UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-K





x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


For the
fiscal year ended on August 31, 2010 or





 ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT
OF 1934




For the
transition period from _________to _________





RUBY
CREEK RESOURCES, INC.


(Exact
name of registrant as specified in Charter





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)


Securities
registered pursuant to Section 12(b) of the Act: NoneSecurities registered
pursuant to Section 12(g) of the Act:




Common
Stock, $0.001 Par Value


(Title of
class)




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes  ̈ No
x




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 of Section 15(d) of the Act.  Yes  ̈  No
x




Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the 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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  x


Indicate
by checkmark 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
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




The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant computed by reference to the price at which the
registrant's common equity, as of the last business day of the registrant's most
recently completed second fiscal quarter was approximately
$4,043,567




The
registrant had 28,883,642 shares of common stock outstanding as of December 3,
2010.














FORWARD
LOOKING STATEMENTS




This
annual report contains forward-looking statements that involve risks and
uncertainties.  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 outlined in this annual report under "Risk
Factors". These factors or any of them may cause our actual results to differ
materially from any forward-looking statement made in this annual report.
Forward-looking statements in this annual report include, among others,
statements regarding our capital needs; business plans; and
expectations.




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. Some of the risks and assumptions include: our need for additional
financing, our limited operating history, our history of operating losses, our
exploration activities may not result in commercially exploitable quantities of
ore on our mineral property, the risks inherent in the exploration for minerals
such as geologic formation, weather, accidents, equipment failures and
governmental restrictions, the competitive environment in which we operate,
changes in governmental regulation and administrative practices, our dependence
on key personnel, conflicts of interest of our directors and officers, our
ability to fully implement our business plan, our ability to effectively manage
our growth, and other regulatory, legislative and judicial
developments.




We advise
the reader that these cautionary remarks expressly qualify in their entirety all
forward-looking statements attributable to us or persons acting on our
behalf.  Important factors that you should also consider, include, but
are not limited to, the factors discussed under "Risk Factors" in this annual
report.




The
forward-looking statements in this annual report are made as of the date of this
annual report 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.


2


AVAILABLE
INFORMATION




Ruby
Creek Resources Inc. files annual, quarterly and current reports, proxy
statements, and other information with the Securities and Exchange Commission
(the "SEC"). You may read and copy documents referred to in this Annual Report
on Form 10-K that have been filed with the SEC at the SEC's Public Reference
Room, 450 Fifth Street, N.W., Washington, D.C.  You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.  You can also obtain copies of our SEC filings by
going to the SEC's website at http://www.sec.gov.




REFERENCES




As used
in this annual report: (i) the terms "we", "us", "our", "Ruby Creek" and the
"Company" mean Ruby Creek Resources Inc.; (ii) "SEC" refers to the Securities
and Exchange Commission; (iii) "Securities Act" refers to the United States
Securities Act of 1933,
as amended; (iv) "Exchange Act" refers to the United States Securities Exchange Act of
1934, as amended; and (v) all dollar amounts refer to United States
dollars unless otherwise indicated.





3




TABLE OF
CONTENTS




ITEM
      1.
                    BUSINESS
                    5ITEM
      1A.
                    RISK
      FACTORS
                    17ITEM
      1B.
                    UNRESOLVED
      STAFF COMMENTS
                    23ITEM
      2.
                    PROPERTIES
                    23ITEM
      3.
                    LEGAL
      PROCEEDINGS
                    23ITEM
      4.
                    SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                    23ITEM
      5.
                    MARKET
      FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
                    24ITEM
      6.
                    SELECTED
      FINANCIAL DATA
                    26ITEM
      7.
                    MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
                    26ITEM
      7A.
                    QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                    32ITEM
      8.
                    FINANCIAL
      STATEMENTS
                    33ITEM
      9.
                    CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
                    53ITEM
      9A.
                    CONTROLS
      AND PROCEDURES
                    53ITEM
      9B.
                    OTHER
      INFORMATION
                    55ITEM
      10.
                    DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
                    55ITEM
      11.
                    EXECUTIVE
      COMPENSATION
                    59ITEM
      12.
                    SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
                    61ITEM
      13.
                    CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
      INDEPENDENCE
                    63ITEM
      14.
                    PRINCIPAL
      ACCOUNTING FEES AND SERVICES
                    64ITEM
      15.
                    EXHIBITS
                    65SIGNATURES
                    67


4


PART
I


ITEM
1. BUSINESS




Name and
Incorporation




The
Company was originally incorporated in the Province of British Columbia, Canada
on May 3, 2006. On January 29, 2009, we changed our corporate jurisdiction to
the State of Nevada and established our authorized capital at 500,000,000 common
shares with a par value or $0.001. We are currently considered an exploration or
exploratory stage company as we are involved in the examination and
investigation of land that we believe may contain valuable minerals, for the
purpose of discovering the presence of commercially viable reserves of
ore.




Our
office is located at 750 3rd Avenue 11th Floor, New York, NY USA 10017; our
telephone number is (212) 679-5711




Our Corporate
History




Prior to
our recent mining activities described below, we had acquired an option to
purchase a group of eight mining exploration claims, known as the More Creek
property, located in northwestern British Columbia, Canada. As part of its
redirection to Tanzania, Ruby Creek fully relinquished its option on the
interest More Creek Properties Canada .




We are
considered an exploration or exploratory stage company as we are involved in the
examination and investigation of land that we believe may contain valuable
minerals, for the purpose of discovering the presence of ore, if any, and its
extent. There is no assurance that a commercially viable mineral deposit exists
on any of our mining properties, and a great deal of further exploration will be
required before a final evaluation as to the economic and legal feasibility for
our future exploration is determined. We have no known reserves of any type of
mineral.




