What changed in this filing

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Item 1. Financial Statements

2021-06-25 compared with 2020-12-18 · 285 added, 370 removed, 463 unchanged (59% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets

November 30, 2020 February 29, 2020

May 31, 2021 February 28, 2021

Cash and cash equivalents (note 3) $ 339 $ 214

Short-term investments (note 3) 364 525

Accounts receivable, net of allowance of $13 and $9, respectively (note 1 and note 4) 212 215

Accounts receivable, net of allowance of $9 and $10, respectively (note 4) 153 182

Other receivables 26 25

1 unchanged sentence

Other current assets (note 4) 61 50

Restricted cash and cash equivalents (note 3) 50 49

Restricted cash equivalents and restricted short-term investments (note 3) 29 28

Long-term investments (note 3) 37 37

8 unchanged sentences

Income taxes payable (note 5) 8 6

Debentures (note 6) — 606

Deferred revenue, current (note 11) 208 225

21 unchanged sentences

Consolidated Statements of Shareholders’ Equity

Three Months Ended November 30, 2020

Capital Stock

and Additional

Paid-in Capital Deficit Accumulated

Comprehensive Loss Total

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

Net loss — ( 130 ) — ( 130 )

Other comprehensive income — — 4 4

Stock-based compensation 11 — — 11

Shares issued:

Exercise of stock options 1 — — 1

Employee share purchase plan 3 — — 3

Balance as at November 30, 2020 $ 2,803 $ ( 991 ) $ ( 9 ) $ 1,803

Three Months Ended November 30, 2019

Capital Stock

and Additional

Paid-in Capital Deficit Accumulated

Comprehensive Loss Total

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

Net loss — ( 32 ) — ( 32 )

Other comprehensive loss — — ( 2 ) ( 2 )

Stock-based compensation 15 — — 15

Shares issued:

Exercise of stock options 1 — — 1

Employee share purchase plan 4 — — 4

Balance as at November 30, 2019 $ 2,742 $ ( 157 ) $ ( 37 ) $ 2,548

See notes to consolidated financial statements.

BlackBerry Limited

(United States dollars, in millions) (unaudited)

Consolidated Statements of Shareholders’ Equity

Nine Months Ended November 30, 2020

Three Months Ended May 31, 2021

Capital Stock

5 unchanged sentences

Other comprehensive income — — 3 3

Cumulative impact of adoption of ASC 326 — ( 4 ) — ( 4 )

Stock-based compensation (note 7) 7 — — 7

2 unchanged sentences

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

Balance as at November 30, 2020 $ 2,803 $ ( 991 ) $ ( 9 ) $ 1,803

Nine Months Ended November 30, 2019

Balance as at May 31, 2021 $ 2,834 $ ( 1,368 ) $ ( 10 ) $ 1,456

Three Months Ended May 31, 2020

Capital Stock

4 unchanged sentences

Net loss — ( 636 ) — ( 636 )

Other comprehensive loss — — ( 17 ) ( 17 )

Other comprehensive income — — 7 7

Cumulative impact of adoption of ASC 326 — ( 4 ) — ( 4 )

3 unchanged sentences

Employee share purchase plan 3 — — 3

Balance as at November 30, 2019 $ 2,742 $ ( 157 ) $ ( 37 ) $ 2,548

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

See notes to consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Operations

Three Months Ended Nine Months Ended

November 30, 2020 November 30, 2019 November 30, 2020 November 30, 2019

Three Months Ended

May 31, 2021 May 31, 2020

Revenue (note 11) $ 174 $ 206

6 unchanged sentences

Impairment of goodwill (note 3) — 594

Impairment of long-lived assets (note 3) — 3 21 5

Debentures fair value adjustment (note 6) ( 4 ) 1

276 227 1,285 659

Operating loss ( 58 ) ( 645 )

Investment income (loss), net ( 1 ) ( 1 ) ( 6 ) 2

Investment loss, net ( 2 ) —

Loss before income taxes ( 60 ) ( 645 )

7 unchanged sentences

(United States dollars, in millions) (unaudited)

Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended Nine Months Ended

November 30, 2020 November 30, 2019 November 30, 2020 November 30, 2019

Consolidated Statements of Comprehensive Loss

Three Months Ended

May 31, 2021 May 31, 2020

Net loss $ ( 62 ) $ ( 636 )

Other comprehensive income (loss)

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 nine months ended November 30, 2020 and November 30, 2019 — — 3 —

Foreign currency translation adjustment, net of income taxes of $1 million and nil, respectively, for the three and nine months ended November 30, 2020 (net of income taxes of nil for the three and nine months ended November 30, 2019) 1 — 5 ( 2 )

Net change in fair value from instrument-specific credit risk on the Debentures, net of income taxes of $2 million and nil, respectively, for the three and nine months ended November 30, 2020 (net of income taxes of nil for the three and nine months ended November 30, 2019) (note 6) 3 ( 2 ) 16 ( 15 )

Other comprehensive income (loss) 4 ( 2 ) 24 ( 17 )

Other comprehensive income

Net change in fair value and amounts reclassified to net loss from derivatives designated as cash flow hedges during the three months ended, net of income taxes of nil (May 31, 2020 - income taxes of nil) (note 9) 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 nil (May 31, 2020 - income taxes of $1 million) (note 6) 1 7

Other comprehensive income 3 7

Comprehensive loss $ ( 59 ) $ ( 629 )

3 unchanged sentences

Consolidated Statements of Cash Flows

Nine Months Ended

November 30, 2020 November 30, 2019

Three Months Ended

May 31, 2021 May 31, 2020

Cash flows from operating activities

Net loss $ ( 62 ) $ ( 636 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization 49 50

1 unchanged sentence

Impairment of goodwill — 594

Impairment of long-lived assets 21 5

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

Debentures fair value adjustment (note 6) ( 4 ) 1

2 unchanged sentences

Net changes in working capital items

Accounts receivable, net ( 1 ) 17

Accounts receivable, net of allowance 29 1

Other receivables ( 1 ) ( 6 )

5 unchanged sentences

Deferred revenue ( 29 ) ( 32 )

Net cash provided by (used in) operating activities 30 ( 8 )

Net cash used in operating activities ( 33 ) ( 31 )

Cash flows from investing activities

2 unchanged sentences

Acquisition of intangible assets ( 6 ) ( 8 )

Business acquisitions, net of cash acquired — 1

Acquisition of short-term investments ( 209 ) ( 299 )

Proceeds on sale or maturity of restricted short-term investments 24 —

Proceeds on sale or maturity of short-term investments 369 270

2 unchanged sentences

Issuance of common shares 4 4

Payment of finance lease liability ( 1 ) ( 2 )

Repurchase of 3.75% Debentures ( 610 ) —

Issuance of 1.75% Debentures 365 —

Net cash provided by (used in) financing activities ( 236 ) 6

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

Net decrease in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period ( 153 ) ( 35 )

Net cash provided by financing activities 4 4

Effect of foreign exchange gain on cash, cash equivalents, restricted cash, and restricted cash equivalents 3 —

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period 150 ( 66 )

Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period 218 426

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 and nine months ended November 30, 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 months ended May 31, 2021 are not necessarily indicative of the results that may be expected for the full year ending February 28, 2022.

