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, 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
of
Incorporation or Organization) |  | (I.R.S. Employer
Identification No.)
|                                                               |  |                                     
|3463 Magic Drive, Suite
355
        San Antonio, Texas         |  | 78229                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          



Registrant’s Telephone Number, Including
Area Code:(210) 775-0888



Common Stock, Par Value $0.001 Per
Share

(Title of Class)



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
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
    Common Stock |  | As
    of       
| | -------------------- |  | ---------------------- |  | ----------------
| | 5,113,030            |  | $0.001
    par value   |  | May
    20, 2015




















DIGERATI
TECHNOLOGIES, INC.

QUARTERLY
REPORT ON FORM 10-Q

FOR
THE QUARTER ENDED APRIL 30, 2014



INDEX



|PART
I -- FINANCIAL INFORMATION  |                                                                                          
|-------------------------------- | -----------------------------------------------------------------------------------------
|                                 |                                                                                          
|Item
    1.                      | Financial
    Statements                                                                 
|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                       | 22                                                                                       





2







DIGERATI
TECHNOLOGIES, INC.

CONTENTS



|PAGE
    4     |  | CONSOLIDATED
    BALANCE SHEETS AS OF APRIL 30, 2014 AND AS OF JULY 31, 2013  (UNAUDITED)                         
|-------------- |  | ------------------------------------------------------------------------------------------------------------------
|               |  |                                                                                                                   
|PAGE
    5     |  | CONSOLIDATED
    STATEMENTS OF OPERATIONS FOR THE THREE  AND NINE MONTHS ENDED APRIL 30, 2014 AND 2013 (UNAUDITED)
|               |  |                                                                                                                   
|PAGE
    6     |  | CONSOLIDATED
    STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED APRIL 30, 2014 AND 2013 (UNAUDITED)           
|               |  |                                                                                                                   
|PAGES
    7-14 |  | 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, |  
|------------------------------------------------------------------------------------------------------------------ |  | --------- | ------- | - | -------- | -
|                                                                                                                   |  | 2014      |         |   | 2013     |  
|                                                                                                                   |  |           |         |   |          |  
|ASSETS                                                                                                             |  |           |         |   |          |  
|CURRENT ASSETS:                                                                                                    |  |           |         |   |          |  
|Cash and cash equivalents                                                                                          |  | $         | 117     |   |          | $
|Accounts receivable, net of allowance for doubtful accounts of $54 and $54, respectively                           |  |           | 9       |   |          |  
|Prepaid and other current assets                                                                                   |  |           | 71      |   |          |  
|Assets held for sale                                                                                               |  |           | 79,100  |   |          |  
|Total current assets                                                                                               |  |           | 79,297  |   |          |  
|                                                                                                                   |  |           |         |   |          |  
|LONG-TERM ASSETS:                                                                                                  |  |           |         |   |          |  
|Intangible assets, net of accumulated amortization of $88 and $76, respectively                                    |  |           | 62      |   |          |  
|Property and equipment, net                                                                                        |  |           | 2       |   |          |  
|Total assets                                                                                                       |  | $         | 79,361  |   |          | $
|                                                                                                                   |  |           |         |   |          |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                              |  |           |         |   |          |  
|CURRENT LIABILITIES:                                                                                               |  |           |         |   |          |  
|Accounts payable                                                                                                   |  | $         | 2,440   |   |          | $
|Accounts payable - related party                                                                                   |  |           | 337     |   |          |  
|Accrued liabilities                                                                                                |  |           | 343     |   |          |  
|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                          |  |           | 1,392   |   |          |  
|Derivative liability                                                                                               |  |           | 10      |   |          |  
|Liabilities held for sale                                                                                          |  |           | 78,670  |   |          |  
|Total current liabilities                                                                                          |  |           | 83,242  |   |          |  
|                                                                                                                   |  |           |         |   |          |  
|LONG-TERM LIABILITIES:                                                                                             |  |           |         |   |          |  
|Customer deposits                                                                                                  |  |           | 138     |   |          |  
|Total long-term liabilities                                                                                        |  |           | 138     |   |          |  
|                                                                                                                   |  |           |         |   |          |  
|Total liabilities                                                                                                  |  |           | 83,380  |   |          |  
|                                                                                                                   |  |           |         |   |          |  
|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                                                                                                |  |           | (79,183 | ) |          |  
|Other comprehensive income                                                                                         |  |           | 1       |   |          |  
|Total stockholders' deficit                                                                                        |  |           | (4,019  | ) |          |  
|Total liabilities and stockholders' deficit                                                                        |  | $         | 79,361  |   |          | $



