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, 2014

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 ofIncorporation or Organization) |  | (IRS EmployerIdentification 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, or a smaller
reporting company.





| | Large accelerated filer | ☐ |  | Accelerated filer         | ☐
| | ----------------------- | - |  | ------------------------- | -
| | Non-accelerated filer   | ☐ |  | Smaller reporting company | ☒



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 $766,955 based on the
closing price of $0.15 per share on July 13, 2015, as reported on the over-the-counter bulletin board.



Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of
the Securities Exchange Act of 1934 subsequent to the distributions of securities under a plan confirmed by a court. ☐
Yes ☒ No



There were
5,113,030 shares of issuer’s Common Stock outstanding as of July 13, 2015.




















TABLE
OF CONTENTS





|           |                                                                                                              | Page
|---------- | ------------------------------------------------------------------------------------------------------------ | ----
|PART I    
|Item 1.    | Business                                                                                                     | 3   
|Item 1A.   | Risk Factors                                                                                                 | 10  
|Item 1B.   | Unresolved Staff Comments                                                                                    | 10  
|Item 2.    | Properties                                                                                                   | 10  
|Item 3.    | Legal Proceedings                                                                                            | 11  
|Item 4.    | (Removed and Reserved)                                                                                       | 11  
|           |                                                                                                              |     
|PART II   
|           |                                                                                                              |     
|Item 5.    | Market for Registrant’s Common Equity; Related Stockholder Matters and Issuer Purchases of Equity Securities | 11  
|Item 6.    | Selected Financial Data                                                                                      | 12  
|Item 7.    | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 12  
|Item 7A.   | Quantitative and Qualitative Disclosures about Market Risk                                                   | 16  
|Item 8.    | Financial Statements and Supplementary Data                                                                  | 17  
|Item 9.    | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures                        | 35  
|Item 9A.   | Controls and Procedures                                                                                      | 36  
|Item 9B.   | Other Information                                                                                            | 36  
|           |                                                                                                              |     
|PART III  
|           |                                                                                                              |     
|Item 10.   | Directors, Executive Officers and Corporate Governance                                                       | 37  
|Item 11.   | Executive Compensation                                                                                       | 39  
|Item 12.   | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               | 41  
|Item 13.   | Certain Relationships and Related Transactions, and Director Independence                                    | 42  
|Item 14.   | Principal Accountant Fees and Services                                                                       | 43  
|           |                                                                                                              |     
|PART IV   
|           |                                                                                                              |     
|Item 15.   | Exhibits, Financial Statement Schedules                                                                      | 44  
|           |                                                                                                              |     
|SIGNATURES













PART
I



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



Digerati
Technologies, Inc., a Nevada corporation (including our subsidiaries, “we”, “us”, or “Digerati”),
is a diversified holding company that has no independent operations apart from its subsidiaries. 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. Our principal business in the past has been providing transportation of
voice traffic for other telecommunication service providers, wireless carriers and regional Internet telephony providers using
Voice over Internet Protocol (“VoIP”) technologies. Our wholly owned subsidiary, Shift8 Technologies, Inc. (“Shift8”),
offers a portfolio of Internet-based telephony products and services through our cloud telephony application platform and session-based
communication network that is interconnected with numerous U.S. and foreign service providers.



On
November 26, 2012, we completed the acquisition of two established oil field service companies with operations in North Dakota
and Montana. Dishon Disposal, Inc., a North Dakota corporation (“Dishon”), is engaged primarily in the business of
treating and disposing of oil field waste. Hurley Enterprises, Inc. a Montana corporation (“Hurley”), is engaged primarily
in the business of providing oil field support equipment and services, including skd houses, telecommunication services, booster
booths, portable toilets, generators, potable water and mess halls. During the year ending July 31, 2014, both Hurley and Dishon
were sold by the Grantor Trust for an aggregate sale price of $41,500,000. See Note 4 in the consolidated financial statements.



Bankruptcy



On
May 30, 2013, Digerati Technologies, Inc., Debtor in Possession (“Digerati”) filed a voluntary petition in the United
States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”), Case No. 13-33264
(the “Bankruptcy”), seeking relief under the provisions of Chapter 11 of the United States Bankruptcy Code.



On
April 4, 2014 (the “Confirmation Date”), the Bankruptcy Court entered an Agreed Order Confirming Joint Plan of Reorganization
Filed by Plan Proponents (“Agreed Order”) confirming the Plan Proponents’ Joint Chapter 11 Plan of Reorganization
as modified on the record on April 4, 2014 and/or as modified by the Agreed Order (the “Reorganization Plan”). As
used herein, the term “Reorganized Debtor” refers to Digerati Technologies, Inc., a Nevada corporation, after the
Confirmation Date and as reorganized by the Reorganization Plan. The following summary of the Agreed Order and Reorganization
Plan is not intended to be a complete description and is qualified in its entirety by reference to the Agreed Order, Reorganization
Plan, Plan Supplement and Disclosure Statement. A copy of the Agreed Order and Reorganization Plan are filed as exhibits to our
Current Report on Form 8-K filed with the Securities and Exchange Commission on April 11, 2014, and can be viewed electronically
and downloaded at http://dm.epiq11.com/DIG/Document/GetDocument/2475693.



Summary
of the Plan



This
summary is not intended to be a complete description of the Reorganization Plan, and it is qualified in its entirety by reference
to the Agreed Order, Reorganization Plan, Plan Supplement and Disclosure Statement. A copy of the Agreed Order and Reorganization
Plan were filed as exhibits to Digerati’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
April 11, 2014.



| | (a) | The
                                         Agreed Order provided final approval of the Disclosure Statement, a copy of which was
                                         filed as an exhibit to Digerati’s Current Report on Form 8-K dated January 23,
                                         2014.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | Upon
                                         the Confirmation Date, the Reorganized Debtor had 1,977,626 shares of common stock outstanding.
                                         All outstanding shares of Digerati’s preferred stock, warrants, options, conversion
                                         rights and other rights to acquire shares of common stock and all “super voting”
                                         shares were cancelled.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





3







| | (c) | The
                                         Reorganized Debtor’s Board of Directors consisted of Messrs. Arthur L. Smith, William
                                         E. McIlwain and James J. Davis. The Reorganized Debtor’s officers, who served at
                                         the discretion of the board of directors until the Stockholder Meeting, were:
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | Arthur L. Smith | President and Chief Executive Officer
| | --------------- | -------------------------------------
| | Antonio Estrada | Chief Financial Officer              



Subsequently,
on September 15, 2014, the Company held its Annual Meeting of Shareholders, and at the discretion of the new directors, Mr. Smith
and Mr. Estrada continued to serve as officers of the Reorganized Debtor.



| | (d) | The
                                         Reorganized Debtor was required to hold a Stockholder Meeting to elect a new board of
                                         directors after August 31, 2014, and before September 15, 2014. The Reorganized Debtor’s
                                         officers and directors, as well as the parties to the BSA and a Rule 11 Mediated Settlement
                                         Agreement dated January 14, 2014 (the “Rule 11 Agreement”), were not eligible
                                         for election to the new board of directors at the Stockholder Meeting. Messrs. Smith
                                         and Estrada were not permitted to solicit proxies in connection with the Stockholder
                                         Meeting but were allowed to vote shares of common stock owned by them. Subsequently,
                                         on September 15, 2014, the Company held its Annual Meeting of Shareholders, and new directors
                                         were elected.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | Under
                                         the Reorganization Plan title to the issued and outstanding shares of Dishon Disposal,
                                         Inc., a North Dakota corporation (“Dishon”), and Hurley Enterprises, Inc.,
                                         a Montana corporation (“Hurley”), owned by Digerati were transferred to a
                                         Grantor Trust subject to existing liens and the Rule 11 Agreement. The Dishon and Hurley
                                         shares did not vest in the Reorganized Debtor and remained the property of Digerati’s
                                         bankruptcy estate. Additionally, under the Reorganization Plan certain retained litigation
                                         claims were transferred to the Grantor Trust. The beneficiary of the Grantor Trust is
                                         the Reorganized Debtor. The trustee and Disbursing Agent of the Grantor Trust is Mr.
                                         William R. Greendyke. All other assets of Digerati that are not transferred to the Grantor
                                         Trust and/or retained by Digerati vested in the Reorganized Debtor as of the Confirmation
                                         Date, including but not limited to the common stock of Shift8 Technologies, Inc., free
                                         and clear of liens, claims and encumbrances.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (f) | All
                                         of the issued and outstanding shares of Dishon and Hurley were sold by the Grantor Trust
                                         and the proceeds from the sale were distributed by the trustee and Disbursing Agent to
                                         discharge certain allowed claims. The claims distribution set forth in the Reorganization
                                         Plan were as follows:
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (i) | Allowed
                                         priority claims were paid in full from cash on hand.
| | --- | -----------------------------------------------------------------------------------------------------



| | (ii) | Allowed
                                         administrative claims will be paid from the proceeds of the sale of the Dishon and Hurley
                                         shares except for those amounts paid pursuant to the budget attached to the Reorganization
                                         Plan. The Company estimated the maximum potential amount of any federal income tax liability
                                         on the gains derived from the sale of the Dishon and Hurley shares and deposited that
                                         amount into a reserve account until determination of the actual taxes due.
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Proceeds
                                         from the sale of the Dishon shares in excess of $1,250,000 plus one-half of Digerati’s
                                         unpaid professional fees (the “Dishon Carve Out”) and amount reserved for
                                         taxes were delivered to creditors holding $30,000,000 of Digerati’s indebtedness
                                         secured by the Dishon shares, up to the principal of and accrued interest on such indebtedness.
                                         In addition, the secured creditors maintain a right to seek a refund if the estimated
                                         amount withheld for taxes on the sale of the Dishon shares exceeds the tax obligation.
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | Proceeds
                                         from the sale of the Hurley shares in excess of $1,250,000 plus one-half of Digerati’s
                                         unpaid professional fees (the “Hurley Carve Out”) and amount reserved for
                                         taxes were delivered to creditors holding $30,000,000 of Digerati’s indebtedness
                                         secured by the Hurley shares, up to the principal of and accrued interest on such indebtedness.
                                         In addition, the secured creditors maintain a right to seek a refund if the estimated
                                         amount withheld for taxes on the sale of the Hurley shares exceeds the tax obligation.
                                         Principal of or interest on Digerati’s indebtedness secured by the Hurley shares
                                         that is in excess of the net proceeds from the sale of Hurley shares has been waived.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





4







| | (v) | Allowed
                                         unsecured claims of $1,000 or less were paid in full from cash on hand.
| | --- | ------------------------------------------------------------------------------------------------------------------------



| | (vi) | Allowed
                                         unsecured claims greater than $1,000 were paid in full from the Dishon Carve Out and
                                         the Hurley Carve Out. The excess from the combined $2,500,000 withheld from the sale
                                         of the Dishon shares and Hurley shares will be applied to the unpaid professional fees.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vii) | All
                                         cure payments under assumed contracts were paid within 90 days of April 4, 2014.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------



| | (viii) | All
                                         executory contracts of Digerati were rejected except as previously assumed by order in
                                         the Bankruptcy Court or specifically listed as assumed in the Reorganization Plan.
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ix) | The
                                         Reorganized Debtor released Messrs. Arthur L. Smith, Antonio Estrada, William E. McIlwain
                                         and James J. Davis in their individual capacity and their respective capacities as officers
                                         and/or directors, as applicable, of Digerati, Hurley or Dishon of all claims and causes
                                         of action that arise on or before the Confirmation Date that could be asserted by Digerati,
                                         the estate and/or on account of the Bankruptcy through the Stockholder Meeting. The Reorganized
                                         Debtor also released Messrs. Arthur L. Smith, William McIlwain and James Davis to the
                                         greatest extent provided by law from any claims.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (x) | The
                                         Reorganization Plan became effective on December 31, 2014.
| | --- | -------------------------------------------------------------------------------------------------------



Based
upon the Agreed Order and Reorganization Plan, Dishon and Hurley were accounted for as discontinued operations. We are presently
engaged only in providing Internet-based communication products and services through Shift8.



