What changed in this filing

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Item 1A. Risk Factors

2021-03-31 compared with 2020-04-07 · 157 added, 152 removed, 187 unchanged (62% of the section changed)

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The risks and uncertainties described below are not the only ones the Company faces.

Additional risks and uncertainties, including those of which the Company is unaware or the Company deems immaterial, may also have a material adverse effect on the Company’s business, financial condition and results of operations.

Additional risks and uncertainties, including those of which the Company is unaware or the Company currently deems immaterial, may also have a material adverse effect on the Company’s business, financial condition and results of operations.

Risks Related to the Company’s Business

The Company may not be able to enhance, develop, introduce or monetize products and services for the enterprise market in a timely manner with competitive pricing, features and performance.

The industries in which the Company competes are characterized by increasingly rapid technological change, frequent new product introductions, frequent market price reductions, constant improvements in features and short product life cycles.

address competing technologies and products developed by other companies, and to continue to develop and introduce new products and services offering enhanced performance and functionality on a timely basis at competitive prices.

The industries in which the Company competes are characterized by rapid technological change, frequent new product introductions, frequent market price reductions, constant improvements in features and short product life cycles.

The Company’s future success depends upon its ability to enhance and integrate its current products and services, including the BlackBerry Spark platform, to provide for their compatibility with evolving industry standards and operating systems, to address competing technologies and products developed by other companies, and to continue to develop and introduce new products and services offering enhanced performance and functionality on a timely basis at competitive prices.

The process of developing new technology is complex and uncertain, and involves time, substantial costs and risks, which are further magnified when the development process involves multiple operating platforms.

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The Company may not be able to maintain or expand its customer base for its software and services offerings to grow revenue or achieve sustained profitability.

The Company has focused its strategy on software and services to grow revenue and generate sustainable profitability, including by commercializing the BlackBerry Spark platform as the leading end-to-end communications platform for securing and managing IoT endpoints.

The Company has focused its strategy on software and services to grow revenue and generate sustainable profitability, including by commercializing the BlackBerry Spark platform.

For the Company to increase its software and services revenues, it must continually grow its customer base by attracting new customers or, in the case of existing customers, deploying software and services across more endpoints or attracting additional users in such existing customers’ businesses.

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The Company’s customers’ expansion and renewal rates may decline or fluctuate as a result of a number of factors, including the perceived need for such additional software and services, the level of satisfaction with the Company’s software and services, features or functionality, the reliability of the Company’s software and services, the Company’s customer support, customer budgets and other competitive factors, such as pricing and competitors’ offerings.

For smaller or simpler deployments, the switching costs and time are relatively minor compared to traditional enterprise software deployments and such a customer may more easily decide not to renew with the Company and switch to a competitor’s offerings.

For larger deployments, particularly with enterprise customers in highly regulated industries such as financial services, government, healthcare and transportation, the Company is subject to risks related to increased customer bargaining power, longer sales cycles, regulatory changes, and enhanced customer support obligations.

For smaller or simpler deployments, the switching costs and time are relatively minor compared to traditional enterprise software deployments and such a customer may more easily decide

not to renew with the Company and switch to a competitor’s offerings.

The Company must invest significant time and resources in providing ongoing value to these customers and in enhancing its reputation as an enterprise software vendor.

If these efforts fail, or if the Company’s customers do not renew for other reasons, or if they renew on terms less favourable to the Company, the Company’s revenue may decline and its results of operations could be materially impacted.

The Company’s ability to grow software and services revenue is also dependent on its ability to:

(i) expand its distribution capabilities with partners, resellers and licensees, (ii) maintain a qualified direct sales force, which requires significant time and resources, including investment in systems and training, and (iii) increase the integration of sales efforts across business units to leverage leads and synergistic products and services in the Company’s portfolio.

The Company’s ability to grow software and services revenue is also dependent on its ability to expand its distribution capabilities with partners, resellers and licensees and its ability to maintain a qualified direct sales force, which requires significant time and resources, including investment in systems and training.

From time to time, the Company may choose to reorganize its go-to-market teams in an effort to better leverage its sales resources and improve customer service.

These reorganizations, which may include investments in educating the Company’s sales force, can cause short-term disruptions and may negatively impact sales.

There can be no assurance that the Company will be successful in implementing its sales and distribution strategy.

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No technology has been exclusively or commercially adopted as the industry standard for many of the products and services offered by the Company.

Accordingly, both the nature

of the competition and the scope of the business opportunities afforded by the markets in which the Company competes are uncertain.

Accordingly, both the nature of the competition and the scope of the business opportunities afforded by the markets in which the Company competes are uncertain.

