UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

WASHINGTON,
D.C. 20549



FORM
10-K



(mark
one)



☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For
the fiscal year ended July 31, 2017

or



☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For
the transition period from _______to _________



Commission
File Number: 001-15687



DIGERATI
TECHNOLOGIES, INC.

(Exact
Name of Registrant as Specified in Its Charter)





|Nevada                                                                 |  | 74-2849995                       
|---------------------------------------------------------------------- |  | ---------------------------------
|(State or Other Jurisdiction of
Incorporation
        or Organization) |  | (IRS Employer
Identification No.)
|                                                                       |  |                                  
|3463 Magic Drive, Suite 355
        San Antonio, Texas                 |  | 78229                            
|(Address of Principal Executive Offices)                               |  | (Zip Code)                       



Registrant’s
Telephone Number, Including Area Code: (210) 614-7240



Securities
registered pursuant to Section 12(b) of the Act: NONE



Securities
registered pursuant to Section 12(g) of the Act:



Common
Stock, Par Value $0.001 Per Share

(Title
of Class)



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   ☐ Yes
  ☒ No



Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.	☐ Yes
 ☒ No



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes  ☐ No



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). ☒ Yes  ☐ No



Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. ☒





Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.





|Large accelerated filer | ☐                                               | Accelerated filer         | ☐
|----------------------- | ----------------------------------------------- | ------------------------- | -
|Non-accelerated filer   | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☒
|                        | Emerging growth company                         | ☐                        



If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 	☐ Yes
☒ No



The
aggregate market value of the voting and non-voting common equity held by non-affiliates of the issuer was $4,067,179 based on
the closing price of $0.43 per share on December 13, 2017, as reported on the over-the-counter bulletin board.



There
were 9,458,556 shares of issuer’s Common Stock outstanding as of December 13, 2017.




















TABLE
OF CONTENTS







|             |                                                                                                              | Page
|------------ | ------------------------------------------------------------------------------------------------------------ | ----
|             | PART
    I                                                                                                   |     
|Item
    1.  | Business                                                                                                     | 2   
|Item
    1A. | Risk Factors                                                                                                 | 8   
|Item
    1B. | Unresolved Staff Comments                                                                                    | 8   
|Item
    2.  | Properties                                                                                                   | 8   
|Item
    3.  | Legal Proceedings                                                                                            | 8   
|Item
    4.  | (Removed
    and Reserved)                                                                                   |     
|             |                                                                                                              |     
|             | PART
    II                                                                                                  |     
|             |                                                                                                              |     
|Item
    5.  | Market for Registrant’s Common Equity; Related Stockholder Matters and Issuer Purchases of Equity Securities | 9   
|Item
    6.  | Selected Financial Data                                                                                      | 10  
|Item
    7.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 10  
|Item
    7A. | Quantitative and Qualitative Disclosures about Market Risk                                                   | 14  
|Item
    8.  | Financial Statements and Supplementary Data                                                                  | 15  
|Item
    9.  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures                        | 28  
|Item
    9A. | Controls and Procedures                                                                                      | 28  
|Item
    9B. | Other Information                                                                                            | 28  
|             |                                                                                                              |     
|             | PART
    III                                                                                                 |     
|             |                                                                                                              |     
|Item
    10. | Directors, Executive Officers and Corporate Governance                                                       | 29  
|Item
    11. | Executive Compensation                                                                                       | 30  
|Item
    12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               | 34  
|Item
    13. | Certain Relationships and Related Transactions, and Director Independence                                    | 34  
|Item
    14. | Principal Accountant Fees and Services                                                                       | 35  
|             |                                                                                                              |     
|             | PART
    IV                                                                                                  |     
|             |                                                                                                              |     
|Item
    15. | Exhibits, Financial Statement Schedules                                                                      | 36  
|             |                                                                                                              |     
|             | SIGNATURES                                                                                                   | 37  













PART
I



| | ITEM
                          1. | BUSINESS.
| | --------------------------------- | ---------



Overview



Digerati
Technologies, Inc., a Nevada corporation (including our subsidiaries, “we,” “us,” “Company”
or “Digerati”), through our wholly-owned subsidiary, Shift8 Networks, Inc. (“Shift8”), provides a portfolio
of Internet-based telephony products and services through our cloud application platform and session-based communication network,
which is interconnected to numerous U.S. and foreign service providers. Our services are designed to provide enterprise-class,
carrier-grade services to small-to-medium sized businesses ("SMB") at affordable monthly rates. Our services, known
as Unified Communications as a Service (“UCaaS”) or cloud communications, include fully hosted IP/PBX, mobile applications,
Voice over Internet Protocol (“VoIP”) transport, SIP trunking, and customized VoIP services all delivered Only
in the CloudTM.



History



Digerati
was formed in 2004 as the successor to a business originally commenced by Latcomm International, Inc., a Canadian company formed
in 1994. We began providing communication services in 1995 along the U.S.-Mexico corridor to capitalize on the opportunities created
by the deregulation of the telecommunication industries within Latin America. Through FY 2012 our principal business was providing
transportation of voice traffic for other telecommunication service providers, wireless carriers and regional Internet telephony
providers using VoIP technologies.



Until
July 2014, Digerati owned a waste disposal business focused on disposing of solid and liquid wastes from drilling sites and an
oilfield services business providing skid houses, telecommunication services, booster booths, portable restrooms, generators,
potable water, and mess halls to drilling contractors and oil companies in the Bakken region of Montana and North Dakota.



During
FY 2016 Flagship Energy Company, a wholly-owned subsidiary of Digerati, entered into an Agreement with a Texas-based contract-for-hire
oil and gas operator (“Operator”). Under the Agreement, Flagship utilized the Operator for the drilling, completion
and the initial operations of a shallow oil and gas well in conjunction with the purchase of 100% of Operator’s working
interest and 80% of its Net Revenue Interest. Under the Agreement, the Operator agreed to transfer all field-level operations
and assign 100% of a certain oil, gas and mineral lease to Flagship upon demand, which included a tract of land located in South
Texas. Additionally, Flagship entered into a Joint Operating Agreement ("JOA") with Operator, whereby the parties agreed
to develop the oil and gas well or wells for the production and retrieval of oil and gas commodities as provided for in the oil,
gas and mineral lease. During the fiscal year ended July 31, 2017 the Company recognized an impairment loss of $248,000 for the
total capitalized investment amount in the oil and gas properties.



Recent
Developments



In
May 2017, Shift8 and T3 Acquisition, Inc., a Florida corporation (“Acquisition Sub”), and newly formed wholly-owned
subsidiary of Shift8 Technologies, Inc.(“Shift8 Tech”), entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with T3 Communications, Inc., a Florida corporation (“T3”). The Merger Agreement provides that,
upon the terms and subject to the conditions thereof, the Acquisition Sub will be merged with and into T3, with T3 continuing
as the surviving corporation and as a wholly-owned subsidiary of Shift8 Tech. The Company anticipates closing the transaction
during the second quarter of fiscal year 2018. The Merger has been approved by the Shareholders of T3 and is subject to certain
customary closing conditions.



Between
April and October 2017, we have raised $840,000 through the issuance of 1,680,000 shares of Digerati common stock and three-year
warrants to purchase up to 315,000 shares of common stock at an exercise price of $0.50 per share.





2







On
December 1, 2017, Shift8 Technologies, In., a Nevada corporation (“Shift8”), a wholly owned subsidiary of Digerati
Technologies, Inc., a Nevada corporation (the “Company”), and Synergy Telecom, Inc., a Texas corporation ("Synergy"),
closed a transaction to acquire all the assets, assumed all customers, and critical vendor arrangements from Synergy. The agreed
purchase price was $450,000. Shift8 paid $125,000 upon execution of the Agreement and issued 500,000 shares of common stock with
an agreed market value of $200,000. In addition, Shift8 entered into a promissory note with the seller for $125,000 with an effective
annual interest rate of 6%, 5 quarterly payments and a maturity date of February 28, 2019.



Products
and Services



We
provide a comprehensive suite of Internet-based communication services to meet the global needs of businesses that are seeking
simple, flexible, and cost-effective communication solutions. Our Internet-based services include fully hosted IP/PBX services,
mobile applications, SIP trunking, call center applications, interactive voice response auto attendant, call recording, simultaneous
calling, voicemail to email conversion and multiple customized IP/PBX features in a hosted or cloud environment. Our services,
known as UCaaS or cloud communications, are specifically designed for the needs of the small to medium-sized business, enterprise
customers, call centers with international communication requirements, and regional Internet service providers that do not have
the scale necessary to acquire their own telephony infrastructure.



In
addition, we operate a VoIP network for processing voice communication services to U.S. and foreign telecommunications companies
that lack transmission facilities or require additional capacity to terminate VoIP traffic in Mexico, Asia, the Middle East and
Latin America.



Voice
over Internet Protocol Networks



The
basic technology of traditional telecommunications systems was designed for slow mechanical switches. Communications over the
traditional telephone network are routed through circuits that must dedicate all circuit resources to each call from its inception
until the call ends, regardless of whether anyone is actually talking on the circuit. This circuit-switching technology incurs
a significant cost per call and does not efficiently support the integration of voice with data services. Data networks, however,
were designed for electronic switching. They break the data stream into small, individually addressed packages of data (“packets”)
that are routed independently of each other from the origin to the destination. Therefore, they do not require a fixed amount
of bandwidth to be reserved between the origin and destination of each call and they do not waste bandwidth when it is not being
used for actual transmission of information. This allows multiple voice or voice and data calls to be pooled, resulting in these
networks being able to carry more calls with an equal amount of bandwidth. Moreover, they do not require the same complex switching
methods required by traditional voice telephone networks, instead using a multiplicity of routers to direct each packet to its
destination and automatically routing packets around blockages, congestion or outages.



Packet
switching can be used within a data network or across networks, including the public Internet. The Internet itself is not a single
data network owned by any single entity, but rather a loose interconnection of networks belonging to many owners that communicate
using the Internet Protocol (“IP”). By converting voice signals to digital data and handling the voice signals as
data, it can be transmitted through the more efficient switching networks designed for data transmissions and through the Internet
using the IP. The transmission of voice signals as digitalized data streams over the Internet is known as Voice over Internet
Protocol or “VoIP”. A VoIP network has the following advantages over traditional networks:



| | ● | Simplification:An integrated infrastructure
that supports all forms of communication allows more standardization, a smaller equipment complement, and less equipment management.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Network Efficiency: The integration of voice
and data fills up the data communication channels efficiently, thus providing bandwidth consolidation and reduction of the costs
associated with idle bandwidth. This combined infrastructure can support dynamic bandwidth optimization and a fault tolerant design.
The differences between the traffic patterns of voice and data offer further opportunities for significant efficiency improvements.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | Co-existence with traditional communication mediums:IP telephony can be used in conjunction with existing public telephone
system switches, leased and dial-up lines, PBXs and other customer premise equipment, enterprise LANs, and Internet connections.
IP telephony applications can be implemented through dedicated gateways, which in turn can be based on open standards platforms
for reliability and scalability.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





3







| | ● | Cost reduction:Under the VoIP network, the connection is directly to the Internet backbone and as a result the telephony
access charges and settlement fees are avoided.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The
growth of voice over the Internet was limited in the past due to poor sound quality caused by technical issues such as delays
in packet transmission and by bandwidth limitations related to Internet network capacity and local access constraints. However,
the continuing addition of data network infrastructure, improvements in packet switching and compression technology, new software
algorithms and improved hardware have substantially reduced delays in packet transmissions and resulted in better sound quality.
Nevertheless, certain VoIP routes into countries with limited or poor Internet infrastructure continue to lack the consistent
quality required for voice transport and termination.



We
believe that the infrastructure required for a global network is too expensive for most companies to acquire and deploy on their
own. As a result, many companies use a network consisting of a combination of gateways owned by different operators. For a network
to achieve optimal functionality and quality, however, the gateways need to be interoperable, or able to communicate with one
another. Technological solutions have emerged that support interoperability between different protocols and/or gateways. Cisco
Systems, Inc. has emerged as a dominant supplier of VoIP gateways and other manufacturers often seek to make their equipment interoperable
with Cisco.



Long
distance telephone calls transported over the Internet are less expensive than similar calls carried over the traditional telephone
network primarily because the cost of using the Internet is not determined by the distance those calls need to travel. Also, routing
calls over the Internet is more cost-effective than routing calls over the traditional telephone network because the technology
that enables Internet telephony is more efficient than traditional telephone network technology. The greater efficiency of the
Internet creates cost savings that can be passed on to the consumer in the form of lower long-distance rates or retained by the
carrier as higher margins.



By
using the public Internet, VoIP providers like us are able to avoid direct payment for transport of communications, instead of
paying for large “pipes” into the public Internet, billed by bandwidth rather than usage, which transmits calls to
a distant gateway. The Internet, which has its origins in programs devised by the Department of Defense to provide multiple routes
and therefore redundancy which was largely immune from the failure of a single network element, provides great redundancy and
can be “self healing” in the event of an outage in a particular network element or transmission path. Moreover, adding
an additional entry or exit point (a Point of Presence or “PoP”) does not require any expensive or time-consuming
reconfiguration or reprogramming of existing network elements. The new element is simply installed with a specific IP address
and it can send or receive information to or from any other IP address on the Internet.



Cloud
Communications



Cloud
communications are Internet-based voice and data communications where telecommunications applications, switching and storage
are hosted by a third-party service provider outside of the organization using the services. Services are accessed by the user
over the public Internet. Cloud telephony refers specifically to voice services and more specifically the replacement
of conventional business telephone equipment (such as a PBX) with VoIP service hosted by a third-party service provider and
delivered over the Internet.



We
operate a cloud communication network that consists of a VoIP switching system and cloud telephony application platform. Our network
allows us to provide end-to-end cloud telephony solutions designed to provide significant benefits to businesses of all sizes,
with single or multiple locations. The integration of our cloud communication platform and global VoIP network allows us to provide
our customers with virtually any type of telephony solution on a global basis.



