UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________________
FORM 6-K
_________________________________________________________________
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For the month of, December 2019
_________________________________________________________________  
Commission File Number 1-38232
_________________________________________________________________  
BlackBerry Limited
(Translation of registrant’s name into English)
_________________________________________________________________ 
2200 University Avenue East, Waterloo, Ontario, Canada N2K 0A7
(Address of principal executive offices)
_________________________________________________________________ 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40F:
Form 20-F  ¨            Form 40-F  x
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨






DOCUMENTS INCLUDED AS PART OF THIS REPORT
Document
1.    Consolidated Financial Statements for the Three and Nine Months Ended November 30, 2019.
2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three and Nine Months Ended November 30, 2019.
3.
Canadian Forms 52-109F2 - Certification of Interim Filings
This Report on Form 6-K is incorporated by reference into the Registration Statements on Form S-8 of the Registrant, which were originally filed with the Securities and Exchange Commission on March 28, 2002 (File No. 333-85294), October 21, 2002 (File No. 333-100684), April 28, 2008 (File No. 333-150470), October 3, 2011 (File No. 333-177149), July 10, 2013 (File No. 333-189880), December 20, 2013 (File No. 333-192986 and 333-192987), July 25, 2014 (File No. 333-197636), August 20, 2015 (File No. 333-206480), February 12, 2016 (File No. 333-209525), August 24, 2017 (File No. 333-220153), February 22, 2019 (File No. 333-229799) and on March 5, 2019 (File No. 333-230079).







BlackBerry Limited
Incorporated under the Laws of Ontario
(United States dollars, in millions) (unaudited)
Consolidated Balance Sheets
 
As at
 
November 30, 2019

February 28, 2019
Assets
 
 
 
Current
 
 
 
Cash and cash equivalents
$
515


$
548

Short-term investments
367


368

Accounts receivable, net
216


233

Other receivables
13


19

Income taxes receivable
10


9

Other current assets
58


56

 
1,179

 
1,233

Restricted cash and cash equivalents
32


34

Long-term investments
56


55

Other long-term assets
23


28

Deferred income tax assets


2

Operating lease right-of-use assets
133



Property, plant and equipment, net
76


85

Goodwill
1,459


1,463

Intangible assets, net
955


1,068

 
$
3,913

 
$
3,968

Liabilities
 
 
 
Current
 
 
 
Accounts payable
$
27


$
48

Accrued liabilities
193


192

Income taxes payable
19


17

Debentures
609

 

Deferred revenue, current
264


253

 
1,112

 
510

Deferred revenue, non-current
117


136

Operating lease liabilities
127



Other long-term liabilities
8


19

Long-term debentures


665

Deferred income tax liabilities
1


2

 
1,365

 
1,332

Commitments and contingencies (Note 11)
 
 
 
Shareholders’ equity
 
 
 
Capital stock and additional paid-in capital
 
 
 
Preferred shares: authorized unlimited number of non-voting, cumulative, redeemable and retractable
 
 
 
Common shares: authorized unlimited number of non-voting, redeemable, retractable Class A common shares and unlimited number of voting common shares
 
 
 
Issued - 552,131,972 voting common shares (February 28, 2019 - 547,357,972)
2,742


2,688

Deficit
(157
)

(32
)
Accumulated other comprehensive loss
(37
)

(20
)
 
2,548

 
2,636

 
$
3,913

 
$
3,968

See notes to consolidated financial statements.
On behalf of the Board: 
John S. Chen
Barbara Stymiest
Director
Director



BlackBerry Limited
(United States dollars, in millions) (unaudited)

Consolidated Statements of Shareholders’ Equity
 
 
Capital Stock
and Additional
Paid-in Capital
 
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
Balance as at February 28, 2019
$
2,688

 
$
(32
)
 
$
(20
)
 
$
2,636

Net loss

 
(111
)
 

 
(111
)
Other comprehensive loss

 

 
(17
)
 
(17
)
Cumulative impact of adoption of ASC 842

 
(14
)
 

 
(14
)
Shares issued:
 
 
 
 
 
 
 
Stock-based compensation
46

 

 

 
46

Exercise of stock options
2

 

 

 
2

Employee share purchase plan
6

 

 

 
6

Balance as at November 30, 2019
$
2,742

 
$
(157
)
 
$
(37
)
 
$
2,548

 
Capital Stock
and Additional
Paid-in Capital
 
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
Balance as at February 28, 2018
$
2,560

 
$
(45
)
 
$
(10
)
 
$
2,505

Net income

 
42

 

 
42

Cumulative impact of adoption of ASC 606

 
(86
)
 

 
(86
)
Cumulative impact of adoption of ASU 2016-01

 
6

 
(6
)
 

Shares issued:
 
 
 
 
 
 
 
Stock-based compensation
53

 

 

 
53

Exercise of stock options
1

 

 

 
1

Employee share purchase plan
4

 

 

 
4

Balance as at November 30, 2018
$
2,618

 
$
(83
)
 
$
(16
)
 
$
2,519

See notes to consolidated financial statements.







BlackBerry Limited
(United States dollars, in millions, except per share data) (unaudited)

Consolidated Statements of Operations
 
 
Three Months Ended
 
Nine Months Ended
 
November 30, 2019
 
November 30, 2018
 
November 30, 2019
 
November 30, 2018
Revenue
$
267

 
$
226

 
$
758

 
$
649

Cost of sales
69

 
56

 
207

 
157

Gross margin
198

 
170

 
551

 
492

Operating expenses
 
 
 
 
 
 
 
Research and development
66

 
55

 
199

 
167

Selling, marketing and administration
132

 
93

 
385

 
299

Amortization
49

 
33

 
146

 
105

Debentures fair value adjustment
(20
)
 
(69
)
 
(71
)
 
(111
)
 
227

 
112

 
659

 
460

Operating income (loss)
(29
)
 
58

 
(108
)
 
32

Investment income (loss), net
(1
)
 
2

 
2

 
13

Income (loss) before income taxes
(30
)
 
60

 
(106
)
 
45

Provision for income taxes
2

 
1

 
5

 
3

Net income (loss)
$
(32
)
 
$
59

 
$
(111
)
 
$
42

Earnings (loss) per share
 
 
 
 

 
 
Basic
$
(0.06
)
 
$
0.11

 
$
(0.20
)
 
$
0.08

Diluted
$
(0.07
)
 
$
(0.01
)
 
$
(0.27
)
 
$
(0.09
)
See notes to consolidated financial statements.



BlackBerry Limited
(United States dollars, in millions) (unaudited)

Consolidated Statements of Comprehensive Income (Loss)
 
Three Months Ended
 
Nine Months Ended
 
November 30, 2019
 
November 30, 2018
 
November 30, 2019
 
November 30, 2018
Net income (loss)
$
(32
)
 
$
59

 
$
(111
)
 
$
42

Other comprehensive income (loss)
 
 
 
 
 
 
 
Net change in unrealized gains on available-for-sale debt securities

 

 

 
1

Net change in fair value of derivatives designated as cash flow hedges during the period, net of income taxes of nil for the three and nine months ended November 30, 2019 and November 30, 2018

 
(2
)
 

 
(3
)
Amounts reclassified to net income (loss) during the period for derivatives designated as cash flow hedges, net of income taxes of nil for the three and nine months ended November 30, 2019 and November 30, 2018

 
1

 

 
2

Foreign currency translation adjustment

 
(2
)
 
(2
)
 
(6
)
Gain (loss) from change in fair value from instrument-specific credit risk on the Debentures
(2
)
 
5

 
(15
)
 
6

Other comprehensive income (loss)
(2
)
 
2

 
(17
)
 

Comprehensive income (loss)
$
(34
)
 
$
61

 
$
(128
)
 
$
42

See notes to consolidated financial statements.



