10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x     QUARTERLY REPORT UNDER SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 29, 2012

¨    TRANSITION REPORT UNDER SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT OF 1934 F

for the transition period from _____ to _____

Commission File Number: 000-52354

RUBY CREEK RESOURCES, INC.

NEVADA	000-52354	26-4329046
(State or other jurisdiction of	(Commission File No.)	(IRS Employee Identification No.)
incorporation  or organization)

750 3rd Avenue 11th Floor, New York, NY 10017

(Address of Principal Executive Offices)

(212) 679-5711

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of 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    x   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 (do not check if smaller reporting company)    ¨

Smaller Reporting Company    x

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.   Yes     ¨     No     x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 47,513,763 shares of common stock as of April 16, 2012.

RUBY CREEK RESOURCES, INC.

Quarterly Report on Form 10-Q for the Quarterly Period Ended February 29, 2012

FORWARD-LOOKING STATEMENTS

This Form 10-Q for the quarterly period ended February 29, 2012 contains forward-looking statements that involve risks and uncertainties.  Forward-looking statements in this document include, among others, statements regarding our capital needs, business plans and expectations.  Such forward-looking statements involve assumptions, risks and uncertainties regarding, among others, the success of our business plan, availability of funds, government regulations, operating costs, our ability to achieve significant revenues, our business model and products and other factors.  Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements.  In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology.  In evaluating these statements, you should consider various factors, including the assumptions, risks and uncertainties set forth in reports and other documents we have filed with or furnished to the SEC.  These factors or any of them may cause our actual results to differ materially from any forward-looking statement made in this document.  While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding future events, our actual results will likely vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.  The forward-looking statements in this document are made as of the date of this document and we do not intend or undertake to update any of the forward-looking statements to conform these statements to actual results, except as required by applicable law, including the securities laws of the United States.

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Ruby Creek Resources, Inc.

 Table of Contents

February 29, 2012 

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets – February 29, 2012 and August 31, 2011	4
	Consolidated Statements of Operations –Three Months and Six Months ended February 29, 2012 and 2011 and cumulative to date	5
	Consolidated Statement of Equity – Inception (May 3, 2006)  to February 29, 2012	6
	Consolidated Statements of Cash Flows - Six Months ended February 29, 2012 and 2011and cumulative to date	7
	Notes to Consolidated Financial Statements	8-18
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19-24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	25
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 2.	Unregistered Sales of Equity Securities	26
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Submission of Matters to a Vote of Security Holders	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
Signatures		29

-3-

RUBY CREEK RESOURCES, INC.

(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

	February 29,			August 31,
	2012			2011
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	250,364		$	1,836,877
Due from related party		23,345			-
Prepaid expenses and other current assets		397,638			259,768
Total current assets		671,347			2,096,645
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $91,763 and $42,123 , respectively		2,462,202			312,729
MINERAL PROPERTIES		2,377,369			7,141,800
TOTAL ASSETS	$	5,510,918		$	9,551,174
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	424,040		$	404,941
Installment loan payable		-			11,042
Due to Handeni Gold, net of discount		-			1,864,340
Convertible note payable, current, net of discount		549,487			-
Due to related parties		47,925			82,612
Total current liabilities		1,021,452			2,362,935
LONG-TERM LIABILITIES
Due to Handeni Gold, net of discount		0			2,817,692
Convertible note payable,  net of discount		274,744			-
Due to Mkuvia Maita, net of discount		325,205			-
Deferred income taxes payable		405,000			-
Total long-term liabilities		1,004,949			2,817,692
COMMITMENTS AND CONTINGENCIES (Note 7)
TOTAL LIABILITIES		2,026,401			5,180,627
EQUITY
Common stock, 500,000,000 shares authorized, par value $0.001; 46,177,764 and 39,576,978  shares issued and outstanding, respectively		46,178			39,577
Additional paid-in capital		17,232,101			12,397,133
Deferred compensation		(121,945	)		(104,691	)
Comprehensive income  from foreign currency translation		40,203			29,524
Deficit accumulated during the exploration stage		(13,764,220	)		(7,990,996	)
Total stockholders' equity		3,432,317			4,370,547
Noncontrolling interest		52,200			-
Total  Equity		3,484,517			4,370,547
TOTAL LIABILITIES AND EQUITY	$	5,510,918		$	9,551,174

See accompanying notes to unaudited consolidated financial statements.

-4-

RUBY CREEK RESOURCES, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

													Cumulative
													for the Period
													from
	Three Months Ended						Six Months Ended						May 3, 2006
	February 29,			February 28,			February 29,			February 28,			(Inception) to
													February 29,
	2012			2011			2012			2011			2012
EXPENSES
Mineral exploration and operating costs	$	429,340		$	342,800		$	802,802		$	574,030		$	2,306,742
Consulting services		237,170			99,873			424,801			192,807			2,047,708
Depreciation		25,233			5,757			48,542			9,020			90,665
Interest and financing fees		157,627			116,356			863,586			256,113			2,439,356
Management services		359,210			119,148			673,660			257,802			2,097,467
General and administrative		427,398			211,102			750,650			436,649			2,573,100
Total expenses		1,635,978			895,037			3,564,042			1,726,422			11,555,038
														-
LOSS FROM OPERATIONS		(1,635,978	)		(895,037	)		(3,564,042	)		(1,726,422	)		(11,555,038	)
OTHER INCOME (EXPENSE)
Impairment - Mineral Properties		(1,930,682	)		-			(1,930,682	)		-			(1,930,682	)
Impairment - Equiment		(300,000	)		-			(300,000	)		-			(300,000	)
		(2,230,682	)		-			(2,230,682	)		-			(2,230,682	)
NET LOSS		(3,866,660	)		(895,037	)		(5,794,724	)		(1,726,422	)		(13,785,720	)
NET LOSS  ATTRIBUTABLE TO NONCONTROLLING INTEREST		21,500			-			21,500			-			21,500
NET LOSS  ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(3,845,160	)	$	(895,037	)	$	(5,773,224	)	$	(1,726,422	)	$	(13,764,220	)
NET LOSS PER COMMON SHARE, BASIC AND DILUTED	$	(0.09	)	$	(0.03	)	$	(0.14	)	$	(0.06	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED		44,017,382			30,115,445			42,037,384			26,744,027

See accompanying notes to unaudited consolidated financial statements.

-5-

RUBY CREEK RESOURCES, INC.

(An Exploration Stage Company)

Consolidated Statement of Equity (Deficit)

From May 3, 2006 (Date of Inception) to February 29, 2012

																	Comprehensive
								Deferred			Non-			Deficit			Income (Loss) -
	Common Stock				Additional			Compensation			Controlling			Accumulated During			Foreign Exchange		Total
	Shares		Amount		Paid-in capital			Expense			Interest			Exploration Stage			Translation		Equity (Deficit)
Balance - May 3, 2006 (Date of Inception)		-	$	-	$	-		$	-					$	-		$	-	$	-
August 31, 2006 - issuance of common shares for cash at $0.01 per share		4,500,000		4,500		40,500			-			-			-			-		45,000
August 31, 2006 - issuance of common shares for cash at $0.05 per share		2,970,000		2,970		145,530			-			-			-			-		148,500
August 31, 2006 - issuance of common shares for cash at $0.10 per share		867,000		867		80,833			-			-			-			-		81,700
August 31, 2006 - donated rent and management services		-		-		3,000			-			-			-			-		3,000
Net loss		-		-		-			-			-			(19,696	)		-		(19,696	)
Balance - August 31, 2006		8,337,000		8,337		269,863			-			-			(19,696	)		-		258,504
September 5, 2006 - cash received for stock subscription		-		-		5,000			-			-			-			-		5,000
Net loss		-		-		-			-						(127,497	)		-		(127,497	)
Balance - August 31, 2007		8,337,000		8,337		274,863			-			-			(147,193	)		-		136,007
Net loss															(96,974	)		-		(96,974	)
Balance - August 31, 2008		8,337,000		8,337		274,863			-			-			(244,167	)		-		39,033
July 23. 2009 - issuance of common shares for cash at $0.05 per share		400,000		400		14,600			-			-			-			-		15,000
Stock based compensation		-		-		24,547			-			-			-			-		24,547
Net loss		-		-		-			-			-			(207,877	)		-		(207,877	)
Balance - August 31, 2009		8,737,000		8,737		314,010			-			-			(452,044	)		-		(129,297	)
November 6, 2009 - issuance of common shares for related party debt at $0.05 per share		1,000,000		1,000		49,000			-			-			-			-		50,000
December 24, 2009 to February 19, 2010 - issuance of common shares for cash at $0.125 per share		1,600,000		1,600		198,400			-			-			-			-		200,000
February 1, 2010 - issuance of common shares for services at $0.20 per share		110,000		110		21,890			-			-			-			-		22,000
December 22, 2009 to January 22, 2010 - issuance of common shares and warrants for finance fee		180,000		180		61,120			-			-			-			-		61,300
Fair value - beneficial conversion feature, warrants and discount in connection with issuance of 11%  convertible notes		-		-		100,000			-			-			-			-		100,000
March 3, 2010 - issuance of common shares for finance fee @ $0.25 per share		10,000		10		2,490			-			-			-			-		2,500
March 23, 2010 - issuance of common shares for bridge loan default conversion at $0.05 per share		1,544,877		1,545		75,699			-			-			-			-		77,244
March 23, 2010 - fair value of warrants on default of bridge loan		-		-		787,369			-			-			-			-		787,369
June 4, 2010 - issuance of common stock for services at $0.35 per share		50,000		50		19,450			-			-			-			-		19,500
June 30, 2010 - Issuance of common stock for services at $0.25 per share		8,608		9		2,143			-			-			-			-		2,152
July 26, 2010 - Issuance of common stock for services at $0.25 per share		30,000		30		7,470			-			-			-			-		7,500
April 3, 2010 to August 26, 2010 - issuance of common shares for cash at $0.25 per share		5,356,000		5,356		1,333,644			-			-			-			-		1,339,000
August 16, 2010 - Issuance of common stock on exercise of options		101,427		101		3,445			-			-			-			-		3,546
August 27, 2010 - Issuance of common stock for mineral property		4,000,000		4,000		2,116,000			-			-			-			-		2,120,000
Stock based compensation		-		-		628,293			-			-			-			-		628,293
Comprehensive income - foreign exchange translation		-		-		-			-						-			890		890
Net loss		-		-		-			-			-			(2,544,627	)		-		(2,544,627	)
Balance - August 31, 2010		22,727,912		22,728		5,720,423			-			-			(2,996,671	)		890		2,747,370
October 18, 2010 to August 24, 2011 - issuance of common shares for cash at $0.50 per share		9,231,000		9,231		4,606,269			-			-			-			-		4,615,500
Exercises of warrants issued in private placements for cash		595,000		595		206,905			-			-			-			-		207,500
Issuance of common stock for services at $0.25-$0.50 per share		291,755		292		143,706			-			-			-			-		143,998
Issuance of common stock in connection with employment agreement at $0.50 per share		200,000		200		99,800			(83,333	)					-			-		16,667
Issuance of common stock in connection with consulting agreement at an average of $0.87 per share		200,000		200		172,800			(173,000	)					-			-		-
Cashless exercise of warrants issued in consulting arrangements		571,311		571		(571	)		-			-			-			-		-
Convertible notes - related parties and accrued interest converted at $0.05 per share		2,220,000		2,220		108,780			-			-			-			-		111,000
Exercise of warrant issued in connection with bridge loan default		1,500,000		1,500		73,500			-			-			-			-		75,000
Exercise of warrants issued in connection 11% convertible debentures		2,000,000		2,000		98,000			-			-			-			-		100,000
Exercise of warrants issued in consulting arrangements		40,000		40		1,960			-			-			-			-		2,000
Amortization of deferred compensation expense		-		-		-			151,642			-			-			-		151,642
Stock based compensation		-		-		1,165,561			-			-			-			-		1,165,561
Comprehensive income - foreign exchange translation		-		-		-			-			-			-			28,634		28,634
Net loss		-		-		-			-						(4,994,325	)		-		(4,994,325	)
Balance - August 31, 2011		39,576,978		39,577		12,397,132			(104,691	)		-			(7,990,996	)		29,524		4,370,547
October 6, 2011 to November 16, 2011 - issuance of common shares for cash at $0.75 per share		320,000		320		239,680			-			-			-			-		240,000
Exerciseof warrants issued in private placements for cash		987,500		987		337,763			-			-			-			-		338,750
Cashless exercise of warrants issued in consulting arrangements		1,164,603		1,165		(1,165	)		-			-			-			-		-
Issuance of common stock for services at $0.50-$1.30 per share		270,682		271		294,088			(130,000	)		-								164,359
Shares issued on acquisition of Gold Standard		1,200,000		1,200		1,438,800			-			-			-			-		1,440,000
Intrinsic value of conversion feature of convertible notes				-		810,400			-			-			-			-		810,400
Issuance of common share on exercise of compensation warrants for cash		900,000		900		44,100			-			-			-			-		45,000
Exercise of warrants issued in connection with bridge loan default		390,000		390		97,110			-			-			-			-		97,500
Amortization of deferred compensation expense		-		-		-			112,746			-			-			-		112,746
Issuance of common stock for conversion of Mining Equipment Note, net of fair value adjustment		1,368,000		1,368		1,024,632			-			-			-			-		1,026,000
Stock based compensation		-		-		623,260			-			-			-			-		623,260
Noncontrolling interest		-		-		(73,700	)		-			73,700			-			-		-
Comprehensive income - foreign exchange translation		-		-		-			-			-			-			10,679		10,679
Net loss attributable to noncontrolling interest - six  months ended February 29, 2012		-		-		-			-			(21,500	)		-			-		(21,500	)
Net loss attributable to common shareholders - six  months ended February 29, 2012		-		-		-			-			-			(5,773,224	)		-		(5,773,224	)
Balance - February 29,2012 (Unaudited)		46,177,764	$	46,178	$	17,232,101		$	(121,945	)	$	52,200		$	(13,764,220	)	$	40,203	$	3,484,517

See accompanying notes to unaudited consolidated financial statements.

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RUBY CREEK RESOURCES, INC.

(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

							Cumulative
							for the Period
							from
							May 3, 2006
	Six Months Ended						(Inception) to
	February 29,			February 28,			February 29,
	2012			2011			2012
Cash Flows From Operating Activities
Net loss attibutable to common shareholders	$	(5,773,224	)	$	(1,726,422	)	$	(13,764,220	)
Net loss attibutable to noncontrolling interest		(21,500	)		-			(21,500	)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation		23,309			9,020			65,431
Impairment - Mineral Properties		1,930,682			-			1,940,453
Impairment - Equipment		300,000			-			300,000
Donated services		-			-			3,000
Interest and financing fees, including discount accretion		844,086			253,177			2,403,360
Common stock issued for services		277,105			25,781			601,897
Stock based compensation		623,260			142,234			2,441,661
Net changes in noncash working capital items:
(Increase) decrease - Prepaid expenses		(137,869	)		10,072			(375,638	)
Increase  (decrease) - Accounts payable		29,778			(3,217	)		495,741
Increase (decrease) - Due to/from related parties		(58,032	)		82,756			74,580
Net cash flows  (used in) operating activities		(1,962,405	)		(1,206,599	)		(5,835,235	)
Cash flows from investing activities
Purchase of equipment		(96,782	)		(145,710	)		(451,635	)
Mineral properties and deposits		(237,532	)		(111,035	)		(1,192,932	)
Net cash flows (used in) investing activities		(334,314	)		(256,745	)		(1,644,567	)
					-
Cash flows from financing activities					-
Issuance of common shares for cash - private placements		240,000			2,463,750			6,689,700
Exercise of private placement warrants - proceeds		338,749			-			723,249
Exercise of warrant issued in connection with bridge loan		97,500			-			97,500
Exercise of compensation warrants for cash		45,000			-			45,000
Installment loan - proceeds		-			-			41,584
Installment loan - repayments		(11,042	)		(10,833	)		(41,868	)
Bridge loan - related party		-			-			75,000
Convertible notes - related parties		-			-			100,000
Net cash flows provided by financing activities		710,207			2,452,917			7,730,165
Net increase (decrease) in cash		(1,586,513	)		989,573			250,363
Cash - beginning of period		1,836,877			325,756			-
Cash - end of period	$	250,363		$	1,315,329		$	250,363
Supplemental disclosures
Interest paid	$	-		$	289		$	517
Taxes paid	$	-		$	-		$	-
Conversion of related party debt to shares and warrants	$	-		$	-		$	127,244
Conversion of related party convertible notes and accrued interest to common shares	$	-		$	111,000		$	111,000
Mineral properties acquired - short-term payments	$	-		$	-		$	1,100,000
Mineral properties acquired - long-term payments, net of discount	$	-		$	-		$	3,576,170
Noncontrolling interest	$	73,700		$	-		$	-
Mineral properties acquired - fair value of common shares issued	$	1,440,000		$	-		$	3,560,000
Convertible notes issued for property and equipment	$	2,000,000		$	-		$	-
Assets acquired for assumed liability	$	325,205		$	-		$	-
Deferred income tax liability	$	405,000		$	-		$	-

See accompanying notes to unaudited consolidated financial statements.

