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Form 10-Q Sonder Holdings Inc. For: Mar 31

May 16, 2022 8:14 AM EDT

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sond-20220331
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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 March 31, 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 217,308,629 shares of common stock outstanding as of May 11, 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 financial, operating and growth forecasts and projections;
•    our business, revenue, expenses, operating results, and financial condition;
•    our ability to manage our growth;
•    our ability to achieve or maintain our profitability;
•    our strategies or expectations regarding market position and financial results;
•    other expectations, beliefs, plans, strategies, anticipated developments, and other matters that are not historical facts;
•    the effects of the COVID-19 pandemic or other public health crises on our business, revenue, operating results and financial condition;
•    the impact of world events and any associated economic downturn on our future operating and financial performance;
•    uncertainty, or adverse economic and business conditions, including as a result of slowing or uncertain economic growth in the United States or worldwide;
•    our ability to successfully negotiate favorable lease terms and onboard new properties;
•    our expenses related to the preparation, opening and repair of our leased properties;
•    our dependency on landlords for certain maintenance and other significant obligations related to properties;
•    our operating flexibility and limits;
•    potential ancillary revenue opportunities and our ability to improve our revenue management capabilities in order to further optimize current and future demand segments;
•    the use of proceeds from our financings and the expected duration of our capital resources;
•    our ability to build out our sales capabilities for both outbound sales and inbound sales;
•    our ability to attract and retain guests;
•    our ability to successfully anticipate and satisfy guest demands, including through the introduction of new features, products or services;
•    our beliefs about the positive impact of our technology investments on our brand and future financial results;
•    our competitive advantages and the effects of increased competition in our market;
•    the growth and expansion of the market for hospitality and our ability to compete effectively with existing competitors and new market entrants;
•    our ability to expand and scale our business, including expectations and plans for expanding in existing markets, entering into new markets and accommodation categories, and managing our international expansion;
•    our relationships with third-party distribution channels and indirect channels;
•    our reliance on third-party vendors and suppliers;
•    seasonality and other variations in our results of operations from period-to-period, which may cause historical performance to not be indicative of future performance;
•    our ability to maintain and enhance our brand;
•    our ability to attract and retain qualified employees and key personnel;
2

•    our ability to maintain, protect, enforce and enhance our technology and intellectual property;
•    our ability to maintain the security of our software and third parties’ personal data and adequately address privacy concerns;
•    our ability to successfully defend litigation brought against us;
•    our assessments and beliefs regarding the 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;
•    our ability to manage the increased expenses and time associated with being a public company; and
•    our ability to comply with modified or future regulatory, judicial, and legislative changes or developments which apply to our business.
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. 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 common stock 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 common stock.

•    Sonder’s actual results may differ materially from its forecasts and projections.
•    Sonder’s results could be negatively affected by changes in travel, hospitality, real estate and vacation markets.
•    Sonder 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 related to Sonder’s leases could adversely affect Sonder’s ability to generate revenue from such leased buildings.
•    Newly leased properties may generate revenue later than Sonder estimated, and may be more difficult or expensive to integrate into Sonder’s operations than expected.
•    Sonder’s limited operating history and evolving business make it difficult to evaluate its future prospects and challenges.
•    Sonder may be unable to effectively manage its growth.
•    Costs relating to the opening, operation and maintenance of its leased properties could be higher than expected.
•    Sonder depends on landlords to deliver properties in a suitable condition and to manage and maintain its properties.
•    Sonder’s long-term and fixed-cost leases limit its flexibility.
•    Under certain circumstances, Sonder’s 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 Sonder.
•    Sonder may be unable to attract new guests or generate repeat bookings.
•    Sonder may be unable to introduce upgraded amenities, services or features for its guests in a timely and cost-efficient manner.
•    Sonder operates in the highly competitive hospitality market.
•    Sonder uses third-party distribution channels to market its units, and these channels have historically accounted for a substantial percentage of Sonder’s bookings.
•    Sonder’s results of operations vary from period-to-period, and historical performance may not be indicative of future performance.
•    Sonder’s long-term success depends, in part, on Sonder’s ability to expand internationally, and Sonder’s business is susceptible to risks associated with international operations.
•    Sonder’s business depends on its reputation and the strength of its brand, and any deterioration could adversely impact its market share, revenues, business, financial condition, or results of operations.
•    Claims, lawsuits, and other proceedings could adversely affect Sonder’s business.
•    Sonder may be subject to liability or reputational damage for the activities of its guests or other incidents at Sonder’s properties.
•    Sonder is subject to claims and liabilities associated with potential health and safety issues and hazardous substances at properties.
•    Sonder must attract and retain sufficient, highly skilled personnel and is subject to risks associated with the employment of hospitality personnel, including unionized labor.
•    Sonder has identified material weaknesses in its internal control over financial reporting and may identify material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of its consolidated financial statements.
•    Sonder relies on third parties for important services and technologies, and their availability and performance are uncertain.
•    Sonder’s processing, storage, use and disclosure of personal data exposes it 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 Sonder.
•    Sonder faces risks related to its intellectual property.
•    Sonder’s business is highly regulated across multiple jurisdictions, including evolving and sometimes uncertain short-term rental regulations and tax laws, which may limit Sonder’s growth or otherwise negatively affect it.
•    Sonder may require additional capital, which might not be available in a timely manner or on favorable terms.
•    Sonder’s indebtedness and credit facilities contain financial covenants and other restrictions that may limit its operational flexibility or otherwise adversely affect its results of operations.
4

