Form 4: RYTHM Insider Converts Note to Warrants

RSLGH, LLC, a subsidiary of Green Thumb Industries, converted a $10.175 million convertible note into 3,222,997 pre-funded warrants of RYTHM, Inc.

Summary

• RSLGH, LLC, an indirect wholly-owned subsidiary of Green Thumb Industries Inc., converted a convertible note into pre-funded warrants of RYTHM, Inc.
• The convertible note, issued on November 5, 2024, had a principal of $10,000,000 and accrued interest of $175,000 as of November 3, 2025, totaling $10,175,000.
• The conversion resulted in the acquisition of 3,222,997 pre-funded warrants.
• The warrant conversion price used was $3.157 per warrant.
• The pre-funded warrants have an exercise price of $0.001 per share.
• The warrants are subject to a 49.99% beneficial ownership limitation and may require stockholder approval for exercise under Nasdaq rules.

Sentiment

Score: 7

Explanation: The conversion of a convertible note into pre-funded warrants by a significant shareholder (Green Thumb Industries via RSLGH, LLC) is generally a positive signal, as it reduces immediate debt obligations for RYTHM, Inc. and indicates continued strategic interest from a major industry player. While it introduces potential future dilution, it provides flexibility for the investor.

Positives

• Conversion of debt (convertible note) into equity-like instruments (warrants) could reduce RYTHM's immediate debt obligations.
• Green Thumb Industries, through RSLGH, LLC, maintains a significant equity-linked position in RYTHM, Inc., indicating continued strategic interest.

Negatives

• The conversion of the note into warrants, rather than direct common stock, suggests a desire to defer immediate dilution or maintain flexibility regarding ownership limits.
• The beneficial ownership limitation of 49.99% and potential need for stockholder approval for exercise could restrict immediate full conversion into common stock.

Risks

• Potential future dilution for existing shareholders if the pre-funded warrants are fully exercised.
• Regulatory hurdles (Nasdaq listing rules, stockholder approval) could delay or complicate the full exercise of the warrants.
• The 49.99% beneficial ownership limitation could cap Green Thumb's immediate direct influence through common stock.

Future Outlook

The filing indicates a strategic move by a significant shareholder to convert debt into equity-linked instruments, suggesting a long-term interest in RYTHM, Inc. The future exercise of these warrants will depend on market conditions and potential shareholder approval.

Industry Context

This transaction reflects a common strategy in industries where companies seek to manage debt and strategic investments. For the cannabis industry, such financial maneuvers are frequent given the evolving regulatory landscape and capital-intensive nature. Green Thumb Industries, a major player, is strengthening its position in RYTHM, Inc.

Comparison to Industry Standards

• The use of convertible notes and pre-funded warrants is a standard financial instrument for strategic investments, particularly in growth-oriented sectors or those with regulatory complexities like cannabis.
• The beneficial ownership limitation (49.99%) is a common mechanism to avoid triggering certain change-of-control provisions or regulatory thresholds, often seen in highly regulated industries.
• The requirement for stockholder approval for warrant exercise under Nasdaq rules is a standard governance practice to protect existing shareholders from significant dilution without their consent.

Corporate Governance

Related Party Transactions

• The transaction involves RSLGH, LLC, an indirect wholly-owned subsidiary of Green Thumb Industries Inc., which is also a 10% owner and has a director relationship with RYTHM, Inc. This constitutes a related-party transaction.

Stakeholder Impact

• Shareholders: Potential future dilution if warrants are exercised, but current debt burden is reduced. The transaction signals continued strategic interest from a major investor.
• Creditors: Conversion of debt to equity-linked instruments improves RYTHM's balance sheet by reducing outstanding debt.

Next Steps

• Potential future exercise of the 3,222,997 pre-funded warrants by RSLGH, LLC.
• Potential requirement for RYTHM, Inc. stockholder approval for warrant exercise, if triggered by Nasdaq listing rules.

Key Dates

Recommendation

This Form 4 reports a strategic conversion of a convertible note into pre-funded warrants by a significant insider (Green Thumb Industries via RSLGH, LLC). While it reduces RYTHM's immediate debt and signals continued strategic interest, it also introduces potential future dilution. The transaction itself doesn't fundamentally alter the company's operational outlook or financial performance in the short term, but rather restructures an existing investment. Therefore, a "hold" recommendation is appropriate as investors should monitor the company's core business performance and future warrant exercise decisions rather than reacting solely to this financial restructuring.

Keywords

RYTHM Inc., RYM, Green Thumb Industries, RSLGH LLC, Convertible Note, Pre-Funded Warrants, Insider Transaction, SEC Form 4, Beneficial Ownership, Equity Conversion, Cannabis Industry