 1,317,590 — — — — — 2,123 — — 2,123 
Issuance of common stock upon exercise of common stock warrants— — — — 82,352 — — — — — 120 — — 120 
Stock-based compensation— — — — — — — — — — 16,601 — — 16,601 
Components of comprehensive loss:
Net loss— — — — — — — — — — — — (152,490)(152,490)
Other comprehensive income— — — — — — — — — — — 2,834 — 2,834 
Balances as of June 30, 2021111,257,435 518,750 18,474,628 49,733 11,929,282 13,859,669 — — — 32,742 8,500 (672,915)(631,672)
Note: Amounts may not recalculate due to rounding


See Notes to Condensed Consolidated Financial Statements.

12

SONDER HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Six Months Ended June 30,
20222021
Cash flows from operating activities
Net loss $(21,383)$(152,490)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization11,626 8,332 
Share-based compensation11,734 16,601 
Bad debt expense191 88 
Write-off of capital assets373 658 
Amortization of operating lease right-of-use assets70,228 — 
Write-off of debt issuance costs362 — 
Straight-line rent— 6,199 
Unrealized loss on foreign currency transactions6,458 2,921 
Amortization of debt issuance costs9,040 1,012 
Amortization of debt discounts(2,640)11,977 
Change in fair value of share-settled redemption feature and gain on conversion of Convertible Notes(29,512)— 
Change in fair value of derivative instruments— (4,100)
Change in fair value of warrants— 1,286 
Change in fair value of SPAC Warrants(37,634)— 
Change in fair value of Earn Out liability(96,522)— 
Other adjustments to net loss249 — 
Changes in operating assets and liabilities:
Accounts receivable(2,941)(164)
Prepaid rent598 (852)
Prepaid expenses(4,877)(945)
Other current assets(2,948)(701)
Other non-current assets6,265 (6,988)
Accounts payable(22,382)(856)
Accrued liabilities11,148 6,801 
Sales tax payable4,251 1,982 
Deferred revenue19,089 12,722 
Operating lease assets and operating lease liabilities, net(24,862)— 
Other current liabilities1,212 13 
Other non-current liabilities1,262 251 
Net cash used in operating activities(91,615)(96,253)

13

SONDER HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
(In thousands)
(unaudited)
Six Months Ended June 30,
20222021
Cash flows from investing activities
Purchase of property and equipment(16,145)(4,476)
Capitalization of internal-use software(2,236)(2,424)
Net cash used in investing activities(18,381)(6,900)
Cash flows from financing activities
Proceeds from Delayed Draw Notes, net of issuance costs of $5,775
159,225 — 
Repayment of debt(24,680)(6,900)
Debt extinguishment costs(3,065)— 
Proceeds from Business Combination and PIPE offering325,928 162,366 
Issuance costs of common stock(58,555)— 
Proceeds from exercise of stock options1,447 2,123 
Proceeds from exercise of common stock warrants— 120 
Issuance of redeemable convertible preferred stock— 1,020 
Net cash provided by financing activities400,300 158,729 
Effects of foreign exchange on cash499 (258)
Net change in cash and restricted cash290,803 55,318 
Cash and restricted cash at the beginning of period69,941 123,108 
Cash and restricted cash at end of period
$360,744 $178,426 

Six Months Ended June 30,
20222021
Supplemental disclosures of cash flow information:
Cash paid for income taxes during the period480 163 
Cash paid for interest during the year2,044 1,761 
Non-cash disclosure of investing and financing activities:
Accrued purchases of property and equipment469 227 
Conversion of Convertible Notes159,172 — 
Conversion of Legacy Sonder Warrants1,243 — 
Reclassification of liability-classified Legacy Sonder Warrants to equity2,111 — 
Recognition of Earn Out liability(98,117)— 
Issuance of Delayed Draw Warrants5,598 — 
Reconciliation of cash and restricted cash:
Cash$359,500 $178,351 
Restricted cash1,244 75 
Total cash and restricted cash$360,744 $178,426 
See Notes to Condensed Consolidated Financial Statements.
14

SONDER HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Description of Business
Company and Background
Sonder Holdings Inc. is headquartered in San Francisco, California, and together with its wholly owned subsidiaries (collectively Sonder), provides short and long-term accommodations to travelers in various cities across North America, Europe and the Middle East. The Sonder units in each apartment style building and each hotel property are selected, designed and managed directly by Sonder.
As used herein, “Sonder,” “we,” “our,” the “Company” and similar terms include Sonder and its subsidiaries, unless the context indicates otherwise.
On January 18, 2022, Sonder consummated the previously announced business combination by and among Gores Metropoulos II, Inc. (GMII), Sunshine Merger Sub I, Inc. (First Merger Sub), a direct, wholly-owned subsidiary of Second Merger Sub (as defined below), Sunshine Merger Sub II, LLC, a direct, wholly-owned subsidiary of GMII (Second Merger Sub), and Sonder Operating Inc., a Delaware corporation formerly known as Sonder Holdings Inc. (Legacy Sonder) (the “Business Combination”). Refer to Note 16. Business Combinations for details of the transaction.
Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP, U.S. GAAP, or generally accepted accounting principles). The condensed consolidated financial statements include the accounts of Sonder Holdings Inc., its wholly owned subsidiaries, and one variable interest entity (VIE) for which it is the primary beneficiary in accordance with consolidation accounting guidance. All intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, including normal recurring adjustments, necessary to present fairly Sonder’s financial position as of June 30, 2022, its results of operations and comprehensive loss mezzanine equity and stockholders’ equity (deficit), and cash flows for the six months ended June 30, 2022 and 2021. Sonder’s condensed consolidated results of operations and comprehensive loss, mezzanine equity and stockholders’ equity (deficit), and cash flows for the six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year.

In accordance with ASC 810, Consolidation, Sonder evaluates its ownership, contractual and other interests in entities to assess whether it has a variable interest in entities in which it has a financial relationship and, if so, whether or not those entities are VIEs. These evaluations are complex, involving judgment and the use of estimates and assumptions based on available historical and prospective information, among other factors. For an entity to qualify as a VIE, ASC 810 requires Sonder to determine if it is the primary beneficiary of the VIE, and, if so, to consolidate such entity into its consolidated financial statements and, if not, to account for the investment or other variable interest in a VIE in accordance with applicable U.S. GAAP.

Sonder consolidates its VIE in which it holds a controlling financial interest and is therefore deemed the primary beneficiary. Sonder will be deemed to hold a controlling financial interest when it (1) has the power to direct the activities that most significantly impact the economic performance of this VIE and (2) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to this VIE. Periodically, Sonder reevaluates its ownership, contractual and other interests in entities to determine whether any changes in its interest or relationship with an entity impacts the determination of whether it is still the primary beneficiary of such entity. As of June 30, 2022 and December 31, 2021, Sonder’s consolidated VIE was not material to the condensed consolidated financial statements.
COVID-19 Pandemic
The ongoing impact of the COVID-19 pandemic on the global economy as well as whether and to what extent additional variants or resurgences of the virus continue to occur and the extent to which COVID-19 will continue to adversely impact Sonder remains uncertain. Sonder’s financial results for all of 2021 and the first half of 2022 were materially adversely affected by the COVID-19 pandemic, and the pandemic may continue to materially adversely impact
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business operations, results of operations and liquidity in the near term and possibly longer. The extent of the recovery is uncertain and will be largely dependent on the effectiveness of COVID-19 prevention and treatment against prevalent COVID-19 strains in the cities and countries in which Sonder operates.
Use of Estimates
The preparation of condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expense during the reporting periods. Such management estimates include revenue recognition, bad debt allowance, the fair value of share-based awards, valuation of common stock, estimated useful life of software development costs, valuation of intellectual property and intangible assets, contingent liabilities, and valuation allowance for deferred tax assets, among others. These estimates are based on information available as of the date of the condensed consolidated financial statements; therefore, actual results could differ from those estimates.
Deferred Transaction Costs
Deferred transaction costs consist of expenses incurred in connection with Sonder becoming publicly traded, including legal, accounting, printing, and other related costs. Since Sonder became publicly traded, these deferred costs have been reclassified to stockholders’ equity (deficit) and recorded against the proceeds from the transaction.
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In February 2016, FASB issued ASU No. 2016-02, Leases (Topic 842), which has subsequently been amended by ASUs 2018-01, 2018-10, 2018-11, 2018-20, 2019-01, 2019-10 and 2020-05. The guidance requires the recognition of right of use (ROU) assets and lease liabilities for substantially all leases under U.S. GAAP. The guidance retains a distinction between finance leases and operating leases, and the classification criteria for distinguishing between finance leases and operating leases are substantially similar to that under previous U.S. GAAP. The expense recognition and cash flow treatment arising from either a finance lease or operating lease by a lessee have not changed significantly from previous U.S. GAAP. For operating leases, a lessee is required to do the following: (i) recognize a right-of-use (ROU) asset and a lease liability, initially measured at the present value of the lease payments, on the condensed consolidated balance sheets; (ii) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis; and (iii) classify all cash payments within operating activities in the statement of cash flows. ASU 2016-02 is effective for public entities and employee benefit plans that file or furnish financial statements with or to the SEC for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and is effective for all other entities for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, except for employee benefit plans that file or furnish financial statements with or to the SEC or not-for-profit entities. Early adoption is allowed. In November 2019, FASB issued amended guidance which defers the effective date for emerging growth companies (EGCs) for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Sonder implemented ASC 842 as of January 1, 2022. The most significant effects of Topic 842 were the recognition of $1.1 billion in operating lease right-of-use assets, $143.0 million of current operating lease liabilities, $1.1 billion of non-current operating lease liabilities, and a $66.1 million reduction to deferred rent, which was recorded as a reduction the ROU asset measured on adoption date. Sonder applied Topic 842 to all leases as of January 1, 2022, with comparative periods continuing to be reported under Topic 840. As part of the adoption of Topic 842, Sonder carried forward the assessment from Topic 840 of whether our contracts contain or are leases, the classification of leases, and remaining lease terms. See Note 6. Leases for further details.
Recently Issued Accounting Pronouncements
In June 2016, FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which has subsequently been amended by ASUs 2018-19, 2019-04, 2019-05, 2019-10 and 2019-11. The guidance changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance replaces the current ‘incurred loss’ model with an ‘expected loss’ approach. This generally will result in the earlier recognition of allowances for losses and requires increased disclosures. ASU 2016-13 is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and is effective for all other entities for fiscal years
16

beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted. In November 2019, FASB issued amended guidance which defers the effective date for emerging growth companies (EGCs) for fiscal years beginning after December 15, 2022, and interim periods therein. Sonder is currently evaluating the impact ASU 2016-13 will have on its condensed consolidated financial position, results of operations, and cash flows.
In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which was subsequently amended by ASU 2021-04. The guidance provides optional expedients and exceptions to contract modifications and hedging relationships that reference the London Interbank Offered Rate or another reference rate expected to be discontinued. The standard is effective upon issuance through December 31, 2022 and may be applied at the beginning of the interim period that includes March 12, 2020 or any date thereafter. Sonder does not have any hedging relationships and currently does not have material contracts impacted by reference rate reform; however, Sonder will continue to assess contracts through December 31, 2022.
Note 3. Revenue
Revenue Recognition
Sonder generates revenues primarily by providing short-term or month-to-month accommodations to its guests. Sonder’s revenue is generated from stays booked through Sonder.com or the Sonder app, which it refers to as direct revenue, or from stays booked through third party corporate and online travel agencies (OTAs), which it refers to as indirect revenue.
The following table sets forth Sonder’s total revenues for the periods shown disaggregated between direct and indirect channels (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Direct revenue$42,843 $23,924 $74,777 $44,005 
Indirect revenue78,479 23,345 127,011 34,822 
Total revenue$121,322 $47,269 $201,788 $78,827 
No guest represented over 10% of revenues for the three and six months ended June 30, 2022 and 2021.
Three third-party corporate and OTAs represented over 34%, 18%, and 12% of net accounts receivable balance for as of June 30, 2022, and one third-party OTA represented 29% of Sonder’s net accounts receivable balance as of December 31, 2021.
Note 4. Fair value measurement and financial instruments
Sonder follows the ASC 820 fair value hierarchy established under the standards of U.S. GAAP to determine the fair value of its financial instruments as follows:
Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2—Inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.
Level 3—Unobservable inputs for which there is little or no market data that is significant to the fair value of the assets or liabilities. Consideration is given to the risk inherent in the valuation technique and the inputs to the model.
A financial instrument’s classification within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
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Liabilities Measured at Fair Value on a Recurring Basis
As of December 31, 2021, Sonder did not have observable inputs for the valuation of its preferred stock warrant liabilities or the share-settled redemption feature related to Sonder’s convertible promissory notes (Convertible Notes).
The Convertible Notes were initially separated into debt and the share-settled redemption feature components and assigned a fair value. The value assigned to the debt component was the estimated fair value as of the issuance date of similar debt without the share-settled redemption feature. The difference between the cash proceeds and the estimated fair value represented the value which was assigned to the share-settled redemption feature and recorded as a debt discount. The significant unobservable input used in the fair value measurement of the Convertible Notes and the share-settled redemption feature was the fair value of the underlying stock at the valuation measurement date.
As of December 31, 2021, the fair value of the preferred stock warrant liabilities was based in part on aggregate equity value indications, consistent with the analysis for Sonder’s common stock valuation using the option pricing method. The significant unobservable input used in the fair value measurement of the preferred stock warrant liabilities was the fair value of the underlying preferred stock at the valuation measurement date.
On January 18, 2022, upon the closing of the Business Combination, the outstanding principal and accrued and unpaid interest of the Convertible Notes and the preferred stock warrants were converted to equity. As such, there were no share-settled redemption features or preferred stock warrant liabilities as of June 30, 2022.
SPAC Warrants
As part of the GMII initial public offering (GMII IPO), GMII issued 9,000,000 public warrants (the Public Warrants) and 5,500,000 private placement warrants (the Private Placement Warrants), each of which is exercisable at a price of $11.50 per share (the SPAC Warrants).
Sonder has determined that the Public Warrants issued in the GMII IPO, which remained outstanding at the closing of the Business Combination and became exercisable for shares of Sonder’s common stock, are subject to treatment as a liability. As of the closing of the Business Combination and June 30, 2022, Sonder utilized a Monte Carlo simulation methodology to value the Public Warrants using Level 3 inputs, as Sonder did not have observable inputs for the valuation. The significant unobservable inputs used in the fair value measurement of the Public Warrants liability are related to expected share-price volatility of 54.5% and the expected term of 4.6 years. The Public Warrants were valued at $0.03 per warrant at June 30, 2022.
The fair value of the Private Placement Warrants was deemed to be equal to the fair value of the Public Warrants since the Private Placement Warrants have similar terms and are subject to substantially the same redemption features as the Public Warrants. Sonder determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant because the transfer of the Private Placement Warrants to anyone outside of a small group of individuals constituting the sponsors would result in the Private Placement Warrants having substantially the same terms as the Public Warrants. As such, the estimated fair value of the Private Placement Warrants is classified as a Level 3 fair value measurement
Refer to Note 7. Preferred and Common Stock Warrants for further details on the SPAC Warrants.
Earn Out
In addition to the consideration paid at the closing of the Business Combination, certain investors may receive their pro rata share of up to an aggregate of 14,500,000 additional shares of Sonder’s common stock (the Earn Out) as consideration as a result of the common stock achieving certain benchmark share prices as contemplated by the Merger Agreement.
Sonder has determined that the Earn Out is subject to treatment as a liability. Sonder utilized a Monte Carlo simulation methodology to value the Earn Out using Level 2 inputs. The key assumptions used in the Monte Carlo simulation are related to expected share-price volatility, expected term, risk-free interest rate and dividend yield. The expected volatility as of June 30, 2022 was derived from the volatility of comparable public companies.
Sonder did not have any assets or liabilities measured at Level 1 as of June 30, 2022 on a recurring or non-recurring basis. As of June 30, 2022, the Earn Out liability, Public Warrants liability and Private Placement Warrants liability were
18

recorded in other non-current liabilities in the condensed consolidated balance sheet. The following table summarizes Sonder’s Level 2 and Level 3 financial liabilities measured at fair value on a recurring basis (in thousands):
June 30, 2022
Level 2Level 3Total
Financial liabilities:
Other non-current liabilities:
Earn Out liability$1,595 $— $1,595 
Public Warrants— 270 270 
Private Placement Warrants— 165 165 
Total financial liabilities measured and recorded at fair value$1,595 $435 $2,030 
Sonder did not have any asset or liability measured at Level 1 or Level 2 as of December 31, 2021 on a recurring or non-recurring basis. The following table summarizes Sonder’s Level 3 financial liabilities measured at fair value on a recurring basis (in thousands):
December 31, 2021
Level 3
Financial liabilities:
Other non-current liabilities:
Preferred stock warrant liabilities$3,288 
Share-settled redemption feature30,322 
Total financial liabilities measured and recorded at fair value$33,610 
The following table presents changes in Sonder’s Level 3 liabilities measured at fair value for the six months ended June 30, 2022 (in thousands):
June 30, 2022
Level 3
Beginning balance$33,610 
Public Warrants liability23,604 
Private Placement Warrants liability14,465 
Decrease in fair value of share-settled redemption feature upon conversion of Convertible Notes(30,322)
Decrease in fair value of Public Warrants liability(23,334)
Decrease in fair value of Private Placement Warrants liability(14,300)
Conversion of preferred stock warrant liabilities to equity(3,288)
Total financial liabilities measured and recorded at fair value$435 
The following table presents changes in Sonder’s Level 3 liabilities measured at fair value for the year ended December 31, 2021 (in thousands):
December 31, 2021
Level 3
Beginning balance$1,140 
Recognition of share-settled redemption feature45,156 
Decrease in fair value of share-settled redemption feature(14,834)
Increase in fair value of preferred stock warrant liabilities2,148 
Total financial liabilities measured and recorded at fair value$33,610 

As of December 31, 2021, the share-settled redemption feature and the preferred stock warrant liabilities were recorded in convertible notes and other non-current liabilities, respectively, in the condensed consolidated balance sheet.
There were no transfers of financial instruments between valuation levels during the three and six months ended June 30, 2022 and the year ended December 31, 2021.
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Sonder estimates that the fair value of its restricted cash, accounts receivable, prepaid rent, prepaid expenses, other current assets, accounts payable, accrued liabilities, sales tax payable, deferred revenue, current portion of long-term debt, convertible notes and other current liabilities approximates carrying value due to the relatively short maturity of the instruments. The carrying value of Sonder’s long-term debt approximates fair value because it bears interest at market rate and all other terms are also reflective of current market terms.
The fair value of the warrants (Delayed Draw Warrants) issued in connection with the delayed draw term loan (Delayed Draw Notes) was estimated by separating the Delayed Draw Notes into the debt and warrants components and assigning a fair value to each component. The value assigned to the debt component was the estimated fair value as of the issuance date of similar debt without the warrants. The difference between the cash proceeds and the estimated fair value represented the value which was assigned to the Delayed Draw Warrants and recorded as a debt discount. As of the closing of the Business Combination, the fair value of the Delayed Draw Warrants was $5.6 million and was included in additional paid in capital in the condensed consolidated balance sheet.
These assumptions are inherently subjective and involve significant management judgment. Any change in fair value is recognized as a component of other expense (income), net, on the condensed consolidated statements of operations and comprehensive loss.
Note 5. Debt
Delayed Draw Note Purchase Agreement
On December 10, 2021, Sonder entered into a note and warrant purchase agreement (the Delayed Draw Note Purchase Agreement) with certain private placement investors (Purchasers or PIPE Investors) for the sale of Delayed Draw Notes to be available to Sonder following the closing of the Business Combination. The Delayed Draw Note Purchase Agreement also provided that the Purchasers will be issued Delayed Draw Warrants to purchase shares of common stock in connection with the transaction.
The Delayed Draw Notes have a maturity of five years from the date of issuance and are subject to interest on the unpaid principal amount at a rate per annum equal to the three-month secured overnight financing rate (SOFR rate) plus 0.26% (subject to a floor of 1%) plus 9.0% payable in cash, or for the first two years, payment in kind at the election of Sonder, quarterly in arrears. The Delayed Draw Notes are secured by substantially all of the assets of Sonder.
The Purchasers also received Delayed Draw Warrants to purchase an aggregate of 2,475,000 shares of Sonder’s common stock, each with an exercise price of $12.50 per share. The Delayed Draw Warrants have an expiration date of five years after issuance.
The Delayed Draw Note Purchase Agreement also includes customary events of default, including failure to pay the note obligations or other amounts when due, material breach of representations or warranties, breach of negative covenants, failure to perform or comply with obligations under the Delayed Draw Notes or the Delayed Draw Note Purchase Agreement, acceleration of certain other indebtedness, certain judgements against Sonder, legal processes instituted against Sonder or its assets, issues with the enforceability of the Delayed Draw Note Purchase Agreement and ancillary documents, bankruptcy, insolvency or similar proceedings with respect to Sonder, and orders under debtor relief laws.
In January 2022, Sonder drew down $165 million in Delayed Draw Notes and issued Delayed Draw Warrants to purchase 2,475,000 shares of common stock to the Purchasers. As of June 30, 2022, the total long-term debt on the condensed consolidated balance sheet was $161.3 million, consisting of $172.4 million of unpaid principal balance, which included the $165 million principal amount and payment-in-kind (PIK) interest of $7.4 million that was added to the principal balance, net of $5.8 million in issuance costs and $5.3 million in Delayed Draw Warrant liabilities.
As of December 31, 2021, the total long-term debt on the condensed consolidated balance sheet consisted of $13.1 million of current portion of the long-term debt and $10.7 million of non-current portion of long-term debt, representing $24.5 million of unpaid principal balance, net of the $0.6 million of deferred loan issuance costs.
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Long term debt, net consisted of the following (in thousands):

