Latest / The Accounting Podcast / SuiteWorld #2: Accounting for Bitcoin, ESG, and SPACs with Jason Sheehan, CPA
Transcript
- Attention: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for understanding! Jason Sheehan: [00:00:00] So when you look at a traditional power provider, they generate electricity. If it doesn't get used, it kind of just goes out on the Griid and just gets wasted. And so we've gone and done is negotiated with these power companies and say, hey, we'll take that and use it instead of going to waste. And then if there's a draw on it that they need it for consumers or else we'll curtail our equipment and return that power to the Griid so it gets used. Blake Oliver: [00:00:28] This episode of The Cloud Accounting Podcast was recorded at the Oracle NetSuite SuiteWorld Conference in September of 2022. To learn more about NetSuite and the SuiteWorld Conference visit netsuitesuiteworld.com David Leary: [00:00:48] Welcome to The Cloud Accounting Podcast. I am David Leary. Blake Oliver: [00:00:51] And I am Blake Oliver. David Leary: [00:00:52] And we are at day two of SuiteWorld, Oracle's NetSuite, SuiteWorld Conference. And we get to start talking to CFOs and finance leaders at companies today. Blake Oliver: [00:01:03] Customers of NetSuite customers. And this is why we're here. I mean, it was great talking with Evan Goldberg yesterday. It's always fun meeting the Oracle people, talking to the NetSuite people, but you know the customers. That's why we're here. So let's talk to our first customer. David Leary: [00:01:18] Our first customer is Jason Sheehan, CPA director of finance at Griid, Griid. Blake Oliver: [00:01:24] Griid. Jason, welcome to the show. Jason Sheehan: [00:01:26] Thanks for having me. Glad to be here. Blake Oliver: [00:01:28] So tell us in a few sentences, what is Griid? Jason Sheehan: [00:01:31] So Griid is a US based infrastructure company that focuses on Bitcoin mining. And so we are in the process of going public via a SPAC, which was announced this past November. So we are growing fast and obviously in a nice market that's, you know, full of turmoil right now in terms of Bitcoin volatility. So fun to be a part of. Blake Oliver: [00:01:52] Well, this is great. These are two of my favorite things, cryptocurrency and SPACs, right? We love to talk about. David Leary: [00:01:57] Esg. Blake Oliver: [00:01:58] And ESG. Yeah. Esg is on the agenda, too. How is that connected? Jason Sheehan: [00:02:02] Oh, because our company is actually focused on being carbon neutral. So as of today, and we're not doing that via offsets, credit offsets or anything like that, we're actually truly carbon neutral in terms of our power generation. So what that means is we're we're trying to be at about 74% today and a targeting 90% by the end of 23 to be carbon neutral. And we do that through how we source our energy. And that comes in the form of hydropower. We're exploring nuclear options as well as traditional electricity. We're buying the excess kind of off the grids. And then if they need it back, we kind of curtail our equipment, restore the electricity back so it doesn't get wasted. David Leary: [00:02:39] So so Blake and I want to start a Bitcoin mining factory. Yeah. It's all these huge expenses involved. And we're going to put solar panels because we live in the Arizona desert, so it's going to be carbon neutral. I'll come to you to get the money to build this financing. Is that that. Blake Oliver: [00:02:52] Or do you build these facilities? Jason Sheehan: [00:02:54] We build these so we're fully vertically integrated company. And so what that means is we actually build what we call pods, which is where we house all of our mining equipment racks, cabling the actual computers themselves and we don't have any customers, so we mine our own and that's how we generate our revenue and that's how we pay our bills. Blake Oliver: [00:03:13] So how have things been recently with the drop in prices? I know times are tough for mining. Jason Sheehan: [00:03:19] Yeah. And you know, there's there's opportunities that represent themselves when this happens too, because there's a lot of the equipment that's tied to the price of Bitcoin. So when you see these drops, you know, the related miners also drop in price. So there's there's some opportunities there to buy equipment, buy the dip on the other side of it by the actual machines at a lower price point. So certainly it does create some different challenges in terms of running a business that we rely on on Bitcoin revenue generation from. But, you know, that's why we have an app in place now that we can start modeling out these different scenarios and stress testing and things like that. Blake Oliver: [00:03:52] So say that again, What's in place. Jason Sheehan: [00:03:54] And SPV are that suite planning and budgeting. So, you know, so I'm sure you guys want to get into that a little bit. Blake Oliver: [00:04:00] Well