The Company’s competitors, including new market entrants, may implement new technologies before the Company does, deliver new products and services earlier, or provide products and services that are disruptive or that are attractively priced or enhanced or better quality compared to those of the Company, making it more difficult for the Company to win or preserve market share.

Some of the Company’s competitors have greater name recognition, larger customer bases and significantly greater financial, technical, marketing, public relations, sales, distribution and other resources than the Company does.

In particular, some of the Company’s competitors have increased their focus on marketing and product development in the enterprise market.

In particular, some of the Company’s competitors may be able to leverage their relationships with enterprise customers based on other products or incorporate functionality into existing products to gain business in a manner that discourages users from purchasing the Company’s solutions, including by selling at zero or negative margins, product bundling or offering closed technology platforms.

In the automotive sector, some of the Company’s OEM and Tier 1 customers have accelerated internal development of embedded solutions.

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The Company is also exposed to risk as a result of process, coding or human errors and through attempts by third parties to fraudulently induce employees to provide access to confidential or personal information.

Although malicious attempts to gain unauthorized access to such information affect many companies across various industries, the Company is at a relatively greater risk of being specifically targeted because of its reputation for security and the nature of its network operations, and because the Company has been involved in the identification of organized cyber adversaries.

Although malicious attempts to gain unauthorized access to such information affect many companies across various industries, the

Company is at a relatively greater risk of being specifically targeted because of its reputation for security and the nature of its network operations, and because the Company has been involved in the identification of organized cyber adversaries.

The Company devotes significant resources to network security, encryption and authentication technologies and other measures, including security policies and procedures, vulnerability testing and awareness training, to mitigate cyber risk to its systems, endpoints and data.

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The Company may not be able to anticipate these techniques, to implement adequate preventative measures or to identify and respond to them in a timely manner, and the Company’s efforts to do so may have a material adverse impact on the Company’s operating margins, the user experience or compatibility with third party products and services.

Although the Company has not experienced any material financial or other losses relating to technology failure, cyberattacks or security breaches, there is no assurance that the Company will not experience loss or damage in the future.

Although to date the Company has not experienced any material financial or other losses relating to technology failure, cyberattacks or security breaches, there is no assurance that the Company will not experience loss or damage in the future.

If the network and product security measures implemented by the Company or its partners, including third-party data center operators, cloud service providers and product manufacturers are breached, or perceived to be breached, or if the confidentiality, integrity or availability of the Company’s data, including intellectual property and legally protected personal data, is compromised, the Company could be exposed to significant litigation, service disruptions, investigation and remediation costs, regulatory sanctions, fines and contractual penalties.

In addition, any such event could materially damage the Company’s reputation, which is built in large measure on the security and reliability of BlackBerry products and services, and could result in the loss of investor confidence, channel partners, competitive advantages, revenues and customers, including the Company’s most significant government and regulated enterprise customers.

While the Company maintains cybersecurity insurance, the

Company’s coverage may be insufficient to cover all losses or types of claims that may arise from cyber incidents, and any incidents may result in the loss of, or increased costs of, the Company’s insurance.

While the Company maintains cybersecurity insurance, the Company’s coverage may be insufficient to cover all losses or types of claims that may arise from cyber incidents, and any incidents may result in the loss of, or increased costs of, the Company’s insurance.

A failure or perceived failure of the Company’s solutions to detect or prevent security vulnerabilities could materially adversely affect the Company’s reputation, financial condition and results of operations.

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Further, a breach of an artificial intelligence and machine learning-based solution offered by another endpoint security provider could cause the market to lose confidence in next-generation security software generally, including the Company’s solutions.

The outbreak of the COVID-19 coronavirus could have a material adverse effect on the Company’s business, results of operations and financial condition.

In recent weeks, the COVID-19 coronavirus pandemic has caused significant volatility in financial markets, including the market price of the Company’s securities, and has raised the prospect of an extended global recession.

Public health problems resulting from COVID-19 and precautionary measures instituted by governments and businesses to mitigate its spread, including travel restrictions and quarantines, could contribute to a general slowdown in the global economy, adversely impact the businesses of the Company’s customers, suppliers and distribution partners, and disrupt the Company’s operations.

Changes in the Company’s operations in response to COVID-19 or employee illnesses resulting from the pandemic may result in inefficiencies or delays, including in sales and product development efforts and additional costs related to business continuity initiatives, that cannot be fully mitigated through succession planning, employees working remotely or teleconferencing technologies.

In addition, a prolonged economic downturn could result in reduced demand for the Company’s products and services, and the existing uncertainty has already negatively impacted revenue from the BlackBerry QNX automotive software business.

