What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-09-28 compared with 2022-06-24 · 192 added, 133 removed, 614 unchanged (35% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets

May 31, 2022 February 28, 2022

August 31, 2022 February 28, 2022

Cash and cash equivalents (note 2) $ 431 $ 378

38 unchanged sentences

Consolidated Statements of Shareholders’ Equity

Three Months Ended May 31, 2022

Three Months Ended August 31, 2022

Capital Stock

2 unchanged sentences

Comprehensive Loss Total

Balance as at May 31, 2022 $ 2,880 $ ( 1,475 ) $ ( 20 ) $ 1,385

Net loss — ( 54 ) — ( 54 )

Other comprehensive loss — — ( 8 ) ( 8 )

Stock-based compensation 7 — — 7

Balance as at August 31, 2022 $ 2,887 $ ( 1,529 ) $ ( 28 ) $ 1,330

Three Months Ended August 31, 2021

Capital Stock

and Additional

Paid-in Capital Deficit Accumulated

Comprehensive Loss Total

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

See notes to consolidated financial statements.

BlackBerry Limited

(United States dollars, in millions) (unaudited)

Consolidated Statements of Shareholders’ Equity

Six Months Ended August 31, 2022

Capital Stock

and Additional

Paid-in Capital Deficit Accumulated

Comprehensive Loss Total

Balance as at February 28, 2022 $ 2,869 $ ( 1,294 ) $ ( 19 ) $ 1,556

4 unchanged sentences

Employee share purchase plan (note 6) 3 — — 3

Balance as at May 31, 2022 $ 2,880 $ ( 1,475 ) $ ( 20 ) $ 1,385

Three Months Ended May 31, 2021

Balance as at August 31, 2022 $ 2,887 $ ( 1,529 ) $ ( 28 ) $ 1,330

Six Months Ended August 31, 2021

Capital Stock

4 unchanged sentences

Net loss — ( 206 ) — ( 206 )

Other comprehensive income — — 3 3

Other comprehensive loss — — ( 2 ) ( 2 )

Stock-based compensation 17 — — 17

2 unchanged sentences

Employee share purchase plan 3 — — 3

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

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

See notes to consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Operations

Three Months Ended

May 31, 2022 May 31, 2021

Three Months Ended Six Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

Revenue (note 10) $ 168 $ 175 $ 336 $ 349

5 unchanged sentences

Amortization 25 45 52 91

Impairment of long-lived assets (note 2) 4 — 4 —

Gain on sale of property, plant and equipment, net (note 3) ( 6 ) — ( 6 ) —

Debentures fair value adjustment (note 5) ( 10 ) 67 ( 56 ) 63

Litigation settlement (note 9) — — 165 —

153 253 434 425

Operating loss ( 47 ) ( 141 ) ( 224 ) ( 199 )

10 unchanged sentences

Consolidated Statements of Comprehensive Loss

Three Months Ended

May 31, 2022 May 31, 2021

Three Months Ended Six Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

Net loss $ ( 54 ) $ ( 144 ) $ ( 235 ) $ ( 206 )

Other comprehensive income (loss)

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, 2021 - income taxes of nil) (note 8) 1 1

Other comprehensive 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, 2022 and August 31, 2021 (note 8) ( 2 ) ( 2 ) ( 1 ) ( 1 )

Foreign currency translation adjustment ( 6 ) ( 3 ) ( 10 ) ( 2 )

Net change in fair value from instrument-specific credit risk on the 1.75% Debentures, net of income taxes of nil (May 31, 2021 - income taxes of nil) (note 5) 2 1

Other comprehensive income (loss) ( 1 ) 3

Net change in fair value from instrument-specific credit risk on the 1.75% Debentures, net of income taxes of nil for the three and six months ended August 31, 2022 and August 31, 2021 (note 5) — — 2 1

Other comprehensive loss ( 8 ) ( 5 ) ( 9 ) ( 2 )

Comprehensive loss $ ( 62 ) $ ( 149 ) $ ( 244 ) $ ( 208 )

3 unchanged sentences

Consolidated Statements of Cash Flows

Three Months Ended

May 31, 2022 May 31, 2021

Six Months Ended

August 31, 2022 August 31, 2021

Cash flows from operating activities

3 unchanged sentences

Stock-based compensation 15 17

Impairment of long-lived assets (note 2) 4 —

Gain on sale of property, plant and equipment, net (note 3) ( 6 ) —

Debentures fair value adjustment (note 5) ( 56 ) 63

4 unchanged sentences

Other receivables 10 2

Income taxes receivable — 1

Other assets ( 1 ) 4

5 unchanged sentences

Cash flows from investing activities

Acquisition of long-term investments ( 2 ) ( 1 )