The consolidated balance sheet at February 28, 2021 was derived from the audited Annual Financial Statements but does not contain all of the footnote disclosures from the Annual Financial Statements.

Certain of the comparative figures have been reclassified to conform to the current period’s presentation.

The Company operates as a single reportable segment.

For additional information concerning the Company’s segment reporting, see Note 11.

In the first quarter of fiscal 2022, the Chief Operating Decision Maker (“CODM”), who is the Executive Chair and Chief Executive Officer (“CEO”) of the Company, began making decisions and assessing the performance of the Company using three operating segments, whereas the CODM previously made decisions and assessed the performance of the Company as a single operating segment.

As a result of the internal reporting reorganization, the Company is now organized and managed as three reportable operating segments:

Cyber Security, IoT (collectively, “Software & Services”), and Licensing and Other, as further discussed in Note 11.

Risks and Uncertainties

In March 2020, the World Health Organization characterized the novel coronavirus (“COVID-19”) as a global pandemic and extraordinary actions have been taken by international, federal, state, provincial and local governmental authorities to contain and combat the spread of COVID-19 in regions throughout the world.

The COVID-19 outbreak and related public health measures, including orders to shelter-in-place, travel restrictions and mandated business closures, have adversely affected workforces, organizations, consumers and economies leading to an economic downturn and increased market volatility.

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 have caused volatility in demand for the Company’s products and services, adversely affected 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 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.

During the third quarter of fiscal 2021, this uncertainty did not result in additional significant judgements.

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.

The novel coronavirus (“COVID-19”) pandemic has prompted extraordinary actions by international, federal, state, provincial and local governmental authorities to contain and combat the spread of COVID-19 in regions throughout the world.

The COVID-19 pandemic and related public health measures, including orders to shelter-in-place, travel restrictions and mandated business closures, adversely affected workforces, organizations, consumers and economies, which led to an economic downturn and which may cause market volatility and uncertainty in future periods.

In fiscal 2022 and fiscal 2021, the economic downturn and uncertainty caused by the COVID-19 pandemic and the measures undertaken to contain its spread negatively affected the Company’s QNX automotive software business, caused volatility in demand for the Company’s products and services, adversely affected the ability of the Company’s sales and professional services teams to work with customers, impacted spending from new customers and increased sales cycle times.

The uncertainty also resulted in the Company making significant judgments related to its estimates and assumptions concerning the impairment of goodwill, indefinite-lived intangible assets, certain operating lease right-of-use (“ROU”) assets and associated property, plant and equipment, and concerning the collectability of receivables.

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, judgments, or revise the carrying value of its assets or liabilities, other than the COVID-19 pandemic as discussed above and below in Note 3.

These estimates may change, as new events occur and additional information is obtained, and such changes will be recognized in the consolidated financial statements as soon as they become known.

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

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

Although the Company experienced higher Software & Services revenue in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021, when the COVID-19 pandemic first materially negatively impacted the Company’s operations, and observed a continued recovery in both automotive design activities and production volumes during the first quarter of fiscal 2022, the COVID-19 pandemic and related global chip shortage have had and, in fiscal 2022, may continue to have a material adverse impact on the Company’s QNX automotive software business in particular and on the Company’s business, results of operations and financial condition on a consolidated basis.

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

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

The ultimate impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on, among other things, the pandemic’s duration and severity, the governmental restrictions that may be sustained or imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the pandemic (including the distribution and efficacy of vaccines, particularly against emergent viral variants), the impact of the global chip shortage

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

and global economic conditions.

The long-term impact of the COVID-19 pandemic on the Company’s business may not be fully reflected until future periods.

Significant Accounting Policies and Critical Accounting Estimates

There have been no material changes to the Company’s accounting policies or critical accounting estimates from those

described in the Annual Financial Statements, except in Note 6 relating to the issuance of the 1.75% Debentures (as defined in Note 6) and as described below, which were adopted during fiscal 2021.

There have been no material changes to the Company’s accounting policies or critical accounting estimates from those described in the Annual Financial Statements.

Accounting Standards Adopted During Fiscal 2022

ASC 350, Goodwill and Other

In January 2017, the Financial Accounting Standards Board (“FASB”) released ASU 2017-04 on the topic of Intangibles— Goodwill and Other (ASC 350).

ASU 2017-04 simplifies the subsequent measurement of goodwill, eliminating Step 2 from the goodwill impairment test.

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 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.

The amendments in this update were effective for an entity’s annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

The Company adopted this standard on March 1, 2020.

ASC 326, Credit Losses

In June 2016, the FASB released ASU 2016-13 on the topic of Financial Instruments — Credit Losses (ASC 326).

ASU 2016-13 replaces the previous incurred loss impairment methodology in U.S.

GAAP with a methodology that reflects expected credit losses, requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates, and requires entities to estimate an expected lifetime credit loss on its financial assets.

The guidance also amends the impairment model for available-for-sale debt securities, requiring entities to determine whether all or a portion of the unrealized loss on such securities is a credit loss, and also eliminating the option for management to consider the length of time a security has been in an unrealized loss position as a factor in concluding whether or not a credit loss exists.

The amended model states that an entity recognizes an allowance for credit losses on available-for-sale debt securities, instead of a direct reduction of the amortized cost basis of the investment, as required under previous guidance.

As a result, entities recognize improvements to estimated credit losses on available-for-sale debt securities immediately in earnings as opposed to in interest income over time.

The guidance was effective for interim and annual periods beginning after December 15, 2019.

The Company adopted this guidance in the first quarter of fiscal 2021 using the modified retrospective method.

As a result of the adoption of the new standard on credit losses, the Company recorded a cumulative adjustment to the consolidated balance sheet increasing the allowance for credit losses and increasing deficit by approximately $ 4 million as at March 1, 2020.

As a result, the allowance for credit losses was $ 13 million in the consolidated balance sheet as at March 1, 2020.

The following policies have been updated to reflect the adoption of the new standard in accounting for credit losses on financial instruments and goodwill.

Goodwill represents the excess of the acquisition price in a business combination over the fair value of identifiable net assets acquired.

Goodwill is allocated at the date of the business combination.

Goodwill is not amortized but is tested for impairment annually on December 31 or more frequently if events or changes in circumstances indicate the asset may be impaired.

These events and circumstances may include a significant change in legal factors or in the business climate, a significant decline in the Company’s share price, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant disposal activity and the testing of recoverability for a significant asset group.

The Company’s impairment test is carried out in one step.

The carrying amount of the reporting unit, including goodwill, was compared with its fair value.

The estimated fair value was determined utilizing multiple approaches based on the nature of the reporting units being valued.

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.

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)

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

When the carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit is considered to be impaired and written down to its fair value.

Different judgments could yield different results.

Events and circumstances resulted in a goodwill impairment test being conducted as at May 31, 2020;

Accounts receivable, net

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 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.

When specific customers are identified as no longer sharing the same risk profile as their current pool, they are removed from the pool and evaluated separately.

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

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.

The Company’s cash equivalents and investments, other than publicly issued equity securities and private equity investments without readily determinable fair value, consist of money market and other debt securities, which are classified as available-for-sale for accounting purposes and are carried at fair value.

