What changed in this filing

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Item 1. Financial Statements

2022-12-21 compared with 2022-09-28 · 164 added, 150 removed, 656 unchanged (32% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets

August 31, 2022 February 28, 2022

November 30, 2022 February 28, 2022

Cash and cash equivalents (note 2) $ 255 $ 378

13 unchanged sentences

Accounts payable $ 21 $ 22

Accrued liabilities (note 3 and note 9) 300 157

Accrued liabilities (note 3) 154 157

Income taxes payable (note 4) 21 11

Debentures (note 5) 392 —

Deferred revenue, current (note 10) 179 207

21 unchanged sentences

Consolidated Statements of Shareholders’ Equity

Three Months Ended August 31, 2022

Three Months Ended November 30, 2022

Capital Stock

2 unchanged sentences

Comprehensive Loss Total

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

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

Net loss — ( 4 ) — ( 4 )

Other comprehensive loss — — ( 8 ) ( 8 )

Other comprehensive income — — 2 2

Stock-based compensation 9 — — 9

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

Three Months Ended August 31, 2021

Shares issued:

Employee share purchase plan 2 — — 2

Balance as at November 30, 2022 $ 2,898 $ ( 1,533 ) $ ( 26 ) $ 1,339

Three Months Ended November 30, 2021

Capital Stock

2 unchanged sentences

Comprehensive Loss Total

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

Net loss — ( 144 ) — ( 144 )

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

Net income — 74 — 74

Other comprehensive loss — — ( 5 ) ( 5 )

1 unchanged sentence

Shares issued:

Exercise of stock options 1 — — 1

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

Employee share purchase plan 4 — — 4

Balance as at November 30, 2021 $ 2,857 $ ( 1,438 ) $ ( 20 ) $ 1,399

See notes to consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Shareholders’ Equity

Six Months Ended August 31, 2022

Nine Months Ended November 30, 2022

Capital Stock

8 unchanged sentences

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

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

Six Months Ended August 31, 2021

Balance as at November 30, 2022 $ 2,898 $ ( 1,533 ) $ ( 26 ) $ 1,339

Nine Months Ended November 30, 2021

Capital Stock

9 unchanged sentences

Employee share purchase plan 7 — — 7

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

Balance as at November 30, 2021 $ 2,857 $ ( 1,438 ) $ ( 20 ) $ 1,399

See notes to consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Operations

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Revenue (note 10) $ 169 $ 184 $ 505 $ 533

10 unchanged sentences

111 66 545 491

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

Investment loss, net ( 2 ) ( 1 ) ( 3 ) ( 3 )

Loss before income taxes ( 49 ) ( 142 ) ( 227 ) ( 202 )

Operating income (loss) ( 2 ) 51 ( 226 ) ( 148 )

Investment income (loss), net 2 25 ( 1 ) 22

Income (loss) before income taxes — 76 ( 227 ) ( 126 )

Provision for income taxes (note 4) 4 2 12 6

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

Loss per share (note 7)

Net income (loss) $ ( 4 ) $ 74 $ ( 239 ) $ ( 132 )

Earnings (loss) per share (note 7)

Basic $ ( 0.01 ) $ 0.13 $ ( 0.41 ) $ ( 0.23 )

3 unchanged sentences

(United States dollars, in millions) (unaudited)

Consolidated Statements of Comprehensive Loss

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 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 )

Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Net income (loss) $ ( 4 ) $ 74 $ ( 239 ) $ ( 132 )

Other comprehensive income (loss)

Net change in fair value and amounts reclassified to net loss from derivatives designated as cash flow hedges during the period, net of income taxes of nil for the three and nine months ended November 30, 2022 and November 30, 2021 (note 8) — — ( 1 ) ( 1 )

Foreign currency translation adjustment 1 ( 4 ) ( 9 ) ( 6 )

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 )

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 nine months ended November 30, 2022 and November 30, 2021 (note 5) 1 ( 1 ) 3 —

Other comprehensive income (loss) 2 ( 5 ) ( 7 ) ( 7 )

Comprehensive income (loss) $ ( 2 ) $ 69 $ ( 246 ) $ ( 139 )

See notes to consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Cash Flows

Six Months Ended

August 31, 2022 August 31, 2021

Nine Months Ended

November 30, 2022 November 30, 2021

Cash flows from operating activities

3 unchanged sentences

Stock-based compensation 23 25

Gain on sale of investment — ( 22 )

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

15 unchanged sentences

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

Distribution from long-term investments — 35

Acquisition of property, plant and equipment ( 5 ) ( 6 )

9 unchanged sentences

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

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

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period ( 124 ) 82

Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period 406 218

10 unchanged sentences

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

Operating results for the three and 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.