Acquisition of property, plant and equipment ( 4 ) ( 4 )

Proceeds on sale of property, plant and equipment (note 3) 17 —

Acquisition of intangible assets ( 16 ) ( 14 )

6 unchanged sentences

Net cash provided by financing activities 3 5

Effect of foreign exchange gain (loss) on cash, cash equivalents, restricted cash, and restricted cash equivalents ( 1 ) 3

Effect of foreign exchange loss on cash, cash equivalents, restricted cash, and restricted cash equivalents ( 2 ) —

Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period 52 100

11 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, 2022 are not necessarily indicative of the results that may be expected for the full year ending February 28, 2023.

Operating results for the three and six months ended August 31, 2022 are not necessarily indicative of the results that may be expected for the full year ending February 28, 2023.

The consolidated balance sheet at February 28, 2022 was derived from the audited Annual Financial Statements but does not contain all of the footnote disclosures from the Annual Financial Statements.

57 unchanged sentences

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 2023, the Company decided to exit and seek subleases for certain leased facilities.

The Company recorded a non-cash, pre-tax and after-tax impairment charge of $ 4 million related to the operating lease right-of-use (“ROU”) assets for 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.

The Company conducts an evaluation of the related liabilities and expenses and revises its assumptions and estimates as appropriate as new or updated information becomes available.

Non-Marketable Equity Investments Measured Using the Measurement Alternative

2 unchanged sentences

Cash, Cash Equivalents and Investments

The components of cash, cash equivalents and investments by fair value level as at May 31, 2022 were as follows:

The components of cash, cash equivalents and investments by fair value level as at August 31, 2022 were as follows:

Cost Basis (1)

8 unchanged sentences

Equity securities 10 — ( 10 ) — — — — —

Term deposits, certificates of deposits, and GICs 54 — — 54 28 — — 26

Term deposits and certificates of deposits 35 — — 35 10 — — 25

Bearer deposit notes 126 — — 126 126 — — —

3 unchanged sentences

government sponsored enterprise notes 75 — — 75 13 62 — —

Corporate notes/bonds 19 — — 19 — 19 — —

treasury bills/notes 18 — — 18 18 — — —

556 — — 556 319 212 — 25

27 unchanged sentences

(1) Cost basis for other investments includes the effect of returns of capital and impairment.

As at May 31, 2022, the Company had private non-marketable equity investments without readily determinable fair value of $ 30 million (February 28, 2022 - $ 30 million).

During the three months ended May 31, 2022 and May 31, 2021, no adjustments were made to the carrying value of non-marketable equity investments without readily determinable fair value as a result of observable price changes or impairment.

As of May 31, 2022, the Company has recorded a cumulative upward adjustment of $ 5 million to the carrying value of certain non-marketable equity investments without readily determinable fair value as a result of observable price changes for identical or similar securities (February 28, 2022 - $ 5 million).

As of May 31, 2022, the Company has recorded a cumulative impairment of $ 3 million to the carrying value of certain other non-marketable equity investments without readily determinable fair value (February 28, 2022 - $ 3 million).

There were no realized gains or losses on available-for-sale securities for the three months ended May 31, 2022 (realized losses of nil for the three months ended May 31, 2021).

As at August 31, 2022, the Company had private non-marketable equity investments without readily determinable fair value of $ 29 million (February 28, 2022 - $ 30 million).

As of August 31, 2022, the Company has recorded a cumulative impairment of $ 3 million to the carrying value of certain other non-marketable equity investments without readily determinable fair value (February 28, 2022 - $ 3 million).

There were no realized gains or losses on available-for-sale securities for the three and six months ended August 31, 2022 and August 31, 2021.

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.

