Item
1.01. Entry into a Material Definitive Agreement
On
December 19, 2018, Foothills Exploration, Inc. (the “Company”), entered into a convertible loan transaction with an
unaffiliated investor (“Holder”) in the principal amount of $58,300 (the “Note”), which funded and closed
on December 21, 2018, before giving effect to certain transactional costs including legal fees yielding a net of $53,000. The
Note carries an original issue discount of $5,300.00 (the “OID”), 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.
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. Provided that no Event of Default has occurred, the conversion price (the “Conversion
Price”) shall equal the Variable Conversion Price (as defined herein) (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 equal the lesser of (i) 60% multiplied by the lowest Trading Price (as defined below) during the
previous twenty-five (25) Trading Days (as defined below) before the Issue Date of this Note (representing a discount rate of
40%) or (ii) 60% multiplied by the Market Price (as defined herein) (representing a discount rate of 40%). “Market Price”
means the lowest Trading Price for the Common Stock during the twenty-five (25) Trading Day period ending on the latest complete
Trading Day prior to the Conversion Date. “Trading Price” means, for any security as of any date, the lesser of: (a)
the lowest trade price on the Over-the-Counter Bulletin Board (the “OTCBB”), OTCQB or applicable trading market as
reported by a reliable reporting service (“Reporting Service”) designated by the Holder or, if the OTCBB is not the
principal trading market for such security, the trading price of such security on the principal securities exchange or trading
market where such security is listed or traded or, if no trading price of such security is available in any of the foregoing manners,
the average of the trading prices of any market makers for such security that are listed in the “pink sheets” by the
National Quotation Bureau, Inc., or (b) the closing bid price on the OTCBB, OTCQB or applicable trading market as reported by
a Reporting Service designated by the Holder or, if the OTCBB is not the principal trading market for such security, the closing
bid price of such security on the principal securities exchange or trading market where such security is listed or traded or,
if no closing bid price of such security is available in any of the foregoing manners, the average of the closing bid prices of
any market makers for such security that are listed in the “pink sheets” by the National Quotation Bureau, Inc. To
the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take
all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law.
The Company agrees to honor all conversions submitted pending this adjustment.
The
Note accrues interest at 10% per year. The maturity date for the Note is September 19, 2019 (“Maturity Date”), and
is the date upon which the principal sum, as well as any accrued and unpaid interest, shall be due and payable. This Company may
prepay any amount outstanding under this Note, during the initial 60 calendar day period after the issuance 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 140% 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) eighteen percent (18%) 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 360-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 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.