BlackBerry Limited
(United States dollars, in millions) (unaudited)

Consolidated Statements of Cash Flows
 
Nine Months Ended
 
November 30, 2019

November 30, 2018
Cash flows from operating activities
 
 
 
Net income (loss)
$
(111
)
 
$
42

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

 

Amortization
160

 
116

Stock-based compensation
46

 
53

Non-cash consideration received from contract with a customer
(8
)
 

Debentures fair value adjustment
(71
)
 
(111
)
Other long-term assets

 
2

Operating leases
(12
)
 

Other
9

 
4

Net changes in working capital items:


 
 
Accounts receivable, net
17

 
13

Other receivables
6

 
46

Income taxes receivable
(1
)
 
13

Other assets
3

 
(1
)
Accounts payable
(21
)
 
(14
)
Income taxes payable
2

 
(1
)
Accrued liabilities
(24
)
 
(57
)
Deferred revenue
(10
)
 
(23
)
Other long-term liabilities
7

 

Net cash provided by (used in) operating activities
(8
)
 
82

Cash flows from investing activities

 
 
Acquisition of long-term investments
(1
)

(2
)
Proceeds on sale or maturity of long-term investments


2

Acquisition of property, plant and equipment
(9
)

(14
)
Proceeds on sale of property, plant and equipment


1

Acquisition of intangible assets
(24
)

(24
)
Business acquisitions, net of cash acquired
1



Acquisition of short-term investments
(829
)

(2,754
)
Proceeds on sale or maturity of short-term investments
830


2,962

Net cash provided by (used in) investing activities
(32
)

171

Cash flows from financing activities

 
 
Issuance of common shares
8


5

Finance lease liability
(2
)


Net cash provided by financing activities
6

 
5

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

(3
)
Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period
(35
)
 
255

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


855

Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period
$
547

 
$
1,110

See notes to consolidated financial statements.


BlackBerry Limited
Notes to the Consolidated Financial Statements
(In millions of United States dollars, except share and per share data, and except as otherwise indicated) (unaudited)


1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES
Basis of Presentation and Preparation
These interim consolidated financial statements have been prepared by management in accordance with United States generally accepted accounting principles (“U.S. GAAP”). They do not include all of the disclosures required by U.S. GAAP for annual financial statements and should be read in conjunction with the audited consolidated financial statements of BlackBerry Limited (the “Company”) for the year ended February 28, 2019 (the “Annual Financial Statements”), which have been prepared in accordance with U.S. GAAP. In the opinion of management, all normal recurring adjustments considered necessary for fair presentation have been included in these interim consolidated financial statements. Operating results for the three and nine months ended November 30, 2019 are not necessarily indicative of the results that may be expected for the full year ending February 29, 2020.
Certain comparative figures have been reclassified to conform to the current period’s presentation.
The Company operates as a single reportable segment. For additional information concerning the Company’s segment reporting, see Note 13.
Correction of Previously Issued Financial Statements
Accounts receivable, contract assets and contract liabilities associated with certain contracts with customers accounted for under Accounting Standard Codification 606 (“ASC 606”)
During the third quarter of fiscal 2020, the Company corrected an error associated with the presentation of accounts receivable and associated deferred revenues for certain contracts with customers on the comparative February 28, 2019 consolidated balance sheets. This correction has no impact to the deficit or the consolidated statement of operations for any period and impacts only the consolidated balance sheet as at February 28, 2019.
Under ASC 606, a receivable is recorded when it is unconditional; that is, the only thing required for its collection is the passage of time. If a receivable is not unconditional, the amount is treated as a contract asset and netted against any contract liabilities, such as deferred revenue, associated with the same contract. Most of the Company’s contracts for its Internet of Things (“IoT”) software and services contain customer termination provisions, but do not have refund rights for the unused portion of any contract.
As, contractually, all amounts are owed to the Company regardless of the customer’s actions, the Company has determined that the associated accounts receivable are unconditional and should not have been treated as contract assets, and would therefore not be netted against the associated deferred revenue.
The Company continues to net receivables that are not unconditional with the associated deferred revenue, such as pre-billed professional services or contracts with customers that have refund provisions.
As a result of the correction, the balances in the Company’s consolidated balance sheet as at February 28, 2019 have been reclassified in the consolidated balance sheets as at November 30, 2019 as follows:
 
As at
February 28, 2019
(as previously disclosed)
 
Correction
 
As at
February 28, 2019
(corrected)
Assets
 
 
 
 
 
Accounts receivable, net
$
194

 
$
39

 
$
233

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Deferred revenue, current
214

 
39

 
253


Significant Accounting Policies and Critical Accounting Estimates
There have been no material changes to the Company’s accounting policies or critical accounting estimates from those described in the Annual Financial Statements, except as described below, which were adopted during fiscal 2020.


1

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)

Leases
On March 1, 2019, the Company adopted the new standard on leases, Accounting Standards Codification 842 (“ASC 842”). The Company determines if an arrangement is or contains a lease at inception. Such determination requires consideration of all relevant facts and circumstances. Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued liabilities, and operating lease liabilities on the Company’s consolidated balance sheets. Finance leases are included in property, plant and equipment, net, accrued liabilities, and other long-term liabilities on the Company’s consolidated balance sheets.  
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As most of the Company’s leases do not provide an implicit discount rate, the Company primarily uses its incremental borrowing rate, based on the information available at the commencement date of the lease, in determining the present value of future payments. The Company’s incremental borrowing rate is determined based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment. The operating lease ROU asset includes any lease payments made, lease incentives and initial direct costs incurred. The lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. In some cases, the Company has index-based variable lease payments for which an estimated rate is applied to the initial lease payment to determine future lease payment amounts.
The Company has building, car and data center lease agreements with lease and non-lease components that are accounted for separately. The Company has elected the short-term lease exemption, which allows the Company to not apply the recognition requirements to lease terms of 12 months or less on commencement date. The Company also elected the package of practical expedients where lease classification, embedded leases, and initial direct costs are not reassessed upon adoption of ASC 842.
For additional information concerning the Company’s leases, see Note 12.
Derivative financial instruments
On March 1, 2019, the Company adopted the new Accounting Standards Update (“ASU”) 2017-12 related to accounting for hedging activities. The Company uses derivative financial instruments, including forward contracts and options, to hedge certain foreign currency exposures. The Company does not use derivative financial instruments for speculative purposes.
The Company records all derivative instruments at fair value on the consolidated balance sheets. The fair value of these instruments is calculated based on notional and exercise values, transaction rates, market quoted currency spot rates, forward points, volatilities and interest rate yield curves. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative instrument and the resulting designation.
For derivative instruments designated as cash flow hedges, the entire change in the value of the hedging instrument included in the assessment of hedge effectiveness is initially reported as a component of accumulated other comprehensive income (loss) (“AOCI”), net of tax, and subsequently reclassified into income in the same period or periods in which the hedged item affects income. In order for the Company to receive hedge accounting treatment, the cash flow hedge must be highly effective in offsetting changes in the value of the hedged item and the relationship between the hedging instrument and the associated hedged item must be formally documented at the inception of the hedge relationship. Hedge effectiveness is formally assessed, both at hedge inception and on an ongoing basis, to determine whether the derivatives used in hedging transactions are highly effective in offsetting changes in the value of the hedged items and whether they are expected to continue to be highly effective in future periods.
The Company formally documents relationships between hedging instruments and associated hedged items. This documentation includes: identification of the specific foreign currency asset, liability or forecasted transaction being hedged; the nature of the risk being hedged; the hedge objective; and the method of assessing hedge effectiveness. If an anticipated transaction is deemed no longer likely to occur, the corresponding derivative instrument is de-designated as a hedge and any associated unrealized gains and losses in AOCI are recognized in income at that time. Any future changes in the fair value of the instrument are recognized in current income.
For any derivative instruments that do not meet the requirements for hedge accounting, or for any derivative instruments for which hedge accounting is not elected, the changes in fair value of the instruments are recognized in income in the current period and will generally offset the changes in the U.S. dollar value of the associated asset, liability or forecasted transaction.