TABLE OF CONTENTS
5

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)
March 31,
2022
December 31,
2021
Assets
Current assets
Cash$406,348 $69,726 
Restricted cash683 215 
Accounts receivable, net of allowance of $3,291 and $4,127 at March 31, 2022 and December 31, 2021 respectively
1,336 4,638 
Prepaid rent3,380 2,957 
Prepaid expenses14,435 5,029 
Other current assets18,518 16,416 
Total current assets444,700 98,981 
Property and equipment, net35,243 27,461 
Operating lease right-of-use assets1,133,809 — 
Other non-current assets15,606 22,037 
Total assets$1,629,358 $148,479 
Liabilities, mezzanine equity and stockholders’ equity (deficit)
Current liabilities
Accounts payable$16,109 $19,096 
Accrued liabilities25,313 19,557 
Sales tax payable11,366 8,412 
Deferred revenue34,068 18,811 
Current portion of long-term debt 13,116 
Convertible notes 184,636 
Current operating lease liabilities143,014 — 
Total current liabilities229,870 263,628 
Non-current operating lease liabilities1,070,896  
Deferred rent 66,132 
Long-term debt, net156,722 10,736 
Other non-current liabilities36,603 3,906 
Total liabilities1,494,091 344,402 
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 1 
Post-Combination exchangeable common stock  
Exchangeable AA common stock  
Additional paid-in capital918,369 43,106 
Cumulative translation adjustment9,298 7,299 
Accumulated deficit(792,420)(814,812)
Total stockholders’ equity (deficit)135,267 (764,406)
Total liabilities, mezzanine equity and stockholders’ equity (deficit)$1,629,358 $148,479 
See Notes to Condensed Consolidated Financial Statements.
6

SONDER HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except number of shares and per share information)
(unaudited)
Three Months Ended March 31,
20222021
Revenue$80,466 $31,558 
Cost of revenue (excluding depreciation and amortization)73,896 39,205 
Operations and support48,267 25,423 
General and administrative36,981 32,149 
Research and development7,625 3,319 
Sales and marketing9,461 2,511 
Total costs and expenses176,230 102,607 
Loss from operations(95,764)(71,049)
Interest expense, net and other expense (income), net:
Interest expense, net8,202 3,827 
Change in fair value of SPAC Warrants(26,324) 
Change in fair value of Earn Out liability(73,177) 
Change in fair value of share-settled redemption feature and gain on conversion of Convertible Notes(29,512) 
Other expense, net2,624 3,642 
Total interest expense, net and other expense (income), net(118,187)7,469 
Income (loss) before income taxes22,423 (78,518)
Provision for income taxes31 23 
Net income (loss)$22,392 $(78,541)
Net income (loss) per share attributable to common stockholders:
Basic$0.11 $(7.37)
Diluted$(0.18)$(7.37)
Weighted average shares used to compute net income (loss) per share attributable to common stockholders:
Basic176,326,658 10,656,458 
Diluted171,827,058 10,656,458 
Other comprehensive income (loss):
Net income (loss)$22,392 $(78,541)
Change in foreign currency translation adjustment1,999 1,145 
Comprehensive income (loss)$24,391 $(77,396)
See Notes to Condensed Consolidated Financial Statements.
7