Operating results for the three and nine months ended November 30, 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.

42 unchanged sentences

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

The Company’s cash and cash equivalents, accounts receivable, other receivables, accounts payable and accrued liabilities are carried at amounts that approximate their fair values (Level 2 measurement) due to their short maturities.

Recurring Fair Value Measurements

The Company’s cash and cash equivalents, accounts receivable, other receivables, accounts payable and accrued liabilities are measured at an amount that approximates their fair values (Level 2 measurement) due to their short maturities.

In determining the fair value of investments held, the Company primarily relies on an independent third-party valuator for the fair valuation of securities.

4 unchanged sentences

The Company also holds certain public equity securities obtained through an initial public offering by the issuer of a previously held non-marketable equity investment.

For a description of how the fair value of the 1.75% Debentures (as defined in Note 5) was determined, see the “Convertible debentures” accounting policies in Note 1 to the Annual Financial Statements.

For a description of how the fair value of the 1.75% Debentures was determined, see the “Convertible debentures” accounting policies in Note 1 to the Annual Financial Statements.

The 1.75% Debentures are classified as Level 3.

5 unchanged sentences

Impairment of Long-Lived Assets

During the second quarter of fiscal 2023, the Company decided to exit and seek subleases for certain leased facilities.

During the second quarter of fiscal 2023, the Company exited certain leased facilities and is in the process of seeking subleases for those properties.

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.

6 unchanged sentences

Cash, Cash Equivalents and Investments

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

The components of cash, cash equivalents and investments by fair value level as at November 30, 2022 were as follows:

Cost Basis (1)

9 unchanged sentences

Term deposits and certificates of deposits 34 — — 34 9 — — 25

Bearer deposit notes 126 — — 126 126 — — —

Bankers’ acceptances/bearer deposit notes 102 — — 102 102 — — —

Commercial paper 208 — — 208 80 128 — —

32 unchanged sentences

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

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.

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

As of November 30, 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 nine months ended November 30, 2022 and November 30, 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.

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

The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents as at November 30, 2022 and February 28, 2022 from the consolidated balance sheets to the consolidated statements of cash flows:

November 30, 2022 February 28, 2022

Cash and cash equivalents $ 255 $ 378

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

August 31, 2022 February 28, 2022

The contractual maturities of available-for-sale investments as at November 30, 2022 and February 28, 2022 were as follows:

November 30, 2022 February 28, 2022

Cost Basis Fair Value Cost Basis Fair Value

2 unchanged sentences

$ 431 $ 421 $ 644 $ 635

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

As at November 30, 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 August 31, 2022 was $ 4 million (February 28, 2022 - $ 4 million).

The allowance for credit losses as at November 30, 2022 was $ 5 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

Carrying Amount

Beginning balance as of February 28, 2021 $ 10

2 unchanged sentences

Ending balance of the allowance for credit loss as at February 28, 2022 4

Current period recovery for expected credit losses —

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%).

Current period provision for expected credit losses 1

Ending balance of the allowance for credit loss as at November 30, 2022 $ 5

The allowance for credit losses as at November 30, 2022 consists of $ 2 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 one customer that comprised more than 10% of accounts receivable as at November 30, 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 November 30, 2022, other receivables included items such as claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund program’s investment in BlackBerry QNX, 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.

4 unchanged sentences

Other current assets comprised the following:

August 31, 2022 February 28, 2022

November 30, 2022 February 28, 2022

Intellectual property $ 134 $ 118

3 unchanged sentences

Pursuant to the patent sale agreement, the Company would receive a license back to the patents being sold, which relate primarily to mobile devices, messaging and wireless networking.

