Stock-Based Compensation

6 Months Ended

Jan. 31, 2021

Share-based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

NOTE 4 – STOCK-BASED COMPENSATION

In November 2015, the Company 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 the Company to retain and attract qualified individuals who will contribute to the overall success of the Company. The Company'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, 2021, we issued:

● 7,608,820 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 $247,287 equivalent to the value of the shares calculated based on the share's closing price at the grant dates.

● 250,000 common shares to a former member of the Management team for services in lieu of cash compensation. The Company recognized stock-based compensation expense of approximately $17,500 equivalent to the value of the shares calculated based on the share's closing price at the grant dates.

● 3,730,000 options to purchase common shares to various employees with an exercise price of $0.04 per share and a term of 5 years. At issuance, 33,333 of the options vested, 66,667 of the options will vest equally over a period of two years, and 3,630,000 of the options will vest equally over a period of three years. The options have a fair market value of $214,812.

During the six months ended January 31, 2020, we issued:

● 7,313,827 common shares to the Executive Officers for services in lieu of cash compensation. The Company recognized stock-based compensation expense of approximately $410,044 equivalent to the value of the shares calculated based on the share's closing price at the grant dates.

● 2,988,251 shares of common stock to the Executive Officers, with a market value at time of issuance of $158,216 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 during the six months ended January 31, 2021 were determined using the Black-Scholes option pricing model which used the following assumptions:

Expected dividend yield	0.00%
Expected stock price volatility	198.82% - 317.52%
Risk-free interest rate	0.22% - 1.47%
Expected term	2.0 - 3.0 years.

The Company recognized approximately $53,455 and $251,603 in stock-based compensation expense for stock options to employees for the six months ended January 31, 2021 and 2020, respectively. Unamortized compensation stock option cost totaled $224,562 and $189,161 at January 31, 2021 and January 31, 2020, respectively.

A summary of the stock options as of January 31, 2021 and July 31, 2020 and the changes during the six months ended January 31, 2021 are presented below:

			Weighted average		Weighted average remaining contractual
	Options		exercise price		term (years)
Outstanding at July 31, 2020		5,000,000	$	0.27		2.66
Granted		3,730,000	$	0.04		4.86
Exercised		-		-		-
Forfeited and cancelled		-		-		-
Outstanding at January 31, 2021		8,730,000	$	0.17		3.33
Exercisable at January 31, 2021		5,270,390	$	0.26		2.29

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 8,730,000 and 5,000,000 stock options outstanding at January 31, 2021 and July 31, 2020 was $55,204 and $0, respectively.

The aggregate intrinsic value of 5,270,390 and 4,717,699 stock options exercisable at January 31, 2021 and July 31, 2020 was $3,760 and $0, respectively.