Item
1.01. Entry into a Material Definitive Agreement
On November 1, 2018, Foothills Exploration,
Inc. (the “Company”), entered into a loan transaction with an unaffiliated investor (“Holder”),
which funded and closed on November 5, 2018. The Company issued the lender a convertible promissory note (“Note”)
dated November 1, 2018, in the principal amount of $380,000 with an original issue discount of 10% and received proceeds
of $342,000, before giving effect to certain transactional costs including legal fees on November 5, 2018. As part of this transaction
the Company also issued (i) 650,000 shares of the Company’s restricted common stock and two tranches of warrants
: (ii) tranche 1 are warrants having a 5-year term to purchase 687,500 shares of the Company’s restricted
common stock at an exercise price of $0.20 per share with cashless exercise option and (ii) tranche 2 are warrants having
a 5-year term to purchase 2,062,500 shares of the Company’s restricted common stock at an exercise price of $0.20 per share
with cashless exercise option. Tranche 2 warrants may be redeemed by the Company for $20,000 (“Call Payment”)
beginning on the date of issuance, November 1, 2018, and ending on the date which is 180 calendar days following the issuance
date (the “Call”). If Company exercises the Call, then the Company shall make the Call Payment to the Holder within
five business days of the date that the Company exercises the Call. If the Call Payment is not made within the required time frame,
then the Company will lose its right to exercise the Call for the tranche 2 warrants.
The Note accrues interest at 12% per year,
and is due and payable on May 1, 2019 (“Maturity Date”). The Company may prepay the Note without prepayment penalty
if prepaid during the first 180 days following issuance date. No prepayment is permitted after the initial 180 days from issuance.
The warrants are subject to adjustment in certain events such as forward or reverse stock splits or if subsequent financings are
at terms that are more favorable to persons in subsequent issuances of securities. The Note agreements give the lender the right
to convert the loan amounts due into common stock at a conversion price equal to the lesser of (i) 50% multiplied by the lowest
trading price during the previous twenty (20) trading day period ending on the latest complete trading day prior to the date of
this Note and (ii) the alternate conversion price (subject to equitable adjustments for stock splits, stock dividends or rights
offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations,
recapitalization, reclassifications, extraordinary distributions and similar events). The “Alternate Conversion Price”
means 50% multiplied by the Market Price. “Market Price” means the lowest trading price for the common stock
during the twenty (20) trading day period ending on the latest complete trading day prior to the conversion date. Should Holder
exercise its conversion rights upon terms provided within the Note, the interests of our shareholders may be materially diluted
and a change in control could occur. Net proceeds obtained in this transaction will be used to retire certain
outstanding loan obligation currently due and payable, and for general corporate and working capital purposes. No
broker-dealer or placement agent was retained or involved in this transaction.
The transaction documents contain additional
terms and provisions, representations and warranties, including further provisions covering conversions of debt, remedies on default,
venue, and governing law. The summary of the transactions described in this Form 8-K is qualified in its entirety by
reference to the Securities Purchase Agreement, the Convertible Promissory Note and Forms of Warrants, which are
filed as Exhibits 10.1, 10.2, 10.3 and 10.4 respectively, to this report.
In addition, Foothills Exploration, LLC,
an indirect subsidiary of the Company, has recently signed a letter of intent to acquire certain producing natural gas
properties in Wyoming. The properties cover approximately 18,000 gross acres with the majority of the acreage held by stripper
gas production. Closing of this transaction is subject to:
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completion of due diligence currently under way,
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negotiation and execution of definitive acquisition agreements,
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availability of adequate financing, and
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other customary conditions.
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The Company’s indirect subsidiary
is currently seeking to raise capital in a private offering, to accredited investors only, in a transaction exempt from registration
under Regulation D Rule 506(c). No assurance can be given that adequate funding will be obtained or that the any of these transactions
will close.
Forward-Looking Statements
All statements, other than statements of
historical facts, included in this Form 8-K that address activities, events or developments that we expect, believe or anticipate
will or may occur in the future are forward-looking statements. These statements are based on certain assumptions we made based
on management’s experience, perception of historical trends and technical analyses, current conditions, capital plans, drilling
plans, production expectations, our ability to raise adequate additional capital, or enter into other financing arrangements to
support our acquisition, development and drilling activities, anticipated future developments, and other factors believed to be
appropriate and reasonable by management. When used in this Form 8-K, words such as “will,” “possible,”
“potential,” “believe,” “estimate,” “intend,” “expect,” “may,”
“should,” “anticipate,” “could,” “plan,” “predict,” “project,”
“profile,” “model,” “strategy,” “future” or their negatives or the statements
that include these words or other words that convey the uncertainty of future events or outcomes, are intended to identify forward-looking
statements, although not all forward-looking statements contain such identifying words. In particular, statements, express or
implied, concerning our future operating results and returns or our ability to acquire or develop proven or probable reserves,
our ability to replace or increase reserves, increase production, obtain adequate capital to fund acquisitions or other operations,
or generate income or cash flows are forward-looking statements.
Forward-looking statements are not guarantees
of performance. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our
control. While forward-looking statements are based on assumptions and analyses made by us that we believe to be reasonable under
the circumstances, whether actual results and developments will meet our expectations and predictions depend on a number of risks
and uncertainties which could cause our actual results, performance, and financial condition to differ materially from our expectations.
As a result, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved
(in full or at all) or will prove to have been correct. We have had sporadic and limited revenue and our securities are subject
to considerable risk. Investors are cautioned to review FTXP’s other filings with the Securities and Exchange Commission
for a discussion of risk and other factors that affect our business. Any forward-looking statement made by us in this Form 8-K
speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from
time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future development or otherwise, except as may be required by law.