-7-

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statements

(An Exploration Stage Company)

February 29, 2012

(Unaudited)

NOTE 1 - Organization and Summary

Organization

Ruby Creek Resources, Inc. (the “Company”) was incorporated in the Province of British Columbia on May 3, 2006.  The Company is an Exploration Stage Company.  The Company’s principal business is the acquisition and exploration of mineral properties.  

Effective January 29, 2009, the Company changed its jurisdiction from the Province of British Columbia to the State of Nevada.  Effective the same date, the Company's authorized capital was changed from an unlimited number of common shares without par value to 500,000,000 common shares with a par value of $0.001 per share. Tanzania Ruby Creek Limited (TzRC) was formed in December 2011 (100% owned by the Company), Ruby Creek Resources (Tanzania) Limited (“RCRTz) was incorporated on May 21, 2010 in Tanzania, (a joint venture 70% owned by the Company), and Ruby Creek Gold (Tanzania) Limited (99% owned by the Company) and Ruby Creek Diamonds Limited (100% owned by the Company) were formed on August 10, 2011.  Gold Standard (Tanzania) Limited (95% owned by the Company), was acquired on November 29, 2011 in the transaction described in Note 3c. 

Going Concern

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.  The Company is in the exploration stage and has not generated revenues since inception.  The Company has incurred significant losses from inception through February 29, 2012 of approximately $13,785,000, raising substantial doubt about the ability of the Company to continue as a going concern.  Further, as discussed in Note 7A – Litigation, the Company commenced litigation againt Handeni Gold Inc (formerly Douglas Lake Minerals, Inc) related to claims for breaches of contract and fraud related to the Mkuvia Property. Handeni Gold Inc. has filed an action against the Company seeking certain payments and removal or cerain asset restrictions. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary financing to settle outstanding debts, fund ongoing operating losses and to discover and successfully exploit economically recoverable mineral reserves on its resource properties and ultimately on the attainment of future profitable operations; and to the satisfactory outcome of the referenced litigation. The Company has funded its operations with private equity and/or convertible debt financing and is in the process of identifying additional sources of capital from debt or equity sources. While management believes it has made significant progress in its plan of operations, additional working capital and capital funds will be required to finance the Company’s operations until commercial operations commence and positive cash flow can be achieved.  Management believes that additional financing will be available on terms acceptable to the Company. However, there can be no assurance of this, nor is there any assurance that commercial operations will be achieved. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Basis of Presentation - Unaudited Interim Financial Statements

The accompanying unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles ("US GAAP") for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the annual audited consolidated financial statements.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been   omitted pursuant to such rules and regulations.  However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended August 31, 2011 included in the Company's annual report filed with the Securities and Exchange Commission.  The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-K which was filed with the SEC on December 14, 2011.  In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position, operating results and cash flows for the period presented, consisting solely of normal recurring adjustments, have been made.  Operating results for the three and six month periods ended February 29, 2012 are not necessarily indicative of the results that may be expected for the year ending August 31, 2012.

Recent Accounting Pronouncements

There are no recent pronouncements issued which are expected to have a material effect on the Company’s consolidated financial statements.

-8-

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statements

(An Exploration Stage Company)

February 29, 2012

(Unaudited)

NOTE 2 – Property and Equipment

Property and equipment consists of the following at February 29, 2012 and August 31, 2011:

	February 29, 2012
	Cost		Accumulated Depreciation		Net Book Value
Vehicles	$	523,935	$	32,088	$	491,847
Computer equipment		14,152		6,310		7,842
Exploration and mining equipment		2,182,165		1,370		2,180,795
Furniture and fixtures		30,937		13,739		17,198
Camp facilities		102,776		38,256		64,520
		2,853,965		91,763		2,762,202
Less: Impairment provision		300,000		-		300,000
	$	2,553,965	$	91,763	$	2,462,202

	August 31, 2011
	Cost		Accumulated Depreciation		Net Book Value
Vehicles	$	112,282	$	6,915	$	105,367
Computer equipment		9,432		4,509		4,923
Exploration and mining equipment		116,165		342		115,823
Furniture and fixtures		28,458		8,878		19,580
Camp facilities		88,515		21,479		67,036
	$	354,852	$	42,123	$	312,729

Effective February 29, 2012, the Company has recorded an impairment for equipment acquired in the Gold Standard transaction discussed in Note 3c ($200,000), and for the Mkuvia Project related camp facilities ($100,000) as a result of the Handeni litigation discussed in Note 7A – Litigation.

NOTE 3 - Mineral Properties

Mineral property acquisition costs, advance payments and deposits consist of the following as of February 29, 2012 and August 31, 2011:

	February 29, 2012			August 31, 2011
Mkuvia Gold Project – mineral and mining rights	$	6,796,170		$	6,796,170
Mkuvia Gold Project – mineral and mining rights – provision for  impairment		(6,796,169	)		-
Kapinga Property - advance payment and deposit		102,128			60,000
Gold Standard –mineral and mining rights		2,044,205			250,000
Other properties - advance payments and deposits		231,035			35,630
	$	2,377,369		$	7,141,800

-9-

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statements

(An Exploration Stage Company)

February 29, 2012

(Unaudited)

(a) The Company entered into the following transactions with respect to the Mkuvia Project:

(i) On November 7, 2009, a Purchase Agreement (the “Agreement”) with Handeni Gold Inc. (“Handeni”), formerly Douglas Lake Minerals, Inc., for the right to acquire and develop a 70% interest in 125 square kilometeres of the Handeni’s Mkuvia property;

(ii) On March 7, 2010, a Tanzanian joint venture company ("RCRTz") was formed for the ownership and management of the 125 square kilometer aforementioned property. A second Joint Venture Agreement (the "JVA") was entered into by the parties with respect to an additional 255 square kilometers.The JVA provides that Maita's 5% interest in the entire project shall vest when RCRTz obtains a mining license over a portion of the area covered by the prospecting licenses.

(iii) On May 24, 2010 (effective on June 16, 2010), the Company acquired the exclusive mineral and mining rights to the additional 255 square kilometers of the Mkuvia property from Handeni.

The original aggegate purchase price of $9,000,000 was recorded as the sum of cash paid, the present value of future payments and the fair value of restricted shares of Company common stock issued in the amount of $6,796,170. The series of future payments in the gross amount of $4,700,000 were recorded at their aggregate fair value of $3,576,170 determined utilizing a discount rate of 12% per annum which resulted in a discount to the purchase price of $1,123,830. Four million restricted shares of Company common stock issued with an agreed upon contractual value of $3,200,000 had a fair value of $2,120,000 which resulted in a further discount of the purchase price of $1,080,000. With respect to the future paments, the Company has been recording accretion reflected as interest expense in its results of operations. Interest expense for the three and six month periods ended February 29, 2012 and February 28, 2011 include amortization of $90,359, $183,455, $60,658 and $119,533, respectively, of this debt discount.

Reference is made to Note 7A – Litigation, regarding the litigation commenced by the Company against Handeni related to the Companies various claims for breaches of contract and fraud. As discussed more fully in Note 7A, the Company has impaired the net value of the Mkuvia Project in the amount of $1,930,862, which represents the recorded asset value reduced by the accreted value of future payments as of February 29, 2012. While management believes that it will ultimately be successful in its lawsuit it believes that recording the impairment is necessary given the damages suffered by the Company as a result of Handeni’s breaches and fraud. The carrying value of the Mukuvia Project has been written down to $1 and the impairment loss is net of the liabilities also written off consistent with the position of impairing the asset, since the obligation to make any payments is tied to receiving title to the assets purchased.

(b)     On September 9, 2010, as amended effective on February 14, 2011 and September 9, 2011, the Company signed an agreement with Carlos JK Kapinga (“CJKK”, the property rights owner), whereby the Company was granted the exclusive right to acquire the mineral and mining rights to the 350 sq km Kapinga property. On August 23, 2011 the transfer of 100% ownership of one of the prospecting license from CJKK to Ruby Creek Gold (Tanzania) Limited was recorded with the Commissioner For Minerals of the Ministry of Energy and Minerals as part of the foregoing transaction.

The aforementioned arrangement includes the following terms and conditions:

· The purchase price is $155,000 plus 75,000 shares of the Company’s common stock, against which payments approximating $100,000 made through February 29, 2012 plus any subsequent payments will be applied. Any unpaid balance and the share issuance will be completed upon satisfactory transfer of the remaining prospecting licenses (three prospecting licenses in total) deemed necessary to transfer 100% ownership of all property rights to the Company;

· The Kapinga mineral and mining rights cover the 350 square kilometer Kapinga property; and

· Within 30 days of the  issuance of the first mining license on the Kapinga properties, an additional payment of $100,000 and 75,000 shares of common stock of the Company plus within six months of that date a final payment of $100,000 in cash or common stock of the Company valued at $100,000, at the Company’s option.

All of the Company’s properties are located in the Liwale and Nachingwea Districts, Lindi Region of the United Republic of Tanzania.

(c)    Effective January 12, 2011,   the Company entered into transactions with Gold Standard Ltd. (“GSL”) and Gold Standard Tanzania Ltd, (“GSTL”).  The GSL transaction was for the purchase of a 95% share (the “Shares”) of GSTL whose assets include a 10 year, 10 square kilometer mining license issued in September 2010, two Prospecting License Joint Ventures of 39 and 89 square kilometers, a Regional Environmental Report on the combined 128 square kilometer property and an established mining camp. The property is immediately adjacent to and on the west-northwest border of the Company’s Gold Plateau Project, specifically the Mkuvia 1 property acquired in November 2009. The GSTL transaction was for the purchase of mining equipment (the “Equipment”).

-10-

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statements

(An Exploration Stage Company)

February 29, 2012

(Unaudited)

NOTE 3 - Mineral Properties, continued

On July 18, 2011, as amended and closed on November 29, 2011, the Company, GSTL, GSL and Robert Moriarty (with respect to representations and warranties and cooperation only) entered into a Purchase Agreement (the “APA”) which replaced in their entirety the agreements dated January 12, 2011 referred to in the preceding paragraph. Pursuant to the APA, the Company acquired the identical assets and assumed the identical liabilities for an aggregate purchase price of $3,540,000 plus assumed liabilities.  The APA consideration consisted of:

· $100,000;

· 1,200,000 shares of the restricted common stock of the Company with a fair value of $1.20 per share;

· Issuance of a $1,026,000 Convertible Mining Equipment Note; and (the “Mining Equipment Note”); and

· Issuance of a $974,000 Convertible Shares Note (the “Share Note”).

The principal balances of the Share Note and Mining Equipment Notes are payable in three equal tranches each aggregating $666,667 six, twelve and eighteen months after closing, plus accrued interest. Each note bears interest at 8% per annum on the declining balance. The Company may elect to pay the interest in cash or in common shares of the Company.  For this purpose common shares will be valued at the volume average weighted price per share as defined in the APA on the payment due date. Until paid in full, the holder may elect to receive payment of any portion of interest and/or principal in restricted common shares of the Company with a conversion price of $0.75 per share with respect to the Mining Equipment Note and accrued interest and $1.00 per share with respect to the Share Note and accrued interest. The unpaid balance of the Mining Equipment Note and accrued interest is convertible at the holder’s option at any time. Also at the holder’s option, $324,667 plus accrued interest of the Share Note is convertible on inception to the day prior to the due date of the first payment (May 26, 2012), $324,667 plus accrued interest is convertible between May 26, 2012 and the day prior to the due date of the second payment (November 26, 2012) and any remaining principal plus accrued interest is convertible between November 26, 2012 and maturity. In each case the conversion amount may be reduced by amounts that can be offset by the Company against the Share Note per the indemnification and hold harmless obligations of GSL and Robert Moriarty per terms of the APA.

On the closing date:

i. The intrinsic value of the conversion feature of the Equipment Note of  $615,600 has been reflected as a discount of the Equipment Note and as an addition to additional paid-in capital, resulting in an effective interest rate of 31.8% on the convertible note;

ii. The intrinsic value of the conversion feature of the Share Note of  $194,800 has been reflected as a discount of the Share Note and as an addition to additional paid-in capital resulting in an effective interest rate of 31.8% on the convertible note;

iii. The net liability assumed in the transaction of $395,000, which is payable in scheduled non-interest bearing future payments, was recorded at its present value using a discount rate of 8% per annum. The resulting discount of $69,795 was recorded as a reduction of assets acquired.

iv. The mineral property was grossed up by an estimated Tanzanian deferred tax liability in the amount of $405,000, resulting from the excess of book value over tax value of mineral and mining rights of GST.

The Company recorded the allocation of the purchase price of the assets acquired as follows:

Mineral properties	$	2,044,205
Mining and exploration equipment		2,426,000
Deferred income taxes		(405,000	)
	$	4,065,205

The Company recorded the allocation of the debt assumed as follows:

Mineral properties $ 325,205

-11-

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statements

(An Exploration Stage Company)

February 29, 2012

(Unaudited)

NOTE 3 - Mineral Properties, continued

Effective on November 29, 2011, GSL elected to convert the Equipment Note to shares of the Company. The Company issued 1,368,000 of its common shares and recorded $615,600 as non-cash accretion interest expense in its results of operations for the six months ended February 29, 2012.

On April 6, 2011 the Company and Maita, the original owner of the mining license and other rights to be acquired in the GSL transaction, entered into a settlement agreement pursuant to which the Company satisfied certain GSL obligations to Maita. The Company paid $200,000 on execution of the settlement agreement, which was applied to the $595,000 in obligations assumed in the aforementioned GSTL transaction. In consideration of this payment, the Company assumed certain of Maita’s security interests in the GSL assets that existed at that time, Maita withdrew a joint venture termination notice that he had caused to be issued to GSL, delivered the mining license to counsel to be held in escrow and to be delivered to the Company upon closing the GSL transaction and agreed to cooperate in the physical transfer of certain GSL and GSTL assets physically in his possession. As a result of the consummation of the GSL transaction on November 29, 2011, the mining license was released to the Company.

(d)    The Company entered into transactions to acquire six additional properties with corresponding prospecting licenses or prospecting license applications pending. The purchase price of these properties aggregated $270,000, of which approximately $215,000 was paid as of February 29, 2012.  The balance of the purchase price of each transaction becomes due and payable upon the transfer of each prospecting license to the Company. These payments were for the acquisition of the Keigi property and corresponding prospecting license; the Tundura North property and the Tundura South Property and corresponding prospecting licenses.  The balance remaining due on these properties of $65,000 will be paid as the related prospecting licenses are issued in the Company’s name.

NOTE 4 - Bridge Loan

On December 22, 2009, the Company received $75,000 in proceeds of a bridge loan transaction (the “Bridge”) from a significant shareholder and advisor (currently a director) (“Holder”).  The loan bears interest at the rate of 12% per annum.  The loan agreement grants the holder the right to convert any portion of the balance plus accrued interest into common shares of the Company at a price of $0.125 per share.  The original January 22, 2010 due date of the Bridge was extended several times by mutual consent, ultimately to March 23, 2010.  In consideration of the loan and these extensions, the Company agreed to additional consideration in the form of units of common shares and additional warrants.  This additional consideration resulted in the issuance of an aggregate of 180,000 common shares and two year warrants to purchase an additional 390,000 common shares at $0.25 per share.  On March 23, 2010, the Company defaulted on the payment of interest and principal on the Bridge.  Upon occurrence of the default, the Holder converted the outstanding balance of the note ($75,000) and accrued interest ($2,244) into 1,544,877 shares of common stock of the Company at the contractual conversion price of $0.05 per share. In addition, as a result of this default, the Company was obligated to issue to the Holder a two year warrant to purchase 1,500,000 common shares at an exercise price of $0.05 per share.  On November 30, 2010, the Holder exercised his conversion rights to the 1,500,000 common share default warrant. The Company received $75,000 and issued 1,500,000 restricted common shares.

-12-

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statements

(An Exploration Stage Company)

February 29, 2012

(Unaudited)

NOTE 5 -   Convertible Notes – Related Parties

On November 27, 2009, the Company issued two $50,000, 11% convertible notes for total proceeds of $100,000 to a significant shareholder and special advisor (and now a director) and to another significant shareholder.  These notes were due and payable on November 27, 2010.   In addition, each noteholder received a warrant to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.05 for a term of three years.  The Company calculated an associated beneficial conversion feature and discount of $100,000, which amount was reflected as a discount of the face amount of these debentures on the date of the transaction.  The amount was determined using the relative fair value method.   The Company estimated the fair value of the warrant using the Black-Scholes option pricing model with the following assumptions: an expected life of three years, a risk-free interest rate of 2.57%, and a dividend rate of 0% and an expected volatility of 116%. This discount was accreted to interest expense over the term of the debentures, and was reflected as a non-cash charge over the term of these notes.

