UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549



FORM
10-Q



(Mark
One)

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



For
the quarterly period ended April 30, 2016



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)                                       |  | (I.R.S.
    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) 775-0888



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



| | 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
☒



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 distribution of securities under a plan confirmed by a court. 	Yes ☒ 
No ☐



Indicate
the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practical date.





|Number
    of Shares |  | Class:                            |  | As
    of:  
|-------------------- |  | --------------------------------- |  | ------------
|5,234,165            |  | Common Stock $0.001 par
    value |  | May 23, 2016





















DIGERATI
TECHNOLOGIES, INC.

QUARTERLY
REPORT ON FORM 10-Q

FOR
THE QUARTER ENDED APRIL 30, 2016



INDEX



|PART
I -- FINANCIAL INFORMATION  |                                                                                          
|-------------------------------- | -----------------------------------------------------------------------------------------
|                                 |                                                                                          
|Item
    1.                      | Financial
    Statements (Unaudited)                                                     
|Item
    2.                      | Management’s
    Discussion and Analysis of Financial Condition and Results of Operations
|Item
    3.                      | Quantitative
    and Qualitative Disclosures About Market Risk                           
|Item
    4.                      | Control
    and Procedures                                                               
|                                 |                                                                                          
|PART
    II -- OTHER INFORMATION |                                                                                          
|                                 |                                                                                          
|Item
    1.                      | Legal
    Proceedings                                                                    
|Item
    1A.                     | Risk
    Factors                                                                         
|Item
    2.                      | Unregistered
    Sales of Equity Securities and Use of Proceeds                          
|Item
    3.                      | Defaults
    Upon Senior Securities                                                      
|Item
    5.                      | Other
    Information                                                                    
|Item
    6.                      | Exhibits                                                                                 
|                                 |                                                                                          
|SIGNATURES                       | 18                                                                                       





2






DIGERATI
TECHNOLOGIES, INC.

CONTENTS



|PAGE
    4 |  | CONSOLIDATED
    BALANCE SHEETS AS OF APRIL 30, 2016 AND AS OF JULY 31, 2015  (UNAUDITED)                        
|---------- |  | -----------------------------------------------------------------------------------------------------------------
|           |  |                                                                                                                  
|PAGE
    5 |  | CONSOLIDATED
    STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED APRIL 30, 2016 AND 2015 (UNAUDITED)
|           |  |                                                                                                                  
|PAGE
    6 |  | CONSOLIDATED
    STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED APRIL 30, 2016 AND 2015 (UNAUDITED)          
|           |  |                                                                                                                  
|PAGES 7-11 |  | NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)                                                       





3






PART
1. FINANCIAL INFORMATION



ITEM
1. FINANCIAL STATEMENTS



DIGERATI
TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED
BALANCE SHEETS

(In
thousands, unaudited)



