What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-09-24 compared with 2020-06-25 · 231 added, 162 removed, 580 unchanged (40% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets

May 31, 2020 February 29, 2020

August 31, 2020 February 29, 2020

Cash and cash equivalents (note 3) $ 837 $ 377

38 unchanged sentences

Consolidated Statements of Shareholders’ Equity

Three Months Ended August 31, 2020

Capital Stock

2 unchanged sentences

Comprehensive Loss Total

Balance as at May 31, 2020 $ 2,777 $ ( 838 ) $ ( 26 ) $ 1,913

Net loss — ( 23 ) — ( 23 )

Other comprehensive income — — 13 13

Stock-based compensation 9 — — 9

Shares issued:

Exercise of stock options 2 — — 2

Balance as at August 31, 2020 $ 2,788 $ ( 861 ) $ ( 13 ) $ 1,914

Three Months Ended August 31, 2019

Capital Stock

and Additional

Paid-in Capital Deficit Accumulated

Comprehensive Loss Total

Balance as at May 31, 2019 $ 2,708 $ ( 81 ) $ ( 30 ) $ 2,597

Net loss — ( 44 ) — ( 44 )

Other comprehensive loss — — ( 5 ) ( 5 )

Stock-based compensation 14 — — 14

Balance as at August 31, 2019 $ 2,722 $ ( 125 ) $ ( 35 ) $ 2,562

See notes to consolidated financial statements.

BlackBerry Limited

(United States dollars, in millions) (unaudited)

Consolidated Statements of Shareholders’ Equity

Six Months Ended August 31, 2020

Capital Stock

and Additional

Paid-in Capital Deficit Accumulated

Comprehensive Loss Total

Balance as at February 29, 2020 $ 2,760 $ ( 198 ) $ ( 33 ) $ 2,529

6 unchanged sentences

Employee share purchase plan (note 7) 3 — — 3

Balance as at May 31, 2020 $ 2,777 $ ( 838 ) $ ( 26 ) $ 1,913

Balance as at August 31, 2020 $ 2,788 $ ( 861 ) $ ( 13 ) $ 1,914

Six Months Ended August 31, 2019

Capital Stock

10 unchanged sentences

Employee share purchase plan 2 — — 2

Balance as at May 31, 2019 $ 2,708 $ ( 81 ) $ ( 30 ) $ 2,597

Balance as at August 31, 2019 $ 2,722 $ ( 125 ) $ ( 35 ) $ 2,562

See notes to consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Operations

Three Months Ended

May 31, 2020 May 31, 2019

Three Months Ended Six Months Ended

August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019

Revenue (note 11) $ 259 $ 244 $ 465 $ 491

6 unchanged sentences

Impairment of goodwill (note 3) — — 594 —

Impairment of long-lived assets (note 3) 21 2 21 2

Debentures fair value adjustment (note 6) 18 ( 23 ) 19 ( 51 )

221 219 1,009 432

Operating loss ( 22 ) ( 43 ) ( 667 ) ( 79 )

Investment income, net — 3

Investment income (loss), net ( 5 ) — ( 5 ) 3

Loss before income taxes ( 27 ) ( 43 ) ( 672 ) ( 76 )

8 unchanged sentences

Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended

May 31, 2020 May 31, 2019

Three Months Ended Six Months Ended

August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019

Net loss $ ( 23 ) $ ( 44 ) $ ( 659 ) $ ( 79 )

Other comprehensive income (loss)

Net changes in fair value and amounts reclassified to net loss from derivatives designated as cash flow hedges during the period, net of income taxes of nil (May 31, 2019 - income taxes of nil) ( 1 ) ( 1 )

Foreign currency translation adjustment 1 ( 1 )

Net change in fair value from instrument-specific credit risk on the Debentures, net of income taxes of $1 million (May 31, 2019 - income taxes of nil) (note 6) 7 ( 8 )

Net change in fair value and amounts reclassified to net loss from derivatives designated as cash flow hedges during the period, net of income taxes of nil for the three and six months ended August 31, 2020 and August 31, 2019 4 1 3 —

Foreign currency translation adjustment, net of income taxes of $1 million and $1 million, respectively, for the three and six months ended August 31, 2020 (net of income taxes of nil for the three and six months ended August 31, 2019) 2 ( 1 ) 3 ( 2 )

Net change in fair value from instrument-specific credit risk on the Debentures, net of income taxes of $1 million and $2 million, respectively, for the three and six months ended August 31, 2020 (net of income taxes of nil for the three and six months ended August 31, 2019) (note 6) 7 ( 6 ) 14 ( 13 )

Other comprehensive income (loss) 13 ( 6 ) 20 ( 15 )

4 unchanged sentences

Consolidated Statements of Cash Flows

Three Months Ended

May 31, 2020 May 31, 2019

Six Months Ended

August 31, 2020 August 31, 2019

Cash flows from operating activities

2 unchanged sentences

Amortization 100 107

Deferred income taxes — 2

Stock-based compensation 22 31

Impairment of goodwill 594 —

Impairment of long-lived assets 21 2

Non-cash consideration received from contracts with customers — ( 8 )

Debentures fair value adjustment (note 6) 19 ( 51 )

Other long-term liabilities ( 1 ) —

Operating leases ( 2 ) ( 12 )

Other ( 3 ) 5

Net changes in working capital items

15 unchanged sentences

Proceeds on sale or maturity of short-term investments 794 532

Net cash used in investing activities ( 39 ) ( 129 )

Net cash provided by (used in) investing activities 454 ( 42 )

Cash flows from financing activities

Issuance of common shares 6 3

Payment of finance lease liability ( 1 ) ( 1 )

Net cash provided by financing activities 5 2

Effect of foreign exchange loss on cash, cash equivalents, restricted cash, and restricted cash equivalents — ( 1 )

Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period ( 66 ) ( 191 )

Effect of foreign exchange gain (loss) on cash, cash equivalents, restricted cash, and restricted cash equivalents 1 ( 1 )

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period 460 ( 88 )

Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period 426 582

10 unchanged sentences

In the opinion of management, all normal recurring adjustments considered necessary for fair presentation have been included in these interim consolidated financial statements.

Operating results for the three months ended May 31, 2020 are not necessarily indicative of the results that may be expected for the full year ending February 28, 2021.

Operating results for the three and six months ended August 31, 2020 are not necessarily indicative of the results that may be expected for the full year ending February 28, 2021.

The consolidated balance sheet at February 29, 2020 was derived from the audited Annual Financial Statements but does not contain all of the footnote disclosures from the Annual Financial Statements.