While the full extent and impact of the pandemic cannot be reasonably estimated at this time, it could have a material adverse impact on the Company’s consolidated business, results of operations and financial condition in fiscal 2021.

The COVID-19 coronavirus pandemic has had and may continue to have a material adverse effect on the Company’s business, results of operations and financial condition.

Throughout fiscal 2021, the COVID-19 coronavirus pandemic and related public health measures, including orders to shelter-in-place, travel restrictions and mandated business closures, have adversely affected workforces, organizations, consumers and economies leading to an economic downturn and increased market volatility.

The COVID-19 pandemic has disrupted the normal operations of the Company and the businesses of many of the Company’s customers, suppliers and distribution partners.

Throughout most of fiscal 2021, the Company mandated remote working, utilizing virtual meetings and suspending employee travel, to protect the health and safety of its employees, contractors, customers and visitors.

The Company also shifted customer, industry and other stakeholder events to virtual-only experiences, and may similarly alter, postpone or cancel other events in the future.

The Company has a limited history with substantially remote operations and the long-term impacts of it are uncertain.

In fiscal 2021, the economic downturn and uncertainty caused by the COVID-19 pandemic and the measures undertaken to contain its spread negatively affected the Company’s QNX automotive software business and caused volatility in demand for the Company’s products and services, adversely affected the ability of the Company’s sales and professional services teams to work with customers, and increased sales cycle times.

The uncertainty also resulted in the Company making significant judgments related to its estimates and assumptions concerning the impairment of goodwill, indefinite-lived intangible assets and certain operating lease right-of-use assets and associated property, plant and equipment.

The COVID-19 pandemic and related global chip shortage have had and, in fiscal 2022, may continue to have a material adverse impact on the Company’s QNX automotive software business in particular and on the Company’s business, results of operations and financial condition on a consolidated basis.

While the Company does not expect the COVID-19 pandemic and its related economic impact to materially adversely affect the Company’s liquidity position, the Company continues to evaluate the current and potential impact of the pandemic on its business, results of operations and consolidated financial statements, including potential asset impairment.

The Company also continues to actively monitor developments and business conditions that may cause it to take further actions that alter business operations as may be required by applicable authorities or that the Company determines are in the best interests of its employees, customers, suppliers and stockholders.

The ultimate impact of COVID-19 will depend on, among other things, the pandemic’s duration and severity, governmental restrictions which may be sustained or additional measures which may be imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the pandemic (including the availability and distribution of vaccines), the impact of the global chip shortage and global economic conditions.

The long-term impact of the COVID-19 pandemic on the Company’s business may not be fully reflected until future periods.

The Company’s success depends on its continuing ability to attract new personnel, retain existing key personnel and manage its staffing effectively.

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Competition for such people is intense, continuous, and increasing in the industries in which the Company participates, and the Company has experienced solicitations of its employees by its competitors.

Competition for highly skilled personnel is intense, especially in the San Francisco Bay Area and in the Waterloo, Ontario area, where the Company has a substantial presence and need for highly skilled personnel.

The Company is also substantially dependent on the continued service of its existing engineering personnel because of the complexity of its products and services.

Also, to the extent that the Company hires employees from mature public companies with significant financial resources, the Company may be subject to allegations that such employees have been improperly solicited, or that they have divulged proprietary or other confidential information or that their former employers own such employees’ inventions or other work product.

To attract and retain critical personnel, the Company may experience increased compensation costs that are not offset by increased productivity or higher prices for our products and services.

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The Company makes training available to its partners and develops sales programs to incentivize them to promote and deliver the Company’s current and future products and services and to grow its user base.

If the Company is not able to effectively identify and establish new relationships with successful resellers and channel partners, or in maintaining or enhancing existing such relationships without giving rise to conflicts between channels, or if the Company’s partners do not act in a manner that will promote the success of the Company’s products and services, the Company’s business, results of operations and financial condition could be materially adversely affected.

If the Company is not able to effectively identify and establish new relationships with successful resellers and channel partners, or to maintain or enhance existing relationships without giving rise to conflicts between channels, or if the Company’s partners do not act in a manner that will promote the success of the Company’s products and services, the Company’s business, results of operations and financial condition could be materially adversely affected.

Many resellers and channel partners sell products and services of the Company’s competitors and may terminate their relationships with the Company with limited or no notice and limited or no penalty.