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,
IP 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 for specialized
applications. Our services 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, require additional capacity or do not have the regulatory licenses to terminate 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.





5







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.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | 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.





6







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 aPBX)
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 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.



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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





7







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.



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.





8







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.



We
are a provider of “interconnected VoIP services.” In June 2005, the FCC imposed 911 emergency service obligations
on providers of “interconnected VoIP services.” The FCC also required interconnected VoIP service providers to register
with the FCC, comply with the requirements of the Communications Assistance for Law Enforcement Act, and to make Universal Service
Fund (“USF”) contributions. We believe that our services are currently compliant with all applicable requirements
of the FCC’s order, 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.





9







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 recently 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.



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.



Employees



As
of July 31, 2014, we had 6 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 $6,500. We believe that our leased facilities
are suitable and adequate for their intended use.





10







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



On
May 30, 2013, we filed a voluntary petition in the United States Court for the Southern District of Texas, Houston Division, Case
No. 13-33264, seeking relief under the provisions of Chapter 11 of the United States Bankruptcy Code. On April 4, 2014, the Bankruptcy
Court entered an Agreed Order Confirming Joint Plan of Reorganization Filed by Plan Proponents, confirming the Plan Proponents’
Joint Chapter 11 Plan of Reorganization as modified on the record on April 4, 2014 and/or as modified by the Agreed Order. The
Reorganization Plan became effective on December 31, 2014. See Item 1 Business – Bankruptcy, and Note 3 to the Consolidated
Financial Statements.



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



Not
Applicable.



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 OTC Bulletin Board 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 OTC Bulletin Board reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not
necessarily represent actual transactions. All prices have been adjusted to reflect a 115:1 reverse stock split effective as of
November 16, 2012.





|Fiscal 2013    |  | Low |      |  | High |  
|-------------- |  | --- | ---- |  | ---- | -
|First Quarter  |  | $   | 0.17 |  |      | $
|Second Quarter |  | $   | 0.14 |  |      | $
|Third Quarter  |  | $   | 0.15 |  |      | $
|Fourth Quarter |  | $   | 0.05 |  |      | $
|               |  |     |      |  |      |  
|Fiscal 2014    |  | Low |      |  | High |  
|First Quarter  |  | $   | 0.12 |  |      | $
|Second Quarter |  | $   | 0.15 |  |      | $
|Third Quarter  |  | $   | 0.15 |  |      | $
|Fourth Quarter |  | $   | 0.10 |  |      | $



Holders



As
of July 10, 2015, there were approximately 1,275 record holders of our Common Stock.



Dividends



We
have not paid cash dividends on our common stock because we have not generated sufficient earnings. We do not anticipate paying
a dividend in the future and expect to use all available earnings to provide funds for growth of our business.





11







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, 2014.



|                                                           |  | 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-                                                                                         |  | N/A                                                                         |  | -0-                                                                                         
|                                                           |  |                                                                                             |  |                                                                             |  |                                                                                             
|Equity Compensation Plans not approved by security holders |  | -0-                                                                                         |  | N/A                                                                         |  | -0-                                                                                         
|                                                           |  |                                                                                             |  |                                                                             |  |                                                                                             
|Total                                                      |  | -0-                                                                                         |  | N/A                                                                         |  | -0-                                                                                         



Pursuant
to the Agreed Order and Reorganization Plan, all outstanding options were terminated on April 4, 2014 by agreement.



Sales
of Unregistered Securities



Not
Applicable



|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.
|------- | --------------------------------------------------------------------------------------



SPECIAL
NOTE: This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Securities and Exchange Act of 1934, as amended. “Forward looking
statements” are those 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,
2014 and 2013. It 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 2014 or 2014
refers to the year ended July 31, 2014 and fiscal 2013 or 2013 refers to the year ended July 31, 2013.



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 (cloud-based hosted services) to value-added resellers and
enterprise customers. The services include fully hosted IP/PBX services, IP 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 for specialized applications.





12







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
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.



Results
of Operations



The
following table sets forth certain items included in our results of operations in thousands of dollars amounts and variances between
periods for the years ended July 31, 2014 and 2013.





|                                                                                                                                 |  | Years ended July 31, |        |   |      |   |        |           | 
|-------------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | ------ | - | ---- | - | ------ | --------- | 
|                                                                                                                                 |  | 2014                 |        |   | 2013 |   |        | Variances | 
|OPERATING REVENUES:                                                                                                              |  |                      |        |   |      |   |        |           | 
|Global VoIP services                                                                                                             |  | $                    | 163    |   |      | $ | 638    |           | 
|Cloud-based hosted services                                                                                                      |  |                      | 225    |   |      |   | 284    |           | 
|Total operating revenues                                                                                                         |  |                      | 388    |   |      |   | 922    |           | 
|                                                                                                                                 |  |                      |        |   |      |   |        |           | 
|Cost of services (exclusive of depreciation and amortization, shown below)                                                       |  |                      | 354    |   |      |   | 636    |           | 
|GROSS MARGIN                                                                                                                     |  |                      | 34     |   |      |   | 286    |           | 
|                                                                                                                                 |  |                      |        |   |      |   |        |           | 
|Selling, general and administrative expense (exclusive of legal and professional fees)                                           |  |                      | 553    |   |      |   | 709    |           | 
|Legal and professional fees                                                                                                      |  |                      | 2,695  |   |      |   | 360    |           | 
|Bad debt                                                                                                                         |  |                      | -      |   |      |   | 54     |           | 
|Depreciation and amortization expense                                                                                            |  |                      | 17     |   |      |   | 29     |           | 
|OPERATING LOSS                                                                                                                   |  |                      | (3,231 | ) |      |   | (866   | )         | 
|                                                                                                                                 |  |                      |        |   |      |   |        |           | 
|OTHER INCOME (EXPENSE):                                                                                                          |  |                      |        |   |      |   |        |           | 
|Gain (loss) derivative instruments and disposal of fixed assets                                                                  |  |                      | (56    | ) |      |   | 84     |           | 
|Gain (loss) on debt extinguishment                                                                                               |  |                      | 346    |   |      |   | 83     |           | 
|Interest expense                                                                                                                 |  |                      | 37     |   |      |   | (381   | )         | 
|Total other income (expense)                                                                                                     |  |                      | 327    |   |      |   | (214   | )         | 
|                                                                                                                                 |  |                      |        |   |      |   |        |           | 
|LOSS FROM CONTINUING OPERATIONS, BEFORE TAX                                                                                      |  | $                    | (2,904 | ) |      | $ | (1,080 | )         | 
|                                                                                                                                 |  |                      |        |   |      |   |        |           | 
|INCOME TAX BENEFIT (EXPENSE) FROM DISCONTINUED OPERATIONS                                                                        |  |                      | 2,410  |   |      |   | (629   | )         | 
|LOSS FROM CONTINUING OPERATIONS                                                                                                  |  |                      | (494   | ) |      |   | (1,709 | )         | 
|NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS
    (INCLUDING GAIN ON DISPOSAL OF $4,581 AND $0,     RESPECTIVELY), NET OF TAXES |  |                      | 4,678  |   |      |   | (1,222 | )         | 
|NET INCOME (LOSS) ATTRIBUTED TO DIGERATI TECHNOLOGIES, INC.                                                                      |  | $                    | 4,184  |   |      | $ | (2,931 | )         | 



Global
VoIP Services.Global VoIP services revenue decreased by $475,000, or 74%, from fiscal 2013 to fiscal 2014. The decrease in
revenue is attributable primarily to the price pressure in our industry due to a reduction of international termination, the overall
reduction in the number of carriers connected to our network, and our de-emphasis of our wholesale carrier business.





13







Cloud
Communication Services. Cloud communication services revenue decreased by $59,000, or 21%, from fiscal 2013 to fiscal 2014.
The decrease in revenue between periods is primarily attributed to the decrease in one key customer that generated significant
monthly recurring hosted services revenue. Hosted services include fully hosted IP/PBX services, IP trunking, call center applications,
prepaid services, interactive voice response auto attendant, call recording, simultaneous calling, voicemail to email conversion,
SIP trunking and multiple other IP/PBX features in a hosted environment.



Cost
of Services (exclusive of depreciation and amortization).The consolidated cost of services decreased by $282,000, or 44%,
from 2013 to 2014. The decrease in cost of services is a direct correlation to the decline in Global VoIP services revenue.



Selling,
General and Administrative (SG&A) Expenses (exclusive of legal and professional fees).SG&A expenses decreased by
$156,000, or 22%, from 2013 to 2014. The decrease in SG&A between periods is attributable to adjustments recognized as a result
of wages that were forgiven as part of the bankruptcy settlement agreement.



Legal
and professional fees. Legal and professional fees increased by $2,335,000, or 649%, from 2013 to 2014. The increase is attributable
to the legal fees related to the voluntary petition pursuant to Chapter 11 of the U.S. Bankruptcy Code filed on May 30, 2013.



Bad
debt. Bad debt decreased by $54,000, or 100%, from 2013 to 2014. The decrease is attributable to the recognition of bad debt
expense for certain accounts receivable we deemed uncollectable in 2013. We did not recognize any bad debt expense during 2014.



Depreciation
and amortization. Depreciation and amortization decreased by $12,000 or 41%, from 2013 to 2014. The decrease is as a result
of most of our fixed assets reaching their fully depreciated value during 2013.



