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 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.

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.

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

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

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 2		Level 3		Total
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 feature	30,322
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):


	March 31, 2022
	Level 3
Beginning balance	$	33,610
Public Warrants liability	23,604
Private Placement Warrants liability	14,465
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


	December 31, 2021
	Level 3
Beginning balance	$	1,140
Recognition of share-settled redemption feature	45,156
Decrease in fair value of share-settled redemption feature	(14,834)
Increase in fair value of preferred stock warrant liabilities	2,148
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).