Our
Business




The
Mkuvia Gold Project




The
Mkuvia Gold Project is located in the Liwale and Nachingwea Districts, Lindi
Region of the United Republic of Tanzania.  The project is the subject
of a report titled the “Technical & Resource Report on the Mkuvia Gold
Project”, prepared for our joint venture partner, Douglas Lake Minerals, by Mr.
Laurence Stephenson, P.Eng. of British Columbia, Canada and Ross McMaster,
MAusIMM of Queensland, Australia.  Mr. Stephenson and Mr. McMaster are
independent and Qualified Persons in accordance with JORC and NI
43-101.  Douglas Lake has spent more than $2,100,000 in exploration
and developing an understanding of the mineralization on a portion of the
property while focusing on a relatively small area for mechanized production
(about 10 sq km).




Our joint
venture partner, Douglas Lake, has completed its technical report, reserve
estimate, feasibility study and mining plan.  The obligation to
complete the environmental impact assessment report and mining license
application has been assumed by the Ruby Creek Tz, formed on May 24, 2010 as
more fully described below. Timing of the application for additional Mining
Licenses will be dependent upon the results from the initial Mining License and
our ability to obtain adequate financial and human resources to sustain our
operations.


5


On
November 7, 2009, the Company entered into a Purchase Agreement (the
“Agreement”) with Douglas Lake Minerals for the right to acquire and develop a
portion of Douglas Lake’s Mkuvia Gold Project.  Pursuant to the terms
of the Agreement, the Company acquired a seventy percent (70%) interest in 125
square kilometers of the 380 square kilometers Mkuvia Gold Project for total
gross consideration of $3,000,000, payable over three years.  In
accordance with the terms of the Agreement, the Company paid $250,000 in cash
initially, and upon issuance by the Company of its Notice of Satisfactory Due
Diligence to Douglas Lake Minerals dated March 15, 2010 paid an additional
$100,000.   Additionally, the Agreement provided that within 12 months
of closing, the Company has the option to increase its interest to 75 percent of
the 125 square kilometers by making an additional $1,000,000 payment to Douglas
Lake.




On March 7, 2010, the Company entered into an agreement for the
creation of a Tanzanian Joint Venture company called Ruby Creek Resources
(Tanzania) Limited, formed initially for the ownership and management of the 125
square kilometer Mkuvia Gold Project.  The Joint Venture company is
owned 70% by the Company, 25% by Douglas Lake and 5% by Mr. Maita Mkuvia
(subject to conditions as described below), the owner of the original
Prospecting Licenses.  The joint venture company was officially formed
in Tanzania on May 24, 2010.  Ruby Creek Tz is the operating company
of and holds mining rights to the 125 square kilometers of land relating to
Mkuvia Gold Project acquired by the Company on November 7, 2009 as well the
mining rights for the additional 255 sq km of the Mkuvia Gold Project acquired
effective on June 16, 2010, as more fully described below. An additional Joint
Venture Agreement was entered into by the parties with respect to the additional
255 sq km of the Mkuvia Gold Project effective on May 24, 2010 for the
development rights (collectively the “JVA”). Ruby Creek Tz assumed control of
the permitting and licensing processes.  The JVA provides that Maita
Mkuvia’s 5% interest shall vest when Ruby Creek Tz obtains a mining license over
a portion of the area covered by the Prospecting Licenses relating to the entire
project and a retention license over the balance for the area not covered by the
initial mining license.




As a
result of the foregoing, the Company controls the exclusive mineral and mining
rights to the entire 380 square kilometers of the Mkuvia Gold
Project.




Among
other conditions, with respect to the entire 380 sq km of the Project, we also
have the right to increase our interest from 70% to 75% for an aggregate of
$2,000,000 ($1 million with respect to the initial 125 sq km acquisition and $1
million with respect to the remaining 255 sq km).




In all
cases, the original owner of the prospecting licenses, Mr. Maita Mkuvia retains
a 3 percent Net Smelter Royalty as per the original agreement between Mr. Maita
and Douglas Lake.




Location
and Access




The
Mkuvia Gold Project, consists of 380 square kilometers  located in the
Nachingwea District, Lindi Region of the United Republic of Tanzania, and is
approximately 140 kilometers west of Nachingwea town. The Lindi Region is one of
the three regions forming Southern Zone of United Republic of Tanzania, the
other regions being Mtwara and Ruvuma. The Mtwara and Ruvuma regions border
northern Mozambique and eastern Malawi.


6


Nature of
the Prospecting Licenses




According
to the Technical & Resource Report on the Mkuvia Alluvial Gold Project
prepared for our joint venture partner, by Laurence Stephenson, P.Eng. and Ross
McMaster, MAusIMM, to date, the known gold mineralization in Mkuvia Property
occurs as alluvial placer deposits comprising of a significant, but unquantified
accumulation of gold in alluvium hosted by: 1) reworked palaeo-placer by the
Mbwemkuru River and its tributaries, and 2) an over 10 meter thick zone of
palaeo-placer sand and pebble beds non-conformably overlying biotite schist,
gneiss, quartzite, garnet-amphibolite and granitoids.  The latter
comprises a poorly sorted palaeo-beach placer plateau extending over 29 km along
a NW-SE direction and ~5 km wide along a NE-SW direction (Figures 5 & 6). In
addition there are extensive troughs with similar continental alluvium further
west in the Karroo Basin. It is however notable that at the highest point on the
property, pebble conglomerates were noted on the surface that have been worked
sporadically by the artisanal miners suggesting that gold is present. This is
consistent with the proposition that the mineralization is associated with a
wide spread beach placer environment.  Gold-bearing alluvium along the
Mbwemkuru River occurs within a 0.35 to 2.0 m thick zone between the bedrock and
sandy-gravelly material related to present drainage active channels and
terraces. This zone contains an estimated 1.0 grams per cubic meter that the
small-scale miners are currently reportedly recovering.




The gold
is very fine-grained in general, suggesting a distal source, although some
coarser-grained flakes are present. The gold is associated with the black sands
that comprise fine-grained ilmenite and pink garnet and minor magnetite. These
may be represented by distinct ferruginous layers in the conglomerate
sequence.  The minerals in the black sand are consistent with the
beach placer model.