|                                                                                                                      |  | April 30, |         |   | July 31, |  
|--------------------------------------------------------------------------------------------------------------------- |  | --------- | ------- | - | -------- | -
|                                                                                                                      |  | 2016      |         |   | 2015     |  
|                                                                                                                      |  |           |         |   |          |  
|ASSETS                                                                                                                |  |           |         |   |          |  
|CURRENT ASSETS:                                                                                                       |  |           |         |   |          |  
|Cash and cash equivalents                                                                                             |  | $         | 6       |   |          | $
|Restricted cash                                                                                                       |  |           | 1,509   |   |          |  
|Accounts receivable, net                                                                                              |  |           | 2       |   |          |  
|Prepaid and other
    current assets                                                                                  |  |           | 33      |   |          |  
|Total
    current assets                                                                                              |  |           | 1,550   |   |          |  
|                                                                                                                      |  |           |         |   |          |  
|LONG-TERM ASSETS:                                                                                                     |  |           |         |   |          |  
|Intangible assets, net                                                                                                |  |           | 33      |   |          |  
|                                                                                                                      |  |           |         |   |          |  
|Property and equipment, net                                                                                           |  |           | 4       |   |          |  
|Oil and gas property                                                                                                  |  |           | 145     |   |          |  
|                                                                                                                      |  |           |         |   |          |  
|Total
    assets                                                                                                      |  | $         | 1,732   |   |          | $
|                                                                                                                      |  |           |         |   |          |  
|LIABILITIES
    AND STOCKHOLDERS' DEFICIT                                                                             |  |           |         |   |          |  
|CURRENT LIABILITIES:                                                                                                  |  |           |         |   |          |  
|Accounts payable                                                                                                      |  | $         | 809     |   |          | $
|Accounts payable - related parties                                                                                    |  |           | 18      |   |          |  
|Accrued liabilities                                                                                                   |  |           | 2,945   |   |          |  
|Current portion
    of long term debt - related party                                                                 |  |           | -       |   |          |  
|Total
    current liabilities                                                                                         |  |           | 3,772   |   |          |  
|                                                                                                                      |  |           |         |   |          |  
|LONG-TERM LIABILITIES:                                                                                                |  |           |         |   |          |  
|Customer deposits                                                                                                     |  |           | 140     |   |          |  
|Total
    long-term liabilities                                                                                       |  |           | 140     |   |          |  
|                                                                                                                      |  |           |         |   |          |  
|Total liabilities                                                                                                     |  |           | 3,912   |   |          |  
|                                                                                                                      |  |           |         |   |          |  
|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, 5,234,165 and 5,113,030 issued and outstanding, respectively |  |           | 5       |   |          |  
|Additional paid in capital                                                                                            |  |           | 75,656  |   |          |  
|Subscription receivable                                                                                               |  |           | -       |   |          |  
|Accumulated deficit                                                                                                   |  |           | (77,842 | ) |          |  
|Other comprehensive
    income                                                                                        |  |           | 1       |   |          |  
|Total
    stockholders' deficit                                                                                       |  |           | (2,180  | ) |          |  
|Total
    liabilities and stockholders' deficit                                                                       |  | $         | 1,732   |   |          | $



See
accompanying notes to consolidated financial statements







4






DIGERATI
TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF OPERATIONS

(In
thousands, except per share amounts, unaudited)



|                                                                                              |  | Three
    months ended  April 30, |           |   | Nine
    months ended  April 30, |  
|--------------------------------------------------------------------------------------------- |  | --------------------------------- | --------- | - | -------------------------------- | -
|                                                                                              |  | 2016                              |           |   | 2015                             |  
|OPERATING REVENUES:                                                                           |  |                                   |           |   |                                  |  
|Global
    VoIP services                                                                      |  | $                                 | 9         |   |                                  | $
|Cloud-based hosted
    services                                                               |  |                                   | 47        |   |                                  |  
|                                                                                              |  |                                   |           |   |                                  |  
|Total
    operating revenues                                                                  |  |                                   | 56        |   |                                  |  
|                                                                                              |  |                                   |           |   |                                  |  
|OPERATING EXPENSES:                                                                           |  |                                   |           |   |                                  |  
|Cost of services
    (exclusive of depreciation and amortization)                             |  |                                   | (1        | ) |                                  |  
|Selling, general
    and administrative expense                                               |  |                                   | 250       |   |                                  |  
|Legal and professional
    fees                                                               |  |                                   | 45        |   |                                  |  
|Bad debt                                                                                      |  |                                   | -         |   |                                  |  
|Depreciation
    and amortization expense                                                     |  |                                   | 4         |   |                                  |  
|Total
    operating expenses                                                                  |  |                                   | 298       |   |                                  |  
|                                                                                              |  |                                   |           |   |                                  |  
|OPERATING LOSS                                                                                |  |                                   | (242      | ) |                                  |  
|                                                                                              |  |                                   |           |   |                                  |  
|OTHER INCOME (EXPENSE):                                                                       |  |                                   |           |   |                                  |  
|Loss on derivative
    instruments and disposal of fixed assets                               |  |                                   | -         |   |                                  |  
|Gain (loss) on debt
    extinguishment                                                        |  |                                   | -         |   |                                  |  
|Interest
    income (expense)                                                                 |  |                                   | (28       | ) |                                  |  
|Total
    other income (expense)                                                              |  |                                   | (28       | ) |                                  |  
|                                                                                              |  |                                   |           |   |                                  |  
|NET LOSS ATTRIBUTED
    TO DIGERATI TECHNOLOGIES, INC.                                        |  | $                                 | (270      | ) |                                  | $
|                                                                                              |  |                                   |           |   |                                  |  
|LOSS
    PER SHARE - BASIC AND DILUTED ATTRIBUTED TO DIGERATI TECHNOLOGIES, INC. SHAREHOLDERS |  | $                                 | (0.05     | ) |                                  | $
|                                                                                              |  |                                   |           |   |                                  |  
|WEIGHTED AVERAGE
    COMMON SHARES OUTSTANDING - BASIC AND DILUTED                            |  |                                   | 5,234,165 |   |                                  |  