6 unchanged sentences

The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration of the outbreak, impact on the Company’s customers and its sales cycles, and impact on the Company’s employees.

The economic downturn and uncertainty caused by the COVID-19 outbreak and the measures undertaken to contain its spread have negatively affected the Company’s QNX automotive software business and has caused volatility in demand for the Company’s products and services, adversely affecting the ability of the Company’s sales and professional services teams to meet with customers and provide service, impacted spending from new customers and increased sales cycle times.

The economic downturn and uncertainty caused by the COVID-19 outbreak and the measures undertaken to contain its spread have negatively affected the Company’s QNX automotive software business and have caused volatility in demand for the Company’s products and services, adversely affecting the ability of the Company’s sales and professional services teams to meet with customers and provide service, impacted spending from new customers and increased sales cycle times.

The Company continues to evaluate the current and potential impact of the COVID-19 outbreak on its business, results of operations and consolidated financial statements, including the impairment of goodwill and indefinite-lived intangible assets and the collectability of receivables.

During the three months ended May 31, 2020, this uncertainty resulted in significant judgment related to the Company’s estimates and assumptions concerning impairment of goodwill and indefinite-lived intangible assets and the collectability of receivables.

During the first quarter of fiscal 2021, this uncertainty resulted in the Company making significant judgements related to its estimates and assumptions concerning impairment of goodwill and indefinite-lived intangible assets and the collectability of receivables.

During the second quarter of fiscal 2021, this uncertainty resulted in the Company making significant judgements related to its estimates and assumptions concerning impairment of certain operating lease right-of-use (“ROU”) assets and associated property, plant and equipment.

As of the date of issuance of the financial statements, the Company is not aware of any additional events or circumstances which would require it to update its estimates, judgements, or revise the carrying value of its assets or liabilities, other than the COVID-19 pandemic as discussed above and below in Note 3.

1 unchanged sentence

Actual results could differ from these estimates and any such differences may be material to the Company’s financial statements.

The Company remains focused on continuity plans and preparedness measures in the event that certain jurisdictions or sectors of the economy remain closed for an extended period or are shut down again.

Although the Company experienced sequential revenue growth and observed a partial recovery in global automotive production volumes in the second quarter of fiscal 2021, the Company believes that the COVID-19 pandemic has had and may continue to have a material adverse impact on the Company’s consolidated business, results of operations and financial condition in fiscal 2021.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

effects of the pandemic may not be fully reflected in the Company’s business until future periods.

The Company does not expect the COVID-19 pandemic and its related economic impact to materially adversely affect its liquidity position.

Significant Accounting Policies and Critical Accounting Estimates

6 unchanged sentences

Previously, under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.

Instead, under the amendments of ASU 2017-04, an entity performs its annual, or interim, goodwill

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

impairment test by comparing the fair value of a reporting unit with its carrying amount.

Instead, under the amendments of ASU 2017-04, an entity performs its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

The Company will recognize an impairment charge for any amount by which the carrying amount exceeds the reporting unit’s fair value.

21 unchanged sentences

In its analysis, the Company utilized multiple valuation techniques, including the income approach, discounted future cash flows, the market-based approach, and the asset value approach.

The analysis requires significant judgment, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of revenue growth for our reporting units, estimation of the useful life over which cash flows will occur, terminal growth rate, profitability measures, and determination of the discount rates for the reporting units.

The analysis requires significant judgment, including estimation of future cash flows, which is dependent on internal forecasts,

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

estimation of the long-term rate of revenue growth for our reporting units, estimation of the useful life over which cash flows will occur, terminal growth rate, profitability measures, and determination of the discount rates for the reporting units.

The carrying amount of the Company’s assets was assigned to reporting units using reasonable methodologies based on the asset type.

4 unchanged sentences

The accounts receivable balance reflects invoiced and accrued revenue and is presented net of an allowance for credit losses.

The Company expects the majority of its accounts receivable balances to continue to come from large customers as it sells the majority of its software products and services through resellers and network carriers rather than directly.

The Company expects the majority of its accounts receivable balances to continue to come from large customers as it sells the majority of its software products and services through distributor partners, such as resellers and network carriers, rather than directly.

The Company establishes current expected credit losses (“CECL”) for pools of assets with similar risk characteristics by evaluating historical levels of credit losses, current economic conditions that may affect a customer’s ability to pay, and creditworthiness of significant customers.

1 unchanged sentence

The Company, in the normal course of business, monitors the financial condition of its customers and reviews the credit history of each new customer.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company (such as in the case of bankruptcy filings or material deterioration in the customer’s operating results or financial position, and payment experiences), the Company records a specific credit loss provision to reduce the customer’s related accounts receivable to its estimated net realizable value.

When the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company (such as in the case of bankruptcy filings or material deterioration in the customer’s operating results or financial position, and payment experiences), the Company records a specific credit loss provision to reduce the customer’s related accounts receivable to its estimated net realizable value.

If circumstances related to specific customers change, the Company’s estimates of the recoverability of accounts receivable balances could be further adjusted.

9 unchanged sentences

Investments with maturities in excess of one year or investments that the Company does not intend to sell are classified as long-term investments.

Allowance for Credit Losses on Available-for-sales Debt Securities

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

Allowance for Credit Losses on Available-for-sale Debt Securities

The Company accounts for credit losses on available-for-sale debt securities in accordance with ASC 326.

11 unchanged sentences

ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

There are no accounting pronouncements which have not yet been adopted that are expected to have a significant impact on the Company’s financial statements and related disclosures.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

In August 2020, the FASB issued a new accounting standard on the topic of debt with conversion and other options, ASU 2020-06.

The amendment in this update simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock.

This update also amends the guidance for the derivatives scope exception for contracts in an entity's own equity to reduce form-over-substance-based accounting conclusions and requires the application of the if-converted method for calculating diluted earnings per share.

The update also requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity’s financial statements, and information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments.

The guidance is effective for interim and annual periods beginning after December 15, 2021.

The Company will adopt this guidance in the first quarter of fiscal 2023 and does not expect the adoption to have a material impact on its results of operations, financial position and disclosures.

FAIR VALUE MEASUREMENTS, CASH, CASH EQUIVALENTS AND INVESTMENTS

8 unchanged sentences

The fair value hierarchy also requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

Recurring Fair Value Measurements

4 unchanged sentences

The independent third-party valuator considers the information provided by the Company before determining whether a change in their original pricing is warranted.

The Company’s investments largely consist of securities issued by major corporate and banking organizations, the provincial and federal governments of Canada, international government banking organizations and the United States Department of the Treasury and are all investment grade.