Operating
loss. The Company reported an operating loss of $3,231,000 for 2014 compared to an operating loss of $866,000 for 2013. The
increase in operating loss between periods is primarily attributed to the increase in legal and professional fees of $2,335,000.



Other
income (expense). Other income (expense) improved by $541,000, or 253% from 2013 to 2014. The primary reason for the improvement
in other income (expense) is attributed to the recognition in 2014 of $346,000 in gain on debt extinguishment related to debts
that were forgiven as part of various settlements. Additionally, interest expense decreased between periods by $418,000, due to
reduction in debt by the Company.



Net
loss from continuing operations, before tax. Net loss from continuing operations, before tax increased by $1,824,000 or 169%,
from the year ended July 31, 2013 to the year ended July 31, 2014. The increase in net loss from continuing operations, before
tax is primarily attributed to the increase in legal and professional fees of $2,335,000 and the decrease in gross margin between
periods of $252,000.



Income
tax benefit (expense) from discontinued operations. Income tax benefit (expense) from discontinued operations improved by
$3,039,000 or 483%, from the year ended July 31, 2013 to the year ended July 31, 2014.



Net
income (loss) from discontinued operations, net of taxes. Net income (loss) from discontinued operations, net of taxes improved
by $5,900,000 or 483%, from the year ended July 31, 2013 to the year ended July 31, 2014. The primary reason for the improvement
between periods is attributed to the recognition of $4,581,000 in gain on disposal of discontinued operations.



Net
income (loss) attributed to Digerati Technologies, Inc.Net income (loss) attributed to Digerati Technologies, Inc. improved
by $7,115,000 or 243%, from the year ended July 31, 2013 to the year ended July 31, 2014. The improvement in net income (loss)
attributed to Digerati Technologies, Inc. is as a result of the improvement in net income from discontinued operations between
periods.





14







Liquidity
and Capital Resources



Cash
Position: We had a consolidated cash balance of $2,185,000 as of July 31, 2014, which includes $1,838,000 in restricted cash
for payments to unsecured creditors. Subsequent to year end, on October 2, 2014 the Trustee of the Grantor Trust paid approximately
$1,838,000 of unsecured claims in accordance to the Chapter 11 Plan of Reorganization. Net cash provided by operating activities
during the year ended July 31, 2014 was approximately $8,295,000. Cash provided by investing activities during the year ended
July 31, 2014 was approximately $26,526,000. We had cash used in financing activities of $41,017,000 pursuant to the issuance
and payments of various promissory notes during the year ended July 31, 2014. Overall, our net operating, investing and financing
activities during the year ended July 31, 2014 consumed approximately $6,196,000 of cash.



Our
current cash expenses are expected to be approximately $75,000 per month, including wages, rent, utilities and corporate professional
fees primarily associated with finalization of our Reorganization Plan. 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, 2014 our total
liabilities were approximately $3,195,000. As mentioned in Note 3 to the Consolidated Financial Statements, upon the sale of the
shares of Dishon and Hurley and in accordance with the Reorganization Plan, the appointed trustee paid approximately $1,838,000
of unsecured claims and intends to pay approximately $1,470,000 in professional fees. In addition, the trustee paid approximately
$41,500,000 in secured claims. There were no proceeds from the sale of Dishon and Hurley shares in excess of the unsecured claims,
professional fees and secured claims.



We
estimate that we need approximately $500,000 of additional working capital to fund our ongoing operations. Additionally, we have
an accumulated deficit in Stockholders’ Deficit of approximately $75,948,000, which raises substantial doubt about our ability
to continue as a going concern.



We
will continue to work with various funding sources to secure additional debt and equity financings. However, we cannot offer any
assurance that we will be successful in executing the aforementioned plans 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
| | - | -----------------------------------------------------------------------------------------------------------



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 options is determined using the Black-Scholes valuation
model. There were no stock options granted during 2013 and 2014.





15







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.





16







|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                                     | 18  
|Consolidated
    Balance Sheets as of July 31, 2014 and 2013                                    | 19  
|Consolidated
    Statements of Operations for the Years Ended July 31, 2014 and 2013            | 20  
|Consolidated
    Statements of Stockholders’ Deficit for the Years Ended July 31, 2014 and 2013 | 21  
|Consolidated
    Statements of Cash Flows for the Years Ended July 31, 2014 and 2013            | 22  
|Notes
    to Consolidated Financial Statements                                                  | 23  







17







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 ofDigerati Technologies, Inc. and its subsidiaries (collectively,
“Digerati”) as of July 31, 2014 and July 31, 2013, and the related consolidated statements of operations, stockholders’
deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of Digerati’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.



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, 2014 and July 31, 2013 and the consolidated results of their operations and their
cash flows for each of the years then ended 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



July 15,
2015





18







PART
1. FINANCIAL INFORMATION



ITEM
1. FINANCIAL STATEMENTS



DIGERATI
TECHNOLOGIES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands, except per share amounts)



|                                                                                              |  | July
    31, |         |   | July
    31, |  
|--------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ------------ | -
|                                                                                              |  | 2014         |         |   | 2013         |  
|                                                                                              |  |              |         |   |              |  
|ASSETS                                                                                        |  |              |         |   |              |  
|CURRENT
    ASSETS:                                                                           |  |              |         |   |              |  
|Cash
    and cash equivalents                                                                 |  | $            | 347     |   |              | $
|Restricted
    cash                                                                           |  |              | 1,838   |   |              |  
|Accounts
    receivable, net of allowance for doubtful accounts of $54, respectively          |  |              | 9       |   |              |  
|Prepaid
    and other current assets                                                          |  |              | 157     |   |              |  
|Assets
    held for sale                                                                      |  |              | -       |   |              |  
|Total
    current assets                                                                      |  |              | 2,351   |   |              |  
|                                                                                              |  |              |         |   |              |  
|LONG-TERM
    ASSETS:                                                                         |  |              |         |   |              |  
|Intangible
    assets, net of accumulated amortization of $91 and $76, respectively           |  |              | 59      |   |              |  
|                                                                                              |  |              |         |   |              |  
|Property
    and equipment, net                                                               |  |              | 1       |   |              |  
|                                                                                              |  |              |         |   |              |  
|Total
    assets                                                                              |  | $            | 2,411   |   |              | $
|                                                                                              |  |              |         |   |              |  
|LIABILITIES
    AND STOCKHOLDERS' DEFICIT                                                     |  |              |         |   |              |  
|CURRENT
    LIABILITIES:                                                                      |  |              |         |   |              |  
|Accounts
    payable                                                                          |  | $            | 1,283   |   |              | $
|Accrued
    liabilities                                                                       |  |              | 376     |   |              |  
|10%
    Convertible debentures, net of unamortized discount of $0 and $56, respectively       |  |              | 50      |   |              |  
|Current
    portion of long term debt, net of unamortized discount of $0 and $0, respectively |  |              | 1,338   |   |              |  
|Derivative
    liability                                                                      |  |              | 10      |   |              |  
|Liabilities
    held for sale                                                                 |  |              | -       |   |              |  
|Total
    current liabilities                                                                 |  |              | 3,057   |   |              |  
|                                                                                              |  |              |         |   |              |  
|LONG-TERM
    LIABILITIES:                                                                    |  |              |         |   |              |  
|Customer
    deposits                                                                         |  |              | 138     |   |              |  
|Total
    long-term liabilities                                                               |  |              | 138     |   |              |  
|                                                                                              |  |              |         |   |              |  
|Total
    liabilities                                                                         |  |              | 3,195   |   |              |  
|                                                                                              |  |              |         |   |              |  
|Commitments
    and contingencies                                                             |  |              |         |   |              |  
|                                                                                              |  |              |         |   |              |  
|STOCKHOLDERS'
    DEFICIT:                                                                    |  |              |         |   |              |  
|Preferred
    stock, 50,000,000 shares authorized, none issued and  outstanding               |  |              | -       |   |              |  
|Common
    stock, $0.001, 150,000,000 shares authorized, 1,977,626 and 1,977,626              |  |              |         |   |              |  
|issued
    and outstanding, respectively                                                      |  |              | 2       |   |              |  
|Additional
    paid in capital                                                                |  |              | 75,161  |   |              |  
|Accumulated
    deficit                                                                       |  |              | (75,948 | ) |              |  
|Other
    comprehensive income                                                                |  |              | 1       |   |              |  
|Total
    stockholders' deficit                                                               |  |              | (784    | ) |              |  
|Total
    liabilities and stockholders' deficit                                               |  | $            | 2,411   |   |              | $



See
accompanying notes to consolidated financial statements





19









DIGERATI TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)







|                                                                                                                         |  | Years ended July 31, |          
|------------------------------------------------------------------------------------------------------------------------ |  | -------------------- | ---------
|                                                                                                                         |  | 2014                 |          
|OPERATING REVENUES:                                                                                                      |  |                      |          
|Global VoIP services                                                                                                     |  | $                    | 163      
|Cloud-based hosted services                                                                                              |  |                      | 225      
|                                                                                                                         |  |                      |          
|Total operating revenues                                                                                                 |  |                      | 388      
|                                                                                                                         |  |                      |          
|OPERATING EXPENSES:                                                                                                      |  |                      |          
|Cost of services (exclusive of depreciation and amortization)                                                            |  |                      | 354      
|Selling, general and administrative expense (exclusive of legal and professional fees)                                   |  |                      | 553      
|Legal and professional fees                                                                                              |  |                      | 2,695    
|Bad debt                                                                                                                 |  |                      | -        
|Depreciation and amortization expense                                                                                    |  |                      | 17       
|Total operating expenses                                                                                                 |  |                      | 3,619    
|                                                                                                                         |  |                      |          
|OPERATING LOSS                                                                                                           |  |                      | (3,231   
|                                                                                                                         |  |                      |          
|OTHER INCOME (EXPENSE):                                                                                                  |  |                      |          
|Gain (loss) derivative instruments and disposal of fixed assets                                                          |  |                      | (56      
|Gain (loss) on debt extinguishment                                                                                       |  |                      | 346      
|Interest expense                                                                                                         |  |                      | 37       
|Total other income (expense)                                                                                             |  |                      | 327      
|                                                                                                                         |  |                      |          
|NET LOSS FROM CONTINUING OPERATIONS, BEFORE TAX                                                                          |  |                      | (2,904   
|                                                                                                                         |  |                      |          
|INCOME TAX BENEFIT (EXPENSE) FROM DISCONTINUED OPERATIONS                                                                |  |                      | 2,410    
|LOSS FROM CONTINUING OPERATIONS                                                                                          |  |                      | (494     
|NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS (INCLUDING GAIN ON DISPOSAL OF $4,581 AND $0, RESPECTIVELY), NET OF TAXES |  |                      | 4,678    
|NET INCOME (LOSS) ATTRIBUTED TO DIGERATI TECHNOLOGIES, INC.                                                              |  | $                    | 4,184    
|                                                                                                                         |  |                      |          
|INCOME (LOSS) PER SHARE - BASIC AND DILUTED                                                                              |  |                      |          
|From continuing operations                                                                                               |  | $                    | (0.25    
|From discontinued operations                                                                                             |  | $                    | 2.37     
|EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED ATTRIBUTED TO DIGERATI                                                     |  |                      |          
|TECHNOLOGIES, INC. SHAREHOLDERS                                                                                          |  | $                    | 2.12     
|                                                                                                                         |  |                      |          
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED                                                           |  |                      | 1,977,626





