RYTHM, Inc. (RYM) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. RYTHM, Inc. (formerly Agrify Corporation) has repositioned itself as a distributor of hemp-derived THC beverages and a licensor of iconic brands (including Señorita, RYTHM, and incredibles). The company exited its legacy cultivation and extraction businesses in 2024 and 2025, respectively, which are now reported as discontinued operations. The company is classified as a non-accelerated filer, smaller reporting company, and emerging growth company.
Key Financial Metrics
| Metric (in thousands) | Q2 2026 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|
| Revenue | $23,021 | $36,307 | $2,580 |
| Gross Profit | $18,536 | $28,933 | $772 |
| Gross Margin | 80.5% | 79.7% | 29.9% |
| Operating Income (Loss) | $1,936 | $(2,098) | $(10,499) |
| Net Income (Loss) | $1,184 | $21,106 | $(8,986) |
| Cash and Equivalents | $41,915 | $41,915 | $31,170 (Start of Period) |
| Operating Cash Flow | N/A | $9,697 | $(15,138) |
| Total Debt (Current + Long-term) | $80,623 | $80,623 | N/A |
Note: Net income for the six months ended June 30, 2026, includes a significant non-cash income tax benefit of $26.8 million.
Material Changes vs. Prior Period
- Revenue Surge: Revenue increased 1,307% year-over-year for the six months ended June 30, 2026. This is primarily driven by the commencement of licensing agreements with a related party (Green Thumb Industries) and a shift from sales-based royalties to fixed annual fees effective April 1, 2026.
- Profitability Shift: The company reported a net income of $21.1 million for the six months ended June 30, 2026, compared to a net loss of $9.0 million in the prior year. This turnaround is largely attributable to the release of a $26.8 million valuation allowance against deferred tax assets, rather than operational cash generation alone.
- Expense Growth: Selling, General, and Administrative (SG&A) expenses increased 175% year-over-year to $31.0 million, driven by marketing spend and shared service costs from related parties.
- Debt Structure: The company issued $80 million in secured convertible notes in May and August 2025. As of June 30, 2026, $72 million of this debt is held by a related party and is classified as current.
Guidance, Outlook, Risks, and Contingencies
- Regulatory Risk (Critical): Federal legislation passed in November 2025 (effective November 2026) may restrict hemp-derived THC products to 0.4mg per container. RYTHM's current products exceed this limit, potentially requiring reformulation, discontinuation, or a shift to DEA-registered facilities, which would significantly increase costs.
- Related Party Dependence: A single related-party customer accounted for 76% of total revenue for the six months ended June 30, 2026. Additionally, 90% of the company's debt is held by a related party (Green Thumb).
- Liquidity and Going Concern: While management believes cash and anticipated licensing revenue are sufficient for the next 12 months, the maturity of $80 million in convertible notes by February 2027 raises substantial doubt about the going concern status if holders elect cash repayment. Management expects to address this via extension or conversion.
- Repurchase Rights: Green Thumb holds call options to repurchase the intellectual property assets acquired in 2025 if specific regulatory conditions are met, which could occur if the new federal legislation takes effect.
- Legal Proceedings: The company is involved in ongoing litigation regarding its former cultivation business (Bud & Mary's and Bowdoin Construction), though a $1.15 million settlement was reached in the Bowdoin matter in July 2026.
Investor Verification Checklist
- Tax Benefit Sustainability: Verify the assumptions behind the $26.8 million non-cash tax benefit and the release of the valuation allowance.
- Debt Conversion Terms: Review the terms of the $80 million convertible notes, specifically the conversion prices ($23.53 and $29.475) and the likelihood of conversion versus cash repayment at maturity.
- Regulatory Impact: Assess the feasibility of reformulating products to meet the potential 0.4mg THC federal limit effective November 2026.
- Related Party Transactions: Scrutinize the fixed licensing fee structure ($70 million/year) and the concentration of revenue and debt with Green Thumb Industries.
- Repurchase Option Risk: Evaluate the probability of Green Thumb exercising its repurchase option on the acquired IP assets under the new regulatory framework.