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 May 31, 2022 and February 28, 2022 from the consolidated balance sheets to the consolidated statements of cash flows:

May 31, 2022 February 28, 2022

The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents as at August 31, 2022 and February 28, 2022 from the consolidated balance sheets to the consolidated statements of cash flows:

August 31, 2022 February 28, 2022

Cash and cash equivalents $ 431 $ 378

1 unchanged sentence

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

The contractual maturities of available-for-sale investments as at May 31, 2022 and February 28, 2022 were as follows:

May 31, 2022 February 28, 2022

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 August 31, 2022 and February 28, 2022 were as follows:

August 31, 2022 February 28, 2022

Cost Basis Fair Value Cost Basis Fair Value

2 unchanged sentences

$ 566 $ 556 $ 644 $ 635

As at May 31, 2022 and February 28, 2022, the Company had no available-for-sale debt securities with continuous unrealized losses .

As at August 31, 2022 and February 28, 2022, the Company had no available-for-sale debt securities with continuous unrealized losses .

CONSOLIDATED BALANCE SHEET DETAILS

Accounts Receivable, Net of Allowance

The allowance for credit losses as at May 31, 2022 was $ 4 million (February 28, 2022 - $ 4 million).

The allowance for credit losses as at August 31, 2022 was $ 4 million (February 28, 2022 - $ 4 million).

The Company recognizes current estimated credit losses (“CECL”) for accounts receivable.

6 unchanged sentences

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

August 31, 2022

Beginning balance as of February 28, 2021 $ 10

3 unchanged sentences

Current period recovery for expected credit losses —

Ending balance of the allowance for credit loss as at May 31, 2022 $ 4

The allowance for credit losses as at May 31, 2022 consists of $ 1 million (February 28, 2022 - $ 2 million) relating to CECL estimated based on days past due and region and $ 3 million (February 28, 2022 - $ 2 million) relating to specific customers that were evaluated separately.

Ending balance of the allowance for credit loss as at August 31, 2022 $ 4

The allowance for credit losses as at August 31, 2022 consists of $ 1 million (February 28, 2022 - $ 2 million) relating to CECL estimated based on days past due and region and $ 3 million (February 28, 2022 - $ 2 million) relating to specific customers that were evaluated separately.

There was no customer that comprised more than 10% of accounts receivable as at August 31, 2022 (February 28, 2022 - no customer comprised more than 10%).

Other Receivables

As at August 31, 2022, other receivables included items such as an intellectual property licensing receivable, among other items, none of which were greater than 5% of the current assets balance.

As at February 28, 2022, other receivables included items such as receivables from the Government of Canada’s Hardest-Hit Business Recovery Program (“HHBRP”) and an intellectual property licensing receivable, among other items, none of which were greater than 5% of the current assets balance.

BlackBerry Limited

1 unchanged sentence

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

There was no customer that comprised more than 10% of accounts receivable as at May 31, 2022 (February 28, 2022 - no customer comprised more than 10%).

Other Receivables

As at May 31, 2022 and February 28, 2022, other receivables included items such as receivables from the Government of Canada’s Hardest-Hit Business Recovery Program (“HHBRP”) and an intellectual property licensing receivable, among other items, none of which were greater than 5% of the current assets balance in any of the periods presented.

Other Current Assets

Other current assets comprised the following:

May 31, 2022 February 28, 2022

August 31, 2022 February 28, 2022

Intellectual property $ 132 $ 118

5 unchanged sentences

Catapult continues to work on securing its required financing;

however, the Company is no longer under exclusivity with Catapult and is exploring alternative options in parallel.

however, the Company is no longer under exclusivity with Catapult and is continuing to explore alternative options in parallel.

For the year ended February 28, 2022, the Company had classified $ 118 million of intellectual property that would be sold under the patent sale agreement with Catapult as other current assets on the Company’s consolidated balance sheets relating to the patent sale agreement.

As at May 31, 2022, the Company continues to classify the intellectual property as other current assets on the Company’s consolidated balance sheets.

As at August 31, 2022, the Company continues to classify $ 132 million of intellectual property, which includes the initial $ 118 million of intellectual property that would be sold under the patent sale agreement with Catapult with additions related to patent maintenance, as other current assets on the Company’s consolidated balance sheets.

Other current assets also 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 any of the periods presented.

1 unchanged sentence

Property, plant and equipment comprised the following:

May 31, 2022 February 28, 2022

August 31, 2022 February 28, 2022

BlackBerry operations and other information technology $ 94 $ 92

4 unchanged sentences

Net book value $ 27 $ 41

Sale of Property, Plant and Equipment, Net

During the second quarter of fiscal 2023, the Company completed the sale of its corporate aircraft.

As a result, the Company recorded proceeds of approximately $ 17 million and incurred a gain on disposal of approximately $ 6 million (cost of $ 29 million, accumulated amortization of $ 18 million, and a net book value of approximately $ 11 million).