See accompanying notes to consolidated
financial statements





20









DIGERATI
TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR
THE YEARS ENDED JULY 31, 2014 AND 2013

(In
thousands, except share amounts)





|                                  |  | Common |           |  | Additional
        Paid-in |   |   | Accumulated |  |   | Other
        Comprehensive |  |  |        |        
|--------------------------------- |  | ------ | --------- |  | -------------------------- | - | - | ----------- |  | - | --------------------------- |  |  | ------ | -------
|                                  |  | Shares |           |  | Par                        |   |   | Capital     |  |   | Deficit                     |  |  | Income |        
|BALANCE, July 31,
    2012        |  |        | 974,500   |  |                            | $ | 1 |             |  | $ | 74,812                      |  |  | $      | (77,201
|Stock option expense              |  |        | -         |  |                            |   | - |             |  |   | 78                          |  |  |        | -      
|Issuance of warrants for services |  |        | -         |  |                            |   | - |             |  |   | 3                           |  |  |        | -      
|Stock issued for debt             |  |        | 306,100   |  |                            |   | - |             |  |   | 101                         |  |  |        | -      
|Reverse split round up            |  |        | 697,026   |  |                            |   | 1 |             |  |   | 167                         |  |  |        | -      
|Net loss                          |  |        | -         |  |                            |   | - |             |  |   | -                           |  |  |        | (2,931 
|BALANCE, July 31, 2013            |  |        | 1,977,626 |  |                            | $ | 2 |             |  | $ | 75,161                      |  |  | $      | (80,132
|Net income                        |  |        | -         |  |                            |   | - |             |  |   | -                           |  |  |        | 4,184  
|BALANCE, July 31, 2014            |  |        | 1,977,626 |  |                            | $ | 2 |             |  | $ | 75,161                      |  |  | $      | (75,948



See
accompanying notes to consolidated financial statements



21







DIGERATI
TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF CASH FLOWS

(In
thousands)



|                                                                                     |  | Years ended July 31, |        
|------------------------------------------------------------------------------------ |  | -------------------- | -------
|                                                                                     |  | 2014                 |        
|                                                                                     |  |                      |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                |  |                      |        
|Net income (loss)                                                                    |  | $                    | 4,184  
|Adjustments to reconcile net income (loss) to cash provided by operating activities: |  |                      |        
|(Gain) loss on debt extinguishment                                                   |  |                      | (346   
|(Gain) loss on derivative instruments and disposal of fixed assets                   |  |                      | 56     
|(Gain) on sale of Subsidiaries                                                       |  |                      | (4,581 
|Depreciation, amortization and accretion                                             |  |                      | 8,994  
|Impairment of goodwill                                                               |  |                      | -      
|Amortization of debt discount                                                        |  |                      | -      
|Issuance of stock grants and options for services                                    |  |                      | -      
|Issuance of warrants for services                                                    |  |                      | -      
|Changes in operating assets and liabilities:                                         |  |                      |        
|Accounts receivable                                                                  |  |                      | 32     
|Prepaid expenses and other current assets                                            |  |                      | 133    
|Accounts payable                                                                     |  |                      | 113    
|Accrued liabilities                                                                  |  |                      | (290   
|Customer deposits                                                                    |  |                      | -      
|Net cash provided by operating activities                                            |  |                      | 8,295  
|                                                                                     |  |                      |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                |  |                      |        
|Proceeds from sale of Subsidiaries                                                   |  |                      | 41,500 
|Restricted cash                                                                      |  |                      | (1,838 
|Acquisition of Subsidiaries                                                          |  |                      | -      
|Purchases of property & equipment                                                    |  |                      | (13,136
|Net cash provided by (used in) investing activities                                  |  |                      | 26,526 
|                                                                                     |  |                      |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                |  |                      |        
|Payments on debt                                                                     |  |                      | (46,384
|Proceeds from note payable, related party                                            |  |                      | 45     
|Proceeds from note payable                                                           |  |                      | 5,322  
|Net cash (used in) provided by financing activities                                  |  |                      | (41,017
|                                                                                     |  |                      |        
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                     |  |                      | (6,196 
|CASH AND CASH EQUIVALENTS, beginning of period                                       |  |                      | 6,543  
|                                                                                     |  |                      |        
|CASH AND CASH EQUIVALENTS, end of period                                             |  | $                    | 347    
|                                                                                     |  |                      |        
|SUPPLEMENTAL DISCLOSURES:                                                            |  |                      |        
|Cash paid for interest                                                               |  | $                    | -      
|                                                                                     |  |                      |        
|NON-CASH INVESTING AND FINANCING TRANSACTIONS                                        |  |                      |        
|Common stock issued for debt                                                         |  | $                    | -      



See
accompanying notes to consolidated financial statements





22







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”, “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





23







Cloud
Communication Services: We provide cloud communication services to value-added resellers and enterprise customers. The service
includes fully hosted IP/PBX services, IP 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 for specialized applications.



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.



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. For the purposes of the statement of cash flows, cash and cash equivalents
includes cash reserves held by the Grantor Trust as of July 31, 2014 for payments of approximately of $1,838,000 for unsecured
claims in accordance to the Chapter 11 Plan of Reorganization. See Note 3.



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, 2014 and 2013, Digerati’s
allowance for doubtful accounts balance was $54,000.



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. As of July 31, 2014 and 2013, Digerati has derivative instruments related to, convertible debt, debentures
and warrants. See Note 12.





24







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. No liability
for unrecognized tax benefits was recorded as of July 31, 2014 and 2013.



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 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, 2014 and 2013, potential dilutive securities had an anti-dilutive effect and were not included in
the calculation of diluted net 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.



Our
derivative liabilities as of July 31, 2014 and 2013 were $10,000 for both periods and were valued using Level 3 inputs.



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.





25







NOTE
2 – GOING CONCERN



Financial
Condition



Digerati’s
consolidated financial statements for the year ending July 31, 2014 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 $75,948,000 and a working capital deficit of approximately $706,000 which raises substantial
doubt about Digerati’s ability to continue as a going concern.



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, 2014 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 – BANKRUPTCY



On
May 30, 2013, Digerati Technologies, Inc., Debtor in Possession (“Digerati”) filed a voluntary petition in the United
States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”), Case No. 13-33264
(the “Bankruptcy”), seeking relief under the provisions of Chapter 11 of the United States Bankruptcy Code.



On
April 4, 2014 (the “Confirmation Date”), the Bankruptcy Court entered an Agreed Order Confirming Joint Plan of Reorganization
Filed by Plan Proponents (“Agreed Order”) confirming the Plan Proponents’ Joint Chapter 11 Plan of Reorganization
as modified on the record on April 4, 2014 and/or as modified by the Agreed Order (the “Reorganization Plan”). As
used herein, the term “Reorganized Debtor” refers to Digerati Technologies, Inc., a Nevada corporation, after the
Confirmation Date and as reorganized by the Reorganization Plan.





26







Summary
of the Plan



This
summary is not intended to be a complete description of the Reorganization Plan, and it is qualified in its entirety by reference
to the Agreed Order, Reorganization Plan, Plan Supplement and Disclosure Statement. A copy of the Agreed Order and Reorganization
Plan were filed as exhibits to Digerati’s Current Report on Form 8-K filed with the Securities and Exchange Commission on
April 11, 2014.



| | (g) | The
                                         Agreed Order provided final approval of the Disclosure Statement, a copy of which was
                                         filed as an exhibit to Digerati’s Current Report on Form 8-K dated January 23,
                                         2014.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (h) | Upon
                                         the Confirmation Date, the Reorganized Debtor had 1,977,626 shares of common stock outstanding.
                                         All outstanding shares of Digerati’s preferred stock, warrants, options, conversion
                                         rights and other rights to acquire shares of common stock and all “super voting”
                                         shares were cancelled.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (i) | The
                                         Reorganized Debtor’s Board of Directors consisted of Messrs. Arthur L. Smith, William
                                         E. McIlwain and James J. Davis. The Reorganized Debtor’s officers, who served at
                                         the discretion of the board of directors until the Stockholder Meeting, were:
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | Arthur
L. Smith | President and Chief Executive Officer | 
| | --------------- | ------------------------------------- | 
| | Antonio Estrada | Chief Financial Officer               | 





Subsequently,
on September 15, 2014, the Company held its Annual Meeting of Shareholders, and at the discretion of the new directors, Mr. Smith
and Mr. Estrada continued to serve as officers of the Reorganized Debtor.



| | (j) | The
                                         Reorganized Debtor was required to hold a Stockholder Meeting to elect a new board of
                                         directors after August 31, 2014, and before September 15, 2014. The Reorganized Debtor’s
                                         officers and directors, as well as the parties to the BSA and a Rule 11 Mediated Settlement
                                         Agreement dated January 14, 2014 (the “Rule 11 Agreement”), were not eligible
                                         for election to the new board of directors at the Stockholder Meeting. Messrs. Smith
                                         and Estrada were not permitted to solicit proxies in connection with the Stockholder
                                         Meeting but were allowed to vote shares of common stock owned by them. Subsequently,
                                         on September 15, 2014, the Company held its Annual Meeting of Shareholders, and new directors
                                         were elected.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (k) | Under
                                         the Reorganization Plan title to the issued and outstanding shares of Dishon Disposal,
                                         Inc., a North Dakota corporation (“Dishon”), and Hurley Enterprises, Inc.,
                                         a Montana corporation (“Hurley”), owned by Digerati were transferred to a
                                         Grantor Trust subject to existing liens and the Rule 11 Agreement. The Dishon and Hurley
                                         shares did not vest in the Reorganized Debtor and remained the property of Digerati’s
                                         bankruptcy estate. Additionally, under the Reorganization Plan certain retained litigation
                                         claims were transferred to the Grantor Trust. The beneficiary of the Grantor Trust is
                                         the Reorganized Debtor. The trustee and Disbursing Agent of the Grantor Trust is Mr.
                                         William R. Greendyke. All other assets of Digerati that are not transferred to the Grantor
                                         Trust and/or retained by Digerati vested in the Reorganized Debtor as of the Confirmation
                                         Date, including but not limited to the common stock of Shift8 Technologies, Inc., free
                                         and clear of liens, claims and encumbrances.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (l) | All
                                         of the issued and outstanding shares of Dishon and Hurley were sold by the Grantor Trust
                                         and the proceeds from the sale were distributed by the trustee and Disbursing Agent to
                                         discharge certain allowed claims. The claims distribution set forth in the Reorganization
                                         Plan were as follows:
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xi) | Allowed
                                         priority claims were paid in full from cash on hand.
| | ---- | -----------------------------------------------------------------------------------------------------



| | (xii) | Allowed
                                         administrative claims will be paid from the proceeds of the sale of the Dishon and Hurley
                                         shares except for those amounts paid pursuant to the budget attached to the Reorganization
                                         Plan. The Company estimated the maximum potential amount of any federal income tax liability
                                         on the gains derived from the sale of the Dishon and Hurley shares and deposited that
                                         amount into a reserve account until determination of the actual taxes due.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