Ownership
Interest in the Prospecting Licenses




Ruby
Creek will pay a 3% net smelter royalty return to Mr. Mkuvia Miata, the original
property prospecting license owner.




Pursuant
to our November 7, 2009 Purchase Agreement for the acquisition of 125 sq km of
the Mkuvia Gold Project, we have the following remaining obligations to Douglas
Lake





1.
            $400,000
      upon Closing and when Ruby Creek receives the first Mkuvia Mining
      License.




2.
            $750,000
      payable within 12 months of
Closing.




3.
            $750,000
      payable within 24 months of
Closing.




4.
            $750,000
      payable within 36 months of Closing.  Ruby Creek at its sole
      discretion may elect to make this final payment in common shares of Ruby
      Creek. The Ruby Creek shares would be valued at the 10 day average trading
      price immediately prior to the 36 month due
  date.





For
financial reporting purposes, the series of payments due after one year in the
gross amount of $2,250,000 were recorded at their fair value of $1,694,042
determined utilizing a discount rate of 12% per annum.Additionally,
the Agreement provides that within 12 months of receipt of the initial mining
license, the Company has the option to increase its interest to 75% of the 125
square kilometers by making an additional $1,000,000 payment to Douglas
Lake.  In all cases, the original owner of the four prospecting licenses,
Mr. Maita Mkuvia, retains a 3 percent Net Smelter Royalty as per the original
agreement between Mr. Maita and Douglas Lake.


7





Effective
on June 16, 2010 pursuant to a second Puchase Agreement, the Company acquired
the exclusive mineral and mining rights to 255 square kilometers of the Mkuvia
Gold Project in Tanzania from Douglas Lake for a total consideration of
$6,000,000. This is payable over a three-year period in a combination of cash
and common shares of the Company.  Upon execution, the Company paid
$200,000; in July 2010 paid an additional $150,000 and issued 4,000,000 common
shares of the Company with an agreed upon value of $3,200,000 at $0.80 per share
(fair market value of these shares was $2,120,000 on the transaction date) which
was paid within 30 days of receipt of governmental Certificates of
Acknowledgement; $450,000 on June 1, 2011; $1,000,000 on June 1, 2012; and
$1,000,000 on June 1 2013. The Company has the option to satisfy the final
$1,000,000 payment due on June 1, 2013 by issuing  shares of its
common stock valued at the Volume Weighted Average Price (“VWAP”) for the 20
days immediately preceding the payment date. Scheduled cash payments can be
accelerated in the event of future equity financing or obtaining additional
mining licenses.  The new Purchase Agreement also provides that the Company
has the option to increase its interest from the current 70%, to 75% of the
Project by making an additional $1,000,000 payment to Douglas Lake. 
Therefore, in total with respect to the entire 380 sq km of the Project, Ruby
Creek has the option to increase its interest from 70% to 75% for $2,000,000. As
a result of this agreement, in combination with the initial purchase agreement
described above, the Company controls the exclusive mineral and mining rights to
the entire 380 square kilometers of the Mkuvia Gold Project.





Prior
Exploration of Our Joint Venture Prospecting Licenses




There has
been little or no exploration of the Mkuvia Gold project prior to Douglas Lake’s
involvement in April of 2008.




Present
Condition and Current State of Exploration




The
property sections that are the subject of our prospecting licenses are currently
being worked by local artisan miners.  The property is considered
undeveloped and does not contain any open-pit or underground mines other than
artisanal operations.  Currently there is no plant or equipment
located on the property.  We are presently negotiating with several
equipment contractors for equipment to be delivered to the property by the end
of our current fiscal year and to commence test mining activities, although
there can be no assurance that this will occur.





Kapinga





On
September 9, 2010,Ruby Creek signed an
option to acquire the exclusive mineral and mining rights to the 340 sq km
Kapinga property for a fixed purchase price of $500,000.  Through the
Purchase Agreement, Ruby Creek has been granted an exclusive option for access
to and exploration of the Kapinga property located immediately adjacent to and
south of its Mkuvia Gold Project in Tanzania.  Should Ruby Creek exercise
its Purchase option in the six month period, the Kapinga Property will be
transferred into our joint venture company Ruby Creek Gold (Tanzania)
Limited.  Ruby Creek will own 85% of the joint venture, Mr. Kapinga 10% and
other parties 5%.  According to the terms of the agreement, if Ruby Creek
exercises its right to purchase the property within six months of signing, a
total of $250,000 will be paid at that time, in addition to certain share
issuances required by the agreements.  The final $250,000 payment will be
made when the first mining license is issued.  Payments can be made in
cash, in common shares of the Company, or a combination of both.




Both the
Kapinga Project and the Company’s Mkuvia Gold Project are located in the Liwale
and Nachingwea Districts, Lindi Region of the United Republic of Tanzania.
 The existing Ruby Creek Mkuvia mining camp will be used as base camp for
the Kapinga exploration.


8


Tanzania




Overview




Tanzania
is located in Central East Africa with about 1,400km of coastline along the
Indian Ocean. Lying just south of the equator, Tanzania is East Africa's largest
country.  It is well situated geographically bordering Burundi, Kenya,
Malawi, Mozambique, Rwanda, Uganda, Zambia and the Democratic Republic of Congo.
It is the economic hub of East Africa providing natural access and commercial
links to eight countries. Tanzania is the right platform for businesses vying to
develop or expand opportunities in the wider region.  The legal system
is based on English common law.




Natural
resources include: natural gas, gold, diamonds, nickel, cobalt, copper and other
base metals, gemstones (apatite, niobium, tanzanite, corundum) iron ore, coal,
hydropower, tin, phosphates, fisheries and forests. Currently Tanzania is the
3rd
largest gold producer in Africa.




History:




Tanzania
is the site of a 30 mile stretch of the Olduvai Gorge often referred to as the
“Cradle of Mankind”.  It was here, that work started by Louis and Mary
Leakey in the early 1930’s, uncovered evidence that it was in this part of
Africa that the human race may first have emerged.