well, one of my questions is then I'm going to ask everybody today is how much of the suite are you using? There's so much. Jason Sheehan: [00:04:06] There is so much. And so, you know, what originally happened back in August was we signed with net Suite with a very fast go live to be on ERP financials first at as of Jan one. And so we got that in place. We were on QuickBooks, you know, single subsidiary, obviously going via spec public QuickBooks isn't going to work out too well. So we actually got live financials first in January and then we expanded to the advanced procurement module and then we're looking at the fixed asset module as well. So we've got a few pieces in place now, did some fun work with suite approvals. We also have the mobile approval capabilities in place because our our structure is that we have these different site locations where these individuals are working out and containers and noisy equipment and stuff. They're not behind a desk, so they're not going to be approving things from their desktop. So having that mobile capability was a big piece of the decisioning of why we went with that suite, as well as the Oracle brand and all that. Blake Oliver: [00:05:06] So quick implementation then. When did you sign the deal? Jason Sheehan: [00:05:10] It was August and we were living in January. Blake Oliver: [00:05:12] Yeah, that's pretty good. Jason Sheehan: [00:05:13] Yeah. So, you know, luckily it was not a giant company. And like I said, we had the one subsidiary and only a couple of years of historical to bring in. So but it was, you know, a large undertaking for sure and a lot, a lot of time and effort going into it but we got there. David Leary: [00:05:27] And how big of work are you or maybe how big is the entire company and then how big is your finance department? Jason Sheehan: [00:05:32] Yeah, So the company, you know, was around 100. You know, the finance department we had, let's see, a handful of us. So there's six of us now, you know, still growing like crazy. But that was another big piece of why we almost net suite as well as MSSP is to get as much as. Automated so we could scale the business without necessarily scaling the headcount as much. And so part of that was automating some of how we actually record our mining activity in net suite. So just a little bit of background on Bitcoin mining. So we participate in what are called pools and so we contribute kind of our hash rate, which is our computing power to this pool. And in return we get our proportional share when a block on the blockchain is is solved. So when that happens, we have our activity in what's called wallets and it causes all the transactions that have occurred, and that is in a format that we ingest into net suite. And then we have configured a solution within that suite that records all that activity for sale activity, withdrawal activity transfer activity, and then it records the appropriate transactions for that as well as the gain loss treatment and establishes our FIFO stack for our crypto holdings. Blake Oliver: [00:06:38] And so wow, so all of your crypto is your holdings, your transactions are all flowing into net suite and they're instantly reflected in the financials. Yep. Jason Sheehan: [00:06:48] So we have a process that's built that we can run that allows us to process all the transactions and then some of there's always a couple of ones that need to be manually reviewed. So there's a review queue that we process, but yeah, we can bring it in and process it accordingly. And then similarly we have a fun impairment exercise that we have to do where we have to value our given the volatility, our Bitcoin holdings on a daily basis, we run that process on a monthly batch. And so that one is also automated where we're going out to Coinbase because we have to pull from a US based index for the pricing. And so we go out to Coinbase, have it pull in and then evaluates our holdings and records the related impairment well also automated. Blake Oliver: [00:07:28] And Jason, I don't know if we asked what is your role? Jason Sheehan: [00:07:31] So I was brought on to be the Director of Finance Project Management, so I started off assisting them in an independent consultant capacity to implement Net Suite. You know, I was doing that for a little bit after I left my prior company helping out a couple of different companies and then great offered me to come on full time and I gladly accepted to continue the journey. So that's kind of how I came to be at Grit. And then prior to that, I was in the software space for about a decade with a company that's local to where I am, and then prior to that was in the banking space going through that financial meltdown fund. David Leary: [00:08:02] And so so you're a CPA that got did audit making and then became and that suite implementer implementation specialist. And so that was kind of your your niche and your freelancing that yeah. Jason