27







| | (xiii) | Proceeds
                                         from the sale of the Dishon shares in excess of $1,250,000 plus one-half of Digerati’s
                                         unpaid professional fees (the “Dishon Carve Out”) and amount reserved for
                                         taxes were delivered to creditors holding $30,000,000 of Digerati’s indebtedness
                                         secured by the Dishon shares, up to the principal of and accrued interest on such indebtedness.
                                         In addition, the secured creditors maintain a right to seek a refund if the estimated
                                         amount withheld for taxes on the sale of the Dishon shares exceeds the tax obligation.
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xiv) | Proceeds
                                         from the sale of the Hurley shares in excess of $1,250,000 plus one-half of Digerati’s
                                         unpaid professional fees (the “Hurley Carve Out”) and amount reserved for
                                         taxes were delivered to creditors holding $30,000,000 of Digerati’s indebtedness
                                         secured by the Hurley shares, up to the principal of and accrued interest on such indebtedness.
                                         In addition, the secured creditors maintain a right to seek a refund if the estimated
                                         amount withheld for taxes on the sale of the Hurley shares exceeds the tax obligation.
                                         Principal of or interest on Digerati’s indebtedness secured by the Hurley shares
                                         that is in excess of the net proceeds from the sale of Hurley shares has been waived.
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xv) | Allowed
                                         unsecured claims of $1,000 or less were paid in full from cash on hand.
| | ---- | ------------------------------------------------------------------------------------------------------------------------



| | (xvi) | Allowed
                                         unsecured claims greater than $1,000 were paid in full from the Dishon Carve Out and
                                         the Hurley Carve Out. The excess from the combined $2,500,000 withheld from the sale
                                         of the Dishon shares and Hurley shares will be applied to the unpaid professional fees.
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xvii) | All
                                         cure payments under assumed contracts were paid within 90 days of April 4, 2014.
| | ------ | -----------------------------------------------------------------------------------------------------------------------------



| | (xviii) | All
                                         executory contracts of Digerati were rejected except as previously assumed by order in
                                         the Bankruptcy Court or specifically listed as assumed in the Reorganization Plan.
| | ------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xix) | The
                                         Reorganized Debtor released Messrs. Arthur L. Smith, Antonio Estrada, William E. McIlwain
                                         and James J. Davis in their individual capacity and their respective capacities as officers
                                         and/or directors, as applicable, of Digerati, Hurley or Dishon of all claims and causes
                                         of action that arise on or before the Confirmation Date that could be asserted by Digerati,
                                         the estate and/or on account of the Bankruptcy through the Stockholder Meeting. The Reorganized
                                         Debtor also released Messrs. Arthur L. Smith, William McIlwain and James Davis to the
                                         greatest extent provided by law from any claims.
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (xx) | The
                                         Reorganization Plan became effective on December 31, 2014.
| | ---- | -------------------------------------------------------------------------------------------------------



NOTE
4 – DISCONTINUED OPERATIONS



The
Company applied discontinued operations accounting in accordance with ASC Topic 205-20, Presentation of Financial Statements–Discontinued
Operations to the operations of Dishon and Hurley, two well established oil field services operating entities acquired on November
26, 2012.



In
aggregate, discontinued operations included net sales of $57.03 million and net income, net of tax of $4,678,000 during the year
ended July 31, 2014. As of July 31, 2014 both Dishon and Hurley were sold. Assets and liabilities as of the sale date, included
total assets of $77.42 million and total liabilities of $78.69 million. Liabilities included $60 million in notes payable to the
former owners of Dishon and Hurley as described below.



In
November 2012, Digerati entered into a promissory note in the amount of $30 million with Mr. Terry Dishon, payable in bi-monthly
installments, bearing interest of 0.22% per annum and a maturity date of November 16, 2014. On July 1, 2014, the Grantor Trust
entered into a Stock Purchase Agreement for the sale of 100% of the outstanding equity of Dishon for an aggregate sale price of
$27,000,000, subject to adjustment for certain assets and liabilities as of the closing date. The closing occurred on July 18,
2014.  At the time of closing, the trustee paid the promissory note to Terry Dishon, and the deficiency on principal balance
and interest of approximately $3,000,000 was waived by the note holder.





28







In
November 2012, Digerati entered into a promissory note in the amount of $20 million and $10 million with Hurley Fairview, LLC
and Mrs. Sheyenne Rae Nelson Hurley, respectively, payable in bi-monthly installments, bearing interest of 0.22% per annum and
a maturity date of March 31, 2015. On July 10, 2014, the trustee of the Grantor Trust entered into a Stock Purchase Agreement
for the sale of 100% of the outstanding equity of Hurley for an aggregate sale price of $14,500,000. The closing occurred on July
30, 2014. At the time of closing, the trustee paid the promissory notes to Hurley Fairview, LLC and Sheyenne Rea Nelson Hurley,
and the deficiency on principal balance and interest of approximately $15,500,000 was waived by the note holders.



Based
on the final sales prices for Dishon and Hurley, an impairment of $5,885,000 was recorded on the Hurley goodwill during the year
ended July 31, 2013.



Assets
and liabilities of discontinued operations as of sale date and July 31, 2013 were as follows (in thousands):



|                                       |  | Sale 
Date |        |   | July 31,
2013 |  
|-------------------------------------- |  | ---------- | ------ | - | ------------- | -
|Cash and cash equivalents              |  | $          | 3,399  |   |               | $
|Accounts receivable                    |  |            | 13,520 |   |               |  
|Other assets                           |  |            | 9,285  |   |               |  
|Property and equipment                 |  |            | 30,393 |   |               |  
|Goodwill                               |  |            | 3,858  |   |               |  
|Land                                   |  |            | 3,851  |   |               |  
|Permit – waste disposal, net           |  |            | 12,048 |   |               |  
|Permit – sludge service                |  |            | 1,071  |   |               |  
|Total net assets held for sale         |  | $          | 77,425 |   |               | $
|                                       |  |            |        |   |               |  
|Accounts payable                       |  |            | 2,634  |   |               |  
|Accrued expenses                       |  |            | 7,636  |   |               |  
|Notes payable                          |  |            | 68,423 |   |               |  
|Total liabilities held for sale        |  |            | 78,693 |   |               |  
|Net assets (liabilities) held for sale |  | $          | (1,268 | ) |               | $



Net
income from discontinued operations for the twelve months ended July 31, 2014 and 2013 were as follows (in thousands):



|                                                           |  | July 31,
2014 |        |   | July 31,
2013 |  
|---------------------------------------------------------- |  | ------------- | ------ | - | ------------- | -
|Revenues                                                   |  | $             | 57,034 |   |               | $
|Cost of goods sold                                         |  |               | 33,780 |   |               |  
|Gross profit                                               |  |               | 23,254 |   |               |  
|Selling and administrative expenses                        |  |               | 9,901  |   |               |  
|Depreciation and amortization                              |  |               | 8,976  |   |               |  
|Other expense                                              |  |               | 1,870  |   |               |  
|Gain on sale of discontinued operations                    |  |               | (4,581 | ) |               |  
|Net income (loss) from discontinued operations             |  |               | 7,088  |   |               |  
|Income Tax (benefit) expense from discontinued Operations  |  |               | (2,410 | ) |               |  
|Net income (loss) from discontinued operations, net of tax |  | $             | 4,678  |   |               | $



Digerati
recognized a gain on disposal of Dishon and Hurley of $4,581,000; this was the net difference between the net book value at the
time of the sale in comparison to the sales price of both entities, in addition to the debt forgiven by the debt holders.





29







NOTE
5 – INTANGIBLE ASSETS



During
fiscal 2008, Digerati lent $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 (PrivateBrancheXchange), IP Centrex
application, prepaid calling, call center, conferencing, messaging and other innovative telephony functionality necessary to offer
standard and/or custom services to the Residential and Enterprise markets. The NetSapiens’ License is being amortized equally
over a period of 10 years.



NOTE
6 –  PROPERTY AND EQUIPMENT



Following
is a summary of Digerati’s property and equipment at July 31, 2014 and 2013 (in thousands):



|                               |  | Useful lives |  | 2014 |    |   | 2013 |  
|------------------------------ |  | ------------ |  | ---- | -- | - | ---- | -
|Telecom equipment & software   |  | 1-5 years    |  | $    | 6  |   |      | $
|Less: accumulated depreciation |  |              |  |      | (5 | ) |      |  
|Net–property and equipment     |  |              |  | $    | 1  |   |      | $



For
the years ended July 31, 2014 and 2013, depreciation and amortization totaled approximately $17,000 and $29,000, respectively.