The Company also holds a limited amount of equity securities following the initial public offering by the issuer of a previous private equity investment.

For a description of how the fair values of the 3.75% Debentures (as defined in Note 6) are determined, see the “Convertible debentures” accounting policies in Note 1 to the Annual Financial Statements.

Non-Recurring Fair Value Measurements

Upon the occurrence of certain events, the Company re-measures the fair value of long-lived assets, including property, plant and equipment, operating lease right-of-use (“ROU”) assets, intangible assets and goodwill.

Goodwill Impairment

During the first quarter of fiscal 2021, as a result of the deterioration in economic conditions caused by the global COVID-19 pandemic and its impact on the Company’s reporting units, and the decline of the trading value of the Company’s capital stock below the Company’s consolidated carrying value, the Company determined that it was more likely than not that the fair value of at least one of its reporting units was lower than its carrying amount after including goodwill.

As a result, the Company completed an analysis of the fair value of its reporting units to compare against their respective carrying values as of May 31, 2020.

In its analysis, the Company utilized multiple valuation techniques, including the income approach, discounted future cash flows, the market-based approach, and the asset value approach which is based on the sum of the values of each of the assets and liabilities within the entity.

In addition to market data, the valuation techniques utilize Level 3 inputs such as the Company’s internal forecasts of its future results, cash flows and its weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested and based upon the Company’s estimated credit rating.

The analysis involves significant judgment in the selection of assumptions necessary to arrive at the reporting units’ fair values, especially in light of the ongoing COVID-19 pandemic and its short-term and potential long-term impacts to the Company’s business.

The total of the fair values of the Company’s reporting units was reconciled to the Company’s market capitalization based on the quoted market price of the Company’s stock in an active market, adjusted by an appropriate control premium.

Where the carrying amount of a reporting unit exceeded its fair value, goodwill of the reporting unit was considered to be impaired.

Based on the results of the goodwill impairment test, it was concluded that the carrying value of one reporting unit exceeded its fair value, necessitating an impairment charge for the amount of excess and reducing the carrying value of Goodwill.

Consequently, the Company recorded total non-cash goodwill impairment charges of $ 594 million in the BlackBerry Spark reporting unit (the “Goodwill Impairment Charge”).

BlackBerry Limited

1 unchanged sentence

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

The Company also holds a limited amount of equity securities following the initial public offering by the issuer of a previous private equity investment.

Impairment of Long-Lived Assets

During the second quarter of fiscal 2021, the Company decided to exit and seek subleases for certain leased facilities and made a change in the estimate of future sublease activity of a previously exited facility.

The Company recorded a non-cash, pre-tax and after-tax impairment charge of $ 21 million consisting of $ 16 million related to operating lease ROU assets for those facilities and $ 5 million related to property, plant and equipment associated with those facilities.

The impairment was determined by comparing the fair value of the impacted ROU asset to the carrying value of the asset as of the impairment measurement date, as required under ASC Topic 360, Property, Plant, and Equipment, using Level 2 inputs.

The fair value of the ROU asset was based on the estimated sublease income for certain facilities taking into consideration the time period it will take to obtain a sublessor, the applicable discount rate and the sublease rate (six months ended August 31, 2019 - $ 2 million impairment charge related to ROU assets).

Cash, Cash Equivalents and Investments

The components of cash, cash equivalents and investments by fair value level as at May 31, 2020 were as follows:

The components of cash, cash equivalents and investments by fair value level as at August 31, 2020 were as follows:

Cost Basis Unrealized

Gains Unrealized

Losses Other-than-

Impairment Fair Value Cash and

Losses Fair Value Cash and

Equivalents Short-term

5 unchanged sentences

Equity securities 10 — ( 8 ) 2 — 2 — —

Corporate notes/bonds 37 — — — 37 37 — — —

Term deposits, certificates of deposits, and GICs 108 — — — 108 10 50 — 48

Term deposits and certificates of deposits 49 — — 49 — — — 49

Bearer deposit notes 19 — — 19 19 — — —

1 unchanged sentence

promissory notes 19 — — 19 — 19 — —

government sponsored enterprise notes 38 — — — 38 — 38 — —

treasury bills/notes 25 — — — 25 — 25 — —

149 — — 149 44 56 — 49

6 unchanged sentences

Gains Unrealized

Losses Other-than-

Impairment Fair Value Cash and

Losses Fair Value Cash and

Equivalents Short-term

14 unchanged sentences

$ 998 $ — $ ( 8 ) $ 990 $ 377 $ 532 $ 32 $ 49

As at May 31, 2020, the Company had private equity investments without readily determinable fair value of $ 33 million (February 29, 2020 - $ 32 million).

There were no realized gains or losses on available-for-sale securities for the three months ended May 31, 2020 (realized losses of nil for the three months ended May 31, 2019).

As at August 31, 2020, the Company had private equity investments without readily determinable fair value of $ 33 million (February 29, 2020 - $ 32 million).

There were no realized gains or losses on available-for-sale securities for the three and six months ended August 31, 2020 (realized losses of nil for the three and six months ended August 31, 2019).

The Company has restricted cash and cash equivalents, consisting of cash and securities pledged as collateral to major banking partners in support of the Company’s requirements for letters of credit.

6 unchanged sentences

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents as at May 31, 2020 and February 29, 2020 from the consolidated balance sheets to the consolidated statements of cash flows:

May 31, 2020 February 29, 2020

The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents as at August 31, 2020 and February 29, 2020 from the consolidated balance sheets to the consolidated statements of cash flows:

August 31, 2020 February 29, 2020

Cash and cash equivalents $ 837 $ 377

1 unchanged sentence

Total cash, cash equivalents, restricted cash, and restricted cash equivalents presented in the consolidated statements of cash flows

The contractual maturities of available-for-sale investments as at May 31, 2020 and February 29, 2020 were as follows:

May 31, 2020 February 29, 2020

The contractual maturities of available-for-sale investments as at August 31, 2020 and February 29, 2020 were as follows:

August 31, 2020 February 29, 2020

Cost Basis Fair Value Cost Basis Fair Value

2 unchanged sentences

$ 159 $ 151 $ 866 $ 858

As at May 31, 2020, the Company had investments with continuous unrealized losses totaling $ 8 million, consisting of unrealized losses on equity securities (May 31, 2019 - continuous unrealized losses totaling $ 10 million).

As at August 31, 2020, the Company had investments with continuous unrealized losses totaling $ 8 million, consisting of unrealized losses on equity securities (February 29, 2020 - continuous unrealized losses totaling $ 8 million).

