RYTHM (RYM) FY2025 10-K Risk Factors: 5 New, 6 Dropped

What the changes say

The 2026 Appropriations Act could effectively prohibit current hemp-derived THC products beginning November 12, 2026.
Green Thumb’s potential repurchase rights, licensee dependence, and customer licensing are newly emphasized.
Debt expanded to $80.0 million outstanding, with 14% default interest and acceleration risk.
FDA regulation, ownership influence, NOL limitations, and intellectual-property enforcement risks were updated.

What changed since the prior 10-K

New

NewRisks Relating to our Industry
Because the hemp-derived THC industry is new, there are relatively few operators in the industry whose business models we can follow or build upon. Similarly, there is no or limited information about comparable companies available for potential investors to review in making a decision about whether to invest in us
The immature hemp-derived THC industry offers few comparable operators or business models, increasing execution uncertainty for RYTHM.
NewRisks Relating to our Industry
Our business depends in part on our customers obtaining and/or maintaining appropriate licensing
Customer license loss, nonrenewal, or failure to obtain licenses could reduce revenue and limit expansion into affected markets.
NewRisks Related to Our Business
Additionally, following any business acquisition, we could experience difficulty in integrating personnel, operations, financial and other systems, and in retaining key employees and customers
Acquisitions may be difficult to integrate, retain key personnel and customers, or justify recorded goodwill and intangible assets.
NewRisks Related to Our Business
Our intellectual property is subject to repurchase rights, which, if exercised, could materially adversely affect our business
Green Thumb may repurchase assets acquired from MC Brands and VCP if the 2026 hemp-law amendment triggers contractual eligibility conditions.
NewRisks Related to Our Business
Because we do not control licensees’ actions and we depend on licensees for a substantial portion of our earnings from operations, their conduct could harm our business
RYTHM cannot control licensees whose product quality, brand demand, or inability to replace them could materially reduce licensing revenue.

Dropped

DroppedRisks Related to Our Business
Protecting and defending against intellectual property claims may have a material adverse effect on our business
DroppedRisks Related to Our Business
Our success depends in part upon our ability to protect our core technology and intellectual property
DroppedRisks Related to Our Business
We may need to enter into intellectual property license agreements in the future, and if we are unable to obtain these licenses, our business could be harmed
DroppedRisks Relating to our Industry
We face risks due to industry immaturity or limited comparable, competitive or established industry best practices
DroppedRisks Relating to our Industry
Our business depends in part on client licensing
DroppedRisks Related to Ownership of our Common Stock
As a result of these material weaknesses, our management concluded that our internal control over financial reporting was not effective as of December 31, 2024

