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Leases

12 Months Ended

Jul. 31, 2021

NOTE 14 - LEASES

Digerati leases its corporate facilities, sales office and network facilities in Texas and Florida. The annual rent expense under the operating leases were $379,556 and $160,574, for 2021 and 2020, respectively. Below is a list of our primary operating leases:

Location	Annual Rent		Lease Expiration Date	Business Use	Approx. Sq. Ft.

825 W. Bitters, Suite 104, San Antonio, TX 78216	$	26,529	Jul-22	Executive offices		1,546
1610 Royal Palm Avenue, Suite 300, Fort Myers, FL 33901	$	82,102	Dec-25	Office space and network facilities		6,800
2121 Ponce de Leon Blvd., Suite 200, Coral Gables FL 33134	$	164,475	Jul-22	Office space & wireless internet network		4,623
7218 McNeil Dr., FL-1, Austin, TX 78729	$	21,000	Mar-24	Network facilities		25
6606 Lyndon B. Johnson, Fwy., FL1, Suite 125, Dallas, TX 75240	$	14,200	May-22	Network facilities		25
9701 S. John Young Parkway, Orlando, FL 32819	$	30,528	May-23	Network facilities		540
50 NE 9th St, Miami, FL 3313	$	49,560	May-23	Network facilities		25
350 NW 215 St., Miami Gardens, FL 33169	$	23,403	May-22	Wireless internet network		100
8333 NW 53rd St, Doral, FL 33166	$	13,612	Jul-25	Wireless internet network		100
100 SE 2nd Street, Miami, FL 33131	$	36,024	Jan-24	Wireless internet network		100
9055 SW 73rd Ct, Miami, FL 33156	$	8,674	Dec-23	Wireless internet network		100
9517 Fontainebleau Blvd., Miami, FL 33172	$	11,860	Aug-24	Wireless internet network		100

Beginning August 1, 2019, operating ROU assets and operating lease liabilities are recognized based on the present value of lease payments, including annual rent increases, over the lease term at commencement date. The impact of ASU No. 2016-02 (“Leases (Topic 842)” on our consolidated balance sheet beginning August 1, 2019 was through the recognition of ROU assets and lease liabilities for operating leases. Operating leases in effect prior to August 1, 2019 were recognized at the present value of the remaining payments on the remaining lease term as of August 1, 2019. Because none of our leases included an implicit rate of return, we used our incremental secured borrowing rate based on lease term information available as of the adoption date or lease commencement date in determining the present value of lease payments. The incremental borrowing rate on the leases is 5.0%.

The leased properties have a remaining lease term of sixteen to forty-six months as of August 1, 2019. At the option of the Company, it can elect to extend the term of the leases.

The Company has not entered into any sale and leaseback transactions during the year ended July 31, 2021.

On January 1, 2021, the Company entered into a new office lease, with a monthly base lease payment and applicable shared expenses of $4,750 and $2,140, respectively. The base rent will increase on an annual basis by 2% of the base lease payment. The lease expires on January 1, 2026, and at the option of the Company, the lease can be extended for one (1) five (5) year term with a base rent at the prevailing market rate at the time of the renewal.

In November 2020, as part of the acquisition of Nexogy, Inc., the Company assumed an office lease in Coral Gable Florida, two network facilities and five wireless internet network leases. These leases are identified in the table above. The leases’ expiration dates range from May 2022 to July 2025, and at the option of the Company, the leases can be extended for various periods ranging from one to five years, with a base rent at the prevailing market rate at the time of the renewal.

Information related to our operating leases is as follows:

ROU Asset	July 31, 2020	$	176,097
Amortization		$	(327,864	)
Addition - Asset		$	1,086,027
ROU Asset	July 31, 2021	$	934,260

Lease Liability	July 31, 2020	$	176,097
Amortization		$	(327,864	)
Addition - Liability		$	1,086,027
Lease Liability	July 31, 2021	$	934,260

Lease Liability	Short term	$	503,443
Lease Liability	Long term	$	430,817
Lease Liability	Total:	$	934,260

Operating lease cost:		$	379,556

Cash paid for amounts included in the measurement of lease labilities

Operating cashflow from operating leases:		$	379,556

Weighted-average remain lease term-operating lease:			2.9 years

Weighted-average discount rate			5.0	%

The future minimum lease payment under the operating leases are as follows:

	Lease
12 Months ending July 31,	Payments
2022	$	481,967
2023		242,181
2024		142,912
2025		101,512
2026		35,896

Total:	$	1,004,468