Completion of the revenue transaction is subject to the satisfaction of closing conditions.

Catapult continues to work on securing its required financing;

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

Catapult is working with a financing partner and the parties are negotiating definitive closing documents.

In parallel, the Company is in advanced term sheet discussions with a second interested party which has completed its due diligence on the portfolio.

This alternate party is a prominent private equity firm that would not require external financing.

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 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.

As at November 30, 2022, the Company continues to classify $ 134 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:

August 31, 2022 February 28, 2022

November 30, 2022 February 28, 2022

BlackBerry operations and other information technology $ 96 $ 92

12 unchanged sentences

Intangible assets comprised the following:

As at August 31, 2022

As at November 30, 2022

Cost Accumulated

11 unchanged sentences

$ 1,634 $ 1,112 $ 522

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:

For the nine months ended November 30, 2022, amortization expense related to intangible assets amounted to $ 76 million (nine months ended November 30, 2021 - $ 130 million).

Total additions to intangible assets for the nine months ended November 30, 2022 amounted to $ 24 million (nine months ended November 30, 2021 - $ 22 million) and included additions related to patent maintenance classified as other current assets on the Company’s consolidated balance sheets.

During the nine months ended November 30, 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 November 30, 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 - $ 25 million;

3 unchanged sentences

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

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

Changes to the carrying amount of goodwill during the nine months ended November 30, 2022 were as follows:

Carrying Amount

5 unchanged sentences

dollar denominated goodwill ( 5 )

Carrying amount as at August 31, 2022 $ 837

Carrying amount as at November 30, 2022 $ 839

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.

1 unchanged sentence

Other Long-term Assets

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.

As at November 30, 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:

August 31, 2022 February 28, 2022

Accrued settlement (note 9)

November 30, 2022 February 28, 2022

Accrued royalties $ 20 $ 20

Operating lease liabilities, current 25 28

Other 109 109

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 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.

For the nine months ended November 30, 2022, the Company’s net effective income tax expense rate was approximately 5 % compared to a net effective income tax expense rate of 5 % for the nine months ended November 30, 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, 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 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’s total unrecognized income tax benefits as at November 30, 2022 were $ 20 million (February 28, 2022 - $ 20 million).

As at November 30, 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.

2 unchanged sentences

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

The 1.75% Debentures mature on November 13, 2023 .

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

3 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 7.19 % as of August 31, 2022.

The Company’s credit spread was determined to be 7.90 % as of the issuance date of the 1.75% Debentures and 7.52 % as of November 30, 2022.

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

The fair value of the 1.75% Debentures on September 1, 2020 was determined to be approximately $ 456 million and the implied discount approximately $ 91 million.

The Company determined the implied discount on the 1.75% Debentures by calculating the

The fair value of the 1.75% Debentures on September 1, 2020 was determined to be approximately $ 456 million and the implied discount

BlackBerry Limited

1 unchanged sentence

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

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 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

approximately $ 91 million.

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 nine months ended November 30, 2022, which also represents the total changes through earnings of items classified as Level 3 in the fair value hierarchy:

November 30, 2022

Balance as at February 28, 2022 $ 507

Change in fair value of the 1.75% Debentures ( 115 )

Balance as at August 31, 2022 $ 449

Balance as at November 30, 2022 $ 392

The difference between the fair value of the 1.75% Debentures and the unpaid principal balance of $ 365 million is $ 27 million.

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 (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).

The following table shows the impact of the changes in fair value of the 1.75% Debentures for the three and nine months ended November 30, 2022 and November 30, 2021:

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Income associated with the change in fair value from non-credit components recorded in the consolidated statements of operations $ 56 $ 110 $ 112 $ 47

Income (charge) associated with the change in fair value from instrument-specific credit components recorded in AOCL 1 ( 1 ) 3 —

Total decrease in the fair value of the 1.75% Debentures $ 57 $ 109 $ 115 $ 47

For the three and nine months ended November 30, 2022, the Company recorded interest expense related to the 1.75% Debentures of $ 2 million, and $ 5 million which has been included in investment income (loss), net on the Company’s consolidated statements of operations (three and nine months ended November 30, 2021 - $ 2 million and $ 5 million).

