We may in the future be the subject of unfavorable allegations made by short sellers. Any
such allegations may be followed by periods of instability in the market price of our ordinary shares and negative publicity. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could
have to expend significant amounts of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the
relevant short seller by principles of freedom of speech, applicable federal or state law, or issues of commercial confidentiality. Such a situation could be costly and time-consuming and could distract our management from growing our business. Even
if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations, reputation, and shareholders equity, and the value of any of our investments could be greatly reduced or rendered
worthless.
Because Genius is incorporated under the laws of Guernsey, you may face difficulties in protecting your interests, and your ability to
protect your rights through the U.S. Federal courts is limited.
Genius is a limited company incorporated under the laws of
Guernsey. As a result, it may be difficult for investors to effect service of process within the United States upon Geniuss directors or officers, or enforce judgments obtained in the United States courts against Geniuss directors or
officers. We have been advised that there is doubt as to the enforceability in Guernsey of judgments of the U.S. courts of civil liabilities predicated solely upon the laws of the U.S., including the federal securities laws.
As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by
management, members of the board of directors or controlling shareholders than they would as public shareholders of a corporation incorporated in the United States.
It may be difficult to enforce a U.S. judgment against Genius or its directors and officers outside the U.S., or to assert U.S. securities law claims
outside of the U.S.
The majority of Genius directors and executive officers are not residents of the U.S., and the majority of
Geniuss assets and the assets of these persons are located outside the U.S. As a result, it is difficult or may be impossible for investors to effect service of process upon Genius within the U.S. or other jurisdictions, including judgments
predicated upon the civil liability provisions of the federal securities laws of the U.S. Additionally, it is difficult to assert U.S. securities law claims in actions originally instituted outside of the U.S. Foreign courts may refuse to hear a
U.S. securities law claim, because foreign courts may not be the most appropriate forum in which to bring such a claim. Even if a foreign court agrees to hear a claim, it may determine that the law of the jurisdiction in which the foreign court
resides, and not U.S. law, is applicable to the claim. Further, if U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be a time-consuming and costly process, and certain matters of procedure
would still be governed by the law of the jurisdiction in which the foreign court resides.
If a U.S. Holder is treated as owning at least 10% of
Genius ordinary shares, such U.S. Holder may be subject to adverse U.S. federal income tax consequences.
If a U.S. Holder (as
defined in Material Tax Considerations Material U.S. Federal Income Tax Considerations) is treated as owning (directly, indirectly or constructively) at least 10% of the value or voting power of Genius ordinary shares, such
U.S. Holder may be treated as a United States shareholder with respect to Genius, or to any of its subsidiaries, if Genius or such subsidiary constitutes a controlled foreign corporation (in each case, as such terms are
defined under the U.S. Tax Code). Certain United States shareholders of a controlled foreign corporation may be required to annually report and include in their U.S. taxable income, as ordinary income, their pro rata share of Subpart F
income, global intangible low-taxed income and certain investments in U.S. property by such controlled foreign corporations, whether or not such controlled foreign corporation makes any distributions to such United States
shareholder. A failure by a United States shareholder to comply with its reporting obligations may subject the United States shareholder to significant monetary penalties and other adverse tax consequences, and may extend the statute of
limitations with respect to the United States shareholders U.S. federal income tax return for the year for which such reporting was due. Genius cannot provide any assurances that it will assist investors in determining whether Genius or any of
its non-U.S. subsidiaries are treated as controlled foreign corporations or whether any investor is a United States shareholder with respect to any such controlled foreign corporations. Genius also cannot guarantee that it will furnish to any United
States shareholders information that may be necessary for them to comply with the aforementioned obligations. United States investors are urged to consult their own advisors regarding the potential application of these rules to their investments in
Genius. The risk of being subject to increased taxation may deter our current shareholders from increasing their investment in us and others from investing in us, which could impact the demand for, and value of, Genius ordinary shares.
If Genius or any of its subsidiaries is characterized as a passive foreign investment company for U.S. federal income tax purposes, U.S. Holders may
suffer adverse tax consequences.
If Genius or any of its subsidiaries is or becomes a passive foreign investment
company, or a PFIC, within the meaning of Section 1297 of the U.S. Tax Code for any taxable year (or portion thereof) during which a U.S. Holder (as defined in Material Tax Considerations Material U.S. Federal Income Tax
Considerations) holds Genius ordinary shares certain adverse U.S. federal income tax consequences may apply to such U.S. Holder and such U.S. Holder might be subject to additional reporting requirements.
We do not believe Genius will be treated as a PFIC for its current taxable year and do not expect Genius to become one in the near future.
Nevertheless, whether Genius is treated as a PFIC for U.S. federal income tax purposes is a factual determination that must be made annually at the close of each taxable year and, thus, is subject to significant uncertainty. Accordingly, we are
unable to determine whether it will be treated as a PFIC for its current taxable year or for future taxable years, and there can be no assurance that it will not be treated as a PFIC for any taxable year. If Genius determines that it is a PFIC for
any taxable year, Genius intends to, upon written request from a U.S. Holder of Genius ordinary shares, provide a PFIC Annual Information Statement for 2023 or going forward, as applicable. Please see Material Tax Considerations
Material U.S. Federal Income Tax Considerations U.S. Federal Income Taxation of U.S. Holders Passive Foreign Investment Company Rules for a more detailed discussion with respect to Geniuss potential PFIC status. U.S.
investors are urged to consult their tax advisors regarding the possible application of the PFIC rules to them of the Genius ordinary shares.
Indemnity provisions in customer and other third-party agreements potentially expose us to substantial liability for intellectual property infringement
and other losses.
Our agreements with customers and other third parties may include indemnification or other provisions under
which we agree to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by us to property or persons, or other liabilities relating to or arising from our
products and services or other acts or omissions. The term of these contractual provisions often survives termination or expiration of the applicable agreement. Large indemnity payments of damage claims from contractual breach could harm our
business, results of operations and financial condition. Although we generally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them. Any dispute with a customer with respect to
such obligations could have adverse effects on our relationship with that customer and other current and prospective customers, reduce demand for our products and services, damage our reputation and harm our business, results of operations and
financial condition. The Sponsor and former directors of dMY are subject to claims arising out of the Business Combination. We may owe indemnification obligations to such former directors subject to such claims. While we maintain insurance coverage
that we believe is adequate for our business, such coverage may not cover all potential costs and expenses associated with such claims.
Future
resales of Genius ordinary shares may cause the market price of such securities to drop significantly, even if its business is doing well.
Certain of our pre-Listing holders, NFL Enterprises and PIPE Investors have been granted certain
rights, pursuant to the Amended and Restated Investor Rights Agreement and Subscription Agreements, respectively, to require Genius to register, in certain circumstances, the resale under the Securities Act of their Genius ordinary shares held by
them, subject to certain conditions, and to certain demand, piggy-back and shelf registration rights. We have filed a registration statement on Form F-1 to register such ordinary shares for resale, which was
declared effective on June 1, 2021. Further, certain holders who have been issued Genius ordinary shares in connection with the FanHub Acquisition and the Second Spectrum Acquisition have certain registration rights under the respective
agreements to such transactions. We have filed a registration statement on Form F-1 to register such ordinary shares for resale, which was declared effective on September 30, 2021. Pursuant to Rule 429
under the Securities Act, such ordinary shares were then registered on a Form F-3, which was declared effective on June 17, 2022. The sale or possibility of sale of these Genius ordinary shares could have
the effect of increasing the volatility in Genius ordinary share price or putting significant downward pressure on the price of Genius ordinary shares.
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