See
accompanying notes to consolidated financial statements





5






DIGERATI
TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED
STATEMENTS OF CASH FLOWS

(In
thousands, unaudited)



|                                                                                          |  | Nine
    months ended 
    April 30, |       
|----------------------------------------------------------------------------------------- |  | ------------------------------------ | ------
|                                                                                          |  | 2016                                 |       
|                                                                                          |  |                                      |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                     |  |                                      |       
|Net loss                                                                                  |  | $                                    | (906  
|Adjustments to reconcile net loss to
    cash (used in) provided by operating activities: |  |                                      |       
|(Gain) loss on debt
    extinguishment                                                    |  |                                      | -     
|(Gain) loss on derivative
    instruments and disposal of fixed assets                    |  |                                      | (2    
|Depreciation, amortization
    and accretion                                              |  |                                      | 13    
|Bad debt expense                                                                          |  |                                      | -     
|Stock compensation                                                                        |  |                                      | 22    
|Changes in operating
    assets and liabilities:                                          |  |                                      |       
|Restricted cash                                                                           |  |                                      | (1,509
|Accounts receivable                                                                       |  |                                      | (1    
|Prepaid expenses
    and other current assets                                             |  |                                      | (32   
|Accounts payable                                                                          |  |                                      | (129  
|Accounts payable
    - related parties                                                    |  |                                      | 18    
|Accrued
    liabilities and customer deposits                                             |  |                                      | 2,676 
|Net cash provided
    by (used in ) operating activities                                  |  |                                      | 150   
|                                                                                          |  |                                      |       
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                     |  |                                      |       
|Acquisition of oil
    and gas property                                                   |  |                                      | (145  
|Purchases
    of property & equipment                                                     |  |                                      | (4    
|Net cash used
    in investing activities                                                 |  |                                      | (149  
|                                                                                          |  |                                      |       
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                     |  |                                      |       
|Subscription receivable
    proceeds                                                      |  |                                      | 29    
|Issuance of common
    stock                                                              |  |                                      | -     
|Payments on debt,
    related party                                                       |  |                                      | (68   
|Proceeds
    from notes payable, related party                                            |  |                                      | 25    
|Net cash (used
    in) provided by financing activities                                   |  |                                      | (14   
|                                                                                          |  |                                      |       
|INCREASE (DECREASE) IN CASH AND CASH
    EQUIVALENTS                                      |  |                                      | (13   
|CASH AND CASH
    EQUIVALENTS, beginning of period                                        |  |                                      | 19    
|                                                                                          |  |                                      |       
|CASH AND CASH EQUIVALENTS,
    end of period                                              |  | $                                    | 6     
|                                                                                          |  |                                      |       
|SUPPLEMENTAL DISCLOSURES:                                                                 |  |                                      |       
|Cash
    paid for interest                                                                |  | $                                    | 4     
|NON-CASH TRANSACTIONS:                                                                    |  |                                      |       
|Notes
    payable repaid with common stock                                                |  | $                                    | -     
|Repayment
    of liabilities with restricted cash                                         |  | $                                    | -     



See
accompanying notes to consolidated financial statements





6






DIGERATI
TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

April
30, 2016

(Unaudited)



NOTE
1 – BASIS OF PRESENTATION



The
accompanying unaudited interim consolidated financial statements of Digerati Technologies, Inc. (“Digerati” or the
“Company”) have been prepared in accordance with accounting principles generally accepted in the United States of
America and the rules of the United States Securities and Exchange Commission. In the opinion of management, these interim financial
statements contain all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of financial
position and the results of operations for the interim periods presented. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements, which
would substantially duplicate the disclosure contained in the audited consolidated financial statements for the year ended July
31, 2015 contained in the Company’s Form 10-K filed on September 30, 2015 have been omitted.



Taxes



The
effective tax rate was 0% for the three and nine months ended April 30, 2016 and April 30, 2015, respectively.



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.



Restricted
cash



The Company restricted cash for potential tax liabilities; however,
amounts have been expended for operating expenses and an investment.



Oil
and gas property



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





The
Company annually reviews its oil and gas properties for impairment whenever events or changes in circumstances indicate that the
carrying value of such properties may not be recoverable. When it is determined that an oil and gas property’s estimated
future net cash flows will not be sufficient to recover its carrying amount, an impairment charge is recorded to reduce its carrying
value to its estimated fair value. No impairment loss was recognized on the Company’s oil and gas properties during the
period ended.



Unproved
properties are assessed periodically on a property-by-property basis and any impairment in value recognized. If the unproved properties
are determined to be productive, the appropriate related costs are transferred to proved oil and gas properties. Unproved properties
are not subject to depletion, depreciation and amortization. The Company had no proved properties as of April 30, 2016.



7






NOTE
2 – GOING CONCERN



Financial
Condition



Digerati’s
unaudited interim consolidated financial statements for the period ended April 30, 2016 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 has accumulated a deficit of approximately $77,842,000 and a working capital deficit of approximately
$2,222,000 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
unaudited interim consolidated financial statements as of April 30, 2016 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 – PURCHASE AND SALE AGREEMENT AND JOINT OPERATING AGREEMENT



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





8






NOTE
4 – 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,
seeking relief under the provisions of Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy”).



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.



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.



(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



(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 Bankruptcy Settlement
Agreement (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. Following the Annual
Meeting of Shareholders, Mr. Smith and Mr. Estrada were elected to serve as officers of the Reorganized Debtor.



(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.



9






(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.



(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.



(g)               
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.



(h)              
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.



(i)                
The Reorganization Plan became effective on December 31, 2014.



NOTE
5 – DEBT



At
April 30, 2016 and July 31, 2015, outstanding debt consisted of the following: (In thousands)



|                                                                                                                                |  | April 30, 2016 |   |  | July 31, 2015 |  
|------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | - |  | ------------- | -
|Note payable to Arthur L. Smith, bearing interest of 3.00% per annum, maturity October 31, 2015, unsecured. (See details below) |  | $              | - |  |               | $
|Total outstanding long-term debt                                                                                                |  | $              | - |  |               | $
|Current portion of long-term debt                                                                                               |  |                | - |  |               |  
|Long-term debt, net of current portion                                                                                          |  | $              | - |  |               | $



In
November 2013, Shift8 Networks, Inc., an operating subsidiary of Digerati, entered into a note payable with Mr. Arthur L. Smith,
in the amount of $46,755. The note had 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 had an implied annual interest rate of 3%. On October 9, 2015 Shift8 Networks
paid off the total outstanding principal balance and accrued interest.



On
August 21, 2015 the Company entered into a short term promissory note payable for $25,000 with Craig K. Clement, the Company’s
Chairman of the Board. The note had an implied annual interest rate of 0% and a maturity date of October 31, 2015. On October
15, 2015 the Company paid off the total outstanding principal balance.





10






NOTE
6 – STOCK-BASED COMPENSATION



In
November 2015, Digerati adopted the Digerati Technologies, Inc. 2015 Equity Compensation Plan (the “Plan”). The Plan,
authorizes the grant of up to 7.5 million stock options, restricted common shares, non-restricted common shares and other awards
to employees, directors, and certain other persons. The Plan is intended to permit Digerati to retain and attract qualified individuals
who will contribute to the overall success of Digerati. Digerati’s Board of Directors determines the terms of any grants
under the Plan. Exercise prices of all stock options and other awards vary based on the market price of the shares of common stock
as of the date of grant. The stock options, restricted common stock, non-restricted common stock and other awards vest based on
the terms of the individual grant.



During
the nine months ended April 30, 2016, we issued:



| | - | 121,135
                                         common shares to various employees as part of the Company’s profit sharing plan
                                         contribution. The Company recognized stock-based compensation expense of approximately
                                         $22,000 equivalent to the value of the shares calculated based on the share’s closing
                                         price at the grant dates.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As
of April 30, 2016 and 2015, Digerati did not have any outstanding options under the Plan. Unamortized compensation cost totaled
$0 at April 30, 2016 and April 30, 2015.



NOTE
7 – SIGNIFICANT CUSTOMERS



During
the nine months ended April 30, 2016, the Company derived a significant amount of revenue from four customers, comprising 30%,
24%, 15% and 12% of the total revenue for the period, respectively, compared to five customers, comprising 21%, 17%, 14%, 13%
and 11% of the total revenue for the nine months ended April 30, 2015.



During
the nine months ended April 30, 2016, the Company derived a significant amount of accounts receivable from three customers, comprising
60%, 28% and 10% of the total accounts receivable for the period, compared to one customer, comprising 96% of the total accounts
receivable for the nine months ended April 30, 2015.



NOTE
8 – RELATED PARTY TRANSACTIONS



In
November 2013, Shift8 Networks, Inc., an operating subsidiary of Digerati, entered into a note payable with Mr. Arthur L. Smith,
in the amount of $46,755. The note had 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 had an implied annual interest rate of 3%. On October 9, 2015 Shift8 Networks
paid off the total outstanding principal balance and accrued interest.



During
the year ended July 31, 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 warrants for the purchase of an additional 300,000 shares of Common Stock at $0.14
per share for five years. In consideration for the shares and the warrants, 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.
The Black-Scholes pricing model was used to estimate the relative fair value of the 300,000 warrants issued during the period,
using the assumptions of a risk free interest rate of 1.37%, dividend yield of 0%, volatility of 312%, and an expected life of
five years. The warrants have a relative fair value of approximately $34,627 and included in additional paid-in capital. On August
14, 2015, Flagship Oil and Gas Corp. paid $36,065 to the Company for the remaining principal balance and accrued interest associated
with the Flagship Notes.





On
August 21, 2015 the Company entered into a short term promissory note payable for $25,000 with Craig K. Clement, the Company’s
Chairman of the Board. The note had an implied annual interest rate of 0% and a maturity date of October 31, 2015.

On October
15, 2015 the Company paid off the total outstanding principal balance.



NOTE
9 – 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. 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. Recap Marketing & Consulting LLP and Rainmaker Ventures II, Ltd. subsequently challenged
the findings of the arbitrator by filing a motion to vacate in In Re Digerati Technologies, Inc. On November 23, 2015,the
Bankruptcy Court issued an order dismissing the motion to vacate.



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.



11






Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.



This
Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities 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,” “plan,” and “intend.” Although we believe these expectations
are reasonable, our operations involve a number of risks and uncertainties. Some of these risks include the availability and capacity
of competitive data transmission networks and our ability to raise sufficient capital to continue operations. Additional risks
are included in our Annual Report on Form 10-K for the fiscal year ended July 31, 2015 filed with the Securities and Exchange
Commission on September 30, 2015.



The
following is a discussion of the unaudited interim consolidated financial condition and results of operations of Digerati for
the three and nine months ended April 30, 2016 and 2015. It should be read in conjunction with our audited Consolidated Financial
Statements, the Notes thereto, and the other financial information included in the Company’s Annual Report on Form 10-K
for the fiscal year ended July 31, 2015 filed with the Securities and Exchange Commission on September 30, 2015. For purposes
of the following discussion, fiscal 2016 or 2016 refers to the year ended July 31, 2016 and fiscal 2015 or 2015 refers to the
year ended July 31, 2015.





History



Digerati
Technologies, Inc., a Nevada corporation (including our subsidiaries, “we,” “us,” or “Digerati”),
was formed in 2004 as the successor to a business originally commenced by Latcomm International, Inc., a Canadian company formed
in 1994. We began providing communication services in 1995 along the U.S.-Mexico corridor to capitalize on the opportunities created
by the deregulation of the telecommunication industries within Latin America. Through FY 2012 our principal business was providing
transportation of voice traffic for other telecommunication service providers, wireless carriers and regional Internet telephony
providers using 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 application
platform and session-based communication network, which is interconnected to numerous U.S. and foreign service providers.



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



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





Sources
of Revenue and Direct Cost



Sources
of revenue:



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



Cloud-based
hosted Services: We provide enhanced VoIP services to resellers and enterprise customers. The service 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 environment for specialized
applications.



Direct
Costs:



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



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



12






Results
of Operations



Three
Months ended April 30, 2016 Compared to Three Months ended April 30, 2015



Global
VoIP Services.Global VoIP services revenue increased by $2,000, or 29%, from the quarter ended April 30, 2015 to the
quarter ended April 30, 2016. The increase in revenue is attributed primarily to one of our customers temporarily requiring additional
Global VoIP services during the quarter.



Cloud-based
hosted Services. Cloud-based hosted services revenue decreased by $10,000, or 18%, from the quarter ended April 30, 2015 to
the quarter ended April 30, 2016. The decrease in revenue between periods is primarily attributed to the decrease in customers
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 $47,000, or 102%,
from the quarter ended April 30, 2015 to the quarter ended April 30, 2016. The decrease in cost of services is as a result of
various credits and discounts received from key vendors during the quarter.