2

BlackBerry Limited
Notes to the Consolidated Financial Statements
(In millions of United States dollars, except share and per share data, and except as otherwise indicated) (unaudited)

Accounting Standards Adopted during Fiscal 2020
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASC 842 on leases. The standard requires companies to include lease obligations in their balance sheets, including a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases result in the lessee recognizing a ROU asset and a corresponding lease liability. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred on transition. For finance leases, the lessee will recognize interest expense and amortization of the ROU asset, and for operating leases, the lessee will recognize a straight-line total lease expense. The guidance is effective for interim and annual periods beginning after December 15, 2018. The Company adopted this guidance in the first quarter of fiscal 2020 using the modified retrospective method for all leases that existed at or commence after the date of initial application. As a result of the adoption of the new standard on leases, the Company recognized ROU assets of approximately $161 million, lease liabilities of approximately $175 million, and a cumulative adjustment to increase the deficit of approximately $14 million in the consolidated balance sheet as at March 1, 2019. Future lease costs included in the Resource Alignment Program (“RAP”) of approximately $14 million, which were accrued for prior to adoption of ASC 842, and were previously included in accrued liabilities and other long-term liabilities, are now presented in accrued liabilities and operating lease liabilities in the consolidated balance sheet as at March 1, 2019. As a result, total operating lease liabilities were $189 million in the consolidated balance sheet as at March 1, 2019.
In August 2017, the FASB issued ASU 2017-12. This guidance expands the range of strategies that qualify for hedge accounting, changes how certain hedging relationships are presented in the financial statements, and simplifies the application of hedge accounting in certain situations. The guidance is effective for interim and annual periods beginning after December 15, 2018. The Company adopted this guidance in the first quarter of fiscal 2020 and it did not have a material impact to the consolidated financial results.
Issued Accounting Pronouncements
In June 2016, the FASB issued guidance related to the measurement of credit losses on financial instruments, ASU 2016-13. This guidance replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses, requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates, and requires entities to estimate an expected lifetime credit loss on its financial assets. The guidance is effective for interim and annual periods beginning after December 15, 2019. The Company will adopt this guidance in the first quarter of fiscal 2021 and is currently evaluating the impact that the adoption will have on its results of operations, financial position and disclosures.
2.
FAIR VALUE MEASUREMENTS, CASH, CASH EQUIVALENTS AND INVESTMENTS
Fair Value
The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use in pricing the asset or liability such as inherent risk, non-performance risk and credit risk. The Company applies the following fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value into three levels:
Level 1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.
Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Significant unobservable inputs that are supported by little or no market activity.
The fair value hierarchy also requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Recurring Fair Value Measurements
The carrying amounts of the Company’s cash and cash equivalents, accounts receivable, other receivables, accounts payable and accrued liabilities approximate their fair values due to their short maturities.

3

BlackBerry Limited
Notes to the Consolidated Financial Statements
(In millions of United States dollars, except share and per share data, and except as otherwise indicated) (unaudited)

In determining the fair value of investments held (other than those classified as Level 3), the Company primarily relies on an independent third-party valuator for the fair valuation of securities. The Company also reviews the inputs used in the valuation process and assesses the pricing of the securities for reasonableness after conducting its own internal collection of quoted prices from brokers. Fair values for all investment categories provided by the independent third-party valuator that are in excess of 0.5% from the fair values determined by the Company are communicated to the independent third-party valuator for consideration of reasonableness. The independent third-party valuator considers the information provided by the Company before determining whether a change in their original pricing is warranted.
The Company’s investments (other than those classified as Level 3) largely consist of securities issued by major corporate and banking organizations, the provincial and federal governments of Canada, international government banking organizations and the United States Department of the Treasury, and are all investment grade. The Company also holds a limited amount of equity securities following the initial public offering by the issuer of a previous cost-based investment.
For a description of how the fair values of currency forward contracts and currency option contracts and the fair value of the Debentures (as defined in Note 7) are determined, see the “Derivative financial instruments” and “Convertible debentures” accounting policies in Note 1 to the Annual Financial Statements.
The following table summarizes the changes in fair value of the Company’s Level 3 assets for the three and nine months ended November 30, 2019 and November 30, 2018:
 
Three Months Ended
 
Nine Months Ended
 
November 30, 2019
 
November 30, 2018
 
November 30, 2019
 
November 30, 2018
Balance, beginning of period
$
19

 
$
20

 
$
19

 
$
20

Principal repayments

 
(1
)
 

 
(1
)
Balance, end of period
$
19

 
$
19

 
$
19

 
$
19

The Company recognizes transfers in and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurred. There were no transfers in or out of Level 3 assets during the three and nine months ended November 30, 2019 or November 30, 2018.
The Company’s Level 3 assets measured on a recurring basis consist of auction rate securities. For a detailed description of the Company’s valuation of auction rate securities, see Note 4 to the Annual Financial Statements.

4

BlackBerry Limited
Notes to the Consolidated Financial Statements
(In millions of United States dollars, except share and per share data, and except as otherwise indicated) (unaudited)

Cash, Cash Equivalents and Investments
The components of cash, cash equivalents and investments by fair value level as at November 30, 2019 were as follows:
 
Cost Basis
 
Unrealized
Gains
 
Unrealized
Losses
 
Other-than-
temporary
Impairment
 
Fair Value
 
Cash and
Cash
Equivalents
 
Short-term
Investments
 
Long-term
Investments
 
Restricted Cash and Cash Equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bank balances
$
151

 
$

 
$

 
$

 
$
151

 
$
151

 
$

 
$

 
$

Other investments
37

 

 

 

 
37

 

 

 
37

 

 
188

 

 

 

 
188

 
151

 

 
37

 

Level 1:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
10

 

 
(9
)
 

 
1

 

 
1

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Term deposits, certificates of deposits and GICs
133

 

 

 

 
133

 
20

 
81

 

 
32

Bankers’ acceptances/bearer deposit notes
109

 

 

 

 
109

 
104

 
5

 

 

Commercial paper
195

 

 

 

 
195

 
162

 
33

 

 

Non-U.S. promissory notes
186

 

 

 

 
186

 
78

 
108

 

 

Non-U.S. government sponsored enterprise notes
105

 

 

 

 
105

 

 
105

 

 

Non-U.S. treasury bills/notes
34

 

 

 

 
34

 

 
34

 

 

 
762

 

 

 

 
762

 
364

 
366

 

 
32

Level 3:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Auction rate securities
20

 
2

 