CONSOLIDATED BALANCE SHEET DETAILS

Accounts Receivable, Net

The allowance for credit losses as at May 31, 2020 was $ 13 million (February 29, 2020 - $ 9 million).

The allowance for credit losses as at August 31, 2020 was $ 14 million (February 29, 2020 - $ 9 million).

The Company recognizes current estimated credit losses for accounts receivable, net.

7 unchanged sentences

The following table sets forth the activity in the Company’s allowance for credit losses:

Three Months Ended

Six Months Ended

August 31, 2020

Beginning balance as of February 29, 2020 $ 9

1 unchanged sentence

Current period provision for expected credit losses 1

Ending balance of the allowance for credit loss as at May 31, 2020 $ 13

The allowance for credit losses as at May 31, 2020 consists of $ 6 million relating to CECL estimated based on days past due and region, $ 6 million relating to specific customers that were evaluated separately and $ 1 million relating to CECL estimated for long-term accounts receivables.

There were two customers that comprised more than 10% of accounts receivable as at May 31, 2020 (February 29, 2020 - two customers comprised more than 10%).

Ending balance of the allowance for credit loss as at August 31, 2020 $ 14

The allowance for credit losses as at August 31, 2020 consists of $ 5 million relating to CECL estimated based on days past due and region, $ 7 million relating to specific customers that were evaluated separately and $ 2 million relating to CECL estimated for long-term accounts receivables.

BlackBerry Limited

1 unchanged sentence

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

There were two customers that comprised more than 10% of accounts receivable as at August 31, 2020 (February 29, 2020 - two customers comprised more than 10%).

Other Current Assets

As at May 31, 2020, other current assets include items such as the current portion of deferred commissions and prepaid expenses, among other items, none of which were greater than 5 % of the current assets balance in all periods presented.

As at August 31, 2020, other current assets include items such as the current portion of deferred commissions and prepaid expenses, among other items, none of which were greater than 5 % of the current assets balance in all periods presented.

Property, Plant and Equipment, Net

Property, plant and equipment comprised the following:

May 31, 2020 February 29, 2020

August 31, 2020 February 29, 2020

Buildings, leasehold improvements and other $ 66 $ 72

6 unchanged sentences

Intangible assets comprised the following:

As at May 31, 2020

As at August 31, 2020

Cost Accumulated

11 unchanged sentences

$ 2,002 $ 1,087 $ 915

For the three months ended May 31, 2020, amortization expense related to intangible assets amounted to $ 45 million (three months ended May 31, 2019 - $ 47 million)

Total additions to intangible assets for three months ended May 31, 2020 amounted to $ 8 million (three months ended May 31, 2019 - $ 7 million).

During the three months ended May 31, 2020, additions to intangible assets primarily consisted of payments for intellectual property relating to patent maintenance, registration and license fees.

Based on the carrying value of the identified intangible assets as at May 31, 2020, and assuming no subsequent impairment of the underlying assets, the annual amortization expense for the remainder of fiscal 2021 and each of the five succeeding years is expected to be as follows:

For the six months ended August 31, 2020, amortization expense related to intangible assets amounted to $ 89 million (six months ended August 31, 2019 - $ 95 million)

Total additions to intangible assets for six months ended August 31, 2020 amounted to $ 16 million (six months ended August 31, 2019 - $ 16 million).

During the six months ended August 31, 2020, additions to intangible assets primarily consisted of payments for intellectual property relating to patent maintenance, registration and license fees.

Based on the carrying value of the identified intangible assets as at August 31, 2020, and assuming no subsequent impairment of the underlying assets, the annual amortization expense for the remainder of fiscal 2021 and each of the five succeeding years is expected to be as follows:

fiscal 2021 - $ 85 million;

6 unchanged sentences

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

Changes to the carrying amount of goodwill during the three months ended May 31, 2020 were as follows:

Changes to the carrying amount of goodwill during the six months ended August 31, 2020 were as follows:

Carrying Amount

Carrying amount as at February 29, 2020 1,437

Goodwill impairment charge ( 594 )

Carrying amount as at May 31, 2020 $ 843

As a result, the Company completed an analysis of the fair value of its reporting units to compare against their respective carrying values as of May 31, 2020.

Where the carrying amount of a reporting unit exceeded its fair value, goodwill of the reporting unit was considered to be impaired.

Consequently, the Company recorded total non-cash goodwill impairment charges of $ 594 million in the BlackBerry Spark reporting unit (the “Goodwill Impairment Charge”).

Goodwill impairment charge (see Note 3) ( 594 )

Effect of foreign exchange on non-U.S.

dollar denominated goodwill 5

Carrying amount as at August 31, 2020 $ 848

Other Long-term Assets

As at May 31, 2020, other long-term assets include long-term portion of deferred commission and long-term receivables, among other items, none of which were greater than 5 % of total assets in any of the periods presented.

As at August 31, 2020, other long-term assets include long-term portion of deferred commission and long-term receivables, among other items, none of which were greater than 5 % of total assets in any of the periods presented.

Accrued Liabilities

2 unchanged sentences

Other long-term liabilities consist of the long-term portion of finance lease liabilities and non-lease components of Resource Allocation Program liabilities.

For the three months ended May 31, 2020, the Company’s net effective income tax recovery rate was approximately 1 % compared to a net effective income tax expense rate of 6 % for the three months ended May 31, 2019.

For the six months ended August 31, 2020, the Company’s net effective income tax recovery rate was approximately 2 % compared to a net effective income tax expense rate of 4 % for the six months ended August 31, 2019.

The Company’s income tax rate reflects the change in unrecognized income tax benefit and the fact that the Company has a significant valuation allowance against its deferred income tax assets, and in particular, the change in fair value of the Debentures, amongst other items, is offset by a corresponding adjustment of the valuation allowance.

The Company’s net effective income tax rate also reflects the geographic mix of earnings in jurisdictions with different income tax rates.

The Company’s total unrecognized income tax benefits as at May 31, 2020 were $ 61 million (February 29, 2020 - $ 72 million).

As at May 31, 2020, $ 55 million of the unrecognized income tax benefits have been netted against deferred

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

income tax assets and $ 6 million has been recorded within income taxes payable on the Company’s consolidated balance sheets.

The Company’s total unrecognized income tax benefits as at August 31, 2020 were $ 36 million (February 29, 2020 - $ 72 million).

As at August 31, 2020, $ 32 million of the unrecognized income tax benefits have been netted against deferred income tax assets and $ 4 million has been recorded within income taxes payable on the Company’s consolidated balance sheets.