Unrealized gains and losses, net of related income taxes, are recorded in Accumulated Other Comprehensive Loss (“AOCL”) until such investments mature or are sold.

The Company uses the specific identification method of determining the cost basis in computing realized gains or losses on available-for-sale investments, which are recorded in investment income.

The Company does not exercise significant influence with respect to any of these investments.

Publicly issued equity securities are recorded at fair value and revalued at each reporting period with changes in fair value recorded through investment income.

The Company elects to record private equity investments without readily determinable fair value at cost minus impairment, as adjusted for any changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

The Company reassesses each reporting period that its private equity investments without readily determinable fair value continue to qualify for this treatment.

Investments with maturities at the time of purchase of three months or less are classified as cash equivalents.

Investments with maturities of one year or less (but which are not cash equivalents), public equity investments and any investments that the Company intends to hold for less than one year are classified as short-term investments.

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

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.

The Company adopted ASC 326 on March 1, 2020, on a modified retrospective basis.

Under ASC 326, at each reporting period, the Company evaluates its available-for-sale debt securities at the individual security level to determine whether there is a decline in the fair value below its amortized cost basis (an impairment).

In circumstances where the Company intends to sell, or is more likely than not required to sell, the security before it recovers its amortized cost basis, the difference between fair value and amortized cost is recognized as a loss in the consolidated statement of operations, with a corresponding write-down of the security’s amortized cost.

In circumstances where neither condition exists, the Company then evaluates whether a decline is due to credit-related factors.

The factors considered in determining whether a credit loss exists can include the extent to which fair value is less than the amortized cost basis, changes in the credit quality of the underlying issuer, credit ratings actions, as well as other factors.

To determine the portion of a decline in fair value that is credit-related, the Company compares the present value of the expected cash flows of the security discounted at the security’s effective interest rate to the amortized cost basis of the security.

A credit-related impairment is limited to the difference between fair value and amortized cost, and recognized as an allowance for credit loss on the consolidated balance sheet with a corresponding adjustment to net income.

Any remaining decline in fair value that is non-credit related is recognized in other comprehensive income (loss), net of tax.

Improvements in expected cash flows due to improvements in credit are recognized through reversal of the credit loss and corresponding reduction in the allowance for credit loss.

Government Subsidies

The Company recognizes government subsidies as a reduction to operating expenses in the consolidated statement of operations when there is reasonable assurance the Company will receive the amount and has complied with the conditions, if any, attached to the government subsidies.

ASC 740, Income Taxes

In December 2019, the Financial Accounting Standards Board (“FASB”) released ASU 2019-12 on the topic of simplifying the accounting for income taxes, as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes.

The amendments in this update remove certain exceptions from Topic 740, Income Taxes, including:

(i) the exception to the incremental approach for intra-period tax allocation;

(ii) the exception to accounting for basis differences when there are ownership changes in foreign investments;

and (iii) the exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses.

The update also simplifies U.S.

GAAP in several other areas of Topic 740 such as:

(i) franchise taxes and other taxes partially based on income;

(ii) transactions with a government that result in a step up in the tax basis of goodwill;

(iii) separate financial statements of entities not subject to tax;

and (iv) enacted changes in tax laws in interim periods.

The guidance was effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted.

The only aspect of ASU 2019-12 that impacts the Company is the removal of the exception related to intra-period tax allocation.

Upon adoption of the new standard, the Company determines the tax attributable to continuing operations without regard to the tax effect of other items included in other comprehensive income.

The Company adopted this guidance in the first quarter of fiscal 2022 and it did not have a material impact on the Company’s results of operations, financial position or disclosures.

ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

14 unchanged sentences

• Level 3 - Significant unobservable inputs that are supported by little or no market activity.

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

1 unchanged sentence

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

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.

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) were determined, see the “Convertible debentures” accounting policies in Note 1 to the Annual Financial Statements.

The 3.75% Debentures were classified as Level 2.

For a description of how the fair values of the 1.75% Debentures (as defined in Note 6) are determined, see Note 6.

The 1.75% Debentures are classified as Level 3.

The Company’s investments largely consist of debt 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 certain private equity investments without readily determinable fair value, and a limited amount of public 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 1.75% Debentures (as defined in Note 6) and 3.75% Debentures (as defined in Note 6) were determined, see the “Convertible debentures” accounting policies in Note 1 to the Annual Financial Statements.

The 1.75% Debentures are classified as Level 3 and the 3.75% Debentures were classified as Level 2.

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.

Upon the occurrence of certain events, the Company re-measures the fair value of long-lived assets, including property, plant and equipment, operating lease 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”).

The estimated fair values of the Company’s other reporting units substantially exceeded their carrying values at May 31, 2020.

The Company did not identify any goodwill impairment during its annual impairment test in the fourth quarter of fiscal 2021, and all reporting units substantially exceeded their carrying values.

For further discussion of the Goodwill Impairment Charge in fiscal 2021, see Note 3 to the Annual Financial Statements.

BlackBerry Limited

1 unchanged sentence

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

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 (nine months ended November 30, 2019 - $ 5 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 November 30, 2020 were as follows:

The components of cash, cash equivalents and investments by fair value level as at May 31, 2021 were as follows:

Cost Basis Unrealized

Gains Unrealized

Losses Fair Value Cash and

1 unchanged sentence

Investments Long-term

Investments Restricted Cash and Cash Equivalents

Investments Restricted Cash Equivalents

Bank balances $ 90 $ — $ 90 $ 90 $ — $ — $ —

2 unchanged sentences

Equity securities 10 ( 8 ) 2 — 2 — —

Corporate notes/bonds 25 — — 25 — 25 — —

Term deposits, certificates of deposits, and GIC's 147 — 147 60 58 — 29

Bankers’ acceptances/bearer deposit notes 45 — 45 45 — — —

Commercial paper 198 — 198 58 140 — —

2 unchanged sentences

treasury bills/notes 16 — 16 16 — — —

Corporate notes/bonds 3 — 3 — 3 — —

640 — 640 249 362 — 29

5 unchanged sentences

Cost Basis Unrealized

Gains Unrealized

Losses Fair Value Cash and

1 unchanged sentence

Investments Long-term

Investments Restricted Cash and Cash Equivalents

Investments Restricted Cash Equivalents Restricted Short-term Investments

Bank balances $ 165 $ — $ 165 $ 165 $ — $ — $ — $ —

3 unchanged sentences

Term deposits, certificates of deposits, and GICs 138 — 138 7 103 — 4 24

Bankers’ acceptances/bearer deposit notes 84 — — 84 30 54 — —

Bearer deposit notes 40 — 40 — 40 — — —

Commercial paper 162 — 162 15 147 — — —

2 unchanged sentences

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

treasury bills/notes 45 — — 45 45 — — —

Corporate notes/bonds 25 — 25 — 25 — — —

599 — 599 49 522 — 4 24

$ 811 $ ( 7 ) $ 804 $ 214 $ 525 $ 37 $ 4 $ 24

As at November 30, 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 nine months ended November 30, 2020 (realized losses of nil for the three and nine months ended November 30, 2019).

As at May 31, 2021, the Company had private equity investments without readily determinable fair value of $ 37 million (February 28, 2021 - $ 37 million).