 
(3
)
 
19

 

 

 
19

 

 
$
980

 
$
2

 
$
(9
)
 
$
(3
)
 
$
970

 
$
515

 
$
367

 
$
56

 
$
32


5

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 components of cash, cash equivalents and investments by fair value level as at February 28, 2019 were as follows:
 
Cost Basis
 
Unrealized
Gains
 
Unrealized
Losses
 
Other-than-
temporary
Impairment
 
Fair Value
 
Cash and
Cash
Equivalents
 
Short-term
Investments
 
Long-term
Investments
 
Restricted Cash and Cash Equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bank balances
$
326

 
$

 
$

 
$

 
$
326

 
$
322

 
$

 
$

 
$
4

Other investments
36

 

 

 

 
36

 

 

 
36

 

 
362

 

 

 

 
362

 
322

 

 
36

 
4

Level 1:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity securities
10

 

 
(10
)
 

 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Level 2:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Term deposits, certificates of deposits and GICs
85

 

 

 

 
85

 

 
55

 

 
30

Bankers’ acceptances
39

 

 

 

 
39

 
4

 
35

 

 

Commercial paper
264

 

 

 

 
264

 
177

 
87

 

 

Non-U.S. promissory notes
20

 

 

 

 
20

 
20

 

 

 

Non-U.S. government sponsored enterprise notes
139

 

 

 

 
139

 
25

 
114

 

 

Non-U.S. treasury bills/notes
35

 

 

 

 
35

 

 
35

 

 

U.S. treasury bills/notes
42

 

 

 

 
42

 

 
42

 

 

 
624

 

 

 

 
624

 
226

 
368

 

 
30

Level 3:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Auction rate securities
20

 
2

 

 
(3
)
 
19

 

 

 
19

 

 
$
1,016

 
$
2

 
$
(10
)
 
$
(3
)
 
$
1,005

 
$
548

 
$
368

 
$
55

 
$
34

As at November 30, 2019, the Company had equity investments without readily determinable fair value of $37 million (February 28, 2019 - $36 million).
There were no realized gains or losses on available-for-sale securities for the three and nine months ended November 30, 2019 or the three and nine months ended November 30, 2018.
The Company has restricted cash consisting of cash and securities pledged as collateral to major banking partners in support of the Company’s requirements for letters of credit. These letters of credit primarily support certain leasing arrangements entered into in the ordinary course of business, for terms ranging from one month to six years. The Company is restricted from accessing these funds during the term of the leases for which the letters of credit have been issued; however, the Company can continue to invest the funds and receive investment income thereon.
The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents as at November 30, 2019 and February 28, 2019 from the consolidated balance sheets to the consolidated statements of cash flows:
 
As at
 
November 30, 2019
 
February 28, 2019
Cash and cash equivalents
$
515

 
$
548

Restricted cash and cash equivalents
32

 
34

Total cash, cash equivalents, restricted cash, and restricted cash equivalents presented in the consolidated statements of cash flows
$
547

 
$
582


6

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 November 30, 2019 and February 28, 2019 were as follows:
 
As at
 
November 30, 2019
 
February 28, 2019
 
Cost Basis (1)
 
Fair Value
 
Cost Basis (1)
 
Fair Value
Due in one year or less
$
762

 
$
762

 
$
624

 
$
624

Due after five years
17

 
19

 
17

 
19

No fixed maturity
10

 
1

 
10

 

 
$
789

 
$
782

 
$
651

 
$
643

______________________________ 
(1) 
Cost basis includes other-than-temporary impairment.
As at November 30, 2019, the Company had investments with continuous unrealized losses totaling $9 million, consisting of unrealized losses on equity securities (February 28, 2019 - continuous unrealized losses totaling $10 million).
3.
DERIVATIVE FINANCIAL INSTRUMENTS
The notional amounts and fair values of derivative financial instruments outstanding were as follows:
 
Derivative Assets (1)(2)
 
Derivative Liabilities (1)(3)
 
As at
 
As at
  
November 30, 2019
 
February 28, 2019
 
November 30, 2019
 
February 28, 2019
Foreign exchange contracts
 
 
 
 
 
 
 
Fair value of derivatives designated as cash flow hedges
$

 
$
1

 
$
(1
)
 
$
(1
)
Total estimated fair value
$

 
$
1

 
$
(1
)
 
$
(1
)
 
 
 
 
 
 
 
 
Notional amount
$
97

 
$
93

 
$
155

 
$
91

______________________________ 
(1) 
The fair values of derivative assets and liabilities are measured using Level 2 fair value inputs.
(2)  
Derivative assets are included in other current assets.
(3)  
Derivative liabilities are included in accrued liabilities.
Foreign Exchange
For a description of the Company’s usage of derivatives and related accounting policy for these instruments, see Note 1.
The Company enters into forward and option contracts to hedge exposures relating to anticipated foreign currency transactions. These contracts have been designated as cash flow hedges. The maturity dates of these instruments range from December 2019 to October 2020. As at November 30, 2019, the net unrealized loss on these forward and option contracts (including option premiums paid) was nil (February 28, 2019 - net unrealized loss of nil). Unrealized gains associated with these contracts were recorded in other current assets and AOCI. Unrealized losses were recorded in accrued liabilities and AOCI. Option premiums were recorded in AOCI. As at November 30, 2019, the Company estimates that approximately nil of net unrealized losses including option premiums on these forward and option contracts will be reclassified into income (loss) within the next 12 months.

7

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)

For the nine months ended November 30, 2019, a loss of nil relating to the effective portion was recognized in accumulated other comprehensive income (loss). For the three and nine months ended November 30, 2019, no gain or loss was reclassified from AOCI into income related to the effective portion.
The following table shows the impact of derivative instruments designated as cash flow hedges on the consolidated statements of operations and the consolidated statements of comprehensive income (loss) for the three and nine months ended November 30, 2018:
 
Amount of Loss
Recognized in Other Comprehensive Income (Loss) on
Derivative Instruments
(Effective Portion)
 
Location of Loss Reclassified
from AOCI into Income
(Effective Portion)
 
Amount of Loss
Reclassified from AOCI into
Income (Effective Portion)
 
 
Three Months Ended November 30, 2018

Nine Months Ended November 30, 2018
Foreign exchange contracts
$
(2
)
 
Selling, marketing and administration
 
$
(1
)
 
$
(2
)
Total
$
(2
)
 
 
 
$
(1
)
 
$
(2
)
As part of its business operations, the Company may maintain net monetary asset and/or liability balances in foreign currencies. The Company enters into foreign exchange forward contracts to economically hedge certain monetary assets and liabilities that are exposed to foreign currency risk. The principal currencies hedged include the Canadian dollar, euro, and British pound. These contracts are not subject to hedge accounting, and any realized and unrealized gains or losses are recognized in income (loss) each period, offsetting the change in the U.S. dollar value of the foreign currency denominated asset or liability. The maturity dates of these instruments range from December 2019 to March 2020. As at November 30, 2019, there were no unrealized gains or losses recorded in respect of these instruments (February 28, 2019 - nil). Unrealized gains associated with these contracts were recorded in other current assets and selling, marketing and administration expenses. Unrealized losses were recorded in accrued liabilities and selling, marketing and administration expenses.
The following table shows the impact of derivative instruments that are not subject to hedge accounting on the consolidated statements of operations for the three and nine months ended November 30, 2019 and November 30, 2018:    
 
 
 