Our
cloud communication solutions, also known as UCaaS, are designed to minimize upfront capital costs, increase the scalability and
flexibility of the customer’s communications network and service environment, provide robust features and functionality
to increase productivity and reduce the overall cost of communications.





4







Strategy



Our
strategy is to target the small to medium-sized business market through distributors and Value-Added Resellers (“VARs”)
that we enable with our communication network. Our typical VAR is an information technology services firm, traditional PBX vendor,
managed service provider, or systems integrator that has established relationships with businesses in its local market. These
VARs are currently providing local customer support for other IT or PBX services, but lack the technology infrastructure to provide
cloud communication and VoIP services to their customers. Our strategy allows these VARs to focus on their strength of providing
first tier support to their customers while we provide the second and third tier technical support required to operate a cloud
communication and VoIP network. In addition, we transform our VARs’ business model by introducing new cloud telephony services
and adding a new and lucrative recurring revenue stream that increases the VARs’ value proposition for its current and prospective
customers.



Our
cloud-based technology platform enables our VARs to deliver enhanced voice services to their business customers. The features
supported on our cloud communication platform include all standard telephone features and value-added applications such as voicemail
to email, VoIP peering, teleconferencing, IVR auto attendant, and dial-by-name directory. Our system allows the VAR and its customers
a migration path from a traditional PBX system to a complete cloud-based PBX solution.



Our
strategic initiatives to successfully meet our long-term business objectives include:



| | ● | Repositioning
                                         around our cloud and session-based communication services, segments of the industry that
                                         are experiencing significant growth and where there are new business opportunities for
                                         us.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                             
| | ● | Emphasis
                                         on our sales distribution model that enables our VARs to offer cloud and session-based
                                         communication services to the enterprise market in various regions and industries.                                                        
| |   |                                                                                                                                                                                                                                                                                                                             
| | ● | Leverage
                                         our existing global network and relationships to provide new and innovative VoIP solutions
                                         in high demand by enterprise customers.                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                             
| | ● | Continue
                                         enhancing our infrastructure and back office system to streamline operations, automate
                                         key processes, and support the scalability of our VAR distribution model.                                                                 



Competitive
Conditions



The
cloud services industry, including the provisioning of cloud communications services, cloud connectivity, cloud storage and cloud
computing, as well as carrier voice and data services, is highly competitive, rapidly evolving and subject to constant technological
change and intense marketing by providers with similar products and services. We expect that new, smaller, but very agile carrier
competitors, specializing in providing service to regional and emerging markets at low margin and hence low cost, may have an
impact on the carrier market. Similarly, the business services market includes competitors who may be significantly larger and
have substantially greater market presence, financial, technical, operational and marketing resources than we do, including Tier
1 carriers, cable companies and premise-based solutions providers. In the event that such a competitor expends significant sales
and marketing resources in one or several markets where we compete with them, we may not be able to compete successfully in those
markets. Specialized cloud services providers, who focus on one or more cloud service or application, could adopt aggressive pricing
and promotion practices that could impact our ability to compete. We also believe that competition will continue to increase,
placing downward pressure on prices. Such pressure could adversely affect our gross margins if we are not able to reduce our costs
commensurate with the price reductions of our competitors. In addition, the pace of technological change makes it impossible for
us to predict whether we will face new competitors using different technologies to provide the same or similar services offered
or proposed to be offered by us. If our competitors were to provide better and more cost-effective services than ours, we may
not be able to increase our revenues or capture any significant market share.



The
long-distance telephony market and the Internet telephony market are highly competitive. Our competitors include major telecommunications
carriers in the U.S., foreign telecommunications carriers (which may be owned by foreign governments), and numerous small competitors.
We expect to face continuing competition based on price and service offerings from existing competitors and new market entrants
in the future. The principal competitive factors in our market include price, coverage, customer service, technical response times,
reliability, and network size/capacity. The competitive landscape is rapidly altering the number, identity and competitiveness
of the marketplace, and we are unable to determine with certainty the impact of potential consolidation in our industry.





5







A
number of large long-distance carriers have introduced services that make Internet telephony or voice services over the Internet
available to other carriers. All major telecommunications companies either presently do or could route traffic to destinations
worldwide and compete directly with us. Emerging Internet telephony service providers also offer low-cost Internet telephony services
from personal computers to telephones and from telephones to telephones. In addition, Internet service providers and other companies
currently in related markets are now providing voice over the Internet services or have adapted their products to enable voice
over the Internet services. These related companies may migrate into the Internet telephony market as direct competitors.



Many
of our competitors have substantially greater financial, technical and marketing resources, larger customer bases, longer operating
histories, greater name recognition and more established relationships in the industry than we have. As a result, certain of these
competitors may be able to adopt more aggressive pricing policies that could hinder our ability to market our services. We believe
that our key competitive advantages are our ability to deliver reliable, high quality voice service over the Internet in a cost-effective
manner and our VAR distribution model. We cannot provide assurances, however, that these advantages will enable us to succeed
against comparable service offerings from our competitors.



Government
Regulation



VoIP
and other communications services, like ours, have been subject to less regulation at the state and federal levels than traditional
telecommunications services. Providers of traditional telecommunications services are subject to the highest degree of regulation,
while providers of VoIP and other information services are largely exempt from most federal and state regulations governing traditional
common carriers. The FCC has subjected VoIP service providers to a smaller subset of regulations that apply to traditional telecommunications
service providers and has not yet classified VoIP services as either telecommunications or information. The FCC is currently examining
the status of VoIP service providers and the services they provide in multiple open proceedings. In addition, many state regulatory
agencies impose taxes and other surcharges on VoIP services, and certain states take the position that offerings by VoIP providers
are intrastate telecommunications services and therefore subject to state regulation. These states argue that if the beginning
and end points of communications are known, and if some of these communications occur entirely within the boundaries of a state,
the state can regulate that offering. We believe that the FCC has preempted states from regulating VoIP offerings in the same
manner as providers of traditional telecommunications services. However, this issue has not been resolved definitively as a matter
of law, and it remains possible that the FCC could determine that such services are not information services, or that there could
be a judicial or legislative determination that the states are not preempted from regulating VoIP services as traditional telecommunications
services. We cannot predict how or when these issues will be resolved or its potential future impact on our business at this time.



The
effect of any future laws, regulations and orders on our operations, including, but not limited to, our cloud-based communications
and collaboration services, cannot be determined. But as a general matter, increased regulation and the imposition of additional
funding obligations increases service costs that may or may not be recoverable from our customers, which could result in making
our services less competitive with traditional telecommunications services if we increase our prices or decreasing our profit
margins if we attempt to absorb such costs.



Federal,
state, local and foreign governmental organizations are considering other legislative and regulatory proposals that would regulate
and/or tax applications running over the Internet. We cannot predict whether new taxes will be imposed on our services, and depending
on the type of taxes imposed, whether and how our services would be affected thereafter. Increased regulation of the Internet
may decrease its growth and hinder technological development, which may negatively impact the cost of doing business via the Internet
or otherwise materially adversely affect our business, financial condition and results of operations.



Regulation
of Internet-based Telecommunication Services in the United States



We
have the necessary authority under Section 214 of the Communications Act to operate as a domestic and international carrier. We
are considered a non-dominant domestic interstate carrier subject to minimal regulation by the FCC. We are not required to obtain
FCC authority to initiate or expand our domestic interstate operations, but we are required to obtain FCC approval to transfer
control or discontinue service and are required to file various reports and pay various fees and assessments. In addition, we
must offer service on a nondiscriminatory basis at just and reasonable rates and are subject to the FCC’s complaint jurisdiction.
Generally, our international carrier traffic is subject to minimal regulation by state and local jurisdictions.





6







The
FCC requires Internet voice communications service providers, such as our company, to provide E-911 service in all geographic
areas covered by the traditional wire-line E-911 network. Under the FCC’s rules, Internet voice communications providers
must transmit the caller’s phone number and registered location information to the appropriate public safety answering point,
or PSAP, for the caller’s registered location. The FCC also requires interconnected VoIP service providers to make Universal
Service Fund (“USF”) contributions. We believe that our services are currently compliant with all applicable requirements
of the FCC, and we have made and are making the required contributions to the USF. However, should we at some time fail to meet
certain requirements or fail to make required contributions, we could be subject to revocation of our authority to operate or
to fines or penalties.



Some
states have tried to directly regulate VoIP services on an intrastate basis, but these efforts have not held up to court challenges
to date. Many states are holding hearings to research and discuss the issues surrounding the regulation of VoIP services. Others
are encouraging or even requesting VoIP service providers to subject themselves to public service commission jurisdiction and
obtain certification as telephone companies. However, most have adopted a “wait and see” attitude. We monitor the
actions of the various state regulatory agencies to ensure that we are in compliance with the applicable regulations, including
any new regulations that may be passed. However, there can be no assurance that we will become aware of all applicable requirements
on a timely basis, or that we will always be fully compliant with applicable rules and regulations. Should we fail at any time
to be compliant with applicable state regulations, or to file required reports to state regulatory agencies, we could be subject
to fines or other penalties.



Other
regulations affecting the Internet in the United States.



Congress
has enacted legislation that regulates certain aspects of the Internet, including online content, user privacy and taxation. In
addition, Congress and other federal entities are considering other legislative and regulatory proposals that would further regulate
the Internet. Congress has, for example, considered legislation on a wide range of issues including Internet spamming, database
privacy, gambling, pornography and child protection, Internet fraud, privacy and digital signatures. Various states have adopted
and are considering Internet-related legislation. Increased U.S. regulation of the Internet may slow its growth, particularly
if other governments follow suit, which may negatively impact the cost of doing business over the Internet and materially adversely
affect our business, financial condition, results of operations and future prospects.



International
Regulation



The
regulatory treatment of Internet telephony outside of the U.S. varies widely from country to country. A number of countries that
currently prohibit competition in the provision of voice telephony also prohibit Internet telephony. Other countries permit but
regulate Internet telephony. Some countries will evaluate proposed Internet telephony service on a case-by-case basis and determine
whether it should be regulated as a voice service or as another telecommunications service. In many countries, Internet telephony
has not yet been addressed by legislation or regulation. Increased regulation of the Internet and/or Internet telephony providers
or the prohibition of Internet telephony in one or more countries could materially adversely affect our business, financial condition,
operating results and future prospects.



The
International Settlements Policy governs settlements between U.S. carriers’ and foreign carriers’ costs of terminating
traffic over each other’s networks. The FCC enacted certain changes in rules designed to allow U.S. carriers to propose
methods to pay for international call termination that deviate from traditional accounting rates and the International Settlement
Policy. The FCC has also established lower benchmarks for the rates that U.S. carriers can pay foreign carriers for the termination
of international services and these benchmarks may continue to decline. These rule changes have lowered the costs of our competitors
to terminate traffic in the United States and are contributing to the downward pricing pressure facing us in the market.





7







Customers
and Suppliers



We
rely on various suppliers to provide services in connection with our communication services. We use various global VoIP companies
to complete our voice over Internet traffic between US, Mexico, Asia, the Middle East and Latin America. Our customers include
traditional carriers, telephony resellers and other VoIP carriers. We are not dependent upon any single supplier or customer.



During
the year ended July 31, 2017, the Company derived a significant amount of revenue from four customers, comprising 24%, 24%, 11%,
and 8% of the total revenue for the period, respectively, compared to four customers, comprising 26%, 19%, 16%, and 13% of
the total revenue for the year ended July 31, 2016.



As
of the year ended July 31, 2017, the Company derived a significant amount of accounts receivable from three customers, comprising
37%, 27% and 14% of the total accounts receivable for the period, compared to three customers, comprising 68%, 25% and 7%
of the total accounts receivable for the year ended July 31, 2016.



Employees



As
of July 31, 2017, we had 7 employees, all of whom performed operational, technical and administrative functions. We believe our
future success will depend to a large extent on our continued ability to attract and retain highly skilled and qualified employees.
We consider our employee relations to be good. None of these aforementioned employees belongs to labor unions.



| | ITEM
                          1A. | RISK
                                         FACTORS.
| | ---------------------------------- | ------------------------------------------------------



Not
Applicable to smaller reporting companies.



|ITEM
                          1B. | UNRESOLVED
                                         STAFF COMMENTS.
|---------------------------------- | -------------------------------------------------------------------



Not
Applicable to smaller reporting companies.



| | ITEM
                          2. | PROPERTIES.
| | --------------------------------- | -----------



Our
executive office is located at 3463 Magic Drive, Suite 355, San Antonio, Texas, in leased space consisting of 1,090 square feet.
The lease for this facility is on a month to month basis. We pay annual rent of $6,997. We believe that our leased facilities
are suitable and adequate for their intended use.



| | ITEM
                          3. | LEGAL
                                         PROCEEDINGS.
| | --------------------------------- | -----------------------------------------------------------



None.



| | ITEM
                          4. | MINE
                                         SAFETY DISCLOSURES
| | --------------------------------- | ----------------------------------------------------------------



Not
Applicable.





8







PART
II



| | ITEM
                          5. | MARKET
                                         FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
                                         OF EQUITY SECURITIES.
| | --------------------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Market
for Common Equity



Our
common stock is quoted on the OTCPK under the symbol “DTGI”. The following table sets forth the high and low bid prices
for our common stock for the two most recently completed fiscal years, as reported by Bloomberg, LP. Price quotations on the OTCPK
reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.





|Fiscal
    2016    |  | Low |      |  | High |  
|------------------ |  | --- | ---- |  | ---- | -
|First
    Quarter  |  | $   | 0.13 |  |      | $
|Second
    Quarter |  | $   | 0.15 |  |      | $
|Third
    Quarter  |  | $   | 0.25 |  |      | $
|Fourth
    Quarter |  | $   | 0.16 |  |      | $







|Fiscal
    2017    |  | Low |      |  | High |  
|------------------ |  | --- | ---- |  | ---- | -
|First
    Quarter  |  | $   | 0.17 |  |      | $
|Second
    Quarter |  | $   | 0.24 |  |      | $
|Third
    Quarter  |  | $   | 0.20 |  |      | $
|Fourth
    Quarter |  | $   | 0.37 |  |      | $





Holders



As
of December 13, 2017, there were approximately 594 record holders of our Common Stock.