June 30, 2022December 31
2021
Principal balance$172,372 $24,477 
Less: Delayed Draw Warrants liability(5,300)— 
Less: unamortized deferred issuance costs(5,787)(625)
Long term debt, net$161,285 $23,852 

2021 Convertible Promissory Notes
In March 2021, pursuant to a note purchase agreement, Sonder issued the Convertible Notes to certain investors for an aggregate principal amount of $165.0 million. The net proceeds from the issuance of the Convertible Notes were approximately $162.4 million after deducting issuance costs of $2.6 million.
The Convertible Notes were scheduled to mature on March 12, 2022, unless converted in accordance with the conversion terms prior to such date. The Convertible Notes were convertible either automatically, at the option of holders, or at the option of Sonder upon the occurrence of certain specified events.
In January 2022, upon the closing of the Business Combination, the outstanding principal and accrued and unpaid interest of the Convertible Notes were automatically converted into 19,017,105 shares of common stock for a value of $159.2 million. Upon the conversion, Sonder recognized a gain on conversion of $29.5 million as a result of a change in the fair value of the share-settled redemption feature and $159.2 million additional-paid-in-capital. Sonder also recognized the change in fair value of the share-settled redemption feature of $30.3 million, expense related to the debt discount of $10.0 million and interest expense of $1.4 million.

2018 Loan and Security Agreement

In December 2018, Legacy Sonder entered into a loan and security agreement (the 2018 Loan and Security Agreement) with certain venture lenders that provided aggregate borrowing capacity of $50.0 million. As of December 31, 2021, the current portion of the long-term debt was $13.1 million on the consolidated balance sheet and the total non-current portion of the long-term debt on the consolidated balance sheet was $10.7 million, consisting of $11.3 million of unpaid principal balance, net of the $0.6 million of deferred loan issuance costs. Unused commitments under the 2018 Loan and Security Agreement as of December 31, 2021 were $25.0 million. Interest expense on the term loans totaled $4.9 million for the year ended December 31, 2021, and was recorded in interest expense, net in the condensed consolidated statements of operations and comprehensive loss.
In January 2022, at the closing of the Business Combination, Sonder paid down $24.5 million in outstanding principal of the 2018 Loan and Security Agreement and $2.5 million in debt extinguishment costs. Sonder also recognized $0.6 million of early termination fees, $0.4 million of the write off of deferred financing fees, and $0.2 million of interest expense in connection with the repayment of this 2018 Loan and Security Agreement.
Credit Facility
2020 Credit Facility
In February 2020, Legacy Sonder entered into a revolving credit agreement (the 2020 Credit Facility) that provides an aggregate revolving capacity of $50.0 million, which may be borrowed as revolving loans or used for the issuance of letters of credit. Loans under the 2020 Credit Facility may be base rate loans or Eurodollar rate loans, plus a margin of 2.00% per annum. The 2020 Credit Facility includes (i) a letter of credit fee for each letter of credit equal to 1.50% per annum times amount available to be drawn under such letter of credit and (ii) a non-use fee equal to 0.25% times the actual daily amount by which the aggregate commitments provided by facility exceed the sum of the outstanding amount of loans and letters of credit. All outstanding loan balances are due on February 21, 2023, the maturity date for the 2020 Credit Facility. Outstanding balances may be repaid prior to maturity without penalty.
The extensions of credit under the 2020 Credit Facility are guaranteed by certain of Sonder’s subsidiaries and secured on a senior basis by a lien on substantially all of Sonder’s and certain of its subsidiaries’ assets. The 2020 Credit Facility contains customary affirmative covenants, such as financial statement reporting requirements and maintenance of insurance, as well as customary negative covenants, such as restrictions on Sonder’s ability to incur debt and liens, make investments, dispose of assets, pay dividends and repurchase stock, enter into transactions with affiliates and undergo
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fundamental changes such as dissolution or disposal of assets except so long as no default exists. The 2020 Credit Facility provides for a minimum EBITDA covenant and a covenant to maintain liquidity at least equal to the amount outstanding under the 2020 Credit Facility; provided that if liquidity is less than the amount outstanding plus $25.0 million, Sonder must provide cash collateral equal to 105% of the amount outstanding.
The 2020 Credit Facility also includes customary events of default, including, among other things, payment defaults, covenant defaults, breach of representations and warranties, cross-defaults to other material debt, bankruptcy and insolvency events of default, judgment defaults and change of control defaults. Upon the occurrence of an event of default under the 2020 Credit Facility, the lender has the right to terminate its commitments to provide additional loans, declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable, increase the applicable interest rates by 2%, and exercise rights and remedies, including by way of initiating foreclosure proceedings against the collateral securing the obligations under the agreement.
As of June 30, 2022, Sonder was in compliance with all financial covenants, there were no borrowings outstanding on the 2020 Credit Facility, and outstanding letters of credit totaled $32.0 million. As of December 31, 2021, Sonder was in compliance with all financial covenants, and there were no borrowings outstanding on the 2020 Credit Facility.

2020 Québec Credit Facility
In December 2020, a Canadian subsidiary of Sonder entered into an agreement (2020 Québec Credit Facility) with Investissement Québec, a Quebecois public investment entity, that provides a loan facility of CAD $25.0 million and an additional loan of CAD $5.0 million referred to as a conditional-refund financial contribution (CRFC). The loan and the CRFC will bear interest at a fixed rate of 6% per year for a period of 10 years starting from the first date of the loan disbursement. As of June 30, 2022 and December 31, 2021, Sonder was in compliance with all financial covenants, but have not yet met the drawdown requirements and as such, there have been no borrowings on the 2020 Québec Credit Facility.
Restricted Cash
Throughout 2022 and 2021, Sonder entered into multiple cash collateral agreements in connection with the issuance of letters of credit and corporate credit card programs. As of June 30, 2022 and December 31, 2021, Sonder had $1.2 million and $0.2 million, respectively, of cash collateral which was considered to be restricted cash.
Note 6. Leases
Sonder leases buildings or portions of buildings for guest usage, warehouses to store furniture, and corporate offices under noncancellable operating lease agreements, which expire through 2039. Sonder is required to pay property taxes, insurance and maintenance costs for certain of these facilities.
Sonder adopted Topic 842 as of January 1, 2022 using the modified retrospective approach. This approach allows entities to either apply the new lease standard to the beginning of the earliest period presented or only to the condensed consolidated financial statements in the period of adoption without restating prior periods. Sonder has elected to apply the new guidance at the date of adoption without restating prior periods. In addition, Sonder elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed it to carry forward the historical determination of contracts as leases, lease classification and not reassess initial direct costs for historical lease arrangements. Accordingly, previously reported financial statements, including footnote disclosures, have not been recast to reflect the application of the new standard to all comparative periods presented.
Sonder has lease agreements with lease and non-lease components, including embedded leases, and has elected to utilize the practical expedient to account for lease and non-lease components together in the condensed consolidated statements of operations.
Operating lease right-of-use (ROU) assets are included within operating lease right-of-use assets in the condensed consolidated balance sheet. The corresponding operating lease liabilities are included within current operating lease liabilities and non-current operating lease liabilities on Sonder’s condensed consolidated balance sheet as of June 30, 2022. ROU assets represent Sonder’s right to use an underlying asset for the lease term and lease liabilities represent Sonder’s obligation to make lease payments arising from the lease.
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Adoption of the new lease standard had a material impact on Sonder’s condensed consolidated financial statements. The most significant impacts were the (i) recording of ROU assets of $1.1 billion, and (ii) recording lease liabilities of $1.2 billion, as of January 1, 2022 on the condensed consolidated balance sheets. Sonder also reclassified prepaid expenses of $0.2 million and the deferred rent balance, including tenant improvement allowances, and other liability balances of $31.8 million relating to Sonder’s existing lease arrangements as of December 31, 2021, into the ROU asset balance as of January 1, 2022. The standard did not materially impact Sonder’s condensed consolidated statement of operations and comprehensive loss and condensed consolidated statement of cash flows.
Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. Sonder’s assessed lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Certain operating leases provide for annual increases to lease payments based on an index or rate. Sonder estimates the annual increase in lease payments based on the index or rate at the lease commencement date, for both Sonder’s historical leases and for new leases commencing after January 1, 2022.

Components of operating lease expense were as follows (in thousands):

Three Months EndedSix Months Ended
June 30, 2022
Operating lease cost$65,876 $128,823 
Short-term lease cost477 479 
Variable lease cost944 1,587 
Total operating lease cost$67,297 $130,889 

Supplemental information related to operating leases was as follows (in thousands):

Three Months EndedSix Months Ended
June 30, 2022
Cash payments for operating leases$56,838$106,603
New operating lease ROU assets obtained in exchange for operating lease liabilities$11,968$126,868
As of June 30, 2022, the weighted average remaining lease term was 7.4 years and the weighted average discount rate used to determine the net present value of the lease liabilities was 9.4%.

As of June 30, 2022, remaining maturities of operating lease obligations are as follows (in thousands):
As of June 30, 2022Amount
remaining six months of 2022$126,755 
2023254,295 
2024241,299 
2025225,470 
2026197,944 
2027159,325 
Thereafter
471,024 
Gross lease payments1,676,112 
Less imputed interest485,743 
Total operating lease obligations, net 1
$1,190,369 
1 Total operating lease obligations, net excludes $12 million of FF&E allowances for leases that have not yet commenced. As such, total operating lease obligations, net per the above table does not agree to the condensed consolidated balance sheet.

