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 granted 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.

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statments

(An Exploration Stage Company)

May 31, 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 in excess of the face value of $100,000, which amount was reflected as reduction to $0 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 accrued interest,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 and the Company received proceeds of $100,000.

NOTE 6 - Other Related Party Transactions

The Company was indebted to the former Chief Executive Officer (“CEO”) (see Note 7B-f. ) and a director in the amount of $6,070 at May 31, 2012 and was due $1,150 at August 31, 2011. At May 31, 2012 and August 31, 2011, $30,000 and $49,580, respectively, was owing to a significant shareholder, director and special advisor for consulting services. At May 31, 2012 and August 31, 2011, the Company was indebted to a member of its board of directors elected on July 15, 2011, for director and legal fees (and a nominal amount of unreimbursed buisness expenses) incurred in the amount of $22,568 and $25,759, respectively. At May 31, 2012, $3,400 was owing 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.

NOTE 7 – Commitments and Contingencies

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 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. On May 21, 2012, Handeni filed an Answer and Counter claim in New York, as well as a request for the production of documents and a notice of depostion. On June 11, 2012 the Company filed its repsonse and objections and replies to counterclaims and on June 19, 2012 a first set of interrogatories to Handeni; and has produced documents in response to Handeni’s request. The Company is now 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 that would have triggered a series of payments to Handeni. Further, as a result of Handeni’s breaches, the Company has not made a $450,000 payment originally due on June 1, 2011 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.

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statments

(An Exploration Stage Company)

May 31, 2012

(Unaudited)

NOTE 7 – Commitments and Contingencies, continued

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. The Company has filed a Notice of Application with the Supreme Court of British Columbia to dismiss this matter in this court over jusidictional issues. A hearing has been scheduled on this matter for November 13, 2012.

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 nine month period ended May 31, 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 securing proper title to the assets purchased.

B. Commitments 

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statments

(An Exploration Stage Company)

May 31, 2012

(Unaudited)

NOTE 7 – Commitments and Contingencies, continued

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statments

(An Exploration Stage Company)

May 31, 2012

(Unaudited)

NOTE 7 – Commitments and Contingencies, continued

Ruby Creek Resources, Inc.

Notes to Consolidated Financial Statments

(An Exploration Stage Company)

May 31, 2012

(Unaudited)

NOTE 8 -   Common Stock and Common Stock Purchase Options

In the nine month period ended May 31, 2012 the Company concluded the following transactions:

NOTE 9 -   Subsequent Events

Subsequent to May 31, 2012:

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

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 and nine month periods ended May 31, 2012 should be read in conjunction with our unaudited interim financial statements and related notes for the three month and nine month periods ended May 31, 2012 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, the Company’s ability to raise additional capital which it requires both to continue its present and limited operations and to continue with the plan of operations below.

Plan of Operations

In the event that the Company is able to raise additional capital, of which there can be no assurance, 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. On November 29, 2011, we own our first mining license, which allows us to begin commercial gold mining operations. Reference is made to Note 7A – Litigation, regarding litigation commenced by the Company related to the Mkuvia properties.

Due to a lack of available capital, we scaled back our operations and employees during the three months ended May 31, 2012 and are currently preserving the mining assets, equipment and rights we possess until such time the Company is able to raise additional capital, of which there can be no assurance. 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 current and future payments, 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 continued exploration, and commencement of exploration and mining operations on the Gold Standard property. Further, there are other potential exploration properties currently under review.

In the event we are able to raise additional capital, 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 would file for additional mining licenses and our production team can assess what equipment and support structures are necessary to maximize production.

Liquidity and Financial Condition

At May 31, 2012, we had cash balances of $47,000 and a working capital deficit of $931,000, 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 this litigation, certain payments to Handeni have ceased. Substantial amounts of the remaining obligations, principally related to the Gold Standard transaction, 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:

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. As disclosed in Note 3c, we have not made the payment due on May 26, 2012 related to the Gold Standard acquisition and are currently in discussions for the satisfaction of this payment with the seller.