Amount of Gain (Loss) in Income on
Derivative Instruments
 
 
 
Three Months Ended
 
Nine Months Ended
 
Location of Gain (Loss) Recognized in
Income on Derivative Instruments
 
November 30, 2019
 
November 30, 2018
 
November 30, 2019
 
November 30, 2018
Foreign exchange contracts
Selling, marketing and administration
 
$
(1
)
 
$
1

 
$
(1
)
 
$
4

Total
 
 
$
(1
)
 
$
1

 
$
(1
)
 
$
4

Selling, marketing and administration expense for the three and nine months ended November 30, 2019 included $1 million in losses with respect to foreign exchange, net of balance sheet revaluation (three and nine months ended November 30, 2018 - gains of $3 million and nil, respectively).
Credit Risk
The Company is exposed to credit risk on derivative financial instruments arising from the potential for counterparties to default on their contractual obligations. The Company mitigates this risk by limiting counterparties to highly rated financial institutions and by continuously monitoring their creditworthiness. The Company’s exposure to credit loss and market risk will vary over time as a function of currency exchange rates. The Company measures its counterparty credit exposure as a percentage of the total fair value of the applicable derivative instruments. Where the net fair value of derivative instruments with any counterparty is negative, the Company deems the credit exposure to that counterparty to be nil. As at November 30, 2019, the maximum credit exposure to a single counterparty, measured as a percentage of the total fair value of derivative instruments with net unrealized gains, was 78% (February 28, 2019 - 58%). As at November 30, 2019, the Company had a credit risk exposure to counterparties with outstanding or unsettled foreign exchange derivative instruments of nil on a notional amount of $41 million relating to derivative assets and a notional amount of $104 million relating to derivative liabilities (February 28, 2019 - total credit risk exposure of nil on a notional amount of $93 million relating to derivative assets and a notional amount of $91 million relating to derivative liabilities).

8

BlackBerry Limited
Notes to the Consolidated Financial Statements
(In millions of United States dollars, except share and per share data, and except as otherwise indicated) (unaudited)

The Company is exposed to market and credit risk on its investment portfolio. The Company reduces this risk by investing in liquid, investment-grade securities and by limiting exposure to any one entity or group of related entities. As at November 30, 2019, no single issuer represented more than 11% of the total cash, cash equivalents and investments (February 28, 2019 - no single issuer represented more than 16% of the total cash, cash equivalents and investments), and the largest single issuer was Royal Bank of Canada.
Interest Rate Risk
Cash and cash equivalents and investments are invested in certain instruments of varying maturities. Consequently, the Company is exposed to interest rate risk as a result of holding investments of varying maturities. The fair value of investments, as well as the investment income derived from the investment portfolio, will fluctuate with changes in prevailing interest rates. The Company has also issued the Debentures (defined below) with a fixed 3.75% interest rate. The fair value of the Debentures will fluctuate with changes in prevailing interest rates. Consequently, the Company is exposed to interest rate risk as a result of the Debentures. The Company does not currently utilize interest rate derivative instruments to hedge its investment portfolio or changes in market value of the Debentures.
4.
CONSOLIDATED BALANCE SHEETS DETAILS
Accounts Receivable, Net
The allowance for doubtful accounts as at November 30, 2019 was $8 million (February 28, 2019 - $25 million).
There was one customer that comprised more than 10% of accounts receivable as at November 30, 2019 (February 28, 2019 - one customer comprised more than 10%).
Other Current Assets
As at November 30, 2019, other current assets include items such as the current portion of deferred commissions, and prepaid expenses, among other items, none of which were greater than 5% of the current assets balance in all periods presented.
Property, Plant and Equipment, Net
Property, plant and equipment comprised the following:
 
As at
 
November 30, 2019
 
February 28, 2019
Cost
 
 
 
Buildings, leasehold improvements and other
$
74

 
$
68

BlackBerry operations and other information technology
85

 
85

Manufacturing, repair and research and development equipment
74

 
73

Furniture and fixtures
11

 
14

 
244

 
240

Accumulated amortization
168

 
155

Net book value
$
76

 
$
85


9

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)

Intangible Assets, Net
Intangible assets comprised the following:
 
As at November 30, 2019
 
Cost
 
Accumulated
Amortization
 
Net Book
Value
Acquired technology
$
1,019

 
$
618

 
$
401

Intellectual property
487

 
267

 
220

Other acquired intangibles
494

 
160

 
334

 
$
2,000

 
$
1,045

 
$
955

 
As at February 28, 2019
 
Cost
 
Accumulated
Amortization
 
Net Book
Value
Acquired technology
$
1,020

 
$
557

 
$
463

Intellectual property
466

 
239

 
227

Other acquired intangibles
494

 
116

 
378

 
$
1,980

 
$
912

 
$
1,068

Other acquired intangible assets include items such as customer relationships and brand.
For the nine months ended November 30, 2019, amortization expense related to intangible assets amounted to $142 million (nine months ended November 30, 2018 - $101 million). During the nine months ended November 30, 2019, additions to intangible assets primarily consisted of patents received as non-cash consideration in a contract with a customer and payments for intellectual property relating to patent maintenance, registration and licenses.
Based on the carrying value of the identified intangible assets as at November 30, 2019 and assuming no subsequent impairment of the underlying assets, the annual amortization expense for the remainder of fiscal 2020 and each of the five succeeding years is expected to be as follows: 2020 - $44 million; 2021 - $156 million; 2022 - $136 million; 2023 - $107 million; 2024 - $99 million; and 2025 - $93 million.
Goodwill
Changes to the carrying amount of goodwill were as follows:
 
Carrying Amount
Carrying amount as at February 28, 2019
$
1,463

Effect of foreign exchange on non-U.S. dollar denominated goodwill
(2
)
Measurement period adjustment (see Note 5)
(2
)
Carrying amount as at November 30, 2019
$
1,459

Other Long-term Assets
As at November 30, 2019, other long-term assets include items such as 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.

10

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)

Accrued Liabilities
Accrued liabilities comprised the following:
 
As at
 
November 30, 2019
 
February 28, 2019
Variable incentive accrual
$
29

 
$
36

Operating lease liabilities, current
33

 

Other
131

 
156

 
$
193

 
$
192

Other accrued liabilities include, among other items, accrued royalties, accrued vendor liabilities, accrued carrier liabilities and payroll withholding taxes, none of which were greater than 5% of the current liabilities balance.
Other long-term liabilities
Other long-term liabilities consist of the long-term portion of finance lease liabilities and non-lease components of RAP liabilities. It previously included the present value of the long-term portion of accrued future lease payments associated with RAP, which are presented in operating lease liabilities as of the adoption of ASC 842. See Note 1.
5.    BUSINESS ACQUISITIONS
On February 21, 2019, the Company acquired all of the issued and outstanding shares of Cylance Inc. (“Cylance”), an artificial intelligence and cybersecurity leader, for approximately $1.4 billion in cash and common shares, plus the assumption of unvested employee incentive awards. The acquisition of Cylance is a strategic addition to the Company’s end-to-end secure communications portfolio. The accounting for the acquisition of Cylance was completed in the second quarter of fiscal 2020, as the final calculation of working capital of Cylance was finalized.
The Company recorded a measurement period recovery of $3 million in selling, general and administration expenses for the nine months ended November 30, 2019, as the amount would have been recognized in the prior fiscal year, if the adjustment to the provisional amounts had been recognized as of the acquisition date.