Reworded

90% rewrittenRisks Relating to our Industry
The 2018 Farm Bill, which federally legalized hemp and hemp products, was amended in a way that would severely restrict or prohibit the Company’s hemp-derived THC products
The risk now identifies a specific 2026 Appropriations Act amendment that could effectively prohibit current hemp-derived THC products from November 12, 2026.
Was: The 2018 Farm Bill, which federally legalized hemp and hemp products, could be amended to severely restrict or prohibit the Company’s hemp-derived THC products
84% rewrittenRisks Related to Our Business
Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations
The discussion now focuses on Section 382 ownership-change limits after a completed analysis, removing the prior NOL balances and expiration figures.
82% rewrittenRisks Related to Ownership of our Common Stock
Concentration of ownership may prevent new investors from influencing significant corporate decisions
Green Thumb’s ownership decreased from approximately 34% to 33%, but warrants and convertible notes could increase its influence.
76% rewrittenRisks Related to Our Business
We generally control access to and use of our intellectual property and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, customers, and partners, and our software is protected by U.S. copyright laws
The risk now emphasizes unauthorized copying of trademarks, recipes, and other intellectual property, plus limited resources for enforcement.
Was: We generally control access to and use of our proprietary technology and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, customers, and partners, and our software is protected by U.S. copyright laws
67% rewrittenRisks Related to Ownership of our Common Stock
As a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting. These internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our Common Stock
The update adds that ineffective controls or an adverse auditor opinion could reduce confidence in financial reporting and depress common-stock price.
57% rewrittenRisks Related to Our Business
We rely on third parties, including our largest shareholder, to provide numerous capabilities that we depend upon to operate, and a disruption of these systems could adversely affect our business
No substantive change; the risk continues to cover dependence on vendors and Green Thumb shared-services employees.
Was: We rely on third parties, including our largest shareholder, to provide numerous capabilities that we depend upon on to operate, and a disruption of these systems could adversely affect our business
55% rewrittenRisks Relating to our Industry
The FDA could issue new regulations that prohibit or strictly limit the sale of hemp-derived THC products
The 2026 Appropriations Act now directs the FDA to create cannabinoid lists and container-measurement rules, potentially increasing enforcement.
Was: The FDA could issue new regulations that prohibit or strictly limit the sale of hemp-derived products
55% rewrittenRisks Related to Our Business
We have substantial debt and other financial obligations, and we may incur even more debt. Any failure to meet our debt and other financial obligations or maintain compliance with related covenants could harm our business, financial condition, and results of operations
Debt increased from a $10.0 million loan under one note to $80.0 million outstanding across multiple senior secured notes, with 14% default interest and acceleration.
53% rewrittenRisks Relating to our Industry
The cannabis and hemp industries could face strong opposition from other industries
52% rewrittenRisks Relating to our Industry
Hemp-derived THC products may be shown to have negative health and/or safety impacts upon consumers
Was: Hemp-derived products may be shown to have negative health and/or safety impacts upon consumers
52% rewrittenRisks Related to Our Business
Our business and asset portfolio are not highly diversified by either industry or geographically. If our business and assets underperform, our business, financial condition and results of operations would be negatively impacted
50% rewrittenRisks Relating to our Industry
Third parties with whom we do business may perceive themselves as being exposed to reputational, and even legal, risk because of their relationship with us due to our hemp- and limited cannabis-related licensing activities and may, as a result, refuse to do business with us
Was: Third parties with whom we do business may perceive themselves as being exposed to reputational risk because of their relationship with us due to our cannabis and hemp-related business activities and may as a result, refuse to do business with us
48% rewrittenRisks Relating to our Industry
We participate in an evolving and volatile industry
Was: We participate in an evolving industry
48% rewrittenRisks Related to Our Business
We have a relatively short operating history, which makes it difficult to evaluate our business and future prospects
48% rewrittenRisks Relating to our Industry
Other federal agencies may take enforcement actions against companies selling hemp-derived THC products
Was: Other federal agencies may take enforcement actions against companies selling hemp-derived products
47% rewrittenRisks Relating to our Industry
Hemp-derived THC products are not permitted under the Federal Food, Drug, and Cosmetic Act
Was: Hemp-derived THC products are not permitted under the FDCA
47% rewrittenRisks Relating to our Industry
We face competition from the illicit market as well as larger competitors and licensed medical and adult-use cannabis dispensaries
45% rewrittenRisks Relating to our Industry
Hemp-derived THC products which exceed a delta-9-THC concentration of 0.3% on a dry weight basis are federally illegal under the Controlled Substances Act (the “CSA”)
Was: Hemp-derived products which exceed a delta-9 THC concentration of 0.3% on a dry weight basis are federally illegal under the Controlled Substances Act (the “CSA”). The CSA classifies cannabis as an illegal Schedule I drug, meaning it is considered to have a high potential for abuse and no accepted medical use
42% rewrittenRisks Relating to our Industry
Banking regulations could limit access to banking services
39% rewrittenRisks Related to Our Business
We face risks associated with strategic acquisitions
35% rewrittenRisks Relating to our Industry
Inconsistent public opinion and perception of the cannabis and hemp industries may hinder market growth and state regulation, which would adversely impact our growth plans and current operations and result in an adverse effect on our business, financial condition, and results of operations
35% rewrittenRisks Related to Our Business
We face risks related to our products
35% rewrittenRisks Relating to our Industry
The Company is subject to regulations that could impact its ability to sell its product internationally
32% rewrittenRisks Related to Our Business
We face exposure to fraudulent or illegal activity, and our reputation may be negatively impacted by improper conduct by our business partners, employees or agents
30% rewrittenRisks Related to Our Business
The growth and success of our business are significantly affected by the continued contributions of personnel employed by Green Thumb, as well as our ability to attract and retain qualified personnel
Was: The growth and success of our business depends on the continued contributions of personnel employed by Green Thumb, as well as our ability to attract and retain qualified personnel
29% rewrittenRisks Related to Ownership of our Common Stock
The exercise of all or any number of outstanding warrants or the issuance of stock-based awards may dilute your holding of shares of our Common Stock
23% rewrittenRisks Relating to our Industry
States are passing their own laws regulating, restricting, or prohibiting hemp-derived THC products, creating a difficult regulatory patchwork within which to operate
Was: States are passing their own laws regulating, restricting or prohibiting hemp-derived products, creating a difficult regulatory patchwork within which to operate
23% rewrittenRisks Related to Ownership of our Common Stock
We incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our operating results