Selling,
General and Administrative (SG&A) Expenses (exclusive of legal and professional fees).SG&A expenses increased by
$79,000, or 46%, from the quarter ended April 30, 2015 to the quarter ended April 30, 2016. The increase is attributed to the
addition of a new employee for one of our new subsidiaries with an emphasis in the oil and gas services. And the addition of a
new sales person for our Cloud-based hosted services.



Legal
and professional fees. Legal and professional fees decreased by $38,000, or 46%, from the quarter ended April 30, 2015 to
the quarter ended April 30, 2016.



Bad
debt. Bad debt decreased by $4,000, or 100%. The Company did not recognized bad debt during the period ended April 30, 2016,
however during the period ended April 30, 2015 the Company recognized $4,000 of bad debt for accounts that were deemed uncollectable.



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



Operating
loss. The Company reported an operating loss of $242,000 for the three months ended April 30, 2016 compared to an operating
loss of $244,000 for the three months ended April 30, 2015. The decrease in operating loss between periods is primarily attributed
to the decrease in cost of services, which was slightly offset by the increase in SG&A expenses during the quarter.



Other
income (expense). Other income (expense) increased by $27,000 from the quarter ended April 30, 2015 to the quarter ended April
30. The primary reason for the increase in other income (expense) is attributed to the increase between periods interest expense
of approximately $27,000.



Net
income (loss) attributed to Digerati Technologies, Inc.Net income (loss) attributed to Digerati Technologies, Inc. increased
to $25,000 or 10%, from the quarter ended April 30, 2015 to the quarter ended April 30, 2016. The increase in net income (loss)
attributed to Digerati Technologies; Inc. is as a result of the decrease in revenue and the increase in SG&A expenses between
periods.



Nine
Months ended April 30, 2016 Compared to Nine Months ended April 30, 2015



Global
VoIP Services.Global VoIP services revenue decreased by $14,000, or 36%, from the nine months ended April 30, 2015
to the nine months ended April 30, 2016. The decrease in revenue is attributed primarily to slowly dwindling Global VoIP services
due in part to the constant price pressure in the market.



Cloud-based
hosted Services. Cloud-based hosted services revenue decreased by $25,000, or 14%, from the nine months ended April 30, 2015
to the nine months ended April 30, 2016. The decrease in revenue between periods is primarily attributed to the decrease in customers
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 $50,000, or 39%,
from the nine months ended April 30, 2015 to the nine months ended April 30, 2016. The decrease in cost of services is a direct
correlation to the decrease in total revenue and as a result of various credits and discounts received from key vendors.



Selling,
General and Administrative (SG&A) Expenses (exclusive of legal and professional fees).SG&A expenses increased by
$178,000, or 29%, from the nine months ended April 30, 2015 to the nine months ended April 30, 2016. The increase is attributed
to the addition of a new employee for one of our new subsidiaries with an emphasis the in oil and gas services and the addition
of a new sales person for our Cloud-based hosted services.



Legal
and professional fees. Legal and professional fees decreased by $44,000, or 20%, from the nine months ended April 30, 2015
to the nine months ended April 30, 2016. The decrease is attributed to the emphasis in controlling legal and professional fees
during the period.



13






Bad
debt. Bad debt decreased by $9,000, or 100%. The Company did not recognized bad debt during the period ended April 30, 2016,
however during the period ended April 30, 2015 the Company recognized $9,000 of bad debt for accounts that were deemed uncollectable.



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



Operating
loss. The Company reported an operating loss of $883,000 for the nine months ended April 30, 2016 compared to an operating
loss of $768,000 for the nine months ended April 30, 2015. The increase in operating loss between periods is primarily attributed
to the decrease in revenue between periods.



Other
income (expense). Other income (expense) improved by $26,000, or 53%, from the nine months ended April 30, 2015 to the nine
months ended April 30, 2016. The primary reason for the decrease in other income (expense) is attributed to the decrease between
periods in gain (loss) on derivative instruments and disposal of fixed assets of approximately $29,000 and the decrease between
periods in interest expense of approximately $12,000.



Net
income (loss) attributed to Digerati Technologies, Inc.Net income (loss) attributed to Digerati Technologies, Inc. increased
by $89,000 or 11%, from the nine months ended April 30, 2015 to the nine months ended April 30, 2016. The increase in net income
(loss) attributed to Digerati Technologies; Inc. is as a result of the decrease in revenue and the increase in SG&A expenses
between periods.