Dividends



We
have not paid cash dividends on our common stock and we do not anticipate paying a dividend in the foreseeable future.



Equity
Compensation Plans



The
following table provides information regarding securities that have been or are authorized to be issued under our equity compensation
plans as of July 31, 2017.



|                                                           |  | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights |           |  | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights |   |      | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | 
|---------------------------------------------------------- |  | ------------------------------------------------------------------------------------------- | --------- |  | --------------------------------------------------------------------------- | - | ---- | -------------------------------------------------------------------------------------------- | 
|                                                           |  |                                                                                             |           |  |                                                                             |   |      |                                                                                              | 
|Equity Compensation plans approved by security holders     |  |                                                                                             | -0-       |  |                                                                             |   | —    |                                                                                              | 
|                                                           |  |                                                                                             |           |  |                                                                             |   |      |                                                                                              | 
|Equity Compensation Plans not approved by security holders |  |                                                                                             | 1,170,000 |  |                                                                             | $ | 0.24 |                                                                                              | 
|                                                           |  |                                                                                             |           |  |                                                                             |   |      |                                                                                              | 
|Total                                                      |  |                                                                                             | 1,170,000 |  |                                                                             | $ | 0.24 |                                                                                              | 





9







Sales
of Unregistered Securities



In
June 2017, the Company issued an aggregate of 40,000 shares of common stock for $20,000 and 3-year warrants to purchase 7,500
shares of common stock at an exercise price of $0.50 per share.



In
July 2017, the Company issued an aggregate of 1,080,000 shares of common stock for $540,000 and 3-year warrants to purchase 202,500
shares of common stock at an exercise price of $0.50 per share.



In
August 2017, the Company issued an aggregate of 480,000 shares of common stock for $240,000 and 3-year warrants to purchase 90,000
shares of common stock at an exercise price of $0.50 per share.



In
September 2017, the Company issued an aggregate of 12,500 shares of common stock with a market value at time of issuance of $4,375.
The shares were issued for consulting services.





In
October 2017, the Company issued an aggregate of 80,000 shares of common stock for $40,000 and 3-year warrants to purchase 15,000
shares of common stock at an exercise price of $0.50 per share.



In
December 2017, the Company closed a transaction to acquire all the assets, assumed all customers, and critical vendor arrangements
from Synergy Telecom, Inc. for total consideration of $450,000, including the issuance of 500,000 shares of common stock valued
at $200,000. See Item 1 – Recent developments for further discussion.



The
sales and issuances of the securities described above were made pursuant to the exemptions from registration contained in to Section
4(a)(2) of the Securities Act and Regulation D under the Securities Act. Each purchaser represented that such purchaser’s
intention to acquire the shares for investment only and not with a view toward distribution. We requested our stock transfer agent
to affix appropriate legends to the stock certificate issued to each purchaser and the transfer agent affixed the appropriate
legends. Each purchaser was given adequate access to sufficient information about us to make an informed investment decision.
Except as described in this prospectus, none of the securities were sold through an underwriter and accordingly, there were no
underwriting discounts or commissions involved.



|ITEM
                          6. | SELECTED
                                         FINANCIAL DATA.
|--------------------------------- | -----------------------------------------------------------------



Not
Applicable to smaller reporting companies.



|ITEM
                          7. | MANAGEMENT’S
                                         DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|--------------------------------- | -------------------------------------------------------------------------------------------------------------------------------



This
Annual Report contains “forward-looking statements” that describe management’s beliefs and expectations about
the future. We have identified forward-looking statements by using words such as “anticipate,” “believe,”
“could,” “estimate,” “may,” “expect,” and “intend,” or words of similar
import. Although we believe these expectations are reasonable, our operations involve a number of risks and uncertainties and
actual results may be materially different than our expectations.



The
following is a discussion of the consolidated financial condition and results of operations for the fiscal years ended July 31,
2017 and 2016, and should be read in conjunction with our Consolidated Financial Statements, the Notes thereto, and the other
financial information included elsewhere in this annual report on Form 10-K. For purposes of the following discussion, fiscal
2017 or 2017 refers to the year ended July 31, 2017 and fiscal 2016 or 2016 refers to the year ended July 31, 2016.



Sources
of revenue:



Global
VoIP Services: We currently provide VoIP communication services on a limited basis to U.S. and foreign telecommunications
companies that lack transmission facilities, require additional capacity or do not have the regulatory licenses to terminate traffic
in Mexico, Asia, the Middle East and Latin America. Typically, these telecommunications companies offer their services to the
public for domestic and international long-distance services.





10







Cloud-based
hosted Services: We provide enhanced VoIP services to resellers and enterprise customers. The service includes fully hosted
IP/PBX services, SIP trunking, call center applications, interactive voice response auto attendant, call recording, simultaneous
calling, voicemail to email conversion, and multiple customized IP/PBX features in a hosted or cloud environment.



Direct
Costs:



Global
VoIP Services:We incur transmission and termination charges from our suppliers and the providers of the infrastructure and
network. The cost is based on rate per minute, volume of minutes transported and terminated through the network. Additionally,
we incur fixed Internet bandwidth charges and per minute billing charges. In some cases, we incur installation charges from certain
carriers. These installation costs are passed on to our customers for the connection to our VoIP network.



Cloud-based
hosted Services: We incur bandwidth and co-location charges in connection with enhanced VoIP Services. The bandwidth charges
are incurred as part of the connection between our customers to allow them access to our services.



Results
of Operations



Global
VoIP Services. Global VoIP services revenue decreased by $48,000, or 100%, from fiscal 2016 to fiscal 2017. The decrease in
revenue is as a result of deemphasizing this product, therefore no Global VoIP revenue was generated during the fiscal 2017.



Cloud-based
hosted Services. Cloud-based hosted services revenue decreased by $39,000, or 17%, from fiscal 2016 to fiscal 2017. The decrease
in revenue between periods is primarily attributed to the decrease in customers that generated monthly recurring services revenue
unrelated to the Company's core sales strategy and product line. In addition, our revenue decreased between periods as a result
of the overall decline in revenue from some of our key customers. Hosted services include the following, fully hosted IP/PBX services,
SIP trunking, call center applications, interactive voice response auto attendant, call recording, simultaneous calling, voicemail
to email conversion, SIP trunking and multiple other IP/PBX features in a hosted or cloud environment.



Cost
of Services (exclusive of depreciation and amortization). The cost of services decreased by $9,000, or 6%, from fiscal 2016
to fiscal 2017. During fiscal 2017 the Company received various credits and discounts from key vendors, the Company did not receive
similar credits during the period ended July 31, 2016, thus the decrease in cost of services between periods.



Loss
on disposal of unproven oil and gas properties. The Company reported a loss on disposal of unproven oil and gas properties
of $248,000 for the period ended July 31, 2017 compared to a loss on disposal of unproven oil and gas properties of $0 for the
period ended July 31, 2016. During the period ended July 31, 2017 the Company terminated its investment in the oil and gas properties
and recognized a loss of $248,000 for the total capitalized investment amount.



Selling,
General and Administrative (SG&A) Expenses (exclusive of legal and professional fees).SG&A expenses decreased by
$95,000, or 9%, from fiscal 2016 to fiscal 2017. The decrease is primarily attributed to the reduction in cash compensation to
the Company's management team, the reduction in cash compensation was recognized during fiscal 2017, thus the reduction in SG&A
between periods.



Stock
Compensation.Stock compensation expense increased by $751,000, from fiscal 2016 to fiscal 2017. The increase between periods
is attributed to the recognition of $241,000 in stock compensation expense associated with the Company's contribution to the Profit
Sharing Plan during FY2017, stock compensation expense recognition of stock option expense of $137,000 associated with the stock
options awarded to various employees and stock compensation expense of $351,000 associated with the issuance of common stock in
lieu of cash compensation to the Company's management team. The Company also issued 75,000 shares of common stock in exchange
for $44,000 of public relations consulting services.



Legal
and professional fees. Legal and professional fees increased by $94,000, or 48%, from fiscal 2016 to fiscal 2017. The increase
is attributed to professional and legal expenses incurred related to professionals conducting the due diligence on an acquisition.





11







Bad
debt. Bad debt improved by $8,000 between periods. During Fiscal 2017 the Company recognized a recovery of $8,000 for accounts
that were previously deemed uncollectable.



Depreciation
and amortization. Depreciation and amortization remained comparable between periods.



Operating
loss. The Company reported an operating loss of $2,184,000 for the fiscal period ended July 31, 2017 compared to an operating
loss of $1,116,000 for the fiscal period ended July 31, 2016. The increase in operating loss between periods is primarily attributed
to the recognition of $248,000 related to the loss on disposal of unproven oil and gas properties and the $773,000 in stock compensation
expense recognized during the period ended July 31, 2017.



Gain
on disposal of assets. Gain on disposal of assets decreased by $2,000 between periods. During the period ending July 31,
2017, the Company did not recognize any loss on disposal of assets. During the period ending July 31, 2016, the Company recognized
$2,000 in a loss on disposal of various small assets that reached their useful life.



Miscellaneous
gain. Miscellaneous gain for the year ended July 31, 2017 was $2.6 Million compared to miscellaneous gain for the period
ended July 31, 2016 of $0. The miscellaneous gain was a result of a tax refund received in July 2015 and previously recorded by
the Company as an accrued liability until such time as it could determine the proper accounting. During fiscal 2017, management
determined that the Company was the legal owner of the refund and, therefore, recorded the miscellaneous gain. The Company did
not have such gains during the year ended July 31, 2016.



Interest
expense. Interest income (expense) decreased by $26,000 from the fiscal period ended July 31, 2016 to the period ended July
31, 2017. The reason for the decrease in interest income (expense) is attributed to the decrease between periods in interest expense
as a result of the Company currently not having any promissory notes that incur interest expense.



Net
income (loss).Net income for the year ended July 31, 2017 was $493,000 compared to a net loss for the period ended July 31,
2016 of $1,134,000. The net income is primarily attributed as a result of the miscellaneous gain recorded during fiscal 2017,
this was offset by an increase in stock compensation expense of $773,000 and the loss of $248,000 related to a loss on disposal
of unproven oil and gas properties.



Liquidity
and Capital Resources



Cash
Position: We had a consolidated cash balance of $673,000 as of July 31, 2017. Net cash consumed by operating activities during
the period ended July 31, 2017 was approximately $1,016,000, primarily as a result of operating expenses, that included $773,000
in stock compensation expense and a loss of $248,000 on disposal of unproven oil and gas properties.



Cash
used in investing activities was $40,000 for the purchases of oil and gas property. Cash provided by financing activities during
the period ended July 31, 2017 was $560,000. The Company secured the funds from various accredited investors through the issuance
of 1,120,000 restricted common shares with a price of $0.50 per share and 210,000 warrants with an exercise price of $0.50 per
share. Overall, our net operating, investing and financing activities during the period ended July 31, 2017 consumed approximately
$496,000 of cash.



We
are currently taking initiatives to reduce our overall cash deficiencies on a monthly basis. During fiscal 2018 we anticipate
reducing fixed costs, professional fees and general expenses, in addition, certain members of our management team have taken a
significant portion of their compensation in common stock to reduce the depletion of our available cash. To strengthen our business,
we intend to invest in a new marketing and sales strategy to grow our monthly recurring revenue; we anticipate utilizing our value-added
resellers to tap into new sources of revenue streams, we have also secured various agent agreements to accelerate revenue growth.
In addition, we will continue to focus on selling a greater number of comprehensive services to our existing customer base. Further,
in an effort to increase our revenues, we will continue to evaluate the acquisition of various assets with emphasis in VoIP Services
and Cloud Communication Services, as a result during the due diligence process we anticipate incurring significant legal and professional
fees. On May 8, 2017 we entered into a definitive Agreement and Plan of Merger to acquire T3, a leading provider of cloud communication
and broadband solutions in Southwest Florida. We anticipate closing the acquisition during the second quarter of fiscal year 2018.
The acquisition of T3 will allow the Company to accelerate its revenue growth and expand into new markets.





12







Management
believes that current available resources will not be sufficient to fund the Company’s operations over the next 12 months.
The Company’s ability to continue to meet its obligations and to achieve its business objectives is dependent upon, among
other things, raising additional capital, issuing stock-based compensation to certain members of the executive management team
in lieu of cash, or generating sufficient revenue in excess of costs. At such time as the Company requires additional funding,
the Company will seek to secure such best-efforts funding from various possible sources, including equity or debt financing, sales
of assets, or collaborative arrangements. If the Company raises additional capital through the issuance of equity securities or
securities convertible into equity, stockholders will experience dilution, and such securities may have rights, preferences or
privileges senior to those of the holders of common stock or convertible senior notes. If the Company raises additional funds
by issuing debt, the Company may be subject to limitations on its operations, through debt covenants or other restrictions. If
the Company obtains additional funds through arrangements with collaborators or strategic partners, the Company may be required
to relinquish its rights to certain technologies. There can be no assurance that the Company will be able to raise additional
funds, or raise them on acceptable terms. If the Company is unable to obtain financing on acceptable terms, it may be unable to
execute its business plan, the Company could be required to curtail its operations, and the Company may not be able to pay off
its obligations, if and when they come due.



Our
current cash expenses are expected to be approximately $85,000 per month, including wages, rent, utilities and corporate professional
fees. As described elsewhere herein, we are not generating sufficient cash from operations to pay for our ongoing operating expenses,
or to pay our current liabilities. As of July 31, 2017, our total liabilities were approximately $1,355,000. We will continue
to use our available cash on hand to cover our deficiencies in operating expenses.



We
estimate that we need approximately $500,000 of additional working capital to fund our ongoing operations during Fiscal 2018.



