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Item 1A. Risk Factors

2023-03-31 compared with 2022-04-01 · 116 added, 137 removed, 232 unchanged (52% of the section changed)

Investors in the Company’s securities should carefully consider the following risks, as well as the other information contained in MD&A (as defined below) and elsewhere in this Annual Report on Form 10-K Form for the fiscal year ended February 28, 2022.

Any of the following risks, in whole or in part, could materially and adversely impact the Company’s business, financial condition and operating results.

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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 Suite, 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.

Company’s future success depends upon its ability to enhance and integrate its current products and services, including the BlackBerry Spark Suite, 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 must obtain and maintain certain product approvals and certifications from governmental authorities, regulated enterprise customers and network carrier partners in order to remain competitive, meet contractual requirements and enable its customers to meet their certification needs.

Failure to maintain such approvals or certifications for the Company’s current products or to obtain such approvals or certifications for any new products on a timely basis could have a material adverse effect on the Company’s business, results of operations and financial condition.

In addition, independent industry analysts often issue reports regarding endpoint security solutions and the perception of the Company’s solutions in the marketplace, especially as compared to those of the Company’s competitors, may be significantly influenced by these reports.

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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.

Such attempts may intensify in the event of retaliatory cyber attacks stemming from Russia’s recent invasion of Ukraine.

Such attempts may intensify as a by-product of Russia’s invasion of Ukraine.

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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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 material 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.

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.

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.

The techniques used by cyber adversaries to breach network and endpoint security measures are sophisticated and change frequently, and the Company’s products and services may not protect users against all cyberattacks.

At the same time, the Company’s products and services are highly complex and may contain design defects, bugs or security vulnerabilities that are difficult to detect and correct.

Such internal defects and a variety of external factors, including misconfigurations, errors introduced through collaborations with the Company’s engineering partners or the failure of customers to address risks identified by our platform, could impair the effectiveness of the Company’s solutions and cause them to fail to secure endpoints and prevent attacks or function as intended.

In addition, the Company’s solutions may falsely indicate a cyber threat that does not actually exist, which may negatively impact customers’ trust in the Company’s solutions.

Real or perceived defects, errors or vulnerabilities in the Company’s software and services, or the failure of the Company’s platform solutions to detect or prevent cyber incidents, could result in the delay or denial of their market acceptance and may harm the Company’s reputation, financial condition and results of operations.

If errors are discovered, correcting them could require significant expenditures by the Company and the Company may not be able to successfully correct them in a timely manner or at all.

The Company’s products and services frequently involve the transmission, processing and storage of data, including proprietary, confidential and personally-identifiable information, and a security compromise, misconfiguration or malfunction involving the Company’s software could result in such information being accessible to attackers or other third parties.

Real or perceived security breaches against a customer using the Company’s solutions could cause damage or disruption to the customer and subject the Company to liability, and may result in the customer and the public believing that the Company’s solutions are ineffective, even if they were not implicated in failing to block the attack.

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 Company’s business could be negatively affected as a result of actions of activist shareholders.

Publicly-traded companies have increasingly become subject to campaigns by investors seeking to advocate certain governance changes or corporate actions such as financial or operational restructuring, asset divestitures or even sales of the entire company.

Activist shareholders have publicly advocated for certain governance and strategic changes at the Company in the past, and the Company could be subject to additional shareholder activity or demands in the future.

Given the challenges the Company has encountered in its business in recent years, the Company’s current strategic direction or leadership may not satisfy such shareholders who may attempt to promote or effect changes.

Responding to proxy contests, media campaigns and other tactics by activist shareholders would be costly and time-consuming, disrupt the Company’s operations and divert the attention of the Board and senior management from the pursuit of the Company’s business strategies, which could adversely affect the Company’s results of operations, financial condition and prospects.

If individuals are elected to the Board with a specific agenda to increase short-term shareholder value, it may adversely affect or undermine the Company’s ability to implement its strategic initiatives.

