Gravity Ltd.

July 08, 2010 16:55 ET

Gravity Ltd.: Press Release

TORONTO, ONTARIO--(Marketwire - July 8, 2010) - Gravity Ltd. ("Gravity"), 1681 Summitridge Drive, Beverley Hills, CA, 90210, USA, announces that it has advanced the principal amount of C$120,000 to Zaruma Resources Inc. ("Zaruma") pursuant to the third tranche of a 10% Senior Unsecured Convertible Promissory Note (the "Note") dated May 5, 2010. As consideration for receiving the third tranche under the Note in the amount of C$120,000, Zaruma is obligated to issue to Gravity 2,400,000 common share purchase warrants, each such warrant being exercisable to acquire one common share of Zaruma at C$0.10 per share for a period of one year, subject to adjustment in certain circumstances (each, a "Warrant"). Zaruma has not yet issued the Warrants associated with the advance of the third tranche of the loan, due to Zaruma's being subject to a cease trade order.

Prior to advancing the third tranche, Gravity advanced the first tranche under the Note in the principal amount of C$260,000 and the second tranche in the principal amount of C$120,000. As consideration for receiving the first tranche, Zaruma issued 5,200,000 Warrants to Gravity. The Note will mature one year from the date of issue and is convertible into common shares of Zaruma at a conversion price of C$0.05 per share.

Gravity does not currently own and/or control any common shares of Zaruma. If Gravity converts all of the C$500,000 principal amount of the Note to common shares of Zaruma pursuant to the conversion provisions of the Note, and exercises the 5,200,000 Warrants issued to Gravity in connection with the first tranche, it will own a total of 15,200,000 common shares of Zaruma, representing approximately 11.45% of the issued and outstanding Zaruma common shares on an undiluted basis. If the entire principal amount of the Note were converted and the Warrants associated with the second tranche and the third tranche under the Note were issued and exercised, Gravity would own 20,000,000 common shares of Zaruma, representing in the aggregate approximately 14.53% of the issued and outstanding common shares, calculated on a partially diluted basis (not including the exercise of any other securities convertible into common shares of Zaruma held by any other holder). However, due to Zaruma's being subject to a cease trade order, Gravity cannot, until such time as the cease trade order is revoked, exercise its conversion rights pursuant to the Note and Zaruma cannot issue to Gravity the Warrants associated with the second tranche and third tranche.

Gravity has agreed to advance funds under the Note for investment purposes. Gravity may, in the future, increase or decrease its ownership of securities of Zaruma, directly or indirectly, from time to time depending upon the business and prospects of Zaruma and future market conditions.

On May 5, 2010, Gravity entered into a non-binding Memorandum of Understanding with Zaruma regarding the financing of the Luz del Cobre copper project located on Zaruma's wholly-owned San Antonio property in Sonora, Mexico. For more details regarding the Memorandum of Understanding and the Note, see Zaruma's news release dated May 6, 2010 available under Zaruma's profile on SEDAR at www.sedar.com.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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