Fun with Filings: eFuse
What is the SEC's Form D for and why does a privately-owned company like eFuse have to file one?
This is the first of hopefully many future feature articles in which we attempt to help readers better understand legally mandated processes that both private and public companies have to engage in with government agencies in the United States. Our very first feature focuses on what a Form D, or “Notice of Exempt Offering of Securities” is.
Have you ever seen a U.S. Securities and Exchange Commission (SEC) filing by an esports/gaming company and thought to yourself, “What the $%# does all of this mean?” Using a recent Form D filing from eFuse, we attempt to explain why it's necessary for a privately-owned company in the U.S. to file such a form, and what all the numbers represent. Let’s jump in!
A new filing with the SEC by privately owned, Ohio-based esports company eFuse reveals that it has raised a little over $10M USD through the sale of securities to 49 investors for an undisclosed amount of equity. A $572K portion of the proceeds is allocated to payments to the company’s executives and directors. The transaction was completed on or around July 12, according to the Form D filing ("Notice of Exempt Offering of Securities").
Form D filings are used by unregistered companies (that are not publicly traded on an exchange such as the NASDAQ) to give notice to the SEC of an "exempt offering of securities" and are required by federal securities laws ("the Securities Act of 1933 under Rule 504 or 506 of Regulation D or Section 4(a)(5) of the Securities Act").
Investopedia (an excellent resource in understanding SEC filings, among other things) describes a Form D this way:
“Form D is a short notice detailing basic information about the company for investors in the new issuance. Such information may include the size and date of the offering, along with the names and addresses of a company's executive officers. This notice is in lieu of more traditional, lengthy reports when filing a non-exempt issuance.”
The filing reveals that $572K of the total gross proceeds are declared to either have been or is proposed to be used for payments to eFuse executives and directors such as salaries and planned boni (as well as in house legal/attorney costs).
Those people listed in the filing include owner of Ohio-based energy company Midwest Energy Services Brian Jonard (listed as a director), eFuse Chief Revenue Officer Neil Duffy (listed as an executive officer), eFuse CEO Matthew Benson (listed as both a director and executive officer), and Ohio Innovation Fund Managing Director William Baumel (also listed as a director).
While directors are listed, it should be noted that—for a company of this size (small) that is still in the early start-up phase of growth—the money in question will go towards executive officers’ salaries and other considerations related to administrative costs and operations.
It should also be noted that the money listed in this filing is not a new influx of cash, but instead represents capital raised in tranches–including the $6M investment announced in February 2021 and a $1.4M seed funding round in October of 2019–and was now filed as a “completed round” with the SEC.
eFuse has raised a fair bit of publicly disclosed capital since its launch in December of 2019; In February of 2021 it secured a $6M investment from a collection of professional sports stars, influencers, and investors, led by Ohio Innovation Fund. Those investors included Philadelphia 76ers point guard Seth Curry, Cleveland Browns cornerback Denzel Ward, Dallas Cowboys running back Ezekiel Elliott, New England Patriots defensive end Chase Winovich, and Cleveland Browns wide receiver Odell Beckham Jr. Prior to its official launch in October of 2019, eFuse secured a $1.4M seed financing round–also led by Ohio Innovation Fund.
In case you didn't know, eFuse is an esports-focused platform where its community can meet, compete, and get discovered for their talents. The company also operates esports news site Esports.gg, which it acquired earlier this year for an undisclosed amount of money, as well as several collegiate esports leagues that it also acquired earlier this year: Collegiate Rocket League (CRL) and College CoD (CCL). eFuse spends a lot of its energy working with high-profile content creators, collegiate esports associations, professional players, esports organizations, and stakeholders (game makers or league operators) through its eRena platform to create publicly accessible competitions in the most popular games, usually with a decent prize pool attached.
💡 Want to learn more about other SEC filings? I highly recommend checking out Investopedia or the official SEC website.
🙏 PS: thank-you to Marcus “Esports” Howard for the tip on this filing–if you’re not listening to what he has to say on social media, then you are missing out on some excellent insights about the business of esports and other developing industries. Also thank you to Tobias Seck, my friend and one of the best financial analysts on the planet, for sharing his knowledge on SEC filings with me—you can find his work on Sports Business Journal.