6.
INCOME TAXES
For the nine months ended November 30, 2019, the Company’s net effective income tax expense rate was approximately 5% compared to a net effective income tax expense rate of 7% for the nine months ended November 30, 2018. The Company’s income tax rate reflects the fact that the Company has a significant valuation allowance against its deferred income tax assets, and in particular, the change in fair value of the Debentures, amongst other items, is offset by a corresponding adjustment of the valuation allowance. The Company’s net effective income tax rate also reflects the geographic mix of earnings in jurisdictions with different income tax rates.
The Company’s total unrecognized income tax benefits as at November 30, 2019 were $85 million (February 28, 2019 - $84 million). As at November 30, 2019, $72 million of the unrecognized income tax benefits have been netted against deferred income tax assets and $13 million has been recorded within income taxes payable on the Company’s consolidated balance sheets.
The Company is subject to ongoing examination by tax authorities in certain jurisdictions in which it operates. The Company regularly assesses the status of these examinations and the potential for adverse outcomes to determine the adequacy of the provision for income taxes as well as the provisions for indirect and other taxes and related penalties and interest. While the final resolution of audits is uncertain, the Company believes the ultimate resolution of these audits will not have a material adverse effect on its consolidated financial position, liquidity or results of operations.
7.
DEBENTURES
3.75% Convertible Debentures
On September 7, 2016, Fairfax Financial Holdings Limited (“Fairfax”) and other institutional investors invested in the Company through a private placement of new debentures in an aggregate amount of $605 million (the “Debentures”).

11

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)

Interest on the Debentures is payable quarterly in arrears at a rate of 3.75% per annum. The Debentures mature on November 13, 2020, and each $1,000 of Debentures is convertible at any time into 100 common shares of the Company for a total of 60.5 million common shares at a price of $10.00 per share for all Debentures, subject to adjustments. Covenants associated with the Debentures include limitations on the Company’s total indebtedness.
Under specified events of default, the outstanding principal and any accrued interest on the Debentures become immediately due and payable upon request of holders holding not less than 25% of the principal amount of the Debentures then outstanding. During an event of default, the interest rate rises to 7.75% per annum.
The Debentures are subject to a change of control provision whereby the Company would be required to make an offer to repurchase the Debentures at 115% of par value if a person or group (not affiliated with Fairfax) acquires 35% of the Company’s outstanding common shares, acquires all or substantially all of its assets, or if the Company merges with another entity and the Company’s existing shareholders hold less than 50% of the common shares of the surviving entity.
The following table summarizes the change in fair value of the Debentures for the nine months ended November 30, 2019:
 
 
As at
  
 
November 30, 2019
Balance as at February 28, 2019
 
$
665

Change in fair value of the Debentures
 
(56
)
Balance as at November 30, 2019
 
$
609

The difference between the fair value of the Debentures and the unpaid principal balance of $605 million is $4 million.  The fair value of the Debentures is measured using Level 2 fair value inputs.
The following table shows the impact of the change in fair value of the Debentures for the three and nine months ended November 30, 2019 and November 30, 2018:    
 
 
Three Months Ended
 
Nine Months Ended
  
 
November 30, 2019
 
November 30, 2018
 
November 30, 2019
 
November 30, 2018
Income associated with the change in fair value from non-credit components recorded in the consolidated statements of operations
 
$
20

 
$
69

 
$
71

 
$
111

Income (expense) associated with the change in fair value from instrument-specific credit components recorded in AOCI
 
(2
)
 
5

 
(15
)
 
6

Total decrease in the fair value of the Debentures
 
$
18

 
$
74

 
$
56

 
$
117

For the three and nine months ended November 30, 2019, the Company recorded interest expense related to the Debentures of $6 million and $17 million, respectively, which has been included in investment income, net in the Company’s consolidated statements of operations (three and nine months ended November 30, 2018 - $6 million and $17 million, respectively).
Fairfax, a related party under U.S. GAAP, owns a $500 million principal amount of the Debentures. As such, the payment of interest on the Debentures represents a related-party transaction. Fairfax receives interest at the same rate as other Debenture holders.

12

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)

8.
CAPITAL STOCK
(a)
Capital Stock
The following details the changes in issued and outstanding common shares for the nine months ended November 30, 2019:
 
Capital Stock and Additional
Paid-in Capital
 
Stock
Outstanding
(000s)
 
Amount
Common shares outstanding as at February 28, 2019
547,358

 
$
2,688

Stock-based compensation

 
46

Exercise of stock options
713

 
2

Common shares issued for restricted share unit settlements
3,150

 

Common shares issued for employee share purchase plan
911

 
6

Common shares outstanding as at November 30, 2019
552,132

 
$
2,742

The Company had 552 million common shares, 6 million options to purchase common shares, 25 million restricted share units and 1.0 million deferred share units outstanding as at December 17, 2019. In addition, 60.5 million common shares are issuable upon conversion in full of the Debentures as described in Note 7.
(b)
Stock-based Compensation
Inducement Awards
In the first quarter of fiscal 2020, the Board approved an agreement to grant performance-based equity awards (“Inducement Awards”) to the co-founders of Cylance covering up to 4,182,189 common shares. Up to 25%, 35% and 40% of the Inducement Awards may be earned at the end of the Company’s 2020, 2021 and 2022 fiscal years, respectively, if certain performance conditions are met, and any earned amounts will vest at the end of fiscal 2022. The Company also notes that 75% of the awards eligible to vest in a given year are based on achievement of a billings goal and 25% are based on achievement of a contribution margin goal. In the third quarter of fiscal 2020, 3,122,140 Inducement Awards were forfeited due to the departure of one of the co-founders of Cylance. As at November 30, 2019, there were 1,060,049 Inducement Awards outstanding. The Company recorded compensation expense with respect to the Inducement Awards of approximately $1 million for the three months ended November 30, 2019 and approximately $2 million for the nine months ended November 30, 2019.

13

BlackBerry Limited
Notes to the Consolidated Financial Statements
(In millions of United States dollars, except share and per share data, and except as otherwise indicated) (unaudited)

9.
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, 2019
 
November 30, 2018
 
November 30, 2019
 
November 30, 2018
Net income (loss) for basic earnings (loss) per share available to common shareholders
$
(32
)
 
$
59

 
$
(111
)
 
$
42

Less: Debentures fair value adjustment (1)
(20
)
 
(69
)
 
(71
)
 
(111
)
Add: Interest expense on Debentures (1)
6

 
6

 
17

 
17

Net loss for diluted loss per share available to common shareholders
$
(46
)
 
$
(4
)
 
$
(165
)
 
$
(52
)
 
 
 
 
 
 
 
 
Weighted average number of shares outstanding (000s) - basic (2)
554,585

 
540,406

 
552,931


538,251

Effect of dilutive securities (000s)
 
 
 
 
 
 
 
Stock-based compensation (3)

 

 

 

Conversion of Debentures (1)
60,500

 
60,500

 
60,500

 
60,500

Weighted average number of shares and assumed conversions (000s) - diluted
615,085

 
600,906

 
613,431


598,751

Earnings (loss) per share - reported
 
 
 
 
 
 
 
Basic
$
(0.06
)
 
$
0.11

 
$
(0.20
)

$
0.08

Diluted
$
(0.07
)
 
$
(0.01
)
 
$
(0.27
)
 