Sheehan: [00:08:13] So with my experience in the net suite products as well as just my background and kind of, you know, operating in a space where you wear many different hats, I kind of had a good breadth of knowledge, so I was doing that alongside establishing some other visualization layers for another company I was helping out to just to kind of build out some, some by reporting for them. Blake Oliver: [00:08:34] So jumping around, going back to the net suite implementation, you said we went through it real quick. I think you said you're on procurement. Jason Sheehan: [00:08:42] Yeah, advanced. Blake Oliver: [00:08:42] Procurement. Okay. So that is purchase orders. Jason Sheehan: [00:08:45] Yeah. So purchase orders, purchase requisitions were standing up bunch of catalogs to within the solution. So that way our director of procurement and his team will be able to start leveraging kind of the recurring buys. Some of our purchases are recurring so you know, going through and figuring out what is the recurring setting up the catalogs, you know, trying to integrate that with JIRA as well along side of it. So that's come into play as well. And it's been it's been going great. Blake Oliver: [00:09:11] And fixed assets. Jason Sheehan: [00:09:13] And fixed assets. So yeah, that's kind of the work in progress though. So we have 80,000 different fixed assets, majority of which are the individual miners themselves. So there's a need to track all these different things since we have different legal subsidiaries and the intercompany accounting that goes along with the transfer activity, with. Blake Oliver: [00:09:30] The. Jason Sheehan: [00:09:31] Different pieces. Blake Oliver: [00:09:31] Of, I imagine, an entity for each mining location. Jason Sheehan: [00:09:34] Yeah, exactly. Blake Oliver: [00:09:36] What and when you say miners, you know, I'm picturing people with pickaxes, but that's not what we're talking about, right? Jason Sheehan: [00:09:41] No, no. We're actually talking about, you know, just little computers, essentially, that are specialized for Bitcoin mining. So they have these application specific integrated chips in them as chips. Blake Oliver: [00:09:52] Yeah. Driving up the cost of my graphics card for my gaming PC. Jason Sheehan: [00:09:54] Yes, sadly, yeah. All those card issues are coming into play, but we've actually recently like established a relationship with Intel which was out in the news where we're going to be working with them kind of on some next gen chip activity, you know, to hopefully bolster that up. Blake Oliver: [00:10:10] And then you're also using net suite planning and budgeting. Jason Sheehan: [00:10:13] Yeah. So, you know, the key benefit there is since we're on net suite ERP, all the metadata structures and everything get synched up. We're able to pull in actuals on a scheduled overnight and then during close, if we want, we can do, you know, ad hoc pulls to get any big entries that come in mid day, you know, that type of cycle. But also it all has to create the drivers that we wanted for projection purposes and the reporting and dashboard capabilities is why we went with A.P.B. David Leary: [00:10:39] So what's kind of the next steps for you guys? Like as far as obviously you said you're going to go public via SPAC, but I mean, is that. Actually is that nets, we can help you with that. Blake Oliver: [00:10:48] And I have a related question sort of around that, which is, you know, what was the motivation to go from QuickBooks to Net Suite? I take it it was you wanted to go public? Jason Sheehan: [00:10:56] Yeah, it was. It was the going public as well as, you know, the scalability and obviously being able to accommodate the multiple subsidiaries, which you can't really do so well in QuickBooks as well as the crypto accounting prior to putting in the solution we did with the ERP, it was a very manual process that required third party vendors to facilitate some of the processing of the data and returning it back to us, which obviously cost money. So looking at it from from that vein to kind of reduce the spend as well as is bring it in house and position us to be public in more compliant fashion. And so one of the aspects that we did implement as part of that was a third party solution from strong point who are here on site as well to facilitate some of the more SOX compliant related control activity and documented natively within that suite. So hopefully our auditors will be nice and happy when they come in and can see all the changes that were made, who requested it when, who approved it. So that was another big piece as having that all within the NetSuite ecosystem. Blake Oliver: [00:11:53] How many subsidiaries? Jason Sheehan: [00:11:55] We are up to eight now and we have kind of a pipeline of growth that will continue to grow those those different sites, and each one will be its own subsidiary. Blake Oliver: [00:12:03] So tell us