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

RYTHM, Inc. issued pre-funded warrants to RSLGH, LLC, an indirectly wholly-owned subsidiary of Green Thumb Industries Inc., as payment for interest on two convertible notes.

Summary

• RYTHM, Inc. issued a total of 43,145 pre-funded warrants to RSLGH, LLC on September 1, 2025.
• These warrants were issued as payment of interest on two separate convertible notes held by RSLGH, LLC.
• 11,373 pre-funded warrants were for a convertible note dated November 5, 2024, with an underlying common stock value of 11,373 shares and a derivative price of $23.53.
• 31,772 pre-funded warrants were for a convertible note dated May 22, 2025, with an underlying common stock value of 31,772 shares and a derivative price of $3.158.
• The warrants have an exercise price of $0.001 per share.
• RSLGH, LLC is an indirectly wholly-owned subsidiary of Green Thumb Industries Inc., which is also identified as a 10% owner and director of RYTHM, Inc.
• The exercise of these warrants is subject to a 49.99% beneficial ownership limitation and requires stockholder approval under applicable Nasdaq listing rules, to the extent required.

Sentiment

Score: 6

Explanation: The filing reports a routine transaction (interest payment via warrants) as per existing convertible note agreements. While it indicates RYTHM is meeting its obligations, the potential for future dilution and the need for stockholder approval introduce minor uncertainties. The involvement of Green Thumb Industries as a significant investor is generally positive for strategic alignment.

Positives

• RYTHM, Inc. is fulfilling its interest obligations on convertible notes, indicating adherence to debt covenants.
• The issuance of warrants instead of cash for interest payments could preserve cash flow for RYTHM, Inc.

Negatives

• The issuance of warrants could lead to future dilution for existing shareholders if exercised, especially given the low exercise price of $0.001.
• The requirement for stockholder approval for warrant exercise introduces a potential hurdle and uncertainty.

Risks

• Dilution Risk: Future exercise of the 43,145 pre-funded warrants could dilute the ownership stake of existing RYTHM, Inc. shareholders.
• Regulatory/Approval Risk: The exercise of warrants is subject to stockholder approval under Nasdaq listing rules, which could delay or prevent their full exercise.
• Beneficial Ownership Limitation: The 49.99% beneficial ownership limitation could restrict the immediate full conversion of warrants, impacting the investor's flexibility.

Future Outlook

The filing indicates that the exercise of the pre-funded warrants is subject to future stockholder approval under Nasdaq listing rules, which represents a future event that needs to occur for the warrants to be fully exercisable.

Industry Context

This transaction reflects a common financing strategy where companies issue convertible notes and may pay interest in kind (PIK) through warrants or additional securities, especially in growth-oriented or capital-intensive industries. The involvement of Green Thumb Industries Inc. suggests a strategic investment or partnership within the cannabis or related sectors, where such financing structures are prevalent.

Comparison to Industry Standards

• Issuing warrants as interest payment on convertible notes is a common practice, particularly for companies seeking to conserve cash or in industries where traditional debt financing might be more challenging or expensive.
• The low exercise price of $0.001 for the pre-funded warrants is typical for such instruments, making them highly sensitive to the underlying stock price movements.
• The beneficial ownership limitation (49.99%) and the requirement for stockholder approval for warrant exercise are standard protective measures often included in financing agreements to comply with regulatory requirements (e.g., Nasdaq listing rules) and prevent immediate, significant shifts in control without shareholder consent.

Related Party Transactions

• The transaction involves RSLGH, LLC, which is an indirectly wholly-owned subsidiary of Green Thumb Industries Inc. Both RSLGH, LLC and Green Thumb Industries Inc. are identified as 10% owners and directors of RYTHM, Inc., indicating a related party transaction.

Stakeholder Impact

• Shareholders: Potential for future dilution if the warrants are exercised, which could reduce the value of existing shares. The need for stockholder approval gives current shareholders a say in the dilution.
• Creditors/Noteholders (RSLGH, LLC/Green Thumb): Receive interest payments in the form of warrants, providing them with potential upside exposure to RYTHM's stock performance.
• Company (RYTHM, Inc.): Conserves cash by paying interest with warrants, which can be beneficial for liquidity.

Next Steps

• RYTHM, Inc. shareholders will need to approve the exercise of the pre-funded warrants under Nasdaq listing rules, if required.

Key Dates

Recommendation

This Form 4 filing details a routine interest payment via pre-funded warrants to a significant existing investor, RSLGH, LLC (a Green Thumb subsidiary), as per the terms of convertible notes. While it demonstrates RYTHM's adherence to its debt obligations and conserves cash, the potential for future dilution from warrant exercise and the requirement for stockholder approval introduce minor uncertainties. The transaction itself is expected and does not fundamentally alter the investment thesis for RYTHM, Inc. Therefore, a 'hold' recommendation is appropriate as investors should continue to monitor the company's operational performance and the outcome of the stockholder approval process.

Keywords

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