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, |  
|---------------------------------------------------------------------------------------------------- |  | ---------------------------- | --------- | - | --------------------------- | -
|                                                                                                     |  | 2014                         |           |   | 2013                        |  
|OPERATING REVENUES:                                                                                  |  |                              |           |   |                             |  
|Global VoIP services                                                                                 |  | $                            | 18        |   |                             | $
|Cloud-based hosted services                                                                          |  |                              | 54        |   |                             |  
|Total operating revenues                                                                             |  |                              | 72        |   |                             |  
|                                                                                                     |  |                              |           |   |                             |  
|OPERATING EXPENSES:                                                                                  |  |                              |           |   |                             |  
|Cost of services (exclusive of depreciation and amortization)                                        |  |                              | 72        |   |                             |  
|Selling, general and administrative expense (exclusive of legal and professional fees)               |  |                              | 212       |   |                             |  
|Legal and professional fees                                                                          |  |                              | 727       |   |                             |  
|Depreciation and amortization expense                                                                |  |                              | 4         |   |                             |  
|Total operating expenses                                                                             |  |                              | 1,015     |   |                             |  
|                                                                                                     |  |                              |           |   |                             |  
|OPERATING LOSS                                                                                       |  |                              | (943      | ) |                             |  
|                                                                                                     |  |                              |           |   |                             |  
|OTHER INCOME (EXPENSE):                                                                              |  |                              |           |   |                             |  
|Gain (loss) derivative instruments and disposal of fixed assets                                      |  |                              | -         |   |                             |  
|Gain (loss) on debt extinguishment                                                                   |  |                              | 16        |   |                             |  
|Interest expense                                                                                     |  |                              | (19       | ) |                             |  
|Total other income (expense)                                                                         |  |                              | (3        | ) |                             |  
|                                                                                                     |  |                              |           |   |                             |  
|NET LOSS FROM CONTINUING OPERATIONS, BEFORE TAX                                                      |  |                              | (946      | ) |                             |  
|                                                                                                     |  |                              |           |   |                             |  
|INCOME TAX BENEFIT FROM DISCONTINUED OPERATIONS                                                      |  |                              | 726       |   |                             |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS                                                             |  |                              | (220      | ) |                             |  
|NET INCOME FROM DISCONTINUED OPERATIONS, NET OF TAXES                                                |  |                              | 1,411     |   |                             |  
|NET INCOME ATTRIBUTED TO DIGERATI TECHNOLOGIES, INC.                                                 |  | $                            | 1,191     |   |                             | $
|                                                                                                     |  |                              |           |   |                             |  
|INCOME (LOSS) PER SHARE - BASIC AND DILUTED                                                          |  |                              |           |   |                             |  
|From continuing operations                                                                           |  | $                            | (0.11     | ) |                             | $
|From discontinued operations                                                                         |  | $                            | 0.71      |   |                             | $
|EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED ATTRIBUTED TO DIGERATI TECHNOLOGIES, INC. SHAREHOLDERS |  | $                            | 0.60      |   |                             | $
|                                                                                                     |  |                              |           |   |                             |  
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC AND DILUTED                                       |  |                              | 1,977,626 |   |                             |  



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, |        
|------------------------------------------------------------------------------ |  | --------------------------- | -------
|                                                                               |  | 2014                        |        
|                                                                               |  |                             |        
|CASH FLOWS FROM OPERATING ACTIVITIES:                                          |  |                             |        
|Net income                                                                     |  | $                           | 949    
|Adjustments to reconcile net income to cash provided by  operating activities: |  |                             |        
|(Gain) loss on debt extinguishment                                             |  |                             | (163   
|(Gain) loss on derivative instruments and disposal of fixed assets             |  |                             | 31     
|Depreciation, amortization and accretion                                       |  |                             | 7,686  
|Bad debt                                                                       |  |                             | -      
|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     
|Related party receivables                                                      |  |                             | -      
|Prepaid expenses and other current assets                                      |  |                             | 59     
|Accounts payable                                                               |  |                             | 2,211  
|Accrued liabilities                                                            |  |                             | (295   
|Customer deposits                                                              |  |                             | -      
|Net cash provided by operating activities                                      |  |                             | 10,510 
|                                                                               |  |                             |        
|CASH FLOWS FROM INVESTING ACTIVITIES:                                          |  |                             |        
|Acquisition of Dishon and Hurley                                               |  |                             | -      
|Purchases of property & equipment                                              |  |                             | (10,230
|Net cash used in investing activities                                          |  |                             | (10,230
|                                                                               |  |                             |        
|CASH FLOWS FROM FINANCING ACTIVITIES:                                          |  |                             |        
|Payments on debt                                                               |  |                             | (3,016 
|Proceeds from notes payable                                                    |  |                             | 4,157  
|Net cash provided by financing activities                                      |  |                             | 1,141  
|                                                                               |  |                             |        
|INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                               |  |                             | 1,421  
|CASH AND CASH EQUIVALENTS, beginning of period                                 |  |                             | 6,543  
|                                                                               |  |                             |        
|CASH AND CASH EQUIVALENTS, end of period                                       |  | $                           | 7,964  
|                                                                               |  |                             |        
|SUPPLEMENTAL DISCLOSURES:                                                      |  |                             |        
|Cash paid for interest                                                         |  | $                           | -      
|                                                                               |  |                             |        
|NON-CASH INVESTING AND FINANCING TRANSACTIONS                                  |  |                             |        
|Accrued interest added to debt principal                                       |  | $                           | -      
|Property and equipment exchanged for debt                                      |  | $                           | -      
|Common stock issued for debt                                                   |  | $                           | -      