Liquidity
and Capital Resources



Cash
Position: We had a consolidated cash balance of $6,000 as of April 30, 2016 and we had restricted cash of $1,509,000 as of
April 30, 2016. Net cash provided by operating activities during the nine months ended April 30, 2016 was approximately $150,000,
primarily as a result of accrued liabilities and restricted cash. Cash used in investing activities was $149,000 primarily for
the acquisition of property & equipment and oil and gas property. Cash consumed by financing activities during the nine months
ended April 30, 2016 was approximately $14,000 pursuant to the net reduction in various promissory notes during the period ended
April 30, 2016. Overall, our net operating, investing and financing activities during the period ended April 30, 2016 consumed
approximately $13,000 of cash.



We
are currently taking initiatives to reduce our overall cash deficiencies on a monthly basis. During fiscal 2016 we anticipate
reducing fixed costs, professional fees and general expenses. To strengthen our business we intend to invest in a new marketing
and sales strategy to grow our monthly recurring revenue; we anticipate utilizing our value added resellers to tap into new sources
of revenue streams. In addition, we will continue to focus on selling a greater number of comprehensive services to our existing
customer base. Additionally, we will continue to evaluate the acquisition of various oil and gas properties, as a result we anticipate
incurring professional fees during the due diligence process.



Our
current cash expenses are expected to be approximately $85,000 per month, including wages, rent, utilities and corporate professional
fees. As described elsewhere herein, we are not generating sufficient cash from operations to pay for our ongoing operating expenses,
or to pay our current liabilities. As of April 30, 2016 our total liabilities were approximately $3,912,000. As mentioned in Note
4 to the 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 $1,700,000 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 $77,842,000, 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. During the period ending April
30, 2016 we secured $25,000 from a promissory note from a related party. However, there can be no assurance that we will be successful
in executing the aforementioned plans and be able to continue as a going concern.





14






Item
3. Quantitative and Qualitative Disclosures About Market Risks.



Not
Applicable.



Item
4. Controls and Procedures.



Management’s
Report on Internal Controls 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 April 30, 2016, management assessed the effectiveness of our internal control over financial reporting based on the criteria
for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based
on that evaluation, management concluded that, during the period covered by this report; such internal controls and procedures
were effective based on the COSO criteria.



15






PART
II - OTHER INFORMATION



Item
1.  Legal Proceedings.



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. 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. Recap Marketing & Consulting LLP and Rainmaker Ventures II, Ltd. subsequently challenged
the findings of the arbitrator by filing a motion to vacate in In Re Digerati Technologies, Inc. On November 23, 2015,the
Bankruptcy Court issued an order dismissing the motion to vacate.



Item
1A. Risk Factors.



Not
Applicable



Item
2.  Unregistered Sales of Equity Securities and Use of Proceeds.



None



Item
3.  Defaults Upon Senior Securities.



None



Item
5.  Other Information.



