Stock-Based Compensation

3 Months Ended

Oct. 31, 2019

Share-based Payment Arrangement [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 three months ended October 31, 2019, we issued:

· 3,972,055 common shares to members of the Management team for services in lieu of cash compensation. The Company recognized stock-based compensation expense of approximately $278,044 equivalent to the value of the shares calculated based on the share's closing price at the grant dates.

· 1,317,365 shares of common stock to the Executive Officers, with a market value at time of issuance of $92,216, the stock was issued as payment for outstanding compensation.

· 60,000 options to purchase common shares to an employee with an exercise price of $0.12 per share and a term of 5 years. The options vest equally over a period of three years. The options have a fair market value of $7,158.

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	317.52	%
Risk-free interest rate	1.47	%
Expected term	3.0 year

During the three months ended October 31, 2018 we issued the following to settle accounts payables:

· In September 2018, the Company issued an aggregate of 21,672 shares of common stock with a market value at time of issuance of $5,794. The shares were issued to settle accounts payables of $5,287 to a professional, the Company recognized a loss of $507 upon issuance of the shares. This loss is immaterial, thus presented in stock-based compensation expense on the statement of cash flows.

Digerati recognized approximately $141,647 and $95,000 in stock-based compensation expense to employees during the three months ended October 31, 2019 and 2018, respectively. Unamortized compensation cost totaled $299,118 and $294,000 at October 31, 2019 and October 31, 2018, respectively.

A summary of the stock options as of October 31, 2019 and July 31, 2019 and the changes during the three months ended October 31, 2019 are presented below:

					Weighted-average
			Weighted-average		remaining contractual
	Options		exercise price		term (years)
Outstanding at July 31, 2019		4,940,000	$	0.27		3.65
Granted		60,000	$	0.12		4.82
Exercised		-		-		-
Forfeited and cancelled		-		-		-
Outstanding at October 31, 2019		5,000,000	$	0.27		3.41
Exercisable at October 31, 2019		4,018,038	$	0.27		3.22

The aggregate intrinsic value (the difference between the Company's closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) of the 5,000,000 and 4,940,000 stock options outstanding at October 31, 2019 and July 31, 2019 was $0 and $0, respectively.

The aggregate intrinsic value of 4,018,038 and 3,452,405 stock options exercisable at October 31, 2019 and July 31, 2019 was $0 and $0, respectively.