On November 27, 2010, the holders of the convertible notes elected to convert these notes, plus an aggregate of $11,000 in interest earned, into 2,220,000 shares of common stock at the conversion price of $0.05 per common share. 

In the year ended August 31, 2011, the 2,000,000 warrants were exercised for proceeds of $100,000.

NOTE 6 - Other Related Party Transactions

The former Chief Executive Officer (“CEO”) (see Note 7f ) was indebted to the Company for $23,345 and $1,150 at February 29, 2012 and August 31, 2011, respectively.  At February 29, 2012 and August 31, 2011, $12,000 and $49,580, respectively, was owing to a significant shareholder, director and special advisor for consulting services. At February 29, 2012 and August 31, 2011, the Company was indebted to a member of its board of directors elected on July 15, 2011, for legal fees incurred in the amount of $12,929 and $32,498, respectively, including reimbursed expenses of $429 and $307, respectively. At February 29, 2012, $5,824 was owing to the current CEO and $17,172 to the CFO.

All related party transactions are in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

-13-

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statements

(An Exploration Stage Company)

February 29, 2012

(Unaudited)

NOTE 7 – Commitments and Contingencies

A. Litigation

In connection with the agreements described in Note 3a related to the Mkuvia Gold Project, it has come to the Company’s attention that Handeni and Maita have been permitting a third party to continuously conduct prospecting activities and allegedly conveyed certain of the prospecting licenses and joint venture rights acquired as part of the Mkuvia transactions to third parties, at a date subsequent to the effective dates of the initial transaction, in violation of the Company’s ownership of exclusive mineral and mining rights.  Regarding this matter, Handeni has previously disclosed in its Form 10-Q for the quarter ended November 30, 2011 filed with the SEC on January 17, 2012, that it “is currently investigating through local counsel the registration particulars of prospecting licenses numbered 5664/2009 and 5669/2009, which form a part of the current Joint Venture Company project [which refers to the joint venture with Ruby Creek]. This investigation relates to the reported registration of prospecting licenses numbered 5664/2009 and 5669/2009 to a third party without the Company’s (Handeni’s) approval, in unclear circumstances.”  On February 8, 2012 the Company filed a Summons with Notice in the Supreme Court of the State of New York against Handeni (Douglas Lake Minerals, Inc. as the named defendant) for breach of contract, fraud and breach of fiduciary duty in connection with the violation of joint venture agreements. The relief sought was for compensatory and consequential damages in the amount of $10,000,000. On April 2, 2012, the Company further filed a Complaint in the Supreme Court of the State of New York against Handeni (Douglas Lake Minerals, Inc. as the named defendant). In that complaint the Company is seeking damages caused by Handeni for their violation of the parties agreements and fraud. The Company is seeking $17,000,000 in damages, exclusive of interest, costs and legal fees. As a consequence of the foregoing, the Company has not obtained an initial mining license on the Mkuvia property nor received the required environmental study which would have triggered a series of payments. Further, as a result of Handeni’s breaches, the Comapany has not made a $450,000 payment originally due on June 1, 2011 to Handeni pursuant to the May 24, 2010 agreement, among other things.  In the opinion of the Company’s Tanzanian counsel, the Company has good interest in the prospecting licenses (“PL”) free and clear of any liens and encumbrances and under Tanzanian law any dealings relating to the PL’s and the joint venture rights made subsequent to the dates when the Commissioner of the Ministry of Energy and Mining issued the Certificates of Acknowledgment of the joint venture agreements would not be recognized and they would not affect the rights of the Company in the PL’s. Further, counsel advises that there are no provisions under Tanzanian law in relation to mineral rights which would permit the PL’s to be forfeited or otherwise withdrawn in the event of a change of ownership.

On February 23, 2012, Handeni filed a Notice of Claim against the Company in the Supreme Court of British Columbia claiming breaches of the agreements between the parties and seeking (i) payments as stipulated in the preceding paragraph of $450,000, (ii) 20% of certain private placement proceeds received by the Company ($917,100), (iii) consent of the Company to remove the restrictive resale legend affixed to the 4,000,000 restricted common shares of the Company issued as partial consideration for the properties.and (iv) the right to market and sell the property to third parties. These amounts are included in the liabilities discussed in the next paragraph which have been offset in the determination of the impairment.

Management believes that the Company has suffered significant damages and while it is confident of the merits of its position and that the Company will ultimately be successful in its lawsuit, management has provided an impairment of the Mkuvia assets acquired offset by the recorded amount of the corresponding liabilities, to a nominal value of $1 as of February 29, 2012. A charge of $1,930,682 is reflected in the accompanyng statement of operations for the three and six month periods ended Februay 29, 2012. Offsetting the liabilities to Handeni is appropriate and consistent with the position of impairing the assets, since the obligation to make any payments is tied to proper title to the assets purchased.

-14-

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statements

(An Exploration Stage Company)

February 29, 2012

(Unaudited)

NOTE 7 – Commitments and Contingencies, continued

B. Commitments 

a. Effective June 4, 2010, the Company entered into an Advisory Agreement with Maita (“Advisor”), the original owner of the prospecting licenses of the Mkuvia property Project. The initial term of the agreement is for a three year period. The Advisor or the Company may terminate this Agreement at any time by giving the other party ninety (90) days prior written notice of termination. This Agreement may be renewed for successive one-year periods on mutually acceptable terms. Compensation is comprised of $1,000 for each Director’s meeting the Advisor attends and 300,000 shares of common stock of the Company as follows: 50,000 shares vested upon signing, 75,000 shares issuable on June 4, 2011; 75,000 shares issuable on June 4, 2012 and 100,000 shares on June 4, 2013. In the year ended August 31, 2010, the Company recognized $2,000 in fees paid and $19,500 in stock based compensation, which was the fair market value of the 50,000 shares issued. In the year ended August 31, 2011 the Company incurred $1,000 in fees under this arrangement. As result of matters described in Note 7A, the Company did not make the June 4, 2011 share issuance.

b. The Company entered into an arrangement with a company affiliated with a significant shareholder and current director for the use of a portion of its office space and facilities in New York City for a one year period commencing June 1, 2011 for a gross fee of $36,000. This amount was satisfied by the issuance of 48,000 common shares of the Company valued at $0.75 per share, the fair value at the date of the arrangement.  This fee was recognized as rent expense ratably over the terms of each arrangement.

c. On December 4, 2010, effective July 28, 2010, the Company entered into an employment agreement with a Director of Corporate Communications, Strategic and Technical Advisor with a term of two years, automatically renewable for successive one year terms unless terminated by either party on 60 days advance notice. The contractual annual salary is $93,600 plus bonuses at the discretion of the Board of Directors. The employee is entitled to 200,000 common shares of the Company, 100,000 vesting on commencement and 100,000 vesting six months thereafter. These shares had a fair market value of $100,000 on the date of grant. In addition, the employee was granted non-qualified stock options to purchase 300,000 shares of common stock, which vest at the rate of 37,500 options per quarter from the effective date. The options granted are exercisable at $0.60 per share and have a five year life. The Company estimated the fair value of the stock options to be $132,522 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of five years, risk-free interest rate of 0.61%, a dividend and forfeiture rate of 0% and a volatility of 143.7%.  The amount is being amortized ratably over the initial expected two year term of service. Results of operation include stock based compensation in the amount of $29,065 and $58,130 for the three months and six months ended February 29, 2012, respectively for these arrangements.

d. On December 16, 2010, effective on September 21, 2010, the Company entered into an Advisory Agreement with a Consultant to advise and provide assistance to Company management on matters relating to mining projects and properties in Tanzania and in surrounding regions. The initial term is for two years and may be renewed for successive one-year periods thirty days prior to any expiration. Compensation under the agreement is comprised of (i) $1,000 for any Director's meeting the Advisor is attends at management's request and (ii) 100,000 shares of common stock of the Company issued on the effective date, 100,000 shares on June 1, 2011, 100,000 shares on January 1, 2012 and 100,000 shares on October 1, 2012. The initial 100,000 shares were valued at the closing market price on the OTC BB on their grant date of $0.70 per share. The June 1, 2011 100,000 shares were valued at the closing market price on the OTC BB on that date of $1.03 per share. The January 1, 2012 100,000 shares were valued at the closing market price on the OTC BB on that date of $1.30 per share. For the three and six month periods ended February 29, 2012, $44,143 and $87,746 were included in amortization expense and a balance of $101,112 was included in deferred compensation at February 29, 2012.

-15-

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statements

(An Exploration Stage Company)

February 29, 2012

(Unaudited)

NOTE 7 – Commitments and Contingencies, continued

e. On April 29, 2011, effective May 1, 2011, the Company entered into an executive agreement with a current member of its Board of Directors (“Director”) for advisory services with respect to strategic, financial and regulatory issues. The term of the agreement is two years, subject to termination for cause. The contractual base compensation is $6,000 per month, increasing to $9,000 per month immediately after the Company reports two consecutive quarters of positive cash flow from operations and further increasing to $12,000 per month immediately after the Company reports two consecutive quarters of positive net income.  Bonuses are payable at the discretion of the Board of Directors. In addition, 200,000 shares of common stock are issuable upon the attainment of certain gold production levels as defined in the agreement and upon the attainment of the aforementioned operating results, up to an aggregate of 1,000,000 shares. Under the agreement, the director was granted non-qualified stock options to purchase 1,375,000 shares of common stock – 375,000 vesting on execution, and 250,000 vesting at the end of each successive six month period commencing on the effective date. The options include a cashless exercise provision. The options granted have an exercise price of $0.50 per share and a five year life.  The Company estimated the fair value of the stock options to be $1,118,334 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of three and one half years, risk-free interest rate of 1.01%, a dividend and forfeiture rate of 0% and a volatility of 116.5%.  The $305,276 value of the options vesting on grant was expensed on grant and the remainder is being amortized ratably over the two year vesting term. Results of operation include stock based compensation in the amount of $101,632 and $203,624 for the three and six month periods ended February 29, 2012.

f. On April 29, 2011, effective May 1, 2011, the Company entered into an executive agreement with the now former CEO. The term of the agreement was for two years. The contractual base compensation was $14,000 per month, with future increases based upon financial results. Under the agreement, the director was granted non-qualified stock options to purchase 1,375,000 shares of common stock - 375,000 vesting and exercisable on execution, and 250,000 becoming exercisable at the end of each successive six month period commencing on the effective date. The options include a cashless exercise provision. The options granted were exercisable at $0.50 per share and had a five year life. The Company estimated the fair value of the stock options to be $1,118,334 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of three and one half years, risk-free interest rate of 1.01%, a dividend and forfeiture rate of 0% and a volatility of 116.5%. The $305,276 value of the options vesting on grant was expensed, and the remainder was being amortized ratably over the two year vesting term. Results of operation include stock based compensation in the amount of $101,632 and $169,387 for the three month and six month periods ended February 29, 2012. On Janaury 31, 2012, the Company and the former CEO entered into a consulting agreement expiring May 31, 2012, which terminated and superceded the executive agreement in its entirety. Under the consulting agreement the former CEO will receive $14,000 per month; retained 625,000 of his original options which became fully vested and are exercisable through May 1, 2014; and was granted additional options to purchase 250,000 common shares exercisable for three years at $0.75 per share. The Company estimated the fair value of the 250,000 stock options to be $120,773 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of two years, risk-free interest rate of 1.01%, a dividend and forfeiture rate of 0% and a volatility of 81.7%. These options include a cashless exercise provision and vest in the event that the agreement is not terminated for Cause, as defined in the agreement, prior to the end of the term of the consulting ageement. Duties include assistance with respect to overall strategy and strategic advice to the Board of Directors and officers in its relations in Tanzania and transaction assistance to the new CEO, only as directed in writing by the Board. Further, the former CEO is required to complete other corporate actions as stipulated in the agreement. No stock based compensation expense was required with respect to modification of the original options since the fair value of the modified options was less than the original options.

-16-

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statements

(An Exploration Stage Company)

February 29, 2012

(Unaudited)

NOTE 7 – Commitments and Contingencies, continued

g. On June 27, 2011, effective on February 1, 2011, the Company entered into an agreement with a consultant to continue to assist management on a part time basis in the role of interim chief financial officer (“Consultant”) through May 31, 2012. Compensation for these services is at the rate of $4,800 per month based upon 40 hours per month plus additional compensation at the rate of $120 per hour in excess of 40 hours. The Consultant shall have the right to receive compensation in shares valued at $0.75 per share, at his option. This hourly rate shall increase to $200 per hour immediately after the Company reports two consecutive quarters of positive cash flow from operations.  Under the agreement, the Consultant was granted non-qualified stock options to purchase 150,000 shares of common stock – 60,000 vesting on execution, and 7,500 vesting each month commencing on June 1, 2011 for the remaining term of the agreement. The options granted are exercisable at $0.75 per share and have a five year life. The options include a cashless exercise provision. The Company estimated the fair value of the stock options to be $114,889 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of three and one half years, risk-free interest rate of 1.04%, a dividend and forfeiture rate of 0% and a volatility of 116.5%.  The $46,002 value of the options vesting on grant was expensed, and the remainder is being amortized ratably over the one year term. Results of operation include stock based compensation in the amount of 17,222 and $34,443 related to these options for the three months and six months ended February 29, 2012. For the three months and six months ended February 29, 2012, in accordance with the terms of his agreement the Consultant elected to receive payment for services rendered in shares of common stock of the Company in the amount of $44,781 and $58,997, respectively, which includes $9,999 and $18,685 representing the excess of the fair value of the shares issued over the issuance price, respectively.

h. Effective on June 6, 2011 the Company entered into a two year employment agreement with a Controller. Base compensation is payable at the rate of $100,000 per annum, and $125,000 per annum after the initial 90 day period for the remainder of the agreement. The Controller was granted non-qualified common stock purchase options to purchase 200,000 shares of the Company’s common stock at $0.75 per share. These options have a five-year life and include a cashless exercise feature. The options vest with respect to 25,000 shares on September 6, 2011 and 25,000 at the end of each three months thereafter commencing on December 6, 2011 until fully vested. The Company estimated the fair value of the stock options to be $159,048 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of three and one half years, risk-free interest rate of 0.74%, a dividend and forfeiture rate of 0% and a volatility of 112.4%.  Further, on September 6, 2011, after the expiration of the initial 90 day period, the Company was obligated to grant the Controller 25,000 shares of restricted common stock of the Company, of which 10,000 vested on the grant date and 15,000 on December 6, 2011. The Controller is also entitled (i) to participate in all Company sponsored benefit plans (ii) to an annual bonus at the discretion of the Board of Directors; and (iii) a salary increase once the Company attains positive operating cash flow. Results of operation include stock based compensation in the amount of $23,162 and $46,324 for the three and six months ended February 29, 2012. Effective on January 31, 2012, the Board of Directors elected the Controller as CEO. An agreement is currently being negotiated.

i. On July 15, 2011, the Company entered into an independent Director Agreement with a new director for an initial term expiring July 15, 2013. The Company is obligated to pay a $20,000 annual retainer and grant 200,000 non-qualified stock options to purchase 200,000 shares of common stock exercisable at $0.50 per share and with a five year life. The options include a cashless exercise provision. These options vest at the rate of 25,000 options per quarter beginning on July 15, 2011. The Company estimated the fair value of the stock options to be $179,024 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of three and one half years, risk-free interest rate of 1.01%, a dividend and forfeiture rate of 0% and a volatility of 113%.  The fair value of the options is being amortized ratably over the two year vesting term. Results of operation include stock based compensation in the amount of $22,378 and $44,756 for the three and six months ended February 29, 2012.

-17-

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statements

(An Exploration Stage Company)

February 29, 2012

(Unaudited)

NOTE 8 -   Common Stock and Common Stock Purchase Options

 In October 2011 the Company commenced an offering of units.  Each unit consists of one common share and one share purchase warrant. Two warrants are required to purchase one common share at a price of $1.50 per share for a period of up to two years. Through February 29, 2012, the Company sold 300,000 units and received proceeds of $240,000.

In addition, during the six month period ended February 29, 2012:

a. 1,164,603 warrants exercisable at $0.05 per share were converted to 1,225,000 restricted common shares on a cashless basis.

b. 1,835,000 private placement warrants were exercised to acquire 967,500 common shares for net proceeds of $328,750.

c. On February 15, 2012, the Company offered the holders of its $1.00 common stock purchase warrants issued in connection with a private placement the right to purchase two common shares for each $1.00 warrant for a limited time. In February, 2012, the holder of 10,000 such warrants exercised, paid $10,000 and received 20,000 common shares. In the period from March 1, 2012 to March 30, 2012, the holders of 611,500 such warrants exercised, paid $611,500 in proceeds and received 1,223,000 common shares. The 1,243,000 shares issued to the warrant holders who accepted this offer had a weighted average fair value of $0.72 per share on the dates of offer as compared to the original per share exercise price of $0.50, or $0.22 per share. This transaction has been treated as a capital transaction and the fair value of $278,000 has been recorded in additional paid in capital. The balance of these unexercised warrants to purchase 8,609,500 common shares at $1.00 per share remain outstanding under their original terms.

d. In connection with the Gold Standard transaction described in Note 3c, on January 7, 2012 the Board of Directors of the Company (i) issued 50,000 common shares to a consultant for assisting in the transaction (the fair value of these shares of $60,000 on their date of issuance was included in general and administrative expenses) and (ii) issued stock options to purchase 65,000 common shares to various individuals at $0.75 per share which vested on grant with a five-year life. These options include a cashless exercise provision. The fair value of these options determined using the Black-Scholes option pricing model using a risk-free interest rate of .52% per annum and a volatility of 105% was $58,000 and is included in stock based compensation. Two officers each received 12,500 and an independent director received 25,000 of these options.

NOTE 9 -   Subsequent Events

a. Subsequent to February 29, 2012, the Company received proceeds of $57,500 and issued 115,000 shares of common stock on the exercise of 330,000 $.50 warrants issued in a private placement. These proceeds were received from related parties (Director $50,000; CFO $7,500).

The Company evaluated subsequent events through the financial statement filing date.

-18-

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

As used in this quarterly report: (i) the terms "we", "us", "our" and the "Company" mean Ruby Creek Resources, Inc.; (ii) "SEC" refers to the Securities and Exchange Commission; (iii) "Exchange Act" refers to the Securities Exchange Act of 1934, as amended; and (iv) all dollar amounts refer to United States dollars unless otherwise indicated.

The following discussion of our plan of operations, results of operations and financial condition for the three month period ended November 30, 2011 should be read in conjunction with our unaudited interim financial statements and related notes for the three month period ended November 30, 2011 included in this quarterly report.   This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, some of which are outside our control.

Plan of Operations

Our plan of operations for the next year is to commence gold mining production and to continue exploration activities on our properties acquired and to be acquired. Our Gold Plateau project will approximate 1500 sq km (579 sq miles) including properties currently owned and assuming closing of all properties currently in contract. The major properties currently owned include the Mkuvia property, Gold Standard, Kapinga and Keigi. With the closing of the Gold Standard acquisition on November 29, 2011, we now own our first mining license, which allows us to begin commercial gold mining operations. Reference is made to Note 7A – Litigation, regarding litiagation commenced by the Company related to the Mkuvia properties.

Due to our lack of operating history and lack of operating revenues, uncertainty on the availability of adequate financial resources to support operations and to fund future payment, there exists substantial doubt about our ability to continue as a going concern. In March 2012, we commenced test mining on the Gold Standard mining license. Even if we complete our current exploration and test mining programs and commence mining operations on our Gold Standard mining license and we are successful in identifying mineral deposits, we will have to spend substantial funds on further drilling and engineering studies, mining equipment and/or contractors before we will know if we have a commercially viable mineral deposit or reserve and are able to achieve positive cash flow from operations. Our plan of operations for the next twelve months is to obtain the funding necessary for the continued exploration, development of the Mkuvia Gold Project and commencement of exploration and mining operations on the Gold Standard property. Further, there are other potential exploration properties currently under review.

Our geological team will perform geological studies to identify areas where mining licenses and mining activities would be most productive. As these sites are identified, we will file for additional mining licenses and our production team will assess what equipment and support structures are necessary to maximize production. Although we have received our first mining license and plan to commence gold mining operations in the next few months, we expect to continue to incur operating losses for the foreseeable future. We base this expectation, in part, on the fact that we have not been able to quantify gold reserves on our properties or establish that we can extract and process gold economically and at a level sufficient to support operations.

Liquidity and Financial Condition

At February 29, 2012, we had cash balances of $250,000 and a working capital deficit of $350,000, including a $549,000 convertible note payable to Gold Standard (see Note 3c).  In addition to working capital requirements, our need for liquidity includes payment obligations remaining under our Kapinga, Gold Standard and other property purchases. Reference is made to Notes 3a and 7A to the Unaudited Consolidated Financial Statements included elsewhere herein for a discussion of the litigation the Company commenced in February 2012 against Handeni Gold Inc. with respect to the Mkuvia Properties. As a consequence of that litigation, the financial statements reflect an impairment provision of $1,931,000 which is the recorded amount of Mkuvai mineral rights reduced by the associated liabilities. As a result of the Handeni litigation, certain payments to Handeni have been suspended. Substantial amounts of the remaining obligations, principally the Gold Standard, may be converted to or satisfied in shares of our common stock.  Effective on September 9, 2011, we acquired the mineral and mining rights to three properties which will be covered by prospecting licenses on a total of 350 sq km property known as the Kapinga Properties, under the following terms and conditions, as modified from an earlier arrangement:

• A purchase price of $155,000 plus 75,000 shares of Company common stock, against which payments of $60,000 were made through August 31, 2011. Any unpaid balance and the share issuance will be completed upon satisfactory transfer of the remaining prospecting licenses deemed necessary to transfer 100% ownership of all property rights to the Company;

• The Company will acquire a 100% interest in KAP 1,2,3

• The Kapinga mineral and mining rights have been expanded to cover the 350 sq km Kapinga property plus an additional 15 sq km contiguous with other Company properties; and

-19-

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

• Within 30 days of the  issuance of the first mining license on the Kapinga properties, an additional payment of $100,000 and 75,000 shares of common stock of the Company plus within six months of that date a final payment of $100,000 in cash or common stock of the Company valued at $100,000, at the Company’s option.

On November 29, 2011 we concluded the acquisition of a 95% interest in Gold Standard Tanzania Ltd, (“GSTL”). GSTL’s assets include a 10 year, 10 square kilometer mining license issued in September 2010, and other assets including two Prospecting License Joint Ventures of 39 and 89 square kilometers, a Regional Environmental Report on the combined 139 square kilometer property, mining equipment and an established mining camp. The purchase price was $3,000,000 in cash, convertible promissory notes and stock, as well as the assumption of $585,000 in GSTL liabilities. (See Note 3c to the Unaudited Consolidated Financial Statements included herein). The property is immediately adjacent to and on the west-northwest border of the Company’s Gold Plateau Project.

All of the properties comprising the Gold Plateau Project are located in the Liwale and Nachingwea Districts, Lindi Region of the United Republic of Tanzania.

In the six months ended February 29, 2012 and for the subsequent period through April 16, 2012, we received additional funding as follows:

· On October 2011, we commenced an offering of equity securities pursuant to Rule 506 of Regulation D and Regulation S at a price of $0.75 per unit.  Through December 5, 2011, the Company sold 320,000 units of this offering and received proceeds of $240,000 and issued associated $1.50 two year warrants to purchase an additional 160,000 shares.  If all of these warrants were exercised it would result in proceeds of an additional $240,000. We incurred and paid $15,000 in commissions related to these funds received.

· In the six months ended February 29, 2012, private placement warrants were exercised to acquire 1,082,500 common shares for net proceeds of $386,250.

· A Director exercised certain Bridge Loan default warrants resulting in the issuance of 390,000 common shares for $97,500 in proceeds and certain compensation warrants to purchase 900,000 common shares for $45,000 in proceeds.

· On February 15, 2012, the Company offered the holders of its $1.00 common stock purchase warrants issued in connection with a private placement the right to purchase two common shares for each $1.00 warrant for a limited time.  Through March 31, 2012, the holders of 621,500 such warrants exercised, paid $621,500 in proceeds and received 1,243,000 common shares. The unexercised remaining quantity of this class of warrant to purchase 8,609,500 common shares at $1.00 per share remain outstanding for the balance of their original two year terms.

-20-

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

The following common stock purchase options and warrants were outstanding as of February 29, 2012 with various expiration dates over the next five year period:

	Number of shares Issuable				Proceeds if Exercised
Compensatory warrant exercisable for shares to former CEO		875,000	(a)		$500,000
Compensatory warrants exercisable for shares to directors and related parties		1,975,000	(a)		717,500
Compensatory warrant/options exercisable for shares – others		650,000	(a)		122,500
Compensatory stock options  – employment agreements		915,000	(a)	(b)	591,250
Shares issuable upon exercise of warrants  - July 2009 private placement		100,000			5,000
Shares issuable upon conversion of 4,031,000 warrants issued in April 2010 private placement		2,015,500			1,007,750
Shares issuable upon conversion of 9,221,000 warrants issued in October 2010 private placement		9,221,000			9,221,000
Shares issuable upon conversion of 320,000 warrants issued in October 2011 private placement		160,000			240,000
8% Convertible Share Note – Gold Standard transaction		974,000			974,000
Total		16,885,500			$13,379,000

(a) These securities include cashless exercise provisions. (b) Compensatory options include certain vesting provisions.    

If all of the warrants and options were exercised we could receive an additional $11,447,750 in proceeds, excluding proceeds of $1,931,250 of securities with cashless exercise provisions. We cannot however predict if market conditions would be favorable, or that the various holders would exercise their rights even if the various exercise prices were lower than the market price of our shares.

Future Financings

We anticipate that any future additional funding will be in the form of equity financing from the sale of our common stock or other securities convertible into our common stock. In addition to equity and equity related financing sources, we believe that debt financing may be a viable alternative for funding additional phases of exploration and to fund actual mining operations once production commences.  We expect mining operations to commence by March 31, 2012 exploiting the initial mining license acquired in the Gold Standard acquisition. However, while management believes that it will be successful, there can be no assurance that any potential subsequent financings will be, or that any funds raised will be sufficient for us to conduct and sustain our operations, fund our obligations under property acquisition agreements and pay our expenses for the next twelve months. In the absence of such financing, we will not be able to continue exploration of our venture prospecting licenses for the Gold Plateau, and our business plan could fail.  Even if we are successful in obtaining debt or equity financing and/or generate positive cash flow from operations to fund our various acquisition and exploration programs, there is no assurance that we will obtain the funding necessary to pursue any advanced exploration of any prospecting licenses we presently have or that we may acquire or that the any project will yield commercially viable levels of minerals.  If we do not continue to obtain additional financing, we will be forced to limit or abandon our plan of operations.  

We believe that the nature of the deposit at the Gold Plateau readily lends itself to producing gold with a reasonable level of investment and the discovery of areas on the Project where gold grades will exceed the economically viable concentration levels. This has been the experience with artisanal mining on the Mkuvai and Gold Standard properties. While we have no assurance of such results, we would intend to use positive cash flow generated to fund and reduce the need to raise capital. The cash flow expected to be generated from operations expands gold production and funds placer and potentially source rock exploration.

-21-

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

Results of Operations for the three months and six months ended February 29, 2012.

Mining Exploration and Operating Costs

During the three months and six months ended February 29, 2012, mining, exploration and operating costs were $429,340 and $802,802 respectively, as compared to $342,800 and $574,030 in the comparable periods of the preceding year. This is reflective of our activities following the acquisition of the mineral and mining rights to the Gold Standard and Mkuvia properties as well as activities to advance our progress towards commencing production. Specific activities included purchasing, retention and training of personnel, ongoing construction of our mining camp, equipment maintenance and repair and further developing our extraction techniques. Current periods include a $300,000 provision for the repair and refurbishment of equipment acquired in the Gold Standard transcation.

Exploration activities were directed at identifying what we believe will be the most productive mining sites based on our samples of gold concentrations. We continued to explore other potential prospecting sites, which activities will increase as our properties increase, and especially now that we have obtained our first mining license with the Gold Standard acquisition. We also greatly enhanced our in country management by adding a highly qualified operations specialist.

In order to support our exploration and mining activities we continue to improve and expand our base camp. This included upgrading our living quarters as well as our cooking and lavatory facilities. We will incur similar costs to improve the camp located on the Gold Standard property. We also incurred substantial costs for travel and transportation and food and supplies.  In preparation for commencing production we shifted approximately $83,000 from exploration to production costs while increasing our security costs by approximately $113,000 and our camp support facility costs by approximately $201,000 during the six months ended February 29, 2012 as compared to the six month period from the prior year.

Consulting Services

During the three months and six months ended February 29, 2012, we incurred $237,130 and $424,801, respectively, in consulting costs as compared to $99,873 and $192,807 in the comparable periods of the preceding year. We incurred consulting costs for a wide range of advisory and support services to assist us with our operations in Tanzania, to enhance our financing strategies and for other legal and administrative improvements. Of the total amount we incurred, $203,264 and $356,268 was satisfied through stock based compensation during the three months and six months ended February 29, 2012, respectively. During three months and six months ended February 28, 2011 of the total amount we incurred, $49,610 and $108,355 was satisfied through stock based compensation, respectively. 

Interest and Financing Fees

During the three months and six months ended February 29, 2012 , we incurred approximately $157,627 and $863,586, respectively, in interest and financing fees as compared to $116,356 and $256,113 in the comparable periods of the preceding year. During the six months ended February 29, 2012, we incurred a non-cash interest charge of $615,600 arising from the conversion by the holders of the $1,026,000 Equipment Note issued in the acquisition of Gold Standard, Ltd. into 1,368,000 common shares.  This charge represented the intrinsic value of the conversion feature. The remaining amounts incurred in 2012 of $228,486 were non-cash charges for the accretion of debt discount related to the amounts due Handeni and Gold Standard and accrued interest of $19,500 on the Gold Standard Share Note.

Management Services

During three months and six months ended February 29, 2012, we incurred $359,210 and $673,660 respectively, in management services compared to $119,148 and $257,802 in the comparable periods of the preceding year. Of those amounts approximately $185,000 and $395,000, respectively, was paid in the form of stock based compensation for the three and six month periods end February 29, 2012. Of the total amount incurred during the three months and six month period ended February 29, 2011, approximately $47,000 and $134,000 was paid in the form stock based compensation. In these periods stock based compensation represented the fair value of compensatory stock options and warrants and common shares earned. 

-22-

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

General and Administrative, Professional Fees, and Shareholder Relations

During the three months and six months ended February 29, 2012, we incurred approximately $427,398 and $750,650, respectively, in General and Administrative, Professional Fees, and Shareholder Relations compared to $211,102 and $436,649 in the comparable periods of the preceding year. These expenses increased in a manner consistent with the increased complexity and scope of operations of the Company, travel and related costs, directors and officers insurance, additional support staff and facilities costs as well legal and other professional fees.

Impairment – Mineral Properties and Equipment

In connection with the Handeni litigation described in Note 7A – Litigation of Notes to Consolidated Financial Statements and Part II, Item 1. Legal Proceedings included elsewhere herein, the Company provided an impairment provision of $1,931,000, which is equal to the carrying value as of February 29, 2012 of the Mkuvia Properties ($6,796,000) acquired from Handeni, reduced by recorded liabilites to Handeni as of February 29, 2012 ($4,865,000). While we are confident that we will be successful in this litigation, we have recorded this non-cash impairment because of uncertainties associated with litigation and to reflect the potential impairment that could occur in the unlikely event we are not successful in this matter. Current periods also include a $300,000 provision for the impairment of equipment.

Net Loss

The net loss approximated $3,867,000 and $5,794,000 for the three month and six month periods ended February 29, 2012 as compared to $895,000 and $1,726,000 in the comparable periods of the preceding year.  Our net loss from inception of the Company on May 3, 2006 until February 29, 2012 approximated $13,786,000. Our net loss for the six months ended February 29, 2012 is attributable to the execution of our business plan to become a gold producing mining company.  For the six months ended February 29, 2012, stock based compensation for management services approximated $399,000, non-cash financing costs approximated $864,000, depreciation and amortization approximated $49,000, common stock issued for consulting services approximated $356,000, the non-cash impairment of the Mkuvia Project of $1,931,000 and impairment for equipment of $300,000 for an aggregate of $3,899,000 in non-cash costs included in results of operations. Of the Net loss, $21,500 was attributed to the 5% noncontrolling interest in the Gold Standard operations, which was acquired effective on November 29, 2011

Going Concern

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.  The Company is in the exploration stage and has not generated revenues since inception.  The Company has incurred significant losses from inception through February 29, 2012 of approximately $13,785,000, raising substantial doubt about the ability of the Company to continue as a going concern.  Further, as discussed in Note 7A – Litigation, the Company commenced litigation againt Handeni Gold Inc (formerly Douglas Lake Minerals, Inc) related to claims for breaches of contract and fraud related to the Mkuvia Property. Handeni Gold Inc. has filed an action against the Company seeking certain payments and removal or cerain asset restrictions. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary financing to settle outstanding debts, fund ongoing operating losses and to discover and successfully exploit economically recoverable mineral reserves on its resource properties and ultimately on the attainment of future profitable operations; and to the satisfactory outcome of the referenced litigation.  The Company has funded its operations with private equity and/or convertible debt financing and is in the process of identifying additional sources of capital from debt or equity sources. While management believes it has made significant progress on its plan of operations, additional working capital and capital funds will be required to finance the Company’s operations until commercial operations commence and positive cash flow can be achieved.  Management believes that additional financing will be available on terms acceptable to the Company. However, there can be no assurance of this, nor is there any assurance that commercial operations will be achieved. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

-23-

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis.  The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements.  In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances.  Actual results could differ from those estimates made by management.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

Mineral Property Costs

The Company has been in the exploration stage since its formation on May 3, 2006 and has not realized any revenues from its planned operations.  It is primarily engaged in the acquisition and exploration of mineral resources.

The Company classifies its mineral rights as tangible assets and accordingly acquisition costs are capitalized as mineral property costs. Generally accepted accounting principles require that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  In performing the review for recoverability, the Company is to estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the undiscounted expected future cash flows is less than the carrying amount of the asset, an impairment loss is recognized.  Mineral exploration costs are

expensed as incurred until commercially mineable deposits are determined to exist within a particular property.  To date the Company has not established any proven or probable reserves.

The Company accounts for asset retirement obligations by recording the initial measurement and subsequent accounting for obligations associated with the sale, abandonment, or other disposal of long-term tangible assets arising from the acquisition, construction or development and for normal operations of such assets.  The Company has not incurred any potential costs related to the retirement of mineral property interests since commercial mining operations have not commenced.

Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar. The functional currency of the Company’s Tanzanian subsidiary is the Tanzanian Shilling. The financial statements of the subsidiary are translated to United States dollars in accordance with ASC 830, Foreign Currency Translation Matters. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Related translation adjustments are reported as a separate component of stockholders' equity, whereas gains or losses resulting from foreign currency transactions are included in results of operations.

Recent Accounting Pronouncements

Recent pronouncements issued are not expected to have a material effect on the Company’s consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are currently not subject to any material market risks.

-24-

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer has concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of the end of the period covered by this report, based on their evaluation of these controls and procedures required by paragraph (b) of Rules 13a-15 and 15d-15, due to certain material weaknesses in our internal control over interim financial reporting as of February 29, 2012, as described in our management’s report on internal control over financial reporting included in our annual report on Form 10-K for our fiscal year ended August 31, 2011, which deficiencies have not been remedied as of February 29, 2012.

Changes in Internal Control over Financial Reporting

Effective February 1, 2010, we retained an interim CFO. Effective on June 6, 2011 we retained a Controller who has since assumed the role of CEO. He is however, continuing to participate in estalishing controls over financial reporting processes and procedures. Further, we have retained additional accounting personnel in our Tanzanzian operation. We believe their participation has and will strengthen internal controls, and certain new controls have been installed or are in the process of being designed and implemented.  We believe that this did and will continue to improve and strengthen our internal controls over financial reporting.

-25-

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any material legal proceedings nor are we aware of any legal proceedings pending or threatened against us or our properties other than as follows:

On March 8, 2010, the Company was served with a Writ of Summons from its former general counsel, Lang Michener LLP of Vancouver, Canada, for the collection of its alleged uncollected fees in the amount of approximately US$115,000, including claimed interest.  On November 23, 2010, the parties settled this litigation and the Company paid approximately $75,000 in full satisfaction. Mutual releases were exchanged.

In connection with the agreements described in Notes 3a-3c to the Unauduited Consolidated Financial Statements included elsewhere herein related to the Mkuvia Gold Project, it has come to the Company’s attention that Handeni and Maita have been permitting a third party to continuously conduct prospecting activities and allegedly conveyed certain of the prospecting licenses and joint venture rights acquired as part of the Mkuvia transactions to third parties, at a date subsequent to the effective dates of the initial transaction, in violation of the Company’s ownership of exclusive mineral and mining rights.  Regarding this matter, Handeni has previously disclosed in its Form 10-Q for the quarter ended November 30, 2011 filed with the SEC on January 17, 2012, that it “is currently investigating through local counsel the registration particulars of prospecting licenses numbered 5664/2009 and 5669/2009, which form a part of the current Joint Venture Company project [which refers to the joint venture with Ruby Creek]. This investigation relates to the reported registration of prospecting licenses numbered 5664/2009 and 5669/2009 to a third party without the Company’s (Handeni’s) approval, in unclear circumstances.”  On February 8, 2012 the Company filed a Summons with Notice in the Supreme Court of the State of New York against Handeni (Douglas Lake Minerals, Inc. as the named defendant) for breach of contract, fraud and breach of fiduciary duty in connection with the violation of the joint venture agreements. The relief sought was for compensatory and consequential damages in the amount of $10 million. On April 2, 2012, the Company further filed a Complaint in the Supreme Court of the State of New York against Handeni (Douglas Lake Minerals, Inc. as the named defendant). In that complaint the Company is seeking damages caused by Handeni for their violation of the parties’ agreements and for fraud. The Company is seeking $17,000,000 in damages, exclusive of interest, costs and legal fees. As a consequence of the foregoing, the Company has not obtained an initial mining license on the Mkuvia property nor received the required environmental study which would have triggered a series of payments. Further, as a result of Handeni’s breaches, the Comapany has not made a $450,000 payment originally due on June 1, 2011 to Handeni pursuant to the May 24, 2010 agreement, among other things.  In the opinion of the Company’s Tanzanian counsel, the Company has good interest in the prospecting licenses (“PL”) free and clear of any liens and encumbrances and under Tanzanian law any dealings relating to the PL’s and the joint venture rights made subsequent to the dates when the Commissioner of the Ministry of Energy and Mining issued the Certificates of Acknowledgment of the joint venture agreements would not be recognized and they would not affect the rights of the Company in the PL’s. Further, counsel advises that there are no provisions under Tanzanian law in relation to mineral rights which would permit the PL’s to be forfeited or otherwise withdrawn in the event of a change of ownership.

On February 23, 2012, Handeni filed a Notice of Claim against the Company in the Supreme Court of British Columbia claiming breaches of the agreements between the parties and seeking (i) payments as stipulated in the preceding paragraph of $450,000, (ii) 20% of certain private placement proceeds received by the Company ($917,100), (iii) consent of the Company to remove the restrictive resale legend affixed to the 4,000,000 common shares of the Company issued as partial consideration for the properties.and (iv) the right to market and sell the property to third parties. These amounts are included in the liabilities discussed in the next paragraph which have been offset in the determination of the impairment.

Management believes that the Company has suffered significant damages and while it is confident of the merits of its position and that the Company will ultimately be successful in its lawsuit, management has provided an impairment of the Mkuvia assets acquired offset by the recorded amount of the corresponding liabilities, to a nominal value of $1 as of February 29, 2012. A charge of $1,930,682 is reflected in the Company’s results of operations for the three and six month periods ended Februay 29, 2012. Offsetting the liabilities to Handeni is appropriate and consistent with the position of impairing the assets, since the obligation to make any payments is tied to proper title to the assets purchased.

Item 2. Unregistered Sales of Equity Securities

On July 20, 2009, the Company issued 400,000 restricted shares of common stock at a price of $0.05 per share for proceeds of $20,000.  As part of this private placement, the Company issued 200,000 share purchase warrants to purchase. Each warrant is exercisable to purchase one share of common stock at $0.05 for a period five years.  The fair value of these share purchase warrants using a risk-free rate of 2.57% and a volatility of 99% was $17,492 or $0.09 per warrant.  The shares were issued to David Bukzin and Double Trouble Productions, LLC.

-26-

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

The shares issued to David Bukzin and Double Trouble Productions were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act, and corresponding provisions of state securities laws, which exempt transactions involving offers or sales by an issuer solely to one or more accredited investors.  Double Trouble Productions, LLC and Mr. Bukzin are “accredited investors” as such term is defined in Regulation D under the Securities Act.

On November 27, 2009, the Company entered into two convertible note agreements to issue two 1 year, $50,000, 11% convertible notes for total proceeds of $100,000.  Each note is convertible, in part or in full, into the Company’s common stock at an exercise price of $0.05 per common share, and interest is to be paid quarterly.  In addition, each holder of the note received warrants to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.05 for a term of three years.  The proceeds of these notes were received December 3, 2009 and used to make the first $100,000 installment in the Mkuvia Gold Project Joint Venture Agreement described above. On November 27, 2010, the holders of the convertible notes elected to convert these notes, plus an aggregate of $11,000 in interest earned, into 2,220,000 shares of common shares at the conversion price of $0.05 per common share. 

On March 10, 2010, the Company filed a final Form D with the Securities and Exchange Commission disclosing the sale of 1,600,000 units to 20 investors at a price of $0.125 per unit resulting in gross proceeds of $200,000.  Each unit consisted of one share and one warrant.  The warrants are exercisable at a price of $0.25 for a period of two years.  Two warrants are required to purchase one share.  The shares issued pursuant to the units were issued to 19 accredited investors and one non-accredited investor.   The shares issued to the above investors were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Regulation D, Rule 506.

In addition to the shares issued in reliance on the exemption from registration afforded by Regulation D, Rule 506, shares issued to two investors were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Regulation S.  Both investors are residents of Quebec, Canada.

In the period from April 3, 2010 and August 26, 2010, pursuant to Rule 506 of Regulation D and Regulation S of the Securities Act of 1933 the Company sold a total of 5,356,000 units to 56 individuals and received proceeds of $1,339,000. Each unit consisted of one share of common stock at a price of $0.25 per share and one warrant. Two warrants are required to purchase one share of stock for $.50 per share, and each warrant is exercisable for a period of two years.  The shares issued to these investors were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Regulation D, Rule 506.  In addition to the shares issued in reliance on the exemption from registration afforded by Regulation D, Rule 506, shares were issued to certain investors that were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Regulation S. 

-27-

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

In the period from October 18, 2010 and concluded on August 23, 2011, the Company conducted an offering of its equity securities pursuant to Rule 506 of Regulation D and Regulation S and received proceeds of $4,615,500 for the sale of 9,231,000 Units at a price of $0.50 per Unit.  Each Unit consists of one common share and one common stock purchase warrant. One warrant is required to buy one common share, or an aggregate of 9,231,000 common shares in total, at a price of $1.00 per share. These warrants are exercisable for a period of up to two years from the closing date of each subscription.   The shares issued to these investors were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Regulation D, Rule 506. In addition to the shares issued in reliance on the exemption from registration afforded by Regulation D, Rule 506, shares were issued to certain investors that were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Regulation S.  

On October 6, 2011 the Company commenced an offering of its equity securities pursuant to Rule 506 of Regulation D and Regulation S at a price of $0.75 per unit.  Each unit consists of one common share and one share purchase warrant. Two warrants are required to purchase one common share at a price of $1.50 per share and are exercisable for a period of up to two years from the closing date of each subscription. Through December 5, 2011, the Company sold 320,000 units and received proceeds of $240,000. The shares issued to these investors were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Regulation D, Rule 506. In addition to the shares issued in reliance on the exemption from registration afforded by Regulation D, Rule 506, shares were issued to certain investors that were not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Regulation S.  

Item 3. Defaults upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Securities Holders

None.

Item 5. Other Information

None.

-28-

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

Item 6. Exhibits

The following exhibits are filed with this Quarterly Report on Form 10-Q

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive (Filed herewith)
31.2	Certification of Chief Financial Officer (Filed herewith)
32.1	Certification of Chief Executive Officer and Chief Financial Officer (Filed herewith)

SIGNATURES

Pursuant to the requirements of Section 13 and 15 (d) 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.

RUBY CREEK RESOURCES, INC.

/s/ Daniel Bartley

David Bartley

Chief Executive Officer

Dated: April 20, 2012

/s/ Myron Landin

Myron Landin, CPA

Chief Financial Officer

 Dated: April 20, 2012

-29-

EX-31.1

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

The undersigned certifies that:

1. I have reviewed this report on Form 10-Q, for the quarterly period ended February 29, 2012, of Ruby Creek Resources, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer’s certifying officers are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The small business issuer’s certifying officer has disclosed, based on the most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

/s/ Daniel Bartley

Daniel Bartley

Chief Executive Officer

Dated: April 20, 2012

EX-31.2

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

  EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

The undersigned certifies that:

1. I have reviewed this report on Form 10-Q, for the quarterly period ended February 29, 2012, of Ruby Creek Resources, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. The small business issuer’s certifying officers are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The small business issuer’s certifying officer has disclosed, based on the most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

/s/ Myron Landin

Myron Landin, CPA

Chief Financial Officer

Dated:  April 20, 2012

EX-32.1

Ruby Creek Resources, Inc.

(An Exploration Stage Company)

February 29, 2012 

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Ruby Creek Resources, Inc. for the quarterly period ended February 29, 2012 as filed with the Securities and Exchange Commission on the date hereof, the undersigned, Daniel Bartley, Chief Executive Officer and Myron Landin, Chief Financial Officer, each hereby certifies that, to their knowledge, the Report on Form 10-Q of Ruby Creek Resources Inc.:

(1)	The Quarterly Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Daniel Bartley

Daniel Bartley

Chief Executive Officer

April 20, 2012

/s/ Myron Landin

Myron Landin, CPA

Chief Financial Officer,

April 20, 2012

XML

Property and Equipment

6 Months Ended

Feb. 29, 2012

Property Plant and Equipment [Abstract]

Property Plant And Equipment Disclosure [Text Block]

NOTE 2 – Property and Equipment

Property and equipment consists of the following at February 29, 2012 and August 31, 2011:

	February 29, 2012
	Cost		Accumulated Depreciation		Net Book Value
Vehicles	$	523,935	$	32,088	$	491,847
Computer equipment		14,152		6,310		7,842
Exploration and mining equipment		2,182,165		1,370		2,180,795
Furniture and fixtures		30,937		13,739		17,198
Camp facilities		102,776		38,256		64,520
		2,853,965		91,763		2,762,202
Less: Impairment provision		300,000		-		300,000
	$	2,553,965	$	91,763	$	2,462,202

	August 31, 2011
	Cost		Accumulated Depreciation		Net Book Value
Vehicles	$	112,282	$	6,915	$	105,367
Computer equipment		9,432		4,509		4,923
Exploration and mining equipment		116,165		342		115,823
Furniture and fixtures		28,458		8,878		19,580
Camp facilities		88,515		21,479		67,036
	$	354,852	$	42,123	$	312,729

Effective February 29, 2012, the Company has recorded an impairment for equipment acquired in the Gold Standard transaction discussed in Note 3c ($200,000), and for the Mkuvia Project related camp facilities ($100,000) as a result of the Handeni litigation discussed in Note 7A – Litigation.

XML

Organization and Summary

6 Months Ended

Feb. 29, 2012

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]

NOTE 1 - Organization and Summary

Organization

Ruby Creek Resources, Inc. (the “Company”) was incorporated in the Province of British Columbia on May 3, 2006.  The Company is an Exploration Stage Company.  The Company’s principal business is the acquisition and exploration of mineral properties.  

Effective January 29, 2009, the Company changed its jurisdiction from the Province of British Columbia to the State of Nevada.  Effective the same date, the Company's authorized capital was changed from an unlimited number of common shares without par value to 500,000,000 common shares with a par value of $0.001 per share. Tanzania Ruby Creek Limited (TzRC) was formed in December 2011 (100% owned by the Company), Ruby Creek Resources (Tanzania) Limited (“RCRTz) was incorporated on May 21, 2010 in Tanzania, (a joint venture 70% owned by the Company), and Ruby Creek Gold (Tanzania) Limited (99% owned by the Company) and Ruby Creek Diamonds Limited (100% owned by the Company) were formed on August 10, 2011.  Gold Standard (Tanzania) Limited (95% owned by the Company), was acquired on November 29, 2011 in the transaction described in Note 3c. 

Going Concern

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.  The Company is in the exploration stage and has not generated revenues since inception.  The Company has incurred significant losses from inception through February 29, 2012 of approximately $13,785,000, raising substantial doubt about the ability of the Company to continue as a going concern.  Further, as discussed in Note 7A – Litigation, the Company commenced litigation againt Handeni Gold Inc (formerly Douglas Lake Minerals, Inc) related to claims for breaches of contract and fraud related to the Mkuvia Property. Handeni Gold Inc. has filed an action against the Company seeking certain payments and removal or cerain asset restrictions. The continuation of the Company as a going concern is dependent upon its ability to obtain necessary financing to settle outstanding debts, fund ongoing operating losses and to discover and successfully exploit economically recoverable mineral reserves on its resource properties and ultimately on the attainment of future profitable operations; and to the satisfactory outcome of the referenced litigation. The Company has funded its operations with private equity and/or convertible debt financing and is in the process of identifying additional sources of capital from debt or equity sources. While management believes it has made significant progress in its plan of operations, additional working capital and capital funds will be required to finance the Company’s operations until commercial operations commence and positive cash flow can be achieved.  Management believes that additional financing will be available on terms acceptable to the Company. However, there can be no assurance of this, nor is there any assurance that commercial operations will be achieved. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Basis of Presentation - Unaudited Interim Financial Statements

The accompanying unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles ("US GAAP") for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”) and on the same basis as the annual audited consolidated financial statements.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been   omitted pursuant to such rules and regulations.  However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended August 31, 2011 included in the Company's annual report filed with the Securities and Exchange Commission.  The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-K which was filed with the SEC on December 14, 2011.  In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position, operating results and cash flows for the period presented, consisting solely of normal recurring adjustments, have been made.  Operating results for the three and six month periods ended February 29, 2012 are not necessarily indicative of the results that may be expected for the year ending August 31, 2012.

Recent Accounting Pronouncements

There are no recent pronouncements issued which are expected to have a material effect on the Company’s consolidated financial statements.

XML

CONSOLIDATED BALANCE SHEETS (USD $)	Feb. 29, 2012	Aug. 31, 2011
ASSETS
Cash	$ 250,364	$ 1,836,877
Due from related party	23,345	0
Prepaid expenses and other current assets	397,638	259,768
Total current assets	671,347	2,096,645
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $91,763 and $42,123 , respectively	2,462,202	312,729
MINERAL PROPERTIES	2,377,369	7,141,800
TOTAL ASSETS	5,510,918	9,551,174
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities	424,040	404,941
Installment loan payable	0	11,042
Due to Handeni Gold, net of discount	0	1,864,340
Convertible note payable, current, net of discount	549,487	0
Due to related parties	47,925	82,612
Total current liabilities	1,021,452	2,362,935
LONG-TERM LIABILITIES
Due to Handeni Gold, net of discount	0	2,817,692
Convertible note payable, net of discount	274,744	0
Due to Mkuvia Maita, net of discount	325,205	0
Deferred income taxes payable	405,000	0
Total long-term liabilities	1,004,949	2,817,692
COMMITMENTS AND CONTINGENCIES (Note 7)
TOTAL LIABILITIES	2,026,401	5,180,627
EQUITY
Common stock, 500,000,000 shares authorized, par value $0.001; 46,177,764 and 39,576,978 shares issued and outstanding, respectively	46,178	39,577
Additional paid-in capital	17,232,101	12,397,133
Deferred compensation	(121,945)	(104,691)
Comprehensive income from foreign currency translation	40,203	29,524
Deficit accumulated during the exploration stage	(13,764,220)	(7,990,996)
Total stockholders' equity	3,432,317	4,370,547
Noncontrolling interest	52,200	0
Total Equity	3,484,517	4,370,547
TOTAL LIABILITIES AND EQUITY	$ 5,510,918	$ 9,551,174

XML

Consolidated Statement of Equity (Deficit) [Parenthetical] (USD $)	4 Months Ended	6 Months Ended	12 Months Ended
	Aug. 31, 2006	Feb. 29, 2012	Aug. 31, 2011	Aug. 31, 2010	Aug. 31, 2009
Stock issued for cash exercise price per share issues one	$ 0.01	$ 0.75	$ 0.50	$ 0.125	$ 0.05
Stock issued for cash exercise price per share issues two	$ 0.05			$ 0.25
Stock issued for cash exercise price per share issues three	$ 0.10
Issuance price per share of stock issued for related party debt				$ 0.05
Stock issued for services exercise price per share issues one				$ 0.20
Issuance price per share of stock issued for services lower range limit		$ 0.50	$ 0.25
Issuance price per share of stock issued for services upper range limit		$ 1.30	$ 0.50
Issuance price per share of stock issued for finance fee				$ 0.25
Issuance price per share of stock issued for bridge loan				$ 0.05
Stock issued for services exercise price per share issues two				$ 0.35
Stock issued for services exercise price per share issues three				$ 0.25
Stock issued for services exercise price per share issues four				$ 0.25
Issuance price per share of stock issued for employment agreement			$ 0.50
Issuance price per share of stock issued for consulting agreement			$ 0.87
Issuance price per share of stock issued for notes related parites and accrued interest			$ 0.05
Percentage rate of interest of convertible notes				11.00%
Percentage rate of interest of convertible debentures			11.00%

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	6 Months Ended		70 Months Ended
	Feb. 29, 2012	Feb. 28, 2011	Feb. 29, 2012
Cash Flows From Operating Activities
Net loss attibutable to common shareholders	$ (5,773,224)	$ (1,726,422)	$ (13,764,220)
Net loss attibutable to noncontrolling interest	(21,500)	0	(21,500)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation	23,309	9,020	65,431
Impairment - Mineral Properties	1,930,682	0	1,940,453
Impairment - Equipment	300,000	0	300,000
Donated services	0	0	3,000
Interest and financing fees, including discount accretion	844,086	253,177	2,403,360
Common stock issued for services	277,105	25,781	601,897
Stock based compensation	623,260	142,234	2,441,661
Net changes in noncash working capital items:
(Increase) decrease - Prepaid expenses	(137,869)	10,072	(375,638)
Increase (decrease) - Accounts payable	29,778	(3,217)	495,741
Increase (decrease) - Due to/from related parties	(58,032)	82,756	74,580
Net cash flows (used in) operating activities	(1,962,405)	(1,206,599)	(5,835,235)
Cash flows from investing activities
Purchase of equipment	(96,782)	(145,710)	(451,635)
Mineral properties and deposits	(237,532)	(111,035)	(1,192,932)
Net cash flows (used in) investing activities	(334,314)	(256,745)	(1,644,567)
Cash flows from financing activities
Issuance of common shares for cash - private placements	240,000	2,463,750	6,689,700
Exercise of private placement warrants - proceeds	338,749	0	723,249
Exercise of warrant issued in connection with bridge loan	97,500	0	97,500
Exercise of compensation warrants for cash	45,000	0	45,000
Installment loan - proceeds	0	0	41,584
Installment loan - repayments	(11,042)	(10,833)	(41,868)
Bridge loan - related party	0	0	75,000
Convertible notes - related parties	0	0	100,000
Net cash flows provided by financing activities	710,207	2,452,917	7,730,165
Net increase (decrease) in cash	(1,586,513)	989,573	250,363
Cash - beginning of period	1,836,877	325,756	0
Cash - end of period	250,363	1,315,329	250,363
Supplemental disclosures
Interest paid	0	289	517
Taxes paid	0	0	0
Conversion of related party debt to shares and warrants	0	0	127,244
Conversion of related party convertible notes and accrued interest to common shares	0	111,000	111,000
Mineral properties acquired - short-term payments	0	0	1,100,000
Mineral properties acquired - long-term payments, net of discount	0	0	3,576,170
Noncontrolling interest	73,700	0	0
Mineral properties acquired - fair value of common shares issued	1,440,000	0	3,560,000
Convertible notes issued for property and equipment	2,000,000	0	0
Assets acquired for assumed liability	325,205	0	0
Deferred income tax liability	$ 405,000	$ 0	$ 0

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CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $)	Feb. 29, 2012	Aug. 31, 2011
Accumulated depreciation of property and equipment (in dollars)	$ 91,763	$ 42,123
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	46,177,764	39,576,978
Common stock, shares outstanding	46,177,764	39,576,978

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DOCUMENT AND ENTITY INFORMATION	6 Months Ended
	Feb. 29, 2012	Apr. 16, 2012
Entity Registrant Name	Ruby Creek Resources, Inc.
Entity Central Index Key	0001379810
Current Fiscal Year End Date	--08-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	rbyc
Entity Common Stock, Shares Outstanding		47,513,763
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Feb. 29, 2012
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2012

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		6 Months Ended		70 Months Ended
	Feb. 29, 2012	Feb. 28, 2011	Feb. 29, 2012	Feb. 28, 2011	Feb. 29, 2012
EXPENSES
Mineral exploration and operating costs	$ 429,340	$ 342,800	$ 802,802	$ 574,030	$ 2,306,742
Consulting services	237,170	99,873	424,801	192,807	2,047,708
Depreciation	25,233	5,757	48,542	9,020	90,665
Interest and financing fees	157,627	116,356	863,586	256,113	2,439,356
Management services	359,210	119,148	673,660	257,802	2,097,467
General and administrative	427,398	211,102	750,650	436,649	2,573,100
Total expenses	1,635,978	895,037	3,564,042	1,726,422	11,555,038
LOSS FROM OPERATIONS	(1,635,978)	(895,037)	(3,564,042)	(1,726,422)	(11,555,038)
OTHER INCOME (EXPENSE)
Impairment - Mineral Properties	(1,930,682)	0	(1,930,682)	0	(1,930,682)
Impairment - Equiment	(300,000)	0	(300,000)	0	(300,000)
Nonoperating Income (Expense)	(2,230,682)	0	(2,230,682)	0	(2,230,682)
NET LOSS	(3,866,660)	(895,037)	(5,794,724)	(1,726,422)	(13,785,720)
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST	21,500	0	21,500	0	21,500
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$ (3,845,160)	$ (895,037)	$ (5,773,224)	$ (1,726,422)	$ (13,764,220)
NET LOSS PER COMMON SHARE, BASIC AND DILUTED (in dollars per share)	$ (0.09)	$ (0.03)	$ (0.14)	$ (0.06)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED (in shares)	44,017,382	30,115,445	42,037,384	26,744,027

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Convertible Notes - Related Parties

6 Months Ended

Feb. 29, 2012

Convertible Notes - Related Parties [Abstract]

Convertible Notes - Related Parties [Text Block]

NOTE 5 -   Convertible Notes – Related Parties

On November 27, 2009, the Company issued two $50,000, 11% convertible notes for total proceeds of $100,000 to a significant shareholder and special advisor (and now a director) and to another significant shareholder.  These notes were due and payable on November 27, 2010.   In addition, each noteholder received a warrant to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.05 for a term of three years.  The Company calculated an associated beneficial conversion feature and discount of $100,000, which amount was reflected as a discount of the face amount of these debentures on the date of the transaction.  The amount was determined using the relative fair value method.   The Company estimated the fair value of the warrant using the Black-Scholes option pricing model with the following assumptions: an expected life of three years, a risk-free interest rate of 2.57%, and a dividend rate of 0% and an expected volatility of 116%. This discount was accreted to interest expense over the term of the debentures, and was reflected as a non-cash charge over the term of these notes.

On November 27, 2010, the holders of the convertible notes elected to convert these notes, plus an aggregate of $11,000 in interest earned, into 2,220,000 shares of common stock at the conversion price of $0.05 per common share. 

In the year ended August 31, 2011, the 2,000,000 warrants were exercised for proceeds of $100,000.

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Bridge Loan

6 Months Ended

Feb. 29, 2012

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

NOTE 4 - Bridge Loan

On December 22, 2009, the Company received $75,000 in proceeds of a bridge loan transaction (the “Bridge”) from a significant shareholder and advisor (currently a director) (“Holder”).  The loan bears interest at the rate of 12% per annum.  The loan agreement grants the holder the right to convert any portion of the balance plus accrued interest into common shares of the Company at a price of $0.125 per share.  The original January 22, 2010 due date of the Bridge was extended several times by mutual consent, ultimately to March 23, 2010.  In consideration of the loan and these extensions, the Company agreed to additional consideration in the form of units of common shares and additional warrants.  This additional consideration resulted in the issuance of an aggregate of 180,000 common shares and two year warrants to purchase an additional 390,000 common shares at $0.25 per share.  On March 23, 2010, the Company defaulted on the payment of interest and principal on the Bridge.  Upon occurrence of the default, the Holder converted the outstanding balance of the note ($75,000) and accrued interest ($2,244) into 1,544,877 shares of common stock of the Company at the contractual conversion price of $0.05 per share. In addition, as a result of this default, the Company was obligated to issue to the Holder a two year warrant to purchase 1,500,000 common shares at an exercise price of $0.05 per share.  On November 30, 2010, the Holder exercised his conversion rights to the 1,500,000 common share default warrant. The Company received $75,000 and issued 1,500,000 restricted common shares.

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Common Stock and Common Stock Purchase Options

6 Months Ended

Feb. 29, 2012

Stockholders Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 8 -   Common Stock and Common Stock Purchase Options

 In October 2011 the Company commenced an offering of units.  Each unit consists of one common share and one share purchase warrant. Two warrants are required to purchase one common share at a price of $1.50 per share for a period of up to two years. Through February 29, 2012, the Company sold 300,000 units and received proceeds of $240,000.

In addition, during the six month period ended February 29, 2012:

a. 1,164,603 warrants exercisable at $0.05 per share were converted to 1,225,000 restricted common shares on a cashless basis.

b. 1,835,000 private placement warrants were exercised to acquire 967,500 common shares for net proceeds of $328,750.

c. On February 15, 2012, the Company offered the holders of its $1.00 common stock purchase warrants issued in connection with a private placement the right to purchase two common shares for each $1.00 warrant for a limited time. In February, 2012, the holder of 10,000 such warrants exercised, paid $10,000 and received 20,000 common shares. In the period from March 1, 2012 to March 30, 2012, the holders of 611,500 such warrants exercised, paid $611,500 in proceeds and received 1,223,000 common shares. The 1,243,000 shares issued to the warrant holders who accepted this offer had a weighted average fair value of $0.72 per share on the dates of offer as compared to the original per share exercise price of $0.50, or $0.22 per share. This transaction has been treated as a capital transaction and the fair value of $278,000 has been recorded in additional paid in capital. The balance of these unexercised warrants to purchase 8,609,500 common shares at $1.00 per share remain outstanding under their original terms.

d. In connection with the Gold Standard transaction described in Note 3c, on January 7, 2012 the Board of Directors of the Company (i) issued 50,000 common shares to a consultant for assisting in the transaction (the fair value of these shares of $60,000 on their date of issuance was included in general and administrative expenses) and (ii) issued stock options to purchase 65,000 common shares to various individuals at $0.75 per share which vested on grant with a five-year life. These options include a cashless exercise provision. The fair value of these options determined using the Black-Scholes option pricing model using a risk-free interest rate of .52% per annum and a volatility of 105% was $58,000 and is included in stock based compensation. Two officers each received 12,500 and an independent director received 25,000 of these options.

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Other Related Party Transactions

6 Months Ended

Feb. 29, 2012

Other Related Party Transactions Disclosure [Abstract]

Other Related Party Transactions Disclosure [Text Block]

NOTE 6 - Other Related Party Transactions

The former Chief Executive Officer (“CEO”) (see Note 7f ) was indebted to the Company for $23,345 and $1,150 at February 29, 2012 and August 31, 2011, respectively.  At February 29, 2012 and August 31, 2011, $12,000 and $49,580, respectively, was owing to a significant shareholder, director and special advisor for consulting services. At February 29, 2012 and August 31, 2011, the Company was indebted to a member of its board of directors elected on July 15, 2011, for legal fees incurred in the amount of $12,929 and $32,498, respectively, including reimbursed expenses of $429 and $307, respectively. At February 29, 2012, $5,824 was owing to the current CEO and $17,172 to the CFO.

All related party transactions are in the normal course of business and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

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Commitments and Contingencies

6 Months Ended

Feb. 29, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments And Contingencies Disclosure [Text Block]

NOTE 7 – Commitments and Contingencies

A. Litigation

In connection with the agreements described in Note 3a related to the Mkuvia Gold Project, it has come to the Company’s attention that Handeni and Maita have been permitting a third party to continuously conduct prospecting activities and allegedly conveyed certain of the prospecting licenses and joint venture rights acquired as part of the Mkuvia transactions to third parties, at a date subsequent to the effective dates of the initial transaction, in violation of the Company’s ownership of exclusive mineral and mining rights.  Regarding this matter, Handeni has previously disclosed in its Form 10-Q for the quarter ended November 30, 2011 filed with the SEC on January 17, 2012, that it “is currently investigating through local counsel the registration particulars of prospecting licenses numbered 5664/2009 and 5669/2009, which form a part of the current Joint Venture Company project [which refers to the joint venture with Ruby Creek]. This investigation relates to the reported registration of prospecting licenses numbered 5664/2009 and 5669/2009 to a third party without the Company’s (Handeni’s) approval, in unclear circumstances.”  On February 8, 2012 the Company filed a Summons with Notice in the Supreme Court of the State of New York against Handeni (Douglas Lake Minerals, Inc. as the named defendant) for breach of contract, fraud and breach of fiduciary duty in connection with the violation of joint venture agreements. The relief sought was for compensatory and consequential damages in the amount of $10,000,000. On April 2, 2012, the Company further filed a Complaint in the Supreme Court of the State of New York against Handeni (Douglas Lake Minerals, Inc. as the named defendant). In that complaint the Company is seeking damages caused by Handeni for their violation of the parties agreements and fraud. The Company is seeking $17,000,000 in damages, exclusive of interest, costs and legal fees. As a consequence of the foregoing, the Company has not obtained an initial mining license on the Mkuvia property nor received the required environmental study which would have triggered a series of payments. Further, as a result of Handeni’s breaches, the Comapany has not made a $450,000 payment originally due on June 1, 2011 to Handeni pursuant to the May 24, 2010 agreement, among other things.  In the opinion of the Company’s Tanzanian counsel, the Company has good interest in the prospecting licenses (“PL”) free and clear of any liens and encumbrances and under Tanzanian law any dealings relating to the PL’s and the joint venture rights made subsequent to the dates when the Commissioner of the Ministry of Energy and Mining issued the Certificates of Acknowledgment of the joint venture agreements would not be recognized and they would not affect the rights of the Company in the PL’s. Further, counsel advises that there are no provisions under Tanzanian law in relation to mineral rights which would permit the PL’s to be forfeited or otherwise withdrawn in the event of a change of ownership.

On February 23, 2012, Handeni filed a Notice of Claim against the Company in the Supreme Court of British Columbia claiming breaches of the agreements between the parties and seeking (i) payments as stipulated in the preceding paragraph of $450,000, (ii) 20% of certain private placement proceeds received by the Company ($917,100), (iii) consent of the Company to remove the restrictive resale legend affixed to the 4,000,000 restricted common shares of the Company issued as partial consideration for the properties.and (iv) the right to market and sell the property to third parties. These amounts are included in the liabilities discussed in the next paragraph which have been offset in the determination of the impairment.

Management believes that the Company has suffered significant damages and while it is confident of the merits of its position and that the Company will ultimately be successful in its lawsuit, management has provided an impairment of the Mkuvia assets acquired offset by the recorded amount of the corresponding liabilities, to a nominal value of $1 as of February 29, 2012. A charge of $1,930,682 is reflected in the accompanyng statement of operations for the three and six month periods ended Februay 29, 2012. Offsetting the liabilities to Handeni is appropriate and consistent with the position of impairing the assets, since the obligation to make any payments is tied to proper title to the assets purchased.

B. Commitments 

a. Effective June 4, 2010, the Company entered into an Advisory Agreement with Maita (“Advisor”), the original owner of the prospecting licenses of the Mkuvia property Project. The initial term of the agreement is for a three year period. The Advisor or the Company may terminate this Agreement at any time by giving the other party ninety (90) days prior written notice of termination. This Agreement may be renewed for successive one-year periods on mutually acceptable terms. Compensation is comprised of $1,000 for each Director’s meeting the Advisor attends and 300,000 shares of common stock of the Company as follows: 50,000 shares vested upon signing, 75,000 shares issuable on June 4, 2011; 75,000 shares issuable on June 4, 2012 and 100,000 shares on June 4, 2013. In the year ended August 31, 2010, the Company recognized $2,000 in fees paid and $19,500 in stock based compensation, which was the fair market value of the 50,000 shares issued. In the year ended August 31, 2011 the Company incurred $1,000 in fees under this arrangement. As result of matters described in Note 7A, the Company did not make the June 4, 2011 share issuance.

b. The Company entered into an arrangement with a company affiliated with a significant shareholder and current director for the use of a portion of its office space and facilities in New York City for a one year period commencing June 1, 2011 for a gross fee of $36,000. This amount was satisfied by the issuance of 48,000 common shares of the Company valued at $0.75 per share, the fair value at the date of the arrangement.  This fee was recognized as rent expense ratably over the terms of each arrangement.

c. On December 4, 2010, effective July 28, 2010, the Company entered into an employment agreement with a Director of Corporate Communications, Strategic and Technical Advisor with a term of two years, automatically renewable for successive one year terms unless terminated by either party on 60 days advance notice. The contractual annual salary is $93,600 plus bonuses at the discretion of the Board of Directors. The employee is entitled to 200,000 common shares of the Company, 100,000 vesting on commencement and 100,000 vesting six months thereafter. These shares had a fair market value of $100,000 on the date of grant. In addition, the employee was granted non-qualified stock options to purchase 300,000 shares of common stock, which vest at the rate of 37,500 options per quarter from the effective date. The options granted are exercisable at $0.60 per share and have a five year life. The Company estimated the fair value of the stock options to be $132,522 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of five years, risk-free interest rate of 0.61%, a dividend and forfeiture rate of 0% and a volatility of 143.7%.  The amount is being amortized ratably over the initial expected two year term of service. Results of operation include stock based compensation in the amount of $29,065 and $58,130 for the three months and six months ended February 29, 2012, respectively for these arrangements.

d. On December 16, 2010, effective on September 21, 2010, the Company entered into an Advisory Agreement with a Consultant to advise and provide assistance to Company management on matters relating to mining projects and properties in Tanzania and in surrounding regions. The initial term is for two years and may be renewed for successive one-year periods thirty days prior to any expiration. Compensation under the agreement is comprised of (i) $1,000 for any Director's meeting the Advisor is attends at management's request and (ii) 100,000 shares of common stock of the Company issued on the effective date, 100,000 shares on June 1, 2011, 100,000 shares on January 1, 2012 and 100,000 shares on October 1, 2012. The initial 100,000 shares were valued at the closing market price on the OTC BB on their grant date of $0.70 per share. The June 1, 2011 100,000 shares were valued at the closing market price on the OTC BB on that date of $1.03 per share. The January 1, 2012 100,000 shares were valued at the closing market price on the OTC BB on that date of $1.30 per share. For the three and six month periods ended February 29, 2012, $44,143 and $87,746 were included in amortization expense and a balance of $101,112 was included in deferred compensation at February 29, 2012.

e. On April 29, 2011, effective May 1, 2011, the Company entered into an executive agreement with a current member of its Board of Directors (“Director”) for advisory services with respect to strategic, financial and regulatory issues. The term of the agreement is two years, subject to termination for cause. The contractual base compensation is $6,000 per month, increasing to $9,000 per month immediately after the Company reports two consecutive quarters of positive cash flow from operations and further increasing to $12,000 per month immediately after the Company reports two consecutive quarters of positive net income.  Bonuses are payable at the discretion of the Board of Directors. In addition, 200,000 shares of common stock are issuable upon the attainment of certain gold production levels as defined in the agreement and upon the attainment of the aforementioned operating results, up to an aggregate of 1,000,000 shares. Under the agreement, the director was granted non-qualified stock options to purchase 1,375,000 shares of common stock – 375,000 vesting on execution, and 250,000 vesting at the end of each successive six month period commencing on the effective date. The options include a cashless exercise provision. The options granted have an exercise price of $0.50 per share and a five year life.  The Company estimated the fair value of the stock options to be $1,118,334 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of three and one half years, risk-free interest rate of 1.01%, a dividend and forfeiture rate of 0% and a volatility of 116.5%.  The $305,276 value of the options vesting on grant was expensed on grant and the remainder is being amortized ratably over the two year vesting term. Results of operation include stock based compensation in the amount of $101,632 and $203,624 for the three and six month periods ended February 29, 2012.

f. On April 29, 2011, effective May 1, 2011, the Company entered into an executive agreement with the now former CEO. The term of the agreement was for two years. The contractual base compensation was $14,000 per month, with future increases based upon financial results. Under the agreement, the director was granted non-qualified stock options to purchase 1,375,000 shares of common stock - 375,000 vesting and exercisable on execution, and 250,000 becoming exercisable at the end of each successive six month period commencing on the effective date. The options include a cashless exercise provision. The options granted were exercisable at $0.50 per share and had a five year life. The Company estimated the fair value of the stock options to be $1,118,334 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of three and one half years, risk-free interest rate of 1.01%, a dividend and forfeiture rate of 0% and a volatility of 116.5%. The $305,276 value of the options vesting on grant was expensed, and the remainder was being amortized ratably over the two year vesting term. Results of operation include stock based compensation in the amount of $101,632 and $169,387 for the three month and six month periods ended February 29, 2012. On Janaury 31, 2012, the Company and the former CEO entered into a consulting agreement expiring May 31, 2012, which terminated and superceded the executive agreement in its entirety. Under the consulting agreement the former CEO will receive $14,000 per month; retained 625,000 of his original options which became fully vested and are exercisable through May 1, 2014; and was granted additional options to purchase 250,000 common shares exercisable for three years at $0.75 per share. The Company estimated the fair value of the 250,000 stock options to be $120,773 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of two years, risk-free interest rate of 1.01%, a dividend and forfeiture rate of 0% and a volatility of 81.7%. These options include a cashless exercise provision and vest in the event that the agreement is not terminated for Cause, as defined in the agreement, prior to the end of the term of the consulting ageement. Duties include assistance with respect to overall strategy and strategic advice to the Board of Directors and officers in its relations in Tanzania and transaction assistance to the new CEO, only as directed in writing by the Board. Further, the former CEO is required to complete other corporate actions as stipulated in the agreement. No stock based compensation expense was required with respect to modification of the original options since the fair value of the modified options was less than the original options.

g. On June 27, 2011, effective on February 1, 2011, the Company entered into an agreement with a consultant to continue to assist management on a part time basis in the role of interim chief financial officer (“Consultant”) through May 31, 2012. Compensation for these services is at the rate of $4,800 per month based upon 40 hours per month plus additional compensation at the rate of $120 per hour in excess of 40 hours. The Consultant shall have the right to receive compensation in shares valued at $0.75 per share, at his option. This hourly rate shall increase to $200 per hour immediately after the Company reports two consecutive quarters of positive cash flow from operations.  Under the agreement, the Consultant was granted non-qualified stock options to purchase 150,000 shares of common stock – 60,000 vesting on execution, and 7,500 vesting each month commencing on June 1, 2011 for the remaining term of the agreement. The options granted are exercisable at $0.75 per share and have a five year life. The options include a cashless exercise provision. The Company estimated the fair value of the stock options to be $114,889 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of three and one half years, risk-free interest rate of 1.04%, a dividend and forfeiture rate of 0% and a volatility of 116.5%.  The $46,002 value of the options vesting on grant was expensed, and the remainder is being amortized ratably over the one year term. Results of operation include stock based compensation in the amount of 17,222 and $34,443 related to these options for the three months and six months ended February 29, 2012. For the three months and six months ended February 29, 2012, in accordance with the terms of his agreement the Consultant elected to receive payment for services rendered in shares of common stock of the Company in the amount of $44,781 and $58,997, respectively, which includes $9,999 and $18,685 representing the excess of the fair value of the shares issued over the issuance price, respectively.

h. Effective on June 6, 2011 the Company entered into a two year employment agreement with a Controller. Base compensation is payable at the rate of $100,000 per annum, and $125,000 per annum after the initial 90 day period for the remainder of the agreement. The Controller was granted non-qualified common stock purchase options to purchase 200,000 shares of the Company’s common stock at $0.75 per share. These options have a five-year life and include a cashless exercise feature. The options vest with respect to 25,000 shares on September 6, 2011 and 25,000 at the end of each three months thereafter commencing on December 6, 2011 until fully vested. The Company estimated the fair value of the stock options to be $159,048 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of three and one half years, risk-free interest rate of 0.74%, a dividend and forfeiture rate of 0% and a volatility of 112.4%.  Further, on September 6, 2011, after the expiration of the initial 90 day period, the Company was obligated to grant the Controller 25,000 shares of restricted common stock of the Company, of which 10,000 vested on the grant date and 15,000 on December 6, 2011. The Controller is also entitled (i) to participate in all Company sponsored benefit plans (ii) to an annual bonus at the discretion of the Board of Directors; and (iii) a salary increase once the Company attains positive operating cash flow. Results of operation include stock based compensation in the amount of $23,162 and $46,324 for the three and six months ended February 29, 2012. Effective on January 31, 2012, the Board of Directors elected the Controller as CEO. An agreement is currently being negotiated.

i. On July 15, 2011, the Company entered into an independent Director Agreement with a new director for an initial term expiring July 15, 2013. The Company is obligated to pay a $20,000 annual retainer and grant 200,000 non-qualified stock options to purchase 200,000 shares of common stock exercisable at $0.50 per share and with a five year life. The options include a cashless exercise provision. These options vest at the rate of 25,000 options per quarter beginning on July 15, 2011. The Company estimated the fair value of the stock options to be $179,024 at the date of grant, using the Black-Scholes option pricing model with the following assumptions: expected life of three and one half years, risk-free interest rate of 1.01%, a dividend and forfeiture rate of 0% and a volatility of 113%.  The fair value of the options is being amortized ratably over the two year vesting term. Results of operation include stock based compensation in the amount of $22,378 and $44,756 for the three and six months ended February 29, 2012.

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Subsequent Events

6 Months Ended

Feb. 29, 2012

Subsequent Events [Abstract]

Subsequent Events [Text Block]

NOTE 9 -   Subsequent Events

a. Subsequent to February 29, 2012, the Company received proceeds of $57,500 and issued 115,000 shares of common stock on the exercise of 330,000 $.50 warrants issued in a private placement. These proceeds were received from related parties (Director $50,000; CFO $7,500).

The Company evaluated subsequent events through the financial statement filing date.

