Related Party Transactions

9 Months Ended

Apr. 30, 2024

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 8 – RELATED PARTY TRANSACTIONS 

On December 31, 2021, as a result of the of the acquisition of Skynet’s assets, the two sellers became related parties as they continued to be involved as consultants for 12 months to manage the customer relationship. The Company will pay $100,000 to each of the consultants on an annual basis. As of April 30, 2024 and July 31, 2023, there were no outstanding balances owed to the consultants. Part of the Purchase Price of $600,000 (the “Earn-out Amount”) was retained by the Company and will be paid to sellers in six equal quarterly payments. An additional $100,000 (the “Holdback Amount”) was retained by the Company and will be paid to sellers in accordance with the Skynet asset purchase agreement (the “Asset Purchase Agreement”). The total balance outstanding on the Holdback amount as of April 30, 2024 and July 31, 2023 was $103,000 and $100,000, respectively. The Company amortized $450 and $29,764 of debt discount as interest expense during the nine months ended April 30, 2024 and 2023, respectively. The total debt discount outstanding as of April 30, 2024 and July 31, 2023, was $900 and $0, respectively. The total balance outstanding on the Earn-out Amounts as of April 30, 2024 and July 31, 2023 was $412,000 and $400,000, respectively. On January 13, 2024, the maturity date on the Note was extended to December 31, 2024. As consideration for this extension agreement, the Noteholder received a fee in an amount equal to 3.0% of the principal amount of the Notes outstanding as of December 31, 2023, which was added to the principal balance on the Note.

Acquisition Payable – Skynet

As part of the acquisition of Skynet’s assets, the Company will pay the seller a $1,000,000 (the “Share Payment”) by issuance of restricted shares of the Company’s common stock to the owners. On September 1, 2022, the Company and the sellers amended the Asset Purchase Agreement. In accordance with the amended agreement, the Share Payment will be made via the issuance of shares on the earlier of (i) the effective date of that certain Registration Statement on Form S-1 filed by the Company with the Securities and Exchange Commission on August 11, 2021 (in which case the stock will be valued at the price set forth in the prospectus that is a part of such Registration Statement, without underwriter discounts) and (ii) April 30, 2023 (in which case the stock will be valued at the average of the last transaction price on the OTCQB for each of the 10 trading days immediately preceding such issuance date). On December 5, 2022 and March 9, 2023, the Asset Purchase Agreement was amended. The payments due were originally extended until the closing of the merger with MEOA which was expected to close during the second quarter of calendar year 2023. On June 15, 2023, Digerati terminated the Business Combination Agreement with MEOA. On November 22, 2023, the maturity date on the Note was extended to December 31, 2023. On January 13, 2024, the maturity date was extended to December 31, 2024. As a condition of the extension of the maturity date, a 3% fee was added to the principal balance of the Note. The total principal balance outstanding on the acquisitions payable as of April 30, 2024 and July 31, 2023 was $1,030,000 and $1,000,000, respectively. The Company amortized $900 and $0 of debt discount as interest expense during the nine months ended April 30, 2024 and 2023, respectively. The total debt discount outstanding as of April 30, 2024 and July 31, 2023, was $1,799 and $0, respectively.