Upexi, Inc. Common Stock LD Micro 20th Annual Main Event Conference

Hi, everybody, and thank you very much. Really appreciate you being here. I'm Brian Rudick. I'm the Chief Strategy Officer. Upexi is a leading Solana treasury company. That means that we attempt to raise as much capital in an accretive fashion to buy as much Solana as we can. We have other ways that we can add additional value for shareholders that we'll get into in the presentation. As you can see, Upexi started out and continues to be a consumer brand owner. We currently have one consumer brand, which is an innovative pet supplies product company, where we sell direct to consumer or via third parties like Amazon. That business is roughly $5 million in annually recurring revenue. It's roughly break even, and it is a very small part of our story, as you'll soon see.

That is because in February of last year, we announced our transition to a digital assets company, and specifically in April, we raised $100 million in what was the first large-scale equity raise for an altcoin treasury, meaning anything beyond Bitcoin here in the U.S. We actually quickly began staking our treasury to earn a, at the time, 7% yield to turn it into this productive asset, as well as buying a lot of locked Solana at a discount, which provides for built-in gains for shareholders. We'll talk about what exactly this means in a little bit. We followed it up with a highly accretive $200 million raise in July, putting our total raise at that point to $300 million. Then we announced that we had roughly 2.4 million Solana tokens early this year.

More recently, as I'm sure some folks are aware of, crypto has been in a bit of a bear market. We've really focused on the things that we can control. This is really reducing our expenses and shoring up the balance sheet. I'll provide more details there shortly, but that is a bit of a timeline of our company. Before actually getting into what is basically tantamount to a primer, I'll talk about what differentiates Upexi from peers, because we do have a few other companies that attempt to do these similar things that we do. Number one is management. Our CEO, Allan Marshall, founded XPO Logistics. It's a $22 billion NYSE-listed company, so he's been uber successful.

Previously, our CFO, Andrew, has been a public company CFO for many years. I actually spent most of my time running a long-short book for different hedge funds like Citadel and Millennium covering banks, which is the most analogous thing to a digital asset treasury company prior to their existence. Effectively, we believe we know what we're doing. Number two, we have what we believe is a leading strategy. We try to increase shareholder value as much as possible, but in a very risk-prudent fashion. What this means is we target only a moderate amount of leverage, which we generally believe that leverage is good when you have a positive medium-term view of the asset. As you know, crypto is quite volatile, so you have to make sure you don't get ahead of your skis.

This also means we're not doing any sort of crazy on-chain degen trading like some of our peers who are looping liquid staking tokens, where you're putting some of the treasury at risk. We are also using only qualified custodians and diversifying amongst third-party providers to try to utilize best operational and risk management practices. Effectively, we're trying to increase shareholder value in a risk-prudent fashion, and we think that this benefits us in two ways. First, we think we're well positioned for any market environment that we may come across. Number two, we think this will help to attract investors of all kinds. Number three, we've generally led with innovation. As I mentioned, we did do the first large-scale equity raise for an altcoin treasury.

In July, part of that $200 million raise was actually an in-kind convertible note issuance where we issued a convertible note and we took Solana as consideration. We are going to continue to try to lead with innovation, particularly on the capital market side of things, to stay ahead of peers. Lastly, we're one of the few treasury companies who have demonstrated the ability to create value for shareholders. Last year, we utilized our three value accrual mechanisms to actually increase our Solana per share by 35% by our measure.

To put that in perspective, and this is the whole reason why you would own a treasury company rather than owning the crypto outright, if an investor had bought Solana and staked it themselves in similarly sized and similarly timed investments, they would have had 3% more Solana, and we were able to get investors 35% more Solana. So there are these ways that we can get investors more SOL, and in theory, if we can execute, we can therefore hopefully outperform the base asset. What is all of this? What is a treasury company? Well, it all began with MicroStrategy in August 2020, where MicroStrategy was a slow-growing technology company. They were public, and so they were listed on the Nasdaq, and they were tired of seeing the dollars that they held on balance sheet erode in terms of purchasing power.

They ended up buying Bitcoin, and Bitcoin started to move up. MicroStrategy's stock started to move up too, and in fact, it moved up even more. Pretty soon they accrued a multiple in terms of market cap relative to the value of their Bitcoin. In other words, if they had $100 million worth of Bitcoin, the market might say the company's worth $200 million, so they traded at 2 times. Then they realized that they can monetize that premium multiple via accretive issuance. When you issue equity, when you're trading at 2 times book value, it's tantamount to selling a dollar for 2 or effectively buying Bitcoin half off. They've just done this over and over again to create free Bitcoin for shareholders.

Actually, until recently in this latest downturn in crypto, it was the best performing stock in the U.S., even outpacing Nvidia and Tesla and Google. They've just done really, really well, and it's more than just a leverage play because they can do this capital markets flywheel. What you've seen more recently is these historical efforts really focused on Bitcoin, and then when we got a more open SEC, they've moved to cryptocurrencies beyond just Bitcoin. It provides a lot of benefits for shareholders. Number one, you can access cryptocurrency or a proxy, in the form of a familiar equity security. Number two, we'll often trade with a beta to the underlying, which is generally a positive if you think the underlying can go up over the medium term.

Number three, as I mentioned, we do have additional ways like accretive issuance to add value for shareholders. As far as what is the main components of a treasury company, there's really 2. Number one is external visibility. You have to make sure you're as visible as possible so everybody knows about you. That actually increases demand for the stock and helps you command that premium multiple. Number two is actually monetizing that multiple, which is all about issuing equity, issuing convertible notes. Some companies are now issuing pref's. You can see everything that Upexi has done here on both sides of the equation, and I think we've executed quite well and hopefully intend to continue to do so. This is a slide on the way that we can add value for our shareholders. This is what gets me so excited.

Maybe I'll start with staking. This has to do with the way that the cryptocurrency was brought into being and also the consensus mechanism. For Solana, it's a proof of stake network. What that means is you can effectively lock up your tokens for a very short period of time. You're helping to secure the blockchain in a very low risk manner. In exchange for that, you get in-kind yield. We're generating a 5%-6% yield on our treasury, turning it into this productive asset. If we did nothing else, we'd have 5%-6% more SOL in one year. Another one is around locked token purchases, where when Solana came into being, it came with an initial supply of 500 million, and Solana Foundation didn't want all of the SOL just circulating on the open market.

It sold some of that to venture capital funds, and those were subject to vesting schedules. We have a buy and hold strategy only, so it does not really matter if we are buying Solana that is locked, and we can buy that at a nice solid discount. So 36% of our book is locked that, in general, we are buying at a 14%, 15% discount. We are still getting our staking yield. What is really nice about that is we look at it as tantamount to built-in gains for shareholders. If you put that discount into a yield equivalent, we are roughly doubling that staking yield. The last way that we create value is just this intelligent issuance, which we cover in more depth in this slide. Let us continue with that example.

Let us say that we currently have a multiple and we go out there and we issue equity when we are trading above one. The math works out to be that we are effectively, and by definition, increasing our crypto per share when we do issue equity. As I mentioned, we can issue equity either directly via our ATM, we can do a large equity private placement, or we can do convertible notes, which we have done more so on the in-kind version. That will increase our crypto per share, and then as long as that multiple holds, our stock price should move up commensurately, and then you can just continue to do this again and again. MicroStrategy actually did this last year and created $9 billion worth of free Bitcoin using this capital markets arbitrage.