What changed in this filing

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Item 1. Financial Statements

2021-09-23 compared with 2021-06-25 · 194 added, 152 removed, 596 unchanged (37% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets

May 31, 2021 February 28, 2021

August 31, 2021 February 28, 2021

Cash and cash equivalents (note 3) $ 291 $ 214

38 unchanged sentences

Consolidated Statements of Shareholders’ Equity

Three Months Ended May 31, 2021

Three Months Ended August 31, 2021

Capital Stock

2 unchanged sentences

Comprehensive Loss Total

Balance as at February 28, 2021 $ 2,823 $ ( 1,306 ) $ ( 13 ) $ 1,504

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

Net loss — ( 144 ) — ( 144 )

Other comprehensive loss — — ( 5 ) ( 5 )

Stock-based compensation 10 — — 10

Shares issued:

Exercise of stock options 1 — — 1

Balance as at August 31, 2021 $ 2,845 $ ( 1,512 ) $ ( 15 ) $ 1,318

Three Months Ended August 31, 2020

Capital Stock

and Additional

Paid-in Capital Deficit Accumulated

Comprehensive Loss Total

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

Net loss — ( 23 ) — ( 23 )

Other comprehensive income — — 13 13

Stock-based compensation 9 — — 9

Shares issued:

Exercise of stock options 2 — — 2

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

See notes to consolidated financial statements.

BlackBerry Limited

(United States dollars, in millions) (unaudited)

Consolidated Statements of Shareholders’ Equity

Six Months Ended August 31, 2021

Capital Stock

and Additional

Paid-in Capital Deficit Accumulated

Comprehensive Loss Total

Balance as at February 28, 2021 $ 2,823 $ ( 1,306 ) $ ( 13 ) $ 1,504

Net loss — ( 206 ) — ( 206 )

Other comprehensive loss — — ( 2 ) ( 2 )

Stock-based compensation (note 7) 17 — — 17

2 unchanged sentences

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

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

Three Months Ended May 31, 2020

Balance as at August 31, 2021 $ 2,845 $ ( 1,512 ) $ ( 15 ) $ 1,318

Six Months Ended August 31, 2020

Capital Stock

10 unchanged sentences

Employee share purchase plan 3 — — 3

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

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

See notes to consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Operations

Three Months Ended

May 31, 2021 May 31, 2020

Three Months Ended Six Months Ended

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Revenue (note 11) $ 175 $ 259 $ 349 $ 465

6 unchanged sentences

Impairment of goodwill (note 3) — — — 594

Impairment of long-lived assets — 21 — 21

Debentures fair value adjustment (note 6) 67 18 63 19

253 221 425 1,009

Operating loss ( 141 ) ( 22 ) ( 199 ) ( 667 )

10 unchanged sentences

Consolidated Statements of Comprehensive Loss

Three Months Ended

May 31, 2021 May 31, 2020

Three Months Ended Six Months Ended

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Net loss $ ( 144 ) $ ( 23 ) $ ( 206 ) $ ( 659 )

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

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 six months ended August 31, 2021 and August 31, 2020 (note 9) ( 2 ) 4 ( 1 ) 3

Foreign currency translation adjustment, net of income taxes of nil for the three and six months ended August 31, 2021 (net of income taxes of $1 million and $1 million respectively, for the three and six months ended August 31,2020) ( 3 ) 2 ( 2 ) 3

Net change in fair value from instrument-specific credit risk on the Debentures, net of income taxes of nil for the three and six months ended August 31, 2021 (net of income taxes of $1 million and $2 million, respectively, for the three and six months ended August 31, 2020) (note 6) — 7 1 14

Other comprehensive income (loss) ( 5 ) 13 ( 2 ) 20

Comprehensive loss $ ( 149 ) $ ( 10 ) $ ( 208 ) $ ( 639 )

3 unchanged sentences

Consolidated Statements of Cash Flows

Three Months Ended

May 31, 2021 May 31, 2020

Six Months Ended

August 31, 2021 August 31, 2020

Cash flows from operating activities

4 unchanged sentences

Impairment of goodwill — 594

Impairment of long-lived assets — 21

Debentures fair value adjustment (note 6) 63 19

18 unchanged sentences

Proceeds on sale or maturity of short-term investments 537 794

Net cash provided by (used in) investing activities 176 ( 39 )

Net cash provided by investing activities 113 454

Cash flows from financing activities

Issuance of common shares 5 6

Payment of finance lease liability — ( 1 )

Net cash provided by financing activities 5 5

Effect of foreign exchange gain on cash, cash equivalents, restricted cash, and restricted cash equivalents — 1

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

Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period 100 460

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

Operating results for the three and six months ended August 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.

4 unchanged sentences

Risks and Uncertainties

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.

In fiscal 2022 and fiscal 2021, the economic downturn and uncertainty caused by the novel coronavirus (“COVID-19”) 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.

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.

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

Notes to the Consolidated Financial Statements

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

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

15 unchanged sentences

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.

As a result of its 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.

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)

ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

14 unchanged sentences

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

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 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.

11 unchanged sentences

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.

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)

Goodwill Impairment

6 unchanged sentences

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

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)

Cash, Cash Equivalents and Investments

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

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

Cost Basis Unrealized

38 unchanged sentences

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

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).

As at August 31, 2021, the Company had private equity investments without readily determinable fair value of $ 38 million (February 28, 2021 - $ 37 million).

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

3 unchanged sentences

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

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

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

August 31, 2021 February 28, 2021

Cash and cash equivalents $ 291 $ 214

4 unchanged sentences

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

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

August 31, 2021 February 28, 2021

Cost Basis Fair Value Cost Basis Fair Value

2 unchanged sentences

$ 647 $ 639 $ 609 $ 602

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).

As at August 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 of Allowance

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

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

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

7 unchanged sentences

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

August 31, 2021

Beginning balance as of February 29, 2020 $ 9

3 unchanged sentences

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%).

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

The allowance for credit losses as at August 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 August 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.

As at August 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

3 unchanged sentences

Property, plant and equipment comprised the following:

May 31, 2021 February 28, 2021

August 31, 2021 February 28, 2021

Buildings, leasehold improvements and other $ 53 $ 67

6 unchanged sentences

Intangible assets comprised the following:

As at May 31, 2021

As at August 31, 2021

Cost Accumulated

11 unchanged sentences

$ 2,015 $ 1,244 $ 771

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:

For the six months ended August 31, 2021, amortization expense related to intangible assets amounted to $ 89 million (six months ended August 31, 2020 - $ 89 million)

Total additions to intangible assets for six months ended August 31, 2021 amounted to $ 14 million (six months ended August 31, 2020 - $ 16 million).

During the six months ended August 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 August 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 - $ 73 million;

6 unchanged sentences

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

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

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

Carrying Amount

6 unchanged sentences

dollar denominated goodwill ( 1 )

Carrying amount as at May 31, 2021 $ 850

Carrying amount as at August 31, 2021 $ 848

Other Long-term Assets

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.

As at August 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:

May 31, 2021 February 28, 2021

Accrued royalties $ 20 $ 20

August 31, 2021 February 28, 2021

Operating lease liabilities, current 30 33

Other 144 145

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 accrued liabilities include accrued royalties, accrued director fees, 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 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.

For the six months ended August 31, 2021, the Company’s net effective income tax expense rate was approximately 2 % compared to a net effective income tax recovery rate of 2 % for the six months ended August 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 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’s total unrecognized income tax benefits as at August 31, 2021 were $ 19 million (February 28, 2021 - $ 24 million).

As at August 31, 2021, $ 19 million of the unrecognized income tax benefits have been netted against deferred income tax assets and nil 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.

11 unchanged sentences

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.

The Company’s credit spread was determined to be 7.90 % as of the issuance date of the 1.75% Debentures and 6.46 % as of August 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:

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

August 31, 2021

Balance as at February 28, 2021 $ 720

Change in fair value of the Debentures 62

Balance as at May 31, 2021 $ 715

Balance as at August 31, 2021 $ 782

The difference between the fair value of the 1.75% Debentures and the unpaid principal balance of $ 365 million is $ 417 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 $ —

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

Three Months Ended Six Months Ended

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Charge associated with the change in fair value from non-credit components recorded in the consolidated statements of operations $ ( 67 ) $ — $ ( 63 ) $ —

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).

Total increase in the fair value of the 1.75% Debentures $ ( 67 ) $ — $ ( 62 ) $ —

For the three and six months ended August 31, 2021, the Company recorded interest expense related to the Debentures of $ 2 million and $ 3 million, respectively, which has been included in investment loss, net on the Company’s consolidated statements of operations (three and six months ended August 31, 2020 - $ 6 million and $ 11 million).

BlackBerry Limited

3 unchanged sentences

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.

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 to Fairfax represent related party transactions.