If the Company’s competitors offer their products and services to the resellers and channel partners on more favorable contractual or business terms, have more products and services available, or those products and services are, or are perceived to be, in higher demand by end users, or are more lucrative for the resellers and channel partners, there may be continued pressure on the Company to reduce the price of its products and services, or those resellers and channel partners may stop offering the Company’s products or de-emphasize the sale of its products and services in favor of the Company’s competitors, which could have a material adverse effect on the Company’s business, results of operations and financial condition.

Litigation against the Company may result in adverse outcomes.

In the course of its business, the Company receives general commercial claims related to the conduct of its business and the performance of its products and services, including product liability and warranty claims, employment claims, claims for breaches of contractual covenants and other litigation claims, which may potentially include claims relating to improper use of, or access to, personal data.

Liability claims related to product defects, bugs or vulnerabilities could give rise to class action litigation or to the withdrawal of certifications, and the Company may be subject to such claims either directly or indirectly through indemnities that it provides to certain of its customers.

The Company’s exposure to product liability risk may increase as the Company continues to commercialize its software innovations for autonomous and connected vehicles.

In addition, the Company is subject to potential litigation claims and enforcement actions arising from its public disclosure.

The Company is committed to providing a high level of disclosure and transparency and provides commentary that highlights the trends and uncertainties that the Company anticipates.

Given the highly competitive and rapidly evolving industry in which the Company operates and the recent transition in the Company’s business strategy, the Company’s financial results may not follow any past trends, making it difficult to predict the Company’s financial results.

Consequently, actual results may differ materially from those expressed or implied by the Company’s forward-looking statements and may not meet the expectations of analysts or investors, which can contribute to the volatility of the market price of the Company’s common shares.

Litigation resulting from these claims could be costly and time-consuming and could divert the attention of management and key personnel from the Company’s business operations.

The complexity of the technology involved and the inherent uncertainty of commercial, class action, securities, employment and other litigation increases these risks.

In recognition of these considerations, the Company may enter into settlements resulting in material expenditures, the payment of which could have a material adverse effect on the Company’s business, results of operation and financial condition.

If the Company is unsuccessful in its defense of material litigation claims or is unable to settle the claims, the Company may be faced with significant monetary damages or injunctive relief against it that could have a material adverse effect on the Company’s business, BlackBerry brand, results of operations and financial condition.

Administrative or regulatory actions against the Company or its employees could also have a material adverse effect on the Company’s business, BlackBerry brand, results of operations and financial condition.

See also “Legal Proceedings” in this Annual Report on Form 10-K.

Network disruptions or other business interruptions could have a material adverse effect on the Company’s business and harm its reputation.

The Company’s operations rely to a significant degree on the efficient and uninterrupted operation of complex technology systems and networks, which are in some cases integrated with those of carrier partners, cloud service providers, and third-party data centre operators.

The Company’s network operations and technology systems are potentially vulnerable to damage or interruption from a variety of sources, including by fire, earthquake, power loss, telecommunications or computer systems failure, cyber attack, human error, terrorist acts, war, and the threatened or actual suspension of BlackBerry services at the request of a government for alleged non-compliance with local laws or other events.

The increased number of third party applications on the Company’s network may also enhance the risk of network disruption or cyber attack for the Company.

There may also be system or network interruptions if new or upgraded systems are defective or not installed properly, or if data centre operators fail to meet agreed service levels.

The Company has experienced network events in the past, and any future outage in a network or system or other unanticipated problem that leads to an interruption or disruption of BlackBerry services could have a material adverse effect on the Company’s business, results of operations and financial condition, and could adversely affect the Company’s longstanding reputation for reliability.

As the Company moves to handle increased data traffic and support more applications or services, the risk of disruption and the expense of maintaining a resilient and secure network services capability may significantly increase.

The Company may not be successful in fostering an ecosystem of third-party application developers.

The Company believes decisions by customers to purchase its products, including the forthcoming BlackBerry IVY platform, depend and will depend in part on the availability and compatibility of software applications and services that are developed and maintained by third-party developers.

The Company may not be able to convince third parties to develop and maintain applications for its cybersecurity software and embedded solutions platforms.

The loss of, or inability to maintain these developer relationships may materially and adversely affect the desirability of the Company’s products and, hence, the Company’s revenue from the sale of its products.

The Company’s products and services are dependent upon interoperability with rapidly changing systems provided by third parties.

The Company’s platform depends on interoperability with operating systems, such as those provided by Apple, Google and Microsoft, as well as automotive OEMs.

Operating systems are upgraded frequently in response to consumer demand and, in order to maintain the interoperability of its platform, the Company may need to release new software updates at a much greater pace than a traditional enterprise software company that supports only a single platform.

