Form 4: RYTHM Issues Warrants to Green Thumb Subsidiary for Interest

RSLGH, LLC, a subsidiary of Green Thumb Industries, received pre-funded warrants from RYTHM, Inc. as interest payments on convertible notes.

Summary

• RSLGH, LLC, an indirect wholly-owned subsidiary of Green Thumb Industries Inc., acquired a total of 43,145 pre-funded warrants from RYTHM, Inc.
• These warrants were issued as payment of interest on two separate Convertible Notes held by RSLGH, LLC.
• The first issuance involved 11,373 pre-funded warrants related to a Convertible Note dated November 5, 2024, with an underlying common stock price of $23.53.
• The second issuance involved 31,772 pre-funded warrants related to a Convertible Note dated May 22, 2025, with an underlying common stock price of $3.158.
• Each pre-funded warrant has an exercise price of $0.001.
• The exercise of these warrants is subject to a 49.99% beneficial ownership limitation and requires stockholder approval under applicable Nasdaq listing rules.

Sentiment

Score: 6

Explanation: Neutral to slightly positive. For RYTHM, it conserves cash but introduces future dilution. For Green Thumb, it offers upside potential. The conditions (stockholder approval) add a layer of uncertainty.

Positives

• For RYTHM, Inc.: Issuing warrants for interest payments allows the company to conserve cash, which can be beneficial for liquidity and operational funding.
• For RSLGH, LLC/Green Thumb Industries Inc.: Receiving warrants provides potential upside exposure to RYTHM, Inc.'s stock price without immediate cash outlay, and the low exercise price of $0.001 makes them highly leveraged to future stock appreciation.

Negatives

• For RYTHM, Inc. shareholders: The future exercise of these warrants will result in dilution of existing common stock, potentially impacting earnings per share and ownership percentage.
• The requirement for stockholder approval for warrant exercise introduces a potential hurdle and uncertainty for the warrant holder.

Risks

• Dilution Risk: Future exercise of the 43,145 pre-funded warrants will increase the number of outstanding common shares, diluting existing shareholders.
• Regulatory/Approval Risk: The exercise of warrants is subject to stockholder approval under Nasdaq listing rules, which may not be granted, limiting the warrant holder's ability to convert.
• Beneficial Ownership Limitation: A 49.99% beneficial ownership limitation is imposed, which could restrict the full exercise or conversion of warrants if it breaches this threshold.

Future Outlook

The future exercise of these warrants by RSLGH, LLC is contingent upon obtaining stockholder approval under applicable Nasdaq listing rules, introducing an element of uncertainty regarding the full conversion of these derivative securities into common stock.

Industry Context

This transaction reflects a common financing strategy where companies issue convertible instruments or warrants as interest payments to conserve cash, particularly in industries where cash flow management is critical or access to traditional debt financing is more challenging. The cannabis industry, in which Green Thumb Industries operates, often faces unique financing constraints due to regulatory complexities, making such arrangements more prevalent.

Comparison to Industry Standards

• Issuing warrants as interest payments is a common practice for companies seeking to preserve cash, especially in growth-oriented or capital-intensive sectors.
• The low exercise price of $0.001 for pre-funded warrants is typical for such instruments, designed to provide significant leverage to the underlying stock's appreciation.
• The requirement for stockholder approval for warrant exercise, particularly when it involves a significant beneficial owner, aligns with corporate governance best practices and Nasdaq listing rules to protect existing shareholders from excessive dilution without their consent.

Corporate Governance

Related Party Transactions

• RSLGH, LLC, the recipient of the warrants, is identified as a 10% owner and director of RYTHM, Inc., making this a related party transaction.
• RSLGH, LLC is an indirectly wholly-owned subsidiary of Green Thumb Industries Inc., which is also identified as a 10% owner and director.

Stakeholder Impact

• Shareholders of RYTHM, Inc.: Potential future dilution upon exercise of the warrants, which could impact per-share metrics. However, the immediate benefit is cash conservation for the company.
• RSLGH, LLC / Green Thumb Industries Inc.: Gains potential upside exposure to RYTHM, Inc.'s stock without immediate cash outlay, but faces conditions (stockholder approval, beneficial ownership limits) for full realization.

Next Steps

• RYTHM, Inc. will need to seek stockholder approval for the exercise of the pre-funded warrants as required by Nasdaq listing rules.

Key Dates

Recommendation

This Form 4 filing primarily discloses an insider transaction involving the issuance of pre-funded warrants as interest payments. While it indicates RYTHM, Inc. is conserving cash, the potential for future dilution exists, contingent on stockholder approval. For RSLGH, LLC/Green Thumb, it represents a strategic stake with upside potential. Without broader financial context or operational updates, a "hold" recommendation is appropriate as this filing alone does not provide sufficient information to warrant a strong buy or sell, but it is a notable event for existing shareholders to monitor due to potential dilution and the strategic relationship.

Keywords

RYTHM Inc., RYM, Green Thumb Industries, RSLGH LLC, SEC Form 4, Pre-Funded Warrants, Convertible Note, Interest Payment, Beneficial Ownership, Stockholder Approval, Nasdaq Listing Rules, Insider Transaction, Derivative Securities