Stock-Based Compensation

12 Months Ended

Jul. 31, 2021

Share-based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

NOTE 6 – 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 year ended July 31, 2020, we issued:

● 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. At the time of issuance, the options had a fair market value of $7,158.

● 21,811,100 shares of common stock to various employees for services in lieu of cash compensation and as part of the Company’s Non-Standardized profit-sharing plan. The Company recognized stock-based compensation expense of $801,891 equivalent to the fair market value of the shares at issuance.

During the year ended July 31, 2020 we issued the following to non-employee professionals:

● 400,000 shares of common stock with a market value at time of issuance of $15,240. The shares were issued for consulting services.

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 year ended July 31, 2021, we issued:

● 7,858,820 shares of common stock to various employees for services in lieu of cash compensation and as part of the Company’s Non-Standardized profit-sharing plan. The Company recognized stock-based compensation expense of $264,712 equivalent to the value of the shares calculated based on the share’s closing price at the grant dates.

● 4,230,000 options to purchase common shares to various employees with an exercise price ranging from $0.042 to $0.1475 per share and a term of 5 years. At issuance, 200,000 of the options vested, 400,000 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. At issuance the stock options had a fair market value of $267,343.

The fair market value of all options issued during the year ended July 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	197.71% - 198.82	%
Risk-free interest rate	0.22% - 0.34	%
Expected term	2.0 - 3.0 years.

Digerati recognized approximately $399,500 and $1,112,000 in stock-based compensation expense to employees during the years ended July 31, 2021 and 2020, respectively. Unamortized compensation cost totaled $195,835 and $63,203 at July 31, 2021 and July 31, 2020, respectively.

A summary of the stock options as of July 31, 2021 and July 31, 2020 and the changes during the years ended July 31, 2021 and July 31,2020:

			Weighted-		Weighted-average remaining
			average		contractual
	Options		exercise price		term (years)
Outstanding at July 31, 2019		4,940,000	$	0.27		3.65
Granted		60,000	$	0.12		4.07
Exercised		-		-		-
Forfeited and cancelled		-		-		-
Outstanding at July 31, 2020		5,000,000	$	0.27		2.66
Granted		4,230,000	$	0.05		4.39
Exercised		-		-		-
Forfeited and cancelled		-		-		-
Outstanding at July 31, 2021		9,230,000	$	0.17		2.93
Exercisable at July 31, 2021		6,091,863	$	0.23		2.18

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 9,230,000 and 5,000,000 stock options outstanding at July 31, 2021 and July 31, 2020 was $392,891 and $0, respectively.

The aggregate intrinsic value of 6,091,863 and of 4,717,699 stock options exercisable at July 31, 2021 and July 31, 2020 was $91,978 and $0, respectively.