The Company is subject to ongoing examination by tax authorities in certain jurisdictions in which it operates.

1 unchanged sentence

While the final resolution of audits is uncertain, the Company believes the ultimate resolution of these audits will not have a material adverse effect on its consolidated financial position, liquidity or results of operations.

3.75% Convertible Debentures

On September 7, 2016, Fairfax Financial Holdings Limited (“Fairfax”) and other institutional investors invested in the Company through a private placement of new debentures in an aggregate amount of $ 605 million (the “3.75% Debentures”).

4 unchanged sentences

During an event of default, the interest rate rises to 7.75 % per annum.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

The 3.75% Debentures are subject to a change of control provision whereby the Company would be required to make an offer to repurchase the 3.75% Debentures at 115 % of par value if a person or group (not affiliated with Fairfax) acquires 35 % of the Company’s outstanding common shares, acquires all or substantially all of its assets, or if the Company merges with another entity and the Company’s existing shareholders hold less than 50 % of the common shares of the surviving entity.

The following table summarizes the change in fair value of the Debentures for the three months ended May 31, 2020:

On July 22, 2020, the Company announced that, with the required approval of the holders of the 3.75% Debentures, it would redeem the 3.75% Debentures for a redemption amount of approximately $ 615 million (the “Redemption Amount”), which would settle all outstanding obligations of the Company in respect of the 3.75% Debentures.

The redemption was completed on September 1, 2020 , after the end of the second quarter of fiscal 2021.

As at August 31, 2020, the fair value of the 3.75% Debentures was determined to be the Redemption Amount of $ 615 million, which includes $ 5 million in accrued interest.

The following table summarizes the change in fair value of the 3.75% Debentures for the six months ended August 31, 2020:

August 31, 2020

Balance as at February 29, 2020 606

Change in fair value of the 3.75% Debentures 4

Balance as at May 31, 2020 $ 599

Balance as at August 31, 2020 $ 610

The difference between the fair value of the 3.75% Debentures and the unpaid principal balance of $ 605 million is $ 5 million.

The fair value of the 3.75% Debentures is measured using Level 2 fair value inputs.

The following table shows the impact of the changes in fair value of the Debentures for the three months ended May 31, 2020 and May 31, 2019:

Three Months Ended

May 31, 2020 May 31, 2019

The following table shows the impact of the changes in fair value of the 3.75% Debentures for the three and six months ended August 31, 2020 and August 31, 2019:

Three Months Ended Six Months Ended

August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019

Income (charge) associated with the change in fair value from non-credit components recorded in the consolidated statements of operations $ ( 18 ) $ 23 $ ( 19 ) $ 51

1 unchanged sentence

Total decrease (increase) in the fair value of the 3.75% Debentures $ ( 11 ) $ 17 $ ( 4 ) $ 38

For the three months ended May 31, 2020, the Company recorded interest expense related to the Debentures of $ 6 million, which has been included in investment income, net on the Company’s consolidated statements of operations (three months ended May 31, 2019 - $ 6 million).

The Company is required to make quarterly interest-only payments of approximately $ 6 million in the second quarter of fiscal 2021 and approximately $ 5 million in the third quarter of fiscal 2021 when the Debentures mature.

For the three and six months ended August 31, 2020, the Company recorded interest expense related to the 3.75% Debentures of $ 6 million and $ 11 million, respectively, which has been included in investment income, net on the Company’s consolidated statements of operations (three and six months ended August 31, 2019 - $ 6 million and $ 11 million, respectively).

Fairfax, a related party under U.S.

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As such, the payment to Fairfax of interest on the 3.75% Debentures represents a related-party transaction.

Fairfax receives interest at the same rate as other Debenture holders.

Fairfax receives interest at the same rate as other holders of the 3.75% Debentures.

1.75% Convertible Debentures

On July 22, 2020, as subsequently updated on August 28, 2020, the Company announced that it had entered into an agreement with Fairfax and another institutional investor for the issuance of an aggregate of $ 365 million principal amount of new 1.75 % unsecured convertible debentures maturing on November 13, 2023 (the “1.75% Debentures”) on a private placement basis.

These were issued on September 1, 2020 , after the end of the second quarter of fiscal 2021.

Fairfax agreed to acquire $ 330 million principal amount of the 1.75% Debentures and receives interest at the same rate as the other holder of the 1.75% Debentures.

The 1.75% Debentures have terms that are substantially identical to those of the 3.75% Debentures except that the 1.75% Debentures are convertible into common shares at a price of $ 6.00 per common share, bear a lower rate of interest at 1.75 % per annum, are subject to a higher approval threshold for extraordinary resolutions and mature in 2023.

Additionally, the 1.75% Debentures cannot be converted to the extent that, after giving

BlackBerry Limited

1 unchanged sentence

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

effect to the conversion, the holder would beneficially own or exercise control or direction over more than 19.99 % of the Company’s then issued and outstanding shares.

Quarterly and annual interest expense on the 1.75% Debentures will be approximately $ 2 million and $ 6 million, respectively.

CAPITAL STOCK

The following details the changes in issued and outstanding common shares for the three months ended May 31, 2020:

The following details the changes in issued and outstanding common shares for the six months ended August 31, 2020:

Capital Stock and

6 unchanged sentences

Common shares issued for employee share purchase plan 799 3

Common shares outstanding as at May 31, 2020 555,623 $ 2,777

The Company had 556 million voting common shares outstanding, 5 million options to purchase voting common shares, 24 million RSUs and 1 million DSUs outstanding as at June 22, 2020.

In addition, 60.5 million common shares are issuable upon conversion in full of the Debentures as described in Note 6.

Common shares outstanding as at August 31, 2020 556,468 $ 2,788

The Company had 557 million voting common shares outstanding, 4 million options to purchase voting common shares, 24 million RSUs and 1 million DSUs outstanding as at September 21, 2020.

In addition, 60.5 million common shares are issuable upon conversion in full of the 3.75% Debentures as described in Note 6, prior to their redemption.

An aggregate of 60.8 million common shares are issuable upon conversion in full of the 1.75% Debentures as described in Note 6.

BlackBerry Limited

3 unchanged sentences

The following table sets forth the computation of basic and diluted loss per share:

Three Months Ended

May 31, 2020 May 31, 2019

Three Months Ended Six Months Ended

August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019

Net loss for basic and diluted loss per share available to common shareholders $ ( 23 ) $ ( 44 ) $ ( 659 ) $ ( 79 )

Debentures fair value adjustment (1) (2)

— ( 23 ) — ( 51 )

interest expense on Debentures (1) (2)

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Conversion of Debentures (1) (2)

— 60,500 — 60,500

Weighted average number of shares and assumed conversions (000’s) diluted 558,882 612,843 558,365 612,596

3 unchanged sentences

______________________________

(1) The Company has not presented the dilutive effect of the Debentures using the if-converted method in the calculation of diluted loss per share for the three months ended May 31, 2020, as to do so would be antidilutive.