See
accompanying notes to consolidated financial statements





6







DIGERATI
TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

April
30, 2014

(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 financial statements for the most recent Form 10-K filed on July 30, 2014 have been omitted.



Taxes



The effective
tax rate was 77% and 47% for the three months and nine months ended April 30, 2014, respectively, from an effective tax rate of
0% for the three and nine months ended April 30, 2013 due to the estimated income tax benefit from discontinued operations.



NOTE
2 – GOING CONCERN



Financial
Condition



Digerati’s
unaudited interim consolidated financial statements for the period ended April 30, 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 has accumulated a deficit of approximately $79,183,000 and a working capital deficit of approximately
$3,945,000 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, 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.





7







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              





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





8







| | (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.
| | ----- | -----------------------------------------------------------------------------------------------------------------------------



| | (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.
| | --- | -------------------------------------------------------------------------------------------------------



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 include net sales of $44.14 million and net income, net of tax of $2,270,000 during the nine
months ended April 30, 2014. Assets and liabilities held for sale as of April 30, 2014 related to the discontinued operations
include total assets of $79.10 million and total liabilities of $78.67 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.



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.



As
a result of the assets and liabilities being classified as held for sale, and based on the final sales prices for Dishon and Hurley,
an impairment of $5,885,000 was recorded on the Hurley goodwill on July 31, 2013.





9







Assets
and liabilities of discontinued operations as of April 30, 2014 and July 31, 2013 were as follows (in thousands):



|                                       |  | April 30, 2014 |        |  | July 31, 2013 |  
|-------------------------------------- |  | -------------- | ------ |  | ------------- | -
|Cash and cash equivalents              |  | $              | 7,847  |  |               | $
|Accounts receivable                    |  |                | 14,464 |  |               |  
|Other assets                           |  |                | 7,182  |  |               |  
|Property and equipment                 |  |                | 28,083 |  |               |  
|Goodwill                               |  |                | 3,858  |  |               |  
|Land                                   |  |                | 3,851  |  |               |  
|Permit – waste disposal, net           |  |                | 12,744 |  |               |  
|Permit – sludge service                |  |                | 1,071  |  |               |  
|Total net assets held for sale         |  | $              | 79,100 |  |               | $
|                                       |  |                |        |  |               |  
|Accounts payable                       |  |                | 3,188  |  |               |  
|Accrued expenses                       |  |                | 6,361  |  |               |  
|Notes payable                          |  |                | 69,121 |  |               |  
|Total liabilities held for sale        |  |                | 78,670 |  |               |  
|Net assets (liabilities) held for sale |  | $              | 430    |  |               | $



Net
income from discontinued operations for the nine months ended April 30, 2014 and 2013 were as follows (in thousands):



|                                                           |  | April 30, 2014 |         |   | April 30, 2013 |  
|---------------------------------------------------------- |  | -------------- | ------- | - | -------------- | -
|Revenues                                                   |  | $              | 44,136  |   |                | $
|Cost of goods sold                                         |  |                | 22,885  |   |                |  
|Gross profit                                               |  |                | 21,251  |   |                |  
|Selling and administrative expenses                        |  |                | (10,141 | ) |                |  
|Depreciation and amortization                              |  |                | (6,737  | ) |                |  
|Other income (expense)                                     |  |                | (934    | ) |                |  
|Net income (loss) from discontinued operations             |  |                | 3,439   |   |                |  
|Income Tax (benefit) expense from discontinued Operations  |  |                | (1,169  | ) |                |  
|Net income (loss) from discontinued operations, net of tax |  | $              | 2,270   |   |                | $



NOTE
5 – NOTES PAYABLE



At
April 30, 2014 and July 31, 2013, outstanding debt consisted of the following: (In thousands)



|Outstanding
debt consisted of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | April 30, 2014 |        |   | July 31, 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) |  |                | 335    |   |               |  
|Note payable to MCI Partners, Inc. bearing no interest and no maturity date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                | 22     |   |               |  
|Total outstanding long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | $              | 1,392  |   |               |  
|Current portion of long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                | (1,392 | ) |               |  
|Long-term debt, net of current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | $              | -      |   |               | $







10







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 resulted in a remaining balance of $10,000 as
of April 30, 2014. The Company cancelled the related warrants as a result of the payment made for the put rights.