In
August 2017, the Company raised $240,000 through the issuance of 480,000 shares of common stock and three-year warrants to purchase
90,000 shares of common stock at $0.50 per share.



In
October 2017, the Company issued an aggregate of 80,000 shares of common stock for $40,000 and 3-year warrants to purchase 15,000
shares of common stock at an exercise price of $0.50 per share.



Digerati’s
consolidated financial statements for the year ending July 31, 2017 have been prepared on a going concern basis, which contemplates
the realization of assets and the settlement of liabilities in the normal course of business. Digerati has incurred net losses
and accumulated a deficit of approximately $77,637,000 and a working capital deficit of approximately $527,000 which raises substantial
doubt about Digerati’s ability to continue as a going concern.



Critical
Accounting Policies



Revenue
Recognition.We derive our revenue from Global VoIP Services and Cloud Communication Services. Revenue is recognized when
persuasive evidence of an arrangement exists, service or network capacity has been provided, the price is fixed or determinable,
collectability is reasonably assured and there are no significant obligations remaining.



We
record and report our revenue on the gross amount billed to our customers in accordance with the following “gross indicators”:





| | ● | Digerati
                                         is the primary obligor in its arrangements,                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                              
| | ● | Digerati
                                         has latitude in establishing pricing,                                                                                                                                      
| |   |                                                                                                                                                                                                                              
| | ● | Digerati
                                         changes the product or performs part of the service and is involved in the determination
                                         of the product or service specifications,
| |   |                                                                                                                                                                                                                              
| | ● | Digerati
                                         has discretion in supplier selection; and                                                                                                                                  
| |   |                                                                                                                                                                                                                              
| | ● | Digerati
                                         assumes credit risk for the amount billed to the customer                                                                                                                  





13







We
recognize revenue from Global VoIP Services in the period the service is provided, net of revenue reserves for potential billing
credits. Such credits can result from disagreements with customers regarding the duration, destination or rates charged for each
call. We recognize Cloud Communication Services revenue during the period the services are provided.



Stock-based
Compensation.We account for share-based compensation in accordance with provisions on share-based payments which require
measurement of compensation cost for all stock-based awards at fair value on the date of grant and recognition of compensation
over the service period for awards expected to vest. The fair value of stock grants is determined using the Black-Scholes valuation
model. During fiscal 2016 and 2017, the Company issued 121,135 common shares and 1,003,970 common shares, respectively to various
employees as part of our profit sharing plan contribution. At the time of issuance during fiscal 2016 and 2017 we recognized stock
based compensation expense of approximately $22,000 and $241,000, respectively equivalent to the market value of the shares issued
calculated based on the share's closing price at the grant dates.



Derivative
financial instruments. We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks.
However, we evaluate the application of derivative accounting for all convertible financial instruments and freestanding warrants.



For
derivative financial instruments that meet the definition of liabilities, the derivative instrument is initially recorded at its
fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.
For option-based derivative financial instruments, we use the Black-Scholes option-pricing model to value the derivative instruments.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity,
is re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current
or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of
the balance sheet date.



|ITEM
                          7A. | QUANTITATIVE
                                         AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|---------------------------------- | ----------------------------------------------------------------------------------------------------



Not
Applicable to smaller reporting companies.





14







|ITEM
                          8. | FINANCIAL
                                         STATEMENTS AND SUPPLEMENTARY DATA
|--------------------------------- | ------------------------------------------------------------------------------------



INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS





|                                                                                            |  | Page
|------------------------------------------------------------------------------------------- |  | ----
|Consolidated Financial Statements of Digerati Technologies,
    Inc. and Subsidiaries       |  |     
|                                                                                            |  |     
|Report of Independent Registered Public Accounting Firm                                     |  | 16  
|Consolidated Balance Sheets as of July 31, 2017 and 2016                                    |  | 17  
|Consolidated Statements of Operations for the Years Ended July 31, 2017 and 2016            |  | 18  
|Consolidated Statements of Stockholders’ Deficit for the Years Ended July 31, 2017 and 2016 |  | 19  
|Consolidated Statements of Cash Flows for the Years Ended July 31, 2017 and 2016            |  | 20  
|Notes to Consolidated Financial Statements                                                  |  | 21  







15







REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To
the Board of Directors and Stockholders

Digerati
Technologies, Inc.

San
Antonio, Texas



We
have audited the accompanying consolidated balance sheets of Digerati Technologies, Inc. and its subsidiaries (collectively, “Digerati”)
as of July 31, 2017 and July 31, 2016, and the related consolidated statements of operations, stockholders’ deficit
and cash flows each of the years in the two-year period ended 2017. Digerati Technologies, Inc.’s management is responsible
for these financial statements. Our responsibility is to express an opinion on these consolidated financial statements.



We
conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of
material misstatement. Digerati is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
Digerati’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.



In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Digerati as of July 31, 2017 and July 31, 2016 and the consolidated results of their operations and their
cash flows for each of the years in the two-year period ended 2017, in conformity with accounting principles generally accepted
in the United States of America.



The
accompanying consolidated financial statements have been prepared assuming that Digerati will continue as a going concern. As
discussed in Note 2 to the consolidated financial statements, Digerati suffered losses from operations and has a working capital
deficit, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those
matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from
the outcome of this uncertainty.



/s/
LBB & Associates Ltd., LLP

LBB & Associates Ltd., LLP

Houston,
Texas



December
13, 2017





16







PART 1. FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS



DIGERATI TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE
SHEETS

(In thousands)



|                                                                                                                                                                                                     |  | July 31, 2017 |         |   | July 31, 2016 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------- | -
|ASSETS                                                                                                                                                                                               |  |               |         |   |               |  
|CURRENT ASSETS:                                                                                                                                                                                      |  |               |         |   |               |  
|Cash and cash equivalents                                                                                                                                                                            |  | $             | 673     |   |               | $
|Accounts receivable, net                                                                                                                                                                             |  |               | 15      |   |               |  
|Prepaid and other current assets                                                                                                                                                                     |  |               | 9       |   |               |  
|Total current assets                                                                                                                                                                                 |  |               | 697     |   |               |  
|                                                                                                                                                                                                     |  |               |         |   |               |  
|LONG-TERM ASSETS:                                                                                                                                                                                    |  |               |         |   |               |  
|Intangible assets, net                                                                                                                                                                               |  |               | 14      |   |               |  
|Property and equipment, net                                                                                                                                                                          |  |               | 2       |   |               |  
|Oil and gas property - unproven                                                                                                                                                                      |  |               | -       |   |               |  
|                                                                                                                                                                                                     |  |               |         |   |               |  
|Total assets                                                                                                                                                                                         |  | $             | 713     |   |               | $
|                                                                                                                                                                                                     |  |               |         |   |               |  
|LIABILITIES AND STOCKHOLDERS’
    DEFICIT                                                                                                                                                            |  |               |         |   |               |  
|CURRENT LIABILITIES:                                                                                                                                                                                 |  |               |         |   |               |  
|Accounts payable                                                                                                                                                                                     |  | $             | 859     |   |               | $
|Accrued liabilities                                                                                                                                                                                  |  |               | 365     |   |               |  
|Total current liabilities                                                                                                                                                                            |  |               | 1,224   |   |               |  
|                                                                                                                                                                                                     |  |               |         |   |               |  
|LONG-TERM LIABILITIES:                                                                                                                                                                               |  |               |         |   |               |  
|Customer deposits                                                                                                                                                                                    |  |               | 131     |   |               |  
|Total long-term liabilities                                                                                                                                                                          |  |               | 131     |   |               |  
|                                                                                                                                                                                                     |  |               |         |   |               |  
|Total liabilities                                                                                                                                                                                    |  |               | 1355    |   |               |  
|                                                                                                                                                                                                     |  |               |         |   |               |  
|Commitments and contingencies                                                                                                                                                                        |  |               |         |   |               |  
|                                                                                                                                                                                                     |  |               |         |   |               |  
|STOCKHOLDERS’ DEFICIT:                                                                                                                                                                               |  |               |         |   |               |  
|Preferred stock, $0.001, 50,000,000 shares authorized, none issued and outstanding Common stock, $0.001, 150,000,000 shares authorized, 8,386,056 and 5,234,158 issued and outstanding, respectively |  |               | 8       |   |               |  
|Additional paid in capital                                                                                                                                                                           |  |               | 76,986  |   |               |  
|Accumulated deficit                                                                                                                                                                                  |  |               | (77,637 | ) |               |  
|Other comprehensive income                                                                                                                                                                           |  |               | 1       |   |               |  
|Total stockholders' deficit                                                                                                                                                                          |  |               | (642    | ) |               |  
|Total liabilities and stockholders' deficit                                                                                                                                                          |  | $             | 713     |   |               | $



See accompanying
notes to consolidated financial statements





17







DIGERATI
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)





|                                                              |  | Years ended July 31, |          
|------------------------------------------------------------- |  | -------------------- | ---------
|                                                              |  | 2017                 |          
|OPERATING REVENUES:                                           |  |                      |          
|Global VoIP services                                          |  | $                    | -        
|Cloud-based hosted services                                   |  |                      | 193      
|Total operating revenues                                      |  |                      | 193      
|OPERATING EXPENSES:                                           |  |                      |          
|Cost of services (exclusive of depreciation and amortization) |  |                      | 134      
|Loss on disposal of unproven oil and gas properties           |  |                      | 248      
|Selling, general and administrative expense                   |  |                      | 922      
|Stock compensation expense                                    |  |                      | 773      
|Legal and professional fees                                   |  |                      | 290      
|Bad debt                                                      |  |                      | (8       
|Depreciation and amortization expense                         |  |                      | 18       
|Total operating expenses                                      |  |                      | 2,377    
|                                                              |  |                      |          
|OPERATING LOSS                                                |  |                      | (2,184   
|OTHER INCOME (EXPENSE):                                       |  |                      |          
|Gain on derivative instruments and disposal of fixed assets   |  |                      | -        
|Miscellaneous gain                                            |  |                      | 2,623    
|Interest income (expense)                                     |  |                      | -        
|Total other income (expense)                                  |  |                      | 2,623    
|                                                              |  |                      |          
|NET INCOME (LOSS)                                             |  | $                    | 439      
|                                                              |  |                      |          
|INCOME (LOSS) PER SHARE - BASIC                               |  | $                    | 0.07     
|                                                              |  |                      |          
|INCOME (LOSS) PER SHARE - DILUTED                             |  | $                    | 0.06     
|                                                              |  |                      |          
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC            |  |                      | 6,339,906
|                                                              |  |                      |          
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED          |  |                      | 6,982,081



See
accompanying notes to consolidated financial statements





18







DIGERATI
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
YEARS ENDED JULY 31, 2017 AND 2016
(In thousands, except for share amounts)





|                                        |  | Common Shares |           |  | Par |   |   | Additional Paid-in Capital |  |   | Subscription Receivable |  |  | Accumulated Deficit |     |   | Other Comprehensive Income |   |         | Totals | 
|--------------------------------------- |  | ------------- | --------- |  | --- | - | - | -------------------------- |  | - | ----------------------- |  |  | ------------------- | --- | - | -------------------------- | - | ------- | ------ | 
|BALANCE, July 31, 2015                  |  |               | 5,113,023 |  |     | $ | 5 |                            |  | $ | 75,634                  |  |  | $                   | (29 | ) |                            | $ | (76,936 | )      | 
|Stock issued for services, to employees |  |               | 121,135   |  |     |   | - |                            |  |   | 22                      |  |  |                     | -   |   |                            |   | -       |        | 
|Stock issued for debt & cash            |  |               | -         |  |     |   | - |                            |  |   | -                       |  |  |                     | 29  |   |                            |   | -       |        | 
|Net loss                                |  |               | -         |  |     |   | - |                            |  |   | -                       |  |  |                     | -   |   |                            |   | (1,140  | )      | 
|BALANCE, July 31, 2016                  |  |               | 5,234,158 |  |     | $ | 5 |                            |  | $ | 75,656                  |  |  | $                   | -   |   |                            | $ | (78,076 | )      | 
|Stock issued for services, to employees |  |               | 1,956,898 |  |     |   | 2 |                            |  |   | 727                     |  |  |                     | -   |   |                            |   | -       |        | 
|Stock issued for professional services  |  |               | 75,000    |  |     |   | - |                            |  |   | 44                      |  |  |                     | -   |   |                            |   | -       |        | 
|Stock issued for cash                   |  |               | 1,120,000 |  |     |   | 1 |                            |  |   | 559                     |  |  |                     | -   |   |                            |   | -       |        | 
|Net Income                              |  |               | -         |  |     |   | - |                            |  |   | -                       |  |  |                     | -   |   |                            |   | 439     |        | 
|BALANCE, July 31, 2017                  |  |               | 8,386,056 |  |     | $ | 8 |                            |  | $ | 76,986                  |  |  | $                   | -   |   |                            | $ | (77,637 | )      | 



See
accompanying notes to consolidated financial statements





19







DIGERATI
TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)





|                                                                           |  | Years ended July 31, |       
|-------------------------------------------------------------------------- |  | -------------------- | ------
|                                                                           |  | 2017                 |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                      |  |                      |       
|Net income (loss)                                                          |  | $                    | 439   
|Adjustments to reconcile net loss to cash used in by operating activities: |  |                      |       
|Gain on derivative instruments and disposal of assets                      |  |                      | -     
|Loss on disposal of unproven oil and gas properties                        |  |                      | 248   
|Depreciation and amortization                                              |  |                      | 18    
|Stock compensation                                                         |  |                      | 773   
|Changes in operating assets and liabilities:                               |  |                      |       
|Accounts receivable                                                        |  |                      | (13   
|Prepaid expenses and other current assets                                  |  |                      | (1    
|Accounts payable                                                           |  |                      | 70    
|Accrued liabilities and customer deposits                                  |  |                      | (2,550
|Net cash (used in) provided by operating activities                        |  |                      | (1,016
|                                                                           |  |                      |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                                      |  |                      |       
|Acquisition of oil and gas property                                        |  |                      | (38   
|Purchases of property & equipment                                          |  |                      | (2    
|Net cash used in investing activities                                      |  |                      | (40   
|                                                                           |  |                      |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                                      |  |                      |       
|Subscription receivable proceeds                                           |  |                      | -     
|Proceeds from issuance of common stock                                     |  |                      | 560   
|Payments on debt, related party                                            |  |                      | -     
|Proceeds from notes payable, related party                                 |  |                      | -     
|Net cash provided by (used in) financing activities                        |  |                      | 560   
|                                                                           |  |                      |       
|DECREASE IN CASH AND CASH EQUIVALENTS                                      |  |                      | (496  
|CASH AND CASH EQUIVALENTS, beginning of period                             |  |                      | 1,169 
|                                                                           |  |                      |       
|CASH AND CASH EQUIVALENTS, end of period                                   |  | $                    | 673   
|                                                                           |  |                      |       
|SUPPLEMENTAL DISCLOSURES:                                                  |  |                      |       
|Cash paid for interest                                                     |  | $                    | -     



See
accompanying notes to consolidated financial statements



20







DIGERATI
TECHNOLOGIES, INC.