There were no realized gains or losses on available-for-sale securities for the three months ended May 31, 2021 (realized losses of nil for the three months ended May 31, 2020).

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.

These letters of credit support certain leasing arrangements entered into in the ordinary course of business and also support patent litigation in certain jurisdictions.

The letters of credit are for terms ranging from one month to five years.

These letters of credit support certain leasing arrangements entered into in the ordinary course of business.

The letters of credit are for terms ranging from one month to four years.

The Company is legally restricted from accessing these funds during the term of the leases for which the letters of credit have been issued;

however, the Company can continue to invest the funds and receive investment income thereon.

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 following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents as at November 30, 2020 and February 29, 2020 from the consolidated balance sheets to the consolidated statements of cash flows:

November 30, 2020 February 29, 2020

The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents as at May 31, 2021 and February 28, 2021 from the consolidated balance sheets to the consolidated statements of cash flows:

May 31, 2021 February 28, 2021

Cash and cash equivalents $ 339 $ 214

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 November 30, 2020 and February 29, 2020 were as follows:

November 30, 2020 February 29, 2020

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 contractual maturities of available-for-sale investments as at May 31, 2021 and February 28, 2021 were as follows:

May 31, 2021 February 28, 2021

Cost Basis Fair Value Cost Basis Fair Value

2 unchanged sentences

$ 650 $ 642 $ 609 $ 602

As at November 30, 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).

As at May 31, 2021, the Company had investments with continuous unrealized losses totaling $ 8 million, consisting of unrealized losses on equity securities (February 28, 2021 - continuous unrealized losses totaling $ 7 million).

CONSOLIDATED BALANCE SHEET DETAILS

Accounts Receivable, Net

The allowance for credit losses as at November 30, 2020 was $ 13 million (February 29, 2020 - $ 9 million).

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

The CECL for accounts receivable, net are estimated based on days past due and region for each customer in relation to a representative pool of assets consisting of a large number of customers with similar risk characteristics that operate under similar economic environments.

Accounts Receivable, Net of Allowance

The allowance for credit losses as at May 31, 2021 was $ 9 million (February 28, 2021 - $ 10 million).

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

The cumulative expected credit losses (“CECL”) for accounts receivable, net are estimated based on days past due and region for each customer in relation to a representative pool of assets consisting of a large number of customers with similar risk characteristics that operate under similar economic environments.

The Company determined the CECL by estimating historical credit loss experience based on the past due status and region of the customers, adjusted as appropriate to reflect current conditions and estimates of future economic conditions, inclusive of the effect of the COVID-19 pandemic on credit losses.

The duration and severity of COVID-19 and continued market volatility is highly uncertain and, as such, the impact on expected credit losses is subject to significant judgment and may cause variability in the Company’s allowance for credit losses in future periods.

The duration and severity of the COVID-19 pandemic and the resulting market volatility are highly uncertain and, as such, the impact on expected credit losses is subject to significant judgment and may cause variability in the Company’s allowance for credit losses in future periods.

When specific customers are identified as no longer sharing the same risk profile as their current pool, they are removed from the pool and evaluated separately.

3 unchanged sentences

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

Nine Months Ended

November 30, 2020

Beginning balance as of February 29, 2020 $ 9

Impact of adopting ASC 326 4

Current period provision for expected credit losses —

Ending balance of the allowance for credit loss as at November 30, 2020 $ 13

The allowance for credit losses as at November 30, 2020 consists of $ 6 million relating to CECL estimated based on days past due and region and $ 7 million relating to specific customers that were evaluated separately.

Prior period recovery for expected credit losses ( 3 )

Ending balance of the allowance for credit loss as at February 28, 2021 10

Current period recovery for expected credit losses ( 1 )

Ending balance of the allowance for credit loss as at May 31, 2021 $ 9

The allowance for credit losses as at May 31, 2021 consists of $ 2 million (February 28, 2021 - $ 3 million) relating to CECL estimated based on days past due and region and $ 7 million (February 28, 2021 - $ 7 million) relating to specific customers that were evaluated separately.

There was one customer that comprised more than 10% of accounts receivable as at May 31, 2021 (February 28, 2021 - one customer comprised more than 10%).

Other Current Assets

As at May 31, 2021 and February 28, 2021, other current assets included 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.

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 November 30, 2020 (February 29, 2020 - two customers comprised more than 10%).

Other Current Assets

As at November 30, 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:

November 30, 2020 February 29, 2020

May 31, 2021 February 28, 2021

Buildings, leasehold improvements and other $ 57 $ 67

6 unchanged sentences

Intangible assets comprised the following:

As at November 30, 2020

As at May 31, 2021

Cost Accumulated

11 unchanged sentences

$ 2,015 $ 1,244 $ 771

For the nine months ended November 30, 2020, amortization expense related to intangible assets amounted to $ 133 million (nine months ended November 30, 2019 - $ 142 million)

Total additions to intangible assets for nine months ended November 30, 2020 amounted to $ 23 million (nine months ended November 30, 2019 - $ 24 million).

During the nine months ended November 30, 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 November 30, 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

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)

succeeding years is expected to be as follows:

For the three months ended May 31, 2021, amortization expense related to intangible assets amounted to $ 45 million (three months ended May 31, 2020 - $ 45 million)

Total additions to intangible assets for three months ended May 31, 2021 amounted to $ 6 million (three months ended May 31, 2020 - $ 8 million).

During the three months ended May 31, 2021, 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, 2021, and assuming no subsequent impairment of the underlying assets, the annual amortization expense for the remainder of fiscal 2022 and each of the five succeeding years is expected to be as follows:

fiscal 2022 - $ 114 million;

3 unchanged sentences

fiscal 2026 - $ 96 million and fiscal 2027 - $ 88 million.

Changes to the carrying amount of goodwill during the nine months ended November 30, 2020 were as follows:

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)

Changes to the carrying amount of goodwill during the three months ended May 31, 2021 were as follows:

Carrying Amount

3 unchanged sentences

dollar denominated goodwill 6

Carrying amount as at November 30, 2020 $ 849

Carrying amount as at February 28, 2021 849

Effect of foreign exchange on non-U.S.

dollar denominated goodwill 1

Carrying amount as at May 31, 2021 $ 850

Other Long-term Assets

As at November 30, 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 May 31, 2021 and February 28, 2021, other long-term assets included 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

Accrued liabilities comprised the following:

November 30, 2020 February 29, 2020

May 31, 2021 February 28, 2021

Accrued royalties $ 20 $ 20

Operating lease liabilities, current 31 33

Other 113 125

Other accrued liabilities includes accrued vendor liabilities, accrued carrier liabilities, variable incentive accrual and payroll withholding taxes, among other items, none of which were greater than 5 % of the current liabilities balance.

Other accrued liabilities include accrued vendor liabilities, accrued carrier liabilities, variable incentive accrual and payroll withholding taxes, among other items, none of which were greater than 5 % of the current liabilities balance.

Other Long-term Liabilities

Other long-term liabilities consist of the long-term portion of finance lease liabilities and non-lease component liabilities related to the Company’s previous Resource Allocation Program entered into in order to transition the Company from a legacy hardware manufacturer to a licensing driven software business.

