Preferred and Common Stock Warrants

3 Months Ended

Mar. 31, 2022

Warrants and Rights Note Disclosure [Abstract]

Preferred and Common Stock Warrants

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 Warrant	Number Outstanding	Issuance Date	Exercise Price		Expiration Date
Series A	59,440	10/20/2016	$	1.36	10/20/2026
Series B	57,696	1/30/2018	$	2.40	1/30/2028
Series C	218,417	12/28/2018	$	5.04	12/28/2025
Series D	71,456	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 its note and warrant 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 (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 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 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 $23.7 million, which was recorded in other non-current liabilities in the condensed consolidated balance sheet upon the closing of the Business Combination. At March 31, 2022, the fair value decreased to $7.3 million and was recorded in other non-current liabilities in the condensed consolidated balance sheet. The change in fair value of $16.4 million is reflected as other income in the condensed consolidated statements of operations and comprehensive income (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 March 31, 2022, the fair value decreased to $4.5 million and was recorded in other non-current liabilities in the condensed consolidated balance sheet. The change in fair value of $10.0 million is reflected as other income in the condensed consolidated statements of operations and comprehensive income (loss).

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 common 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 March 31, 2022, Sonder had 32,296,539 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, which closed on January 18, 2022). Refer to Note 10. Exchangeable shares and redeemable convertible preferred stock for further details.

As of March 31, 2022, Sonder has reserved the following shares of common stock for future issuance:

	March 31, 2022
Conversion of exchangeable shares	40,000,000
Outstanding stock options	30,802,205
Outstanding restricted stock units (RSUs)	72,254
Outstanding warrants liability	14,499,966
Shares issuable pursuant to Earn Out liability	14,500,000
Outstanding Delayed Draw Note warrants liability	2,475,000
Shares available for grant under the ESPP	6,564,031
Shares available for grant under the 2021 Equity Incentive Plan	28,171,591
Total common stock reserved for future issuance	137,085,047

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

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(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.