Stock-Based Compensation

6 Months Ended

Jan. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

NOTE 4 – STOCK-BASED COMPENSATION

In November 2015, Digerati adopted the Digerati Technologies, Inc. 2015 Equity Compensation Plan (the “Plan”). The Plan authorizes the grant of up to 7.5 million stock options, restricted common shares, non-restricted common shares and other awards to employees, directors, and certain other persons. The Plan is intended to permit Digerati to retain and attract qualified individuals who will contribute to the overall success of Digerati. Digerati’s Board of Directors determines the terms of any grants under the Plan. Exercise prices of all stock options and other awards vary based on the market price of the shares of common stock as of the date of grant. The stock options, restricted common stock, non-restricted common stock and other awards vest based on the terms of the individual grant.

During the six months ended January 31, 2019, we issued:

● 635,155 common shares to various employees as part of the Company’s Non-Standardized profit-sharing plan contribution. The Company recognized stock-based compensation expense of approximately $115,000 equivalent to the value of the shares calculated based on the share’s closing price at the grant dates.

● 100,000 options to purchase common shares to a member of the Board of Directors with an exercise price of $0.18 per share and a term of 5 years. The options vest equally over a period of one year. The options have a fair market value of $11,406.

The fair market value of all options issued was determined using the Black-Scholes option pricing model which used the following assumptions:

Expected dividend yield	0.00	%
Expected stock price volatility	178.79	%
Risk-free interest rate	2.73	%
Expected term	1.0 year

Digerati recognized approximately $251,000 and $503,500 in stock-based compensation expense to employees during the six months ended January 31, 2019 and 2018, respectively. Unamortized compensation cost totaled $265,000 and $420,000 at January 31, 2019 and January 31, 2018, respectively.

A summary of the stock options as of January 31, 2019 and July 31, 2018 and the changes during the six months ended January 31, 2019 and July 31,2018:

					Weighted-average
			Weighted-average		remaining contractual
	Options		exercise price		term (years)
Outstanding at July 31, 2018		3,415,000	$	0.33		4.58
Granted		100,000	$	0.18		4.87
Exercised		-		-		-
Forfeited and cancelled		-		-		-
Outstanding at January 31, 2019		3,515,000	$	0.32		3.58
Exercisable at January 31, 2019		2,664,688	$	0.31		3.41

The aggregate intrinsic value (the difference between the Company’s closing stock price on the last trading day of the six months and the exercise price, multiplied by the number of in-the-money options) of the 3,515,000 and 3,415,000 stock options outstanding at January 31, 2019 and July 31, 2018 was $56,000 and $706,372, respectively.

The aggregate intrinsic value of 2,664,688 and 2,006,111 stock options exercisable at January 31, 2019 and July 31, 2018 was $47,317 and $587,389, respectively.