Perceived uncertainties as to the Company’s future direction as a result of shareholder activism could also result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners.

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 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.

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

Also, the Company’s financial results and share price performance (particularly for those employees for whom equity-based compensation is a key element of their total compensation), among other factors, may impact the Company’s ability to attract new, and retain existing, employees.

In addition, the Company’s ability to hire and retain qualified personnel may be negatively impacted by any changes that the Company makes with respect to remote, on-site or hybrid work arrangements, as these may not meet the needs or expectations of employees or may be perceived as less favourable compared to other companies’ policies.

Also, the Company’s financial results and share price performance (particularly for senior employees for whom equity-based compensation is a key element of their total compensation), among other factors, may impact the Company’s ability to attract new, and retain existing, employees.

In addition, the Company’s ability to hire and retain qualified personnel may be negatively impacted by the Company’s policies with respect to remote, on-site or hybrid work arrangements, as these may not meet the needs or expectations of employees or may be perceived as less favourable compared to other companies’ policies.

Any failure by the Company to attract and retain key employees could have a material adverse effect on the Company’s business, results of operations and financial condition.

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If the Company does not maintain appropriate staffing, develop effective business continuity and succession programs, mitigate turnover and effectively utilize employees with the right mix of skills and experience across the functions necessary to meet the current and future needs of its business, the financial and operational performance of the Company could suffer.

At the same time, the Company’s products and services are highly complex and may contain design defects, bugs or security vulnerabilities that are

difficult to detect and correct.

In addition, the Company’s solutions may falsely indicate a cyber threat that does not actually exist, which may negatively impact customers’ trust in the Company’s solutions.

If errors are discovered, correcting them could require significant expenditures by the Company and the Company may not be able to successfully correct them in a timely manner or at all.

The Company’s success depends on its relationships with resellers and channel partners.

The Company’s ability to maintain and expand its market reach, particularly with small and medium-sized businesses, is increasingly dependent on establishing, developing and maintaining relationships with third party resellers and channel partners.

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 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.

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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.

See Note 10 to the Consolidated Financial Statements for information regarding certain legal proceedings in which the Company is involved, including a consolidated securities class action complaint filed in the U.S.

District Court for the Southern District of New York.

In addition, 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.

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

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.

Litigation resulting from these claims and from actions asserted by the Company 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.

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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.

The Company’s success depends on its relationships with resellers and channel partners.

The Company’s ability to maintain and expand its market reach is increasingly dependent on establishing, developing and maintaining relationships with third party resellers and channel 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.

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

The Company has acquired and continues to seek out opportunities to acquire or invest in, businesses, assets, products, services and technologies that expand, complement or are otherwise related to the Company’s business or provide opportunities for growth.

In addition, the Company is increasingly collaborating and partnering with third parties to develop technologies, products and services, as well as seek new revenue through partnering arrangements.

These activities involve significant challenges and risks, including:

that they may not advance the Company’s strategic objectives or generate satisfactory synergies or return on investment;

that the Company may have difficulty integrating and managing new employees, business systems, development teams and product offerings;

the potential loss of key employees of an acquired business;

additional demands on the Company’s management, resources, systems, procedures and controls;

disruption of the Company’s ongoing business;

and diversion of management’s attention from other business concerns.

Acquisitions, investments or other strategic collaborations or partnerships may involve significant commitments of financial and other resources of the Company.

If these fail to perform as expected, or if the Company fails to enter into and execute the transactions or arrangements needed to succeed, the Company may not be able to bring its products, services or technologies to market successfully or in a timely manner, which would have a material adverse impact on results of operations.

Furthermore, an acquisition may have an adverse effect on the Company’s cash position if all or a portion of the purchase price is paid in cash, and common shares issuable in an acquisition would dilute the percentage ownership of the Company’s existing shareholders.

