Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

General Overview

As used in this current report and unless otherwise indicated, the terms "we", "us", "our", and the "Company" mean Upexi, Inc.

Upexi, Inc., a Delaware corporation, originally formed as a Nevada corporation in September of 2018. The Company has seven active subsidiaries that are part of the Company. We are in the cryptocurrency industry and the management of cash assets through a cryptocurrency portfolio, primarily focused in Solana tokens and staking of those tokens. We also operate as a brand owner specializing in the development, manufacturing, and distribution of consumer products.

Operating Segments

The Company's financial reporting is organized into a single segment that includes production, sales and distribution of branded products, following the sale of E-Core, Technology Inc. and its subsidiaries. Other sources of revenue and related costs are aggregated and viewed by management as immaterial or have similar economic characteristics, products, production, distribution processes and regulatory environment as the other product sales or directly support the Company's single segment.

DESCRIPTION OF BUSINESS

Our Company

We are a digital asset treasury company focused on acquiring, holding, and deploying Solana ("SOL") as a core treasury asset in a disciplined and capital efficient manner. Our treasury strategy allocates capital to SOL and related activities with the objective of enhancing long-term shareholder value while maintaining appropriate liquidity and managing risk.

In addition to potential price appreciation of SOL, we seek to generate incremental returns through capital allocation strategies that include staking SOL, delegating SOL to validators, and selectively acquiring discounted locked token positions. We may also utilize equity or convertible debt issuances to support treasury growth when management determines such issuances are in the best interests of its shareholders. As of March 31, 2026, we held liquid and locked SOL tokens of approximately 1,383,079 and 978,852, respectively.

We also operate as a brand owner specializing in the development, manufacturing, and distribution of consumer products.

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Critical Accounting Estimates

There have been no material changes to our critical accounting policies as disclosed in "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the year ended June 30, 2025.

Results of Operations

The following summary of the Company's operations should be read in conjunction with its unaudited condensed consolidated financial statements for the three and nine months ended March 31, 2026 and 2025, which are included herein.

		Three Months Ended March 31,
		2026				2025				Change
Revenue		$	1,050,667			$	3,160,480			$	(2,109,813	)
Digital asset revenue			3,506,432				-				3,506,432
Cost of revenue			206,365				1,601,374				(1,395,009	)
Sales and marketing expenses			553,300				1,039,299				(485,999	)
Distribution costs			588,652				990,049				(401,397	)
General and administrative expenses			4,931,678				2,642,654				2,289,024
Unrealized loss on digital assets			92,307,488				5,268				92,302,220
Realized loss on digital asset revenue conversion to USD			1,887,472				-				1,887,472
Realized loss on sale of digital assets			6,773,418				-				6,773,418
Other operating expenses			4,094,993				469,069				3,625,924
Other expenses			2,557,563				244,427				2,313,136
Net loss		$	(109,343,830	)		$	(3,831,660	)		$	(105,512,170	)

Revenue declined by approximately $2.1 million, or 66.8%, as compared with the same period last year, primarily due to the Company's shift away from legacy health, wellness and other consumer-product lines and the exit of certain manufacturing and distribution operations. Management's focus is on the digital asset strategy and resources are allocated accordingly. We do not expect significant increases to these revenue sources in future quarters.

Digital asset revenue increased by approximately $3.5 million as compared with the same period last year as the Company began its investments in digital assets toward the end of fiscal year 2025. The Company earns staking revenue by delegating its digital assets to third-party validators on proof-of-stake blockchain networks. The digital asset revenue is expected to increase as the number of SOL tokens the Company has staked increases, the overall increase in the price of SOL and the Company's continued expansion of its digital asset strategy.

Cost of revenue decreased by approximately $1.4 million, or 87.1%, as compared with the same period last year. The gross margin was approximately 80.4% and 49.3% for the three months ended March 31, 2026 and 2025, respectively, an increase of approximately 31%, as compared with the same period last year, mainly due to the elimination of the manufacturing and distribution operations.

Sales and marketing expenses decreased by approximately $0.5 million, or 46.8%, as compared with the same period last year. Management expects the sales and marketing expenses to significantly decline, quarter over quarter for the remainder of the year as less marketing expenses are spent on the remaining products and several of the fixed sales and marketing expenses have been eliminated.

Distribution costs decreased by approximately $0.4 million, or 40.5%, as compared with the same period last year. The decrease in distribution costs was primarily related to the overall decline in revenue and is expected to continue to decline for the remainder of the year.