For the nine months ended November 30, 2020, the Company’s net effective income tax recovery rate was approximately 1 % compared to a net effective income tax expense rate of 5 % for the nine months ended November 30, 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 (as defined in Note 6), amongst other items, is offset by a corresponding adjustment of the valuation allowance.

For the three months ended May 31, 2021, the Company’s net effective income tax expense rate was approximately 3 % compared to a net effective income tax recovery rate of 1 % for the three months ended May 31, 2020.

The Company’s income tax rate reflects the change in unrecognized income tax benefit, if any, 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 (as defined in Note 6), 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 November 30, 2020 were $ 35 million (February 29, 2020 - $ 72 million).

As at November 30, 2020, $ 33 million of the unrecognized income tax benefits have been netted against deferred income tax assets and $ 2 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 May 31, 2021 were $ 24 million (February 28, 2021 - $ 24 million).

As at May 31, 2021, $ 22 million of the unrecognized income tax benefits have been netted against deferred income tax assets and $ 2 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.

6 unchanged sentences

On September 1, 2020, Hamblin Watsa Investment Counsel Ltd., in its capacity as investment manager of Fairfax Financial Holdings Limited ("Fairfax") and another institutional investor invested in the Company through a $ 365 million private placement of new debentures (the “1.75% Debentures”), which replaced $ 605 million of debentures issued in a private placement on September 7, 2016 (the “3.75% Debentures”) as described below (collectively, the “Debentures”).

Interest on the 1.75% Debentures is payable quarterly in arrears at a rate of 1.75 % per annum.

The 1.75% Debentures mature on November 13, 2023 and each $ 1,000 of 1.75% Debentures is convertible at any time into 166.67 common shares of the Company, for a total of 60.8 million common shares at a price of $ 6.00 per share for all 1.75% Debentures, subject to adjustments.

Covenants associated with the 1.75% Debentures include limitations on the Company’s total indebtedness.

Under specified events of default, the outstanding principal and any accrued interest on the 1.75% Debentures become immediately due and payable upon request of holders holding not less than 25 % of the principal amount of the 1.75% Debentures then outstanding.

During an event of default, the interest rate rises to 5.75 % per annum.

The 1.75% Debentures are subject to a change of control provision whereby the Company would be required to make an offer to repurchase the 1.75% 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.

Additionally, the 1.75% Debentures cannot be converted to the extent that, after giving 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 (the “Blocker Provision”).

Due to the conversion option and other embedded derivatives within the 1.75% Debentures, and consistent with the Company’s accounting for the 3.75% Debentures, the Company has elected to record the 1.75% Debentures, including the debt itself and all embedded derivatives, at fair value and present the 1.75% Debentures as a single hybrid financial instrument.

No portion of the fair value of the 1.75% Debentures has been recorded as equity, nor would be if the embedded derivatives were bifurcated from the host debt contract.

Each period, the fair value of the 1.75% Debentures is recalculated and resulting gains and losses from the change in fair value of the Debentures associated with non-credit components are recognized in income, while the change in fair value associated with credit components is recognized in AOCL.

The fair value of the Debentures has been determined using the significant level 2 inputs of principal value, interest rate spreads and curves, any observable trades of the Debentures that occurred during the period, the market price and volatility of the Company’s listed common shares, and the significant level 3 inputs related to credit spread and the implied discount of the 1.75% Debentures at issuance.

The Company determined its credit spread by calibrating to observable trades of the 3.75% Debentures and trending the calibrated spread to valuation dates utilizing an appropriate credit index.

The Company’s credit spread was determined to be 7.90 % as of the issuance date of the 1.75% Debentures and 6.98 % as of November 30, 2020.

The fair value of the Debentures has been determined using the significant Level 2 inputs interest rate curves and any observable trades of the Debentures that may have occurred during the period, the market price and volatility of the Company’s listed common shares, and the significant Level 3 inputs related to credit spread and the implied discount of the 1.75% Debentures at issuance.

The Company originally determined its credit spread by calibrating to observable trades of the 3.75% Debentures and trending the calibrated spread to valuation dates utilizing an appropriate credit index.

The Company’s credit spread was determined to be 7.90 % as of the issuance date of the 1.75% Debentures and 6.50 % as of May 31, 2021.

An increase in credit spread will result in a decrease in the fair value of 1.75% Debentures and vice versa.

1 unchanged sentence

The Company determined the implied discount on the 1.75% Debentures by calculating the fair value of the 1.75% Debentures on September 1, 2020 utilizing the above credit spread and other inputs described above.

The following table summarizes the change in fair value of the 1.75% Debentures for the three months ended May 31, 2021, which also represents the total changes through earnings of items classified as Level 3 in the fair value hierarchy:

Balance as at February 28, 2021 $ 720

Change in fair value of the Debentures ( 5 )

Balance as at May 31, 2021 $ 715

The difference between the fair value of the 1.75% Debentures and the unpaid principal balance of $ 365 million is $ 350 million.

The following table shows the impact of the changes in fair value of the 1.75% Debentures for the three months ended May 31, 2021 and May 31, 2020:

Three Months Ended

May 31, 2021 May 31, 2020

Income associated with the change in fair value from non-credit components recorded in the consolidated statements of operations $ 4 $ —

Income associated with the change in fair value from instrument-specific credit components recorded in AOCL 1 —

Total decrease in the fair value of the 1.75% Debentures $ 5 $ —

For the three months ended May 31, 2021, the Company recorded interest expense related to the Debentures of $ 2 million, which has been included in investment loss, net on the Company’s consolidated statements of operations (three months ended May 31, 2020 - $ 6 million).

BlackBerry Limited

1 unchanged sentence

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

The following table summarizes the change in fair value of the 1.75% Debentures for the three months ended November 30, 2020, which also represents the total changes through earnings of items classified as level 3 in the fair value hierarchy:

November 30, 2020

Principal received as of September 1, 2020 $ 365

Change in fair value of the Debentures 94

Balance as at November 30, 2020 $ 459

The difference between the fair value of the 1.75% Debentures and the unpaid principal balance of $ 365 million is $ 94 million.

The following table shows the impact of the changes in fair value of the 1.75% Debentures for the three and nine months ended November 30, 2020 and November 30, 2019:

Three Months Ended Nine Months Ended

November 30, 2020 November 30, 2019 November 30, 2020 November 30, 2019

Charge associated with the change in fair value from non-credit components recorded in the consolidated statements of operations $ ( 89 ) $ — $ ( 89 ) $ —

Charge associated with the change in fair value from instrument-specific credit components recorded in AOCL ( 5 ) — ( 5 ) —

Total increase in the fair value of the 1.75% Debentures $ ( 94 ) $ — $ ( 94 ) $ —

For the three and nine months ended November 30, 2020, the Company recorded interest expense related to the Debentures of $ 2 million and $ 13 million, respectively, which has been included in investment income, net on the Company’s consolidated statements of operations (three and nine months ended November 30, 2019 - $ 6 million and $ 17 million, respectively).

Fairfax, a related party under U.S.

GAAP due to its beneficial ownership of common shares in the Company after taking into account potential conversion of the Debentures, owned $ 500 million principal amount of the original 3.75% Debentures and also purchased $ 330 million principal amount of the 1.75% Debentures.