Any such activity may not be successful in generating revenue, income or other returns to the Company, and the financial or other resources committed to such activities would not be available to the Company for other purposes.

In addition, the acquisitions may involve unanticipated costs and liabilities, including possible litigation and new or increased regulatory exposure, which are not covered by the indemnity or escrow provisions, if any, of the relevant acquisition agreements.

As business circumstances dictate, the Company may also decide to divest itself of assets or businesses.

The Company may not be successful in identifying or managing the risks involved in any divestiture, including its ability to obtain a reasonable purchase price for the assets, potential liabilities that may continue to apply to the Company following the divestiture, potential tax implications, employee issues or other matters.

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

In the fourth quarter of fiscal 2022, the Company announced that it had entered into an agreement for the sale of substantially all of its non-core patent assets for total consideration of $600 million.

The buyer is a special purpose vehicle formed to acquire the Company’s assets and completion of the transaction is subject to the satisfaction of financing and other closing conditions.

Closing is targeted for the end of the first quarter of fiscal 2023 but there can be no assurance that the transaction will be successfully completed.

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.

The COVID-19 coronavirus pandemic and related public health measures, including orders to shelter-in-place, travel restrictions and mandated business closures, has adversely affected workforces, organizations, consumers and economies leading to increased market volatility and economic disruption.

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.

During fiscal 2022 and 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 long-term impacts on the Company of substantially remote operations are uncertain.

The economic downturn and uncertainty caused by the COVID-19 pandemic and the measures undertaken to contain its spread have 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 the COVID-19 pandemic on the Company’s operational and financial performance will depend on, among other things, the pandemic’s duration and severity, including resurgences in some geographic areas as a result of new strains and variants, the governmental restrictions that may be sustained or imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the pandemic (including the distribution and efficacy of vaccines, particularly against emergent viral variants), the impact of the global chip shortage and other supply chain constraints.

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

See Note 10 to the Consolidated Financial Statements for information regarding certain legal proceedings in which the Company is involved.

Adverse macroeconomic and geopolitical conditions have had and may continue to have a material adverse effect on the Company’s business, results of operations and financial condition.

The COVID-19 pandemic and ensuing global semiconductor shortage have had and may continue to have a material adverse impact on production-based royalties for the Company’s QNX automotive software business.

The invasion of Ukraine by Russia and resulting global sanctions against Russia have exacerbated the disruption of automotive supply chains and its impact on the Company’s business.

Economic weakness or inflation resulting directly or indirectly from the COVID-19 pandemic and the invasion of Ukraine, as well as higher interest rates implemented in response to inflation and resulting fears of recession, may negatively impact consumer demand for automobiles and is contributing to reduced spending on and longer sales cycles for cybersecurity solutions, which in turn may continue to adversely affect the Company’s business, results of operations and financial condition on a consolidated basis.

Because all components of the Company’s budgeting and forecasting are dependent upon estimates of economic activity in the markets that the Company serves and demand for its products and services, economic uncertainties make it difficult to estimate future income and expenditures.

Although the Company does not believe that inflation had a direct effect on its operations in fiscal 2023, higher interest rates implemented in response to inflation contributed to the non-cash goodwill and long-lived asset impairment charges of $476 million (the “Fiscal 2023 Impairment Charge”) recorded by the Company in the fourth quarter of the year.

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

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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.

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.

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.

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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.

Many of the Company’s products include intellectual property which must be licensed from third parties.

The termination of any of these licenses, or the failure of such third parties to adequately maintain, protect or update their software or intellectual property rights, could delay the Company’s ability to offer its products while the Company seeks to implement alternative technology offered by other sources (which may not be available on commercially reasonable terms) or develop such technology internally (which would require significant unplanned investment on the Company’s part).

The use of third-party software in the Company’s products could also expose the Company and its customers to security vulnerabilities.

In addition, certain software that the Company uses may be subject to open source licenses.

Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code.

