RYTHM, Inc.

Third-quarter 2022 revenue was $7 million, down $8.8 million, or 55.4%, from $15.8 million in Q3 2021. The company reported a gross loss of $4.1 million, or 58.6% of revenue, versus a $380,000 gross loss, or 2.4% of revenue, a year ago; extraction revenue was $5.7 million with about a 27% gross margin. Net loss was $46.3 million, or $17.33 per diluted share, versus a $9.8 million loss, or $4.68 per diluted share, last year; adjusted EBITDA loss was $28.8 million versus $5.6 million a year ago. Full-year 2022 revenue guidance was reduced to $65 million to $70 million from $70 million to $75 million, mainly because $5.3 million of Bud & Mary’s revenue was deferred. The company ended Q3 with $12.5 million of cash, restricted cash and marketable securities, and as of November 7 had sold 6,132,565 shares under the ATM for approximately $15.6 million in gross proceeds and about $15.1 million in net proceeds after commissions.

Raymond Chang framed the quarter as temporarily distorted by legal and financing constraints rather than underlying demand. He said the company remained confident it has the legal rights to recover the deferred Bud & Mary’s revenue and described the lawsuit as meritless, while also stressing that the business is pivoting toward a more scalable model. His tone was optimistic about the rapid deployment program, the extraction product pipeline, and international demand, especially in Europe.

Timothy Oakes focused on the mechanics behind the quarter’s weakness and the impact on margins and profitability. He highlighted the $5.3 million revenue deferral tied to Bud & Mary’s, the $1.8 million of extraction shipments blocked by quarterly cash-spend limits, and the resulting gross loss and enlarged operating losses. He also detailed the $24.1 million of G&A, including a $15 million bad-debt reserve, $1.1 million of severance, $2.2 million of prepayment-penalty interest expense within the $4 million of net interest expense, a $17.9 million debt-extinguishment loss, and a $5.7 million favorable warrant fair-value remeasurement. He noted the company was in compliance with its restructured $35 million senior secured promissory note and had ATM availability remaining.

Analysts focused on whether retail sales were flowing through customer facilities, demand trends in extraction, the size and timing of the backlog, and the Bud & Mary’s dispute. Management said WhiteCloud in Nevada continued selling through dispensaries and described strong traction in extraction, including a rebound in Q4, but acknowledged that the company is not yet ready to launch a TTK-style extraction offering because remote monitoring and cloud control still need work. On backlog, Tim clarified the reported figure as $646 million, with most of it tied to SaaS and production revenue over roughly 10 years. On Bud & Mary’s, Raymond declined legal detail but reiterated confidence in full recovery, citing both corporate and personal guarantees from David Morgan.