GAAP due to its beneficial ownership of common shares in the Company after taking into account potential conversion of the Debentures, owned $ 500 million principal amount of the 3.75% Debentures and purchased $ 330 million principal amount of the 1.75% Debentures.

As such, the redemption of Fairfax’s portion of the 3.75% Debentures, the investment by Fairfax in the 1.75% Debentures and the payment of interest on the Debentures represent related party transactions.

2 unchanged sentences

On September 7, 2016, Fairfax and other institutional investors invested in the Company through a $ 605 million private placement of the 3.75% Debentures.

The terms of the 3.75% Debentures were substantially similar to those of the 1.75% Debentures, except that the 3.75 % Debentures had a higher interest rate, were convertible into common shares at a price of $ 10.00 per common share, were subject to a lower approval threshold for extraordinary resolutions, did not contain the Blocker Provision and had a maturity date of November 13, 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 .

As the Redemption Amount represented fair value at August 31, 2020 and the Company elected the fair value option for the 3.75% Debentures, the impact of the redemption on the fair value was recorded in the second quarter of fiscal 2021.

A portion of the fair value associated with changes in instrument-specific credit components in the amount of $ 6 million remained in OCI until redemption on September 1, 2020 at which point $ 6 million was discharged to the consolidated statement of operations and is included in the table below.

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 following table shows the impact of the changes in fair value of the 3.75% Debentures for the three and nine months ended November 30, 2020 and November 30, 2019:

Three Months Ended Nine Months Ended

November 30, 2020 November 30, 2019 November 30, 2020 November 30, 2019

Income (charge) associated with the change in fair value from non-credit components recorded in the consolidated statements of operations $ — $ 20 $ ( 19 ) $ 71

Income (charge) associated with the change in fair value from instrument-specific credit components recorded in AOCL — ( 2 ) 15 ( 15 )

Realized charges associated with the change in fair value from credit components recorded in the consolidated statements of operations on redemption ( 6 ) — ( 6 ) —

Realized charges associated with the change in fair value from credit components released from AOCL on redemption 6 — 6 —

Total decrease (increase) in the fair value of the 3.75% Debentures $ — $ 18 $ ( 4 ) $ 56

As the Redemption Amount represented fair value at August 31, 2020 and the Company elected the fair value option for the 3.75% Debentures, the impact to the consolidated statements of operations of the redemption on the fair value was recorded in the second quarter of fiscal 2021.

The following table shows the impact of the changes in fair value of the 3.75% Debentures for the three months ended May 31, 2021 and May 31, 2020:

Three Months Ended

May 31, 2021 May 31, 2020

Charge associated with the change in fair value from non-credit components recorded in the consolidated statements of operations $ — $ ( 1 )

Income associated with the change in fair value from instrument-specific credit components recorded in AOCL — 8

Total decrease in the fair value of the 3.75% Debentures $ — $ 7

CAPITAL STOCK

The following details the changes in issued and outstanding common shares for the nine months ended November 30, 2020:

The following details the changes in issued and outstanding common shares for the three months ended May 31, 2021:

Capital Stock and

6 unchanged sentences

Common shares issued for employee share purchase plan 379 3

Common shares outstanding as at November 30, 2020 562,016 $ 2,803

The Company had 563 million voting common shares outstanding, 3 million options to purchase voting common shares, 19 million RSUs and 1 million DSUs outstanding as at December 15, 2020.

Common shares outstanding as at May 31, 2021 566,248 $ 2,834

The Company had 566 million voting common shares outstanding, 1 million options to purchase voting common shares, 20 million RSUs and 1 million DSUs outstanding as at June 22, 2021.

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

4 unchanged sentences

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

Three Months Ended Nine Months Ended

November 30, 2020 November 30, 2019 November 30, 2020 November 30, 2019

Three Months Ended

May 31, 2021 May 31, 2020

Net loss for basic and diluted loss per share available to common shareholders (1)

Debentures fair value adjustment (1) (2)

$ ( 62 ) $ ( 636 )

interest expense on Debentures (1) (2)

Net loss for diluted loss per share available to common shareholders $ ( 130 ) $ ( 46 ) $ ( 789 ) $ ( 165 )

Weighted average number of shares outstanding (000’s) - basic (3) (4)

562,443 554,585 559,732 552,931

Effect of dilutive securities (000’s)

Conversion of Debentures (1) (2)

Weighted average number of shares outstanding (000’s) - basic and diluted (1) (2) (3)

567,358 557,839

Weighted average number of shares and assumed conversions (000’s) diluted 562,443 615,085 559,732 613,431

Loss per share - reported

2 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 and nine months ended November 30, 2020, as to do so would be antidilutive.

See Note 6 for details on the Debentures.

(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 nine months ended November 30, 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 nine months ended November 30, 2019, and added the number of shares that would have been issued upon conversion to the diluted weighted average number of shares outstanding.

(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, 2021 and May 31, 2020, as to do so would be antidilutive.

See Note 6 for details on the Debentures.

(3) The three and nine months ended November 30, 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 nine months ended November 30, 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.

(2) The three months ended May 31, 2021, includes approximately 1,421,945 common shares (Exchange Shares) remaining to be issued on the third anniversary date of the Cylance acquisition completed on February 21, 2019, in consideration for the acquisition.

The three months ended May 31, 2020, includes approximately 2,802,067 common shares to be issued in equal installments on the two anniversary dates of the Cylance acquisition thereafter, 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 and nine months ended November 30, 2020, and three and nine months ended November 30, 2019, as to do so would be antidilutive.

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)

(3) 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, 2021, and three months ended May 31, 2020, as to do so would be antidilutive.

ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in AOCL by component net of tax, for the nine months ended November 30, 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

AOCL as at February 29, 2020 $ ( 9 ) $ ( 1 ) $ ( 1 ) $ ( 22 ) $ ( 33 )

The changes in AOCL by component net of tax, for the three months ended May 31, 2021 and May 31, 2020 were as follows:

May 31, 2021 May 31, 2020

Cash Flow Hedges

Balance, beginning of period $ 1 $ ( 1 )

Other comprehensive income before reclassification 2 ( 2 )

Amounts reclassified from AOCL into net loss ( 1 ) 1

Change in cumulative comprehensive income for the period 5 3 — 16 24

AOCL as at November 30, 2020 $ ( 4 ) $ 2 $ ( 1 ) $ ( 6 ) $ ( 9 )

During the three and nine months ended November 30, 2020, $ 1 million in gains and $ 1 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 nine months ended November 30, 2019 - nil losses).

Accumulated net unrealized gains (losses) on derivative instruments designated as cash flow hedges $ 2 $ ( 2 )

Foreign Currency Cumulative Translation Adjustment

Balance, beginning of period $ ( 4 ) $ ( 9 )

Other comprehensive income before reclassification 1 1

Foreign currency cumulative translation adjustment $ ( 3 ) $ ( 8 )

Change in Fair Value From Instrument-Specific Credit Risk On Debentures

Balance, beginning of period $ ( 9 ) $ ( 22 )

Other comprehensive income before reclassification 1 7

Change in fair value from instruments-specific credit risk on Debentures $ ( 8 ) $ ( 15 )

Other Post-Employment Benefit Obligations

Actuarial losses associated with other post-employment benefit obligations $ ( 1 ) $ ( 1 )

Accumulated Other Comprehensive Loss, End of Period $ ( 10 ) $ ( 26 )

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)

COMMITMENTS AND CONTINGENCIES

(a) Letters of Credit

The Company had $ 50 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 November 30, 2020.