AND
SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Description
of Business.Digerati Technologies, Inc. (“we”, “our”, “Company” or “Digerati”)
was incorporated in the state of Nevada on May 24, 2004. Digerati is a diversified holding company that has no independent operations
apart from its subsidiaries. Through our wholly owned subsidiary, Shift8 Technologies, Inc., we are an established cloud telephony
service provider that offers a comprehensive suite of cloud communication services to meet the global needs of businesses that
are seeking simple, flexible, and cost-effective communication solutions. Unlike legacy phone systems, our telephony services
are delivered Only in the Cloud...TM, or over the Internet, making service available to customers from anywhere
internet access is available.



Principles
of Consolidation.The consolidated financial statements include the accounts of Digerati, and its subsidiaries, which
are majority owned by Digerati In accordance with ASC 810-10-05. All significant inter-company transactions and balances have
been eliminated.



Reclassifications.Certain amounts in the consolidated financial statements of the prior year have been reclassified to conform to the presentation
of the current year for comparative purposes.



Use
of Estimates. In preparing financial statements, management makes estimates and assumptions that affect the reported amounts
of assets and liabilities in the balance sheet and revenue and expenses in the statement of operations. Actual results could differ
from those estimates.



Concentration
of Credit Risk.Financial instruments that potentially subject Digerati to concentration of credit risk consist primarily
of trade receivables. In the normal course of business, Digerati provides credit terms to its customers. Accordingly, Digerati
performs ongoing credit evaluations of its customers and maintains allowances for possible losses, which, when realized, have
been within the range of management’s expectations. Digerati maintains cash in bank deposit accounts, which, at times, may
exceed federally insured limits. Digerati has not experienced any losses in such accounts and Digerati does not believe it’s
exposed to any significant credit risk on cash and cash equivalents.



Revenue
Recognition.Digerati derives revenue from two product offerings Global VoIP Services and Cloud Communication Services.
Revenue is recognized when persuasive evidence of an arrangement exists, services have been provided, the price is fixed or determinable,
collectability is reasonably assured and there are no significant obligations remaining.



Digerati
records and reports its revenue on the gross amount billed to its customers in accordance with the following indicators:





| | ● | Digerati is the primary obligor in its arrangements,
| | - | ----------------------------------------------------
| |   |                                                     
| | ● | Digerati has latitude in establishing pricing,      
| |   |                                                     

| | ● | Digerati changes the product or performs part of the service and is involved in the determination
of the product or service specifications,
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                            

| | ● | Digerati has discretion in supplier selection and
| | - | -------------------------------------------------
| |   |                                                  

| | ● | Digerati assumes credit risk for the amount billed to the customer.
| | - | -------------------------------------------------------------------



Sources
of revenue:



Global
VoIP Services: We currently provide VoIP communication services to U.S. and foreign telecommunications companies that lack
transmission facilities, require additional capacity or do not have the regulatory licenses to terminate traffic in Mexico, Asia,
the Middle East and Latin America. Typically, these telecommunications companies offer their services to the public for domestic
and international long-distance services



Cloud
Communication Services: We provide cloud communication services to value-added resellers and enterprise customers. The service
includes fully hosted IP/PBX services, SIP trunking, call center applications, prepaid services, interactive voice response auto
attendant, call recording, simultaneous calling, voicemail to email conversion, and multiple customized IP/PBX features in a hosted
or cloud environment.



Cost
of Services:



Global
VoIP Services: We incur transmission and termination charges from our suppliers and the providers of the infrastructure and
network. The cost is based on rate per minute, volume of minutes transported and terminated through the network. Additionally,
we incur fixed Internet bandwidth charges and per minute billing charges. In some cases we incur installation charges from certain
carriers. These installation costs are passed on to our customers for the connection to our VoIP network.





21







Cloud
Communication Services: We incur bandwidth, licensing, and co-location charges in connection with cloud communication services.
The bandwidth charges are incurred as part of the connection between our customers to allow them access to our services.



Cash
and cash equivalents.The Company considers all bank deposits and highly liquid investments with original maturities of
three months or less to be cash and cash equivalents.



Oil
and gas properties.



The
Company follows the successful efforts method of accounting for its oil and gas properties and, accordingly, exploration costs,
other than the costs of drilling exploratory wells, are charged to expense as incurred. The costs of drilling exploratory wells
are capitalized pending determination of whether the wells have discovered proved commercial reserves. If proved commercial reserves
are not discovered, such drilling costs are expensed. Other exploration costs, including geological and geophysical costs and
delay rentals on unproved leaseholds are charged to exploration expense as incurred. The costs of all development wells and related
equipment used in the production of oil and gas are capitalized. Costs to operate and maintain field equipment are expensed as
incurred. Direct costs of acquiring developed or undeveloped leasehold acreage, including lease bonuses, brokerage and other fees,
are capitalized. A gain or loss is recognized when a property is sold or an entire field ceases to produce and is abandoned.



The
Company annually reviews its oil and gas properties for impairment whenever events or changes in circumstances indicate that the
carrying value of such properties may not be recoverable. When it is determined that an oil and gas property’s estimated
future net cash flows will not be sufficient to recover its carrying amount, an impairment charge is recorded to reduce its carrying
value to its estimated fair value. During the fiscal year ended July 31, 2017 the Company recognized an impairment loss of $248,000
on the Company’s oil and gas properties.



Unproved
properties are assessed periodically on a property-by-property basis and any impairment in value recognized. If the unproved properties
are determined to be productive, the appropriate related costs are transferred to proved oil and gas properties. Unproved properties
are not subject to depletion, depreciation and amortization. The Company had no proved or unproved properties as of July 31, 2017.



Allowance
for Doubtful Accounts.



Bad
debt expense is recognized based on management’s estimate of likely losses each year based on past experience and an estimate
of current year uncollectible amounts. As of July 31, 2017 and 2016, Digerati’s allowance for doubtful accounts balance
was $0 and $0, respectively.



Property
and equipment.Property and equipment is recorded at cost. Additions are capitalized and maintenance and repairs are charged
to expense as incurred. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets, which are one to five years.



Impairment
of Long-Lived Assets. Digerati reviews the carrying value of its long-lived assets annually or whenever events or changes
in circumstances indicate that the value of an asset may no longer be appropriate. Digerati assesses recoverability of the carrying
value of the asset by estimating the future net cash flows expected to result from the asset, including eventual disposition.
If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference
between the asset’s carrying value and fair value.



Derivative
financial instruments. Digerati does not use derivative instruments to hedge exposures to cash flow, market, or foreign
currency risks. However, Digerati analyzes its convertible instruments and free-standing instruments such as warrants for derivative
liability accounting.



For
derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its
fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.
For option-based derivative financial instruments, Digerati uses the Black-Scholes option-pricing model to value the derivative
instruments.



The
classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is
re-assessed at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current
or non-current based on whether or not net-cash settlement of the derivative instrument is probable within the next 12 months
from the balance sheet date.





22







Income
taxes. Digerati recognizes deferred tax assets and liabilities based on differences between the financial reporting and
tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences
are expected to be recovered. Digerati provides a valuation allowance for deferred tax assets for which it does not consider realization
of such assets to be more likely than not.



Since
January 1, 2007, Digerati accounts for uncertain tax positions in accordance with the authoritative guidance issued by the Financial
Accounting Standards Board on income taxes which addresses how an entity should recognize, measure and present in the financial
statements uncertain tax positions that have been taken or are expected to be taken in a tax return. Pursuant to this guidance,
Digerati recognizes a tax benefit only if it is “more likely than not” that a particular tax position will be sustained
upon examination or audit. To the extent the “more likely than not” standard has been satisfied, the benefit associated
with a tax position is measured as the largest amount that is greater than 50% likely of being realized upon settlement. As of
July 31, 2017 we have no liability for unrecognized tax benefits.



Stock-based
compensation. Digerati accounts for share-based compensation in accordance with the provisions on share-based payments
which require measurement of compensation cost for all stock-based awards at fair value on date of grant and recognition of compensation
over the service period for awards expected to vest. The fair value of stock options is determined using the Black-Scholes valuation
model.



Basic
and diluted net income (loss) per share. The basic net loss per common share is computed by dividing the net loss by the
weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted
on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive
securities. For the year ended July 31, 2017 and 2016, potential dilutive securities including options and warrants had dilutive
effect and were included in the calculation of diluted net income (loss) per common share.



Fair
Value of Financial Instruments. Fair value is defined as the exchange price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. A fair value hierarchy is used which requires an entity to maximize
the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy based
on the three levels of inputs that may be used to measure fair value are as follows:



Level
1– Quoted prices in active markets for identical assets or liabilities.



Level
2– Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs
that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.



Level
3– Unobservable inputs that are supported by little or no market activity and that are financial instruments whose
values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments
for which the determination of fair value requires significant judgment or estimation.



For
certain of our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses,
the carrying amounts approximate fair value due to the short maturity of these instruments. The carrying value of our long-term
debt approximates its fair value based on the quoted market prices for the same or similar issues or the current rates offered
to us for debt of the same remaining maturities.



Recently
issued accounting pronouncements.Digerati does not expect the adoption of any recently issued accounting pronouncements
to have a significant impact on Digerati’s results of operations, financial position or cash flows.



NOTE
2 – GOING CONCERN



Financial
Condition



Digerati’s
consolidated financial statements for the year ending July 31, 2017 have been prepared on a going concern basis, which contemplates
the realization of assets and the settlement of liabilities in the normal course of business. Digerati has incurred net losses
and accumulated a deficit of approximately $77,637,000 and a working capital deficit of approximately $527,000 which raises substantial
doubt about Digerati’s ability to continue as a going concern.





23







Management
Plans to Continue as a Going Concern



Management
believes that current available resources will not be sufficient to fund the Company’s operations over the next 12 months.
The Company’s ability to continue to meet its obligations and to achieve its business objectives is dependent upon, among
other things, raising additional capital or generating sufficient revenue in excess of costs. At such time as the Company requires
additional funding, the Company will seek to secure such additional funding from various possible sources, including the public
equity market, private financings, sales of assets, collaborative arrangements and debt. If the Company raises additional capital
through the issuance of equity securities or securities convertible into equity, stockholders will experience dilution, and such
securities may have rights, preferences or privileges senior to those of the holders of common stock or convertible senior notes.
If the Company raises additional funds by issuing debt, the Company may be subject to limitations on its operations, through debt
covenants or other restrictions. If the Company obtains additional funds through arrangements with collaborators or strategic
partners, the Company may be required to relinquish its rights to certain technologies. There can be no assurance that the Company
will be able to raise additional funds, or raise them on acceptable terms. If the Company is unable to obtain financing on acceptable
terms, it may be unable to execute its business plan, the Company could be required to delay or reduce the scope of its operations,
and the Company may not be able to pay off its obligations, if and when they come due.



The
Company will continue to work with various funding sources to secure additional debt and equity financings. However, Digerati
cannot offer any assurance that it will be successful in executing the aforementioned plans to continue as a going concern.



Digerati’s
consolidated financial statements as of July 31, 2017 do not include any adjustments that might result from the inability to implement
or execute Digerati’s plans to improve our ability to continue as a going concern.



NOTE
3 – INTANGIBLE ASSETS



During
fiscal 2008, Digerati made a loan of $150,000 to NetSapiens Inc. The note receivable had a maturity date of June 26, 2008 with
interest at 8% per year. The note was secured by NetSapiens’ proprietary Starter Platform License and SNAPsolution modules.
On June 26, 2008 Digerati converted the outstanding interest and principal balance into a lifetime and perpetual NetSapiens’
License. The License provides Digerati with the ability to offer Hosted PBX (Private Branch eXchange), IP Centrex application,
prepaid calling, call center, conferencing, messaging and other innovative telephony functionality necessary to offer standard
and/or custom services to enterprise markets. The NetSapiens’ License, in the amount of $150,000, is being amortized equally
over a period of 10 years. For the years ended July 31, 2017 and 2016, amortization totaled approximately $15,000 and $15,000,
respectively.



NOTE
4  – PROPERTY AND EQUIPMENT



Following
is a summary of Digerati’s property and equipment at July 31, 2017 and 2016 (in thousands):



|                               |  | Useful lives |  | 2017 |     |   | 2016 |  
|------------------------------ |  | ------------ |  | ---- | --- | - | ---- | -
|Telecom equipment & software   |  | 1-5 years    |  | $    | 16  |   |      | $
|Less: accumulated depreciation |  |              |  |      | (14 | ) |      |  
|Net–property and equipment     |  |              |  | $    | 2   |   |      | $



For
the years ended July 31, 2017 and 2016, depreciation totaled approximately $3,000 and $3,000, respectively.