In addition, the Company typically receives limited advance notice of changes in features and functionality of operating systems and platforms, and therefore the Company may be forced to divert resources from its preexisting product roadmap to accommodate these changes.

If the Company fails to enable IT departments to support operating system upgrades upon release, the Company’s business and reputation could suffer.

This could further disrupt the Company’s product roadmap and cause it to delay introduction of planned products and services, features and functionality, which could harm the Company’s business.

Furthermore, some of the features and functionality in the Company’s products and services require interoperability with APIs of other operating systems, and if operating system providers decide to restrict the Company’s access to their APIs, that functionality would be lost and the Company’s business could be impaired.

Operating system providers have included, and may continue to include, features and functionality in their operating systems that are comparable to elements of the Company’s products and services, thereby making the Company’s platform less valuable.

The inclusion of, or the announcement of an intent to include, functionality perceived to be similar to that offered by the Company’s products and services in mobile or embedded operating systems may have an adverse effect on the Company’s ability to market and sell its products and services.

Risks Related to Intellectual Property and Technology Licensing

The Company may not be able to obtain rights to use third-party software and is subject to risks related to the use of open source software.

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In addition, the Company expends significant resources to patent and manage the intellectual property it creates with the expectation that it will generate revenues by incorporating that intellectual property in its products or services.

The Company is also monetizing its patent portfolio through outbound patent licensing, and derives a significant portion of its patent licensing revenue from its agreement with Teletry.

The Company is also monetizing its patent portfolio through outbound patent licensing, and derives a significant portion of its Licensing and Other revenue from its agreement with Teletry.

Although the Company operates its own direct licensing program, it may not be possible for the Company to offset any reduction in revenue from Teletry in the short term, or at all.

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Finally, the royalties the Company can obtain to monetize its intellectual property may decline because of the evolution of technology, changes in the selling price of products using licensed patents, or the difficulty of discovering infringements.

The Company is in ongoing, exclusive negotiations with a North American entity for the potential sale of a portion of the Company’s patent portfolio relating primarily to non-core or legacy mobile devices, messaging and wireless networking technologies.

These negotiations have had and may continue to have an adverse effect on the Company’s ability to monetize its patent portfolio, and the ultimate impact of any definitive sale transaction on Licensing and Other revenue and on the monetization of the Company’s patent portfolio is difficult to predict.

Detecting and protecting against the unauthorized use of the Company’s products, technology proprietary rights, and intellectual property rights is expensive, difficult and, in some cases, impossible.

Litigation may be necessary in the future to enforce or defend the Company’s intellectual property rights and could result in substantial costs and diversion of management resources, either of which could harm the Company’s business, financial condition and results of operations, and there is no assurance that the Company will be successful.

Litigation against the Company may result in adverse outcomes.

In the course of its business, the Company receives general commercial claims related to the conduct of its business and the performance of its products and services, including product liability and warranty claims, employment claims and other litigation claims, which may potentially include claims relating to improper use of, or access to, personal data.

The Company’s exposure to product liability risk may increase as the Company continues to commercialize its software innovations for autonomous and connected vehicles.

In addition, the Company is subject to potential litigation claims arising from its disclosure practices.

The Company is committed to providing a high level of disclosure and transparency and provides commentary that highlights the trends and uncertainties that the Company anticipates.

Despite the Company’s cautions in each earnings release, earnings conference call and securities filings that contain forward-looking statements, the Company may nevertheless be subject to potential securities litigation or enforcement actions.

Litigation resulting from these claims could be costly and time-consuming and could divert the attention of management and key personnel from the Company’s business operations.

The complexity of the technology involved and the inherent uncertainty of commercial, class action, securities, employment and other litigation increases these risks.

The Company could be found to have infringed on the intellectual property rights of others.

Companies in the software and technology industries, including some of the Company’s current and potential competitors, own large numbers of patents, copyrights, trademarks and trade secrets and frequently engage in litigation based on allegations of infringement or other violations of intellectual property rights.

Although the Company believes that third-party software included in the Company’s products is licensed from the entity holding the intellectual property rights and that its products do not infringe on the rights of third parties, third parties have and are expected to continue to assert infringement claims against the Company in the future.

The Company may be subject to these types of claims either directly or indirectly through indemnities that it provides to certain of its customers, partners and suppliers against these claims.

As the Company continues to develop software products and expand its portfolio using new technology and innovation, its exposure to threats of infringement may increase.

Many intellectual property infringement claims are brought by entities whose business model is to obtain patent-licensing revenues from operating companies such as the Company.

Because such entities do not typically generate their own products or services, the Company cannot deter their claims based on counterclaims that they infringe patents in the Company’s portfolio or by entering into cross-licensing arrangements.

Regardless of whether patent or other intellectual property infringement claims against the Company have any merit, they could:

• adversely affect the Company’s relationships with its customers;

• be time-consuming and expensive to evaluate and defend, including in litigation or other proceedings;

• result in negative publicity for the Company;

• divert management’s attention and resources;

• cause product delays or stoppages;

• subject the Company to significant liabilities;

• require the Company to develop possible workaround solutions that may be costly and disruptive to implement;

• require the Company to cease certain activities or to cease selling its products and services in certain markets.

In addition, any such claim may require the Company to enter into costly royalty agreements or obtain a license for the intellectual property rights of third parties.

Such licenses may not be available or they may not be available on commercially reasonable terms.

Any of the foregoing infringement claims and related litigation could have a significant adverse impact on the Company’s business and operating results, as well as the Company’s ability to generate future revenues and profits.

See also “Legal Proceedings” in this Annual Report on Form 10-K.

Risks Related to Assets, Indebtedness and Taxation

The Company faces substantial asset risk, including the potential for charges related to its long-lived assets and goodwill.

The Company’s long-lived assets include items such as the Company’s network infrastructure, operating lease right-of-use assets and certain intellectual property.

As at February 29, 2020, the Company’s long-lived assets had a carrying value of approximately $1.11 billion.

As at February 28, 2021, the Company’s long-lived assets had a carrying value of approximately $882 million.

Under United States generally accepted accounting principles (“U.S.

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Goodwill represents the excess of the acquisition price over the fair value of identifiable net assets acquired.

As at February 29, 2020, the Company’s goodwill had a carrying value of approximately $1.44 billion.

As at February 28, 2021, the Company’s goodwill had a carrying value of approximately $849 million.

GAAP, the Company tests goodwill for impairment annually, during the fourth quarter, or more frequently if events or changes in circumstances indicate that the asset may be impaired.

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If any such events or circumstances arise, the Company may be required to record an impairment charge in the value of its goodwill.

In the first quarter of fiscal 2021, the Company recorded total non-cash goodwill impairment charges of

$594 million in the BlackBerry Spark reporting unit.

For additional information, see Note 3 to the Consolidated Financial Statements.

The Company has incurred indebtedness, which could adversely affect its operating flexibility and financial condition.

The Company has, and may from time to time in the future have, third-party debt service obligations pursuant to its outstanding indebtedness, which currently includes $605 million aggregate principal amount of the Debentures.

The Company has, and may from time to time in the future have, third-party debt service obligations pursuant to its outstanding indebtedness, which currently includes $365 million aggregate principal amount of 1.75% unsecured convertible debentures (the “Debentures”).

The degree to which the Company is leveraged could have important consequences, including that:

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GAAP may be negatively affected to the extent that any indebtedness, such as the Debentures, are accounted for by the Company at fair value and include embedded derivatives which fluctuate in value from period to period.

If the Company’s cash flow from operations declines significantly, including any such decline related to the impact of the COVID-19 pandemic, it could result in its inability to pay amounts due under its outstanding indebtedness or to fund other liquidity needs and it may be required to refinance all or part of its then existing indebtedness (including the Debentures), sell assets, reduce or delay capital expenditures or seek to raise additional capital, any of which could have a material adverse effect on the Company’s business, results of operations and financial condition.

If the Company’s cash flow from operations declines significantly, the Company may be unable to pay amounts due under its outstanding indebtedness or to fund other liquidity needs and it may be required to refinance all or part of its then existing indebtedness (including the Debentures), sell assets, reduce or delay capital expenditures or seek to raise additional capital, any of which could have a material adverse effect on the Company’s business, results of operations and financial condition.

The Debentures are subject to restrictive and other covenants that may limit the discretion of the Company and its subsidiaries with respect to certain business matters.

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A breach of any of these covenants could result in a default under the Company’s outstanding indebtedness, which would have a material adverse effect on the Company’s business, results of operations and financial condition.

In addition, certain of the Company’s competitors may operate on a less leveraged basis, or without such restrictive covenants, and therefore could have greater generating and financing flexibility than the Company.

There can be no assurance that the Company will be able to repay, restructure or refinance its indebtedness, including the Debentures, as principal amounts become due, or that it will be able to do so on terms as favourable as those currently in place, particularly during the current period of financial market instability related to the COVID-19 pandemic.

In addition, certain of the Company’s competitors may operate on a less leveraged basis, or without such restrictive covenants, and therefore could have greater operating and financing flexibility than the Company.

If the Company is unable to refinance its indebtedness or is only able to refinance indebtedness on less favourable terms, this may have a material adverse effect on the Company’s business, results of operations and financial condition.

Tax provision changes, the adoption of new tax legislation or exposure to additional tax liabilities could materially impact the Company’s financial condition.

The Company is subject to income, indirect (such as sales tax, sales and use tax and value-added tax) and other taxes in Canada and numerous foreign jurisdictions.

Significant judgment is required in determining its worldwide liability for income, indirect and other taxes, as well as potential penalties and interest.

In the ordinary course of the Company’s business, there are many transactions and calculations where the ultimate tax determination is uncertain.

Although the Company believes that its tax estimates are reasonable, there can be no assurance that the final determination of any tax audits will not be materially different from that which is reflected in historical income, indirect and other tax provisions and accruals.

Should additional taxes or penalties and interest be assessed as a result of an audit, litigation or changes in tax laws, there could be a material adverse effect on the Company’s current and future results and financial condition.

In addition, there is a risk of recoverability of future deferred tax assets.

The Company’s future effective tax rate will depend on the relative profitability of the Company’s domestic and foreign operations, the statutory tax rates and taxation laws of the related tax jurisdictions, the tax treaties between the countries in which the Company operates, the timing of the release, if any, of the valuation allowance, and the relative proportion of research and development incentives to the Company’s profitability.

federal income tax laws, if a company is, or for any past period was, a passive foreign investment company (“PFIC”), there could be adverse U.S.

federal income tax consequences to U.S.

shareholders even if the Company is no longer a PFIC.

While the Company does not believe that it is currently a PFIC, there can be no assurance that the Company was not a PFIC in the past and will not be a PFIC in the future.

Risks Related to Regulation

The use and management of user data and personal information could give rise to liabilities as a result of legal, customer and other third-party requirements.

User data and personal information is increasingly subject to new and amended legislation and regulations in numerous jurisdictions around the world that are intended to protect the privacy and security of personal information, as well as the collection, storage, transmission, use and disclosure of such information.

The interpretation of privacy and data protection laws and their application to the Internet and mobile communications in a number of jurisdictions is unclear and evolving.

There is a risk that these laws may be interpreted and applied in conflicting ways from country to country and in a manner that is not consistent with the Company’s current data protection practices.

Complying with these varying international requirements could cause the Company to incur additional costs and change the Company’s business practices.

In addition, because the Company’s services are accessible worldwide, certain foreign jurisdictions may claim that the Company is required to comply with their laws, even where the Company has no local entity, employees, or infrastructure.

Non-compliance could result in penalties or significant legal liability and the Company’s business, results of operations and financial condition may be adversely affected.

See also “Regulatory Environment” in this Annual Report on Form 10-K.

The Company’s customers, partners and members of its ecosystem may also have differing expectations or impose particular requirements for the collection, storage, processing and transmittal of user data or personal information in connection with BlackBerry products and services.

Such expectations or requirements could subject the Company to additional costs, liabilities or negative publicity, and limit its future growth.

In addition, governmental authorities may require access to limited data stored by the Company through lawful access demands and capabilities, which could subject the Company to legal liability, unforeseen compliance cost and negative publicity.

Even a perception that the Company’s products or practices do not adequately protect users’ privacy or data collected by the Company, made available to the Company or stored in or through the Company’s products, or that they are being used by third parties to access personal or consumer data, could impair the Company’s sales or its reputation and brand value.

Government regulations applicable to the Company’s products and services, including products containing encryption capabilities, could negatively impact the Company’s business.

Certain government regulations applicable to the Company’s products and services may provide opportunities for competitors or limit growth.

The impact of potential incremental obligations may vary based on the jurisdiction, but regulatory changes could impact whether the Company enters, maintains or expands its presence in a particular market, and whether the Company must dedicate additional resources to comply with these obligations.

Various countries have enacted laws and regulations, adopted controls, license or permit requirements, and restrictions on the export, import, and use of products or services that contain encryption technology.

In addition, from time to time, governmental agencies have proposed additional regulations relating to encryption technology, such as requiring certification, notifications, review of source code, or the escrow and governmental recovery of private encryption keys.

Governmental regulation of encryption technology, including the regulation of imports or exports, could harm the Company’s sales in one or more jurisdictions and adversely affect the Company’s revenues.

Complying with such regulations could also require the Company to devote additional research and development resources to change the Company’s software or services or alter the methods by which the Company makes them available, which could be costly.

In addition, failure to comply with such regulations could result in penalties, costs and restrictions on import or export privileges or adversely affect sales to government agencies or government funded projects.