BlackBerry Limited

3 unchanged sentences

Intangible assets comprised the following:

As at May 31, 2022

As at August 31, 2022

Cost Accumulated

11 unchanged sentences

$ 1,634 $ 1,112 $ 522

For the three months ended May 31, 2022, amortization expense related to intangible assets amounted to $ 25 million (three months ended May 31, 2021 - $ 45 million).

Total additions to intangible assets for the three months ended May 31, 2022 amounted to $ 8 million (three months ended May 31, 2021 - $ 6 million).

During the three months ended May 31, 2022, 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, 2022, and assuming no subsequent impairment of the underlying assets, the annual amortization expense for the remainder of fiscal 2023 and each of the five succeeding years is expected to be as follows:

For the six months ended August 31, 2022, amortization expense related to intangible assets amounted to $ 50 million (six months ended August 31, 2021 - $ 89 million).

Total additions to intangible assets for the six months ended August 31, 2022 amounted to $ 16 million (six months ended August 31, 2021 - $ 14 million).

During the six months ended August 31, 2022, 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, 2022, and assuming no subsequent impairment of the underlying assets, the annual amortization expense for the remainder of fiscal 2023 and each of the five succeeding years is expected to be as follows:

fiscal 2023 - $ 50 million;

3 unchanged sentences

fiscal 2027 - $ 79 million and fiscal 2028 - $ 44 million.

Changes to the carrying amount of goodwill during the three months ended May 31, 2022 were as follows:

Changes to the carrying amount of goodwill during the six months ended August 31, 2022 were as follows:

Carrying Amount

5 unchanged sentences

dollar denominated goodwill ( 7 )

Carrying amount as at May 31, 2022 $ 841

Carrying amount as at August 31, 2022 $ 837

In the fourth quarter of fiscal 2022, the Company announced that it had agreed to the sale of a significant amount of patent assets to Catapult subject to the satisfaction of closing conditions.

The completion of the sale would accelerate the timing of estimated cash flows for the Intellectual Property reporting unit and, based upon changes in the estimates to future cash flows following the contemplated sale, could potentially result in impacts that would be material to the consolidated financial statements in relation to the fair value of the goodwill of that reporting unit.

Other Long-term Assets

As at May 31, 2022 and February 28, 2022, 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, 2022 and February 28, 2022, 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.

BlackBerry Limited

3 unchanged sentences

Accrued liabilities comprised the following:

May 31, 2022 February 28, 2022

August 31, 2022 February 28, 2022

Accrued settlement (note 9)

2 unchanged sentences

Other accrued liabilities include 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 in any of the periods presented.

For the three months ended May 31, 2022, the Company’s net effective income tax expense rate was approximately 2 % compared to a net effective income tax expense rate of 3 % for the three months ended May 31, 2021.

For the six months ended August 31, 2022, the Company’s net effective income tax expense rate was approximately 4 % compared to a net effective income tax expense rate of 2 % for the six months ended August 31, 2021.

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 1.75% Debentures (as defined in Note 5), 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, 2022 were $ 20 million (February 28, 2022 - $ 20 million).

As at May 31, 2022, $ 20 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’s total unrecognized income tax benefits as at August 31, 2022 were $ 20 million (February 28, 2022 - $ 20 million).

As at August 31, 2022, $ 20 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.

7 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 7.31 % as of May 31, 2022.

The Company’s credit spread was determined to be 7.90 % as of the issuance date of the 1.75% Debentures and 7.19 % as of August 31, 2022.

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

5 unchanged sentences

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, 2022, 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, 2022, which also represents the total changes through earnings of items classified as Level 3 in the fair value hierarchy:

August 31, 2022

Balance as at February 28, 2022 $ 507

Change in fair value of the 1.75% Debentures ( 58 )

Balance as at May 31, 2022 $ 459

Balance as at August 31, 2022 $ 449

The difference between the fair value of the 1.75% Debentures and the unpaid principal balance of $ 365 million is $ 84 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, 2022 and May 31, 2021:

Three Months Ended

May 31, 2022 May 31, 2021

Income associated with the change in fair value from non-credit components recorded in the consolidated statements of operations $ 46 $ 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, 2022 and August 31, 2021:

Three Months Ended Six Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

Income (charge) associated with the change in fair value from non-credit components recorded in the consolidated statements of operations $ 10 $ ( 67 ) $ 56 $ ( 63 )

Income associated with the change in fair value from instrument-specific credit components recorded in AOCL — — 2 1

Total decrease in the fair value of the 1.75% Debentures $ 48 $ 5

For the three months ended May 31, 2022, the Company recorded interest expense related to the 1.75% 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, 2021 - $ 2 million).