NOTE
5 – INCOME TAXES



Digerati
files a consolidated tax return. The current tax year is subject to examination by the Internal Revenue Service and certain state
taxing authorities. As of July 31, 2017, Digerati had net operating loss carry-forwards of approximately $3,664,000 to reduce
future federal income tax liabilities; the loss carryforwards will start to expire in 2020. Income tax benefit (provision) for
the years ended July 31, 2017 and 2016 are as follows:



|The effective tax rate for Digerati is reconciled to statutory rates as follows:
|--------------------------------------------------------------------------------
|                                                                                
|                                                                                
|Expected Federal benefit (provision), at statutory rate                         
|Change in valuation allowance                                                   
|                                                                                



Deferred
tax assets are comprised of the following as of July 31, 2017 and 2016:



|                              |  | 2017 |            |   | 2016 |  
|----------------------------- |  | ---- | ---------- | - | ---- | -
|Net operating loss carryover  |  | $    | 1,282,000  |   |      | $
|Valuation allowance           |  |      | (1,282,000 | ) |      |  
|Total deferred tax asset, net |  | $    | -          |   |      | $



At
July 31, 2017, realization of Digerati’s deferred tax assets was not considered likely to be realized. The change in the
valuation allowance for 2017 was approximately $924,000. Management has evaluated and concluded that there are no significant
uncertain tax positions requiring recognition in Digerati’s combined financial statements. The current year remains open
to examination by the major taxing jurisdictions in which Digerati is subject to tax. The Company files a calendar year return
and the net operating loss was adjusted for the fiscal year ended July 31, 2017.



24







We
record unrecognized tax benefits as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes
as a result of the evaluate on new information not previously available. Because of the complexity of some of these uncertainties,
the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax
benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which
new information is available.



NOTE
6 – MISCELLANEOUS GAIN



The
Company received a tax refund in July 2015. The Company recorded the funds as an accrued liability until such time as it could
determine the proper accounting for the refund. Subsequent to its receipt, management has determined that the Company is the legal
owner of the refund which has been recorded as a miscellaneous gain during fiscal 2017. The refund did not result from taxes paid
by the Company and will not be taxed as it originated from the Internal Revenue Service.



NOTE
7 – COMMITMENTS AND CONTINGENCIES



Commitments



Digerati
leases its office space with monthly payments of $583; the lease is on a month to month basis. The annual rent expense under the
operating lease was $6,996 and $7,740, for 2017 and 2016, respectively. The future minimum lease payment under the operating lease
for fiscal year 2017 is $6,996.



Contingencies



Not
applicable.



NOTE
8 – 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 period ended July 31, 2017, we issued:



| | - | 1,003,970
                                         common shares to various employees as part of the Company’s profit sharing plan
                                         contribution. The Company recognized stock-based compensation expense of approximately
                                         $241,000 equivalent to the value of the shares calculated based on the share’s
                                         closing price at the grant dates.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | - | 952,928
                                         common shares to the Company's Management team in lieu of cash compensation. The Company
                                         recognized stock-based compensation expense of approximately $351,000.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



During
fiscal 2017 Digerati's board of directors granted 1,170,000 options to purchase Common Shares to directors and employees, with
an exercise price of $0.24 per share, an average vesting period of 2 years and weighted average remaining contractual life 4.5
years. The Black-Scholes pricing model was used to estimate the fair value of the options to purchase Common Shares granted during
the period, using the assumptions of a risk-free interest rate of 1.73%, dividend yield of 0%, volatility of 245%, and an expected
life of 5 years. The options have a fair value of approximately $226,000. Unamortized compensation cost totaled $88,000 and $0,
respectively as of July 31, 2017 and July 31, 2016.





25







A
summary of the stock options of July 31, 2017 and 2016 and the changes during the years ended July 31, 2017 and 2016 are presented
below:



|                             |  |         |           |  |                  |   |      | Weighted-average      | 
|---------------------------- |  | ------- | --------- |  | ---------------- | - | ---- | --------------------- | 
|                             |  |         |           |  | Weighted-average |   |      | remaining
contractual | 
|                             |  | Options |           |  | exercise price   |   |      | term (years)          | 
|                             |  |         |           |  |                  |   |      |                       | 
|Outstanding at July 31, 2015 |  |         | -         |  |                  | $ | -    |                       | 
|Granted                      |  |         | -         |  |                  |   | -    |                       | 
|Exercised                    |  |         | -         |  |                  |   | -    |                       | 
|Forfeited and cancelled      |  |         | -         |  |                  |   | -    |                       | 
|Outstanding at July 31, 2016 |  |         | -         |  |                  | $ | -    |                       | 
|Granted                      |  |         | 1,170,000 |  |                  | $ | 0.24 |                       | 
|Exercised                    |  |         | -         |  |                  |   | -    |                       | 
|Forfeited and cancelled      |  |         | -         |  |                  |   | -    |                       | 
|Outstanding at July 31, 2017 |  |         | 1,170,000 |  |                  | $ | 0.24 |                       | 
|Exercisable at July 31, 2017 |  |         | 721,111   |  |                  | $ | 0.24 |                       | 



NOTE
9 – WARRANTS



During
the year ended July 31, 2017, the Company secured $560,000 from various accredited investors under a private placement and issued
1,120,000 shares of its common stock at a price of $0.50 per share and warrants to purchase an additional 210,000 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.



A
summary of the warrants as of July 31, 2017 and 2016 and the changes during the years ended July 31, 2017 and 2016 are presented
below:

|                             |  |          |         |  |                  |   |      | Weighted-average      | 
|---------------------------- |  | -------- | ------- |  | ---------------- | - | ---- | --------------------- | 
|                             |  |          |         |  | Weighted-average |   |      | remaining
contractual | 
|                             |  | Warrants |         |  | exercise price   |   |      | term (years)          | 
|                             |  |          |         |  |                  |   |      |                       | 
|Outstanding at July 31, 2015 |  |          | 300,000 |  |                  | $ | 0.14 |                       | 
|Granted                      |  |          | -       |  |                  |   | -    |                       | 
|Exercised                    |  |          | -       |  |                  |   | -    |                       | 
|Forfeited and cancelled      |  |          | -       |  |                  |   | -    |                       | 
|Outstanding at July 31, 2016 |  |          | 300,000 |  |                  | $ | 0.14 |                       | 
|Granted                      |  |          | 210,000 |  |                  | $ | 0.50 |                       | 
|Exercised                    |  |          | -       |  |                  |   | -    |                       | 
|Forfeited and cancelled      |  |          | -       |  |                  |   | -    |                       | 
|Outstanding at July 31, 2017 |  |          | 510,000 |  |                  | $ | 0.29 |                       | 
|Exercisable at July 31, 2017 |  |          | 300,000 |  |                  | $ | 0.14 |                       | 



NOTE
10 – NON-STANDARDIZED PROFIT SHARING PLAN



We
currently provide a Non-Standardized Profit Sharing Plan, adopted September 15, 2006. Under the plan our employees qualify to
participate in the plan after one year of employment. Contributions under the plan are based on 25% of the annual base salary
of each eligible employee up to $53,000 per year. Contributions under the plan are fully vested upon funding. During the years
ended July 31, 2017 and July 31, 2016, the Company issued 1,003,970 and 121,135, respectively, common shares to various employees
as part of the Company’s profit sharing plan contribution. The Company recognized stock-based compensation expense for July
31, 2017 and July 31, 2016 of $241,000 and $22,000, respectively, equivalent to the value of the shares calculated based on the
share’s closing price at the grant dates.



NOTE
11 – SIGNIFICANT CUSTOMERS



During
the year ended July 31, 2017, the Company derived a significant amount of revenue from four customers, comprising 24%, 24%,
11%, and 8% of the total revenue for the period, respectively, compared to four customers, comprising 26%, 19%, 16%, and
13% of the total revenue for the year ended July 31, 2016.



As
of the year ended July 31, 2017, the Company derived a significant amount of accounts receivable from three customers, comprising
37%, 27% and 14% of the total accounts receivable for the period, compared to three customers, comprising 68%, 25% and 7%
of the total accounts receivable for the year ended July 31, 2016.





26







NOTE
12 – AGREEMENT AND JOINT OPERATING AGREEMENT



On
February 29, 2016 Flagship Energy Company ("Flagship"), a wholly-owned subsidiary of Digerati, entered into an Agreement
with a Texas-based contract-for-hire oil and gas operator (“Operator”). Under the Agreement, Flagship utilized the
Operator for the drilling, completion and the initial operations of a shallow oil and gas well in conjunction with the purchase
of 100% of Operator’s working interest and 80% of its Net Revenue Interest. Under the Agreement, the Operator agreed to
transfer all field-level operations and assign 100% of a certain oil, gas and mineral lease to Flagship upon demand, which included
a tract of land located in South Texas. Additionally, Flagship entered into a Joint Operating Agreement ("JOA") with
Operator, whereby the parties agreed to develop the oil and gas well or wells for the production and retrieval of oil and gas
commodities as provided for in the oil, gas and mineral lease.



During
the fiscal year ended July 31, 2017 the Company recognized an impairment loss of $248,000 for the total capitalized investment
amount in the oil and gas properties.



NOTE
13 – AGREEMENT AND PLAN OF MERGER



On
May 8, 2017, Shift8 Technologies, In., a Nevada corporation (“Shift8 Tech”), a wholly owned subsidiary of Digerati
Technologies, Inc., a Nevada corporation (the “Company”), and T3 Acquisition, Inc., a Florida corporation (Acquisition
Sub”), and newly formed wholly-owned subsidiary of Shift8 Tech, entered into an Agreement and Plan Merger (the “Merger
Agreement”) with T3 Communications, a Florida corporation (“T3”). The Merger Agreement provides that, upon the
terms and subject to the conditions thereof, the Acquisition Sub will be merged with and into T3, with T3 continuing as the surviving
corporation and as a wholly-owned subsidiary of Shift8 Tech. The Company anticipates closing the transaction during second quarter
of fiscal year 2018, the Merger has been approved by the Shareholders of T3 and is subject to certain customary closing conditions.



NOTE
14 –  REVOLVING LINE OF CREDIT



On
June 10, 2016, the Company extended a Revolving Line of Credit to one of its Strategic Partners. The Revolving Line of Credit
is for $50,000 with an effective interest rate of 10% and maturity date of June 9, 2017. The Company had a secondary lien on accounts
receivables, fixed assets and all other assets of the Strategic Partner. In addition, the Company also secured a personal guarantee
from the largest shareholder and CEO. As of July 31, 2017, the outstanding balance was $0 and the Revolving Line of Credit has
been terminated.



NOTE
15 – SUBSEQUENT EVENTS



2017
Private Placement



In
August and October 2017, the Company secured $280,000 from various accredited investors and issued 560,000 shares of its common
stock at a price of $0.50 per share and warrants to purchase an additional 105,000 shares of its common stock at an exercise price
of $0.50 per share to an accredited investor. The warrants have a term of three years and are exercisable at any time after the
one-year anniversary.



Other
Matters



On
December 1, 2017, Shift8 Technologies, In., a Nevada corporation (“Shift8”), a wholly owned subsidiary of Digerati
Technologies, Inc., a Nevada corporation (the “Company”), and Synergy Telecom, Inc., a Texas corporation ("Synergy"),
closed a transaction to acquire all the assets, assumed all customers, and critical vendor arrangements from Synergy. Shift8 paid
$125,000 upon execution of the agreement, issued 500,000 shares of common stock with an agreed market value of $200,000, and entered
into a promissory note for $125,000 with an effective annual interest rate of 6% with 5 quarterly payments and a maturity date
of February 28, 2019.





27







|ITEM
9. | CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|------- | -----------------------------------------------------------------------------------------



None



|ITEM
    9A. | CONTROLS
    AND PROCEDURES.
|------------ | ----------------------------



Evaluation
of Disclosure Controls and Procedures



In
accordance with Exchange Act Rules 13a-15 and 15a-15, we carried out an evaluation, under the supervision and with the participation
of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were effective as of July 31, 2017.



Management’s
Report on Internal Control over Financial Reporting



Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control
over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended,
as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers
and effected by the Company’s Board, management and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles
generally accepted in the United States of America and includes those policies and procedures that:



| | ● | Pertain
    to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of
    the assets of the company;                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                       
| | ● | Provide
    reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
    with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company
    are being made only in accordance with authorizations of management and directors of the company; and



| | ● | Provide
    reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s
    assets that could have a material effect on the financial statements.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of
internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control
over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore,
it is possible to design into the process safeguards to reduce, though not eliminate, this risk.



As
of July 31, 2017, management assessed the effectiveness of our internal control over financial reporting based on the criteria
for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based
on that evaluation, management concluded that, during the period covered by this report; such internal controls and procedures
were effective based on the COSO criteria.