On
April 3, 2012, May 2, 2012, May 15, 2012 and June 21, 2012 Digerati entered into four Convertible Debentures totaling $75,000.
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 April
30, 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 paid the principal balance outstanding to the debenture holders.



As
of April 30, 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.



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 paid the principal balance outstanding on the promissory
notes to Alfonso Torres, ATV Texas Ventures IV, ATVF II, Thermo Credit, LLC and Vantage Bank.



NOTE
6 – 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 April 30, 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 nine months
ended April 30, 2014 and 2013, respectively. Unamortized compensation cost totaled $0 at April 30, 2014 and April 30, 2013.



A
summary of the options as of April 30, 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, 2013  |  |         | 126,300 |  |                   | $ | 5.30 |                             | 
|Granted                       |  |         | -       |  |                   |   | -    |                             | 
|Cancelled                     |  |         | 126,300 |  |                   |   | 5.30 |                             | 
|Outstanding at April 30, 2014 |  |         | -       |  |                   | $ | -    |                             | 
|Exercisable at April 30, 2014 |  |         | -       |  |                   | $ | -    |                             | 





11







NOTE
7 – WARRANTS



A
summary of the warrants as of April 30, 2014 and July 31, 2013 and the changes during periods are presented below:



|                              |  |          |         |  |                   |   |      | Weighted-
average     | 
|----------------------------- |  | -------- | ------- |  | ----------------- | - | ---- | --------------------- | 
|                              |  |          |         |  | Weighted-
average |   |      | remaining contractual | 
|                              |  | Warrants |         |  | exercise
price    |   |      | term
(years)          | 
|Outstanding at July 31, 2013  |  |          | 120,600 |  |                   | $ | 4.60 |                       | 
|Granted                       |  |          | -       |  |                   |   | -    |                       | 
|Exercised                     |  |          | -       |  |                   |   | -    |                       | 
|Cancelled                     |  |          | 120,600 |  |                   |   | 4.60 |                       | 
|Outstanding at April 30, 2014 |  |          | -       |  |                   | $ | -    |                       | 
|Exercisable at April 30, 2014 |  |          | -       |  |                   | $ | -    |                       | 



As
of April 30, 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
8 – DERIVATIVE LIABILITIES



The
following table presents the derivative financial instruments, measured and recorded at fair value on the Company’s consolidated
balance sheets on a recurring basis, and their level within the fair value hierarchy as of April 30, 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 April 30, 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%.



NOTE
9 – SUBSEQUENT EVENTS



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.





12







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.



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.



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.



NOTE
10 – SIGNIFICANT CUSTOMERS



During the
nine months ended April 30, 2014, the Company derived a significant amount of revenue from two customers, comprising 22%
and 11% of the total revenue for the period, respectively, compared to two customers, comprising 18% and 13% of the total
revenue for the nine months ended April 30, 2013.



During the
nine months ended April 30, 2014, the Company derived a significant amount of accounts receivable from one customer, comprising
92% of the total accounts receivable for the period, compared to two customers, comprising 19%, and 12% of the total accounts
receivable for the nine months ended April 30, 2013, respectively.



NOTE
11 – RELATED PARTY TRANSACTIONS



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%.
On February 2, 2015, Shift8 Networks made a principal payment of $2,000.



As
of period end there is approximately $337,000 accounts payable to related parties.





13







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, 2013 filed with the Securities and Exchange
Commission on July 30, 2014.



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, 2014 and 2013. 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, 2013 filed with the Securities and Exchange Commission on July 30, 2014. 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.



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. Our principal business 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 more than 200 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 skid houses, telecommunication services, booster
booths, portable toilets, generators, potable water and mess halls.



Sources
of Revenue and Direct Cost



Sources
of revenue:



Oil
field Services: We provide equipment rental services to contractors and major oil drilling entities in the North Dakota Area.
Additionally we provide waste collection, transfer, disposal and recycling services.



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-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:



Oil
field Services: We incur cost associated with the rental of equipment, contractors and engineering associated with our waste
disposal 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.