Sonder does not have material lease receivables from noncancellable lease contracts that would reduce the total contractual operating lease obligations. As of June 30, 2022, the Company has entered into leases that have not yet commenced with
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future lease payments totaling $1.9 billion, excluding purchase options, that are not yet recorded on the condensed consolidated balance sheets and are not reflected in the above table. These leases will commence between 2022 and 2026 with non-cancelable lease terms of one to 17 years.
Rental expense for operating leases for the three months ended June 30, 2022 and 2021 was $65.8 million and $40.7 million, respectively, of which $64.5 million and $38.3 million, respectively, is recognized in cost of revenues, $0.2 million and $1.8 million, respectively, in operations and support, and $1.1 million and $0.6 million, respectively, in general and administrative. Rental expense for operating leases for the six months ended June 30, 2022 and 2021 was $130.9 million and $78.6 million, respectively, of which $128.1 million and $74.2 million, respectively, is recognized in cost of revenues, $0.9 million and $2.7 million respectively, in operations and support, and $1.9 million and $1.7 million, respectively, in general and administrative.
Supplemental Information for Comparative Periods
As of December 31, 2021, prior to the adoption of Topic 842, future minimum payments lease payments under non-cancelable operating leases were as follows (in millions):
As of December 31, 2021Amount
2022$279,093 
2023366,299 
2024418,156 
2025433,541 
2026403,582 
Thereafter1,641,237 
Total minimum future lease payments$3,541,908 
Note 7. Preferred and Common Stock Warrants
Preferred Stock Warrants
Sonder had the following preferred stock warrants outstanding as of December 31, 2021. The number outstanding and exercise price are prior to the application of the merger exchange ratio in the Business Combination, which closed on January 18, 2022:
Type of WarrantNumber OutstandingIssuance DateExercise PriceExpiration Date
Series A59,440 10/20/2016$1.36 10/20/2026
Series B57,696 1/30/2018$2.40 1/30/2028
Series C218,417 12/28/2018$5.04 12/28/2025
Series D71,456 2/21/2020$10.50 2/21/2027
In January 2022, upon the closing of the Business Combination, (i) the Series A and Series B preferred stock warrants were converted into 150,092 post combination shares of Sonder’s common stock for a value of $1.2 million, and (ii) the Series C and Series D warrants automatically converted into warrants to purchase shares of Sonder common stock.
The warrants previously exercisable for Series C and Series D preferred stock are accounted for as equity in accordance with FASB ASC Topic 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity. Upon the closing of the Business Combination, Sonder reclassified $2.0 million related to such warrants from other non-current liabilities to equity in the condensed consolidated balance sheet.
Common Stock Warrants
Delayed Draw Warrants
In January 2022, pursuant to the Delayed Draw Note Purchase Agreement with certain PIPE Investors, Sonder issued $165 million in aggregate principal amount of Delayed Draw Notes and 2,475,000 Delayed Draw Warrants to the PIPE Investors. The warrants are exercisable for shares of common stock at an exercise price of $12.50 per share. The Delayed
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Draw Warrants have an expiration date five years after issuance. The purchasers of the Delayed Draw Notes were also provided with customary registration rights for the shares issuable upon exercise of the Delayed Draw Warrants.
The Delayed Draw Warrants are accounted for as equity-classified warrants in accordance with FASB ASC Topic 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Equity.” Upon the closing of the Business Combination the value of the Delayed Draw Warrants was $5.6 million and was recorded within additional paid in capital in the condensed consolidated balance sheet.
Public Warrants
Prior to the Business Combination, GMII issued 9,000,000 public warrants (Public Warrants), which remained outstanding at the closing of the Business Combination and became exercisable for shares of common stock. Each whole Public Warrant entitles the registered holder to purchase one whole share of common stock at a price of $11.50 per share, subject to certain adjustments. A warrant holder may exercise its Public Warrants only for a whole number of shares of common stock. This means that only a whole Public Warrant may be exercised at any given time by a warrant holder. No fractional Public Warrants were issued upon separation of the units and only whole Public Warrants trade. Accordingly, unless a registered holder purchased at least five units, they were not able to receive or trade a whole Public Warrant. The Public Warrants will expire on January 18, 2027 (five years after the consummation of the Business Combination), at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Public Warrants are accounted for as liabilities as there are terms and features that do not qualify for equity classification in FASB ASC Topic 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity. The fair value of the Public Warrants at January 18, 2022 was a liability of $23.6 million, which was recorded in other non-current liabilities in the condensed consolidated balance sheet upon the closing of the Business Combination. At June 30, 2022, the fair value was $0.3 million and was recorded in other non-current liabilities in the condensed consolidated balance sheet. The change in fair value of $7.0 million and $23.3 million for the three and six months ended June 30, 2022, respectively, is reflected as other income in the condensed consolidated statements of operations and comprehensive loss.
Private Placement Warrants
Prior to the closing of the Business Combination, GMII issued 5,500,000 private placement warrants (Private Placement Warrants). The Private Placement Warrants have terms and provisions that are identical to those of the Public Warrants sold as part of the units in the GMII IPO, except that the Private Placement Warrants may be physical (cash) or net share (cashless) settled and are not redeemable so long as they are held by Gores Metropoulos Sponsor II, LLC (the Sponsor) or its permitted transferees, and are entitled to certain registration rights. The sale of the Private Placement Warrants was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are accounted for as liabilities as there are terms and features that do not qualify for equity classification in FASB ASC Topic 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity. The fair value of the Private Placement Warrants at January 18, 2022 was a liability of $14.5 million, which was recorded in other non-current liabilities in the condensed consolidated balance sheet. At June 30, 2022, the fair value decreased to $0.2 million and was recorded in other non-current liabilities in the condensed consolidated balance sheet. The change in fair value of $4.3 million and $14.3 million for the three and six months ended June 30, 2022, respectively, is reflected as other income in the condensed consolidated statements of operations and comprehensive loss.
Note 8. Commitments and Contingencies
Surety Bonds
A portion of Sonder’s leases are supported by surety bonds provided by affiliates of certain insurance companies. As of June 30, 2022, Sonder had commitments from five surety providers in the amount of $67.3 million, of which $33.4 million was outstanding. The availability, terms and conditions, and pricing of bonding capacity are dependent on, among other things, continued financial strength and stability of the insurance company affiliates providing the bonding capacity, general availability of such capacity and Sonder’s corporate credit rating.
Legal and Regulatory Matters
Sonder has been and expects to continue to become involved in litigation or other legal proceedings from time to time, including the matters described below. Except as described below, Sonder is not currently a party to any litigation or legal proceedings that, in the opinion of Sonder’s management, are likely to have a material adverse effect on Sonder’s business. Regardless of outcome, litigation and other legal proceedings can have an adverse impact on Sonder because of
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defense and settlement costs, diversion of management resources, possible restrictions on our business as a result of settlement or adverse outcomes, and other factors.
In late February 2020, Sonder was informed about an investigation underway by the New York City Department of Health and Mental Hygiene relating to possible Legionella bacteria contamination in the water supply at 20 Broad Street, New York, NY (Broad Street Property). Due to the failure of the owner of the Broad Street Property (Broad Street Landlord) to address the Legionella bacteria contamination and the associated health risks posed to Sonder’s guests, Sonder withheld payment of rent to the Broad Street Landlord on grounds of, among other reasons, constructive eviction. On July 30, 2020, the Broad Street Landlord sued Sonder USA Inc., Sonder Canada Inc., and Sonder Holdings Inc. for breach of the lease, seeking no less than $3.9 million in damages. Sonder filed counterclaims against the Broad Street Landlord and the property management company for breach of contract, seeking significant damages. The Broad Street Landlord filed a motion for summary judgment. The hearing and oral argument for the summary judgment motion occurred on December 21, 2021. No ruling was issued by the judge. The motion for summary judgment is now under submission. Sonder intends to vigorously defend itself and believes that the claims of the Broad Street Landlord are without merit.
Sonder establishes an accrued liability for loss contingencies related to legal matters when a loss is both probable and reasonably estimable. These accruals represent Sonder’s best estimate of probable losses. Sonder recorded an estimated accrual of $3.4 million and $5.3 million in the condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021, respectively. Sonder’s views and estimates related to these matters may change in the future, as new events and circumstances arise and the matters continue to develop. Until the final resolution of legal matters, there may be an exposure to losses in excess of the amounts accrued. With respect to outstanding legal matters, based on current knowledge, the amount or range of reasonably possible loss will not, either individually or in the aggregate, have a material adverse effect on Sonder’s business, results of operations, financial condition, or cash flows. Legal fees are expensed as incurred.
Note 9. Guarantees and Indemnification
Indemnifications
Sonder has entered into indemnification agreements with all of its directors. The indemnification agreements and its Amended and Restated Bylaws (Bylaws) require Sonder to indemnify these individuals to the fullest extent not prohibited by Delaware law. Subject to certain limitations, the indemnification agreements and Bylaws also require Sonder to advance expenses incurred by its directors. No demands have been made upon Sonder to provide indemnification under the indemnification agreements or the Bylaws, and thus, there are no claims that Sonder is aware of that could have a material adverse effect on its business, results of operations, financial condition, or cash flows.
In the ordinary course of business, Sonder has included limited indemnification provisions under certain agreements with parties with whom it has commercial relations of varying scope and terms with respect to certain matters, including losses arising out of its breach of such agreements or out of intellectual property infringement claims made by third parties. It is not possible to determine the maximum potential loss under these indemnification provisions due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, no material costs have been incurred, either individually or collectively, in connection with Sonder’s indemnification provisions.
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Note 10. Exchangeable shares and redeemable convertible preferred stock
Exchangeable Shares
Upon the consummation of the Business Combination, each share of Sonder Canada exchangeable common shares (Exchangeable Shares) was exchanged into a new series of the same class of virtually identical Sonder Canada Exchangeable Common Shares (Post-Combination Exchangeable Common Shares) exchangeable for Sonder common stock. At June 30, 2022, Sonder had the following authorized and outstanding Post-Combination Exchangeable Common Shares (in thousands except per share amounts):