The Company had $ 29 million in collateralized outstanding letters of credit in support of certain leasing arrangements entered into in the ordinary course of business as of May 31, 2021.

See the discussion of restricted cash in Note 3.

5 unchanged sentences

Litigation has been, and will likely continue to be, necessary to determine the scope, enforceability and validity of third-party proprietary rights or to establish the Company’s proprietary rights.

Regardless of whether claims against the Company have merit, those claims could be time-consuming to evaluate and defend, result in costly litigation, divert management’s attention and resources, subject the Company to significant liabilities and could have the other effects that are described in greater detail under Part I, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the fiscal year ended February 29, 2020, including the risk factors entitled “Litigation against the Company may result in adverse outcomes” and “The Company could be found to have infringed on the intellectual property rights of others”.

Management reviews all of the relevant facts for each claim and applies judgment in evaluating the likelihood and, if applicable, the amount of any potential loss.

3 unchanged sentences

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

As of November 30, 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

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)

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

As of May 31, 2021, 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 accrual has been made.

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

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

8 unchanged sentences

and the often slow pace of litigation.

Though they do not meet the test for accrual described above, the Company has included the following summaries of certain of its legal proceedings that it believes may be of interest to its investors.

The Company has included the following summaries of certain of its legal proceedings though they do not meet the test for accrual described above.

Between October and December 2013, several purported class action lawsuits and one individual lawsuit were filed against the Company and certain of its former officers in various jurisdictions in the U.S.

9 unchanged sentences

The Court granted the plaintiffs’ motion for leave to amend on September 13, 2017.

On September 29, 2017, the plaintiffs filed a second consolidated amended class action complaint (the “Second Amended Complaint”), which added the Company’s former Chief Legal Officer as a defendant.

On September 29,

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)

2017, the plaintiffs filed a second consolidated amended class action complaint (the “Second Amended Complaint”), which added the Company’s former Chief Legal Officer as a defendant.

The Court denied the motion to dismiss the Second Amended Complaint on March 19, 2018.

3 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, the Company filed its opposition brief on May 21, 2020, Cho and Ulug filed their reply brief on June 11, 2020, and oral argument was held on October 30, 2020.

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

The District 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 filed a reply on September 28, 2020.

All discovery was completed as of November 13, 2020.

No other dates have been set.

On January 26, 2021, the District Court granted the plaintiffs’ motion for class certification.

On February 9, 2021, the defendants filed a Rule 23(f) petition for interlocutory review of the class certification order with the Second Circuit Court of Appeals.

The Second Circuit Court of Appeals denied the Rule 23(f) petition on June 23, 2021.

The Second Circuit Court of Appeals affirmed the District Court judgment dismissing Cho and Ulug’s claims on March 11, 2021, and denied Cho and Ulug’s petition for panel rehearing and rehearing en banc on April 28, 2021.On April 19, 2021, Defendants filed a motion for summary judgment, and both parties filed Daubert motions to exclude the testimony of the oppositions’ marketing and accounting experts.

Both sides filed oppositions to these motions on June 21, 2021;

reply briefs are due July 19, 2021.

On May 5, 2021, the parties participated in a mediation with the Hon.

Layn Phillips (ret.), which did not result in an agreement.

On May 11, 2021, the Magistrate Judge granted the parties’ joint request to adjourn the settlement conference previously scheduled for May 19, 2021.

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

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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

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)

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.

(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.

6 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 November 30, 2020, the liability recorded in association with this award is approximately $ 3 million (February 29, 2020 - $ 1 million).

As at November 30, 2020, the Company has received $ 14 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 May 31, 2021, the liability recorded in association with this award is approximately $ 8 million (February 28, 2021 - $ 8 million).

As at May 31, 2021, the Company has received $ 16 million (February 28, 2021 - $ 15 million) in funds from claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund

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)

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.

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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:

The Company reports segment information based on the “management” approach.

The management approach designates the internal reporting used by the CODM for making decisions and assessing performance as a source of the Company’s reportable operating segments.

In the first quarter of fiscal 2022, the CODM, who is the Executive Chair and CEO of the Company, began making decisions and assessing the performance of the Company using three operating segments, whereas the CODM previously made decisions and assessed the performance of the Company as a single operating segment.

The CODM does not evaluate operating segments using discrete asset information.

The Company does not specifically allocate assets to operating segments for internal reporting purposes.

Segment Disclosures

The Company is now organized and managed as three operating segments:

Cyber Security, IoT, and Licensing and Other.

Prior year information has been restated to conform to the current year presentation of the Company’s segment information.

The following table shows information by operating segment for the three months ended May 31, 2021 and May 31, 2020:

BlackBerry Limited

1 unchanged sentence

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

Three Months Ended Nine Months Ended

November 30, 2020 November 30, 2019 November 30, 2020 November 30, 2019

North America (1)

For the Three Months Ended

Cyber Security IoT Licensing and Other Segment Totals

May 31, 2021 May 31, 2020 May 31, 2021 May 31, 2020 May 31, 2021 May 31, 2020 May 31, 2021 May 31, 2020

Segment revenue $ 107 $ 119 $ 43 $ 29 $ 24 $ 58 $ 174 $ 206

Segment cost of sales 46 47 7 6 6 8 59 61

Segment gross margin (1)

$ 61 $ 72 $ 36 $ 23 $ 18 $ 50 $ 115 $ 145

______________________________

(1) A reconciliation of total segment gross margin to consolidated totals is set forth below.

Cyber Security includes revenue from the Company’s BlackBerry Spark® software platform, BlackBerry® AtHoc, BlackBerry® Alert and SecuSUITE.

The BlackBerry Spark platform is a comprehensive offering of security software products and services, including the BlackBerry Spark® Unified Endpoint Security Suite and the BlackBerry Spark® Unified Endpoint Management (“UEM”) Suite, which are also marketed together as the BlackBerry Spark® Suites, offering the Company’s broadest range of tailored cybersecurity and endpoint management options.

The BlackBerry Spark UES Suite includes revenue from the Company’s Cylance® artificial intelligence and machine learning-based platform consisting of BlackBerry® Protect, BlackBerry® Optics, BlackBerry® Persona, BlackBerry® Guard managed services and other cybersecurity applications.

In addition, the Company offers the BlackBerry Cyber Suite, a UEM-agnostic version of its BlackBerry Spark UES Suite.

The BlackBerry Spark UEM Suite includes the Company’s BlackBerry® UEM, BlackBerry® Dynamics™, and BlackBerry® Workspaces solutions.

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

IoT includes revenue from BlackBerry QNX®, BlackBerry Certicom®, BlackBerry Radar®, BlackBerry IVY™ and other IoT applications.

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

Licensing and Other includes revenue from the Company’s intellectual property arrangements and settlement awards.

Other includes revenue associated with the Company’s legacy service access fees (“SAF”) business.