14







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



Results
of Operations



The
following table sets forth certain items included in our results of operations and variances between periods for the three and
nine months ended April 30, 2014 and 2013. All dollar amounts are in thousands.



|                                                                                           |  | Three months ended
April 30, |       |   |      |   |       |           |  |   | Nine months ended
April 30, |   |  |      |      |   |      |  
|------------------------------------------------------------------------------------------ |  | ---------------------------- | ----- | - | ---- | - | ----- | --------- |  | - | --------------------------- | - |  | ---- | ---- | - | ---- | -
|                                                                                           |  | 2014                         |       |   | 2013 |   |       | Variances |  |   | %                           |   |  | 2014 |      |   | 2013 |  
|OPERATING REVENUES:                                                                        |  |                              |       |   |      |   |       |           |  |   |                             |   |  |      |      |   |      |  
|Global VoIP services                                                                       |  | $                            | 18    |   |      | $ | 48    |           |  | $ | (30                         | ) |  |      | -63  | % |      | $
|Cloud-based hosted services                                                                |  |                              | 54    |   |      |   | 154   |           |  |   | (100                        | ) |  |      | -65  | % |      |  
|                                                                                           |  |                              |       |   |      |   |       |           |  |   |                             |   |  |      |      |   |      |  
|Total operating revenues                                                                   |  |                              | 72    |   |      |   | 202   |           |  |   | (130                        | ) |  |      | -64  | % |      |  
|                                                                                           |  |                              |       |   |      |   |       |           |  |   |                             |   |  |      |      |   |      |  
|Cost of services (exclusive
    of depreciation and amortization, shown below)             |  |                              | 72    |   |      |   | 151   |           |  |   | (79                         | ) |  |      | -52  | % |      |  
|GROSS MARGIN                                                                               |  |                              | -     |   |      |   | 51    |           |  |   | (51                         | ) |  |      | -100 | % |      |  
|Selling, general and administrative expense
    (exclusive of legal and professional fees) |  |                              | 212   |   |      |   | 111   |           |  |   | 101                         |   |  |      | 91   | % |      |  
|Legal and professional fees                                                                |  |                              | 727   |   |      |   | 10    |           |  |   | 717                         |   |  |      | 7170 | % |      |  
|Depreciation and amortization
    expense                                                  |  |                              | 4     |   |      |   | 5     |           |  |   | (1                          | ) |  |      | -20  | % |      |  
|OPERATING LOSS                                                                             |  |                              | (943  | ) |      |   | (75   | )         |  |   | (868                        | ) |  |      | 1157 | % |      |  
|                                                                                           |  |                              |       |   |      |   |       |           |  |   |                             |   |  |      |      |   |      |  
|OTHER INCOME (EXPENSE):                                                                    |  |                              |       |   |      |   |       |           |  |   |                             |   |  |      |      |   |      |  
|Gain (loss) derivative instruments and disposal
    of fixed assets                        |  |                              | -     |   |      |   | -     |           |  |   | -                           |   |  |      | -    |   |      |  
|Gain (loss) on debt extinguishment                                                         |  |                              | 16    |   |      |   | -     |           |  |   | 16                          |   |  |      | 100  | % |      |  
|Interest expense                                                                           |  |                              | (19   | ) |      |   | (86   | )         |  |   | 67                          |   |  |      | -78  | % |      |  
|Total other income (expense)                                                               |  |                              | (3    | ) |      |   | (86   | )         |  |   | 83                          |   |  |      | -97  | % |      |  
|                                                                                           |  |                              |       |   |      |   |       |           |  |   |                             |   |  |      |      |   |      |  
|NET LOSS FROM CONTINUING OPERATIONS, BEFORE TAX                                            |  | $                            | (946  | ) |      | $ | (161  | )         |  | $ | (785                        | ) |  |      | 488  | % |      | $
|                                                                                           |  |                              |       |   |      |   |       |           |  |   |                             |   |  |      |      |   |      |  
|INCOME TAX BENEFIT FROM DISCONTINUED OPERATIONS                                            |  |                              | 726   |   |      |   | 1,292 |           |  |   | (566                        | ) |  |      | -44  | % |      |  
|                                                                                           |  |                              |       |   |      |   |       |           |  |   |                             |   |  |      |      |   |      |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS                                                   |  |                              | (220  | ) |      |   | 1,131 |           |  |   | (1,351                      | ) |  |      | -119 | % |      |  
|                                                                                           |  |                              |       |   |      |   |       |           |  |   |                             |   |  |      |      |   |      |  
|NET INCOME FROM DISCONTINUED OPERATIONS,
    NET OF TAXES                                  |  |                              | 1,411 |   |      |   | 2,507 |           |  |   | (1,096                      | ) |  |      | -44  | % |      |  
|                                                                                           |  |                              |       |   |      |   |       |           |  |   |                             |   |  |      |      |   |      |  
|NET INCOME (LOSS) ATTRIBUTED TO DIGERATI
    TECHNOLOGIES, INC.                            |  | $                            | 1,191 |   |      | $ | 3,638 |           |  | $ | (2,447                      | ) |  |      | -67  | % |      | $



Three
Months ended April 30, 2014 Compared to Three Months ended April 30, 2013



Global
VoIP Services.Global VoIP services revenue decreased by $30,000, or 63%, from the quarter ended April 30, 2013 to
the quarter ended April 30, 2014. 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 $100,000, or 65%, from the quarter ended April 30, 2013
to the quarter ended April 30, 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 $79,000, or 52%,
from the quarter ended April 30, 2013 to the quarter ended April 30, 2014. The decrease in cost of services is a direct correlation
to the decrease in total revenue.



