Stock-Based Compensation

6 Months Ended

Jan. 31, 2020

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 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 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 six months ended January 31, 2019, we issued:

● 635,155 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 approximately $115,000 equivalent to the value of the shares calculated based on the share's closing price at the grant dates.

● 100,000 options to purchase common shares to a member of the Board of Directors with an exercise price of $0.18 per share and a term of 5 years. The options vest equally over a period of one year. The options have a fair market value of $11,406.

● 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 $251,603 and $251,000 in stock option amortization expense to employees during the six months ended January 31, 2020 and 2019, respectively. Unamortized compensation cost totaled $189,161 and $265,000 at January 31, 2020 and January 31, 2019, respectively.

A summary of the stock options as of January 31, 2020 and July 31, 2019 and the changes during the six months ended January 31, 2020 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		4.57
Exercised		-		-		-
Forfeited and cancelled		-		-		-
Outstanding at January 31, 2020		5,000,000	$	0.27		3.16
Exercisable at January 31, 2020		4,548,251	$	0.27		3.09

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 January 31, 2020 and July 31, 2019 was $0 and $0, respectively.

The aggregate intrinsic value of 4,548,251 and 3,452,405 stock options exercisable at January 31, 2020 and July 31, 2019 was $0 and $0, respectively.