Arab
traders first began to colonize the area in 700AD.  Portuguese
explorers reached the coastal regions in 1500 and held some control until the
17th century.  Tanganyika became the colony of German East Africa in
1885.  After World War I, it was administered by Britain under a
League of Nations mandate and later as a UN trust territory.




The
Portuguese made Zanzibar one of their tributary regions in 1503 and later
established a trading post. Zanzibar was declared independent of Oman in 1861
and, in 1890 became a British protectorate. On April 26, 1964, the two nations
merged into the United Republic of Tanganyika and Zanzibar. The name was changed
to Tanzania six months later.  Julius Nyerere became its first Prime
Minister on December 9, 1961 and a year later was elected the nation’s first
president when the country became a republic.




In Nov.
1985, Nyerere stepped down as president. Ali Hassan Mwinyi, his vice president,
succeeded him. Running unopposed, Mwinyi was elected
president.  Shortly thereafter plans were announced to study the
benefits of instituting a multiparty democracy, and in Oct. 1995 the country's
first multiparty elections since independence took place. Nyerere died in 1999
and in October of 2009, Nyerere was named "World Hero of Social Justice" by the
United Nations General Assembly.




Political




Tanzania
is a democracy with a republican style government.  The President and
National Assembly members are elected concurrently by direct popular vote for
5-year terms. The President appoints a Prime Minister who serves as the
government's leader in the National Assembly. The President selects his cabinet
from among National Assembly members.  The Constitution also empowers
him to nominate 10 non-elected members of Parliament, who also are eligible to
become cabinet members.




The
unicameral National Assembly has up to 325 members: the Attorney General, the
Speaker, five members elected from the Zanzibar House of Representatives to
participate in the Parliament, 75 special women's seats apportioned among the
political parties based on their election results, 233 constituent seats from
the mainland, and up to 10 members nominated by the President. In 2006, the
President nominated seven members and the Speaker was elected to a constituent
seat, bringing the total number of Members of Parliament to 320. The ruling
party, CCM, holds about 82% of the seats in the Assembly. Laws passed by the
National Assembly are valid for Zanzibar only in specifically designated union
matters.


9


Zanzibar's
House of Representatives has jurisdiction over all non-union matters. There are
currently 81 members in the House of Representatives in Zanzibar: 50 elected by
the people, 10 appointed by the President of Zanzibar, 5 ex officio members, an
Attorney General appointed by the President, and 15 special seats allocated to
women. Zanzibar's House of Representatives can make laws for Zanzibar without
the approval of the union government as long as it does not involve
union-designated matters.  The terms of office for Zanzibar's
President and House of Representatives also are 5 years.  The
semiautonomous relationship between Zanzibar and the union is a relatively
unique system of government.




Tanzania
has a five-level judiciary combining the jurisdictions of tribal, Islamic, and
British common law.  Appeal is from the primary courts through the
district courts, resident magistrate courts, to the high courts, and the high
courts to the Court of Appeals. District and resident court magistrates are
appointed by the Chief Justice, except for judges of the High Court and Court of
Appeals, who are appointed by the president.  The Zanzibari court
system parallels the legal system of the union, and all cases tried in Zanzibari
courts, except for those involving constitutional issues and Islamic law, can be
appealed to the Court of Appeals of the union. A commercial court was
established on the mainland in September 1999 as a division of the High
Court.




For
administrative purposes, Tanzania is divided into 26 regions - 21 on the
mainland, 3 on Zanzibar, and 2 on Pemba. Ninety-nine district councils have been
created to further increase local authority. These districts are also now
referred to as local government authorities. Currently there are 114 councils
operating in 99 districts, 22 are urban and 92 are rural.  The 22
urban units are classified further as city (Dar es Salaam and Mwanza), municipal
(Arusha, Dodoma, Iringa, Kilimanjaro, Mbeya, Morogoro, Shinyanga, Tabora, and
Tanga), and town councils (the remaining 11 communities).




Principal
Government Officials




President
Vice President Prime Minister President of Zanzibar Minister of Foreign Affairs
Ambassador to the United States




From
independence in 1961 until the mid-1980s, Tanzania was a one-party state, with a
socialist model of economic development. Beginning in the mid-1980s, under the
administration of President Ali Hassan Mwinyi, Tanzania undertook a number of
political and economic reforms. In January and February 1992, the government
decided to adopt multiparty democracy.  Legal and constitutional
changes led to the registration of 11 political parties. Two parliamentary
by-elections in early 1994 were the first-ever multiparty elections in Tanzanian
history.




In
October 2000, Tanzania held its second multi-party general
elections.  The ruling CCM party's candidate, Benjamin W. Mkapa,
defeated his three main rivals, winning the presidential election with 71% of
the vote. In the parliamentary elections, CCM won 202 of the 232 elected seats.
In the Zanzibar presidential election, Abeid Amani Karume, the son of former
President Abeid Karume, defeated CUF candidate Seif Sharif Hamad.  The
election was marred by irregularities, especially on Zanzibar.




In
October 2001, the CCM and the CUF parties called for electoral reforms on
Zanzibar that led to the presidential appointment of an additional CUF official
to become a member of the Union Parliament.  Changes to the Zanzibar
Constitution in April 2002 allowed both the CCM and CUF parties to nominate
members to the Zanzibar Electoral Commission. In May 2003, the Zanzibar
Electoral Commission conducted by-elections to fill vacant seats in the
parliament.  Observers considered these by-elections, the first to be
free, fair, and peaceful.




In
February 2008, President Kikwete nominated and the National Assembly approved a
new cabinet. Mizengo Kayanza Peter Pinda was selected as the new Prime
Minister.  President Kikwete, Vice President Ali Mohamed Shein, Prime
Minister Mizengo Kayanza Peter Pinda, and National Assembly members will serve
until the next general elections.


