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13
May 17, 2007
The following Management’s Discussion and Analysis of
Financial Condition and Results of Operations (“MD&A”)
should be read together with the audited consolidated
financial statements and the accompanying notes (the
“Consolidated Financial Statements”) of Research In Motion
Limited (“RIM” or the “Company”) for the fiscal year ended
March 3, 2007. The Consolidated Financial Statements have
been prepared in accordance with United States generally
accepted accounting principles (“U.S. GAAP”).
All financial information herein is presented in United
States dollars, except for certain financial information
contained in tables which is expressed in thousands of United
States dollars, and as otherwise indicated.
RIM has prepared the MD&A with reference to National
Instrument 51-102 “Continuous Disclosure Obligations” of
the Canadian Securities Administrators. This MD&A provides
information for the fiscal year ended March 3, 2007 and up to
and including May 17, 2007.
Additional information about the Company, including the
Company’s Annual Information Form, can be found on SEDAR
at www.sedar.com and on the U.S. Securities and Exchange
Commission’s (“SEC”) website at www.sec.gov.
EXPLANATORY NOTE REGARDING THE RESTATEMENT OF
PREVIOUSLY ISSUED FINANCIAL STATEMENTS
The Company has restated its consolidated balance sheet
as of March 4, 2006, and its consolidated statements of
operations, consolidated statements of cash flows and
consolidated statements of shareholders’ equity for the
fiscal years ended March 4, 2006 and February 26, 2005,
and the related note disclosures (the “Restated Financial
Statements”). The Restated Financial Statements have been
prepared to reflect additional non-cash stock compensation
expense relating to certain stock-based awards granted
prior to the adoption of the Company’s stock option plan on
December 4, 1996 (as amended from time to time, the “Stock
Option Plan”) and certain stock option grants during the 1997
through 2006 fiscal periods, as well as certain adjustments
related to the tax accounting for deductible stock option
expenses. The restatement does not result in a change in the
Company’s previously reported revenues, total cash and cash
equivalents or net cash provided from operating activities
shown in the Restated Financial Statements.
RESEARCH IN MOTION LIMITED
management’s discussion and analysis of financial
condition and results of operations
FOR THE THREE MONTHS AND FISCAL YEAR ENDED MARCH 3, 2007
Background of the Review
The Company commenced a voluntary internal review
(the “Review”) of its stock option granting practices and
related accounting on August 8, 2006. The Review was
commenced under the direction of the Audit Committee of
the Company’s Board of Directors, at the initiative of Dennis
Kavelman, the Company’s former Chief Financial Officer (now
the Company’s Chief Operating Officer – Administration
and Operations), with the support of Jim Balsillie, the Co-
Chief Executive Officer of the Company, and the executive
management team of the Company. Following the recusal
of two Audit Committee members who also served on the
Compensation Committee, the Review was completed by
the remaining two members of the Audit Committee as a
special committee of independent directors of the Board
of Directors (the “Special Committee”). Any references to
actions by the Special Committee prior to January 16, 2007
are to the Audit Committee. The Special Committee was
assisted in the Review by outside legal counsel and outside
accounting advisors in both Canada and the United States.
Certain of the investigative actions by the Special Committee
described hereafter were carried out by the outside legal
counsel or outside accounting advisors under the direction of
the Special Committee.
On September 28, 2006, the Company publicly announced
that the Audit Committee had made a preliminary
determination that, under U.S. generally accepted accounting
principles (“GAAP”), pursuant to which the Company has
been preparing its financial statements since fiscal 2004 (prior
to which time the Company prepared its primary financial
statements in accordance with Canadian GAAP – together
with a U.S. GAAP reconciliation note following its U.S. listing
in 1999), accounting errors were made in connection with
the accounting for certain stock options granted since the
Company’s initial public offering in 1997 (the “IPO”) and
that a restatement (the “Restatement”) of the Company’s
historical financial statements would therefore be required.
At that time, the Company also announced that it had
voluntarily informed the SEC and the Ontario Securities
Commission (the “OSC”) about the Review.
Each of the SEC, the OSC and the office of the United
States Attorney for the Southern District of New York (the
“USAO”) has commenced investigations in connection
with the Company’s stock option granting practices. The
Company intends to continue to cooperate with each of these
agencies.