about the sites. Where are they? You mentioned hydropower. Jason Sheehan: [00:12:07] Yeah. Blake Oliver: [00:12:08] So clear. Jason Sheehan: [00:12:09] Yeah. So we were exploring nuclear. We got most most of them are in Tennessee, New York. We have a site up there that's the hydro site up in New York. But yeah, we go where the power costs can be negotiated to be favorable to us and make sense. Blake Oliver: [00:12:22] And you mentioned, you know, this is a big selling point, marketing point for Griid is it's carbon free or carbon neutral. How does that work? Jason Sheehan: [00:12:31] Yeah, so it's kind of like I mentioned before, it's how we're procuring our power. So when you look at a traditional power provider, they generate electricity. If it doesn't get used, it kind of just goes out on the Griid and just gets wasted. And so we've gone and done is negotiated with these power companies and say, hey, we'll take that and use it instead of going to waste. And then if there's a draw on it that they need it for consumers or else we'll curtail our equipment and return that power to the Griid so it gets used. Blake Oliver: [00:12:59] Okay, because that was the question I was going to hit you with, which is even if it's carbon neutral, you're taking energy from the Griid that could be used by consumers. But you're you're just taking the excess. Jason Sheehan: [00:13:09] Exactly. Yeah. Blake Oliver: [00:13:10] Okay. Jason Sheehan: [00:13:10] And so returning it when they need it. And we trail our equipment so that way it doesn't get wasted. So like I said, we're about 74% today, carbon neutral with targeting 90% end of 23. Blake Oliver: [00:13:20] And are you just mining Bitcoin or are you mining strictly Bitcoin? Strictly bitcoin? Yep. And why that? Why not other cryptos? Jason Sheehan: [00:13:27] You know, we wanted to focus strictly on bitcoin and you know, that was kind of the founders belief is that, you know, let's keep it to Bitcoin and we didn't want to explore other other cryptos at this point. Blake Oliver: [00:13:37] So just keep it simple. Jason Sheehan: [00:13:39] Keep it simple. Blake Oliver: [00:13:39] Okay, well, I'm trying. I'm having trouble finding fault with this. David. You know, I'm a crypto skeptic most of the time, but like, this is this actually sounds pretty good. Yeah. Jason Sheehan: [00:13:48] No, they've got a good business model and a good team structure. And, you know, the accounting side of it, it's a lot of fun. So that's why I was like, Yeah, go for, go for this ride, go for the SPAC and get things set up and automate things as much as possible. That's kind of what I enjoy. Blake Oliver: [00:14:01] Do you think that, you know, like the the rules are going to change, the standards are going to change so that it's not just impairment downward, but you can mark to market? Jason Sheehan: [00:14:09] That sure would be nice because we obviously, you know before the tanking of of as of late with the bitcoin prices, you know there's any dips in there you got to write it down. So then it's it's almost misleading right. Because you look at it, everything's written down. But, you know, price goes back up and you're still holding it and reporting it at that lower level. So, you know, it's it's always fun. You know, when we sell it, we realize those gains and it kind of comes back. But in the meantime, if you look at the balance sheet, it's it's kind of you got to look at the different reserves that are there for the impairment reserve to kind of tease out what the true value is. Blake Oliver: [00:14:41] Yeah. It's not really helpful for investors. Is that an issue with this back like explaining that to people or. Jason Sheehan: [00:14:47] No, I don't think so, because, you know, with the disclosures and everything else, it's the right now we're just going back and forth to the SEC on comment letters and responses. And SEC is always not the quickest, are they? Blake Oliver: [00:14:57] They're giving you a hard time. Jason Sheehan: [00:14:59] Not a hard time, you know, just making sure that we're addressing all their questions and needs. And I think some of them might be coming down to with the Futures Trading Commission as well with who's going to oversee the crypto space, because I think there's been some back and forth there between the SEC and the Futures Commission on who is actually going to have that oversight. So I think that might be coming into play. I don't know that for sure. I'm just speculating, but I believe that's probably what's dragging out some of the that's for registration updates. And then the comment letters back and forth is probably due to that, but not entirely sure. David Leary: [00:15:32] So then you guys, ultimately you're mining, mining, mining, mine, mining, you find a coin. Are you selling that the next day? Are you sitting on this for a long time or like what's kind of the, the business model I guess, Right. Yeah, it all depends. Jason