10


Government
steps to improve the business climate include redrawing tax codes, floating the
exchange rate, licensing foreign banks, and creating an investment promotion
center to cut red tape have greatly improved the business regime.  In
terms of mineral resources and the largely untapped tourism sector, Tanzania is
becoming a viable and attractive market.




The
Government of Zanzibar legalized foreign exchange bureaus on the islands before
mainland Tanzania moved to do so. The effect was to increase the availability of
consumer commodities.  The government has also established a free port
area, which provides the following benefits: contribution to economic
diversification by providing a window for free trade as well as stimulating the
establishment of support services; administration of a regime that imports,
exports, and warehouses general merchandise; adequate storage facilities and
other infrastructure to cater for effective operation of trade; and creation of
an efficient management system for effective re-exportation of
goods.




Foreign
Relations




During
the Cold War era, Tanzania played an important role in regional and
international organizations. Tanzania's first president, Julius Nyerere, was one
of the founding members of the Non-Aligned Movement. Additionally, Tanzania
played an active role in the front-line states, the G-77, and the Organization
of African Unity (OAU). One of Africa's best-known elder statesmen, Nyerere was
personally active in many of these organizations, and served as chairman of the
OAU (1984-85) and chairman of six front-line states concerned with eliminating
apartheid in Southern Africa.  Nyerere's death, in October 1999, is
still commemorated annually.





Tanzania
enjoys good relations with its neighbors in the region and in recent years has
been an active participant in efforts to promote the peaceful resolution of
disputes. Tanzania helped to broker peace talks to end the conflict in Burundi;
a comprehensive cease-fire was signed in Dar es Salaam on September 7, 2006.
Tanzania also supports the Lusaka agreement concerning the conflict in the
Democratic Republic of the Congo. In March 1996, Tanzania, Uganda, and Kenya
revived discussion of economic and regional cooperation. These talks culminated
with the signing of an East African Cooperation Treaty in September 1999; a
treaty establishing a customs union was signed in March 2004. The customs union
went into effect January 1, 2005 and, in time, should lead to complete economic
integration. On July 1, 2007 Rwanda and Burundi joined the East African
Community (EAC) and the customs union as full members. Tanzania is the only
country in East Africa which also is a member of the Southern Africa Development
Community (SADC).  In January 2005, Tanzania became a non-permanent
member of the UN Security Council, serving a two-year term that ended on
December 31, 2006.  President Kikwete was selected to chair the
African Union for a one-year term from February 2008-2009.




U.S.-Tanzanian
Relations




The U.S.
has historically enjoyed very good relations with Tanzania.  The
relationship became closer after terrorists bombed the U.S. Embassy in Dar es
Salaam on August 7, 1998. With the election of President Kikwete, the
relationship has blossomed into warmer relations than at any time since Tanzania
achieved independence.  In February 2008, President Bush made an
official four-day visit to Tanzania.  President Kikwete, who has
visited the U.S. repeatedly, made a reciprocal official visit to Washington in
August 2008. In May 2009, President Kikwete became the first African president
to meet President Barack Obama during a visit to Washington.




The U.S.
Government provides assistance to Tanzania to support programs in the areas of
peace and security, democracy, health, education, economic growth, and natural
resource management.  Tanzania is a major recipient of funding for the
President's Emergency Plan for AIDS Relief (PEPFAR) and the President's Malaria
Initiative (PMI).  In September 2008, Tanzania's $698 million
Millennium Challenge Compact entered into force. The Peace Corps program,
revitalized in 1979, provides assistance in education through the provision of
teachers.  Peace Corps also is assisting in health and environment
sectors.  Currently, about 147 volunteers are serving in
Tanzania.


11


Tanzania
maintains an embassy in the United States.




Geology Of
Tanzania




Definitions




Craton:The term
craton is used to distinguish the stable portion of the continental crust from
regions that are more geologically active and unstable.  Cratons can
be described as shields, in which the basement rock crops out at the surface,
and platforms, in which the basement is overlain by sediments and sedimentary
rock.




Proterozoic:  The
Proterozoic is a geological eon extending from 2,500 million years ago to 542
million years ago.  It represents a period before the first abundant
complex life on Earth.




Volcaniclastics:
Clastic rocks are composed primarily of volcanic materials. Where the volcanic
material has been transported and reworked through mechanical action, such as by
wind or water, these rocks are termed volcaniclastic.





Graben:  A
graben is a depressed block of land bordered by parallel faults producing a
valley with a distinct cliff or escarpment on each side.


Archean: The Archean
is a geologic eon before the Proterozoic.




Ubendian System: The
Ubendian orogeny was a phase of mountain building whose precise dates are
uncertain but which probably occurred about 1800–1700 million years ago,
producing what is now a NW—SE belt in southern Tanzania, northern Zambia, and
the eastern Congo.




Usagaran
System:  Similar to the Ubendian, but of a different time
period. The Usagaran occasionally hosts deposits of semi-precious and precious
stones. The most famed of these is tanzanite.




Karoo System:The
Karoo System is a geologic system of rock formations in Africa covering
1,500,000 square km and extending from the Equator south to the Cape of Good
Hope. The Karoo System spans a period of about 100 million years, starting from
the Permian or Carboniferous Period 300 million years ago) to the Late Triassic
Epoch 228-200 million years ago). The geology of the Great Karoo consists
largely of horizontally-bedded shales and sandstones




Geology




Tanzania
is dominated by a large mineralized Precambrian craton comprised of formations
greater than two billion years old and rimmed by Proterozoic crystalline rocks.
Younger sediments and volcaniclastics of recent times occupy the rifted grabens,
coastal plains and inland basins. The pre-Tertiary geology of Tanzania is
comprised of three main units: an Archaean shield, Proterozoic metamorphic and
sedimentary rocks and Karoo sediments.