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

4 unchanged sentences

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

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

Three Months Ended Six Months Ended

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Charge associated with the change in fair value from non-credit components recorded in the consolidated statements of operations $ — $ ( 18 ) $ — $ ( 19 )

2 unchanged sentences

CAPITAL STOCK

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

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

Capital Stock and

6 unchanged sentences

Common shares issued for employee share purchase plan 379 3

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.

Common shares outstanding as at August 31, 2021 566,995 $ 2,845

The Company had 567 million voting common shares outstanding, 1 million options to purchase voting common shares, 20 million RSUs and 1 million DSUs outstanding as at September 20, 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

May 31, 2021 May 31, 2020

Three Months Ended Six Months Ended

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

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

6 unchanged sentences

______________________________

(1) The Company has not presented the dilutive effect of the Debentures using the if-converted method in the calculation of diluted loss per share for the three months ended May 31, 2021 and May 31, 2020, as to do so would be antidilutive.

(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 six months ended August 31, 2021 and August 31, 2020, as to do so would be antidilutive.

See Note 6 for details on the Debentures.

(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.

(2) The three and six months ended August 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 and six months ended August 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.

(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.

(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 and six months ended August 31, 2021 and August 31, 2020, 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)

ACCUMULATED OTHER COMPREHENSIVE LOSS

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

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

Three Months Ended Six Months Ended

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Cash Flow Hedges

Balance, beginning of period $ 2 $ ( 2 ) $ 1 $ ( 1 )

Other comprehensive income before reclassification 2 ( 2 )

Other comprehensive income (loss) before reclassification ( 2 ) 3 — 1

Amounts reclassified from AOCL into net loss — 1 ( 1 ) 2

2 unchanged sentences

Balance, beginning of period $ ( 3 ) $ ( 8 ) $ ( 4 ) $ ( 9 )

Other comprehensive income before reclassification 1 1

Other comprehensive income (loss) before reclassification ( 3 ) 2 ( 2 ) 3

Foreign currency cumulative translation adjustment $ ( 6 ) $ ( 6 ) $ ( 6 ) $ ( 6 )

6 unchanged sentences

Accumulated Other Comprehensive Loss, End of Period $ ( 15 ) $ ( 13 ) $ ( 15 ) $ ( 13 )

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 $ 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.

The Company had $ 27 million in collateralized outstanding letters of credit in support of certain leasing arrangements entered into in the ordinary course of business as of August 31, 2021.

See the discussion of restricted cash in Note 3.

7 unchanged sentences

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.

Where a potential loss is considered probable and the amount is reasonably estimable, provisions for loss are made based on management’s assessment of the likely outcome.

Where a potential loss is considered probable and the amount is reasonably

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)

estimable, provisions for loss are made based on management’s assessment of the likely outcome.

Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum amount in the range.

1 unchanged sentence

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

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;

As of August 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.

22 unchanged sentences

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

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.

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.

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

4 unchanged sentences

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.

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

All discovery was completed as of November 13, 2020.

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

The class includes “all persons who purchased or otherwise acquired the common stock of BlackBerry Limited on the NASDAQ during the period from March 28, 2013, through and including September 20, 2013 (the “Class Period”).” The class excludes (a) all persons and entities who purchased or otherwise acquired BlackBerry Limited common stock between March 28, 2013, and April 10, 2013, and who sold all their BlackBerry Limited common stock before April 11, 2013, and (b) the Defendants, officers and directors of BlackBerry Limited, members of their immediate families and their legal representatives, heirs, successors, or assigns, and any entity in which any of the Defendants have or had a controlling interest.

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.

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.

Defendants filed a reply in support of their summary judgment motion and a motion to strike Plaintiffs’ response to Defendants’ separate statement of undisputed facts on July 22, 2021.

Plaintiffs filed an opposition to the motion to strike

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)

on August 5, 2021, and Defendants filed a reply in support on August 10, 2021.

On August 13, 2021, Plaintiffs filed an unopposed motion for approval of a class notice plan.

On September 10, 2021, the Court (i) granted in part and denied in part the parties’ Daubert motions and (ii) granted the plaintiffs’ unopposed motion for approval of the class notice plan.

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.

The Court has not set a trial date.

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

20 unchanged sentences

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

As at May 31, 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.

As at August 31, 2021, the liability recorded in association with this award is approximately $ 11 million (February 28, 2021 - $ 8 million).

As at August 31, 2021, the Company has recognized $ 17 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 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.

6 unchanged sentences

(d) Indemnifications

The Company enters into certain agreements that contain indemnification provisions under which the Company could be subject to costs and damages, including in the event of an infringement claim against the Company or an indemnified third party.

