Item
1.01. Entry into a Material Definitive Agreement
On
December 6, 2018, Foothills Exploration, Inc. (the “Company”), entered into a convertible loan transaction with an
unaffiliated investor (“Holder”) in the principal amount of $136,500 (the “Note”). The Note is divided
into three tranches, the first tranche of which, in the face amount of $45,500, funded and closed on December 7, 2018, before
giving effect to certain transactional costs including legal fees yielding a net of $41,500. The Note carries an original issue
discount of $12,000.00 (the “OID”) prorated to each tranche, to cover the Holder’s accounting fees, due diligence
fees, monitoring, and/or other transactional costs incurred in connection with the negotiation, purchase and sale of the Note,
which is included in the principal balance of this Note.
For
each tranche funded under the Note, the Company agreed to issue warrants having a 5-year term to purchase up to 227,500 shares
of the Company’s restricted common stock at an exercise price of $0.20 per share with a cashless exercise option. 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 Holder, after the 180
th
calendar day after the issue date, the right to convert all or any
part of the outstanding and unpaid principal amount and accrued and unpaid interest of this Note due into fully paid and non-assessable
shares of Common Stock at the Conversion Price. The “Conversion Price” shall be the Variable 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 “Variable Conversion Price” shall mean 50% multiplied by the Market Price.
“Market Price” means the lowest one (1) Trading Price (as defined below) for the Common Stock during the twenty (20)
Trading Day period ending on the last complete Trading Day prior to the Conversion Date. “Trading Price” means, for
any security as of any date, the lesser of the (i) lowest traded price and (ii) lowest closing bid price on the OTCQB, or applicable
trading market (the “OTCQB”) as reported by a reliable reporting service (“Reporting Service”) designated
by the Holder (i.e. Bloomberg) or, if the OTCQB is not the principal trading market for such security, on the principal securities
exchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security is
not available in any of the foregoing manners, the lowest intraday price of any market makers for such security that are quoted
on the OTC Markets. If the Trading Price cannot be calculated for such security on such date in the manner provided above, the
Trading Price shall be the fair market value as mutually determined by the Company and the holders of a majority in interest of
the Notes being converted for which the calculation of the Trading Price is required in order to determine the Conversion Price
of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCQB,
or on the principal securities exchange or other securities market on which the Common Stock is then being traded.
Each
tranche of the Note funded accrues interest at 12% per year. The maturity date for each tranche funded shall be twelve (12) months
from the effective date of each payment (each a “Maturity Date”), and is the date upon which the principal sum of
each respective tranche, as well as any accrued and unpaid interest and other fees relating to that respective tranche, shall
be due and payable. This Company may prepay any amount outstanding under each tranche of this Note, during the initial 60 calendar
day period after the issuance of the respective tranche of this Note, by making a payment to the Holder of an amount in cash equal
to 125% multiplied the amount that the Company is prepaying Notwithstanding anything to the contrary contained in this Note, the
Company may prepay any amount outstanding under each tranche of this Note, during the 61
st
through 120 calendar day
period after the issuance of the respective tranche of this Note, by making a payment to the Holder of an amount in cash equal
to 135% multiplied the amount that the Company is prepaying. Notwithstanding anything to the contrary contained in this Note,
the Company may prepay any amount outstanding under each tranche of this Note, during the 121
st
through 180 calendar
day period after the issuance of the respective tranche of this Note, by making a payment to the Holder of an amount in cash equal
to 145% multiplied the amount that the Company is prepaying.
The
Company may not prepay any amount outstanding under each tranche of this Note after the 180
th
calendar day after the
issuance of the respective tranche of this Note. Any amount of principal or interest due pursuant to this Note, which is not paid
by the Maturity Date, shall bear interest at the rate of the lesser of (i) fifteen percent (15%) per annum or (ii) the maximum
amount permitted by law from the due date thereof until the same is paid (“Default Interest”). Interest shall commence
accruing on the date that each tranche of the Note is fully paid and shall be computed on the basis of a 365-day year and the
actual number of days elapsed. Net proceeds obtained in this transaction will be used for general corporate and working capital
purposes. No assurance can be given that any other tranche of the Note will be funded or that any amount due there under will
be prepaid. 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 Form of Warrant,
which are filed as Exhibits 10.1, 10.2, and 10.3 respectively, to this report.
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.