$
(0.09
)
______________________________ 
(1)
The Company has presented the dilutive effect of the Debentures using the if-converted method, assuming conversion at the beginning of the quarter for the three and nine months ended November 30, 2019, and three and nine months ended November 30, 2018. Accordingly, to calculate diluted loss per share, the Company adjusted net income (loss) by eliminating the fair value adjustment made to the Debentures and interest expense incurred on the Debentures in the three and nine months ended November 30, 2019, and three and nine months ended November 30, 2018, and added the number of shares that would have been issued upon conversion to the diluted weighted average number of shares outstanding. See Note 7 for details on the Debentures.
(2) 
Includes approximately 4,182,189 common shares to be issued in equal instalments on the next three anniversary dates of the Cylance acquisition, in consideration for the acquisition. There are no service or other requirements associated with the issuance of these shares.
(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 earnings (loss) per share for the three and nine months ended November 30, 2019, and three and nine months ended November 30, 2018 as to do so would be antidilutive.
10.    ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in AOCI by component, net of tax, for the nine months ended November 30, 2019 were as follows: 
 
 
Foreign Currency Cumulative Translation Adjustment
 
Accumulated Net Unrealized  Losses on
Cash Flow Hedges
 
Other Post-Employment Benefit Obligations
 
Accumulated Net Unrealized Gains on Available-for-Sale Debt Securities
 
Change in fair value from instrument-specific credit risk on Debentures
 
Total
AOCI as at February 28, 2019
 
$
(7
)
 
$

 
$
(1
)
 
$
2

 
$
(14
)
 
$
(20
)
Change in cumulative comprehensive loss for the period
 
(2
)
 

 

 

 
(15
)
 
(17
)
AOCI as at November 30, 2019
 
$
(9
)
 
$

 
$
(1
)
 
$
2

 
$
(29
)
 
$
(37
)
During the three and nine months ended November 30, 2019, nil losses (pre-tax and post-tax) associated with cash flow hedges were reclassified from AOCI into selling, marketing and administration expenses.

14

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)

11.
COMMITMENTS AND CONTINGENCIES
(a)
Letters of Credit
The Company had $27 million in collateralized outstanding letters of credit in support of certain leasing arrangements entered into in the ordinary course of business as of November 30, 2019. See the discussion of restricted cash in Note 2.
(b)
Contingencies
Litigation
The Company is involved in litigation in the normal course of its business, both as a defendant and as a plaintiff. The Company is subject to a variety of claims (including claims related to patent infringement, purported class actions and other claims in the normal course of business) and may be subject to additional claims either directly or through indemnities against claims that it provides to certain of its partners and customers. In particular, the industry in which the Company competes has many participants that own, or claim to own, intellectual property, including participants that have been issued patents and may have filed patent applications or may obtain additional patents and proprietary rights for technologies similar to those used by the Company in its products. The Company has received, and may receive in the future, assertions and claims from third parties that the Company’s products infringe on their patents or other intellectual property rights. Litigation has been, and will likely continue to be, necessary to determine the scope, enforceability and validity of third-party proprietary rights or to establish the Company’s proprietary rights. Regardless of whether claims against the Company have merit, those claims could be time-consuming to evaluate and defend, result in costly litigation, divert management’s attention and resources, subject the Company to significant liabilities and could have the other effects that are described in greater detail under “Risk Factors” in the Company’s unaudited Annual Information Form for the fiscal year ended February 28, 2019, which is included in the Company’s Annual Report on Form 40-F, including the risk factors entitled “Litigation against the Company may result in adverse outcomes” and “The Company could be found to have infringed on the intellectual property rights of others”.
Management reviews all of the relevant facts for each claim and applies judgment in evaluating the likelihood and, if applicable, the amount of any potential loss. 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 the loss cannot be reasonably estimated. Any settlements or awards under such claims are provided for when reasonably determinable.
As of November 30, 2019, there are no claims outstanding for which the Company has assessed the potential loss as both probable to result and reasonably estimable; therefore, no accrual has been made. Further, there are claims outstanding for which the Company has assessed the potential loss as reasonably probable to result; however, an estimate of the amount of loss cannot reasonably be made. There are many reasons that the Company cannot make these assessments, including, among others, one or more of the following: the early stages of a proceeding does not require the claimant to specifically identify the patent claims that have allegedly been infringed or the products that are alleged to infringe; damages sought are unspecified, unsupportable, unexplained or uncertain; discovery has not been started or is incomplete; the facts that are in dispute are highly complex (e.g., once a patent is identified, the analysis of the patent and a comparison to the activities of the Company is a labour-intensive and highly technical process); the difficulty of assessing novel claims; the parties have not engaged in any meaningful settlement discussions; the possibility that other parties may share in any ultimate liability; and the often slow pace of litigation.
Though they do not meet the test for accrual described above, the Company has included the following summaries of certain of its legal proceedings that it believes may be of interest to its investors.
Between October and December 2013, several purported class action lawsuits and one individual lawsuit were filed against the Company and certain of its former officers in various jurisdictions in the U.S. 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.
On March 14, 2014, the four putative U.S. class actions were consolidated in the U.S. District Court for the Southern District of New York, and on May 27, 2014, a consolidated amended class action complaint was filed. On March 13, 2015, the Court issued an order granting the Company’s motion to dismiss. The Court denied the plaintiffs’ motion for reconsideration and for leave to file an amended complaint on November 13, 2015. On August 24, 2016, the U.S. Court

15

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)

of Appeals for the Second Circuit affirmed the District Court order dismissing the complaint, but vacated the order denying leave to amend and remanded to the District Court for further proceedings in connection with the plaintiffs’ request for leave to amend. The Court granted the plaintiffs’ motion for leave to amend on September 13, 2017. On September 29, 2017, the plaintiffs filed a second consolidated amended class action complaint (the “Second Amended Complaint”), which added the former Company’s Chief Legal Officer as a defendant. The Court denied the motion to dismiss the Second Amended Complaint on March 19, 2018. During the first quarter of fiscal 2019, the U.S. class actions lawsuit proceeded to discovery. On August 2, 2019, the Magistrate Judge issued a Report and Recommendation that the Court grant Defendants’ motion for judgment on the pleadings dismissing the claims of Additional Plaintiffs Cho and Ulug. On September 24, 2019, the District Court Judge accepted the Magistrate Judge’s recommendation and dismissed the claims of Cho and Ulug against all defendants. On October 17, 2019, Cho and Ulug filed a Notice of Appeal. All other proceedings, including plaintiffs’ pending motion for class certification but excluding fact and expert discovery, are currently suspended pending the decision of the Second Circuit Court of Appeals in Arkansas Teachers Retirement System et al. v. Goldman Sachs Group, Inc., et al., which involves an issue relevant to the motion for class certification.
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 November 16, 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. On February 5, 2019, the Court entered an order certifying a class comprised of persons (a) who purchased BlackBerry common shares between March 28, 2013, and September 20, 2013, and still held at least some of those shares as of September 20, 2013, and (b) who acquired those shares on a Canadian stock exchange or acquired those shares on any other stock exchange and were a resident of Canada when the shares were acquired. 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 Statement of Claim alleges that actions the Company took when certain if its employees decided to accept offers of employment from Ford Motor Company of Canada amounted to a wrongful termination of the employees’ employment with the Company. The claim seeks (i) an unspecified quantum of statutory, contractual, or common law termination entitlements; (ii) punitive or breach of duty of good faith damages of CAD$20,000,000, or such other amount as the Court finds appropriate, (iii) pre and post judgment interest, (iv) attorneys’ fees and costs, and (v) such other relief as the Court deems just. The Court granted the plaintiffs’ motion to certify the class action on May 27, 2019. The Company commenced a motion for leave to appeal the certification order on June 11, 2019. The court denied the motion for leave to appeal on September 17, 2019.
On February 4, 2019, a putative employment class action and California Private Attorney General Act claim was filed against the Company in the San Joaquin County Superior Court alleging the Company (i) failed to provide itemized wage statements in violation of California Labor Code Section 226(a); and (ii) failed to pay all wages due at termination in violation of California Labor Code Section 201. The complaint seeks statutory penalties, injunctive relief, interest, costs, and attorneys’ fees. The Company filed its answer denying the allegations in the complaint on March 18, 2019, and discovery is proceeding. On August 22, 2019, the Company filed a Motion for Summary Adjudication of the named plaintiff’s wage statement claims. The Court took the motion under submission following oral argument on November 13, 2019, and the motion remains pending.
Other contingencies
In the first quarter of fiscal 2019, the Board approved the 2019 Executive Chair Grant. As part of the agreement, 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 the award is triggered by the Company’s share price, it is considered stock-based compensation and accounted for as a share-based liability award. As at November 30, 2019, the liability recorded in association with this award is approximately nil.