NOTE
7 – DEBT



At
July 31, 2014 and 2013, outstanding debt consisted of the following: (In thousands, except per share amounts).





|Outstanding
debt consisted of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | July 31, |        |   | July 31, |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------- | ------ | - | -------- | -
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | 2014     |        |   | 2013     |  
|Note payable to Alfonso Torres, payable upon maturity, bearing interest of 6.00% per annum, maturing July 31, 2012, unsecured. (See details below)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $        | 560    |   |          | $
|Note payable to Vantage Bank payable in monthly installments, bearing interest at 8.00% per annum, maturing December 29, 2011, collateralized by Digerati’s assets. (See details below)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |          | 13     |   |          |  
|Note payable to ATV Texas Ventures IV payable in monthly installments, bearing interest at 12.00% per annum, maturing October 10, 2012, collateralized by Digerati’s assets. (See details below)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |          | 122    |   |          |  
|Note payable to ATVF II payable in monthly installments, bearing interest at 12% for the first year and 18% during the second year, maturing January 10, 2013, collateralized by Digerati’s assets. (See details below)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |          | 154    |   |          |  
|Note payable to ATVF II payable in monthly installments, bearing interest at 16% for the first year and 18% during the second year, maturing May 10, 2013, collateralized by Digerati’s assets. (See details below)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |          | 186    |   |          |  
|Note payable to Thermo Credit, LLC., interest payment for the first twenty-three months with a balloon payment on the twenty-fourth month, maturing August 2, 2012, collateralized by Digerati’s accounts receivable. Bearing an annual interest rate equivalent to the lesser of the maximum rate and the greater of the prime rate plus 8.25% or 11.5%, a commitment fee of 2% and weekly monitoring fee of .05%. Digerati is required to maintain the following financial covenants: 1) A consolidated debt service coverage ratio, for the 12-month period, of not less than 1.0 as of the last day of each quarter and 2) A consolidated operating income, for the 12-month period, of not less than zero as of the last day of each fiscal year. (See details below) |  |          | 258    |   |          |  
|Note payable to Arthur L. Smith, bearing interest of 3.00% per annum, maturity October 31, 2015, unsecured. (See details below)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |          | 45     |   |          |  
|Note payable to MCI Partners, Inc. bearing no interest and no maturity date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |          | -      |   |          |  
|Convertible Debentures (See details below)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |          | 50     |   |          |  
|Total outstanding long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | $        | 1,388  |   |          |  
|Current portion of long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |          | (1,388 | ) |          |  
|Long-term debt, net of current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $        | -      |   |          | $





30







On
October 12, 2010, three of the warrant holders exercised their put rights and as a result, Digerati made payments to the related
warrant holders amounting to $75,000 that was charged to derivative liability, and the related warrants were cancelled as a result
of the payment made for the put rights and resulted in a remaining balance of $10,000 as of July 31, 2014.



On
April 3, 2012, May 2, 2012, May 15, 2012 and June 21, 2012 Digerati entered into four Convertible Debentures totaling $75,000,
the balance outstanding at July 31, 2014 and 2013 was $50,000 and $19,000 net of discount, respectively. The holders can convert
the debentures into common stock at a rate of $3.45. Additionally, Digerati issued 13,100 warrants at an exercise price of $3.45
to the debenture holders. Digerati analyzed the debentures for derivative accounting consideration and determined that the warrants
qualify as a derivative instrument, due to the exercise price adjustment provision. As of July 31, 2014, the derivative liability
was valued at $0. On April 4, 2014, under the Reorganization Plan, the warrants issued under the convertible debentures were cancelled.
Subsequent to the period end, on October 2, 2014, under the Reorganization Plan, the appointed trustee of the Grantor Trust paid
the principal balance outstanding to the debenture holders.



As
of July 31, 2014, Digerati was in default of its notes with Vantage Bank Texas, National Association (formerly San Antonio National
Bank) and Thermo Credit, LLC due to its failure to meet certain debt covenant ratios.



The
Company was able to obtain a waiver until July 31, 2012 from Vantage Bank for such defaults. On July 5, 2012, Vantage Bank filed
a lawsuit in Bexar County, Texas against Digerati for failure to pay the remaining indebtedness. On November 29, 2012, Digerati
reached an “agreed judgment” with Vantage Bank for $18,796. On October 2, 2014, under the Reorganization Plan, the
appointed trustee paid the principal balance outstanding on the Vantage Bank promissory note.



On
April 18, 2012, Digerati entered into a forbearance agreement with Thermo Credit, LLC, in which the lender agreed to temporarily
forebear the defaults under the promissory note. Additionally during the year ended July 31, 2013, Digerati agreed to transfer
its right to some equipment to Thermo Credit, LLC, and as a result the debt to Thermo Credit, LLC, was reduced by $121,000. On
October 2, 2014, under the Reorganization Plan, the appointed trustee paid the principal balance outstanding on the promissory
note.



In
November 2013, Shift8 Networks, Inc., an operating subsidiary of Digerati, converted accounts payable into a note payable with
Mr. Arthur L. Smith, in the amount of $46,755. The note has an implied annual interest rate of 0% and a maturity date of February
28, 2014. Subsequently, Mr. Smith agreed to extend the maturity date of the promissory note to November 30, 2014 and later agreed
to extend the maturity date to April 30, 2015. On January 31, 2015, Shift8 Networks and Mr. Smith agreed to renew and extend the
maturity date on the promissory note to October 31, 2015. The renewed note has an implied annual interest rate of 3%. Balance
as of July 31, 2014 was $45,000. On February 2, 2015, Shift8 Networks made a principal payment of $2,000.



The
promissory note for $20,000 payable to Recap Marketing & Consulting LLP maturing October 1, 2010 was exchanged for 1,000 shares
of Digerati Series A Preferred Stock during fiscal 2013. Pursuant to the Reorganization Plan confirmed on April 4, 2014, all shares
of the Series A Preferred Stock were cancelled and deemed void ab initio. The $20,000 promissory note is not an Allowed Claim
as defined in the Reorganization Plan.



On
October 2, 2014, under the Reorganization Plan, the appointed trustee of the Grantor Trust paid the principal balance outstanding
on the promissory notes to Alfonso Torres, ATV Texas Ventures IV, ATVF II, Thermo Credit, LLC and Vantage Bank.





31







NOTE
8 – INCOME TAXES



Digerati
files a consolidated tax return. Certain tax years are subject to examination by the Internal Revenue Service and certain state
taxing authorities. As of July 31, 2014, Digerati had net operating loss carryforwards of approximately $19,586,000 to reduce
future federal income tax liabilities. Income tax benefit (provision) for the years ended July 31, 2014 and 2013 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, 2014 and 2013:



|                              |  | 2014 |            |   | 2013 |  
|----------------------------- |  | ---- | ---------- | - | ---- | -
|Net operating loss carryover  |  | $    | 6,855,000  |   |      | $
|Valuation allowance           |  |      | (6,855,000 | ) |      |  
|Total deferred tax asset, net |  | $    | -          |   |      | $



At
July 31, 2014, realization of Digerati’s deferred tax assets was considered not more likely than to be realized. The change
in the valuation allowance for 2014 was approximately $2,545,000. Management has evaluated and concluded that there are no significant
uncertain tax positions requiring recognition in Digerati’s combined financial statements. All tax years remain open to
examination by the major taxing jurisdictions in which Digerati is subject to tax.



NOTE
9 – COMMITMENTS AND CONTINGENCIES



Commitments



Digerati
leases its office space with monthly payments of $545; the lease is on a month to month basis. The annual rent expense under the
operating lease was $8,635 and $13,242 for 2014 and 2013, respectively. The future minimum lease payment under the operating lease
for fiscal year 2015 is $6,500.



Contingencies



On
May 1, 2014, Recap Marketing & Consulting LLP, Rainmaker Ventures II, Ltd and WEM Equity Capital Investments, Ltd. filed an
arbitration claim pursuant to the Bankruptcy Settlement Agreement claiming an aggregate of 4,054,923 shares of Digerati Common
Stock, $.001 par value per share. On July 19, 2014, the arbitrator entered a decision that Recap Marketing & Consulting LLP
was entitled to the transfer of 20,600 shares of Digerati Common Stock that were outstanding as of the date of the November Transactions
and reflected on Digerati’s stockholder list as being held by other stockholders who were principals of Recap Marketing
& Consulting, LLP. The arbitrator’s award also recognized 100 shares of Digerati Common Stock that were outstanding
as of the date of the November Transactions and reflected on Digerati’s stockholder list as being held by Rainmaker Ventures
II, Ltd, 4,400 shares of Digerati Common Stock that were outstanding as of the date of the November Transactions and reflected
on Digerati’s stockholder list as being held by WEM Equity Capital Investments, Ltd. and 31,170 shares of Digerati Common
Stock outstanding as of the date of the November Transactions as to which WEM Equity Capital Investments, Ltd. was the beneficial
owner. In addition, the arbitrator dismissed challenges to the beneficial ownership of shares held by Arthur L. Smith and Antonio
Estrada. Since all shares awarded by the arbitrator were outstanding as of the date of the award, Digerati was not required to
issue additional shares of its Common Stock pursuant to the award.



From
time to time Digerati is involved in various litigations in the ordinary course of business. The Company’s management believes
existing litigation will not have a material adverse effect on the financial condition, results of operations or cash flows of
Digerati.





32







NOTE
10 – STOCK -BASED COMPENSATION



In
September 2005, Digerati adopted its 2005 stock compensation plan. This plan, as amended, authorizes the grant of up to 17.5 million
warrants, 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 warrants, stock options and other awards vary based on the market price of the shares of common stock as of the
date of grant. The warrants, stock options, restricted common stock, non-restricted common stock and other awards vest based on
the terms of the individual grant.



As
of July 31, 2014, Digerati did not have any outstanding options. On April 4, 2014 under the Reorganization Plan all outstanding
options were cancelled.



Digerati
recognized approximately $0 and $78,000 in stock based compensation expense to employees and consultants during the years ended
July 31, 2014 and 2013, respectively. Unamortized compensation cost totaled $0 at July 31, 2014 and July 31, 2013.



A
summary of the options as of July 31, 2014 and July 31, 2013 and the changes during the periods are presented below:



|                             |  |         |          |   | Weighted-average |   |      | Weighted-average remaining | 
|---------------------------- |  | ------- | -------- | - | ---------------- | - | ---- | -------------------------- | 
|                             |  | Options |          |   | exercise price   |   |      | term (years)               | 
|                             |  |         |          |   |                  |   |      |                            | 
|Outstanding at July 31, 2012 |  |         | 126,900  |   |                  | $ | 5.75 |                            | 
|Granted                      |  |         | -        |   |                  |   | -    |                            | 
|Forfeited                    |  |         | (600     | ) |                  |   | 4.02 |                            | 
|Outstanding at July 31, 2013 |  |         | 126,300  |   |                  | $ | 5.30 |                            | 
|Granted                      |  |         | -        |   |                  |   | -    |                            | 
|Cancelled                    |  |         | (126,300 | ) |                  |   | 5.30 |                            | 
|Outstanding at July 31, 2014 |  |         | -        |   |                  | $ | -    |                            | 
|Exercisable at July 31, 2014 |  |         | -        |   |                  | $ | -    |                            | 



NOTE
11 – WARRANTS



During
the year ended July 31, 2014, Digerati did not issue any warrants.