June 30, 2022
Shares
Authorized
Shares
Issued and
Outstanding
Issuance
Price
 Per Share
Net
 Carrying
Value
Aggregate
Liquidation
Preference
Post-Combination Exchangeable Common Shares40,000 28,037 $1.54 $43,173 $43,173 
The net carrying value of the exchangeable shares was included in additional paid-in capital in our condensed consolidated balance sheet.
Sonder had the following authorized and outstanding Exchangeable Shares as of December 31, 2021. The figures below are prior to the application of the merger exchange ratio in the Business Combination, which closed on January 18, 2022 (in thousands except per share amounts):
 December 31, 2021
 Shares
Authorized
Shares
Issued and
Outstanding
Issuance
Price
Per Share
Net
Carrying
Value
Aggregate
Liquidation
Preference
Series AA Common
22,518 9,421 $— $— $— 
Series Seed 1
2,589 2,589 0.53 1,359 1,372 
Series Seed 2
1,209 1,209 0.50 606 605 
Series Seed 3
704 704 1.09 787 768 
Series A
183 183 1.36 250 250 
Series B
2,336 2,336 2.40 5,610 5,605 
Series C
3,175 3,175 5.04 15,991 16,003 
Series D
2,058 1,953 10.50 20,600 20,600 
Series E
421 421 10.77 4,530 4,530 
Total exchangeable shares35,193 21,991 — $49,733 $49,733 
Upon consummation of the Business Combination, all the Exchangeable Shares were automatically converted into 32,296,539 post-combination exchangeable shares of Sonder common stock for a value of $49.7 million (share figure was 21,991,418 shares prior to the application of the merger exchange ratio in the Business Combination, which closed on January 18, 2022).
Redeemable Convertible Preferred Stock
Sonder had the following authorized and outstanding redeemable convertible preferred stock as of December 31, 2021. The figures below are prior to the application of the merger exchange ratio in the Business Combination, which
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closed on January 18, 2022 (in thousands except per share amounts):
December 31, 2021
Shares
Authorized
Shares
Issued and
Outstanding
Issuance
Price
 Per Share
Net
 Carrying
Value
Aggregate
Liquidation
Preference
Series Seed 13,703 785$0.53 $269 $416 
Series Seed 1-A3,703 3280.53 $174 $174 
Series Seed 21,720 4710.50 $222 $235 
Series Seed 2-A1,720 390.50 $20 $20 
Series Seed 3704 1.09 $— $— 
Series Seed 3-A704 1.09 $— $— 
Series A7,023 6,7801.36 $9,241 $9,221 
Series A-17,023 1.36 $— $— 
Series B15,611 13,2182.40 $27,105 $31,723 
Series B-115,611 2.40 $— $— 
Series C19,071 12,1445.04 $56,496 $61,204 
Series C-119,071 3,5145.04 $17,708 $17,708 
Series D21,603 3,48210.50 $35,808 $36,560 
Series D-121,603 16,04910.50 $168,518 $168,518 
Series E34,933 18,95610.77 $203,189 $204,159 
Total redeemable convertible preferred stock173,803 75,767— $518,750 $529,938 
Upon the consummation of the Business Combination, all the redeemable convertible preferred stock were automatically converted into 111,271,424 post-combination shares of Sonder common stock for a value of $518.8 million (share figure was 75,757,555 shares prior to the application of the merger exchange ratio in the Business Combination, which closed on January 18, 2022).
Note 11. Common Stock
The condensed consolidated statements of equity (deficit) reflect the closing of the Business Combination on January 18, 2022. As Legacy Sonder was deemed the accounting acquirer in the Business Combination with GMII, all periods prior to the consummation date reflect the balances and activity of Legacy Sonder. The balances as of December 31, 2021 from the consolidated financial statements of Legacy Sonder as of that date, share activity (redeemable convertible preferred stock, exchangeable shares, and common stock) and per share amounts were retroactively adjusted, where applicable, using the recapitalization exchange ratio of 1.4686. All redeemable convertible preferred stock classified as mezzanine equity was converted into common stock, and reclassified into permanent equity as a result of the Business Combination.
Upon the consummation of the Business Combination, each share of Sonder Canada Exchangeable Shares was exchanged into a new series of the same class of virtually identical Post-Combination Exchangeable Common Shares exchangeable for Sonder common stock. At June 30, 2022, Sonder had 28,037,196 Post-Combination Exchangeable Common Shares. All exchangeable shares classified as mezzanine equity were reclassified into permanent equity as a result of the Business Combination.
Sonder’s amended and restated certificate of incorporation following the Business Combination authorizes the issuance of 690,000,000 shares, consisting of (a) 440,000,000 shares of general common stock (General Common Stock), including (i) 400,000,000 shares of common stock, and (ii) 40,000,000 shares of Special Voting Common Stock (Special Voting Common Stock), and (b) 250,000,000 shares of preferred stock, par value $0.0001 per share (Preferred Stock).
Legacy Sonder Redeemable Convertible Preferred Stock
Upon the consummation of the Business Combination, all the redeemable convertible preferred stock were automatically converted into 111,271,424 shares of post-combination Sonder common stock for a value of $518.8 million (share figure was 75,757,555 shares prior to the application of the merger exchange ratio in the Business Combination,
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which closed on January 18, 2022). Refer to Note 10. Exchangeable shares and redeemable convertible preferred stock for further details.
As of June 30, 2022, Sonder has reserved the following shares of common stock for future issuance:
June 30, 2022
Conversion of exchangeable shares40,000,000 
Outstanding stock options29,235,358 
Outstanding restricted stock units (RSUs)9,889,782 
Outstanding market stock units (MSUs)14,499,972 
Outstanding warrants liability14,499,966 
Shares issuable pursuant to Earn Out liability14,500,000 
Outstanding Delayed Draw Note warrants liability2,475,000 
Shares available for grant under the ESPP6,564,031 
Shares available for grant under the 2021 Equity Incentive Plan19,515,277 
Total common stock reserved for future issuance151,179,386 
As of December 31, 2021, Sonder reserved the following shares of common stock for future issuance:
December 31, 2021
Conversion of preferred stock and exchangeable shares(1)
208,995,747 
Outstanding stock options
19,865,244 
Options available for grant under the 2019 Equity Incentive Plan
1,859,784 
Total common stock reserved for future issuance
230,720,775 
____________
(1)Includes the warrants reclassified to equity as of December 31, 2021 and those issued in connection with the 2018 Loan and Security Agreement and related amendment as of December 31, 2021.
Note 12. Stockholders’ Equity (Deficit)
Equity Incentive Plans
2013 and 2019 Equity Incentive Plans
Prior to the closing of the Business Combination, Legacy Sonder maintained a stock based compensation plan. Legacy Sonder’s 2013 and 2019 Equity Incentive Plans (Legacy Equity Incentive Plans) provided for the grant of stock-based awards to purchase or directly issue shares of common stock to employees, directors and consultants. Options were granted at a price per share equal to the fair value of the underlying common stock at the date of grant. Stock options generally have a 10-year contractual term and vest over a four-year period starting from the date specified in each agreement.
Each Legacy Sonder option from the Legacy Equity Incentive Plans that was outstanding immediately prior to the closing of the Business Combination, whether vested or unvested, was converted into an option to acquire a number of shares of common stock (Exchanged Options) equal to the product (rounded down to the nearest whole number) of (i) the number of shares of Legacy Sonder common stock subject to such Legacy Sonder option immediately prior to the closing of the Business Combination and (ii) the exchange ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of such Legacy Sonder option immediately prior to the closing of the Business Combination, divided by (B) the exchange ratio. Except as specifically provided in the Merger Agreement, following the Business Combination, each Exchanged Option will continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Legacy Sonder
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option immediately prior to the consummation of the Business Combination. All stock option activity was retroactively restated to reflect the Exchanged Options.
Sonder Holdings Inc. 2021 Management Equity Incentive Plan
In connection with the Business Combination, Sonder’s board of directors approved the 2021 management equity incentive plan (2021 Management Equity Incentive Plan). Employees (including directors and officers) and consultants who receive awards under the 2021 Management Equity Incentive Plan may receive their pro rata share of awards covering up to an aggregate of 14,500,000 additional shares of common stock that will vest upon the common stock achieving certain benchmark share prices as contemplated by the Merger Agreement (each achievement of such a benchmark, a Triggering Event). If no Triggering Event occurs within the period specified in the Merger Agreement, the unvested awards will not be issued.
Sonder Holdings Inc. 2021 Equity Incentive Plan
In connection with the Business Combination, GMII’s stockholders approved the 2021 equity incentive plan (2021 Equity Incentive Plan). The 2021 Equity Incentive Plan became effective upon the consummation of the Business Combination and succeeds Sonder’s Legacy Equity Incentive Plans. Under the 2021 Equity Incentive Plan, Sonder may grant options, stock appreciation rights, restricted stock, restricted stock units (RSUs), and performance awards to employees, directors and consultants. Options are granted at a price per share equal to the fair value of the underlying common stock at the date of grant. Options granted are exercisable over a maximum term of 10 years from the date of grant. RSUs typically have a cliff vesting period of one year and continue to vest quarterly thereafter. The 2021 Equity Incentive Plan permits Sonder to deliver up to (a) a number equal to the lesser of (i) 31,507,349 shares or (ii) 12% of the total number of shares outstanding immediately following the Business Combination (including the number of shares of common stock reserved for issuance upon the exchange of Canadian Exchangeable Shares (as defined in the Merger Agreement) issued in the Sonder Canada Share Capital Reorganization (as defined in the Merger Agreement) corresponding to shares of company special voting stock to be issued immediately following the consummation of the Business Combination, plus (b) any shares subject to stock options or other awards that are assumed in the Business Combination and that, on or after the effective date, expire or otherwise terminate without having been exercised in full, are tendered to or withheld by Sonder for payment of an exercise price or for tax withholding obligations, or are forfeited to or repurchased by Sonder due to failure to vest, with the maximum number of shares to be added to the 2021 Equity Incentive Plan under this clause (ii) equal to 26,171,806 shares.
The total number of shares that may be issued under the 2021 Equity Incentive Plan will automatically increase on the first trading day of each calendar year, beginning with calendar year 2022, by a number of shares equal to the least of:
(a) 32,820,155 shares;
(b) 12.5% of the total number of shares outstanding as of immediately following the consummation of the Business Combination (including the number of shares of common stock reserved for issuance upon the exchange of Canadian Exchangeable Shares (as defined in the Merger Agreement) issued in the Sonder Canada Share Capital Reorganization (as defined in the Merger Agreement) corresponding to shares of company special voting stock to be issued immediately following the consummation of the Business Combination);
(c) 5% of the total number of shares outstanding on the last day of the immediately preceding fiscal year; and
(d) a lesser number of shares determined by the administrator.
Sonder Holdings Inc. 2021 Employee Stock Purchase Plan
In connection with the Business Combination, GMII’s stockholders approved the 2021 employee stock purchase plan (ESPP). The ESPP allows eligible employees to purchase shares of Sonder common stock through payroll deductions of up to 15% of their eligible compensation. The number of shares reserved for issuance under the ESPP is equal to the lesser of (i) 5,251,225 shares of common stock or (ii) two percent (2%) of the outstanding shares of the Dilution Adjusted Common Stock (as defined in the Merger Agreement) as of immediately following the consummation of the Business Combination. The ESPP provides for either (i) a 27 month offering period, or (ii) such shorter period as may be established by the administrator from time to time. At the end of each offering period employees are able to purchase shares at 85% of the lower of the fair value of our common stock on the first trading day of the offering period or on the last day of the offering period.
The number of shares of common stock available for issuance under the ESPP will automatically be increased on the first day of each fiscal year, beginning with 2022 and ending with the 2041 fiscal year equal to the least of:
(i) 6,564,031 shares of common stock;
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(ii) 2.5% of the total number of shares of common stock outstanding immediately following the consummation of the Business Combination (including the number of shares of common stock reserved for issuance upon the exchange of Canadian Exchangeable Shares (as defined in the Merger Agreement) issued in the Sonder Canada Share Capital Reorganization (as defined in the Merger Agreement) corresponding to shares of Company Special Voting Stock to be issued immediately following the consummation of the Business Combination);
(iii) one percent (1%) of the outstanding shares of Common Stock on the last day of the immediately preceding fiscal year; or
(iv) an amount determined by the administrator.
Stock-based Compensation Expense
Total stock-based compensation expense is as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Operations and support$1,042 $534 $1,972 $940 
General and administrative3,091 1,628 8,020 15,119 
Research and development844 286 1,586 541 
Sales and marketing77 — 156 
Total stock-based compensation expense$5,054 $2,448 $11,734 $16,601 
Stock options

Sonder measures stock-based compensation expense for stock options at the grant date fair value of the award and recognizes the expense on a straight-line basis over the requisite service period, which is generally the vesting period. Sonder estimates the fair value of stock options using the Black-Scholes option-pricing model. During the three and six months ended June 30, 2022, the Company recorded stock-based compensation expense from stock options of approximately $3.6 million and $8.1 million. During the three and six months ended June 30, 2021, the Company recorded stock-based compensation expense from stock options of approximately $2.4 million and $5.0 million.