(1) The Company has not presented the dilutive effect of the 3.75% Debentures using the if-converted method in the calculation of diluted loss per share for the three and six months ended August 31, 2020, as to do so would be antidilutive.

See Note 6 for details on the 3.75% Debentures.

(2) The Company has presented the dilutive effect of the Debentures using the if-converted method, assuming conversion at the beginning of the quarter for the three months ended May 31, 2019.

Accordingly, to calculate diluted loss per share, the Company adjusted net loss by eliminating the fair value adjustment made to the Debentures and interest expense incurred on the Debentures in the three months ended May 31, 2019, and added the number of shares that would have been issued upon conversion to the diluted weighted average number of shares outstanding.

(2) The Company has presented the dilutive effect of the 3.75% Debentures using the if-converted method, assuming conversion at the beginning of the quarter for the three and six months ended August 31, 2019.

Accordingly, to calculate diluted loss per share, the Company adjusted net loss by eliminating the fair value adjustment made to the 3.75% Debentures and interest expense incurred on the 3.75% Debentures in the three and six months ended August 31, 2019, and added the number of shares that would have been issued upon conversion to the diluted weighted average number of shares outstanding.

See Note 6 for details on the 3.75% Debentures.

(3) For the three months ended May 31, 2020, includes approximately 2,802,067 common shares remaining to be issued in equal installments on the next two anniversary dates of the Cylance acquisition, in consideration for the acquisition.

For the three months ended May 31, 2019, includes approximately 4,182,189 common shares to be issued in equal installments on the three anniversary dates of the Cylance acquisition, in consideration for the acquisition.

(3) The three and six months ended August 31, 2020, includes 2,802,067 common shares remaining to be issued in equal installments on the next two anniversary dates of the Cylance acquisition, in consideration for the acquisition.

The three and six months ended August 31, 2019, includes 4,182,189 common shares to be issued in equal installments on the three anniversary dates of the Cylance acquisition, in consideration for the acquisition.

There are no service or other requirements associated with the issuance of these shares.

(4) The Company has not presented the dilutive effect of in-the-money options and RSUs that will be settled upon vesting by the issuance of new common shares in the calculation of diluted loss per share for the three months ended May 31, 2020, and three months ended May 31, 2019, as to do so would be antidilutive.

(4) The Company has not presented the dilutive effect of in-the-money options and RSUs that will be settled upon vesting by the issuance of new common shares in the calculation of diluted loss per share for the three and six months ended August 31, 2020, and three and six months ended August 31, 2019, as to do so would be antidilutive.

BlackBerry Limited

2 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in AOCL by component net of tax, for the three months ended May 31, 2020 were as follows:

The changes in AOCL by component net of tax, for the six months ended August 31, 2020 were as follows:

Foreign Currency Cumulative Translation Adjustment Accumulated Net Unrealized Losses on Cash Flow Hedges Other Post-Employment Benefit Obligations Change in fair value from instrument-specific credit risk on Debentures Total

3 unchanged sentences

Change in cumulative comprehensive income (loss) for the period 3 3 — 14 20

AOCL as at May 31, 2020 $ ( 8 ) $ ( 2 ) $ ( 1 ) $ ( 15 ) $ ( 26 )

During the three months ended May 31, 2020, $ 2 million in gains (pre-tax and post-tax) associated with cash flow hedges were reclassified from AOCL into selling, marketing and administration expenses (May 31, 2019 - $ 1 million in losses).

AOCL as at August 31, 2020 $ ( 6 ) $ 2 $ ( 1 ) $ ( 8 ) $ ( 13 )

During the three and six months ended August 31, 2020, nil losses and $ 2 million in losses (pre-tax and post-tax), respectively, associated with cash flow hedges were reclassified from AOCL into selling, marketing and administration expenses (three and six months ended August 31, 2019 - nil losses).

COMMITMENTS AND CONTINGENCIES

(a) Letters of Credit

The Company had $ 48 million in collateralized outstanding letters of credit in support of certain leasing arrangements entered into in the ordinary course of business and in support of patent litigation in certain jurisdictions as of May 31, 2020.

The Company had $ 49 million in collateralized outstanding letters of credit in support of certain leasing arrangements entered into in the ordinary course of business and in support of patent litigation in certain jurisdictions as of August 31, 2020.

See the discussion of restricted cash in Note 3.

11 unchanged sentences

Any settlements or awards under such claims are provided for when reasonably determinable.

As of May 31, 2020, there are no material claims outstanding for which the Company has assessed the potential loss as both probable to result and reasonably estimable;

As of August 31, 2020, there are no material claims outstanding for which the Company has assessed the potential loss as both probable to result and reasonably estimable;

therefore, no material accrual has been made.

Further, there are claims outstanding for which the Company has assessed the potential loss as reasonably probable to result;

however, an estimate

Further, there are claims

BlackBerry Limited

1 unchanged sentence

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

of the amount of loss cannot reasonably be made.

outstanding for which the Company has assessed the potential loss as reasonably probable to result;

however, an estimate of the amount of loss cannot reasonably be made.

There are many reasons that the Company cannot make these assessments, including, among others, one or more of the following:

25 unchanged sentences

On October 17, 2019, Cho and Ulug filed a Notice of Appeal.

Cho and Ulug filed their opening brief on February 20, 2020, and the Company filed its opposition brief on May 21, 2020.

Fact discovery was completed on January 31, 2020, and expert discovery is scheduled to be completed on November 13, 2020.

Plaintiffs filed a motion for class certification on June 8, 2020.

Cho and Ulug filed their opening brief on February 20, 2020, the Company filed its opposition brief on May 21, 2020, and Cho and Ulug filed their reply brief on June 11, 2020.

Fact discovery was completed on January 31, 2020, and expert discovery is scheduled to be completed by November 13, 2020.

The Court removed the case from its suspense calendar on May 29, 2020.

Plaintiffs filed a motion for class certification on June 8, 2020, the defendants filed oppositions on August 10, 2020, and the plaintiffs’ reply is due September 28, 2020.

No other dates have been set.

On July 23, 2014, the plaintiffs in the putative Ontario class action filed a motion for certification and leave to pursue statutory misrepresentation claims.