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 nine months ended May 31, 2012 and for the subsequent period through April 16, 2012, we received additional funding as follows:

In the period from June 1, 2012 through July 16, 2012:

The following common stock purchase options and warrants were outstanding as of May 31, 2012 with various expiration dates over the next five-year period:

If all of the warrants and options were exercised, we could receive an additional $10,472,500 in proceeds, excluding proceeds of $1,962,500 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 at the time.`.

Need for Future Financings

As set forth above, the Company’s current and future operations are dependent on raising additional capital. There can be no assurance that the Company will be able to raise additional capital, or, that it will be available on terms acceptable to the Company. In the absence of additional financing, the Company will not be able to continue and even our current limited operations will cease. We conducted test mining operations in three month period ended May 31, 2012 under the initial mining license acquired in the Gold Standard acquisition. A portion of the funds we are currently seeking would be for working capital and to purchase additional mining equipment that is required to commence commercial operations. In the three months ended May 31, 2012 and continuing through the date of this filing, we curtailed operating expenses and all mining activities while we pursue these fund raising activities.

While there is no assurance of this, we believe that the nature of the deposit at the Gold Plateau will lends itself to production of gold with economical concentrations, with an additional level of of investment approximating $1,000,000.

Results of Operations for the three months and nine months ended May 31, 2012.

Mining Exploration and Operating Costs

During the three months and nine months ended May 31, 2012, mining, exploration and operating costs were $698,841 and $1,498,643 respectively, as compared to $386,166 and $960,196 in the comparable periods of the preceding year. This is reflective of our activities following the acquisition of the mining rights to the Gold Standard property as well as activities to advance our progress towards commencing production, including test mining activities. Although we have been able to reduce security costs by $127,576 and subcontracting costs by $46,073 in the nine months ended May 31, 2012 as compared to the comparable period of the preceding year, the current nine month period includes $394,573 in repairs and maintenance costs for our equipment to bring it to operational levels.

In the three months ended May 31, 2012, our test mining produced approximately 14 ounces of gold and for which we received $19,000 in proceeds. These proceeds have been accounted for as a reduction of Mining exploration and operating costs.

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 more efficiently perform our exploration and mining activities we moved most of our living quarters, cooking and lavatory facilities and other support functions to the Gold Standard mining site.

Consulting Services

During the three months and nine months ended May 31, 2012, we incurred $164,957 and $589,758 respectively, in consulting costs as compared to $436,007 and $628,814 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, $144,964 and $501,232 was satisfied through stock based compensation during the three months and nine months ended May 31, 2012, respectively. During three months and six months ended May 31, 2012 of the total amount we incurred, $390,564 and $498,919 was satisfied through stock based compensation, respectively. 

Interest and Financing Fees

During the three months and nine months ended May 31, 2012 , we incurred approximately $66,823 and $930,409, respectively, in interest and financing fees as compared to $124,265 and $380,378 in the comparable periods of the preceding year. During the nine months ended May 31, 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 $275,753 were non-cash charges for the accretion of debt discount related to the amounts due Handeni and Gold Standard and accrued interest of $39,056 on the Gold Standard Share Note.

Management Services

During three months and nine months ended May 31, 2012, we incurred $193,740 and $867,400 respectively, in management services compared to $576,345 and $834,147 in the comparable periods of the preceding year. Of those amounts approximately $78,000 and $477,000, respectively, was paid in the form of stock based compensation for the three and nine month periods end May 31, 2012. Of the total amount incurred during the three months and nine month period ended May 31, 2011, approximately $458,000 and $542,000 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. 

General and Administrative, Professional Fees, and Shareholder Relations

During the three months and nine months ended May 31, 2012, we incurred approximately $474,794 and $1,225,444, respectively, in General and Administrative, Professional Fees, and Shareholder Relations compared to $228,755 and $665,405 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. In addition, the three months ended May 31, 2012 included the writeoff of $125,000 financing costs and other deposits.