All 57 risk factors

Headings as the filing states them, in filing order.

Risks Relating to our Industry

01The 2018 Farm Bill, which federally legalized hemp and hemp products, was amended in a way that would severely restrict or prohibit the Company’s hemp-derived THC products90% rewritten
02States are passing their own laws regulating, restricting, or prohibiting hemp-derived THC products, creating a difficult regulatory patchwork within which to operate23% rewritten
03Hemp-derived THC products are not permitted under the Federal Food, Drug, and Cosmetic Act47% rewritten
04The FDA could issue new regulations that prohibit or strictly limit the sale of hemp-derived THC products55% rewritten
05Other federal agencies may take enforcement actions against companies selling hemp-derived THC products48% rewritten
06Hemp-derived THC products which exceed a delta-9-THC concentration of 0.3% on a dry weight basis are federally illegal under the Controlled Substances Act (the “CSA”)45% rewritten
07The Company is subject to regulations that could impact its ability to sell its product internationally35% rewritten
08Third parties with whom we do business may perceive themselves as being exposed to reputational, and even legal, risk because of their relationship with us due to our hemp- and limited cannabis-related licensing activities and may, as a result, refuse to do business with us50% rewritten
09We face competition from the illicit market as well as larger competitors and licensed medical and adult-use cannabis dispensaries47% rewritten
10Inconsistent public opinion and perception of the cannabis and hemp industries may hinder market growth and state regulation, which would adversely impact our growth plans and current operations and result in an adverse effect on our business, financial condition, and results of operations35% rewritten
11Hemp-derived THC products may be shown to have negative health and/or safety impacts upon consumers52% rewritten
12Because the hemp-derived THC industry is new, there are relatively few operators in the industry whose business models we can follow or build upon. Similarly, there is no or limited information about comparable companies available for potential investors to review in making a decision about whether to invest in usNew
13The cannabis and hemp industries could face strong opposition from other industries53% rewritten
14Our business depends in part on our customers obtaining and/or maintaining appropriate licensingNew
15We face risks related to our insurance coverage and uninsurable risks
16We participate in an evolving and volatile industry48% rewritten
17Banking regulations could limit access to banking services42% rewritten