Sonder recognizes only the portion of the option award granted that is ultimately expected to vest as compensation expense and elects to recognize gross share-based compensation expense with actual forfeitures recognized as they occur.
Fair Value of Stock Options
Sonder estimates the fair value of each stock option award using the Black-Scholes-Merton option-pricing model, which utilizes the estimated fair value of Sonder’s common stock and requires the input of the following subjective assumptions:
Expected Term — The expected term for options granted to employees, officers, and directors is calculated as based on the Sonder’s historical pattern of option exercise behavior and the period of time they are expected to be outstanding. The expected term for options granted to consultants is determined using the remaining contractual life.
Expected Volatility — The expected volatility is based on the average volatility of similar public entities within Sonder’s peer group as Sonder’s stock has not been publicly trading for a long enough period to rely on its own expected volatility.
Expected Dividends — The dividend assumption is based on Sonder’s historical experience. To date Sonder has not paid any dividends on its common stock.
Risk-Free Interest Rate — The risk-free interest rate used in the valuation method is the implied yield currently available on the United States Treasury zero-coupon issues, with a remaining term equal to the expected life term of Sonder’s options.
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The following table summarizes the key assumptions used to determine the fair value of Sonder’s stock options granted to employees, non-employees, officers, and directors:
Three Months Ended June 30,Six Months ended June 30,
202220222021
Expected term (in years)4.15
4.09 - 4.15
3.99
Expected volatility55 %
 54.7%-55.4%
64 %
Dividend yield— %— %— %
Risk-free interest Rate2.84 %
 1.79%-2.84%
0.41 %
Weighted-average grant-date fair value per share$0.97 
 0.97 - 2.13
$4.54 

There were no options granted in the three months ended June 30, 2021.
Performance and Market-based Equity Awards
On November 15, 2019, the Legacy Sonder Board of Directors (the Legacy Sonder Board) granted an award to Francis Davidson, Sonder’s CEO, for a total of 5,613,290 options (the 2019 CEO Option Award), all of which Mr. Davidson fully exercised in December 2020 with a promissory note payable to Sonder in the amount of $24.6 million (the Promissory Note). Of the 5,613,290 total options, 2,041,197 options vest in 72 equal monthly installments starting as of October 1, 2017 (the Service-based Options), subject to Mr. Davidson’s continuous employment, and 3,572,093 options are performance-based (the CEO Performance Awards) that vest as follows, subject to Mr. Davidson’s continuous employment at each such event (the Performance Conditions):
1,530,897 performance awards upon an initial public offering (IPO) if Sonder reaches certain share price targets (the IPO Condition);
1,020,598 performance awards upon a qualified financing at certain valuation milestones (the Qualified Financing Condition); and
1,020,598 performance awards upon Sonder achieving a certain market capitalization milestone (the Market Capitalization Condition).
The fair value of the 2,041,197 Service-based Options was estimated using the Black-Scholes-Merton pricing model. The grant date fair value of the Service-based Options was $3.2 million and is recognized on a straight-line basis over the term of the award. Sonder recognized $11.6 million in expense for the CEO Performance Awards in the six months ended June 30, 2021. Sonder did not recognize any expense for the CEO Performance Awards for the three months ended June 30, 2021 and 2022, or the six months ended June 30, 2022.
The promissory note for $24.6 million represents the aggregate exercise price for the 5,613,290 options that were exercised by Mr. Davidson. The promissory note bears interest at the rate of 2.00% per annum, compounding semiannually. The principal amounts and accrued interest are due upon the earlier of: (i) four years after the issuance, or on December 1, 2023; (ii) the transfer or sale of the shares by the employee without approval by Sonder; or (iii) an initial public offering or an acquisition of Sonder by a public company. The Promissory Note was secured by the shares issued upon exercise of the award and in exchange for the note. While the Promissory Note is full recourse, it is considered to be non-recourse for accounting purposes and thus was not recorded in the condensed consolidated balance sheets as a receivable. As of December 31, 2021, the aggregate borrowings outstanding under the Promissory Note, including interest, was $25.2 million, respectively.
On January 14, 2022, the aggregate outstanding principal amount and interest under the Promissory Note was repaid in full by Mr. Davidson selling to Sonder 1,855,938 shares of Legacy Sonder’s common stock at a repurchase price of $13.85 per Legacy Sonder’s common share (number of shares and amount per share is not adjusted for the application of the merger exchange ratio in the Business Combination of 1.4686), which was equal to the fair value of a share of Legacy Sonder’s common stock as of the repurchase date, for a total aggregate repurchase price of $25.7 million. The repurchase price was offset against and extinguished in full Mr. Davidson’s obligations under the Promissory Note, including the outstanding principal and accrued interest.
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In the three months ended March 31, 2021, the CEO Performance Awards were modified to accelerate the vesting of the IPO Condition and the Qualified Financing Condition because the Legacy Sonder Board desired to reward Mr. Davidson in leading Sonder to perform above expectations given the worsened business conditions brought about by the unexpected COVID-19 pandemic, especially in the hospitality sector, and at the same time, engaging Sonder in potential strategic transactions valuing Sonder at increased valuations. While the vesting of the options under the Market Capitalization Condition were not accelerated by the Legacy Sonder Board, the Legacy Sonder Board approved a resolution clarifying that the Market Capitalization Condition would be eligible to vest in connection with a business combination with a special purpose acquisition company that otherwise achieves the applicable Market Capitalization Condition using an equivalent share price rather than the market capitalization.
In the three and six months ended June 30, 2022, Sonder recognized $0.5 million and $2.7 million in stock-based compensation expense related to the vesting of the Market Capitalization Condition, respectively. In the three and six months ended June 30, 2021, Sonder did not recognize any stock-based compensation expense relating to the vesting of the Market Capitalization Condition.
The modification-date fair value of the CEO Performance Awards was estimated using a Monte Carlo simulation. The Monte Carlo simulation utilizes multiple input variables to estimate the probability that performance conditions will be achieved. These variables include Sonder’s expected stock price volatility over the expected term of the award, actual and projected employee stock option exercise behaviors, and the risk-free interest rate for the expected term of the award. Sonder recognizes compensation expense for its performance awards using an accelerated attribution method from the time it is deemed probable that the vesting condition will be met through the time the service-based vesting condition has been achieved.
On February 18, 2021, the Legacy Sonder Board granted an award to Mr. Davidson for a total of 3,061,794 options (the 2021 CEO Option Award) that vest upon the successful consummation of the Business Combination and as follows, subject to Mr. Davidson’s continuous employment at each such event:
1/3 of the options if the average share value is equal to or greater than $25.16 on or prior to December 31, 2023 (the First Market Value Target);
1/3 of the options if the average share value is equal to or greater than $37.74 on or prior to December 31, 2024 (the Second Market Value Target); and
1/3 of the options if the average share price is equal to or greater than $44.03 on or prior to December 31, 2025 (the Third Market Value Target).
The grant-date fair value of the 2021 CEO Option Award was estimated using the Monte Carlo simulation. The grant-date fair value of the 2021 CEO Option Award on the grant date was $1.3 million.

Restricted stock units (“RSUs”)

The fair value of the RSUs is expensed ratably over the vesting period. RSUs typically vest quarterly over the service period, which is generally four years. During the three and six months ended June 30, 2022, we recorded stock-based compensation expense from RSUs of approximately $0.9 million. We did not have any stock-based compensation expense from RSUs in the three and six months ended June 30, 2021.

Market stock units (“MSUs”)

In May 2022 we issued MSUs to certain key executives under our 2021 Management Equity Incentive Plan. One-sixth of the MSUs vest upon (including prior to but contingent on) the occurrence of each of six distinct triggering events, which occur if the stock price of the Common Stock is equal to or greater than $13.00, $15.50, $18.00, $20.50, $23.00, or $25.50, respectively, within the five year period ending July 17, 2027.