Total decrease (increase) in the fair value of the 1.75% Debentures $ 10 $ ( 67 ) $ 58 $ ( 62 )

For the three and six months ended August 31, 2022, the Company recorded interest expense related to the 1.75% Debentures of $ 2 million, and $ 3 million which has been included in investment loss, net on the Company’s consolidated statements of operations (three and six months ended August 31, 2021 - $ 2 million and $ 3 million).

Fairfax, a related party under U.S.

3 unchanged sentences

CAPITAL STOCK

The following details the changes in issued and outstanding common shares for the three months ended May 31, 2022:

The following details the changes in issued and outstanding common shares for the six months ended August 31, 2022:

Capital Stock and

6 unchanged sentences

Common shares issued for employee share purchase plan 458 3

Common shares outstanding as at May 31, 2022 577,169 $ 2,880

The Company had 577 million voting common shares outstanding, 1 million options to purchase voting common shares, 15 million RSUs and 2 million DSUs outstanding as at June 21, 2022.

Common shares outstanding as at August 31, 2022 577,416 $ 2,887

The Company had 577 million voting common shares outstanding, 1 million options to purchase voting common shares, 15 million RSUs and 1 million DSUs outstanding as at September 23, 2022.

In addition, 60.8 million common shares are issuable upon conversion in full of the 1.75% Debentures as described in Note 5.

4 unchanged sentences

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

Three Months Ended

May 31, 2022 May 31, 2021

Three Months Ended Six Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

Net loss for basic loss per share available to common shareholders $ ( 54 ) $ ( 144 ) $ ( 235 ) $ ( 206 )

1.75% Debentures fair value adjustment (1) (2)

( 10 ) — ( 56 ) —

interest expense on 1.75% Debentures (1) (2)

4 unchanged sentences

Conversion of 1.75% Debentures (1) (2)

60,833 — 60,833 —

Weighted average number of shares and assumed conversions (000’s) diluted 638,147 568,082 637,930 567,724

3 unchanged sentences

______________________________

(1) The Company has presented the dilutive effect of the 1.75% Debentures using the if-converted method, assuming conversion at the beginning of the quarter for the three months ended May 31, 2022.

Accordingly, to calculate diluted loss per share, the Company adjusted net loss by eliminating the fair value adjustment made to the 1.75% Debentures and interest expense incurred on the 1.75% Debentures for the three months ended May 31, 2022, 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 presented the dilutive effect of the 1.75% Debentures using the if-converted method, assuming conversion at the beginning of the quarter for the three and six months ended August 31, 2022.

Accordingly, to calculate diluted loss per share, the Company adjusted net loss by eliminating the fair value adjustment made to the 1.75% Debentures and interest expense incurred on the 1.75% Debentures for the three and six months ended August 31, 2022, and added the number of shares that would have been issued upon conversion to the diluted weighted average number of shares outstanding.

See Note 5 for details on the 1.75% Debentures.

(2) The Company has not presented the dilutive effect of the 1.75% Debentures using the if-converted method in the calculation of diluted loss per share for the three months ended May 31, 2021, as to do so would be antidilutive.

(2) The Company has not presented the dilutive effect of the 1.75% Debentures using the if-converted method in the calculation of diluted loss per share for the three and six months ended August 31, 2021, as to do so would be antidilutive.

See Note 5 for details on the 1.75% Debentures.

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

(4) The Company has not presented the dilutive effect of in-the-money options and RSUs that will be settled upon vesting by the issuance of new common shares in the calculation of diluted loss per share for the three months ended May 31, 2022 and May 31, 2021, as to do so would be antidilutive.

(3) The three and six months ended August 31, 2021, includes approximately 1,421,945 common shares (Exchange Shares) remaining that were subsequently issued on the third anniversary date of the Cylance acquisition completed on February 21, 2019 in consideration for the acquisition.

(4) The Company has not presented the dilutive effect of in-the-money options and RSUs that will be settled upon vesting by the issuance of new common shares in the calculation of diluted loss per share for the three and six months ended August 31, 2022 and August 31, 2021, as to do so would be antidilutive.