The
Archaean Shield or Tanzania Craton occupies the central-western part of the
country. It is comprised of high-grade metamorphic rocks and granite-greenstone
belts in its northern portion. The greenstone belts are host to the major gold
deposits, which are currently the subject of intense exploration activity and
mine development. The Tanzania Craton is surrounded by two lower Proterozoic
belts of crystalline high-grade metamorphic rocks, the Ubendian system to the
west and the Usagaran System to the east. The initiation of the East African
Rift system led to the development of graben structures within the
Usagaran-Ubendian rocks in southeast Tanzania.  The Karoo rocks are a
sedimentary system that developed within intermontain basins formed by
grabens.  They comprise continental sandstones, siltstones and shales
of Permian to Lower Jurassic ages. Total thickness of sediments is believed to
be up to 6,000 meters. The Luwegu Basin is the largest of the Karoo
basins.  Other basins include those at Ruhuhu and the small basin at
Mbamba Bay.


12


The Karoo
system is prevalent all over southern Africa, reaching its northernmost outcrop
in Tanzania.  The Karoo system exhibits a number of features that are
favorable for the development of sandstone-hosted uranium deposits similar to
other uranium bearing regions of the world. The Karoo rocks of South Africa were
explored for sandstone-hosted uranium deposits in the late 1970’s and 1980’s,
leading to the discovery of a number of significant deposits within the Beaufort
Basin.




Tanzania,
with a sequence of rocks spanning in age from Archaean to Recent, is rich in a
wide range of minerals. Gold and diamonds has always been the mainstay of the
country’s mineral production. Other minerals of economic interest include
ferrous metals, base metals and platinum group metals (“PGMs”), tungsten,
gemstones, phosphates, salt, coal, kaolin, building materials and tin.
Geologically, both the Archaean and Proterozoic rocks are prospective for base
metals and PGMs.




Tanzania
is home to some of the largest mines in production today, including Barrick’s
Bulyanhulu underground gold mine, currently with 12 million ounces of proven and
probable gold reserves. In 2008, the mine produced 200,000 ounces of gold at
total cash costs of $620 per ounce. Tanzania also holds AngloGold Ashanti’s
Geita open pit gold mine, currently with 12.4 million ounces of proven and
probable gold reserves. In 2007, the mine produced 327,000 ounces of production
at total cash costs of $601 per ounce. Mining contributes 2.3 percent of
Tanzania’s GDP presently, a figure projected to grow to 10 percent by 2025.
Tanzania has become the investment destination of choice for some of the world's
major mining companies.  The cornerstone of the rebirth of the central
African state has been a reworking of Tanzania's mining legislation. The new
regulatory framework around the country's resource sector has been customized to
entice global mining companies to sink dollars into fixed investment in the
country. As with many other southern and central African states, Tanzania is
well endowed with a wealth of minerals; gold, copper, zinc, diamonds and of
course, tanzanite and the government is eager to capitalize on the country's
natural riches.




Tanzania
has become the investment destination of choice for some of the world's major
mining companies.  The cornerstone of the rebirth of the central
African state has been a reworking of Tanzania's mining legislation. The new
regulatory framework around the country's resource sector has been customized to
entice global mining companies to sink dollars into fixed investment in the
country. As with many other southern and central African states, Tanzania is
well endowed with a wealth of minerals; gold, copper, zinc, diamonds and of
course, tanzanite and the government is eager to capitalize on the country's
natural riches.




Tanzanian
Operations




Ruby
Creek, through its 70% owned Tanzanian subsidiary, Ruby Creek Resources
(Tanzania) Limited (“Ruby Creek Tanzania”), has acquired and is developing the
Mkuvia Gold Project, a 380 sq km property hosting extensive artisanal gold
production.  The Mkuvia was acquired in two transactions, in November
2009 and June  2010.  A base camp of operations has been
established, gold mining equipment has been delivered and testing of mining
equipment and recovery systems has commenced.




Having
achieved its initial goals for 2010 early, Ruby Creek began its next phase of
expansion.  Effective on September 9, 2010, Ruby Creek, through its
85% owned Tanzanian subsidiary, Ruby Creek Gold (Tanzania) Limited (“Ruby Creek
Gold”), acquired the mineral rights to a 340 sq km property immediately south
and adjacent to the Mkuvia, subject to our satisfactory due diligence. It is our
intention that the Ruby Creek Mkuvia Camp will service both
properties.


13


The
Purchase and Joint Venture Agreements evidencing Ruby Creek’s interest in both
properties have been executed and registered with the Ministry of Energy and
Mines.




Ruby
Creek is examining additional potential property acquisitions in this region,
which the Company has named the “Plateau of Gold”.




Through
December 2010, Ruby Creek Tanzania has established a fully staffed base camp for
50 personnel including its own camp security, road improvements, satellite dish
for voice and internet communications, independent fresh water wells, generating
power, and administrative and accounting processes at the Ruby Creek Mkuvia
Camp.  Equipment in support of test mining has been delivered and
equipment testing commenced in September 2010.  Expansion is currently
underway including plans for solar power, a camp capacity increase to 75
personnel and a an airstrip.


14


General
Geological Map of Tanzania








15


Competition




We are a
junior mineral resource exploration company. We compete with other mineral
resource exploration companies for financing and for the acquisition of new
mineral properties. Many of the mineral resource exploration companies with whom
we compete have greater financial and technical resources than those available
to us. Accordingly, these competitors may be able to spend greater amounts on
acquisitions of mineral properties of merit, on exploration of their mineral
properties and on development of their mineral properties. In addition, they may
be able to afford more geological expertise in the targeting and exploration of
mineral properties. This competition could result in competitors having mineral
properties of greater quality and interest to prospective investors who may
finance additional exploration and development.  This competition
could have an adverse impact on our ability to achieve the financing necessary
for us to conduct further exploration of our joint venture mineral
property.




We will
also compete with other junior mineral exploration companies for financing from
a limited number of investors that are prepared to make investments in junior
mineral exploration companies. The presence of competing junior mineral
exploration companies may have an adverse impact on our ability to raise
additional capital in order to fund our exploration programs if investors are of
the view that investments in competitors are more attractive based on the merit
of the mineral properties under investigation and the price of the investment
offered to investors.