General and administrative expenses increased approximately $2.3 million, or 86.6%, as compared with the same period last year. The increase is mainly a result of expenses in connection with the change in the business strategy to hold digital assets as parts of its treasury. The increase was primarily due to the $0.3 million increase in public company expenses, $0.3 million increase in professional fees and the $2.1 million increase in compensation to employees.

Unrealized losses on digital assets increased by approximately $92.3 million as the Company began its investments in digital assets toward the end of fiscal year 2025. The changes mainly result from the price changes on SOL over the recorded cost of SOL during the three months ended March 31, 2026. There was a minimal amount of digital asset activity during the same period one year ago.

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Realized losses on digital asset revenue converted into USD increased by approximately $1.9 million as the Company began its investments in digital assets toward the end of fiscal year 2025 and there was no staking revenue converted into USD in the prior period. The losses were a result of the price changes on SOL from the period the digital assets were recorded as staking revenue and the price the staking revenue was converted into USD during the three months ended March 31, 2026. The digital assets sales are recorded on a first in first out basis.

Realized loss on sale of digital assets increased by approximately $6.8 million as the Company began its investments in digital assets toward the end of fiscal year 2025 and there was no digital assets sold in the prior period.

Other operating expenses increased by approximately $3.6 million as compared with the same period last year. The increase was primarily due to increased stock compensation of approximately $3.5 million.

Other expenses increased by approximately $2.3 million as compared with the same period last year. The increase was primarily due to increased debt used in the purchase of SOL for the digital asset treasury.

		Nine Months Ended March 31,
		2026				2025				Change
Revenue		$	7,115,322			$	11,522,487			$	(4,407,165	)
Digital asset revenue			14,733,562				-				14,733,562
Cost of revenue			2,503,991				4,059,207				(1,555,216	)
Sales and marketing expenses			2,536,696				3,030,687				(493,991	)
Distribution costs			2,400,449				3,722,196				(1,321,747	)
General and administrative expenses			19,711,672				5,558,934				14,152,738
Unrealized loss on digital assets			178,806,383				5,268				178,801,115
Realized loss on digital asset revenue conversion to USD			2,229,071				-				2,229,071
Realized loss on sale of digital assets			6,773,418				-				6,773,418
Other operating expenses			19,883,023				1,141,792				18,741,231
Other expenses			8,524,819				762,950				7,761,869
Net loss		$	(221,520,638	)		$	(6,758,547	)		$	(214,762,091	)

Revenue declined by approximately $4.4 million, or 38.2%, as compared with the same period last year, primarily due to the Company's shift away from legacy health, wellness and other consumer-product lines and the exit of certain manufacturing and distribution operations. Management's focus is on the digital asset strategy and resources are allocated accordingly. We do not expect significant increases to these revenue sources in future periods.

Digital asset revenue increased by approximately $14.7 million as compared with the same period last year as the Company began its investments in digital assets toward the end of fiscal year 2025. The Company earns staking revenue by delegating its digital assets to third-party validators on proof-of-stake blockchain networks. The digital asset revenue is expected to increase as the number of SOL tokens the Company has staked increases, the overall increase in the price of SOL and the Company's continued expansion of its digital asset strategy.

Cost of revenue decreased by approximately $1.6 million, or 38.3%, as compared with the same period last year. The gross margin was approximately 64.8% for the nine months ended March 31, 2026 and 2025.

Sales and marketing expenses decreased marginally by approximately $0.5 million, or 16.3%, compared with the same period last year. Management expects the sales and marketing expenses to significantly decline, quarter over quarter for the remainder of the year as less marketing expenses are spent on the remaining products and several of the fixed sales and marketing expenses have been eliminated.

Distribution costs decreased by approximately $1.3 million, or 35.5%, as compared with the same period last year. The decrease in distribution costs was primarily related to the overall decline in revenue and is expected to continue to decline for the remainder of the year.

General and administrative expenses increased approximately $14.2 million, or 254.6%, as compared with the same period last year. The increase is mainly a result of expenses in connection with the change in the business strategy to hold digital assets as parts of its treasury. The increase was primarily due to the $4.2 million increase in public company expenses, $0.7 million increase in professional fees, $1.8 million in digital asset treasury fees, $0.9 million in travel related expenses and $6.7 million increase in compensation to employees.

Unrealized losses on digital assets increased by approximately $178.8 million as the Company began its investments in digital assets toward the end of fiscal year 2025. The changes mainly result from the price changes on SOL over the recorded cost of SOL during the nine months ended March 31, 2026.

Realized losses on digital asset revenue converted into USD increased by approximately $2.2 million as the Company began its investments in digital assets toward the end of fiscal year 2025 and there was no staking revenue converted into USD in the prior period. The losses were a result of the price changes on SOL from the period the digital assets were recorded as staking revenue and the price the staking revenue was converted into USD during the nine months ended March 31, 2026. The digital assets sales are recorded on a first in first out basis.

Realized loss on sale of digital assets increased by approximately $6.8 million as the Company began its investments in digital assets toward the end of fiscal year 2025 and there was no digital assets sold in the prior period.

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Other operating expenses increased by approximately $18.7 million as compared with the same period last year. The increase was primarily due to increased stock-based compensation of approximately $12.6 million related to restricted stock units, $4.7 million increased stock-based compensation related to the warrants for the asset management agreement, $1.8 million in digital asset service fees, and $1.6 million impairment of assets from manufacturing shutdown.

Other expenses increased by approximately $7.8 million as compared with the same period last year. The increase was primarily due to increased interest expense for the debt used in the purchase of SOL for the digital asset treasury and partially offset by gains from cash management.

Liquidity and Capital Resources

Working Capital

		As of March 31, 2026				As of June 30, 2025
Current assets		$	121,804,457			$	56,778,043
Current liabilities			70,823,719				32,563,906
Working capital		$	50,980,738			$	24,214,137

Cash Flows

		Nine Months Ended March 31,
		2026				2025
Cash flows used in operating activities		$	(17,238,530	)		$	(4,137,346	)
Cash flows (used in) provided by investing activities			(28,951,190	)			5,757,517
Cash flows provided by (used in) financing activities			46,697,417				(2,051,194	)
Net change in cash during the period		$	507,697			$	(431,023	)

On March 31, 2026, the Company had cash of approximately $3.5 million, an increase of approximately $0.5 million from June 30, 2025. The primary changes resulted from financing obtained to implement and grow the Company's digital asset strategy.

Net cash flows used in operating activities was approximately $17.2 million for the nine months ended March 31, 2026, as compared to net cash flows used in operating activities of approximately $4.1 million for the nine months ended March 31, 2025. The approximately $221.5 million dollar net loss from operations was offset by approximately $178.8 million in unrealized losses on digital assets, net digital asset revenue not converted to USD of approximately $5.7 million, realized loss on sale of digital assets of approximately $6.8 million, loan amortization costs of approximately 2.7 million, the impairment of assets from the manufacturing shutdown of approximately $1.4 million and stock compensation expense of approximately $18.0 million and offset by approximately $1.3 million gain on the extinguishment of debt. The changes in assets and liabilities used approximately 2.9 million. Various costs were incurred in connection with beginning, implementing, and growing the Company's digital asset strategy and are expected to continue.

Net cash flows used in investing activities was approximately $29.0 million for the nine months ended March 31, 2026, as compared to net cash flows provided by investing activities of approximately $5.8 million for the nine months ended March 31, 2025. The primary use of funds was on the acquisitions of SOL for the digital assets treasury during the nine months ended March 31, 2026. In the nine months ended March 31, 2025, the primary driver was the cash collected in connection with the sale of a building and the collection of the purchase price for E-core.

Net cash flows provided by financing activities was approximately $46.7 million for the nine months ended March 31, 2026, as compared to net cash flows used in financing activities of approximately $2.1 million for the nine months ended March 31, 2025. The primary driver of the change was the financing obtained from a capital raise occurring in each of July 2025 and November 2025 for purposes of executing the Company's digital asset strategy in the nine months ended March 31, 2026. This capital raise was offset by the expenses incurred for the capital raise and the expenses incurred for the convertible note obtained in a swap transaction for SOL Other notable drivers include the exercise of warrants that provided cash of approximately $0.1 million and cash used for common stock repurchases of approximately $2.8 million. In the nine months ended March 31, 2025, the primary driver of cash used in financing activities was the payment on a note in connection with the sale of a building.

We estimate that we will have sufficient working capital to fund our operations over the twelve months following the date of the issuance of these condensed consolidated financial statements and meet all of our debt obligations. Additionally, we have a shelf registration statement on file with the SEC that was declared effective January 8, 2026. Specific information on the terms of and the securities being offered will be provided at the time of the applicable offering. Proceeds from any future offerings are expected to be used for corporate purposes or other purposes to be disclosed at the time of offering.

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Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.