BlackBerry Limited

2 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in AOCL by component net of tax, for the three months ended May 31, 2022 and May 31, 2021 were as follows:

Three Months Ended

May 31, 2022 May 31, 2021

The changes in AOCL by component net of tax, for the three and six months ended August 31, 2022 and August 31, 2021 were as follows:

Three Months Ended Six Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

Cash Flow Hedges

Balance, beginning of period $ 1 $ 2 $ — $ 1

Other comprehensive income before reclassification 1 2

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

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

2 unchanged sentences

Balance, beginning of period $ ( 14 ) $ ( 3 ) $ ( 10 ) $ ( 4 )

Other comprehensive income (loss) ( 4 ) 1

Other comprehensive loss ( 6 ) ( 3 ) ( 10 ) ( 2 )

Foreign currency cumulative translation adjustment $ ( 20 ) $ ( 6 ) $ ( 20 ) $ ( 6 )

8 unchanged sentences

(a) Letters of Credit

The Company had $ 26 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, 2022.

The Company had $ 26 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, 2022.

See the discussion of restricted cash in Note 2.

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

The Company does not provide for claims for which the outcome is not determinable or claims for which the amount of

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

BlackBerry Limited

1 unchanged sentence

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

the loss cannot be reasonably estimated.

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.

The Company does not provide for claims for which the outcome is not probable or claims for which the amount of the loss cannot be reasonably estimated.

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

As of May 31, 2022, with the exception of the U.S.

As of August 31, 2022, with the exception of the U.S.

class actions settlement discussed in “Litigation Settlement” below in this Note 9, there are no other material claims outstanding for which the Company has assessed the potential loss as both probable to result and reasonably estimable;

14 unchanged sentences

and Canada alleging that the Company and certain of its officers made materially false and misleading statements regarding the Company’s financial condition and business prospects and that certain of the Company’s financial statements contain material misstatements.

The individual lawsuit was voluntarily dismissed and the U.S.

The individual lawsuit was voluntarily dismissed and the consolidated U.S.

class actions reached an agreement in principle to settle;

see “Litigation Settlement” below in this Note 9.

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

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

On November 17, 2015, the Ontario Superior Court of Justice issued an order granting the plaintiffs’ motion for leave to file a statutory claim for misrepresentation.

On December 2, 2015, the Company filed a notice of motion seeking leave to appeal this ruling.

On January 22, 2016, the Court postponed the hearing on the plaintiffs’ certification motion to an undetermined date after asking the Company to file a motion to dismiss the claims of the U.S.

plaintiffs for forum non conveniens.

Before that motion was heard, the parties agreed to limit the class to purchasers who reside in Canada or purchased on the Toronto Stock Exchange.

On November 15, 2018, the Court denied the Company’s motion for leave to appeal the order granting the plaintiffs leave to file a statutory claim for misrepresentation.

1 unchanged sentence

Notice of class certification was published on March 6, 2019.

The Company filed its Statement of Defence on April 1, 2019, and discovery is proceeding.

On February 15, 2017, a putative employment class action was filed against the Company in the Ontario Superior Court of Justice.

The Company filed its Statement of Defence on April 1, 2019.

Discovery is proceeding and the Court has not set a trial date.

On March 17, 2017, a putative employment class action was filed against the Company in the Ontario Superior Court of Justice.

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

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

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

(ii) punitive or breach of duty of good faith damages of CAD$20 million, 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.

1 unchanged sentence

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

The Company filed its Statement of Defence on December 19, 2019, and discovery is proceeding.

The Company filed its Statement of Defence on December 19, 2019.

Discovery is proceeding and the Court has not set a trial date.

Other contingencies

2 unchanged sentences

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

As at May 31, 2022, the liability recorded in association with this award is approximately $ 1 million (February 28, 2022 - $ 2 million).

As at August 31, 2022, the liability recorded in association with this award is approximately $ 1 million (February 28, 2022 - $ 2 million).

BlackBerry Limited

1 unchanged sentence

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

As at May 31, 2022, the Company has recognized $ 17 million (February 28, 2022 - $ 17 million) in funds from claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund program’s investment in BlackBerry QNX.

As at August 31, 2022, the Company has recognized $ 17 million (February 28, 2022 - $ 17 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.

24 unchanged sentences

On January 3, 2022, the Court denied defendants’ motion for summary judgment except with respect to seven statements the Court found were barred by the statute of repose.

On April 6, 2022, the parties accepted a mediator’s proposal, and reached an agreement in principle to settle the U.S.

consolidated actions for $ 165,000,000 .

The settlement is subject to preliminary and final approval by the Court.

The Stipulation of Settlement was executed effective June 7, 2022, the Court granted plaintiffs’ motion for preliminary approval of the settlement on June 14, 2022, and scheduled the final approval hearing for September 29, 2022.

On April 6, 2022, the parties accepted a mediator’s settlement proposal, and reached an agreement in principle to settle the U.S.

consolidated actions for $ 165 million.

The Stipulation of Settlement was executed effective June 7, 2022.

On June 14, 2022, the Court granted plaintiffs’ motion for preliminary approval of the settlement and scheduled the final approval hearing for September 29, 2022.

In the first quarter of fiscal 2023, the Company accrued $ 165 million associated with this settlement within the line Litigation settlement on the consolidated statement of operations.

On June 29, 2022, the Company paid $ 1 million of the settlement amount.

The remaining $ 164 million was paid on September 6, 2022.

(d) Indemnifications

18 unchanged sentences

Cybersecurity, IoT, and Licensing and Other.

The following table shows information by operating segment for the three months ended May 31, 2022 and May 31, 2021:

The following table shows information by operating segment for the three and six months ended August 31, 2022 and August 31, 2021:

For the Three Months Ended

Cybersecurity IoT Licensing and Other Segment Totals

May 31, May 31, May 31, May 31,

August 31, August 31, August 31, August 31,

2022 2021 2022 2021 2022 2021 2022 2021

3 unchanged sentences

$ 61 $ 71 $ 42 $ 33 $ 4 $ 9 $ 107 $ 113

For the Six Months Ended

Cybersecurity IoT Licensing and Other Segment Totals

August 31, August 31, August 31, August 31,

2022 2021 2022 2021 2022 2021 2022 2021

Segment revenue $ 224 $ 227 $ 102 $ 83 $ 10 $ 39 $ 336 $ 349

Segment cost of sales 103 95 17 14 4 12 124 121

Segment gross margin (1)

$ 121 $ 132 $ 85 $ 69 $ 6 $ 27 $ 212 $ 228

______________________________

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

Cybersecurity consists of the Company’s BlackBerry Spark® software platform, BlackBerry® AtHoc®, BlackBerry® Alert and BlackBerry® 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 Suite, which are also marketed together as the BlackBerry Spark® Suite, 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 CylancePROTECT®, CylanceOPTICS®, CylancePERSONA®, CylanceGATEWAY™, CylanceGUARD® managed services and other cybersecurity applications.

The BlackBerry Spark platform is a comprehensive offering of security software products and services, including the BlackBerry® Cyber Suite and the BlackBerry Spark® Unified Endpoint Management Suite, which are also marketed together as the BlackBerry Spark® Suite, 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 CylancePROTECT®, CylanceOPTICS®, CylancePERSONA™, CylanceGATEWAY™, CylanceGUARD® managed services, CylancePROTECT Mobile™ and other cybersecurity applications.

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

7 unchanged sentences

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

The following table reconciles total segment gross margin for the three months ended May 31, 2022 and May 31, 2021 to the Company’s consolidated totals:

Three Months Ended

May 31, 2022 May 31, 2021

The following table reconciles total segment gross margin for the three and six months ended August 31, 2022 and August 31, 2021 to the Company’s consolidated totals:

Three Months Ended Six Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

Total segment gross margin $ 107 $ 113 212 $ 228

4 unchanged sentences

Amortization 25 45 52 91

Impairment of long-lived assets 4 — 4 —

Gain on sale of property, plant and equipment, net ( 6 ) — ( 6 ) —

Debentures fair value adjustment ( 10 ) 67 ( 56 ) 63

7 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, 2022 May 31, 2021

Three Months Ended Six Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

North America (1)

$ 85 $ 101 $ 174 $ 212

Europe, Middle East and Africa 61 57 121 102

12 unchanged sentences

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

Three Months Ended

May 31, 2022 May 31, 2021

Three Months Ended Six Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

Products and services transferred over time $ 95 $ 107 $ 193 $ 213

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, 2022:

The following table sets forth the activity in the Company’s revenue contract balances for the six months ended August 31, 2022:

Accounts Receivable Deferred Revenue Deferred Commissions

3 unchanged sentences

Decrease, net ( 38 ) ( 35 ) —

Closing balance as at May 31, 2022 $ 102 $ 222 $ 16

Closing balance as at August 31, 2022 $ 100 $ 209 $ 16

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, 2022 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, 2022 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, 2022

As at August 31, 2022

Less than 12 Months 12 to 24 Months Thereafter Total

Remaining performance obligations $ 176 $ 24 $ 9 $ 209

Revenue recognized for performance obligations satisfied in prior periods

For the three and six months ended August 31, 2022, $ 1 million of revenue was recognized for performance obligations satisfied in a prior period (three and six months ended August 31, 2021 - no 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, 2022 February 28, 2022

August 31, 2022 February 28, 2022

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

$ 1,377 $ 2,381 $ 1,457 $ 2,567

Information About Major Customers

There was one customer that comprised 15 % of the Company’s revenue in the three months ended May 31, 2022 (three months ended May 31, 2021 - no customer comprised more than 10% of the Company’s revenue).

BlackBerry Limited

1 unchanged sentence

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 16 % and 15 % of the Company’s revenue in the three and six months ended August 31, 2022, respectively (three and six months ended August 31, 2021 - one customer that comprised 12 % and no customer that comprised more than 10% 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, 2022 May 31, 2021

Three Months Ended Six Months Ended

August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021

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

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 2023 was transacted in U.S.

The majority of the Company’s revenue in the second quarter of fiscal 2023 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, 2022, approximately 21 % of cash and cash equivalents, 7 % of accounts receivable and 40 % of accounts payable were denominated in foreign currencies (February 28, 2022 – 37 %, 23 % and 30 %, respectively).

At August 31, 2022, approximately 11 % of cash and cash equivalents, 19 % of accounts receivable and 43 % of accounts payable were denominated in foreign currencies (February 28, 2022 – 37 %, 23 % and 30 %, respectively).

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

11 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, 2022, no single issuer represented more than 14 % of the total cash, cash equivalents and investments (February 28, 2022 - no single issuer represented more than 10 % of the total cash, cash equivalents and investments), with the largest such issuer representing non-US government debt securities.

As at August 31, 2022, no single issuer represented more than 22 % of the total cash, cash equivalents and investments (February 28, 2022 - no single issuer represented more than 10 % of the total cash, cash equivalents and investments), with the largest such issuer representing cash balances and bearer deposits with one of the Company’s banking counterparties.

Liquidity risk

Cash, cash equivalents, and investments were approximately $ 721 million as at May 31, 2022.

Cash, cash equivalents, and investments were approximately $ 699 million as at August 31, 2022.

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

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

Government subsidies

During fiscal 2021, the Government of Canada announced the Canada Emergency Wage Subsidy (“CEWS”) and the Canada Emergency Rent Subsidy (“CERS”) for Canadian employers whose businesses were affected by the COVID-19 pandemic.

The CEWS program initially ran for a thirty-six week period between March and November 2020 and the CERS program for a period between September 2020 and July 2021.

The programs were subsequently extended to

BlackBerry Limited

1 unchanged sentence

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

October 2021.

Government subsidies

The CEWS program initially ran for a thirty-six week period between March and November 2020 and the CERS program for a period between September 2020 and July 2021.

The programs were subsequently extended to October 2021.

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

6 unchanged sentences

The HHBRP provides a subsidy of up to 50 % of eligible employees’ employment insurable remuneration, subject to certain criteria, and rent and ran until May 7, 2022 .

The Company applied for the CEWS, CERS and HHBRP to the extent it met the requirements to receive the subsidy and during the three months ended May 31, 2022, recorded $ 4 million in government subsidies as a reduction to operating expenses in the consolidated statement of operations (May 31, 2021 - $ 15 million).

As at May 31, 2022, the Company has recorded $ 4 million in accrued government subsidies within other receivables on the consolidated balance sheet (May 31, 2021 - $ 9 million).

The Company applied for the CEWS, CERS and HHBRP to the extent it met the requirements to receive the subsidy and during the three and six months ended August 31, 2022, recorded nil and $ 4 million, respectively, in government subsidies as a reduction to operating expenses in the consolidated statement of operations (August 31, 2021 - $ 11 million and $ 27 million, respectively).

As at August 31, 2022, the Company has recorded nil in accrued government subsidies within other receivables on the consolidated balance sheet (February 28, 2022 - $ 8 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