10 unchanged sentences

The Statement of Claim alleges that actions the Company took when certain of its employees decided to accept offers of employment from Ford Motor Company of Canada amounted to a wrongful termination of the employees’ employment with the Company.

The claim seeks (i) an unspecified quantum of statutory, contractual, or common law termination entitlements;

(ii) punitive or breach of duty of good faith damages of CAD$20,000,000, or such other amount as the Court finds appropriate, (iii) pre- and post- judgment interest, (iv) attorneys’ fees and costs, and (v) such other relief as the Court deems just.

The Court granted the plaintiffs’ motion to certify the class action on May 27, 2019.

The claim seeks (i) an unspecified quantum of statutory, contractual, or common law

BlackBerry Limited

1 unchanged sentence

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

Company commenced a motion for leave to appeal the certification order on June 11, 2019.

termination entitlements;

The Court granted the plaintiffs’ motion to certify the class action on May 27, 2019.

The Company commenced a motion for leave to appeal the certification order on June 11, 2019.

The Court denied the motion for leave to appeal on September 17, 2019.

2 unchanged sentences

The complaint seeks statutory penalties, injunctive relief, interest, costs, and attorneys’ fees.

The Company filed its answer denying the allegations in the complaint on March 18, 2019, and discovery is proceeding.

The Company filed its answer denying the allegations in the complaint on March 18, 2019.

On August 22, 2019, the Company filed a Motion for Summary Adjudication of the named plaintiff’s wage statement claims.

The Court took the motion under submission following oral argument on November 13, 2019, and the motion remains pending.

The Court denied the motion on January 21, 2020.

The parties have entered into a settlement agreement that is subject to Court approval.

The plaintiff filed a motion for preliminary approval of the settlement on June 11, 2020, and the preliminary approval hearing is scheduled for July 16, 2020.

The parties will provide notice of the settlement to the class after the Court enters its order preliminarily approving the settlement.

The parties entered into a settlement agreement on June 4, 2020.

The Court granted preliminary settlement approval and certified the proposed class on July 16, 2020.

The final settlement approval hearing is scheduled for October 20, 2020.

Other contingencies

2 unchanged sentences

As the award is triggered by the Company’s share price, it is considered stock-based compensation and accounted for as a share-based liability award.

As at May 31, 2020, the liability recorded in association with this award is approximately $ 2 million (February 29, 2020 - $ 1 million).

As at May 31, 2020, the Company has received $ 12 million in funds from claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund program’s investment in BlackBerry QNX.

As at August 31, 2020, the liability recorded in association with this award is approximately $ 2 million (February 29, 2020 - $ 1 million).

As at August 31, 2020, the Company has received $ 13 million in funds from claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund program’s investment in BlackBerry QNX.

A portion of this amount may be repayable in the future under certain circumstances if certain terms and conditions are not met by the Company, which is not probable at this time.

The Company attempts to ensure that most components essential to the Company’s business are generally available from

multiple sources;

however, certain components are currently obtained from limited sources within a competitive market,

which subjects the Company to supply, availability and pricing risks.

The Company attempts to ensure that most components essential to the Company’s business are generally available from multiple sources;

however, certain components are currently obtained from limited sources within a competitive market, which subjects the Company to supply, availability and pricing risks.

The Company has also entered into various agreements for the supply of components, and the manufacturing of its products;

9 unchanged sentences

The Company has not encountered material costs as a result of such indemnifications in the current period.

See the Company’s Management Information Circular for fiscal 2020 for additional information regarding the Company’s indemnification agreements with its current and former directors and executive officers.

REVENUE AND SEGMENT DISCLOSURES

The Company disaggregates revenue from contracts with customers based on geographical regions, timing of revenue recognition, and the major product and service types.

BlackBerry Limited

1 unchanged sentence

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

REVENUE AND SEGMENT DISCLOSURES

The Company disaggregates revenue from contracts with customers based on geographical regions, timing of revenue recognition, and the major product and service types.

The Company’s revenue, classified by major geographic region in which the Company’s customers are located, was as follows:

Three Months Ended

May 31, 2020 May 31, 2019

Three Months Ended Six Months Ended

August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019

North America (1)

$ 195 $ 179 345 339

Europe, Middle East and Africa 48 47 89 108

9 unchanged sentences

Total revenue, classified by product and service type, was as follows:

Three Months Ended

May 31, 2020 May 31, 2019

Three Months Ended Six Months Ended

August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019

Software and Services $ 151 $ 168 $ 299 $ 336

2 unchanged sentences

Software and Services includes revenue from the Company’s BlackBerry Spark® software platform and BlackBerry IoT Solutions.

The BlackBerry Spark platform includes a suite of security software products and services, including BlackBerry Cylance, BlackBerry UEM, BlackBerry Dynamics and BlackBerry Workspaces.

BlackBerry IoT Solutions includes revenue from BlackBerry QNX, BlackBerry AtHoc, SecuSUITE, BlackBerry Certicom, BlackBerry Radar, and other IoT applications.

The BlackBerry Spark platform includes a suite of security software products and services, including the BlackBerry Spark® Unified Endpoint Security Suite, BlackBerry® UEM, BlackBerry® Dynamics™ and BlackBerry® Workspaces.

BlackBerry IoT Solutions includes revenue from BlackBerry Technology Solutions, which consists of BlackBerry® QNX®, BlackBerry Certicom®, BlackBerry Radar® and other IoT applications, and from BlackBerry® AtHoc® and SecuSUITE.

Software and Services revenue is generated predominantly through software licenses, commonly bundled with support, maintenance and professional services.

2 unchanged sentences

Revenue, classified by timing of recognition, was as follows:

Three Months Ended

May 31, 2020 May 31, 2019

Three Months Ended Six Months Ended

August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019

Products and services transferred over time $ 125 $ 117 $ 241 $ 269

5 unchanged sentences

Revenue contract balances

The following table sets forth the activity in the Company’s revenue contract balances for the three months ended May 31, 2020:

The following table sets forth the activity in the Company’s revenue contract balances for the six months ended August 31, 2020:

Accounts Receivable Deferred Revenue Deferred Commissions

3 unchanged sentences

Decrease, net ( 9 ) ( 57 ) ( 5 )

Closing balance as at May 31, 2020 $ 255 $ 341 $ 27

Closing balance as at August 31, 2020 $ 258 $ 316 $ 23

Transaction price allocated to the remaining performance obligations

The table below discloses the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as at May 31, 2020 and the time frame in which the Company expects to recognize this revenue.

