There is some misunderstanding here – the portable version of AxCrypt 2 (the one where the download has an .exe extension) is indeed just that. It does *not* auto-upgrade version 1. The installable version (the ones where the download has a .msi extension) will indeed upgrade version 1, that’s what installers do.
The message you are referring to is likely the following: “You have updated AxCrypt. Unfortunately, your configuration must be reset. After restarting, your preferences and settings will unfortunately be lost. We apologize for the inconvenience. Your encrypted files are still safe and ok.”
This is displayed when you are running a newer version of AxCrypt 2 than before, and in between the way we store the user configuration settings have changed too much. This was due to the fact that during the Beta testing period we did not want to spend time regression testing all kinds of upgrades, so we just said that if they’re incompatible between version we’ll start afresh.
The point here is that AxCrypt 1 has not been auto-upgraded in your system. It’s still there just as it always has been (if it was there, and you did use the portable install-free version of AxCrypt 2).
Most likely you tried out AxCrypt 2 Beta earlier, and the newly downloaded version found the old user configuration files from that, and thus displayed the message.