Some open source licenses contain requirements that the Company make available source code for modifications or derivative works created by the Company based upon the type of open source software used.

If the Company combines its proprietary solutions with open source software in a certain manner, the Company could, under certain of the open source licenses, face claims from third parties claiming ownership of or demanding the public release of the source code of the Company’s proprietary solutions, or demanding that the Company offer its solutions to users at no cost.

This could allow the Company’s competitors to create similar solutions with lower development effort and time and ultimately could result in a loss of revenue to the Company.

The Company could also be subject to litigation by parties claiming that what the Company believes to be licensed open source software infringes their intellectual property rights.

The terms of many open source licenses have not been interpreted by U.S.

courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on the Company’s ability to commercialize its products and services.

In such an event, the Company could be exposed to litigation or reputational damage, and could be required to obtain licenses from third parties in order to continue offering its products and services or to re-engineer its products or services, or discontinue their sale in the event re-engineering cannot be accomplished on a timely basis, any of which could materially and adversely affect the Company’s business and operating results.

Failure to protect the Company’s intellectual property could harm its ability to compete effectively and the Company may not earn the revenues it expects from intellectual property rights.

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The Company relies on a combination of patents, copyrights, trademarks, trade secrets, confidentiality procedures and contractual provisions to protect its proprietary rights, all of which offer only limited protection.

Despite the Company’s efforts, the steps taken to protect its proprietary rights may not be adequate to preclude misappropriation of its proprietary information or infringement of its intellectual property rights, and the Company’s ability to police such misappropriation or infringement is uncertain.

The laws of certain countries in which the Company’s products and services are sold or licensed do not protect intellectual property rights to the same extent as the laws of Canada or the United States.

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.

Further, the laws of certain countries in which the Company’s products and services are sold or licensed do not protect intellectual property rights to the same extent as the laws of Canada or the United States.

With respect to patent rights, the Company cannot be certain whether any of its pending patent applications will result in the issuance of patents or whether the examination process will require the Company to narrow its claims.

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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.

Changes in the law may weaken the Company’s ability to collect royalty revenue for licensing its patents.

The Company also monetizes its patent assets through outbound licensing.

Changes in the law may weaken the Company’s ability to collect

royalty revenue for licensing its patents.

Similarly, licensees of the Company’s patents may fail to satisfy their obligations to pay royalties, or may contest the scope and extent of their obligations.

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.

If the Malikie Transaction is completed successfully, the consideration payable to the Company from the sale of its non-core patent portfolio will include potential future royalty payments.

The royalties, if any, that may be earned by the Company from the Malikie Transaction in any particular fiscal year or in the aggregate over the term of the royalty arrangement are difficult to predict, particularly given that any such royalties will depend entirely upon the business success of a third party.

The aggregate proceeds that the Company ultimately receives from the Malikie Transaction are expected to be less than $900 million.

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.

Many of the Company’s products include intellectual property which must be licensed from third parties.

The use of third-party software in the Company’s products could also expose the Company and its customers to security vulnerabilities.

In addition, certain software that the Company uses may be subject to open source licenses.

This could allow the Company’s competitors to create similar solutions with lower development effort and time and ultimately could result in a loss of revenue to the Company.

The Company could also be subject to litigation by parties claiming that what the Company believes to be licensed open source software infringes their intellectual property rights.

The terms of many open source licenses have not been interpreted by U.S.

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

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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 28, 2022, the Company’s long-lived assets had a carrying value of approximately $613 million.

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

GAAP”), the Company reviews its long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

The Company’s ability to generate sufficient cash flows to fully recover the current carrying value of these assets depends on the successful execution of its strategies.

If it is determined that sufficient future cash flows do not exist to support the current carrying value, the Company will be required to record an impairment charge for long-lived assets in order to adjust the value of these assets to the newly established estimated value.

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

As at February 28, 2022, the Company’s goodwill had a carrying value of approximately $844 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.