The table below discloses the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as at August 31, 2020 and the time frame in which the Company expects to recognize this revenue.

The disclosure includes estimates of variable consideration, except when the variable consideration is a sales-based or usage-based royalty promised in exchange for a license of intellectual property.

As at May 31, 2020

As at August 31, 2020

Less than 12 Months 12 to 24 Months Thereafter Total

1 unchanged sentence

Revenue recognized for performance obligations satisfied in prior periods

For the three months ended May 31, 2020, no revenue was recognized relating to performance obligations satisfied in a prior period (three months ended May 31, 2019 - nil ).

For the three and six months ended August 31, 2020, nil and $ 1 million of revenue was recognized relating to performance obligations satisfied in a prior period (three and six months ended August 31, 2019 - nil ).

Segment Disclosures

3 unchanged sentences

Property, plant and equipment, intangible assets, operating lease ROU assets and goodwill, classified by geographic region in which the Company’s assets are located, were as follows:

May 31, 2020 February 29, 2020

August 31, 2020 February 29, 2020

Property, Plant and Equipment, Intangible Assets, Operating Lease ROU Assets and Goodwill Total Assets Property, Plant and Equipment, Intangible Assets, Operating Lease ROU Assets and Goodwill Total Assets

4 unchanged sentences

Information About Major Customers

There was one customer that comprised 26 % of the Company’s revenue in three months ended May 31, 2020 (three months ended May 31, 2019 - one customer that comprised 16 % of the Company’s revenue).

There was one customer that comprised 40 % and 34 % of the Company’s revenue in three and six months ended August 31, 2020, respectively (three and six months ended August 31, 2019 - two customers that comprised 15 % and 10 % and one customer that comprised 12 %, respectively).

BlackBerry Limited

3 unchanged sentences

(a) Certain consolidated statements of cash flow information related to interest and income taxes paid is summarized as follows:

For the Three Months Ended

May 31, 2020 May 31, 2019

Three Months Ended Six Months Ended

August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019

Interest paid during the period $ 6 $ 6 $ 11 $ 11

4 unchanged sentences

The Company is exposed to foreign exchange risk as a result of transactions in currencies other than its functional currency, the U.S.

The majority of the Company’s revenue in the first quarter of fiscal 2021 was transacted in U.S.

The majority of the Company’s revenue in the second quarter of fiscal 2021 was transacted in U.S.

Portions of the revenue were denominated in Canadian dollars, euros and British pounds.

1 unchanged sentence

dollars, euros and British pounds.

At May 31, 2020, approximately 12 % of cash and cash equivalents, 11 % of accounts receivable and 32 % of accounts payable were denominated in foreign currencies (February 29, 2020 – 12 %, 17 % and 17 %, respectively).

At August 31, 2020, approximately 5 % of cash and cash equivalents, 12 % of accounts receivable and 46 % of accounts payable were denominated in foreign currencies (February 29, 2020 – 12 %, 17 % and 17 %, respectively).

These foreign currencies primarily include the Canadian dollar, euro and British pound.

5 unchanged sentences

The fair value of investments, as well as the investment income derived from the investment portfolio, will fluctuate with changes in prevailing interest rates.

The Company has also issued the Debentures as described in Note 6 with a fixed 3.75 % interest rate.

The Company has also issued debentures with a fixed interest rate, as described in Note 6.

The fair value of the debentures will fluctuate with changes in prevailing interest rates.

3 unchanged sentences

The Company reduces this risk by investing in liquid, investment-grade securities and by limiting exposure to any one entity or group of related entities.

As at May 31, 2020, no single issuer represented more than 12 % of the total cash, cash equivalents and investments (February 29, 2020 - no single issuer represented more than 8 % of the total cash, cash equivalents and investments), representing cash balances at one of the Company’s banking counterparties.

As at August 31, 2020, no single issuer represented more than 31 % of the total cash, cash equivalents and investments (February 29, 2020 - no single issuer represented more than 8 % of the total cash, cash equivalents and investments), representing cash balances at one of the Company’s banking counterparties.

The Company maintains Credit Support Annexes (“CSAs”) with several of its counterparties.

These CSAs require the outstanding net position of all contracts be made whole by the paying or receiving of collateral to or from the counterparties on a daily basis, subject to exposure and transfer thresholds.

As at May 31, 2020, the Company had $ 2 million in collateral held with counterparties (February 29, 2020 - $ 1 million in collateral posted).

As at August 31, 2020, the Company had no collateral held or posted with counterparties (February 29, 2020 - $ 1 million in collateral posted).

Liquidity risk

Cash, cash equivalents, and investments were approximately $ 955 million as at May 31, 2020.

Cash, cash equivalents, and investments were approximately $ 977 million as at August 31, 2020.

The Company’s management remains focused on efficiently managing working capital balances and managing the liquidity needs of the business.

Based on its current financial projections, the Company believes its financial resources, together with expected future operating cash generating and operating expense reduction activities and access to other potential financing arrangements, should be sufficient to meet funding requirements for current financial commitments and future operating expenditures not yet committed, and should provide the necessary financial capacity for the foreseeable future.

BlackBerry Limited

1 unchanged sentence

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

arrangements, should be sufficient to meet funding requirements for current financial commitments and future operating expenditures not yet committed, and should provide the necessary financial capacity for the foreseeable future.

On July 22, 2020, the Company announced that, with the required approval of the holders of the 3.75% Debentures, it would redeem the 3.75% Debentures for a redemption amount of approximately $ 615 million, which would settle all outstanding obligations of the Company in respect of the 3.75% Debentures.

The redemption was completed on September 1, 2020 , after the end of the second quarter of fiscal 2021.

Also on July 22, 2020, as subsequently updated on August 28, 2020, the Company announced that it had entered into an agreement with Fairfax and another institutional investor for the issuance of an aggregate of $ 365 million principal amount of the 1.75% Debentures maturing on November 13, 2023 .

These were issued on September 1, 2020 , after the end of the second quarter of fiscal 2021.

Government subsidies

1 unchanged sentence

The CEWS provides a subsidy of up to 75% of eligible employees’ employment insurable remuneration, subject to certain criteria.

Accordingly, the Company applied for the CEWS to the extent it met the requirements to receive the subsidy and during the three months ended May 31, 2020, recorded $ 9 million in government subsidies as a reduction to operating expenses in the consolidated statement of operations.

Accordingly, the Company applied for the CEWS to the extent it met the requirements to receive the subsidy and during the three and six months ended August 31, 2020, recorded $ 18 million and $ 27 million, respectively, in government subsidies as a reduction to operating expenses in the consolidated statement of operations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements