
	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operations and support	$	639	$	195	$	1,579	$	1,454
General and administrative	2,405		687		17,524		3,379
Research and development	475		136		1,016		993
Sales and marketing	54		2		55		3
Total stock-based compensation expense	$	3,573	$	1,020	$	20,174	$	5,829

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.

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.


	Three Months Ended September 30,	Nine Months Ended September 30,
	2021	2021	2020
Expected term (in years)	4.00	3.99 - 4.00	5.79
Expected volatility	64%	64%	63% - 67%
Dividend yield	—%	—%	—%
Risk-free interest Rate	0.61%	0.41% - 0.61%	0.44% - 1.46%
Weighted-average grant-date fair value per stock option	$6.59	$4.54 - $6.59	$2.56 - $2.69

On November 15, 2019, the Sonder Board of Directors granted an award to Francis Davidson, Sonder’s CEO, for a total of 5,613,290 options, all of which Mr. Davidson fully exercised in December 2019 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 (“CEO Performance Awards”), that vest as follows, subject to Mr. Davidson’s continuous employment at each such event (the “Performance Conditions”):

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 nine months ended September 30, 2021.

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 September 30, 2021 and December 31, 2020, the aggregate borrowings outstanding under the Promissory Note, including interest, were $25.6 million and $25.2 million, respectively. The aggregate outstanding principal amount and interest under the Promissory Note will be repaid in full prior to the consummation of the Business Combination.

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 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 Sonder Board, the 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 nine months ended September 30, 2021, Sonder recognized $11.6 million in stock-based compensation expense related to the acceleration of this vesting of the IPO Condition and the Qualified Financing 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. The modification-date fair value of the CEO Performance Awards as determined using the Monte Carlo simulation on the modification date was $3.0 million.

Sonder recognizes only the portion of the option award granted to employees, non-employees, officers, and directors that is ultimately expected to vest as compensation expense and elects to recognize gross share-based compensation expense with forfeitures recognized as they occur.

Expected Term—The expected term for options granted to employees, officers, and directors is calculated as the midpoint between the vesting date and the end of the contractual term of the options. 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.

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.


	Years Ended December 31,
	2020	2019
Expected term (in years)	5.79	5.00 - 6.25
Expected volatility	63% - 69%	33% - 35%
Dividend yield	—%	—%
Risk-free interest rate	0.4% - 1.5%	1.6% - 2.6%
Weighted-average grant-date fair value per share	$2.51 - $2.77	$1.47 - $1.62


	Options Outstanding
	Number of Options	Weighted-Average Exercise Price per Option		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Balance as of December 31, 2019	10,633	$	2.52	8.28	$	20,195
Grants	5,829	$	4.58
Exercises	(1,093)	$	1.85
Forfeited	(2,122)	$	3.21
Canceled	(444)	$	2.16
Balance as of December 31, 2020	12,803	$	3.02	7.97	$	19,219
As of December 31, 2020
Options vested and exercisable	4,827	$	2.47	6.54	$	11,798
Options vested and expected to vest	12,803	$	3.02	7.97	$	19,219

The weighted-average grant-date fair value of options granted during the years ended December 31, 2020 and 2019 was $2.60 and $1.25, respectively. The total intrinsic value of options exercised during the years ended December 31, 2020 and 2019 was $3.3 million and $0.9 million, respectively.

On November 15, 2019, the Sonder Board of Directors granted an award to Francis Davidson, Sonder’s CEO, for a total of 5,613,290 options, all of which Mr. Davidson fully exercised in December 2019 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 (“CEO Performance Awards”), that vest as follows, subject to Mr. Davidson’s continuous employment at each such event (the “Performance Conditions”):

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. There was no expense recognized for the CEO Performance Awards in the years ended December 31, 2020 and 2019, as it was not deemed probable that the Performance Conditions would be achieved.

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 consolidated balance sheets as a receivable. As of December 31, 2020, Sonder had not recognized stock-based compensation expense for awards with performance-based and market-based vesting conditions.

As of December 31, 2020 and 2019, the aggregate borrowings outstanding under the Promissory Note, including interest, were $25.2 million and $24.7 million, respectively. The aggregate outstanding principal amount and interest under the Promissory Note shall be repaid in full prior to the consummation of the Business Combination.