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)

Such intellectual property infringement indemnification clauses are generally not subject to any dollar limits and remain in effect for the term of the Company’s agreements.

14 unchanged sentences

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

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 information by operating segment for the three and six months ended August 31, 2021 and August 31, 2020:

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

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Segment revenue $ 120 $ 120 $ 40 $ 31 $ 15 $ 108 $ 175 $ 259

2 unchanged sentences

$ 71 $ 74 $ 33 $ 25 $ 9 $ 101 $ 113 $ 200

For the Six Months Ended

Cyber Security IoT Licensing and Other Segment Totals

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Segment revenue $ 227 $ 239 $ 83 $ 60 $ 39 $ 166 $ 349 $ 465

Segment cost of sales 95 93 14 12 12 15 121 120

Segment gross margin (1)

$ 132 $ 146 $ 69 $ 48 $ 27 $ 151 $ 228 $ 345

______________________________

(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.

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)

Cyber Security consists of 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.

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® Gateway, 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.

1 unchanged sentence

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 consists of 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

Licensing and Other consists of the Company’s intellectual property arrangements and settlement awards.

Other consists of the Company’s legacy service access fees (“SAF”) business.

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

Three Months Ended Six Months Ended

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Total segment gross margin $ 113 $ 200 228 $ 345

4 unchanged sentences

Amortization 45 46 91 92

Impairment of long-lived assets — 21 — 21

Impairment of goodwill — — — 594

Debenture fair value adjustment ( 4 ) 1

Debentures fair value adjustment 67 18 63 19

Investment loss, net 1 5 3 5

8 unchanged sentences

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

Three Months Ended Six Months Ended

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

North America (1)

$ 101 $ 195 $ 212 $ 345

Europe, Middle East and Africa 57 48 102 89

9 unchanged sentences

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

Three Months Ended

May 31, 2021 May 31, 2020

Three Months Ended Six Months Ended

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Products and services transferred over time $ 107 $ 125 $ 213 $ 241

2 unchanged sentences

Revenue contract balances

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

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

Accounts Receivable Deferred Revenue Deferred Commissions

3 unchanged sentences

Decrease, net ( 62 ) ( 50 ) ( 3 )

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

Closing balance as at August 31, 2021 $ 126 $ 244 $ 18

BlackBerry Limited

2 unchanged sentences

Transaction price allocated to the remaining performance obligations

The table below discloses the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as at May 31, 2021 and the time frame in which the Company expects to recognize this revenue.

The table below discloses the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as at August 31, 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 May 31, 2021

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

For the three and six months ended August 31, 2021, no revenue was recognized for performance obligations satisfied in a prior period (three and six months ended August 31, 2020 - nil and $ 1 million of revenue was recognized relating to performance obligations satisfied in a prior period).

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

May 31, 2021 February 28, 2021

August 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

4 unchanged sentences

Information About Major Customers

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).

There was one customer that comprised 12 % and no other customer that comprised more than 10% of the Company’s revenue in the three and six months ended August 31, 2021, respectively (three and six months ended August 31, 2020 - one customer that comprised 40 % and 34 % of the Company’s revenue, respectively).

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

May 31, 2021 May 31, 2020

Three Months Ended Six Months Ended

August 31, 2021 August 31, 2020 August 31, 2021 August 31, 2020

Interest paid during the period $ 2 $ 6 $ 3 $ 11

4 unchanged sentences

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

The majority of the Company’s revenue in the first quarter of fiscal 2022 was transacted in U.S.

The majority of the Company’s revenue in the second 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 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

At August 31, 2021, approximately 31 % of cash and cash equivalents,

BlackBerry Limited

1 unchanged sentence

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

33 % of accounts receivable and 31 % 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 pound.

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.

10 unchanged sentences

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

As at May 31, 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.

As at August 31, 2021, no single issuer represented more than 11 % 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.

As at August 31, 2021, the Company had $ 1 million in collateral posted with counterparties (February 28, 2021 - nil in collateral held or posted).

Liquidity risk

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

Cash, cash equivalents, and investments were approximately $ 772 million as at August 31, 2021.

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

2 unchanged sentences

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 June 2021 and the Government of Canada has proposed plans for an additional extension to September 2021.

The program was subsequently extended to June 2021 and the Government of Canada has announced an additional extension to October 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) .

The extension also includes 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 and six months ended August 31, 2021, recorded $ 11 million and $ 27 million, respectively, in government subsidies as a reduction to operating expenses in the consolidated statement of operations (August 31, 2020 - $ 18 million and $ 27 million, respectively).

CEWS received after June 5, 2021 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.

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