We also
compete with other junior and senior mineral companies for available resources,
including, but not limited to, professional geologists, camp staff, helicopter
or float planes, mineral exploration supplies and drill rigs.




Employees




In our
corporate office in New York we employ the services of five individuals on a
part or full time basis, including the CEO, CFO, Corporate Communications
Director and two part time administrative and accounting personnel. We plan to
retain independent geologists and consultants on a contract basis to conduct the
work programs on our mineral property in order to develop our plan of
operations. We employ in our Ruby Creek Tanzania operations 1 full time
administrator and approximately 50 additional personnel at our operations at our
permanent camp on the Mkuvia Gold Property. These personal are engaged in
exploration, security, facilities and equipment services, facilities and food
provisioning.




Research
and Development Expenditures




We have
not incurred any research or development expenditures since our
incorporation.




Subsidiaries




As a
result of the acquisition of the Mkuvia Gold Property, we have formed an
operating company in Tanzania in which we own a 70% controlling interest, Ruby
Creek Resources (Tanzania) Ltd. We have included 100% of its assets, liabilities
and results of operations results since its inception in our results of
operations for our year ended August 31, 2010 since we are responsible for
providing operating capital and management, and have the right to recover these
costs from future operations. We have also formed Ruby Creek Gold (Tanzania)
Limited to operate the Kapinga Property described above, in which we would own
an 85% controlling interest should that transaction close.




Patents
and Trademarks




We do not
own, either legally or beneficially, any patent or trademark.


16


ITEM
1A. RISK FACTORS




RISK
FACTORS




An
investment in our common stock involves a number of very significant
risks.  You should carefully consider the following risks and
uncertainties in addition to other information in the Company’s SEC filings in
evaluating our Company and its business before purchasing shares of our common
stock.  Our business, operating results and financial condition could
be seriously harmed due to any of the following risks.  The risks
described below may not be all of the risks facing our
Company.  Additional risks not presently known to us or that we
currently consider immaterial may also impair our business
operations.  You could lose all or part of your investment due to any
of these risks.





Risks
associated with our Company





If
we do not obtain additional financing, our business plan may fail.


At August
31, 2010 we had cash of $325,756 and a working capital deficit of
$772,620.  Accordingly, we have insufficient funds to enable us to
complete the required phases of our acquisition or exploration program and
satisfy our on-going general and administrative expenses over the next twelve
months.  During the next twelve-month period, we anticipate that we
will begin to generate revenues through operations, but which may not be at
levels sufficient to support operations.  As such, we will be required
to obtain additional financing in order to complete our planned acquisitions and
operations over the next twelve months or any additional exploration of our
joint venture projects to determine whether any mineral deposit exists on these
claims.  We currently do not have any arrangements for financing and
we may not be able to obtain financing when required.  Obtaining
additional financing would be subject to a number of factors.  These
factors may make the timing, amount, terms or conditions of additional financing
unavailable to us.  If we are unable to obtain additional financing
when needed, our business plan may fail.





Because
we have only recently commenced business operations, we face a high risk of
business failure and this could result in a total loss of your
investment.


We were
incorporated on May 3, 2006, and to date have been involved primarily in
organizational activities, evaluating resource projects, establishing operating
capabilities in Tanzania, recording the principal purchase agreements and joint
venture agreements with the Tanzanian authorities and more recently,
establishing a camp, supporting infrastructure and setting up test mining
equipment.  We have not earned any revenues and have not achieved
profitability. Potential investors should be aware of the difficulties normally
encountered by new mineral exploration companies and the high rate of failure of
such enterprises.  The likelihood of success must be considered in
light of the problems, expenses, difficulties, complications and delays
encountered in connection with the exploration of the projects that we are
undertaking.  These potential problems include, but are not limited
to, unanticipated problems relating to exploration and additional costs and
expenses that may exceed current estimates.  We have no history upon
which to base any assumption as to the likelihood that our business will prove
successful, and we can provide no assurance to investors that we will generate
any operating revenues or ever achieve profitable operations.  If we
are unsuccessful in addressing these risks, our business may fail and you may
lose your entire investment in our shares.





Because
we do not have any revenues, we expect to incur operating losses for the
foreseeable future.


We have
never earned revenues and we have never been profitable.  Prior to
completing exploration on the properties underlying our joint venture projects,
we anticipate that we may incur increased operating expenses without realizing
any revenues.  We may incur significant losses into the foreseeable
future.  If we are unable to generate financing to continue the
exploration of our joint venture projects, we may fail and you may lose your
entire investment in our shares.


17





We
have yet to attain profitable operations and because we will need additional
financing to fund our expanded exploration activities, our accountants believe
there is substantial doubt about our ability to continue as a going
concern.


We have
incurred an accumulated deficit of $2,996,671 for the period from May 3, 2006
(inception) to August 31, 2010, and have no revenues to date.  Our
future viability is dependent upon our ability to obtain financing and upon
future profitable operations from the development of our joint venture
projects.  These factors raise substantial doubt that we will be able
to continue as a going concern.  Our financial statements included
with the annual report of August 31, 2010 have been prepared assuming that we
will continue as a going concern.  Our auditors have made reference to
the substantial doubt as to our ability to continue as a going concern in their
audit report on our audited financial statements for our fiscal year ended
August 31, 2010.  If we are not able to achieve profitability or
obtain additional financing, then we may not be able to continue as a going
concern and our financial condition and business prospects may be adversely
affected.





If
our costs of the next stage of exploration that we are currently conducting are
greater than anticipated, then we may not be able to complete the exploration
program for our joint venture projects without additional financing, of which
there is no assurance that we would be able to obtain.