16

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)

During the nine months ended November 30, 2019, the Company received 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.
(c)
Concentrations in Certain Areas of the Company’s Business
The Company attempts to ensure that most components essential to the Company’s business are generally available from multiple sources; however, certain components are currently obtained from limited sources within a competitive market, which subjects the Company to supply, availability and pricing risks. The Company has also entered into various agreements for the supply of components and the manufacturing of its products; however, there can be no guarantee that the Company will be able to extend or renew these agreements on similar terms, or at all. Therefore, the Company remains subject to risks of supply shortages.
(d)
Indemnifications
The Company enters into certain agreements that contain indemnification provisions under which the Company could be subject to costs and damages, including in the event of an infringement claim against the Company or an indemnified third party. Such intellectual property infringement indemnification clauses are generally not subject to any dollar limits and remain in effect for the term of the Company’s agreements. To date, the Company has not encountered material costs as a result of such indemnifications.
The Company has entered into indemnification agreements with its current and former directors and executive officers. Under these agreements, the Company agreed, subject to applicable law, to indemnify its current and former directors and executive officers against all costs, charges and expenses reasonably incurred by such individuals in respect of any civil, criminal or administrative action that could arise by reason of their status as directors or officers. The Company maintains liability insurance coverage for the benefit of the Company and its current and former directors and executive officers. The Company has not encountered material costs as a result of such indemnifications in the current period. See the Company’s Management Information Circular for fiscal 2019 for additional information regarding the Company’s indemnification agreements with its current and former directors and executive officers.
12.
LEASES
The Company has operating and finance leases primarily for corporate offices, research and development facilities, data centers and certain equipment. The Company’s leases have remaining lease terms of between one year and eight years, some of which may include options to extend the lease for up to 10 years, and some of which may include options to terminate the lease within one month.
The components of lease expense were as follows:
 
 
Three Months Ended

Nine Months Ended
 
 
November 30, 2019
 
November 30, 2019
Operating lease cost, included in selling, marketing and administration
 
$
9

 
$
26

 
 
 
 
 
Finance lease cost
 
 
 
 
Amortization of ROU assets, included in amortization
 
$
1

 
$
2

Interest on lease liabilities, included in investment income, net
 

 

Total finance lease cost
 
$
1

 
$
2


17

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)

Supplemental cash flow information related to leases was as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
 
November 30, 2019
 
November 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
 
Cash used in operating activities related to operating lease payments
 
$
10

 
$
31

During the three and nine months ended November 30, 2019, the Company did not obtain any significant ROU assets in exchange for lease obligations. During the three months ended November 30, 2019, the Company incurred losses of $3 million on the write-down of ROU assets (cost of $8 million, accumulated amortization of $5 million, and a net book value of approximately $3 million). During the nine months ended November 30, 2019, the Company incurred losses of $5 million on the write-down of ROU assets (cost of $14 million, accumulated amortization of $9 million, and a net book value of approximately $5 million).
Supplemental balance sheet information related to leases was as follows:
 
 
As at
 
 
November 30, 2019
 
March 1, 2019 (adoption)
Operating leases
 
 
 
 
Operating lease assets
 
 
 
 
Operating lease ROU assets
 
$
133

 
$
161

Operating lease liabilities
 
 
 
 
Accrued liabilities
 
33

 
36

Operating lease liabilities
 
127

 
153

Total operating lease liabilities
 
$
160

 
$
189

 
 
 
 
 
Finance leases
 
 
 
 
Finance lease assets
 
 
 
 
Property, plant and equipment
 
$
7

 
$
8

Accumulated depreciation
 
(6
)
 
(5
)
Total finance lease assets
 
$
1

 
$
3

 
 
 
 
 
Finance lease liabilities
 
 
 
 
Accrued liabilities
 
$
1

 
$
2

Other long-term liabilities
 

 
1

Total finance lease liabilities
 
$
1

 
$
3

 
 
As at
 
 
November 30, 2019
Weighted Average Remaining Lease Term
 
 
Operating leases
 
5.6 years

Finance leases
 
1.4 years

Weighted Average Discount Rate
 
 
Operating leases
 
3.5
%
Finance leases
 
5.8
%

18

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)

Maturities of undiscounted lease liabilities were as follows:
 
 
As at
 
 
November 30, 2019
 
 
Operating Leases
 
Finance
Leases
Fiscal year 2020 (excluding the nine months ended November 30, 2019)
 
$
10

 
$

Fiscal year 2021
 
36

 
1

Fiscal year 2022
 
34

 

Fiscal year 2023
 
28

 

Fiscal year 2024
 
22

 

Thereafter
 
47

 

Total future minimum lease payments
 
177

 
1

Less:
 
 
 
 
Imputed interest
 
(17
)
 

Total
 
$
160

 
$
1

13.
REVENUE AND SEGMENT DISCLOSURES
Revenue
The Company disaggregates revenue from contracts with customers based on geographical regions, timing of revenue recognition, and the major product and service types. The Company’s revenue, classified by major geographic region in which the Company’s customers are located, was as follows:
 
Three Months Ended
 
Nine Months Ended
 
November 30, 2019

November 30, 2018
 
November 30, 2019
 
November 30, 2018
North America (1)
$
188

 
$
151

 
$
527

 
$
423

Europe, Middle East and Africa
60

 
56

 
168

 
161

Other regions
19

 
19

 
63

 
65

Total
$
267

 
$
226

 
$
758

 
$
649

 
 
 
 
 
 
 
 
North America (1)
70.4
%
 
66.8
%
 
69.5
%
 
65.2
%
Europe, Middle East and Africa
22.5
%
 
24.8
%
 
22.2
%
 
24.8
%
Other regions
7.1
%
 
8.4
%
 
8.3
%
 
10.0
%
Total
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
______________________________ 
(1) North America includes all revenue from the Company’s intellectual property arrangements, due to the global applicability of the patent portfolio and licensing arrangements thereof.

19

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)

Total revenue, classified by product and service type, was as follows:
 
Three Months Ended
 
Nine Months Ended
 
November 30, 2019
 
November 30, 2018
 
November 30, 2019
 
November 30, 2018
IoT
$
145

 
$
148

 
$
413

 
$
410

BlackBerry Cylance
40

 
1

 
108

 
2

Licensing
77

 
68