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Consolidated Statement of Equity (Deficit) (USD $)	Common Stock [Member]	Additional Paid-In Capital [Member]	Deferred Compensation Expense [Member]	Noncontrolling Interest [Member]	Deficit Accumulated During Exploration Stage [Member]	Comprehensive Income (Loss) From Foreign Exchange Translation [Member]	Total
Balance at May. 02, 2006	$ 0	$ 0	$ 0		$ 0	$ 0	$ 0
Balance (in shares) at May. 02, 2006	0
August 31, 2006 - issuance of common shares for cash at $0.01 per share	4,500	40,500	0	0	0	0	45,000
August 31, 2006 - issuance of common shares for cash at $0.01 per share (in shares)	4,500,000
August 31, 2006 - issuance of common shares for cash at $0.05 per share	2,970	145,530	0	0	0	0	148,500
August 31, 2006 - issuance of common shares for cash at $0.05 per share (in shares)	2,970,000
August 31, 2006 - issuance of common shares for cash at $0.10 per share	867	80,833	0	0	0	0	81,700
August 31, 2006 - issuance of common shares for cash at $0.10 per share (in shares)	867,000
August 31, 2006 - donated rent and management services	0	3,000	0	0	0	0	3,000
Net loss	0	0	0	0	(19,696)	0	(19,696)
Balance at Aug. 31, 2006	8,337	269,863	0	0	(19,696)	0	258,504
Balance (in shares) at Aug. 31, 2006	8,337,000
September 5, 2006 - cash received for stock subscription	0	5,000	0	0	0	0	5,000
Net loss	0	0	0	0	(127,497)	0	(127,497)
Balance at Aug. 31, 2007	8,337	274,863	0	0	(147,193)	0	136,007
Balance (in shares) at Aug. 31, 2007	8,337,000
Net loss					(96,974)	0	(96,974)
Balance at Aug. 31, 2008	8,337	274,863	0	0	(244,167)	0	39,033
Balance (in shares) at Aug. 31, 2008	8,337,000
July 23. 2009 - issuance of common shares for cash at $0.05 per share	400	14,600	0	0	0	0	15,000
July 23. 2009 - issuance of common shares for cash at $0.05 per share (in shares)	400,000
Stock based compensation	0	24,547	0	0	0	0	24,547
Net loss	0	0	0	0	(207,877)	0	(207,877)
Balance at Aug. 31, 2009	8,737	314,010	0	0	(452,044)	0	(129,297)
Balance (in shares) at Aug. 31, 2009	8,737,000
November 6, 2009 - issuance of common shares for related party debt at $0.05 per share	1,000	49,000	0	0	0	0	50,000
November 6, 2009 - issuance of common shares for related party debt at $0.05 per share (in shares)	1,000,000
December 24, 2009 to February 19, 2010 - issuance of common shares for cash at $0.125 per share	1,600	198,400	0	0	0	0	200,000
December 24, 2009 to February 19, 2010 - issuance of common shares for cash at $0.125 per share (in shares)	1,600,000
February 1, 2010 - issuance of common shares for services at $0.20 per share	110	21,890	0	0	0	0	22,000
February 1, 2010 - issuance of common shares for services at $0.20 per share (in shares)	110,000
December 22, 2009 to January 22, 2010 - issuance of common shares and warrants for finance fee	180	61,120	0	0	0	0	61,300
December 22, 2009 to January 22, 2010 - issuance of common shares and warrants for finance fee (in shares)	180,000
Beneficial conversion feature of convertible notes	0	100,000	0	0	0	0	100,000
March 3, 2010 - issuance of common shares for finance fee @ $0.25 per share	10	2,490	0	0	0	0	2,500
March 3, 2010 - issuance of common shares for finance fee @ $0.25 per share (in shares)	10,000
April 3, 2010 to August 26, 2010 - issuance of common shares for cash at $0.25 per share	5,356	1,333,644	0	0	0	0	1,339,000
April 3, 2010 to August 26, 2010 - issuance of common shares for cash at $0.25 per share (in shares)	5,356,000
March 23, 2010 - issuance of common shares for bridge loan default conversion at $0.05 per share	1,545	75,699	0	0	0	0	77,244
March 23, 2010 - issuance of common shares for bridge loan default conversion at $0.05 per share (in shares)	1,544,877
March 23, 2010 - fair value of warrants on default of bridge loan	0	787,369	0	0	0	0	787,369
June 4, 2010 - issuance of common stock for services at $0.35 per share	50	19,450	0	0	0	0	19,500
June 4, 2010 - issuance of common stock for services at $0.35 per share (in shares)	50,000
June 30, 2010 - Issuance of common stock for services at $0.25 per share	9	2,143	0	0	0	0	2,152
June 30, 2010 - Issuance of common stock for services at $0.25 per share (in shares)	8,608
July 26, 2010 - Issuance of common stock for services at $0.25 per share	30	7,470	0	0	0	0	7,500
July 26, 2010 - Issuance of common stock for services at $0.25 per share (in shares)	30,000
August 16, 2010 - Issuance of common stock on exercise of options	101	3,445	0	0	0	0	3,546
August 16, 2010 - Issuance of common stock on exercise of options (in shares)	101,427
August 27, 2010 - Issuance of common stock for mineral property	4,000	2,116,000	0	0	0	0	2,120,000
August 27, 2010 - Issuance of common stock for mineral property (in shares)	4,000,000
December 22, 2009 to March 23, 2010 - common shares issued for interest on bridge loan @ $0.05 per share	0		0	0	0		0
Stock based compensation	0	628,293	0	0	0	0	628,293
Comprehensive income - foreign exchange translation	0	0	0		0	890	890
Net loss	0	0	0	0	(2,544,627)	0	(2,544,627)
Balance at Aug. 31, 2010	22,728	5,720,423	0	0	(2,996,671)	890	2,747,370
Balance (in shares) at Aug. 31, 2010	22,727,912
October 18, 2010 to August 24, 2011 - issuance of common shares for cash at $0.50 per share	9,231	4,606,269	0	0	0	0	4,615,500
October 18, 2010 to August 24, 2011 - issuance of common shares for cash at $0.50 per share (in shares)	9,231,000
Exercises of warrants issued in private placements for cash	595	206,905	0	0	0	0	207,500
Exercises of warrants issued in private placements for cash (in shares)	595,000
Issuance of common stock for services	292	143,706	0	0	0	0	143,998
Issuance of common stock for services (in shares)	291,755
Issuance of common stock in connection with employment agreement	200	99,800	(83,333)		0	0	16,667
Issuance of common stock in connection with employment agreement (in shares)	200,000
Issuance of common stock in connection with consulting agreement	200	172,800	(173,000)		0	0	0
Issuance of common stock in connection with consulting agreement (in shares)	200,000
Cashless exercise of warrants issued in consulting arrangements	571	(571)	0	0	0	0	0
Cashless exercise of warrants issued in consulting arrangements (in shares)	571,311
Convertible notes - related parties and accrued interest converted at $0.05 per share	2,220	108,780	0	0	0	0	111,000
Convertible notes - related parties and accrued interest converted at $0.05 per share (in shares)	2,220,000
Exercise of warrant issued in connection with bridge loan default	1,500	73,500	0	0	0	0	75,000
Exercise of warrant issued in connection with bridge loan default (in shares)	1,500,000
Exercise of warrants issued in connection 11% convertible debentures	2,000	98,000	0	0	0	0	100,000
Exercise of warrants issued in connection 11% convertible debentures (in shares)	2,000,000
Exercise of warrants issued in consulting arrangements	40	1,960	0	0	0	0	2,000
Exercise of warrants issued in consulting arrangements (in shares)	40,000
Amortization of deferred compensation expense	0	0	151,642	0	0	0	151,642
Stock based compensation	0	1,165,561	0	0	0	0	1,165,561
Comprehensive income - foreign exchange translation	0	0	0	0	0	28,634	28,634
Net loss	0	0	0		(4,994,325)	0	(4,994,325)
Balance at Aug. 31, 2011	39,577	12,397,133	(104,691)	0	(7,990,996)	29,524	4,370,547
Balance (in shares) at Aug. 31, 2011	39,576,978
Beneficial conversion feature of convertible notes	0	810,400	0	0	0	0	810,400
Exercises of warrants issued in private placements for cash	987	337,763	0	0	0	0	338,750
Exercises of warrants issued in private placements for cash (in shares)	987,500
Issuance of common stock for services	271	294,088	(130,000)	0	0	0	164,359
Issuance of common stock for services (in shares)	270,682			0
Cashless exercise of warrants issued in consulting arrangements	1,165	(1,165)	0	0	0	0	0
Cashless exercise of warrants issued in consulting arrangements (in shares)	1,164,603
Exercise of warrant issued in connection with bridge loan default	390	97,110	0	0	0	0	97,500
Exercise of warrant issued in connection with bridge loan default (in shares)	390,000
October 6, 2011 to November 16, 2011 - issuance of common shares for cash at $0.75 per share	320	239,680	0	0	0	0	240,000
October 6, 2011 to November 16, 2011 - issuance of common shares for cash at $0.75 per share (in shares)	320,000
Shares issued on acquisition of Gold Standard	1,200	1,438,800	0	0	0	0	1,440,000
Shares issued on acquisition of Gold Standard (in shares)	1,200,000
Issuance of common share on exercise of compensation warrants for cash	900	44,100	0	0	0	0	45,000
Issuance of common share on exercise of compensation warrants for cash (in shares)	900,000
Issuance of common stock for conversion of Mining Equipment Note, net of fair value adjustment (in shares)	1,368,000
Issuance of common stock for conversion of Mining Equipment Note, net of fair value adjustment	1,368	1,024,632	0	0	0	0	1,026,000
Amortization of deferred compensation expense	0	0	112,746	0	0	0	112,746
Stock based compensation	0	623,260	0	0	0	0	623,260
Net loss attibutable to noncontrolling interest							(21,500)
Comprehensive income - foreign exchange translation	0	0	0	0	0	10,679	10,679
Net loss attributable to noncontrolling interest - six months ended February 29, 2012	0	0	0	(21,500)	0	0	(21,500)
Net loss	0	0	0	0	(5,773,224)	0	(5,794,724)
Balance at Feb. 29, 2012	$ 46,178	$ 17,232,101	$ (121,945)	$ 52,200	$ (13,764,220)	$ 40,203	$ 3,432,317
Balance (in shares) at Feb. 29, 2012	46,177,764

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Mineral Properties

6 Months Ended

Feb. 29, 2012

Mineral Properties Disclosures [Abstract]

Mineral Properties Disclosures [Text Block]

NOTE 3 - Mineral Properties

Mineral property acquisition costs, advance payments and deposits consist of the following as of February 29, 2012 and August 31, 2011:

	February 29, 2012			August 31, 2011
Mkuvia Gold Project – mineral and mining rights	$	6,796,170		$	6,796,170
Mkuvia Gold Project – mineral and mining rights – provision for  impairment		(6,796,169	)		-
Kapinga Property - advance payment and deposit		102,128			60,000
Gold Standard –mineral and mining rights		2,044,205			250,000
Other properties - advance payments and deposits		231,035			35,630
	$	2,377,369		$	7,141,800

(a) The Company entered into the following transactions with respect to the Mkuvia Project:

(i) On November 7, 2009, a Purchase Agreement (the “Agreement”) with Handeni Gold Inc. (“Handeni”), formerly Douglas Lake Minerals, Inc., for the right to acquire and develop a 70% interest in 125 square kilometeres of the Handeni’s Mkuvia property;

(ii) On March 7, 2010, a Tanzanian joint venture company ("RCRTz") was formed for the ownership and management of the 125 square kilometer aforementioned property. A second Joint Venture Agreement (the "JVA") was entered into by the parties with respect to an additional 255 square kilometers.The JVA provides that Maita's 5% interest in the entire project shall vest when RCRTz obtains a mining license over a portion of the area covered by the prospecting licenses.

(iii) On May 24, 2010 (effective on June 16, 2010), the Company acquired the exclusive mineral and mining rights to the additional 255 square kilometers of the Mkuvia property from Handeni.

The original aggegate purchase price of $9,000,000 was recorded as the sum of cash paid, the present value of future payments and the fair value of restricted shares of Company common stock issued in the amount of $6,796,170. The series of future payments in the gross amount of $4,700,000 were recorded at their aggregate fair value of $3,576,170 determined utilizing a discount rate of 12% per annum which resulted in a discount to the purchase price of $1,123,830. Four million restricted shares of Company common stock issued with an agreed upon contractual value of $3,200,000 had a fair value of $2,120,000 which resulted in a further discount of the purchase price of $1,080,000. With respect to the future paments, the Company has been recording accretion reflected as interest expense in its results of operations. Interest expense for the three and six month periods ended February 29, 2012 and February 28, 2011 include amortization of $90,359, $183,455, $60,658 and $119,533, respectively, of this debt discount.

Reference is made to Note 7A – Litigation, regarding the litigation commenced by the Company against Handeni related to the Companies various claims for breaches of contract and fraud. As discussed more fully in Note 7A, the Company has impaired the net value of the Mkuvia Project in the amount of $1,930,862, which represents the recorded asset value reduced by the accreted value of future payments as of February 29, 2012. While management believes that it will ultimately be successful in its lawsuit it believes that recording the impairment is necessary given the damages suffered by the Company as a result of Handeni’s breaches and fraud. The carrying value of the Mukuvia Project has been written down to $1 and the impairment loss is net of the liabilities also written off consistent with the position of impairing the asset, since the obligation to make any payments is tied to receiving title to the assets purchased.

(b)     On September 9, 2010, as amended effective on February 14, 2011 and September 9, 2011, the Company signed an agreement with Carlos JK Kapinga (“CJKK”, the property rights owner), whereby the Company was granted the exclusive right to acquire the mineral and mining rights to the 350 sq km Kapinga property. On August 23, 2011 the transfer of 100% ownership of one of the prospecting license from CJKK to Ruby Creek Gold (Tanzania) Limited was recorded with the Commissioner For Minerals of the Ministry of Energy and Minerals as part of the foregoing transaction.

The aforementioned arrangement includes the following terms and conditions:

· The purchase price is $155,000 plus 75,000 shares of the Company’s common stock, against which payments approximating $100,000 made through February 29, 2012 plus any subsequent payments will be applied. Any unpaid balance and the share issuance will be completed upon satisfactory transfer of the remaining prospecting licenses (three prospecting licenses in total) deemed necessary to transfer 100% ownership of all property rights to the Company;

· The Kapinga mineral and mining rights cover the 350 square kilometer Kapinga property; and

· Within 30 days of the  issuance of the first mining license on the Kapinga properties, an additional payment of $100,000 and 75,000 shares of common stock of the Company plus within six months of that date a final payment of $100,000 in cash or common stock of the Company valued at $100,000, at the Company’s option.

All of the Company’s properties are located in the Liwale and Nachingwea Districts, Lindi Region of the United Republic of Tanzania.

(c)    Effective January 12, 2011,   the Company entered into transactions with Gold Standard Ltd. (“GSL”) and Gold Standard Tanzania Ltd, (“GSTL”).  The GSL transaction was for the purchase of a 95% share (the “Shares”) of GSTL whose assets include a 10 year, 10 square kilometer mining license issued in September 2010, two Prospecting License Joint Ventures of 39 and 89 square kilometers, a Regional Environmental Report on the combined 128 square kilometer property and an established mining camp. The property is immediately adjacent to and on the west-northwest border of the Company’s Gold Plateau Project, specifically the Mkuvia 1 property acquired in November 2009. The GSTL transaction was for the purchase of mining equipment (the “Equipment”).

On July 18, 2011, as amended and closed on November 29, 2011, the Company, GSTL, GSL and Robert Moriarty (with respect to representations and warranties and cooperation only) entered into a Purchase Agreement (the “APA”) which replaced in their entirety the agreements dated January 12, 2011 referred to in the preceding paragraph. Pursuant to the APA, the Company acquired the identical assets and assumed the identical liabilities for an aggregate purchase price of $3,540,000 plus assumed liabilities.  The APA consideration consisted of:

· $100,000;

· 1,200,000 shares of the restricted common stock of the Company with a fair value of $1.20 per share;

· Issuance of a $1,026,000 Convertible Mining Equipment Note; and (the “Mining Equipment Note”); and

· Issuance of a $974,000 Convertible Shares Note (the “Share Note”).

The principal balances of the Share Note and Mining Equipment Notes are payable in three equal tranches each aggregating $666,667 six, twelve and eighteen months after closing, plus accrued interest. Each note bears interest at 8% per annum on the declining balance. The Company may elect to pay the interest in cash or in common shares of the Company.  For this purpose common shares will be valued at the volume average weighted price per share as defined in the APA on the payment due date. Until paid in full, the holder may elect to receive payment of any portion of interest and/or principal in restricted common shares of the Company with a conversion price of $0.75 per share with respect to the Mining Equipment Note and accrued interest and $1.00 per share with respect to the Share Note and accrued interest. The unpaid balance of the Mining Equipment Note and accrued interest is convertible at the holder’s option at any time. Also at the holder’s option, $324,667 plus accrued interest of the Share Note is convertible on inception to the day prior to the due date of the first payment (May 26, 2012), $324,667 plus accrued interest is convertible between May 26, 2012 and the day prior to the due date of the second payment (November 26, 2012) and any remaining principal plus accrued interest is convertible between November 26, 2012 and maturity. In each case the conversion amount may be reduced by amounts that can be offset by the Company against the Share Note per the indemnification and hold harmless obligations of GSL and Robert Moriarty per terms of the APA.

On the closing date:

i. The intrinsic value of the conversion feature of the Equipment Note of  $615,600 has been reflected as a discount of the Equipment Note and as an addition to additional paid-in capital, resulting in an effective interest rate of 31.8% on the convertible note;

ii. The intrinsic value of the conversion feature of the Share Note of  $194,800 has been reflected as a discount of the Share Note and as an addition to additional paid-in capital resulting in an effective interest rate of 31.8% on the convertible note;

iii. The net liability assumed in the transaction of $395,000, which is payable in scheduled non-interest bearing future payments, was recorded at its present value using a discount rate of 8% per annum. The resulting discount of $69,795 was recorded as a reduction of assets acquired.

iv. The mineral property was grossed up by an estimated Tanzanian deferred tax liability in the amount of $405,000, resulting from the excess of book value over tax value of mineral and mining rights of GST.

The Company recorded the allocation of the purchase price of the assets acquired as follows:

Mineral properties	$	2,044,205
Mining and exploration equipment		2,426,000
Deferred income taxes		(405,000	)
	$	4,065,205

The Company recorded the allocation of the debt assumed as follows:

Mineral properties $ 325,205

Effective on November 29, 2011, GSL elected to convert the Equipment Note to shares of the Company. The Company issued 1,368,000 of its common shares and recorded $615,600 as non-cash accretion interest expense in its results of operations for the six months ended February 29, 2012.

On April 6, 2011 the Company and Maita, the original owner of the mining license and other rights to be acquired in the GSL transaction, entered into a settlement agreement pursuant to which the Company satisfied certain GSL obligations to Maita. The Company paid $200,000 on execution of the settlement agreement, which was applied to the $595,000 in obligations assumed in the aforementioned GSTL transaction. In consideration of this payment, the Company assumed certain of Maita’s security interests in the GSL assets that existed at that time, Maita withdrew a joint venture termination notice that he had caused to be issued to GSL, delivered the mining license to counsel to be held in escrow and to be delivered to the Company upon closing the GSL transaction and agreed to cooperate in the physical transfer of certain GSL and GSTL assets physically in his possession. As a result of the consummation of the GSL transaction on November 29, 2011, the mining license was released to the Company.

(d)    The Company entered into transactions to acquire six additional properties with corresponding prospecting licenses or prospecting license applications pending. The purchase price of these properties aggregated $270,000, of which approximately $215,000 was paid as of February 29, 2012.  The balance of the purchase price of each transaction becomes due and payable upon the transfer of each prospecting license to the Company. These payments were for the acquisition of the Keigi property and corresponding prospecting license; the Tundura North property and the Tundura South Property and corresponding prospecting licenses.  The balance remaining due on these properties of $65,000 will be paid as the related prospecting licenses are issued in the Company’s name.