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 March 31, 2022
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 December 31, 2021
75,767,082 $518,750 12,570,228 $49,733 8,684,246 $1 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 converted111,271,424 518,750 18,460,609 49,733 12,751,662 1 13,835,930 —  — 43,106 7,299 (814,812)(764,406)
Exercise of common stock options— — — — 362,943 — — — — — 873 — — 873 
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 1 — — — — 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)— — (13,835,930)— 32,296,539 — 49,733 — — 49,733 
Issuance of common stock in connection with Business Combination and PIPE offering— — — — 43,845,835 7 — — — — 267,355 — — 267,362 
Earn Out liability recognized upon consummation of the merger— — — — — — — — — — (98,117)— — (98,117)
Assumption of SPAC Warrants upon Business Combination— — — — — — — — — — (38,135)— — (38,135)
Issuance of Delayed Draw Warrants— — — — — — — — — — 5,598 — — 5,598 
Stock-based compensation— — — — — — — — — — 6,680 — — 6,680 
Components of comprehensive loss:
Net Income— — — — — — — — — — — — 22,392 22,392 
Change in Cumulative Translation Adjustment— — — — — — — — — — — 1,999 — 1,999 
Balances as of March 31, 2022 $  $ 184,678,577 $20  $— 32,296,539 $— $918,369 $9,298 $(792,420)$135,267 
8

See Notes to Condensed Consolidated Financial Statements.

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 March 31, 2021
Convertible
Preferred Stock
Exchangeable
Preferred Stock
Common Stock
Exchangeable
AA Stock
Post-Combination Exchangeable Common Shares
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (loss)
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 $1 9,437,358 $— — $— $13,898 $5,666 $(520,435)$(500,870)
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 converted111,121,045 517,730 18,474,628 49,733 10,529,340 1 13,859,669 — — — 13,898 5,666 (520,435)(500,870)
Issuance of Series E Convertible Preferred Stock, net of issuance costs136,390 1,020 — — — — — — — — — — — — 
Issuance of common stock upon exercise of stock options— — — — 379,462 — — — — — 746 — — 746 
Stock-based compensation— — — — — — — — — — 14,153 — — 14,153 
Components of comprehensive loss:
Net loss— — — — — — — — — — — — (78,541)(78,541)
Other comprehensive income— — — — — — — — — — — 1,145 — 1,145 
Balances as of March 31, 2021111,257,435 $518,750 18,474,628 $49,733 10,908,802 $1 13,859,669 $— — $— $28,797 $6,811 $(598,976)$(563,367)
Note: Amounts may not recalculate due to rounding.


See Notes to Condensed Consolidated Financial Statements.
9


10

SONDER HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Three Months Ended March 31,
20222021
Cash flows from operating activities
Net income (loss)$22,392 $(78,541)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization5,630 4,119 
Share-based compensation6,680 14,153 
Bad debt expense41 56 
Write-off of capital assets(6)37 
Amortization of operating lease right-of-use assets37,646 — 
Write-off of debt issuance costs362  
Straight-line rent 3,112 
Unrealized loss on foreign currency transactions2,379 1,571 
Amortization of debt issuance costs8,750 239 
Amortization of debt discounts(3,007)1,988 
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 592 
Change in fair value of warrants 1,532 
Change in fair value of SPAC Warrants(26,324) 
Change in fair value of Earn Out liability(73,177) 
Other adjustments to net income (loss)285 7 
Changes in operating assets and liabilities:
Accounts receivable3,233 (2,106)
Prepaid rent(446)7,383 
Prepaid expenses(9,408)(686)
Other current assets(2,059)(30)
Other non-current assets6,488 (1,765)
Accounts payable(22,009)(3,242)
Accrued liabilities4,742 3,390 
Sales tax payable2,963 345 
Deferred revenue15,253 7,342 
Operating lease assets and operating lease liabilities, net(4,754)— 
Other current liabilities194 5 
Other non-current liabilities2,971 191 
Net cash used in operating activities(50,693)(40,308)
See Notes to Condensed Consolidated Financial Statements.
11

SONDER HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
(In thousands)
(unaudited)
Three Months Ended March 31,
20222021
Cash flows from investing activities
Purchase of property and equipment(10,539)(1,675)
Development of internal-use software(1,077)(1,001)
Net cash used in investing activities(11,616)(2,676)
Cash flows from financing activities
Proceeds from Delayed Draw Notes, net of issuance costs of $5,775
159,225  
Proceeds from Convertible Notes, net of issuance costs of $2,362
 162,638 
Repayment of debt(24,680)(2,018)
Debt extinguishment costs(3,065) 
Proceeds from Business Combination and PIPE offering325,928  
Issuance costs of common stock(58,555) 
Proceeds from exercise of stock options873 746 
Issuance of redeemable convertible preferred stock 1,020 
Net cash provided by financing activities399,726 162,386 
Effects of foreign exchange on cash(327)(280)
Net change in cash and restricted cash337,090 119,122 
Cash and restricted cash at the beginning of period69,941 123,108 
Cash and restricted cash at end of period
$407,031 $242,230 