The following table reconciles total segment gross margin for the three months ended May 31, 2021 and May 31, 2020 to the Company’s consolidated totals:

Three Months Ended

May 31, 2021 May 31, 2020

Total segment gross margin $ 115 $ 145

Adjustments (1) :

Cost of sales 1 2

Research & development 57 57

Selling, marketing and administration 73 90

Amortization 46 46

Impairment of goodwill — 594

Debenture fair value adjustment ( 4 ) 1

Investment loss, net 2 —

Consolidated loss before income taxes $ ( 60 ) $ ( 645 )

______________________________

(1) The CODM reviews segment information on an adjusted basis, which excludes certain amounts as described below:

Stock compensation expenses - Equity compensation is a non-cash expense and does not impact the ongoing operating decisions taken by the Company’s management.

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 disaggregates revenue from contracts with customers based on geographical regions, timing of revenue recognition, and the major product and service types, as discussed above in “Segment Disclosures”.

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, 2021 May 31, 2020

North America (1)

Europe, Middle East and Africa 45 41

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(1) North America includes all revenue from the Company’s intellectual property arrangements, due to the global applicability of the patent portfolio and licensing arrangements thereof.

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

Three Months Ended Nine Months Ended

November 30, 2020 November 30, 2019 November 30, 2020 November 30, 2019

Software and Services $ 162 $ 185 $ 461 $ 521

Licensing and Other 56 82 222 237

Total $ 218 $ 267 $ 683 $ 758

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 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 Secure Communications which consists of BlackBerry® AtHoc® and SecuSUITE.

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

Licensing and Other includes revenue from the Company’s intellectual property licensing arrangements, BBM Consumer licensing arrangement, settlement awards and mobility licensing software arrangements, which includes revenue from licensed hardware sales.

Other includes revenue associated with the Company’s legacy service access fees (“SAF”) business, as well as revenue relating to unspecified future software upgrade rights for devices previously sold by the Company.

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

Three Months Ended Nine Months Ended

November 30, 2020 November 30, 2019 November 30, 2020 November 30, 2019

Three Months Ended

May 31, 2021 May 31, 2020

Products and services transferred over time $ 107 $ 116

1 unchanged sentence

Total $ 174 $ 206

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)

Revenue contract balances

The following table sets forth the activity in the Company’s revenue contract balances for the nine months ended November 30, 2020:

The following table sets forth the activity in the Company’s revenue contract balances for the three months ended May 31, 2021:

Accounts Receivable Deferred Revenue Deferred Commissions

3 unchanged sentences

Decrease, net ( 28 ) ( 29 ) ( 1 )

Closing balance as at November 30, 2020 $ 221 $ 292 $ 22

Closing balance as at May 31, 2021 $ 160 $ 265 $ 20

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)

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 November 30, 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 May 31, 2021 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 November 30, 2020

As at May 31, 2021

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 and nine months ended November 30, 2020, $ 2 million and $ 2 million of revenue was recognized for performance obligations satisfied in a prior period (three and nine months ended November 30, 2019 - nil ) relating to legacy SAF customers.

Segment Disclosures

The Company reports segment information based on the “management” approach.

The management approach designates the internal reporting used by the Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as a source of the Company’s reportable operating segments.

The CODM, who is the Executive Chair and CEO, reviews financial information, makes decisions and assesses the performance of the Company as a single operating segment.

For the three months ended May 31, 2021, no revenue was recognized for performance obligations satisfied in a prior period (three months ended May 31, 2020 - nil ).

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:

November 30, 2020 February 29, 2020

May 31, 2021 February 28, 2021

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

3 unchanged sentences

$ 1,687 $ 2,721 $ 1,731 $ 2,818

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)

Information About Major Customers

There was one customer that comprised 13 % and 27 % of the Company’s revenue in three and nine months ended November 30, 2020, respectively (three and nine months ended November 30, 2019 - one customer that comprised 20 % and one customer that comprised 15 %, respectively).

There was no customer that comprised more than 10% of the Company’s revenue in the three months ended May 31, 2021 (three months ended May 31, 2020 - one customer that comprised 26 % of the Company’s revenue).

CASH FLOW AND ADDITIONAL INFORMATION

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

Three Months Ended Nine Months Ended

November 30, 2020 November 30, 2019 November 30, 2020 November 30, 2019

Three Months Ended

May 31, 2021 May 31, 2020

Interest paid during the period $ 2 $ 6

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 third quarter of fiscal 2021 was transacted in U.S.

The majority of the Company’s revenue in the first quarter of fiscal 2022 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 November 30, 2020, approximately 17 % of cash and cash equivalents, 20 % of accounts receivable and 56 % 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.

At May 31, 2021, approximately 12 % of cash and cash equivalents, 20 % of accounts receivable and 52 % of accounts payable were denominated in foreign currencies (February 28, 2021 – 20 %, 25 % and 34 %, respectively).

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

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)

As part of its risk management strategy, the Company maintains net monetary asset and/or liability balances in foreign currencies and engages in foreign currency hedging activities using derivative financial instruments, including currency forward contracts and currency options.

7 unchanged sentences

Consequently, the Company is exposed to interest rate risk as a result of the Debentures.

The Company does not currently utilize interest rate derivative instruments to hedge its investment portfolio.

The Company does not currently utilize interest rate derivative instruments to hedge its investment portfolio or changes in the market value of the Debentures.

The Company is exposed to market and credit risk on its investment portfolio.

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 November 30, 2020, no single issuer represented more than 17 % 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 November 30, 2020, the Company had no collateral held or posted with counterparties (February 29, 2020 - $ 1 million in collateral posted).

As at May 31, 2021, no single issuer represented more than 13 % of the total cash, cash equivalents and investments (February 28, 2021 - no single issuer represented more than 13 % of the total cash, cash equivalents and investments), representing cash balances at one of the Company’s banking counterparties.

Liquidity risk

Cash, cash equivalents, and investments were approximately $ 757 million as at November 30, 2020.

Cash, cash equivalents, and investments were approximately $ 769 million as at May 31, 2021.

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

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)

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.

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.

Government subsidies

During the first quarter of fiscal 2021, the Government of Canada announced the Canada Emergency Wage Subsidy (“CEWS”) for Canadian employers whose businesses were affected by the COVID-19 pandemic, initially running for a thirty-six week period between March and November 2020.

The program was subsequently extended to December 2020 and the Government of Canada has announced plans for an additional extension to June 2021.

The CEWS originally provided a subsidy of up to 75 % of eligible employees’ employment insurable remuneration, subject to certain criteria, which subsequently declined to up to 65 %.

Accordingly, the Company applied for the CEWS to the extent it met the requirements to receive the subsidy and during the three and nine months ended November 30, 2020, recorded $ 10 million and $ 37 million, respectively, in government subsidies as a reduction to operating expenses in the consolidated statement of operations.

The program was subsequently extended to June 2021 and the Government of Canada has proposed plans for an additional extension to September 2021.

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

The proposed extension would also include a gradual decrease to the subsidy rate.

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, 2021, recorded $ 15 million in government subsidies as a reduction to operating expenses in the consolidated statement of operations (May 31, 2020 - $ 9 million) .

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