In a weird twist of fate – or perhaps a full-circle moment – Oregon marijuana entrepreneur William Simpson late last year finalized the buy-back of his own company, Chalice Farms, for just $3 million nearly seven years after having sold it in a cash-and-stock deal he said was worth north of $60 million.
Simpson and his partners sold Chalice to Golden Leaf Holdings in 2017 for $19.3 million in cash and 83.4 million shares of common stock, but earn-outs built into the deal multiplied the actual value, Simpson said.
Chalice, which at its height had 16 storefront dispensaries, was a premier cannabis company in Oregon, but it fell upon hard times and in 2023 was pushed into court-ordered receivership. Its unpaid debts tallied roughly $35 million, media outlets reported last year, and ultimately the company and its assets were put up for auction over the summer.
Ironically, Simpson and his partners were among the creditors that Golden Leaf still owed money to when Chalice went into receivership. He estimated that Golden Leaf was still short by $3 million, which he now expects to write off as bad debt.
And, he said, the stock shares took a nosedive.
“The only way to get that back now is to make the company successful again,” Simpson said.
That $3 million amount, in yet another coincidence, is exactly how much Simpson bid last year in the receivership auction for most of Chalice’s assets. To his surprise, he won.
“I didn’t think we were going to get it,” Simpson recalled of his bid in August. “I was hopeful, but … there’s a lot of big players with a lot of money, and to me, this is an amazing asset group. I wouldn’t be surprised if it went for $10 or $15 or $20 million.”
“They were doing $29 million in revenue” in 2021, according to Golden Leaf’s last public filing, Simpson noted. “It’s not a small company.”
With his winning $3 million bid – and after all the paperwork was finalized and the deal closed in December – Simpson landed 13 retail shops, a 10,000-square-foot greenhouse capable of producing 300 pounds of cannabis a month, a wholesale license, an extraction lab and edibles kitchen, corporate headquarters, and four cultivation and manufacturing licenses in Nevada that have yet to be stood up.
Golden Leaf had another three cannabis shops that Simpson declined to bid on because he said they were in poor locations.
But the new ownership means a major turn of the page, both for Simpson and for Chalice Farms.
How it came to this
Simpson built up Chalice in Oregon beginning in 2014, after a first successful run in the Washington state marijuana market and years of growing his own marijuana.
“We were one of the first medical dispensaries in the state,” Simpson recalled.
The ensuing years were ones of enormous growth, not just in Oregon but in the national U.S. cannabis sector. Simpson was eager to grow Chalice into a national brand and help normalize marijuana as a mainstream industry.
“To do that, we needed access to more money,” he said.
That need brought him to the negotiating table with various cannabis companies that were already trading on over-the-counter stock exchanges, including Golden Leaf Holdings, and eventually a sale was agreed to in 2017. Chalice was renamed Chalice Brands, and began trading first on over-the-counter markets and then on the Canadian Securities Exchange.
Simpson stayed with Chalice until early 2019, including a stint as CEO, but eventually he decided to retire from cannabis after his mother passed away in 2018.
“I didn’t want to leave. I wanted someone to do the capital market game… and finish the vision we started with Chalice, and make it a national brand,” Simpson recalled, but he was burnt out. He packed up his family and moved to Hawaii.
“I think I was running away. My mom died here in Oregon,” Simpson reflected. “It was just a bad time… It took me probably two years to even start coming out of that dark place.”
When he left Oregon, however, the memories of Chalice stayed with him, along with a sense of not having fully lived up to his original vision for the company. Simpson said that when he agreed to sell in 2017, the national marijuana market was thriving and every deal seemed to turn to gold.
“When I sold it to the publicly traded company, I whole heartedly believed the employees would all monetize through the stock market. Because at the time, everything cannabis was skyrocketing,” Simpson said. “That all crumbled too, including most of my retirement, which was in stock. I ended up having to pay taxes on (stock) that I wasn’t able to sell.”
A couple years late, he realized retirement wasn’t for him. So he returned to Oregon last year, and began doing some consulting work, including with Golden Leaf. Company leaders there tried to engage him to “fix” the company.
“All of a sudden, they announced they were going to file for a receivership in Canada,” Simpson said.
Simpson began scraping together small funding raises when he could and cobbled together the $3 million that he offered. Initially, he said, the amount was rejected by the receiver as too low to cover a lot of Golden Leaf’s existing debts, but with some negotiating, the deal eventually closed.
“I thought for sure somebody would outbid us. I was so worried, because now I had my hopes up. I’m like, ‘Oh my God, I could take back my baby and go finish the vision I started,’” he said.
What’s next
Since winning the bid for Chalice last year, Simpson already has rejuvenated the company.
Though he declined to go into details about Golden Leaf’s apparently flawed approach to running Chalice, he said there have been a number of straightforward changes that quickly improved the company’s bottom line.
Simpson’s first step was to take the company private again, to give the business more financial flexibility and to refocus away from shareholders and onto customers and employees.
He also expanded cannabis inventory selection at all the Chalice stores, lowered much of the product pricing, and updated a lot of the standard operating procedures at the company’s cultivation and manufacturing facilities to both cut costs and improve product quality.
Simpson said the revamped Chalice shops are now like “cannabis Candyland,” with “something for everybody in every price category.”
“We were taking flower that is worth $1,500 at wholesale and making it worth $400 per pound value because all the stuff they (Golden Leaf) did post-production ruined it. So really quickly, we were able to identify those problems,” he said. “The problems, from my perspective, are easy to change.”
And they’re already having a big effect.
“From our standpoint, we’re a brand-new entity. Day One was Jan. 1 of 2024… we’re already up 20%,” Simpson said. “Week over week, stores are getting busier.”
Simpson said he’ll eventually turn his attention to Nevada and the four licenses he owns there. But first, Chalice has to wait for the Oregon market to stabilize a bit further, given that it’s still saturated with cannabis companies in every sector, which is likely one of the factors that led to Golden Leaf’s failure.
Simpson said that Oregon lawmakers have now established a rule that any marijuana company that’s behind in its state tax liabilities won’t be able to renew their business permits, which will help thin out the market and make the survivors healthier.
“It really needs to be 50% of where it is today,” Simpson said of the Oregon cannabis retail landscape, which includes 783 licensed dispensaries.
“Right now, it’s kind of tunnel vision on making the Oregon experience great,” Simpson concluded.
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