These events and circumstances may include a significant change in legal factors or in the business climate, a significant decline in the Company’s share price, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant disposal activity and the testing of recoverability for a significant asset group.

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 $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 1.75% 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, 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.

If the Company cannot maintain an adequate cash balance or positive cash flow from operations, 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, 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.

There can be no assurance that the Company would be able to restructure or refinance the 1.75% Debentures on terms as favourable as those currently in place.

The Company’s ability to restructure or refinance the 1.75% Debentures, as well as the Company’s business and financial condition more generally, may be adversely impacted if the current instability in the banking sector worsens or becomes persistent.

The 1.75% 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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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.

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.

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.

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.

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

GAAP”), the Company reviews its long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

The Company’s ability to generate sufficient cash flows to fully recover the current carrying value of these assets depends on the successful execution of its strategies.

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

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.

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 fourth quarter of fiscal 2023, the Company recorded the Fiscal 2023 Impairment Charge.

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

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

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Canada has not yet released any domestic legislation in respect of the introduction of the global minimum tax.

In February 2022, the Department of Finance Canada released for public comment draft legislative proposals which, if enacted, may limit the deductibility of interest and financing expenses for Canadian tax purposes.

The draft legislative proposals are generally intended to apply in respect of taxation years beginning on or after January 1, 2023.

In November 2022, the Department of Finance Canada released for public comment revised draft legislative proposals which, if enacted, may limit the deductibility of interest and financing expenses for Canadian tax purposes.

The revised draft legislative proposals are generally intended to apply in respect of taxation years beginning on or after October 1, 2023.

The Company will continue to monitor the BEPS and interest deductibility limitation proposals and any impact on the Company, which may result in an increase in future taxes and an adverse effect on the Company.

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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.

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.

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Environmental, social and governance (“ESG”) expectations and standards expose the Company to risks that could adversely affect the Company’s reputation and performance.

Standards for identifying, measuring and reporting ESG matters continue to evolve, including requirements for ESG-related disclosures that may be required of public companies by the securities regulators.

If the Company’s ESG practices or disclosures do not meet evolving investor or other stakeholder expectations and standards, then the reputation of the Company, its ability to attract or retain employees, and its attractiveness as an investment, business partner, acquiror or service provider could be negatively impacted.

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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.

In addition, the Company is increasingly collaborating and partnering with third parties to develop technologies, products and services, as well as seek new revenue through partnering arrangements.

These activities involve significant challenges and risks, including:

that they may not advance the Company’s strategic objectives or generate satisfactory synergies or return on investment;

that the Company may have difficulty integrating and managing new employees, business systems, development teams and product offerings;

the potential loss of key employees of an acquired business;

additional demands on the Company’s management, resources, systems, procedures and controls;

disruption of the Company’s ongoing business;

and diversion of management’s attention from other business concerns.

Acquisitions, investments or other strategic collaborations or partnerships may involve significant commitments of financial and other resources of the Company.

As business circumstances dictate, the Company may also decide to divest itself of assets or businesses.

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

The Company’s business is subject to risks inherent in foreign operations, including fluctuations in foreign currencies.

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The Company maintains offices in a number of foreign jurisdictions and intends to continue to pursue growth in select international markets.

The Company is

subject to a number of risks associated with its foreign operations that may increase liability and costs, lengthen sales cycles and require significant management attention.

The Company is subject to a number of risks associated with its foreign operations that may increase liability and costs, lengthen sales cycles and require significant management attention.

These risks include:

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All of the above factors may have a material adverse effect on the Company’s business, results of operations and financial condition and there can be no assurance that the policies and procedures implemented by the Company to address or mitigate these risks will be successful, that Company personnel will comply with them, or that the Company will not experience these factors in the future.

Adverse economic, geopolitical and environmental conditions may negatively affect the Company.

A slowdown in capital spending by end users of the Company’s products and services, coupled with existing economic and geopolitical uncertainties globally and in the Company’s target vertical markets, could substantially reduce the demand for the Company’s products and services and adversely affect the Company’s business, results of operations and financial condition.