Failure of the Company’s suppliers, subcontractors, channel partners and representatives to use acceptable ethical business practices or to comply with applicable laws could negatively impact the Company’s business.

The Company expects its suppliers, subcontractors, licensees and other partners to operate in compliance with applicable laws, rules and regulations regarding working conditions, labour and employment practices, environmental compliance, anti-corruption, and patent and trademark licensing, as detailed in the Company’s Supplier Code of Conduct.

However, the Company does not directly control their labour and other business practices.

If one of the Company’s suppliers or subcontractors violates applicable labour, anti-corruption or other laws, or implements labour or other business practices that are regarded as unethical, or if a supplier or subcontractor fails to comply with procedures designed by the Company to adhere to existing or proposed regulations, the delivery of BlackBerry products could be interrupted, orders could be canceled, relationships could be terminated, the Company’s reputation could be damaged, and the Company may be subject to liability.

Any of these events could have a negative impact on the Company’s business, results of operations and financial condition.

The Company is subject to risks related to regulations regarding health and safety, hazardous materials usage and conflict minerals.

The Company must comply with a variety of laws, standards and other requirements governing, among other things, health and safety, accessibility, hazardous materials usage, packaging and environmental matters, and its products must obtain regulatory approvals and satisfy other regulatory concerns in the various jurisdictions in which they are sold.

The Company is also subject to SEC disclosure requirements applicable to issuers that have contracted to manufacture products containing certain minerals that are mined from the Democratic Republic of Congo and adjoining countries.

There can be no assurance that the direct or indirect costs of complying with such laws, standards and requirements will not adversely affect the Company’s business, results of operations or financial condition.

Any failure to comply with such laws, standards and requirements may subject the Company to regulatory or civil liability, fines or other additional costs, and reputational harm.

General Risk Factors

Acquisitions, divestitures, investments and other business initiatives may negatively affect the Company’s results of operations.

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The Company’s inability to address these risks could adversely affect the Company’s business, results of operations and financial condition.

The Company’s products and services are dependent upon interoperability with rapidly changing systems provided by third parties.

The Company’s platform depends on interoperability with operating systems, such as those provided by Apple, Google and Microsoft, as well as automotive OEMs.

If the Company fails to enable IT departments to support operating system upgrades upon release, the Company’s business and reputation could suffer.

This could further disrupt the Company’s product roadmap and cause it to delay introduction of planned products and services, features and functionality, which could harm the Company’s business.

Furthermore, some of the features and functionality in the Company’s products and services require interoperability with application programming interfaces (“APIs”) of other operating systems, and if operating system providers decide to restrict the Company’s access to their APIs, that functionality would be lost and the Company’s business could be impaired.

The inclusion of, or the announcement of an intent to include, functionality perceived to be similar to that offered by the Company’s products and services in mobile operating systems may have an adverse effect on the Company’s ability to market and sell its products and services.

The Company could be found to have infringed on the intellectual property rights of others.

infringement or other violations of intellectual property rights.

The Company may be subject to these types of claims either directly or indirectly through indemnities that it provides to certain of its customers, partners and suppliers against these claims .

As the Company continues to develop software products and expand its portfolio using new technology and innovation, its exposure to threats of infringement may increase.

Many intellectual property infringement claims are brought by entities whose business model is to obtain patent-licensing revenues from operating companies such as the Company.

Regardless of whether patent or other intellectual property infringement claims against the Company have any merit, they could:

• adversely affect the Company’s relationships with its customers;

• be time-consuming and expensive to evaluate and defend, including in litigation or other proceedings;

• result in negative publicity for the Company;

• divert management’s attention and resources;

• cause product delays or stoppages;

• subject the Company to significant liabilities;

• require the Company to develop possible workaround solutions that may be costly and disruptive to implement;

• require the Company to cease certain activities or to cease selling its products and services in certain markets.

In addition, any such claim may require the Company to enter into costly royalty agreements or obtain a license for the intellectual property rights of third parties.

Such licenses may not be available or they may not be available on commercially reasonable terms.

See also “Legal Proceedings” in this Annual Report on Form 10-K.

The use and management of user data and personal information could give rise to liabilities as a result of legal, customer and other third-party requirements.

User data and personal information is increasingly subject to new and amended legislation and regulations in numerous jurisdictions around the world, such the GDPR in Europe, that is intended to protect the privacy and security of personal information, as well as the collection, storage, transmission, use and disclosure of such information.

The interpretation of privacy and data protection laws and their application to the Internet and mobile communications in a number of jurisdictions is unclear and in a state of flux.