We determined the grant-date fair value of the MSUs using a Monte Carlo simulation performed by a third-party valuation firm. We recognize stock-based compensation for the MSUs over the requisite service period, which is approximately four years, using the accelerated attribution method. During the three and six months ended June 30, 2022, we granted 14,499,972 MSUs at a total grant-date fair value of $4.2 million. During the three and six months ended June 30, 2022, we recognized approximately $0.1 million in stock-based compensation expense from MSUs.
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Note 13. Net Loss Per Common Share
Net loss per share calculations for all periods prior to the Business Combination have been retrospectively adjusted for the equivalent number of shares outstanding immediately after the closing of the Business Combination to effect the reverse recapitalization. Subsequent to the Business Combination, net loss per share was calculated based on the weighted average number of common stock then outstanding.
The following table sets forth the computation of basic and diluted net loss per share (in thousands, except number of shares and per share amounts):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Basic net loss per share:
Numerator
Net loss$(43,775)$(73,949)$(21,383)$(152,490)
Less: Net loss attributable to convertible preferred stock and exchangeable preferred stockholders— — 1,180 — 
Net loss attributable to common stockholders$(43,775)$(73,949)$(20,203)$(152,490)
Denominator
Basic weighted-average common shares used in computing basic net loss per share215,085,516 11,538,790 197,658,542 11,099,760 
Basic net loss per share attributable to common stockholders$(0.20)$(6.41)$(0.10)$(13.74)
The following potential common shares outstanding were excluded from the computation of diluted net loss per share because including them would have been anti-dilutive (in thousands):
As of June 30,
20222021
Options to purchase common stock
29,235 26,409 
Common stock subject to repurchase or forfeiture
2,173 2,693 
Outstanding market stock units (MSUs)14,500 — 
Redeemable convertible preferred stock(1)
— 111,258 
Exchangeable shares
28,037 32,334 
Total common stock equivalents
73,945 172,694 
____________
(1)Includes the warrants reclassified to equity as of June 30, 2022 and those issued in connection with the 2018 Loan and Security Agreement and related amendment as of December 31, 2021.
Note 14. Income Taxes
Provision for income taxes for the three and six months ended June 30, 2022 was $117 thousand and $148 thousand, respectively, and the effective tax rates were 0.3% and 0.7%, respectively. Provision for income taxes for the three and six months ended June 30, 2021 was $70 thousand and $93 thousand, respectively, and the effective tax rates for these periods were 0.1%. The difference between Sonder’s effective tax rate and the U.S. statutory rate of 21% was primarily due to a full valuation allowance related to Sonder’s net deferred tax assets.
Note 15. Related party transactions
Francis Davidson Promissory Note
In November 2019, Legacy Sonder granted Mr. Davidson, its CEO, the ability to purchase 5,613,290 shares of common stock for an aggregate exercise price of $24.6 million, all of which Mr. Davidson exercised in December 2019 with a full recourse promissory note payable to Sonder. As of December 31, 2021, the aggregate borrowings outstanding
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under the note, including interest of $1.1 million, was $25.2 million. The aggregate outstanding principal amount and interest under the Promissory Note was repaid in full by Mr. Davidson prior to the consummation of the Business Combination. See Note 12. Stockholders’ Equity (Deficit) for details.
2021 Convertible Promissory Notes
In March 2021, Sonder issued the Convertible Notes in an aggregate principal amount of $165 million to certain investors in exchange for Sonder’s agreement to issue the investors shares of its capital stock upon the occurrence of certain events described in the Note Purchase Agreement dated March 12, 2021. Sonder’s investors and their affiliates held $43.3 million of the Convertible Notes. The Convertible Notes automatically converted into shares of Sonder common stock immediately prior to the consummation of the Business Combination. See Note 5. Debt for details of the transaction.
Note 16. Business Combination
On January 18, 2022, Sonder consummated the previously announced Business Combination pursuant to the Agreement and Plan of Merger, dated as of April 29, 2021 (as amended by the Amendment No. 1 to the Agreement and Plan of Merger, dated as of October 27, 2021 (Amendment No. 1)), by and among GMII, Sunshine Merger Sub I, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of Second Merger Sub, Sunshine Merger Sub II, LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of GMII, and Legacy Sonder.
Pursuant to the Merger Agreement, (i) First Merger Sub merged with and into Legacy Sonder, with Legacy Sonder continuing as the surviving corporation (First Merger), and (ii) immediately following the First Merger and as part of the same overall transaction as the First Merger, Legacy Sonder merged with and into Second Merger Sub, with Second Merger Sub continuing as the surviving entity (the Second Merger and, together with the First Merger, the Mergers) and, together with the other transactions contemplated by the Merger Agreement. As a result of the First Merger, Second Merger Sub owned 100% of the outstanding capital stock of Legacy Sonder as the surviving corporation of the First Merger and each share of capital stock of Legacy Sonder was cancelled and converted into the right to receive the merger consideration in accordance with the terms of the Merger Agreement. As a result of the Second Merger, GMII (which was renamed Sonder Holdings Inc.) following the Business Combination owns 100% of the outstanding interests in the surviving entity of the Second Merger (Surviving Entity).
The aggregate merger consideration (excluding any Earn Out shares) paid to securityholders of Legacy Sonder as of immediately prior to the effective time of the First Merger (the Legacy Sonder Securityholders) in connection with the Business Combination was approximately 190,160,300 shares of GMII’s common stock (the Common Stock, which term (a) with reference to GMII prior to the Business Combination and the effectiveness of the Amended and Restated Certificate of Incorporation (Amended and Restated Certificate of Incorporation), means the Class A Stock and the Class F Stock, and (b) with reference to Sonder from and after the effectiveness of the Amended and Restated Certificate of Incorporation and the conversion of the Class F Stock in accordance with the Amended and Restated Certificate of Incorporation, means the common stock, par value $0.0001 per share, of Sonder). Certain of these shares of Common Stock were reserved for issuance upon (a) the exercise of Rollover Options (as defined below) and (b) the exchange of the Post-Combination Exchangeable Common Shares (as defined below) corresponding to shares of Post-Combination Company Special Voting Common Stock (as defined below) issued in the Business Combination.
Pursuant to the Merger Agreement:
holders of existing shares of Common Stock of Legacy Sonder, par value $0.000001 per share (Legacy Sonder Common Stock) (following the conversion of each issued and outstanding share of Legacy Sonder’s preferred stock and the convertible promissory notes issued by Legacy Sonder to certain purchasers pursuant to the Note Purchase Agreement, dated March 12, 2021, as amended, into shares of Legacy Sonder Common Stock prior to the effective time of the First Merger), received approximately 140,544,052 shares of the Company’s Common Stock, pursuant to the exchange ratio of 1.4686 shares for each share of Legacy Sonder Common Stock held;
holders of existing shares of Special Voting Series AA Common Stock, par value $0.000001 per share (Legacy Sonder Special Voting Common Stock), received approximately 32,296,539 shares of the newly created Post-Combination Special Voting Common Stock, par value $0.0001 per share (Post-Combination Special Voting Common Stock), pursuant to the exchange ratio of 1.4686 shares for each share of Legacy Sonder Special Voting Common Stock held;
holders of Series AA Common Exchangeable Preferred Shares (Legacy Sonder Canada Exchangeable Common Shares) of Sonder Canada Inc., a corporation existing under the laws of the province of Québec (Legacy Sonder Canada) received a new series of the same class of virtually identical Legacy Sonder Canada
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Exchangeable Common Shares (Post-Combination Exchangeable Common Shares) whose terms provide (a) for a deferral of any mandatory exchange caused by the Business Combination for a period of at least 12 months from the closing date of the Business Combination, and (b) that such Post-Combination Exchangeable Common Shares shall be exchangeable for Common Stock upon the completion of the Business Combination; and
holders of options to purchase Legacy Sonder Common Stock (Legacy Sonder Stock Options) received options to acquire approximately 30,535,549 shares of Company’s Common Stock (Rollover Options), pursuant to the Option Exchange Ratio of 1.5444 shares for each share of Legacy Sonder Stock Options held.
As a result of the above, the share figures as of December 31, 2021 in the condensed consolidated statement of mezzanine equity and stockholders’ equity (deficit) for the three months ended March 31, 2022 have been adjusted for the application of the exchange ratio of 1.4686 per share.
In addition, all options were adjusted for the Option Exchange Ratio of 1.5444 shares for each share of Legacy Sonder Stock Options held.
Following the closing of the Business Combination, the Company owned all of the issued and outstanding equity interests in Legacy Sonder and its subsidiaries, and the Legacy Sonder Securityholders held approximately 79.7% of the Company. Following the closing of the Business Combination, the Company’s Common Stock and the Company’s Public Warrants began trading on the Nasdaq Global Select Market under the symbols “SOND” and “SONDW,” respectively.
In addition to the consideration paid at the closing of the Business Combination, holders of Legacy Sonder Common Stock, Legacy Sonder Canada Exchangeable Common Shares and warrants of Legacy Sonder immediately prior to the effective time of the Business Combination may receive their pro rata share of up to an aggregate of 14,500,000 additional shares of Common Stock as consideration as a result of the Common Stock achieving certain benchmark share prices as contemplated by the Merger Agreement.
The Business Combination was accounted for as a reverse recapitalization. Under this method of accounting, GMII was treated as the acquired company for financial statement reporting purposes. The most significant change in Sonder’s reported financial position and results is an increase in cash (as compared to Sonder’s consolidated balance sheet at December 31, 2021) of approximately $401.9 million, net of the pay down of $24.7 million outstanding principal of the 2020 Promissory Notes, as well as non-recurring transaction costs of $58.6 million. The $401.9 million includes $159.2 million of delayed draw notes, net of issuance costs
The Business Combination was viewed as an acquisition of control of Legacy Sonder’s stock for tax purposes. As a result, the foreign capital loss carryforwards available to Legacy Sonder as of December 31, 2021 expired, and Sonder is no longer eligible to utilize these foreign capital loss carryforwards in future periods.
The Company estimated the fair value of the option awards granted to the CEO, including the CEO Performance Awards that were modified in the three months ended March 31, 2021, using a Monte Carlo simulation. The fair value of the option awards was $5.5 million, which is to be recognized over the requisite service periods.
Closing of PIPE Investments
Pursuant to subscription agreements entered into in connection with the Merger Agreement (Existing Subscription Agreements), certain investors agreed to subscribe for an aggregate of 20,000,000 newly issued shares of Class A Stock (which became Common Stock upon the effectiveness of the Amended and Restated Certificate of Incorporation) for a purchase price of $10.00 per share, or an aggregate of approximately $200 million (Existing PIPE Investment). In addition, pursuant to subscription agreements entered into in connection with Amendment No.1, certain investors agreed to subscribe for an additional 11,507,074 newly issued shares of Class A Stock (which became Common Stock upon the effectiveness of the Amended and Restated Certificate of Incorporation) for a purchase price of $8.89 per share, or an aggregate of approximately $102.3 million (New PIPE Investment). In addition, concurrently with the execution of Amendment No. 1, GMII entered into a subscription agreement with the Sponsor whereby the Sponsor separately agreed to purchase an additional 709,711 shares of Class A Stock (which became Common Stock upon the effectiveness of the Amended and Restated Certificate of Incorporation) in a private placement for $10.00, or an aggregate of approximately $7.1 million (Additional Sponsor PIPE Commitment and, together with the Existing PIPE Investment and the New PIPE Investment, the PIPE Investment). At the closing of the Business Combination, the Company consummated the PIPE Investment.
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The following table reconciles the elements of the Business Combination to the condensed consolidated statement of cash flows and the consolidated statement of stockholders’ equity (deficit) for the three months ended March 31, 2022 (in thousands):
Cash - PIPE Financing $309,398 
Cash - GMII trust and cash, net of redemptions16,530 
Less: transaction costs and advisory fees(58,555)
Net proceeds from Business Combination and PIPE$267,373 
Proceeds from Delayed Draw Notes, net of issuance costs of $5,775
159,225 
Repayment of debt
(24,680)
Net proceeds from Business Combination, PIPE, and Delayed Draw Notes$401,918 

Note 17. Restructuring Activities
On June 9, 2022, the Company announced its Cash Flow Positive Plan, including a restructuring of its operations which resulted in an approximate 21% reduction of existing corporate roles and 7% reduction of existing frontline roles. In the three months ended June 30, 2022, total restructuring and other charges were $4.0 million and are included in Restructuring and other charges in the Condensed Consolidated Statement of Operations and Comprehensive Loss.

Note 18. Subsequent Events

On August 10, 2022, the Company announced its intention to implement, subject to the final approval of the Company’s Board of Directors, an option exchange program in which eligible employees may exchange certain outstanding options, whether vested or unvested (collectively the “Eligible Awards”), for new options on a one-for-one basis with a per share exercise price equal to fair market value of the Company’s common stock at the conclusion of the tender offer.