Selling,
General and Administrative (SG&A) Expenses (exclusive of legal and professional fees).SG&A expenses increased by
$101,000, or 91%, from the quarter ended April 30, 2013 to the quarter ended April 30, 2014. The increase is attributed to administrative
expenses required to manage the Chapter 11 Plan of Reorganization.





15







Legal
and professional fees. Legal and professional fees increased by $717,000, or 7,170%, from the quarter ended April 30, 2013
to the quarter ended April 30, 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.



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



Operating
loss. The Company reported an operating loss of $943,000 for the three months ended April 30, 2014 compared to an operating
loss of $75,000 for the three months end April 30, 2013. The increase in operating loss between periods is primarily attributed
to the increase in legal and professional fees of $717,000.



Other
income (expense). Other income (expense) decreased by $83,000, or 97%, from the quarter ended April 30, 2013 to the quarter
ended April 30, 2014. The primary reason for the decrease in other income (expense) is attributed to the decrease in interest
expense between periods, due to reduction in debt by the Company.



Net
loss from continuing operations, before tax. Net loss from continuing operations, before tax increased by $785,000 or 488%,
from the three months ended April 30, 2013 to the three months ended April 30, 2014. The increase in net loss from continuing
operations, before tax is primarily attributed to the increase in legal and professional fees of $717,000 and the decrease in
gross margin between periods of $51,000.



Income
tax benefit (expense) from discontinued operations. Income tax benefit (expense) from discontinued operations decreased by
$566,000 or 44%, from the quarter ended April 30, 2013 to the quarter ended April 30, 2014.



Net
income (loss) from discontinued operations, net of taxes. Net income (loss) from discontinued operations, net of taxes decreased
by $1,096,000 or 44%, from the quarter ended April 30, 2013 to the quarter ended April 30, 2014.



Net
income (loss) attributed to Digerati Technologies, Inc.Net income (loss) attributed to Digerati Technologies, Inc. decreased
by $2,447,000 or 67%, from the quarter ended April 30, 2013 to the quarter ended April 30, 2014. The increase in net (loss) attributed
to Digerati Technologies, Inc. is attributed to the increase in (loss) from discontinued operations between periods.



Nine
Months ended April 30, 2014 Compared to the Nine Months ended April 30, 2013



Global
VoIP Services.Global VoIP services revenue decreased by $104,000, or 41%, from the nine months ended April 30, 2013
to the nine months ended April 30, 2014. 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 $294,000, or 63%, from the nine months ended April 30, 2013
to the nine months ended April 30, 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 $207,000, or 42%,
from the nine months ended April 30, 2013 to the nine months ended April 30, 2014. The decrease in cost of services is a direct
correlation to the decrease in total revenue.



Selling,
General and Administrative (SG&A) Expenses (exclusive of legal and professional fees).SG&A expenses increased by
$55,000, or 10%, from the nine months ended April 30, 2013 to the nine months ended April 30, 2014. The increase is attributed
to the administrative expense associated to the Chapter 11 Plan of Reorganization.



Legal
and professional fees. Legal and professional fees increased by $1,971,000, or 3,719%, from the nine months ended April 30,
2013 to the nine months ended April 30, 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.



Depreciation
and amortization. Depreciation and amortization decreased by $11,000, or 46%, from the nine months ended April 30, 2013 to
the nine months ended April 30, 2014. The decrease is due to most of our fixed assets reaching their fully depreciated value.



Operating
loss. The Company reported an operating loss of $2,596,000 for the nine months ended April 30, 2014 compared to an operating
loss of $390,000 for the nine months ended April 30, 2013. The increase in operating loss between periods is primarily attributed
to the increase in legal and professional fees of $1,971,000 and decrease in gross margin between periods of $191,000.





16







Other
income (expense). Other income increased by $121,000, or 807%, from the nine months ended April 30, 2013 to the nine months
ended April 30, 2014. The primary reason for the increase in other income (expense) is attributed to the recognition of $262,000
in a gain from debt extinguishment associated to certain debt forgiven as part of the Chapter 11 Plan of Reorganization.



Net
loss from continuing operations, before tax. Net loss from continuing operations, before tax increased by $2,085,000 or 515%,
from the nine months ended April 30, 2013 to the nine months ended April 30, 2014. The increase in net loss from continuing operations,
before tax is primarily attributed to the increase in legal and professional fees of $1,971,000 and decrease in gross margin between
periods of $191,000.