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, in the three months ended February 29, 2012, the Company provided an impairment provision of $1,931,000, which was equal to the carrying value as of that date of the Mkuvia Properties ($6,796,000) acquired from Handeni, reduced by recorded liabilites to Handeni ($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. The nine months ended May 31, 2012 also includes a $300,000 provision for the impairment of equipment.

Net Loss

The net loss approximated $1,669,000 and $7,463,000 for the three month and nine month periods ended May 31, 2012 (before net loss attributable to noncontrolling interest) as compared to $1,765,000 and $3,941,000 in the comparable periods of the preceding year.  Our net loss from inception of the Company on May 3, 2006 until May 31, 2012 approximated $15,454,000 (before net loss attributable to noncontrolling interest) . Our net loss for the nine months ended May 31, 2012 is attributable to the execution of our business plan to become a gold producing mining company.  For the nine months ended May 31, 2012, stock based compensation for management services approximated $798,000, non-cash financing costs approximated $864,000, depreciation and amortization approximated $121,000, common stock issued for consulting services approximated $412,000, the non-cash impairment of the Mkuvia Project of $1,931,000 and impairment for equipment of $300,000 for an aggregate of $4,383,000 in non-cash costs included in results of operations. Of the Net loss for the nine months ended May 31, 2012, $50,500 is attributable to the 5% noncontrolling interest in the Gold Standard operations, which was acquired effective on November 29, 2011. This results in a net loss for the period attributable to common shareholders of $7,366,000.

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 significant revenues since inception.  The Company has incurred significant losses from inception through May 31, 2012 of approximately $15,454,000 and is currently seeking funding necessary to continue operations. These factors, raise 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 a counterclaim against the Company seeking certain payments and removal of certain 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, advances from related parties and/or convertible debt financing and is in the process of identifying additional sources of capital from debt or equity sources. 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. However, there can be no assurance of this, nor is there any assurance that profitable 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.

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

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income” (“ASU No. 2011-05”), which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of stockholders’ equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for public companies for fiscal years beginning after December 15, 2011, with early adoption permitted. In December 2011, the FASB issued an update to ASU No. 2011-05. The update, ASU No. 2011 -12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (“ASU No. 2011-12”), defers the effective date of certain presentation requirements within ASU No. 2011-05. The Company does not expect that the adoption of ASU 2011-05 will have an impact on its consolidated results of operations, financial condition or cash flows as it only requires a change in the format of the Company’s current presentation.

In September 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-08, “Intangibles – Goodwill and Other (ASC Topic 350): Testing Goodwill for Impairment” (“ASU No. 2011-08”), which amends guidance for goodwill impairment testing. The amendment allows for entities to first assess qualitative factors in determining whether or not the fair value of a reporting unit exceeds its carrying value. If an entity concludes from this qualitative assessment that it is more likely than not that the fair value of a reporting unit exceeds its carrying value, then performing a two-step impairment test is unnecessary. ASU No. 2011-08 will be effective for public companies for fiscal years beginning after December 15, 2011. The Company does not expect that the adoption of ASU 2011-08 will have an impact on its consolidated results of operations, financial condition or cash flows.

There are no other 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.

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 May 31, 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 May 31, 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.

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:

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 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 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. On May 21, 2012, Handeni filed an Answer and Counter claim in New York, as well as a request for the production of documents and a notice of depostion. On June 11, 2012 the Company filed its repsonse and objections and replies to counterclaims and on June 19 a first set of interrogatories to Handeni; and has produced documents in response the Handeni’s request. The Company is now 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 to Handeni. Further, as a result of Handeni’s breaches, the Comapany has not made a $450,000 payment originally due on June 1, 2011 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. The Company has filed a Notice of Application with the Supreme Court of British Columbia to dismiss this matter in this court over jusidictional issues. A hearing has been scheduled on this matter for November 13, 2012.

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 9 month period ended May 31, 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.

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. 

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.