The criteria for eligible participants and other terms of the option exchange program are still being finalized and are subject to approval by the Company’s Board of Directors. If approved, details will be announced in a tender offer statement on Schedule TO in connection with the commencement of the option exchange program. The option exchange program has not yet commenced and will only be made pursuant to the terms and conditions set forth in the tender offer statement on Schedule TO, including the offer to exchange, and other related materials to be filed with the SEC and sent to eligible participants.
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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of the financial condition and results of operations of Sonder Holdings Inc. (“Sonder,” “we,” “us” or “our”) together with Sonder’s condensed consolidated financial statements and related notes included elsewhere in this report and the audited consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Sonder’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” or in other parts of this report. Sonder’s historical results are not necessarily indicative of the results that may be expected for any period in the future. Except as otherwise noted, all references to 2021 refer to the year ended December 31, 2021.
On January 18, 2022, Sonder consummated the previously announced Business Combination pursuant to that certain Agreement and Plan of Merger, dated as of April 29, 2021 (the “Merger Agreement”), as amended by that certain Amendment No. 1 to the Agreement and Plan of Merger, dated as of October 27, 2021, by and among Gores Metropoulos II, Inc. (“GMII”), Sunshine Merger Sub I, Inc., (“First Merger Sub”) and a direct, wholly-owned subsidiary of Second Merger Sub (as defined below), Sunshine Merger Sub II, LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of GMII (“Second Merger Sub”), and Sonder Operating Inc., a Delaware corporation formerly known as Sonder Holdings Inc. (“Legacy Sonder”). Certain terms used in this discussion and analysis of the financial condition and results of operations of Sonder have the same meaning as set forth in GMII’s proxy statement/prospectus/consent solicitation statement dated December 22, 2021 and filed by GMII with the SEC on December 23, 2021.
Overview
Sonder’s mission is to revolutionize hospitality through design and technology to make a world of better stays open to all. With our innovative end-to-end model, we aim to provide better choice, comfort, reliability and value across a wide variety of use cases — from one night to extended stays — for our diverse mix of traveler types. Officially launched in 2014 and headquartered in San Francisco, California, Sonder’s unique product portfolio of approximately 18,700 Live and Contracted Units — from rooms to suites to apartments — spans 41 cities in 10 countries and three continents as of June 30, 2022. Live Units represent the total number of units available for guest bookings on Sonder.com, the Sonder app and other channels at a given point in time. Contracted Units are Units for which we have signed real estate contracts, but are not yet available for guests to book.
We work directly with real estate developers and property owners to lease, manage and operate spaces, providing guests with exceptionally designed accommodations. We operate and manage over 250 Live properties using proprietary technology, delivering services to guests via the Sonder app which features self-service and 24/7 on-the-ground support.
Management Discussion Regarding Opportunities, Challenges and Risks
Supply Growth
A key driver of our revenue growth is our ability to continue signing appealing apartment and hotel properties with favorable terms. Contracted properties become available for guests to book on their Live Date, which is when the property starts to generate Bookable Nights, which is the total number of nights available for stays across all Live Units, and, in turn, revenue.
We quickly pivoted our supply growth strategy during the first quarter of 2020 when the COVID-19 pandemic began impacting the global hospitality industry. We paused all efforts to contract new units in order to focus on preserving cash and optimizing our existing portfolio’s performance. Additionally, we exited leases for nearly 3,400 Live and Contracted Units from March 1, 2020 through December 31, 2020. This targeted unit phase-out enabled us to minimize cash losses during the lockdowns, and rebalance our portfolio away from less favorable units. As a result, our total Live and Contracted Units decreased by approximately 10% in 2020, to approximately 12,000 units as of December 31, 2020.
We resumed our growth efforts in the fourth quarter of 2020, and our focus during the fourth quarter of 2020 and first quarter of 2021 was on signing new properties and rebuilding our pipeline. In the second to fourth quarters of 2021 and the first and second quarters of 2022, we continued to build our pipeline of signed leases and targeted properties across various real estate asset classes (hotels, apartments, and office to apartment conversions). However, as part of our Cash Flow Positive Plan announced in June 2022, we slowed our planned pace of new unit signings to refocus on growth primarily through our already contracted portfolio. In addition, we exited certain Contracted Units that did not align with our Cash Flow Positive Plan and excluded certain Contracted Units with substantial contingencies from the Total Portfolio. As a result, as of June 30, 2022, we had a Total Portfolio of approximately 18,700 Live and Contracted Units.
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Ability to Attract and Retain Guests
Another key driver of our revenue growth is our ability to continue to attract demand from repeat guests and to attract new guests through various channels. We source demand from a variety of channels, including Online Travel Agencies (“OTAs”) such as Airbnb, Booking.com and Expedia, as well as directly through Sonder.com and the Sonder app. Bookings made through OTAs incur channel fees, where we pay a certain percentage of the revenue booked on the OTA in order to compensate the OTA for its listing services. In general, direct bookings are more advantageous to us as they do not incur channel fees.
Direct Bookings
Direct bookings as a percentage of booked revenue (“Direct Bookings”) have fluctuated in recent years due to the COVID-19 pandemic. While OTAs were historically our primary source of demand, we saw an increase in Direct Bookings commencing in early 2020, as we pursued performance marketing and offered extended stay discounts on Sonder.com during the early phases of the pandemic. For the three months ended June 30, 2022, direct bookings as a percentage of booked revenue were 43%.
As the broader hospitality industry continues to recover from the COVID-19 pandemic, we expect our Direct Bookings to remain at current levels or decrease moderately over time.
Technology
We have invested, and will continue to invest, significant resources in our technology architecture and infrastructure. These improvements have allowed us to deploy the latest tools and technologies to build proprietary external and internal facing technology. Our technology is essential to our user experience, as our home-grown technology powers the entire guest journey, from booking through check-out.
External Facing Technology:
Our proprietary technology is essential to our user experience—from enabling easy, intuitive browsing of our full portfolio to allowing seamless reservations. Upon arrival at a Sonder property, our “lobby on your phone” technology guides guests through the in-app check-in and one-touch WiFi, while our digital concierge feature offers curated lists of localized food and experience recommendations to help guests get the most out of their stay. Sonder guests can book intra-stay cleaning, request early check-in / late check-out and self-serve additional customer service requests on the Sonder app while also experiencing a frictionless check-out.
Internal Facing Technology:
In addition to our guest-facing technology, proprietary technology powers our business processes and operations, from supply growth to building openings and day-to-day operations. We have developed:
Our own infrastructure to fuel our real estate underwriting efforts;
Technology to facilitate our global supply chain for furniture, art and fixtures;
A proprietary booking engine;
Pricing and calendar revenue management software;
Room attribution algorithms; and
Task and workflow management software.
As part of our Cash Flow Positive Plan announced in June 2022, in the short- to medium-term we are prioritizing maintenance of our existing signature tech-enabled offering, as well as investing in technological improvements to support additional automation and rapid-payback RevPAR initiatives.
The Business Combination and Public Company Costs
On April 29, 2021, Legacy Sonder entered into the Merger Agreement with GMII, First Merger Sub and Second Merger Sub pursuant to which, among other things, on January 18, 2022, Legacy Sonder merged with and into Second Merger Sub, with Second Merger Sub continuing as the Surviving Entity. Legacy Sonder has been deemed the accounting
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predecessor and GMII is the successor SEC registrant, which means that Legacy Sonder’s financial statements for previous periods will be disclosed in Sonder’s periodic reports filed with the SEC subsequent to January 18, 2022.
The Business Combination was accounted for as a reverse recapitalization. Under this method of accounting, GMII was treated as the acquired company for financial statement reporting purposes. The most significant change in Sonder’s reported financial position and results is an increase in cash (as compared to Sonder’s consolidated balance sheet at December 31, 2021) of approximately $401.9 million, net of the pay down of $24.7 million outstanding principal of the 2020 Promissory Notes, as well as non-recurring transaction costs of $58.6 million. The $401.9 million includes $159.2 million of delayed draw notes, net of issuance costs.
Upon the closing of the Business Combination, our Common Stock was listed on Nasdaq and now trades under the ticker symbol “SOND.” As a publicly traded company, Legacy Sonder’s management team and business operations comprise the Company’s management and operations. Sonder will need to continue to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.
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Sonder’s Business Model
We offer a selection of hotel and apartment style units in cities around the world that guests can book on a nightly, weekly or monthly basis. We leverage our proprietary technology to select, design and manage our global portfolio of properties. We secure our portfolio of properties by entering into agreements with real estate owners under multi-year contracts that allow us to operate the properties on a nightly basis. A typical contract has an initial term of 5-10 years plus up to two 5-year renewals at our election. The agreements can take the form of a Fixed Lease, Mixed Lease or Revenue Share agreement.
Fixed Lease agreement: The vast majority of our historical contracts with real estate owners have been Fixed Lease agreements, whereby we agree to a fixed periodic fee per unit. We then generate revenue on a nightly basis through guests booking and staying at the Sonder operated property.
Mixed Lease agreement: We sometimes employ a hybrid contract structure whereby we agree to pay the real estate owner a minimum fixed periodic fee, plus a certain share of property revenue, typically with a capped periodic amount.
Revenue Share agreement: We also offer a structure whereby we agree to pay the real estate owner a variable fee based on certain revenue related metrics as specified in the agreement, rather than us paying a fixed periodic fee.
Prior to announcing our Cash Flow Positive Plan, our leases commonly included upfront rent abatement to help offset the costs and revenue ramp-up period associated with onboarding units. In addition, in the vast majority of leases, we have been successful in negotiating upfront allowances paid for by the landlord to help us offset the capital invested to prepare and furnish the building and the individual units. Pursuant to our Cash Flow Positive Plan, we are currently aiming to only sign units that are 100% capital light.
We generate revenue on a nightly basis when guests book and stay at Sonder properties, which they can do either directly through Sonder.com or the Sonder app, or through one of several online travel agency (“OTA”) partners with whom we list our properties.
Restructuring
On June 9, 2022, we announced our Cash Flow Positive Plan to reach positive quarterly free cash flow (“FCF”) within 2023. As part of the Cash Flow Positive plan, we completed a restructuring of our operations which resulted in an approximately 21% reduction of then-existing corporate roles and a 7% reduction of then-existing frontline roles. As part of this restructuring, we incurred $4.0 million in one-time restructuring costs as of June 30, 2022, of which approximately $2.4 million was paid out in the second quarter of 2022 and the remainder of which is expected to be paid out in the second half of 2022.
Key Business Metrics and Non-GAAP Financial Measures
We track the following key business metrics and non-generally accepted accounting principles (non-GAAP) financial measures to evaluate our performance, identify trends, formulate financial projections and make strategic decisions. Accordingly, we believe these key business metrics and non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team.
These key business metrics and non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled metrics or measures presented by other companies.
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Key Business Metrics
The following table provides the key metrics for the periods presented (rounded):