DEF: RYTHM, Inc. Seeks Stockholder Approval for Share Issuance

RYTHM, Inc. is holding a special meeting on August 10, 2026, to seek stockholder approval for the issuance of common stock related to convertible notes, warrants, and shared services agreements, which could significantly increase Green Thumb Industries' ownership stake.

Summary

• RYTHM, Inc. is convening a Virtual Special Meeting of Stockholders on August 10, 2026, at 10:00 a.m. Central Time.
• The primary purpose of the meeting is to vote on the 'Issuance Proposal,' which seeks approval for the issuance of common stock to holders of certain convertible promissory notes and warrants, and pursuant to shared services agreements.
• This issuance is required to comply with Nasdaq Listing Rule 5635.
• As of June 26, 2026, RYTHM had 2,179,128 shares of Common Stock outstanding.
• Stockholders of record as of June 26, 2026, are entitled to vote.
• The approval of this proposal could lead to RSLGH, LLC (a subsidiary of Green Thumb Industries Inc.) potentially owning approximately 90.1% of RYTHM's outstanding Common Stock on a non-diluted basis, and 81.6% on a fully-diluted basis.
• The Board of Directors recommends a FOR vote on the Issuance Proposal.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as having a negative sentiment due to the significant potential for shareholder dilution and the concentration of control by a related party, despite the company's stated necessity for capital and services.

Positives

• The proposed share issuance is intended to comply with Nasdaq listing rules, ensuring continued listing.
• The company states that the convertible notes and shared services agreements have provided significant capital resources and facilitated business expansion, including acquisitions.
• The Board of Directors believes the Services Agreements are in the best interest of the Company and its stockholders, and that strengthening the relationship with Green Thumb will be beneficial due to their industry leadership and support.
• The Board concluded that there were no viable alternative financing opportunities that could provide the necessary capital on a timely and acceptable basis.

Negatives

• Approval of the Issuance Proposal will result in significant voting dilution for existing shareholders.
• If approved, RSLGH (and by extension, Green Thumb) could gain control over matters requiring stockholder approval, including director elections and significant corporate transactions.
• The concentration of ownership may delay or prevent a change of control or management changes, and Green Thumb could influence outcomes of transactions that other shareholders might oppose.
• If Green Thumb gains over 50% voting power, RYTHM would be deemed a controlled company by Nasdaq, potentially impacting board independence requirements.
• Sales of a substantial number of shares by RSLGH or other noteholders could depress the market price of RYTHM's Common Stock.
• The increased concentration of ownership may limit the public float and increase stock price volatility, making it harder for investors to sell shares at an appropriate price.

Risks

• Potential for significant voting dilution for current shareholders if the Issuance Proposal is approved.
• Risk of Green Thumb Industries, through RSLGH, gaining controlling voting power and influencing corporate decisions.
• Potential for RYTHM to be deemed a 'controlled company' by Nasdaq, impacting board independence requirements.
• Risk of market price depression due to potential sales of a substantial number of shares by RSLGH or other noteholders.
• Increased stock price volatility and difficulty for investors to sell shares at desired prices due to limited public float.
• Failure to approve the Issuance Proposal could limit the company's ability to raise capital on similar terms in the future.
• Failure to approve the Issuance Proposal could require the company to seek alternative staffing structures upon expiration of the Services Agreements, potentially hindering business management and growth.

Future Outlook

The company is seeking stockholder approval for the issuance of shares related to convertible notes, warrants, and shared services agreements. The outcome of this vote will determine the extent to which RSLGH, LLC (a subsidiary of Green Thumb Industries) can convert its holdings and exercise warrants, potentially leading to a significant increase in its ownership stake and control over RYTHM, Inc. The company believes this is necessary for continued business operations and growth, citing a lack of alternative financing options.

Management Comments

• The Board of Directors recommends that you vote your shares FOR the approval of the Issuance Proposal.
• The Board of Directors concluded that there were no alternative financing opportunities that would provide the Company with the significant amount of required capital on a timely basis and on acceptable terms, if at all.
• The Board believes that further strengthening our Company's relationship with Green Thumb will be beneficial to our stockholders given Green Thumb's industry leadership and support of our growth.
• The failure of our stockholders to approve this Item 1 will mean that RSLGH and the other noteholders may not be able to fully convert their notes and/or exercise their pre-funded warrants into shares of Common Stock.
• If this Item 1 is not approved, we could be limited in our ability to raise capital in the future on similar terms and could be required to seek alternative staffing structures upon expiration of the Services Agreements, each of which could limit our ability to effectively manage and grow our business.

Industry Context

StockSavvy.ai notes that this filing highlights a common scenario for smaller, growth-stage companies in competitive industries, where reliance on strategic investors or related parties for capital and services is prevalent. The need to seek stockholder approval for significant share issuances, especially those that could lead to a change of control or substantial dilution, is a critical governance point governed by exchange rules like Nasdaq's.

Corporate Governance

Related Party Transactions

• The company has entered into convertible notes and shared services agreements with RSLGH, LLC, a subsidiary of Green Thumb Industries Inc. Benjamin Kovler, RYTHM's Chairman and Interim CEO, is also Chairman and CEO of Green Thumb. Armon Vakili, a RYTHM board member, is an employee of Green Thumb.
• The November 2024 Note, May 2025 Notes, and August 2025 Notes were issued to RSLGH, providing significant capital.
• Shared Services Agreements with Vision Management Services, LLC (VMS), an indirect wholly-owned subsidiary of Green Thumb, provide administrative, operational, sales, marketing, and technical services.
• Fees under the Services Agreements can be paid in cash, Common Stock, or pre-funded warrants, with VMS assigning its rights to RSLGH.
• The approval of the Issuance Proposal is necessary for RSLGH to fully convert notes and exercise warrants, potentially leading to Green Thumb gaining majority control.

Stakeholder Impact

• Shareholders: Face significant voting dilution and potential loss of influence over company decisions if the Issuance Proposal is approved. The market price of their shares could be negatively impacted.
• Employees: The company currently has no direct employees other than the Interim CEO, relying heavily on shared services. The long-term impact on staffing structures depends on the outcome of the vote and future agreements.
• Creditors: The filing does not directly address the impact on creditors, but a change in control and potential market price volatility could indirectly affect perceptions of creditworthiness.
• Suppliers: The reliance on shared services from Green Thumb's subsidiary suggests a close relationship. The outcome of the vote could solidify or alter this dynamic.

Next Steps

• Stockholders will vote on the Issuance Proposal at the Virtual Special Meeting on August 10, 2026.
• If approved, RYTHM, Inc. will proceed with the issuance of shares of Common Stock.
• If not approved, RYTHM may face limitations in future capital raising and may need to seek alternative staffing structures.
• The company will continue to operate under the Shared Services Agreements, which automatically renew unless terminated.

Key Dates

Recommendation

While the company requires capital and services, the proposed share issuance carries significant risks of dilution and a shift in control to a related party, which could negatively impact minority shareholders. The lack of immediate financial performance data makes a strong buy or sell recommendation difficult. A 'hold' allows investors to monitor the outcome of the vote and its subsequent impact on the company's governance and market position.

Keywords

RYTHM, Inc., Proxy Statement, Special Meeting, Stockholder Approval, Share Issuance, Convertible Notes, Warrants, Shared Services Agreements, Nasdaq Listing Rule 5635, Green Thumb Industries, RSLGH, LLC, Dilution, Corporate Governance, Control