During
the year ended July 31, 2013, Digerati issued:



| | - | 13,100
warrants to various consultants for services rendered at an average exercise price of $1.15. The Company recognized warrant expense
of approximately $3,000 equivalent to the value of the warrants calculated based on the share’s closing price at the grant
dates. On April 4, 2014 under the Reorganization Plan all outstanding warrants were cancelled.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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





| | Expected dividend yield         | 0.00%             | 
| | ------------------------------- | ----------------- | 
| | Expected stock price volatility | 226.93% - 418.67% | 
| | Risk-free interest rate         | 0.73% - 0.89%     | 
| | Expected term                   | 3.0 - 6.0 years   | 





33







A
summary of the warrants as of July 31, 2014 and 2013 and the changes during the years ended July 31, 2014 and 2013 are presented
below:



|                             |  |          |          |   |                  |   |      | Weighted-average      | 
|---------------------------- |  | -------- | -------- | - | ---------------- | - | ---- | --------------------- | 
|                             |  |          |          |   | Weighted-average |   |      | remaining contractual | 
|                             |  | Warrants |          |   | exercise price   |   |      | term (years)          | 
|                             |  |          |          |   |                  |   |      |                       | 
|Outstanding at July 31, 2012 |  |          | 107,500  |   |                  | $ | 4.60 |                       | 
|Granted                      |  |          | 13,100   |   |                  |   | 1.15 |                       | 
|Exercised                    |  |          | -        |   |                  |   | -    |                       | 
|Forfeited and cancelled      |  |          | -        |   |                  |   | -    |                       | 
|Outstanding at July 31, 2013 |  |          | 120,600  |   |                  | $ | 4.60 |                       | 
|Granted                      |  |          | -        |   |                  |   | -    |                       | 
|Exercised                    |  |          | -        |   |                  |   | -    |                       | 
|Forfeited and cancelled      |  |          | (120,600 | ) |                  |   | 4.60 |                       | 
|Outstanding at July 31, 2014 |  |          | -        |   |                  | $ | -    |                       | 
|Exercisable at July 31, 2014 |  |          | -        |   |                  | $ | -    |                       | 



As
of July 31, 2014, Digerati did not have any outstanding warrants. On April 4, 2014 under the Agreed Order and Reorganization Plan
all outstanding warrants were cancelled



NOTE
12 – DERIVATIVE LIABILITIES



The
following table presents the derivative financial instruments, measured and recorded at fair value on the Company’s consolidated
balance sheet on a recurring basis, and their level within the fair value hierarchy as of July 31, 2014:



|                                         |  | Amount |        |  | Level 1 |   |   | Level 2 |  |   | Level 3 | 
|---------------------------------------- |  | ------ | ------ |  | ------- | - | - | ------- |  | - | ------- | 
|Embedded conversion derivative liability |  | $      | -      |  |         | $ | - |         |  | $ | -       | 
|Warrant derivative liabilities           |  |        | 10,000 |  |         |   | - |         |  |   | -       | 
|                                         |  | $      | 10,000 |  |         | $ | - |         |  | $ | -       | 



The
following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial
instruments, measured at fair value on a recurring basis using significant unobservable inputs:



|Balance
at July 31, 2012                                       |  | $ | 94,000  |  
|-------------------------------------------------------------- |  | - | ------- | -
|Settlement of derivative liability due to conversion of debt   |  | $ | (74,000 | )
|Unrealized derivative gains included in other income (expense) |  |   | (10,000 | )
|Balance at July 31, 2013                                       |  | $ | 10,000  |  
|Unrealized derivative gains included in other income (expense) |  |   | -       |  
|Balance at July 31, 2014                                       |  | $ | 10,000  |  



The
fair value of the derivative liabilities are calculated at the time of issuance and Digerati records a derivative liability for
the calculated value. Changes in the fair value of the derivative liabilities are recorded in other income (expense) in the consolidated
statements of operations.



The
derivatives were valued using the Black-Scholes option pricing model with the following assumptions: stock price on the measurement
dates - $0.03 to $0.07, term of 0.21 years to 5.61 years, expected volatility of 214% to 550%, and discount rates of 0.06% to
1.6%.





34







NOTE
13 – 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 $46,000 per year. Contributions under the plan are fully vested upon funding. We did not make
any contributions during years ended July 31, 2014 and 2013.



NOTE
14 – SUBSEQUENT EVENTS



On
September 15, 2014 the Company held an Annual Meeting of Shareholders and the majority of our shareholders elected Messrs. Craig
K. Clement and Maxwell A. Polinsky as directors. Messrs. Arthur L. Smith, William E. McIlwain and James J. Davis did not stand
for re-election during the Meeting of Shareholders.



On
October 2, 2014 the Grantor Trust paid approximately $1,838,000 of unsecured claims in accordance to the Chapter 11 Plan of Reorganization.



On
October 30, 2014, November 7, 2014, November 14, 2014 and November 24, 2014 Digerati entered into a Promissory Notes for a total
of $40,000 with Flagship Oil and Gas Corp. Craig K. Clement, the CEO and a director of Flagship, is also a Digerati director.
The notes have an implied annual interest rate of 7% and all notes matured on January 5, 2015. Digerati also entered into a preemptive
rights agreement with Flagship, under which the holder has the preemptive right, but not the obligation, to purchase any equity
securities that the Company may propose to issue or sell. On January 13, 2015, the Company issued 363,636 shares of Digerati Common
Stock for payment of the principal of and accrued interest on the $40,000 Flagship Notes.



On
January 13, 2015 the Company executed a stock purchase agreement with Flagship Oil and Gas Corp. for the sale of 2,279,412 shares
of Digerati Common Stock, and a warrant for the purchase of an additional 300,000 shares of Common Stock at $0.136 per share for
five years. In consideration for the shares and the warrant, the Company received a promissory note in the original principal
amount of $310,000 plus interest at the rate of 7.0% per annum, payable in installments of $40,000 plus accrued interest on January
31, 2015; $60,000 plus accrued interest on February 13, 2015; and $210,000 plus accrued interest on March 6, 2015.



On
January 19, 2015 the Company issued 492,356 shares of its Common Stock to various employees as part of Digerati’s profit
sharing plan contribution. The Company recognized stock-based compensation expense of $118,165 equivalent to the value of the
shares calculated based on the share’s closing price at the grant dates.



On
January 22, 2015 the Company's Board of Directors appointed a current director, Craig K. Clement, as Chairman of the Board. Mr.
Clement is CEO of Flagship Oil and Gas Corp.





35







|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, 2014.



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, 2014, 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 not effective based on the COSO criteria. This was due to deficiencies that existed in the design or operation of our internal
controls over financial reporting that adversely affected our ability to prepare accurate and timely financial statements, which
are considered to be material weaknesses.



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.





36







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, 2014.



| | Name                |  | Age |  | Position
    Held                                   |  | Held
    Office Since
| | ------------------- |  | --- |  | --------------------------------------------------- |  | ---------------------
| | Arthur L. Smith     |  | 50  |  | President, Chief Executive Officer and Director (1) |  | 2003                 
| | James J. Davis      |  | 68  |  | Director (1)                                        |  | 2014                 
| | William E. McIlwain |  | 74  |  | Director (1)                                        |  | 2014                 
| | Antonio Estrada     |  | 40  |  | Chief Financial Officer                             |  | 2007                 



| | 1) | Subsequently,
                                         on September 15, 2014 the Company held an Annual Meeting of Shareholders and Messrs.
                                         Arthur L. Smith, William E. McIlwain and James J. Davis did not stand for re-election
                                         as directors during the Meeting of Shareholders.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our
Directors were appointed on April 4, 2014 pursuant to the Agreed Order Confirming Joint Plan of Reorganization Filed by Plan Proponents
entered by the United States Court for the Southern District of Texas, Houston Division in In Re Digerati Technologies, Inc.Each Director will serve in such capacity until the next meeting of the stockholders, at which time a replacement board of
directors will be elected. Subsequently, on September 15, 2014 the Company held an Annual Meeting of Shareholders and the majority
of our shareholders elected Messrs. Craig K. Clement and Maxwell A. Polinsky as directors. Messrs. Arthur L. Smith, William E.
McIlwain and James J. Davis did not stand for re-election during the Meeting of Shareholders.



Arthur
L. Smith (50) is our Chief Executive Officer, President, Secretary and a director. Mr. Smith has over 20 years of public company
experience with a comprehensive background in technology and global telecommunications. Over the years, Mr. Smith has developed
expertise in broad-based areas that includes corporate finance, fiscal/P&L management, business development, mergers &
acquisitions, strategic/tactical planning, sales/operational management, and international business. As a founder of Digerati,
he has held various positions, including Chairman, CEO, and President of our international subsidiary. He is also co-founder and
former Chairman of Globalscape, Inc., a leading provider of Internet-based information exchange solutions and former wholly-owned
subsidiary of Digerati. Globalscape was spun-off to our shareholders in 2000 (NYSE MKT: GSB). Mr. Smith was an officer of Digerati
at the time it filed for protection under Chapter 11 of the United States Bankruptcy Code on May 30, 2013. Subsequently, on September
15, 2014 the Company held an Annual Meeting of Shareholders and Mr. Smith did not stand for re-election as a director during the
Meeting of Shareholders.



James
J. Davis(68), the Chairman of our Board of Directors and a director, is a private investor and management consultant with
more than 40 years’ experience in financial and administrative roles in public and private companies. He is a founding partner
of Pluris Capital Advisors, Inc., a private investment group formed to invest in engineering, consulting and technical service
companies serving the energy and industrial infrastructure markets. From 2009 until his retirement in 2013, Mr. Davis was the
Chief Financial Officer of Express Energy Services, LLC, a privately equity owned company that provides drilling, completion and
decommissioning services in the oil and gas industry. From 2004 to 2007, Mr. Davis was the Vice President and Chief Financial
Officer of CapRock Communications, Inc., a private equity owned company that provides broadband satellite communication services
to the energy, government, maritime, construction and mining industry in remote locations. Prior to 2004, Mr. Davis served in
various senior finance capacities with Parker Drilling Company, MAPCO, Inc., Mesa Petroleum and Gulf Oil Company. Subsequently,
on September 15, 2014 the Company held an Annual Meeting of Shareholders and Mr. Davis did not stand for re-election as a director
during the Meeting of Shareholders.



William
E. McIlwain(74), a director, was the co-founder and President of Gary Greene, Better Homes and Gardens Real Estate Company
until its sale in 2000. Since 2000, Mr. McIlwain has been an independent businessman engaged in providing commercial real estate
services and sales of industrial pipe and a private investor with investments in a variety of small cap and startup businesses.
Subsequently, on September 15, 2014 the Company held an Annual Meeting of Shareholders and Mr. McIlwain did not stand for re-election
as a director during the Meeting of Shareholders.