Three Months Ended March 31,
20222021
Supplemental disclosures of cash flow information:
Cash paid for income taxes during the year381 43 
Cash paid for interest during the year1,873 1,082 
Non-cash disclosure of investing and financing activities:
Accrued purchases of property and equipment1,789  
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$406,348 $241,730 
Restricted cash683 500 
Total cash and restricted cash$407,031 $242,230 
See Notes to Condensed Consolidated Financial Statements.
12

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 multi-family 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. 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 Sonder, the accompanying unaudited condensed consolidated financial statements contain all adjustments, including normal recurring adjustments, necessary to present fairly its financial position as of March 31, 2022, its results of operations and comprehensive income (loss), mezzanine equity and stockholders’ equity (deficit), and cash flows for the three months ended March 31, 2022 and 2021. Sonder’s condensed consolidated results of operations and comprehensive income (loss), mezzanine equity and stockholders’ equity (deficit), and cash flows for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year.
Sonder consolidates its VIE in which it holds a variable interest and is the primary beneficiary. Sonder is the primary beneficiary 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. As a result, Sonder consolidates the assets and liabilities of this VIE. If Sonder is not deemed to be the primary beneficiary in a VIE, it accounts for the investment or other variable interest in a VIE in accordance with applicable U.S. GAAP. As of March 31, 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 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 quarter of 2022 were materially adversely affected by the COVID-19 pandemic, and the pandemic may continue to materially adversely impact 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
13

assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of income 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 August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. For public companies, the guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted. Sonder has early adopted ASU 2020-06 beginning January 1, 2021, and the adoption did not have a material impact on its condensed consolidated financial statements.
In February 2016, the 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, the 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. We implemented ASC 842 as of January 1, 2022. The most significant effects of Topic 842 were the recognition of $1,133.8 million in operating lease right-of-use assets, $143.0 million of current operating lease liabilities, $1,070.9 million 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.
In December 2019, the FASB issued Accounting Standards Update (ASU) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The objective of this element of the initiative is to simplify the accounting for income taxes by removing certain exceptions to general principles in ASC 740 and by clarifying and amending guidance that already exists within US generally accepted accounting principles (US GAAP). ASU 2019-12 was effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, and for all other entities for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Sonder has adopted this standard effective January 1, 2022, but there was no impact on Sonder’s condensed consolidated financial statements.
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In October 2020, the FASB issued ASU 2020-08, Codification Improvements to Subtopic 310-20, Receivables — Nonrefundable Fees and Other Costs, which clarifies when an entity should assess whether a callable debt security is within the scope of accounting guidance, which impacts the amortization period for nonrefundable fees and other costs. For public entities, the guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early application is not permitted. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early application is permitted for all other entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Upon adoption, the amendments are to be applied on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. Sonder adopted the standard as of January 1, 2022, but it did not have any impact on its condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
In June 2016, the 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 beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted. In November 2019, the 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, the 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.

In August 2020 the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, that simplifies the accounting for certain convertible instruments and contracts potentially settled in an entity’s own shares. The ASU changes the accounting for certain convertible instruments by eliminating two of the separation accounting models which will likely result in more convertible instruments being accounted for as a single unit. ASU 2020-06 is generally effective for public business entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Sonder early adopted ASU 2020-06 beginning January 1, 2021, and the adoption did not have a significant impact on its consolidated financial statements.
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 online travel agencies, which it refers to as indirect revenue.
15

The following table sets forth Sonder’s total revenues for the periods shown disaggregated between direct and indirect channels (in thousands):
Three Months Ended March 31,
20222021
Direct revenue
$31,934 $20,094 
Indirect revenue
48,532 11,464 
Total revenue
$80,466 $31,558 
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.
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 the 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 was no share-settled redemption feature or preferred stock warrant liabilities as of March 31, 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 and became exercisable for shares of common stock, are subject to treatment as a liability. As of the closing of the Business Combination and March 31, 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
16