Current and future conditions in the domestic and global economies remain uncertain, and it is difficult to estimate the level of economic activity for the economy as a whole.

It is even more difficult to estimate growth in various parts of the economy, including the markets in which the Company participates.

In addition, acts of terrorism, political unrest, the outbreak of hostilities and armed conflicts within or between countries have created and may continue to create uncertainties that may affect the global economy.

If economic or geopolitical uncertainties, including those related to the COVID-19 pandemic or Russia’s recent invasion of Ukraine, further disrupt the automotive supply chain or cause customers to reduce their IT budgets or to reduce or cancel orders for the Company’s products and services, the Company’s business, results of operations and financial condition may be adversely affected.

Environmental events may negatively affect the Company.

A significant portion of the Company’s personnel, including a majority of its senior leadership team, is based in California, in areas known for seismic activity and wildfires.

The Company also has operations in numerous locations around the world that expose the Company to additional diverse environmental risks.

A significant natural disaster, such as an earthquake, fire or flood could have a material adverse impact on the Company’s business and operations and could cause the Company to incur significant costs to repair damages to its facilities, equipment and infrastructure.

The Company’s offices and remote working locations have historically experienced, and are projected to continue to experience, climate-related events including drought, heat waves, ice storms, power shortages, and wildfires and resultant air quality impacts.

A significant natural disaster, such as an earthquake, fire or flood could have a material adverse impact on the Company’s business and operations and could cause the Company to incur costs to repair damages to its facilities, equipment and infrastructure.

The Company’s offices and remote working locations

have historically experienced, and are projected to continue to experience, climate-related events including drought, heat waves, ice storms, power shortages, and wildfires and resultant air quality impacts.

The increasing frequency and impact of extreme weather events on the infrastructure of the Company and its suppliers, as well as public infrastructure, have the potential to disrupt the business of the Company, its suppliers and its customers.

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In addition, broad market and industry factors may decrease the market price of the Company’s common shares, regardless of the Company’s operating performance.

The stock market in general, and the securities of technology companies in particular, have often experienced extreme price and volume fluctuations, including, in recent years, as a result of the ongoing COVID-19 pandemic, the invasion of Ukraine by Russia, rising inflation and the recent increase in interest rates by the U.S.

Federal Reserve.

The stock market in general, and the securities of technology companies in particular, have often experienced extreme price and volume fluctuations, including, in recent years, as a result of the COVID-19 pandemic, the invasion of Ukraine by Russia, rising inflation and higher interest rates.

Periods of volatility in the overall market and in the market price of the Company’s securities may prompt securities class action litigation against the Company which, if not resolved swiftly, can result in substantial costs and a diversion of management’s attention and resources.

See also the Risk Factor entitled “Litigation against the Company may result in adverse outcomes” and the “Legal Proceedings” section in this Annual Report on Form 10-K.

Rising inflation may negatively impact the Company’s results of operations as well as the credit and securities markets generally, including the market price of the Company’s common shares and Debentures.

Due to global supply chain issues, a rise in energy prices and strong consumer demand as economies continue to reopen from restrictions related to the COVID-19 pandemic, inflation is showing signs of acceleration in the U.S., Canada and globally.

An inflationary environment can increase the Company’s cost of labour as well as energy and other costs.

In addition, economic conditions and market factors may make it difficult for the Company to raise its prices enough to offset rising costs, which could reduce the Company’s profitability, while raising prices could reduce the number of customers who purchase the Company’s products.

Although the U.S.

Federal Reserve and the Bank of Canada recently increased interest rates and announced their intention to further raise interest rates in the near term, inflation is likely to continue.

Conversely, the recently increased interest rates could have a negative effect on trade and securities markets generally, which may in turn have a material adverse effect on the market price of our common shares and our Debentures.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors