Warrants

6 Months Ended

Jan. 31, 2020

Warrants [Abstract]

WARRANTS

NOTE 5 – WARRANTS

During the six months ended January 31, 2020, we did not issue any warrants.

During the six months ended January 31, 2019, we issued the following warrants:

In August 2018, Digerati secured $40,000 from an investor under a private placement and issued 80,000 shares of its common stock at a price of $0.50 per share and warrants to purchase an additional 15,000 shares of its common stock at an exercise price of $0.50 per share. We determined that the warrants issued in connection with the private placement were equity instruments and did not represent derivative instruments. The Company adopted a sequencing policy and determined that the warrants with fixed exercise price were excluded from derivative consideration.

In October 2018, Digerati issued 200,000 warrants under an extension of payments to existing promissory notes, with a combined current principal balance of $75,000, the warrants vested at time of issuance. The warrants have a term of 3 years, with an exercise price of $0.10. Under a Black-Scholes valuation the relative fair market value of the warrants at time of issuance was approximately $31,000 and was recognized as a discount on the promissory note, the Company amortized the fair market value as interest expense over 3 months.

During the six months ended January 31, 2019, Digerati cancelled 260,000 warrants with an exercise price of $0.15. Additionally, the Company issued 260,000 common shares to replace these warrants, in conjunction with two promissory notes with a principal balance of $50,000, in addition at the time of issuance the Company recognized a discount of $36,000.

The fair market value of all warrants issued was determined using the Black-Scholes option pricing model which used the following assumptions:

Expected dividend yield	0.00	%
Expected stock price volatility	153.99% - 237.00	%
Risk-free interest rate	2.05% -2.93	%
Expected term	3.0 - 5.0 years

A summary of the warrants 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
	Warrants		exercise price		term (years)
Outstanding at July 31, 2019		2,700,000	$	0.32		2.19
Granted		-		-		-
Exercised		-		-		-
Forfeited and cancelled		-		-		-
Outstanding at January 31, 2020		2,400,000	$	0.35		1.95
Exercisable at January 31, 2020		2,100,000	$	0.25		1.82

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 warrants) of the 2,400,000 and 2,700,000 warrants outstanding at January 31, 2020 and July 31, 2019 was $5,060 and $63,602, respectively.

The aggregate intrinsic value of 2,100,000 and 2,400,000 warrants exercisable at January 31, 2020 and July 31, 2019 was $5,060 and $64,000, respectively.

In December 2017, Digerati issued 100,000 warrants to a consultant for services, the warrants vested at time of issuance. The warrants have a term of 5 years, with an exercise price of $0.50. Under a Black-Scholes valuation the fair market value of the warrants at time of issuance was approximately $49,000, the Company will amortize the fair market value as warrant expense over 12 months. Additionally, Digerati committed to issue 100,000 warrants if the Company's stock price traded at $0.75 per share for 10 consecutive days, to issue 100,000 warrants if the Company's stock price traded at $1.00 per share for 10 consecutive days, and to issue 100,000 warrants if the Company's stock price traded at $1.25 per share for 10 consecutive days. Under a Black-Scholes valuation the fair market value of the warrants at time of issuance was approximately $143,000, the Company amortized the fair market value as warrant expense over 12 months.