in the fair value measurement of the Public Warrants liability are related to expected share-price volatility of 45.3% and the expected term of 4.8 years. The public warrants were valued at $0.81 per warrant at March 31, 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 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 March 31, 2022 was derived from the volatility of comparable public companies.
Sonder did not have any assets or liabilities measured at Level 1 as of March 31, 2022 on recurring or non-recurring basis. As of March 31, 2022, the Earn Out liability, Public Warrants liability and Private Placement warrants liability were recorded in other non-current liabilities in our 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):
March 31, 2022
Level 2Level 3Total
Financial liabilities:
Other non-current liabilities:
Earn Out liability$24,940 $— $24,940 
Public Warrants— 7,290 7,290 
Private Placement Warrants— 4,455 4,455 
Total financial liabilities measured and recorded at fair value$24,940 $11,745 $36,685 
Sonder did not have any asset or liability measured at Level 1 or Level 2 as of December 31, 2021 on 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 three months ended March 31, 2022 (in thousands):
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March 31, 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(16,314)
Decrease in fair value of Private Placement Warrants liability(10,010)
Conversion of preferred stock warrant liabilities to equity(3,288)
Total financial liabilities measured and recorded at fair value$11,745 
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 our condensed consolidated balance sheet.
There were no transfers of financial instruments between valuation levels during the three months ended March 31, 2022 and the year ended December 31, 2021.
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 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 income (expense), net, on the condensed consolidated statements of operations and comprehensive income (loss).
Note 5. Debt
Delayed Draw Note Purchase Agreement
On December 10, 2021, Sonder entered into a note and warrant 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 completion of the Business Combination. The agreement also provided that the Purchasers will be issued warrants to purchase shares of common stock in connection with the transaction.
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The Delayed Draw Notes have a maturity of five years from the date 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 0.26161% (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 of Delayed Draw Notes also received warrants (the 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 warrants to purchase 2,475,000 shares of common stock to the Purchasers. As of March 31, 2022, the total long-term debt on the condensed consolidated balance sheet was $156.7 million, consisting of $168.1 million of unpaid principal balance, which included the $165 million principal amount and payment-in-kind (PIK) interest of $3.1 million that was added to the principal balance , net of $5.8 million in issuance costs and $5.6 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, consisting of $24.5 million of unpaid principal balance, net of the $0.6 million of deferred loan issuance costs.
Long term debt, net consisted of the following (in thousands):

March 31, 2022December 31
2021
Principal balance$168,112 $24,477 
Less: Delayed Draw Warrants liability(5,598) 
Less: unamortized deferred issuance costs(5,792)(625)
Long term debt, net$156,722 $23,852 

2021 Convertible Promissory Notes
In March 2021, pursuant to a note purchase agreement, Sonder issued convertible promissory notes (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
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$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 income (loss).
In January 2022, Sonder paid down $24.5 million in outstanding principal of the 2018 Loan and Security Agreement and $2.5 million in debt extinguishment costs at the closing of the Business Combination. 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 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 March 31, 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 $27.6 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), which Sonder is not obligated to repay if it satisfies certain milestones relating to the Project (as defined below). The 2020 Québec Credit Facility provides an incentive for expanding Sonder’s operations in Canada (the Project), including establishing Sonder’s Canadian head office and increasing Sonder’s payroll there starting January 1, 2021. The disbursements of the loan and CRFC are based on a percentage of the increase in the accrued and paid gross payroll. 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. The amount of principal and accrued and capitalized interest on the CRFC that Sonder must repay can be reduced up to $5.0 million if Sonder achieves certain milestones, including job creation and preservation and cumulative gross payroll milestones. In the event that Sonder does not complete the Project, the outstanding loan and CRFC and related interest become immediately due. An assessment fee of CAD $0.3 million was paid upon acceptance of the credit facility.
The 2020 Québec Credit Facility is secured by a lien on substantially all of the Canadian subsidiary’s assets and is guaranteed by Sonder. The 2020 Québec Credit Facility contains customary affirmative covenants, such as maintenance
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requirement of the Canadian subsidiary’s operations in Québec, maintenance and creation of jobs in Québec, and financial statement reporting requirements, as well as customary negative covenants, such as declaring dividends, voluntary dissolution or liquidation and relocating substantial portion of its assets outside of Québec without prior written approval. As of March 31, 2022, Sonder was in compliance with all financial covenants, and there were no borrowings or CRFC outstanding on the 2020 Québec Credit Facility. As of December 31, 2021, Sonder was in compliance with all financial covenants, and there were no borrowings or CRFC outstanding 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 cards programs. As of March 31, 2022 and December 31, 2021, Sonder had $0.7 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 ASC 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 not to utilize the practical expedient to account for lease and non-lease components together, rather Sonder is accounting for the lease and non-lease components separately on the consolidated financial statements.
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 March 31, 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.
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 c