Income
tax benefit from discontinued operations. Income tax benefit from discontinued operations decreased by $1,060,000 or 48%,
from the nine months ended April 30, 2013 to the nine months ended April 30, 2014.



Net
income (loss) from discontinued operations, net of taxes. Net income (loss) from discontinued operations, net of taxes decreased
by $2,056,000 or 48%, from the nine months ended April 30, 2013 to the nine months ended April 30, 2014.



Net
income (loss) attributed to Digerati Technologies, Inc.Net income (loss) attributed to Digerati Technologies, Inc. decreased
by $5,201,000 or 85%, from the nine months ended April 30, 2013 to the nine months ended April 30, 2014. The decrease in net income
attributed to Digerati Technologies, Inc. is due to the decrease in net income from discontinued operations between periods.



Liquidity
and Capital Resources



Cash
Position: We had a consolidated cash balance of $117,000 as of April 30, 2014 not including cash from discontinued operations.
While a consolidated cash balance of $7,964,000 including cash from discontinued operations. Net cash provided by operating activities
during the nine months ended April 30, 2014 was approximately $10,510,000. Cash used in investing activities during the nine months
ended April 30, 2014 was approximately $10,230,000. We had cash provided by financing activities of $1,141,000 pursuant to the
issuance and payments of various promissory notes during the nine months ended April 30, 2014. Overall, our net operating, investing
and financing activities during the nine months ended April 30, 2014 generated approximately $1,421,000 of cash.



We
are currently utilizing our available cash to fund any deficiencies in our cash flows from operations. Additionally, we were funding
Digerati from available funds from two subsidiaries, which were subsequently sold during fiscal 2014.



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 April 30, 2014 our total
liabilities were approximately $83,380,000. As mentioned in Note 3 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 intents 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 $79,183,000, 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.



Item
3. Quantitative and Qualitative Disclosures About Market Risks.



Smaller
reporting companies are not required to provide the information required by this item.





17







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, 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.



The
matters involving internal controls and procedures that our management considered to be material weaknesses under the standards
of the Public Company Accounting Oversight Board were:



| | 1. | Ineffective
    controls over the business combination accounting;                                     
| | -- | -------------------------------------------------------------------------------------------------------
| | 2. | Lack
    of accounting expertise to appropriately apply GAAP for complex or non-recurring transactions.



The
aforementioned material weaknesses were identified by management in connection with the review of our financial statements as
of April 30, 2014.



Management
believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes
that, since the Company sold the subsidiaries in July 2014, they now have the adequate resources to enable accurate and reliable
financial reporting. We are further studying best practices in internal controls over financial reporting and designing other
internal controls to implement that will help remediate our weaknesses.



Changes
in internal controls over financial reporting



Except
as noted above, there was no change in our internal controls over financial reporting that occurred during the period covered
by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial
reporting.





18







PART
II - OTHER INFORMATION



Item
1.       Legal Proceedings.



On
January 17, 2013, a lawsuit was filed by certain unauthorized parties on behalf of the Company in the District Court of Clark
County, Nevada against Oleum Capital, LLC. This lawsuit was not approved by the Board or officers of the Company. Accordingly
Arthur L. Smith remained the sole Director, Chief Executive Officer, President, Secretary, and Chairman of the Company. Kelly
V. Kirker, William E. McIlwain, Robert C. Rhodes, and Robert Sonfield have no relationship with the Company and no authority to
speak or act for the Company. On January 17, 2013 the Company initiated litigation in the District Court of Clark County, Nevada
against Oleum Capital, LLC for breach of contract, unjust enrichment, declaratory relief, constructive trust and injunctive relief
for actions of the Defendant and its control persons, David L. Gorham and Bert Tarrant Dunken, Jr. These cases resulted from a
transaction in November 2012 (the "Transaction") whereby the Company acquired two oilfield services companies operating
in the Bakken region of North Dakota and Montana. See Note 4 to the Financial Statements.



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 January 15, 2014, the
Bankruptcy Court entered an Order Approving Compromise and Settlement on the Debtor's and Parties' Emergency Motion to Approve
Compromise of Controversy Under Bankruptcy Rule 9019, which resolved current and prospective claims relating to the Transaction.
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. See Item 1 Business – Bankruptcy, and Note 3 to the Financial Statements.



Item
1A.    Risk Factors.



None



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



None



Item
5.       Other Information.



Departure
of Directors



James J.
Davis, William E. Mcllwain and Arthur L. Smith did not seek re-election as directors and, therefore, were not re-elected to the
Company's Board of Directors at the Company’s Annual Meeting of Shareholders held on September 15, 2014.