37







Antonio
Estrada (40) is our Chief Financial Officer and Treasurer. Mr. Estrada is a seasoned financial executive with over 15 years
of public company and telecommunications industry experience. His experience includes SEC reporting, accounting management, financial
reporting, forecasting, strategic planning, grant writing, corporate finance, GAAP accounting, audit, and treasury/cash management.
He has served in various roles within Digerati, including International Accounting Manager, Treasurer, Internal Auditor, Controller,
Sr. VP of Finance and CFO. Mr. Estrada was an officer of Digerati at the time it filed for protection under Chapter 11 of the
United States Bankruptcy Code on May 30, 2013.



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. James J. Davis served as the Audit Committee Financial Expert during the year ended
July 31, 2014.





38







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



The
compensation programs presently in effect with respect to our Chief Executive Officer and Chief Financial Officer were established
by the Agreed Order Confirming Joint Plan of Reorganization Filed by Plan Proponents entered by the United States Court for the
Southern District of Texas, Houston Division in In Re Digerati Technologies, Inc. As set forth in the Agreed Order, Messrs.
Smith and Estrada each receive a net base salary of $8,900 per month. No other compensation is presently being paid to our Named
Executive Officers.



The
following discussion relates to compensation programs in effect prior to April 4, 2014.



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.





39







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 2005 Stock Compensation Plan (the “Stock Option 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 ($) |  |  | Option Awards ($) |     |  | All Other Compensation ($) |   |     | Total ($) | 
|--------------------------- |  | ---- | ---- |  | ---------- | - | ------- | --------- |  | - | ---------------- |  |  | ----------------- | --- |  | -------------------------- | - | --- | --------- | 
|                            |  |      |      |  |            |   |         |           |  |   |                  |  |  |                   |     |  |                            |   |     |           | 
|Arthur L. Smith             |  |      | 2014 |  |            | $ | 109,500 |           |  | $ | -0-              |  |  | $                 | -0- |  |                            | $ | -0- |           | 
|CEO & President             |  |      | 2013 |  |            | $ | 43,900  |           |  | $ | -0-              |  |  | $                 | -0- |  |                            | $ | -0- |           | 
|                            |  |      |      |  |            |   |         |           |  |   |                  |  |  |                   |     |  |                            |   |     |           | 
|Antonio Estrada Jr.         |  |      | 2014 |  |            | $ | 109,500 |           |  | $ | -0-              |  |  | $                 | -0- |  |                            | $ | -0- |           | 
|CFO                         |  |      | 2013 |  |            | $ | 83,100  |           |  | $ | -0-              |  |  | $                 | -0- |  |                            | $ | -0- |           | 



Our
Board of Directors adopted the 2005 Stock Compensation Plan (the “Stock Option Plan”). Under the Stock Option Plan
the Board of Directors may grant up to 30 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 of authorized shares of common stock will automatically increase as of the date of any new grants pursuant
to the Stock Option Plan by the aggregate number of shares subject to such grant. 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.



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 $46,000 per year. Contributions under the Profit Sharing Plan are fully vested upon funding.





40







OUTSTANDING
EQUITY AWARDS AS OF JULY 31, 2014 (1)



|                    |  |  | Option
                                         Awards              |  | Stock
                                         Awards
|------------------- |  |  | ------------------------------------------------------------------- |  | -----------------------------------------------------
|Name                |  |  | Number of Securities Underlying Unexercised Options (#) Exercisable |  |                                                      
|                    |  |  |                                                                     |  |                                                      
|Arthur L. Smith     |  |  | -                                                                   |  |                                                      
|Antonio Estrada Jr. |  |  | -                                                                   |  |                                                      



| | 1) | As
                                         of July 31, 2014, Digerati did not have any outstanding options. On April 4, 2014 under
                                         the Reorganization Plan all outstanding options were cancelled.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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. Pursuant to the Agreed Order Confirming Joint Plan of Reorganization Filed by Plan Proponents
entered by the United States Court for the Southern District of Texas, Houston Division in In Re Digerati Technologies, Inc.,
Mr. Davis was paid $500 for each meeting of the Directors attended, up to a maximum amount of $2,500 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 served on our Board of Directors 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.



|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.





41







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 30, 2014 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.



|NAME OF                            |  | COMMON |         |  | % OF      | 
|---------------------------------- |  | ------ | ------- |  | --------- | 
|INDIVIDUAL OR GROUP                |  | STOCK  |         |  | CLASS (1) | 
|                                   |  |        |         |  |           | 
|INDIVIDUAL OFFICERS,               |  |        |         |  |           | 
|DIRECTORS AND NOMINEES             |  |        |         | 
|                                   |  |        |         |  |           | 
|Arthur L. Smith                    |  |        | 59,800  |  |           | 
|President, Chief Executive Officer |  |        |         |  |           | 
|Director                           |  |        |         |  |           | 
|                                   |  |        |         |  |           | 
|James J. Davis                     |  |        | -       |  |           | 
|Director                           |  |        |         |  |           | 
|                                   |  |        |         |  |           | 
|William E. McIlwain                |  |        | 31,570  |  |           | 
|Director                           |  |        |         |  |           | 
|                                   |  |        |         |  |           | 
|Antonio Estrada Jr.                |  |        | 62,300  |  |           | 
|Chief Financial Officer            |  |        |         |  |           | 
|                                   |  |        |         |  |           | 
|ALL OFFICERS AND                   |  |        |         |  |           | 
|DIRECTORS AS A GROUP               |  |        | 153,670 |  |           | 



| | (1) | Based
                                         upon 1,977,626 shares of common stock outstanding as of July 31, 2014.
| | --- | ---------------------------------------------------------------------------------------------------------------------



|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 Messrs. James J. Davis and William E. McIlwain satisfy the independence requirements in the NYSE Manual.
In making the determination of director independence with respect to Mr. McIlwain, the Board of Directors considered the ownership
of 1.6% of our outstanding Common Stock by Mr. McIlwain.



In
November 2013, Shift8 Networks, Inc., an operating subsidiary of Digerati, converted accounts payable into a note payable with
Mr. Arthur L. Smith, in the amount of $46,755. The note has an implied annual interest rate of 0% and a maturity date of February
28, 2014. Subsequently, Mr. Smith agreed to extend the maturity date of the promissory note to November 30, 2014 and later agreed
to extend the maturity date to April 30, 2015. On January 31, 2015, Shift8 Networks and Mr. Smith agreed to renew and extend the
maturity date on the $46,755 promissory note to October 31, 2015. The renewed note has an implied annual interest rate of 3%.
Balance as of July 31, 2014 was $45,000. On February 2, 2015, Shift8 Networks made a principal payment of $2,000.





42







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



The
following table sets forth the aggregate fees paid to LBB & Associates Ltd., LLP during 2014 and 2013 for audit services rendered
in connection with the audits and reviews of our consolidated financial statements.



|Description of Fees |  | 2014 |        |  | 2013 |  
|------------------- |  | ---- | ------ |  | ---- | -
|                    |  |      |        |  |      |  
|Audit Fees          |  | $    | 59,000 |  |      | $
|Audit Related Fees  |  |      | -0-    |  |      |  
|Tax fees            |  |      | -0-    |  |      |  
|All Other Fees      |  |      | -0-    |  |      |  



During
the years ended July 31, 2014 and 2013, the Company paid $17,250 and $5,750, 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 2014 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.





43







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. (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. (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. (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. (Exhibit 2.4 to Form 8-K filed on April 11, 2014)                                                                                                                      
|2.5    |  | Bankruptcy Settlement Agreement dated January 15, 2014. (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. (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. Exhibit 2.7 to Form 8-K filed on July 24, 2014)                                                                                             
|3.1    |  | Amended and Restated Articles of Incorporation. (Exhibit 3.1 to Form 8-K filed on April 11, 2014)                                                                                                                                                                                                                   
|3.2    |  | Amended and Restated Bylaws. (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 the Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).                                                                                                                             
|10.1   |  | Bankruptcy Settlement Agreement dated January 15, 2014. (Exhibit 10.1 to Form 8-K filed on January 23, 2014)                                                                                                                                                                                                        
|10.2   |  | Promissory note payable with Arthur L. Smith dated November 15, 2013 in the     principal amount of $46,755 (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed on January 20, 2015 (File No. 001-15687)).                                                                                  
|10.3   |  | Promissory Note dated October 31, 2014 in the original principal amount of $10,000.00 plus interest at the rate of 7.0% per annum due January 5, 2015 (filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).                                           
|10.4   |  | Promissory Note dated November 7, 2014 in the original principal amount of $10,000.00 plus interest at the rate of 7.0% per annum due January 5, 2015 (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).                                           
|10.5   |  | Promissory Note dated November 14, 2014 in the original principal amount of $10,000.00 plus interest at the rate of 7.0% per annum due January 5, 2015 (filed as Exhibit 10.3 to the Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).                                          
|10.6   |  | Promissory Note dated November 24, 2014 in the original principal amount of $10,000.00 plus interest at the rate of 7.0% per annum due January 5, 2015 (filed as Exhibit 10.4 to the Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).                                          
|10.7   |  | Promissory Note dated January 19, 2015 in the original principal amount of $310,000.00 plus interest at the rate of 7.0% per annum, payable in installments (filed as Exhibit 10.5 to the Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).                                     
|10.8   |  | Stock Purchase Agreement dated January 13, 2015, by and among Digerati Technologies, Inc. and Flagship Oil and Gas Corp. (filed as Exhibit 10.6 to the Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).                                                                        
|10.9   |  | Form of stock award agreement under the Company's 2005 Stock Compensation Plan for grants to qualifying employees' 401K Retirement Accounts (filed as Exhibit 10.7 to the Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).                                                     
|10.10  |  | Renewal and Extension Promissory Note payable with Arthur L. Smith dated January 31, 2015 in the principal amount of $46,755 plus interest at the rate of 3.0% per annum due October 31, 2015. (filed as Exhibit 10.9 to the Company's Current Report on Form 10-Q filed on February 20, 2015 (File No. 001-15687)).
|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.                                                                                                                                                                                                                  





44







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:July
    15, 2015 |  | 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  |  | July 15, 2015
|Arthur L. Smith         |  |                              |  |              
|                        |  |                              |  |              
|/s/ Antonio Estrada Jr. |  | Principal Accounting Officer |  | July 15, 2015
|Antonio Estrada Jr.     |  | Principal Finance Officer    |  |              
|                        |  |                              |  |              
|/s/ Craig K. Clement    |  | Director                     |  | July 15, 2015
|Craig K. Clement        |  |                              |  |              
|                        |  |                              |  |              
|/s/ Maxwell A. Polinsky |  | Director                     |  | July 15, 2015
|Maxwell A. Polinsky     |  |                              |  |              







45







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.                    





46