As
a public company with listed equity securities, we need to comply with laws, regulations and requirements, certain corporate governance
provisions of the Sarbanes-Oxley Act or the Dodd-Frank Act, and related regulations of the SEC, which we would not be required
to comply with as a private company. Complying with these statutes, regulations and requirements will occupy a significant amount
of time of our board of directors and management and will significantly increase our costs and expenses.



|ITEM
    9B. | OTHER
    INFORMATION.
|------------ | ----------------------



None





28







PART
III



|ITEM
    10. | DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
|------------ | -----------------------------------------------------------



The
following table contains the name, age of our Directors and executive officers as of July 31, 2017.



|Name                    |  | Age |  | Position
    Held                       |  | Held
    Office Since
|----------------------- |  | --- |  | --------------------------------------- |  | ---------------------
|Arthur
    L. Smith     |  | 52  |  | President
    & Chief Executive Officer |  | 2003                 
|Craig
    K. Clement    |  | 59  |  | Chairman
    of the Board               |  | 2014                 
|Maxwell
    A. Polinsky |  | 59  |  | Director                                |  | 2014                 
|Antonio
    Estrada Jr. |  | 43  |  | Chief
    Financial Officer             |  | 2007                 



Arthur
L. Smith (52) is our Chief Executive Officer, President, and Secretary. Mr. Smith has over 25 years of specialized
experience in the telecommunications, technology, and oil and gas industries.  As the founder of Digerati, formerly known
as ATSI Communications, Inc. (“ATSI”), he led the Company’s start-up operation focused on the USA – Mexico
telecommunications corridor to over US$65 million in annual revenue and alisting on
the American Stock Exchange that resulted in a market value of over US$450 million. Between 1999 and 2009, ATSI was a three-time
recipient of Deloitte and Touche's Fast 500 Award for recognition as one of the 500 fastest growing technology companies in North
America.  As CEO of ATSI, Mr. Smith also co-founded the Company’s highly successful Internet software subsidiary, GlobalSCAPE,
Inc., in 1996(NYSE MKT: GSB).  As Chairman of the Board of GlobalSCAPE, he
led the Company's strategic and business development efforts from inception through its growth strategy that resulted in a listing
on a public stock exchangeand the subsequent sale of ATSI’s ownership to private investors in June 2002. 
Through FY2014, Mr. Smith served as a director for the Company’s oilfield services subsidiaries, Dishon Disposal, Inc. and
Hurley Enterprises, Inc. and is currently President and CEO of the Company’s cloud communications subsidiary, Shift8 Technologies,
Inc.



Craig
K. Clement(59) is our Chairman of the Board. Mr. Clement has over 35 years of executive and board of director experience
with Technology (telecom, software, hardware) and Oil Exploration and Production (E&P) entities (Buffalo Royalty, Petroleum
Search, Yucca, and NASDAQ: PAN), where he was responsible for asset management, acquisitions and divestitures, strategic and tactical
planning, financial operations, corporate finance, legal, transaction structuring, business development, investor relations and
oversight. He assisted in the growth of a San Antonio-based telecom provider (AMEX: AI) from 10 employees to 500, achieving a
public market valuation of nearly US$500 million. He was the founding CEO of GlobalSCAPE, Inc. (NYSE MKT: GSB), the developer
and owner of the popular FTP client software utility, CuteFTPTM, and was the former COO of XPEL Technologies Corp. (TSXV:DAP.U).
Craig was the former Chairman of the South Texas Regional Center for Innovation and Commercialization, which screened and supported
entrepreneurs through the Texas Emerging Technology Fund managed by the Texas Governor's office, which invested more than $350
million in Texas-based technology start-ups. From early 2011 through September 2014, Craig served as a consultant to various E&P
entities including Morning Star, BP, and Forge Energy (EnCap and Pine Brook - private equity sponsored).



Maxwell
A. Polinsky (59) is our Director. Mr. Polinsky is currently the President and a Director
of Winston Gold Mining, a Canadian-based mineral exploration companythat is traded on the CSE Exchange,
and a principal in Venbanc Investment and Management Group Inc., an investment and merchant bank he co-founded in 1994. From 2009
to 2011, Mr. Polinsky was the Chief Financial Officer and a director of RX Exploration Inc., a company that successfully re opened
the previous old historic Drumlummon gold mine in Montana. Mr. Polinsky also served as a director of Nerium Biotechnology from
2006 to 2010, XPEL Technologies from 2003 to 2009, and Nighthawk Systems from 2001 to 2007and Cougar Minerals from 2012
to 2014. Mr. Polinsky holds a Bachelor of Commerce degree from the University of Manitoba.



Antonio
Estrada Jr. (43) is our Chief Financial Officer and Treasurer. Mr. Estrada is a seasoned financial executive with over 18
years of experience in the telecommunications and oil and gas industries. Mr. Estrada’s vast experience includes financial
reporting and modeling, strategic planning, grant writing, and cash management. Mr. Estrada served as the Sr. VP of Finance and
Corporate Controller of Digerati, formerly known as ATSI Communications, Inc., from 2008 to 2013. From 1999 to 2008, Mr. Estrada
served in various roles within ATSI, including International Accounting Manager, Treasurer, Internal Auditor, and Controller.
Mr. Estrada graduated from the University of Texas at San Antonio, with a Bachelors of Business Administration, with a concentration
in Accounting.





29







Section
16(a) Beneficial Ownership Reporting Compliance



Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our Directors and executive officers and persons who own more
than 10% of a registered class of our equity securities to file various reports with the Securities and Exchange Commission concerning
their holdings of, and transactions in, securities we issued. Each such person is required to provide us with copies of the reports
filed. Based on a review of the copies of such forms furnished to us and other information, we believe that none of our officers,
Directors or owners of 10% of any class of our securities failed to report transactions in our securities or reported transactions
in our securities late.



Code
of Ethics



We
adopted an Executive Code of Ethics that applies to the Chief Executive Officer, Chief Financial Officer, Controller and other
members of our management team. The Executive Code of Ethics may be viewed on our Website, www.digerati-inc.com. A copy of the
Executive Code of Ethics will be provided without charge upon written request to Digerati Technologies, Inc., 3463 Magic Drive,
Suite 355, San Antonio, Texas 78229.



Nominating
Committee and Nomination of Directors



We
do not have a nominating committee because the size of our Board of Directors is too small to establish separate standing committees.
Our Directors perform the function of a nominating committee.



The
Directors consider candidates recommended by other members of the Board of Directors, by executive officers and by one or more
substantial, long-term stockholders. In addition, the Board of Directors may seek candidates through a third-party recruiter.
Generally, stockholders who individually or as a group have held 5% of our shares for over one year will be considered substantial,
long-term stockholders. In considering candidates, the Directors take into consideration the needs of the Board of Directors and
the qualifications of the candidate. The Board of Directors has not established a set of criteria or minimum qualifications for
candidacy and each candidate is considered based on the demonstrated competence and knowledge of the individual. To have a candidate
considered by the Directors, a stockholder must submit the recommendation in writing and must include the following information:



| | ● | The
                                         name of the stockholder and evidence of ownership of our shares, including the number
                                         of shares owned and the length of time of ownership; and                                                                                               
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                    
| | ● | The
                                         name of the candidate, the candidate’s resume or a listing of her or his qualifications
                                         to be one of our Directors and the person’s consent to be named as a Director if
                                         nominated by the Directors.



The
stockholder’s recommendation and information described above must be sent to us at 3463 Magic Drive, Suite 355, San Antonio,
Texas 78229.



Audit
Committee and Audit Committee Financial Expert



We
do not have an audit or other committee of our Board of Directors that performs equivalent functions. Our Board of Directors performs
all functions of the audit committee. Mr. Maxwell A. Polinsky served as the Audit Committee Financial Expert during the year ended
July 31, 2017.



|ITEM
    11. | EXECUTIVE
    COMPENSATION.
|------------ | ---------------------------



The
compensation programs presently in effect with respect to the Chief Executive Officer, Chief Financial Officer and Chairman of
the Board were established by the Board of Directors.



Arthur
Smith serves as our President and Chief Executive Officer. Mr. Smith does not have a written employment agreement with the Company.
Effective October 1, 2015, Mr. Smith's annual salary was approved by the Board of Directors to be set at $165,000. The Board of
Directors also approved the reimbursement of monthly expenses up to $1,667. During FY2017 the Board of Directors approved the
issuance of common stock in lieu of cash compensation equivalent to 40% of Mr. Smith's annual salary. No other cash compensation
is presently being paid to Mr. Smith.





30







Antonio
Estrada Jr., serves as our Chief Financial Officer. Mr. Estrada does not have a written employment agreement with the Company.
Effective October 1, 2015, Mr. Estrada's annual salary was approved by the Board of Directors to be set at $165,000. The Board
of Directors also approved the reimbursement of monthly expenses up to $1,667. During FY2017 the Board of Directors approved the
issuance of common stock in lieu of cash compensation equivalent to 40% of Mr. Estrada's annual salary. No other cash compensation
is presently being paid to Mr. Estrada.



Craig
K. Clement, serves as our Chairman of the Board, Chief Executive Officer and President of Flagship Energy Company, a wholly-owned
subsidiary of Digerati. Mr. Clement does not have a written employment agreement with the Company. Effective October 1, 2015,
Mr. Clement's annual salary was approved by the Board of Directors to be set at $195,000. During FY2017 the Board of Directors
approved the issuance of common stock in lieu of cash compensation equivalent to 40% of Mr. Clement's annual salary. No other
cash compensation is presently being paid to Mr. Clement.



Compensation
Discussion and Analysis



Our
compensation programs are designed to meet the following objectives:



| | ● | Offer
                                         compensation opportunities that attract highly qualified executives, reward outstanding
                                         initiative and achievement, and retain the leadership and skills necessary to build long-term
                                         stockholder value;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                          
| | ● | Emphasize
                                         pay-for-performance by maintaining a portion of executives’ total compensation
                                         at risk, tied to both our annual and long-term financial performance and the creation
                                         of stockholder value; and      
| |   |                                                                                                                                                                                                                                                                                                                                          
| | ● | Further
                                         our short and long-term strategic goals and values by aligning executive officer compensation
                                         with business objectives and individual performance.                                                                                             



Our
Board of Directors believes that an executive’s compensation should be tied to the performance of the individual and the
performance of the complete executive team against both financial and non-financial goals, some of which are subjective and within
the discretion of the Board of Directors.



Our
executive compensation program is intended to be simple and clear, and consists of the following elements (depending on individual
performance):



| | ● | Base
                                         salary;                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                   
| | ● | Annual
                                         performance-based cash bonus;                                                     
| |   |                                                                                                                                   
| | ● | Long-term
                                         incentives in the form of stock options; and                                   
| |   |                                                                                                                                   
| | ● | Benefits
                                         that are offered to executives on the same basis as our non-executive employees.



Role
of Management in Determining Compensation Decisions



At
the request of our Board of Directors, our management makes recommendations to our Board of Directors relating to executive compensation
program design, specific compensation amounts, bonus targets, incentive plan structure and other executive compensation related
matters for each of our executive officers, including our Chief Executive Officer. Our Board of Directors maintains decision-making
authority with respect to these executive compensation matters.



Our
Board of Directors reviews the recommendations of our management with respect to total executive compensation and each element
of compensation when making pay decisions. In allocating compensation among compensation elements, we emphasize incentive, not
fixed compensation to ensure that executives only receive superior pay for superior results. We equally value short- and long-term
compensation because both short- and long-term results are critical to our success. In addition, our compensation program includes
various benefits provided to all employees, including life insurance, health insurance and other customary benefits. The objectives
and details of why each element of compensation is paid are described below.





31







Base
Salary.Our objective for paying base salaries to executives is to reward them for performing the core responsibilities of
their positions and to provide a level of security with respect to a portion of their compensation. We consider a number of factors
when setting base salaries for executives, including:



| | ● | Existing salary levels;                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------
| |   |                                                                                                             
| | ● | Competitive pay practices;                                                                                  
| |   |                                                                                                             
| | ● | Individual and corporate performance; and                                                                   
| |   |                                                                                                             
| | ● | Internal equity among our executives, taking into consideration
their relative contributions to our success.



Long-term
Incentive Awards.We award long-term incentive compensation to focus our executives on our long-term growth and stockholder
return, as well as to encourage our executives to remain with us for the long-term. Long-term incentive awards are primarily in
the form of grants of stock options and/or stock award pursuant to our 2015 Equity Compensation Plan (the “Plan”).
We selected this form because of the favorable accounting and tax treatment and the expectation of key employees in our industry
that they would receive stock options and/or stock grants. We do not have pre-established target award amounts for long-term incentive
grants. In determining long-term incentive awards for the Named Executive Officers, our Board of Directors relies on recommendations
from our Chief Executive Officer, who considers the individual performance of the executives, the relation of the award to base
salary and annual incentive compensation, and associated accounting expense. The terms of and amount of awards are made by our
Board of Directors in accordance with the Stock Option Plan.



Executive
Compensation



The
following table sets forth the compensation paid to each of our principal executive officers (the “Named Executive Officers”)
during the last two completed fiscal years:



SUMMARY
COMPENSATION TABLE





|Name and Principal Position             |  | Year |  |  | Salary ($) |         |  | Bonus  ($) |   | Stock Awards  ($) (1) |  |   | Option Awards  ($) (2) |  |  | All Other Compensation ($) |        |  | Total ($) |  
|--------------------------------------- |  | ---- |  |  | ---------- | ------- |  | ---------- | - | --------------------- |  | - | ---------------------- |  |  | -------------------------- | ------ |  | --------- | -
|                                        |  |      |  |  |            |         |  |            |   |                       |  |   |                        |  |  |                            |        |  |           |  
|Arthur L. Smith                         |  | 2017 |  |  | $          | 125,000 |  |            | $ | -0-                   |  | $ | 166,000                |  |  | $                          | 56,000 |  |           | $
|President &
    Chief Executive Officer |  | 2016 |  |  | $          | 170,002 |  |            | $ | -0-                   |  | $ | 8,640                  |  |  | $                          | -0-    |  |           | $
|                                        |  |      |  |  |            |         |  |            |   |                       |  |   |                        |  |  |                            |        |  |           |  
|Antonio Estrada Jr.                     |  | 2017 |  |  | $          | 125,000 |  |            | $ | -0-                   |  | $ | 166,000                |  |  | $                          | 56,000 |  |           | $
|Chief Financial Officer                 |  | 2016 |  |  | $          | 178,775 |  |            | $ | -0-                   |  | $ | 8,640                  |  |  | $                          | -0-    |  |           | $
|                                        |  |      |  |  |            |         |  |            |   |                       |  |   |                        |  |  |                            |        |  |           |  
|Craig K. Clement                        |  | 2017 |  |  | $          | 156,000 |  |            | $ | -0-                   |  | $ | 177,000                |  |  | $                          | 57,000 |  |           | $
|Chairman of the Board                   |  | 2016 |  |  | $          | 179,504 |  |            | $ | -0-                   |  | $ | -0-                    |  |  | $                          | -0-    |  |           | $



| | (1) | During
                                         the year ended July 31, 2017 and 2016, Digerati issued common shares as part of the Company’s
                                         profit sharing plan contribution. In addition, during the year ended July 31, 2017, Digerati
                                         issued common stock in lieu of cash compensation to its Officers.  
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                 
| | (2) | During
                                         the year ended July 31, 2017, Digerati issued 900,000 options to its Officers to acquire
                                         common shares at an exercise price of $0.24 and a fair value at the time issuance of
                                         $169,000. The options vest ratably on a monthly basis through November 21, 2017.