Risks Related to Our Business

18We have a relatively short operating history, which makes it difficult to evaluate our business and future prospects48% rewritten
19We may require additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, may force us to delay, limit, reduce, or terminate our product manufacturing and development, and other operations
20We face exposure to fraudulent or illegal activity, and our reputation may be negatively impacted by improper conduct by our business partners, employees or agents32% rewritten
21We face risks associated with strategic acquisitions39% rewritten
22Additionally, following any business acquisition, we could experience difficulty in integrating personnel, operations, financial and other systems, and in retaining key employees and customersNew
23There can be no assurance that our current and future strategic alliances or expansions of scope of existing relationships will have a beneficial impact on our business, financial condition and results of operations
24Past and potential future divestitures or other transactions could adversely affect our costs, revenues, profitability and financial position
25We have substantial debt and other financial obligations, and we may incur even more debt. Any failure to meet our debt and other financial obligations or maintain compliance with related covenants could harm our business, financial condition, and results of operations55% rewritten
26We are dependent on key inputs and suppliers; and fluctuations in the cost or availability of materials we use in our products and supply chain could negatively affect our results
27Our sales are difficult to forecast
28We may be subject to growth-related risks
29We rely on third parties for certain products sold to our customers, which could limit our control over the quality of the products
30We face an inherent risk of product liability and similar claims
31Our products may be subject to product recalls
32The growth and success of our business are significantly affected by the continued contributions of personnel employed by Green Thumb, as well as our ability to attract and retain qualified personnel30% rewritten
33We rely on third parties, including our largest shareholder, to provide numerous capabilities that we depend upon to operate, and a disruption of these systems could adversely affect our business57% rewritten
34We generally control access to and use of our intellectual property and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, customers, and partners, and our software is protected by U.S. copyright laws76% rewritten
35Our intellectual property is subject to repurchase rights, which, if exercised, could materially adversely affect our businessNew
36Because we do not control licensees’ actions and we depend on licensees for a substantial portion of our earnings from operations, their conduct could harm our businessNew
37Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations84% rewritten
38Failure by our co-manufacturers to comply with food safety, environmental or other laws and regulations, or with the specifications and requirements of our products, may disrupt our supply of products and adversely affect our business
39We may not be able to obtain or maintain necessary permits and authorizations
40We are dependent on the popularity of consumer acceptance of our brand portfolio
41We are and may continue to be subject to constraints on marketing our products
42Our business and asset portfolio are not highly diversified by either industry or geographically. If our business and assets underperform, our business, financial condition and results of operations would be negatively impacted52% rewritten
43We face risks related to our products35% rewritten

Risks Related to Ownership of our Common Stock

44Concentration of ownership may prevent new investors from influencing significant corporate decisions82% rewritten
45A large number of shares eligible for public sale could depress the market price of our common stock
46Our failure to meet the continued listing requirements of Nasdaq could result in a de-listing of our common stock
47The exercise of all or any number of outstanding warrants or the issuance of stock-based awards may dilute your holding of shares of our Common Stock29% rewritten
48Provisions in our articles of incorporation, our by-laws and Nevada law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our Common Stock
49We have not and do not expect to declare any dividends to our shareholders in the foreseeable future
50As a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting. These internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our Common Stock67% rewritten
51Increases in costs, disruption of supply or shortage of raw materials could harm our business
52Litigation may adversely affect our business, financial condition and results of operations
53An active, liquid, and orderly trading market for our Common Stock may not develop, the price of our stock may be volatile, and you could lose all or part of your investment
54We incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our operating results23% rewritten
55If our shares of Common Stock become subject to the penny stock rules, it would become more difficult to trade our shares
56The financial and operational projections that we may make from time to time are subject to inherent risks
57If securities or industry analysts do not publish research or reports about us, our business, or our market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline

Other RYTHM 10-Ks

FY2024 10-K risk factors
58 risks
RYTHM, Inc. faces heavy regulatory exposure surrounding hemp-derived THC products under the Farm Bill, FDA rules, and the Controlled Substances Act. The company relies significantly on Green Thumb for financial support, debt funding, and shared personnel. Business operations are concentrated in extraction solutions and hemp beverages with limited industry diversification.
Filed Mar 21, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.