Sheehan: [00:15:44] So we're not. Holding for investment. Right now, we're really using it to fund growth and operating activities. So we will typically mine and then sell pretty quickly. But you know, we do mine and hold we sell it to fund our operations as needed, essentially, and for equipment buys and things like that. Blake Oliver: [00:16:01] And you said you're part of a pool, is that right? Jason Sheehan: [00:16:03] Yeah. So a lot of Bitcoin miners and crypto miners will participate in what's called a pool. So you kind of get your collective computing power together and then you get your proportional share when a reward is generated from the blockchain. And so that is a pretty typical thing. And so you'll see that across a lot of the space where you're participating in a. Blake Oliver: [00:16:22] Pool and you're going public via a SPAC or that you want to why a SPAC? Why not a traditional IPO this quicker? Jason Sheehan: [00:16:30] You know, I think that's the name of the game is that, you know, the speed to go public via an IPO versus a SPAC is very different. But obviously there's a lot more scrutiny on SPACs, which again, is probably causing some of the delay with with the SEC, is just they want to make sure that they understand our business and what we're doing. And you know, what that's going to look like versus a traditional IPO, a little bit more costly and a little more time intensive to go that route. Blake Oliver: [00:16:53] I imagine that when you started the SPAC process, probably what, like a year ago or. Jason Sheehan: [00:16:58] Yeah, I mean, it was what. Blake Oliver: [00:16:59] It takes a while. Jason Sheehan: [00:17:00] Yeah, it does. It does take a while and there's obviously a lot of NDAs in place and things that can't be discussed back then. But yeah, there's negotiations going on and then yeah, we announced in November 21 we will be going via the. Blake Oliver: [00:17:11] Spac and the SEC. Then in the in the interim started to get hard on SPACs, you know. Right. Jason Sheehan: [00:17:16] Yeah. So I think that's contributing some of this delay in our listing going out. So yeah, so hopefully, I mean we've gone back and forth with them a few times on the camel letters and everything, so hopefully we'll have that wrapped up and satisfy, you know, all their questions. Blake Oliver: [00:17:29] Fingers crossed. Right? Jason Sheehan: [00:17:30] Fingers crossed, indeed. Blake Oliver: [00:17:32] So, David, I derailed one of your questions, but I thought it was a really good question and. David Leary: [00:17:35] I didn't remember it. Now it was about the future. Oh, yeah. So what is the future? I mean, one thing I was just thinking, sitting here, if you get too good at mining, you're going to produce too much supply and the price will fail. And now you have no business, right? So but what's the future in general? What's next? What do you what is your job? Do you have to start implementing with NetSuite as you guys grow? Jason Sheehan: [00:17:52] Yeah. So I mean, always continuing to look to evaluate, you know, where can we leverage net suite for our business and how we're going to optimize the solution as well as what other partner solutions might be out there that might be a good fit to add into the ecosystem. So we're always looking at that and exploring the capabilities. That's kind of part of why I'm here today and or this week is to kind of understand, you know, latest developments and things like that and keep up to speed. So always looking to refine and enhance and automate, provide better visibility to our leadership team in terms of what the finances are doing. Give them the visualizations. If they're not akin to reading numbers on a page, they could see some graphics and things like that. But really just trying to understand what's out there and how we can leverage the technologies that are available to us. Blake Oliver: [00:18:34] Jason, do you personally hold Bitcoin? I do not. Oh, interesting. Jason Sheehan: [00:18:38] Yeah, I mean, usdc USD. Blake Oliver: [00:18:42] And so for our listeners, tell us the difference. Jason Sheehan: [00:18:45] I mean, I don't know, I just, I never got into it. You know, prior to joining Griid, I wasn't very involved in the crypto space, to be perfectly honest, and it was just, you know, I've taken some riskier investments in different areas but never got into the crypto space. And I don't know, I just have it. David Leary: [00:19:01] So you're just never a crypto bro who joined a crypto company. You just for you, I'm a. Jason Sheehan: [00:19:06] Finance and a. David Leary: [00:19:07] Crypto except for you as is implementing network essentially. Yeah that's that's that's your excitement is doing that. Jason Sheehan: [00:19:13] Yeah. And the planning aspects and you know helping craft what that solution looks like so it fits the needs of the business. And I think I mentioned it before, it really doesn't