Our
Board of Directors adopted the 2015 Equity Compensation Plan (the “Plan”). Under the Plan the Board of Directors may
grant up to 7.5 million shares of our common stock to our officers, Directors, employees and consultants. Grants may be in the
form of incentive stock options, non-statutory stock options, restricted stock awards, and/or unrestricted stock awards. The number
and terms of each award is determined by the Board of Directors, subject to the limitation that the exercise price of any option
may not be less than the fair market value of the common stock on the date of grant.





32







We
currently provide a Non-Standardized Profit Sharing Plan (the “Profit Sharing Plan”). The Board of Directors approved
the Profit Sharing Plan on September 15, 2006. Under the Profit Sharing Plan our employees qualified to participate in the Profit
Sharing Plan after one year of employment. Contribution under the Profit Sharing Plan by us is based on 25% of the annual base
salary of each eligible employee up to $53,000 per year. Contributions under the Profit Sharing Plan are fully vested upon funding.



OUTSTANDING
EQUITY AWARDS AS OF JULY 31, 2017



|                    |  | Option Awards                                                       |         | Stock Awards |                                                                      
|------------------- |  | ------------------------------------------------------------------- | ------- | ------------ | ---------------------------------------------------------------------
|Name                |  | Number of Securities Underlying Unexercised Options (#) Exercisable |         |              | Number of Securities Underlying Unexercised Options (#) Unexercisable
|                    |  |                                                                     |         |              |                                                                      
|Arthur L. Smith     |  |                                                                     | 200,000 |              |                                                                      
|Antonio Estrada Jr. |  |                                                                     | 200,000 |              |                                                                      
|Craig K. Clement    |  |                                                                     | 200,000 |              |                                                                      



| | (1) | During
                                         the year ended July 31, 2017, Digerati issued 900,000 options to its Officers to acquire
                                         common shares at an exercise price of $0.24 and a fair value at the time issuance of
                                         $169,000. The options vest ratably on a monthly basis through November 21, 2017.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Compensation
of Directors



Each
Director that is not an officer is reimbursed the reasonable out-of-pocket expenses in connection with their travel to attend
meetings of the Board of Directors. Each Director that is not an officer was paid $1,000 per month.



Compensation
Committee Interlocks and Insider Participation



We
do not have a compensation committee of our Board of Directors or other committee that performs the same functions. Mr. Arthur
L. Smith is presently our Chief Executive Officer and participates in deliberations concerning executive compensation.



Compensation
Committee Report



Our
Board of Directors reviewed and discussed the Compensation Discussion and Analysis with management and, based on such discussion,
included the Compensation Discussion and Analysis in this Annual Report on Form 10-K.





33







|ITEM
    12. | SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
|------------ | ---------------------------------------------------------------------------------------------------



Information
regarding securities authorized to be issued under equity compensation plans is set forth under Item 5 Market for Registrant’s
Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.



The
following table lists the beneficial ownership of shares of our Common Stock by (i) each person known to own more than 5% of our
outstanding voting securities, (ii) each Director and nominee, (iii) the Named Executive Officers and (iv) all Directors and officers
as a group. Information with respect to officers, Directors and their families is as of July 31, 2017 and is based on our books
and records and information obtained from each individual. Information with respect to other stockholders is based upon the Schedule
13D or Schedule 13G filed by such stockholders with the Securities and Exchange Commission. Unless otherwise stated, the business
address of each individual or group is the same as the address of our principal executive office and all securities are beneficially
owned solely by the person indicated.



|                                   |  |         |           |  | Vested
                                                                  Warrants |  |         | Total      |  |  |           |  
|---------------------------------- |  | ------- | --------- |  | --------------------------------------------------------------------------------- |  | ------- | ---------- |  |  | --------- | -
|                                   |  | Shares  |           |  | and                                                                               |  |         | Beneficial |  |  | % Of      |  
|Name
of Beneficial Owner           |  | Owned   |           |  | Options                                                                           |  |         | Ownership  |  |  | Class (1) |  
|                                   |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|INDIVIDUAL OFFICERS,               |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|DIRECTORS AND NOMINEES             |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|                                   |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|Arthur L. Smith                    |  | 762,620 |           |  | 200,000                                                                           |  |         | 962,620    |  |  | 11.48     | %
|President, Chief Executive Officer |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|Director                           |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|                                   |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|Antonio Estrada Jr.                |  |         | 765,120   |  |                                                                                   |  | 200,000 |            |  |  | 965,120   |  
|Chief Financial Officer            |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|                                   |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|Craig k. Clement (2)               |  |         | 2,665,393 |  |                                                                                   |  | 500,000 |            |  |  | 3,165,393 |  
|Chairman of the Board              |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|                                   |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|Maxwell A. Polinsky                |  |         | 4,400     |  |                                                                                   |  | 66,667  |            |  |  | 71,067    |  
|Director                           |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|                                   |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|ALL
OFFICERS AND                   |  |         |           |  |                                                                                   |  |         |            |  |  |           |  
|DIRECTORS
AS A GROUP               |  |         | 4,197,533 |  |                                                                                   |  | 966,667 |            |  |  | 5,164,200 |  



| | (1) | Based
                                         upon 8,386,056 shares of common stock outstanding as of July 31, 2017.                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (2) | As
                                         of July 31, 2017, Mr. Clement has an indirect beneficial ownership of 2,113,048 common
                                         shares and warrants to purchase 300,000 common shares through Flagship Oil and Gas Corp.
                                         In addition, Mr. Clement has a direct beneficial ownership of 552,345 common shares and
                                         200,000 vested options.



|ITEM
    13. | CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
|------------ | ------------------------------------------------------------------------------



For
a director to be considered independent according to the standards set forth in Section 303A.02 of the New York Stock
Exchange Listed Company Manual (the “NYSE Manual”), the Board of Directors must affirmatively determine that the
director has no material relationship with Digerati, either directly or as a partner, shareholder or officer of an
organization that has a relationship with Digerati. In addition, the NYSE Manual provides that a director will not be
considered independent if, within the preceding three years, the director or an immediate family member (i) was an
employee of Digerati, (ii) received more than $120,000 per year in direct compensation from Digerati, (iii) is
affiliated with or employed by a present or former internal or external auditor of Digerati, (iv) employed as an
executive officer of another company for which an executive officer of Digerati serves on the compensation committee or
(v) is an executive officer or employee that makes payments to or receives payments from Digerati of more than
$1,000,000 or two percent of such other company’s gross revenues.



The
Board has determined that Mr. Maxwell A. Polinsky satisfies the independence requirements in the NYSE Manual. In making the determination
of director independence with respect to Mr. Craig K. Clement, the Board of Directors considered that the indirect beneficial
ownership through Flagship Oil and Gas Corp., of 28.77% of our outstanding Common Stock and determined that Mr. Clement did not
meet the requirements to be considered independent.





34







| | ITEM
                                         14. | PRINCIPAL
                                         ACCOUNTANT FEES AND SERVICES.
| | ------------------------------------------------- | --------------------------------------------------------------------------------



The
following table sets forth the aggregate fees paid to LBB & Associates Ltd., LLP during 2017 and 2016 for audit services rendered
in connection with the audits and reviews of our consolidated financial statements.



|Description of Fees |  | 2017 |        |  | 2016 |  
|------------------- |  | ---- | ------ |  | ---- | -
|                    |  |      |        |  |      |  
|Audit Fees          |  | $    | 21,700 |  |      | $
|Review Fees         |  |      | 11,700 |  |      |  
|Tax fees            |  |      | -0-    |  |      |  
|All Other Fees      |  |      | -0-    |  |      |  



During
the years ended July 31, 2017 and 2016, the Company paid $9,038 and $9,080, respectively to MiddletonRainesZapata, LLP for tax
work related to the consolidated tax returns.



Pre-Approval
of Audit and Non-Audit Services



The
Board of Directors considered whether the non-audit services provided by LBB & Associates Ltd., LLP are compatible with maintaining
their independence. Prior to engagement of an independent accounting firm for the next year’s audit, the Board of Directors
is asked to pre-approve the engagement of the independent accounting firm, and the projected fees for audit services and audit-related
services that we will incur. The fee amounts approved for the audit and audit-related services are updated to the extent necessary
at meetings of the Board of Directors during the year. In the 2016 fiscal year, there were no fees paid to LBB & Associates
Ltd., LLP under a de minimis exception to the rules that waives pre-approval for certain non-audit services.





35







PART
IV



| | ITEM
                                         15. | EXHIBITS,
                                         FINANCIAL STATEMENT SCHEDULES.
| | ------------------------------------------------- | ---------------------------------------------------------------------------------



The
following documents are exhibits to this report.



|Number |  | Description                                                                                                                                                                                                                      
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1    |  | Agreed Order Confirming Joint Plan of Reorganization filed by Plan Proponents. (field as Exhibit 2.1 to Form 8-K filed on April 11, 2014)                                                                                        
|2.2    |  | Plan Proponents’ Joint Chapter 11 Plan of Reorganization as Modified on the Record on April 4, 2014. (field as Exhibit 2.2 to Form 8-K filed on April 11, 2014)                                                                  
|2.3    |  | Plan Supplement Naming Independent Director in Connection With Plan Proponents’ Joint Chapter 11 Plan of Reorganization. (field as Exhibit 2.3 to Form 8-K filed on April 11, 2014)                                              
|2.4    |  | Disclosure Statement Under 11 U.S.C. § 1125 and Bankruptcy Rule 3016 in Support of Plan Proponents’ Joint Chapter 11 Plan of Reorganization. (filed as Exhibit 2.4 to Form 8-K filed on April 11, 2014)                          
|2.5    |  | Bankruptcy Settlement Agreement dated January 15, 2014. (field as Exhibit 10.1 to Form 8-K filed on January 23, 2014)                                                                                                            
|2.6    |  | Order Authorizing the Sale of 100% Equity Interests of Dishon Disposal, Inc. and Granting Related Relief approving the Stock Purchase Agreement dated June 27, 2014. (filed as Exhibit 2.6 to Form 8-K filed on July 7, 2014)    
|2.7    |  | Order Authorizing the Sale of 100% Equity Interests of Hurley Enterprises, Inc. and Granting Related Relief approving the Stock Purchase Agreement dated June 26, 2014.(field as  Exhibit 2.7 to Form 8-K filed on July 24, 2014)
|3.1    |  | Amended and Restated Articles of Incorporation. (filed as Exhibit 3.1 to Form 8-K filed on April 11, 2014)                                                                                                                       
|3.2    |  | Amended and Restated Bylaws. (filed as Exhibit 3.2 to Form 8-KA filed on April 25, 2014)                                                                                                                                         
|3.3    |  | Second Amended and Restated Bylaws, effective as of January 13, 2015 (filed as Exhibit 3.1 to Form 8-K filed on January 21, 2015 (File No. 001-15687)).                                                                          
|10.1   |  | Form of stock award agreement under the Company's 2015 Stock Compensation Plan for grants to qualifying employees' 401K Retirement Accounts (filed as Exhibit 10.7 to Form 8-K filed on January 21, 2015 (File No. 001-15687)).  
|10.2   |  | 2015 Equity Compensation Plan (filed as Exhibit 4.1 to Form S-8 filed on November 18, 2015 (File No. 001-15687)).                                                                                                                
|21.1   |  | Subsidiary list                                                                                                                                                                                                                  
|31.1   |  | Certification of our President and Chief Executive Officer, under Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                 
|31.2   |  | Certification of our Chief Financial Officer, under Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                               
|32.1   |  | Certification of our President and Chief Executive Officer, under Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                 
|32.2   |  | Certification of our Chief Financial Officer, under Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                               





36







SIGNATURES



Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.



|                             | DIGERATI
    TECHNOLOGIES, INC.
|---------------------------- | -------------------------------
|                             |                                
|Date:  December
    14, 2017 | By:                            
|                             |                                
|                             |                                
|                             |                                



Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacity and on the dates indicated.



|Signature                   |  | Title                            |  | Date                
|--------------------------- |  | -------------------------------- |  | --------------------
|                            |  |                                  |  |                     
|/s/
    Arthur L. Smith     |  | Principal
    Executive Officer  |  | December
    14,2017
|Arthur
    L. Smith         |  |                                  |  |                     
|                            |  |                                  |  |                     
|/s/
    Antonio Estrada Jr. |  | Principal
    Accounting Officer |  | December
    14,2017
|Antonio
    Estrada Jr.     |  | Principal
    Finance Officer    |  |                     
|                            |  |                                  |  |                     
|/s/
    Craig K. Clement    |  | Director                         |  | December
    14,2017
|Craig
    K. Clement        |  |                                  |  |                     
|                            |  |                                  |  |                     
|/s/
    Maxwell A. Polinsky |  | Director                         |  | December
    14,2017
|Maxwell
    A. Polinsky     |  |                                  |  |                     





37









EXHIBIT
INDEX



|Number |  | Description                                                                                                      
|------ |  | -----------------------------------------------------------------------------------------------------------------
|21.1   |  | Subsidiary List                                                                                                  
|31.1   |  | Certification of our President and Chief Executive Officer, under Section 302 of the Sarbanes -Oxley Act of 2002.
|31.2   |  | Certification of our Chief Financial Officer, under Section 302 of the Sarbanes-Oxley Act of 2002.               
|32.1   |  | Certification of our President and Chief Executive Officer, under Section 906 of the Sarbanes-Oxley Act of 2002. 
|32.2   |  | Certification of our Chief Financial Officer, under Section 906 of the Sarbanes-Oxley Act of 2002.               





38