None



Item
6. Exhibits





|Exhibit
        Number |  | Exhibit Title                                                                                                                                                                                                                   
|---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                       |  |                                                                                                                                                                                                                                 
|2.1                    |  | Agreed Order Confirming Joint Plan of Reorganization filed by Plan Proponents (filed as Exhibit 2.1 to Form 8-K filed on April 11, 2014)                                                                                        
|                       |  |                                                                                                                                                                                                                                 
|2.2                    |  | Plan Proponents’ Joint Chapter 11 Plan of Reorganization as Modified on the Record on April 4, 2014 (filed as Exhibit 2.2 to Form 8-K filed on April 11, 2014)                                                                  
|                       |  |                                                                                                                                                                                                                                 
|2.3                    |  | Plan Supplement Naming Independent Director in Connection With Plan Proponents’ Joint Chapter 11 Plan of Reorganization (filed as Exhibit 2.3 to Form 8-K filed on April 11, 2014)                                              
|                       |  |                                                                                                                                                                                                                                 
|2.4                    |  | Disclosure Statement Under 11 U.S.C. § 1125 and Bankruptcy Rule 3016 in Support of Plan Proponents’ Joint Chapter 11 Plan of Reorganization (filed as Exhibit 2.4 to Form 8-K filed on April 11, 2014)                          
|                       |  |                                                                                                                                                                                                                                 
|2.5                    |  | Bankruptcy Settlement Agreement dated January 15, 2014 (filed as Exhibit 2.5 to Form 8-K filed on April 11, 2014)                                                                                                               
|                       |  |                                                                                                                                                                                                                                 
|2.6                    |  | Order Authorizing the Sale of 100% Equity Interests of Dishon Disposal, Inc. and Granting Related Relief approving the Stock Purchase Agreement dated June 27, 2014 (filed as Exhibit 2.6 to Form 8-K filed on July 7, 2014)    
|                       |  |                                                                                                                                                                                                                                 
|2.7                    |  | Order Authorizing the Sale of 100% Equity Interests of Hurley Enterprises, Inc. and Granting Related Relief approving the Stock Purchase Agreement dated June 26, 2014 (filed as Exhibit 2.7 to Form 8-K filed on July 24, 2014)
|                       |  |                                                                                                                                                                                                                                 
|3.1                    |  | Amended and Restated Articles of Incorporation (filed as Exhibit 3.1 to Form 8-K filed on April 11, 2014)                                                                                                                       
|                       |  |                                                                                                                                                                                                                                 
|3.2                    |  | Second Amended and Restated Bylaws, effective as of January 13, 2015 (filed as Exhibit 3.1 to Form 8-K filed on January 21, 2015).                                                                                              
|                       |  |                                                                                                                                                                                                                                 
|10.1                   |  | 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 Form 10-Q filed on January 20, 2015).                                                     
|                       |  |                                                                                                                                                                                                                                 
|10.2                   |  | 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 Form 8-K filed on January 21, 2015).        





16






|Exhibit
                                         Number |  | Exhibit
    Title                                                                                                                                                                                                                                                              
|------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                        |  |                                                                                                                                                                                                                                                                                
|10.3                                                    |  | 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 Form 8-K filed on January 21, 2015).                                               
|                                                        |  |                                                                                                                                                                                                                                                                                
|10.4                                                    |  | 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 Form 8-K filed on January 21, 2015).                                              
|                                                        |  |                                                                                                                                                                                                                                                                                
|10.5                                                    |  | 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 Form 8-K filed on January 21, 2015).                                              
|                                                        |  |                                                                                                                                                                                                                                                                                
|10.6                                                    |  | 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 Form 8-K filed on January 21, 2015).                                         
|                                                        |  |                                                                                                                                                                                                                                                                                
|10.7                                                    |  | 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 Form 8-K filed on January 21, 2015).                                                                            
|                                                        |  |                                                                                                                                                                                                                                                                                
|10.8                                                    |  | 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 Form 8-K filed on January 21, 2015).                                                         
|                                                        |  |                                                                                                                                                                                                                                                                                
|10.9                                                    |  | 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 Form 10-Q filed on February 20,
    2015).
|                                                        |  |                                                                                                                                                                                                                                                                                
|10.10                                                   |  | Promissory
    Note payable with Craig K. Clement dated August 21, 2015 in the original principal amount of $25,000 plus interest at the
    rate of 0% per annum due October 31, 2015. (filed as Exhibit 10.10 to the Form 10-Q filed on November 25, 2015).                  
|                                                        |  |                                                                                                                                                                                                                                                                                
|10.11                                                   |  | 2015
Equity Compensation Plan (filed as Exhibit 4.1 to the Form S-8 filed on November 18, 2015).                                                                                                                                                                               
|                                                        |  |                                                                                                                                                                                                                                                                                
|31.1                                                    |  | Certification
of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.                                                                                                                         
|                                                        |  |                                                                                                                                                                                                                                                                                
|31.2                                                    |  | Certification
    of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                 
|                                                        |  |                                                                                                                                                                                                                                                                                
|32.1                                                    |  | Certification
    of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                 
|                                                        |  |                                                                                                                                                                                                                                                                                
|32.2                                                    |  | Certification
    of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002.                                                                                                                 





In
accordance with SEC Release 33-8238, Exhibit 32.1 and 32.2 are being furnished and not filed.





17






SIGNATURES



Pursuant
to the requirements 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.
|---------------------- | -------------------------------
|                       | (Registrant)                   
|                       |                                
|Date:
    June 2, 2016 | By:                            
|                       | Name:                          
|                       | Title:                         
|                       |                                
|                       |                                
|                       |                                
|Date:
June 2, 2016     | By:                            
|                       | Name:                          
|                       | Title:                         
|                       |                                







18