matter what industry or business you're in, like NFB can be crafted around your business to fit your needs. And so, you know, we had a good implementation team that helped understand what we do and incorporate that into how we crafted the solution. So that way it fits our business model, which is a little bit unique and not as common as more traditional people might see with customers and everything else, because we don't have any. So we've begun spend and obviously generate revenue and an atypical fashion with mining bitcoin. And so I think that that was the key piece for us. But yeah, that was kind of my bread and butter and what I enjoy doing. Cool. Blake Oliver: [00:19:57] So, so Bitcoin has a fixed supply. Mm hmm. So the number of Bitcoin will decline over time. How does that impact a mining operation like yours? Jason Sheehan: [00:20:07] Yeah. So there's there's a concept called halving. And once you reach a certain amount coins, they kind of have it. And so I think it's supposed to be extinguished by 2140. So I don't think I'll be around for when the supply of bitcoin runs out. But the way that the Bitcoin was designed is that these halving events occur so that it doesn't get mined out like super fast, but eventually it will, you know, past our lifetimes. But that I think, will when we'll start to see the transition over to more fees for transacting and supporting the blockchain transactions that are occurring. Blake Oliver: [00:20:38] And so the data centers that you have that are mining or the mining centers that are mining the coins will flip over to. Facilitating transaction. Yeah. Jason Sheehan: [00:20:47] Okay. And I think that would just be a different fee structure that will be kind of the rewards that were typically the, the, the blockchain, the bitcoin come from the blockchain. Blake Oliver: [00:20:55] And you know, what do you see is the, you know, as an insider in the industry, where do you see Bitcoin headed? I mean, you know, David and I have been skeptical about Bitcoin as a payment method, right? It's it's, it's slow, it's expensive, It doesn't really improve on anything we do currently. Obviously there's the store of value idea, the digital gold kind of concept, but it seems like nothing has, you know, really like we don't really know what it is yet. Jason Sheehan: [00:21:23] Yeah. And that's kind of, I think the opportunity that exists out there just with the, you know, the security around following how a transaction was supported by our efforts in computing and participating in solving that transaction and just the verifiability of it. So, you know, it's very hard to manipulate the blockchain. So I think that aspect of it can have many different use cases going forward. And, you know, the Bitcoin component of that, you know, being one of the first early cryptos around, you know, we'll have that presence to, to be the forerunner for it. Blake Oliver: [00:21:56] Any more questions, David? David Leary: [00:21:57] No. It sounds like, Jason, you're in a really good spot, I think, from an implementation process, right? This is totally crazy. It's all new. And so now going forward, if you know one day when you move on your career, you're going to have all this expertise of implementing that suite and plays ways. You had to invent ways. Yeah. Jason Sheehan: [00:22:13] And, you know, we leverage some of our counterparts that are here today or net suite partners that are here today to kind of help us identify how to do that. Because you're right, it was, you know, complete unknown territory for a lot of people to understand, like what we're trying to do and obviously automate the way that we did was very unique. So yeah, we're kind of first to do it, but excited to be a part of that and excited to see how it's working. Blake Oliver: [00:22:38] Do you want to give a shout out to your net sweep partner? Yeah. Jason Sheehan: [00:22:41] Proyecto don't know if they're here today, but they are instrumental helping us with some of the automation that I mentioned. Strong point too. We're key in our implementation teams from NetSuite themselves, where we're key in getting things stood up and running in the way that we needed to, especially in the ERP and that quick, quick deployment. But our MSSP team was excellent as well and understanding kind of what we do, how we do it, so they could build out the solution the way we needed to do. David Leary: [00:23:06] So Jason, if any of our listeners want to get a hold of you or learn more about Griid. Blake Oliver: [00:23:10] Come work with. David Leary: [00:23:11] You. Jason Sheehan: [00:23:11] Yeah, they can shoot me an email that says Jason Sheehan at Broadcom and just shoot me a note and respond, I'm on LinkedIn too, So yeah, connect me out there. Blake Oliver: [00:23:20] We'll put your LinkedIn in the show notes. Yeah, Perfect. Great. Thanks, Jason. Yeah, thank. Jason Sheehan: [00:23:25] You for having me. I appreciate it.