Fairfax, a related party under U.S.

2 unchanged sentences

Fairfax receives interest at the same rate as other holders of the 1.75% Debentures.

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)

CAPITAL STOCK

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

The following details the changes in issued and outstanding common shares for the nine months ended November 30, 2022:

Capital Stock and

6 unchanged sentences

Common shares issued for employee share purchase plan 960 6

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.

Common shares outstanding as at November 30, 2022 580,346 $ 2,898

The Company had 580 million voting common shares outstanding, 0.5 million options to purchase voting common shares, 13 million RSUs and 2 million DSUs outstanding as at December 16, 2022.

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

2 unchanged sentences

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

LOSS PER SHARE

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

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 )

EARNINGS ( LOSS) PER SHARE

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

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Net income (loss) for basic earnings (loss) per share available to common shareholders $ ( 4 ) $ 74 $ ( 239 ) $ ( 132 )

1.75% Debentures fair value adjustment (1)

8 unchanged sentences

Weighted average number of shares and assumed conversions (000’s) diluted 639,781 631,971 638,551 629,710

Loss per share - reported

Earnings (loss) per share - reported

$ ( 0.01 ) $ 0.13 $ ( 0.41 ) $ ( 0.23 )

1 unchanged sentence

______________________________

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

(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 nine months ended November 30, 2022 and November 30, 2021.

Accordingly, to calculate diluted loss per share, the Company adjusted net income (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 nine months ended November 30, 2022 and November 30, 2021, 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.

(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.

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

(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 nine months ended November 30, 2022 and November 30, 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 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

The changes in AOCL by component net of tax, for the three and nine months ended November 30, 2022 and November 30, 2021 were as follows:

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Cash Flow Hedges

1 unchanged sentence

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

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

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

Accumulated net unrealized gains on derivative instruments designated as cash flow hedges $ ( 1 ) $ — $ ( 1 ) $ —

1 unchanged sentence

Balance, beginning of period $ ( 20 ) $ ( 6 ) $ ( 10 ) $ ( 4 )

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

Other comprehensive income (loss) 1 ( 4 ) ( 9 ) ( 6 )

Foreign currency cumulative translation adjustment $ ( 19 ) $ ( 10 ) $ ( 19 ) $ ( 10 )

1 unchanged sentence

Balance, beginning of period $ ( 6 ) $ ( 8 ) $ ( 8 ) $ ( 9 )

Other comprehensive income before reclassification — — 2 1

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

Change in fair value from instruments-specific credit risk on 1.75% Debentures $ ( 5 ) $ ( 9 ) $ ( 5 ) $ ( 9 )

4 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 August 31, 2022.

The Company had $ 25 million in collateralized outstanding letters of credit in support of certain leasing arrangements entered into in the ordinary course of business as of November 30, 2022.

See the discussion of restricted cash in Note 2.

15 unchanged sentences

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

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;

As of November 30, 2022, there are no other 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.

16 unchanged sentences

see “Litigation Settlement” below in this Note 9.

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 July 23, 2014, the plaintiff in the putative Ontario class action ( Swisscanto Fondsleitung AG v.

BlackBerry Limited, et al.

) 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.

5 unchanged sentences

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.

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

BlackBerry Limited ).

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.

5 unchanged sentences

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

The parties participated in a mediation on November 9, 2022, which did not result in an agreement.

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

1 unchanged sentence

In the first quarter of fiscal 2019, the Board approved a compensation package for the Company’s Executive Chair and CEO as an incentive to remain as Executive Chair until November 23, 2023.

As part of the package, the Company’s Executive Chair and CEO is entitled to receive a contingent performance-based cash award in the amount of $ 90 million that will become earned and payable should the 10-day average closing price of the Company’s common shares on the New York Stock Exchange reach $ 30 before November 3, 2023 .

As part of the package, the Company’s Executive Chair and CEO is entitled to receive a contingent performance-based cash award in the amount of $ 90 million that will become earned and payable should the volume-weighted 10-day average trading price of the Company’s common shares on the New York Stock Exchange reach $ 30 before November 3, 2023 .

