RYTHM, Inc. (RYM) - Q3 2025 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended September 30, 2025. RYTHM, Inc. (formerly Agrify Corporation) has repositioned itself as a distributor of hemp-derived THC products and iconic licensed brands, including Señorita, RYTHM, incredibles, and Beboe. The company completed a strategic pivot by exiting its legacy Cultivation and Extraction businesses, which are now reported as discontinued operations. The company changed its name from Agrify Corporation to RYTHM, Inc., effective September 2, 2025.
Key Financial Metrics
| Metric | Q3 2025 (3 Months) | YTD 2025 (9 Months) | Q3 2024 (3 Months) | YTD 2024 (9 Months) |
|---|---|---|---|---|
| Revenue | $4.04 million | $6.62 million | $0 | $0 |
| Gross Profit | $1.38 million (34.0%) | $2.15 million (32.4%) | $0 | $0 |
| Operating Loss | $(8.89 million) | $(19.39 million) | $(1.22 million) | $(1.62 million) |
| Net Loss | $(10.67 million) | $(19.65 million) | $(18.65 million) | $(17.39 million) |
| Cash & Equivalents | $35.57 million | As of Sept 30, 2025 | ||
| Total Debt | $90.62 million | Includes $82M related party debt | ||
| Working Capital | $21.83 million | Current Assets: $43.9M / Liab: $22.1M |
Material Changes vs. Prior Period
- Revenue Generation: The company generated revenue for the first time in continuing operations ($4.04M in Q3) following the acquisition of the Señorita brand (Dec 2024) and MC Brands (May 2025). Prior year periods reported $0 revenue from continuing operations as legacy businesses were classified as discontinued.
- Expense Surge: Selling, General, and Administrative (SG&A) expenses increased significantly to $10.26 million in Q3 2025 (from $1.22M in Q3 2024), driven by sales/marketing for new brands and related party service charges ($3.1M in Q3).
- Debt Financing: Total debt increased substantially to $90.6 million, primarily due to the issuance of $30 million in May 2025 Notes and $50 million in August 2025 Notes. A significant portion ($82 million) is owed to related parties (Green Thumb Industries affiliates).
- Intangible Assets: Intangible assets grew from $8.9 million to $61.5 million due to the $50 million acquisition of VCP (brand IP) and $5.1 million acquisition of MC Brands.
- Discontinued Operations: The company recorded a $3.53 million gain on the disposal of the Extraction business in the first nine months of 2025.
Guidance, Outlook, and Risks
- Outlook: Management is focused on expanding distribution for hemp-derived THC beverages (Señorita) and edibles. The company relies heavily on licensing revenue from related parties (Green Thumb) and non-licensing product sales.
- Liquidity: As of September 30, 2025, the company held $35.6 million in cash. However, operating cash flow was negative ($20.5 million used YTD 2025), funded primarily by debt financing ($80 million provided by financing activities YTD).
- Risks:
- Related Party Dependence: Significant revenue, expenses, and debt are tied to Green Thumb Industries and its affiliates. Related party transactions included $3.8 million in net activity in Q3 2025.
- Legal Proceedings: Ongoing litigation includes claims from Bud & Mary's (approx. $14.4M reserve), Bowdoin Construction (approx. $7.0M claim), and McCutchan, Inc. (approx. $3.0M claim). The company funded $1.5 million into escrow in January 2025 to settle these claims.
- Internal Controls: Management concluded that disclosure controls and procedures were not effective as of September 30, 2025, due to material weaknesses in internal control over financial reporting.
- Regulatory: Risks associated with federal enforcement of cannabis laws affecting licensees and the value of licensed brands.
Investor Verification Checklist
- Debt Conversion Terms: Verify the conversion prices and beneficial ownership limits for the $90M in convertible notes, particularly the recent conversion of the November 2024 Note into pre-funded warrants.
- Related Party Transactions: Scrutinize the $82 million in related party debt and the $7.3 million in related party SG&A expenses YTD to understand the dependency on Green Thumb Industries.
- Legal Reserves: Confirm the status of the $1.5 million escrow funding and the adequacy of the $14.4 million reserve for the Bud & Mary's litigation.
- Internal Control Remediation: Review the specific remediation plans for the material weaknesses in internal controls disclosed in Item 4.
- Revenue Sustainability: Assess the concentration of revenue from the Señorita brand and the stability of licensing agreements with related parties.