Election
of Directors



Effective
as of September 15, 2014, during the Company's Annual Meeting of Shareholders, the Shareholders elected Craig K. Clement and Maxwell
A. Polinsky to the Company's Board of the Directors.



Craig
K. Clement has nearly thirty-five years' executive and board of director experience with Technology (telecom, software, hardware)
and Exploration and Production (E&P) entities (Buffalo Royalty, Petroleum Search, Yucca, and NASDAQ: PAN), where Mr. Clement
was responsible for asset management, acquisitions/divestitures, strategic/tactical planning, financial operations, corporate
finance, legal, transaction structuring, business development, and investor relations. Mr. Clement assisted in the growth of ATSI
Communications, Inc., predecessor to Digerati Technologies, Inc., from 10 employees to 500 and leading up to its listing on the
American Stock Exchange (AMEX: AI) ATSI Communications achieved a public market valuation of over US$450 million while on the
AMEX. Mr. Clement was the founding CEO of GlobalSCAPE, Inc. (NYSE: GSB), the developer of the popular FTP client software utility
"Cute FTPTM," and former wholly owned subsidiary of Digerati. GlobalSCAPE was spun off to Digerati's shareholders in
2000 (NYSE: GSB). Mr. Clement is the Chairman of the South Texas Regional Center for Innovation and Commercialization, which screened
and supported entrepreneurs through the Texas Emerging Technology Fund managed by the Texas Governor's office. The Texas Emerging
Technology Fund has invested more than $350 million in Texas-based technology start-ups. Since 2011, Mr. Clement has served as
a consultant to various E&P entities including Morning Star, BP, and Forge Energy (EnCap and Pine Brook-sponsored). Mr. Clement
holds a Bachelor of Business Administration degree from the University of Texas at Austin.



Maxwell
A. Polinskyis the Chief Financial Officer and a director of Cougar Minerals Corp., a Canadian-based mineral exploration company
that is traded on the TSX Venture Exchange and a principal in Venbanc Investment and Management Group Inc., an investment and
merchant bank he co-founded in 1994. From 2009 to 2011, Mr. Polinsky was the Chief Financial Officer and a director of RX Exploration
Inc., a company engaged in re-examination of gold projects within North America that have previously reached advanced exploration,
underground development or past gold production. Mr. Polinsky also served as a director of Nerium Biotechnology from 2006 to 2010,
Montana Gold from 2005 to 2011, Xpel Technologies from 2003 to 2009, Nighthawk Systems from 2001 to 2007 and DMI Technologies
Inc. from 1994 to 2002. Mr.Polinsky holds a Bachelor of Commerce degree from the University of Manitoba.





19







Family
Relationships



There are
no family relationships between any of the Company’s directors or officers.



Related
Party Transactions



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%.
On February 2, 2015, Shift8 Networks made a principal payment of $2,000.



On
October 30, 2014, November 7, 2014, November 14, 2014 and November 24, 2014 Digerati entered into four Promissory Notes for a
total of $40,000 with Flagship Oil and Gas Corp. Craig K. Clement, a Digerati director, is also the CEO and director of Flagship.
The notes have an implied annual interest rate of 7% and with maturity date for all notes of 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.



ITEM
6.      EXHIBITS



|Exhibit
        Number |  | Exhibit
    Title                                                                                                                                                                                                                                                                      
|---------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                       |  |                                                                                                                                                                                                                                                                                        
|3.1                    |  | 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                   |  | 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)).                                                 
|                       |  |                                                                                                                                                                                                                                                                                        
|10.2                   |  | 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 Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).      
|                       |  |                                                                                                                                                                                                                                                                                        
|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 Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).      
|                       |  |                                                                                                                                                                                                                                                                                        
|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 Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).     
|                       |  |                                                                                                                                                                                                                                                                                        
|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 Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).     
|                       |  |                                                                                                                                                                                                                                                                                        
|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 Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).





20







|Exhibit
        Number |  | Exhibit
    Title                                                                                                                                                                                                                                                                                                               
|---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                       |  |                                                                                                                                                                                                                                                                                                                                 
|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 Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).                                                                            
|                       |  |                                                                                                                                                                                                                                                                                                                                 
|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 Company's Current Report on Form 8-K filed on January 21, 2015 (File No. 001-15687)).                                                         
|                       |  |                                                                                                                                                                                                                                                                                                                                 
|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 Company's Current Report on Form
    10-Q filed on February 20, 2015 (File No. 001-15687)).
|                       |  |                                                                                                                                                                                                                                                                                                                                 
|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.





21







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:
    May 22, 2015 | By:                            
|                       | Name:                          
|                       | Title:                         
|                       |                                
|                       |                                
|                       |                                
|Date:
    May 22, 2015 | By:                            
|                       | Name:                          
|                       | Title:                         
|                       |                                





22