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

As at November 30, 2022, the liability recorded in association with this award is nominal (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 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.

As at November 30, 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.

31 unchanged sentences

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

On September 29, 2022, the Court granted final approval of the settlement and entered final judgment.

(d) Indemnifications

18 unchanged sentences

Cybersecurity, IoT, and Licensing and Other.

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

The following table shows information by operating segment for the three and nine months ended November 30, 2022 and November 30, 2021:

For the Three Months Ended

Cybersecurity IoT Licensing and Other Segment Totals

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

November 30, November 30, November 30, November 30,

2022 2021 2022 2021 2022 2021 2022 2021

3 unchanged sentences

$ 60 $ 76 $ 41 $ 35 $ 8 $ 7 $ 109 $ 118

For the Six Months Ended

For the Nine Months Ended

Cybersecurity IoT Licensing and Other Segment Totals

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

November 30, November 30, November 30, November 30,

2022 2021 2022 2021 2022 2021 2022 2021

17 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 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

The following table reconciles total segment gross margin for the three and nine months ended November 30, 2022 and November 30, 2021 to the Company’s consolidated totals:

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Total segment gross margin $ 109 $ 118 321 $ 346

8 unchanged sentences

Litigation settlement — — 165 —

Investment loss, net 2 1 3 3

Consolidated loss before income taxes $ ( 49 ) $ ( 142 ) $ ( 227 ) $ ( 202 )

Investment income (loss), net ( 2 ) ( 25 ) 1 ( 22 )

Consolidated income (loss) before income taxes $ — $ 76 $ ( 227 ) $ ( 126 )

______________________________

3 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 Six Months Ended

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

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

North America (1)

14 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Products and services transferred over time $ 88 $ 111 $ 281 $ 324

2 unchanged sentences

Revenue contract balances

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

The following table sets forth the activity in the Company’s revenue contract balances for the nine months ended November 30, 2022:

Accounts Receivable Deferred Revenue Deferred Commissions

2 unchanged sentences

Decrease due to payment, fulfillment of performance obligations, or other ( 524 ) ( 479 ) ( 17 )

Decrease, net ( 38 ) ( 35 ) —

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

Increase (decrease), net ( 7 ) ( 35 ) 1

Closing balance as at November 30, 2022 $ 131 $ 209 $ 17

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 August 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 November 30, 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 August 31, 2022

As at November 30, 2022

Less than 12 Months 12 to 24 Months Thereafter Total

1 unchanged sentence

Revenue recognized for performance obligations satisfied in prior periods

For the three and 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).

For the three and nine months ended November 30, 2022, nil and $ 1 million of revenue was recognized for performance obligations satisfied in a prior period (three and nine months ended November 30, 2021 - $ 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:

August 31, 2022 February 28, 2022

November 30, 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

7 unchanged sentences

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).

There was one customer that comprised 11 % and 14 % of the Company’s revenue in the three and nine months ended November 30, 2022, respectively (three and nine months ended November 30, 2021 - one customer that comprised 14 % and 11 % 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 Six Months Ended

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

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Interest paid during the period $ 2 $ 2 $ 5 $ 5

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 second quarter of fiscal 2023 was transacted in U.S.

The majority of the Company’s revenue in the third 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 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).

At November 30, 2022, approximately 25 % of cash and cash equivalents, 41 % of accounts receivable and 44 % 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 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 $ 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.

As at November 30, 2022, no single issuer represented more than 19 % 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, bearer deposits, term deposits and bankers’ acceptances with one of the Company’s banking counterparties.

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

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

As at November 30, 2022, the Company had $ 1 million in collateral posted with counterparties (February 28, 2022 - nil in collateral posted).

BlackBerry Limited

1 unchanged sentence

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

Liquidity risk

Cash, cash equivalents, and investments were approximately $ 505 million as at November 30, 2022.

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

Government subsidies

10 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 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).

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 nine months ended November 30, 2022, recorded nil and $ 4 million, respectively, in government subsidies as a reduction to operating expenses in the consolidated statement of operations (November 30, 2021 - $ 3 million and $ 30 million, respectively).

As at November 30, 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