We are
proceeding with the next stage of exploration on our joint venture
projects.  However, there is no assurance that our actual costs will
not exceed the budgeted costs.  Factors that could cause actual costs
to exceed budgeted costs include increased prices due to competition for
personnel and supplies, unanticipated problems in completing the exploration
program and delays experienced in completing the exploration
program.  Increases in exploration costs could result in us not being
able to carry out our exploration program without additional
financing.  There is no assurance that we would be able to obtain
additional financing in this event.





Because
of the speculative nature of exploration of mining properties, there is
substantial risk that no commercially exploitable minerals will be found and our
business will fail.


We are in
the equipment testing stage of exploration of one of our joint venture
prospecting projects and in the initial stages of due diligence in another, and
thus have no way to evaluate the likelihood that we will be successful in
establishing commercially exploitable reserves of minerals on our
projects.  Potential investors should be aware of the difficulties
normally encountered by new mineral exploration companies and the high rate of
failure of such enterprises.  The search for valuable minerals as a
business is extremely risky.  We may not find commercially exploitable
reserves of minerals on our joint venture projects.  Exploration for
minerals is a speculative venture necessarily involving substantial
risk.  The expenditures being made by us on our exploration programs
may not result in the discovery of commercial quantities of ore.  The
likelihood of success must be considered in light of the problems, expenses,
difficulties, complications and delays encountered in connection with the
exploration of the joint venture projects that we are
undertaking.  Problems involved in mineral exploration often result in
unsuccessful exploration efforts.  In such a case, we may be unable to
complete our business plan.





We
cannot accurately predict whether commercial quantities of ores will be
established.


Whether
an ore body will be commercially viable depends on a number of factors beyond
our control, including the particular attributes of the deposit such as size,
grade and proximity to infrastructure, as well as mineral prices and government
regulations, including regulations relating to prices, taxes, royalties, land
tenure, land use, importing and exporting of minerals and environmental
protection.  We cannot predict the exact effect of these factors, but
the combination of these factors may result in a mineral deposit being
unprofitable which would have a material adverse effect on our
business.  We have no mineral producing properties at this
time.  We have not defined or delineated any proven or probable
reserves or resources on any of our properties.


18


We
may not be able to establish the presence of minerals on a commercially viable
basis.


We are
incurring substantial expenditures in an attempt to establish the economic
feasibility of mining operations by establishing ore reserves through drilling
and other techniques, developing metallurgical processes to extract metals from
ore, designing facilities and planning mining operations.  The
economic feasibility of a project depends on numerous factors beyond our
control, including the cost of mining and production facilities required to
extract the desired minerals, the total mineral deposits that can be mined using
a given facility, the proximity of the mineral deposits to a user of the
minerals, and the market price of the minerals at the time of
sale.  Our existing or future exploration programs or acquisitions may
not result in the identification of deposits that can be mined profitably and
you could lose your entire investment.





Because
of the inherent dangers involved in mineral exploration, there is a risk that we
may incur liability or damages as we conduct our business.


The
search for valuable minerals involves numerous hazards.  In the course
of carrying out exploration of our joint venture projects, we may become subject
to liability for such hazards, including pollution, cave-ins and other hazards
against which we cannot insure or against which we may elect not to
insure.  We currently have no such insurance nor do we expect to get
such insurance for the foreseeable future.  If a hazard were to occur,
the costs of rectifying the hazard may exceed our asset value and cause us to
liquidate all of our assets, resulting in the loss of your entire investment in
our shares.





If
we discover commercial reserves of precious metals on the property underlying
our joint venture projects, we can provide no assurance that we will be able to
successfully advance the projects into commercial production.


One
property underlying our joint venture project does contain any known bodies of
ore, and one does not.  If our exploration programs are successful in
establishing ore of commercial tonnage and grade, we will require additional
funds in order to advance the joint venture projects into commercial
production.  In such an event, we may be unable to obtain any such
funds, or to obtain such funds on terms that we consider economically feasible,
and you may lose your entire investment in our shares.





Our
exploration activities are subject to various local laws and
regulations.


We are
subject to local laws and regulation governing the exploration, development,
mining, production, importing and exporting of minerals; taxes; labor standards;
occupational health; waste disposal; protection of the environment; mine safety;
toxic substances; and other matters.  We require licenses and permits
to conduct exploration and mining operations.  Amendments to current
laws and regulations governing operations and activities of mining companies or
more stringent implementation thereof could have a material adverse impact on
our Company.  Applicable laws and regulations will require us to make
certain capital and operating expenditures to initiate new
operations.  Under certain circumstances, we may be required to close
an operation once it is started until a particular problem is remedied or to
undertake other remedial actions.  This could have a material adverse
effect on our results and financial condition.





If
we do not obtain clear title to our joint venture projects or properties, our
business may fail.


While we
have received proof of current title ownership in the name of the mineral claim
optionor and we have received a favorable opinion as to the validity of the
various agreements by which we have acquired our current mineral and mining
rights, this should not be construed as a guarantee of title.  The
properties underlying our joint venture projects may be subject to prior
unregistered agreements or transfers or land claims, and title may be affected
by undetected defects.  Acquisition of title to mineral properties is
a very detailed and time-consuming process, and title to our properties may be
affected by prior unregistered agreements or transfer, or undetected
defects.  Some of our joint venture projects are currently subject to
renewal by the Ministry of Energy and Minerals of Tanzania.  There is
a risk that we may not have clear title to all our mineral property interests,
or they may be subject to challenge or impugned in the future, which would have
a material adverse effect on our business.


19


Our
mineral property interests may be subject to other mining licenses.


Local
residents in Tanzania may have registered the right to mine in small areas
located within a prospecting license; such rights are evidenced by a primary
mining license.  There can be no guarantee that we will be successful
in negotiating with primary mining license owners to acquire their rights if we
determine that we need their permission to drill or mine on the land covered by
such mining licenses.





Our
joint venture partners may have business interests, which could be adverse to
our interests.


Our joint
venture partners in our Tanzanian subsidiary, Ruby Creek Resources (Tanzania)
Limited may have interests in projects in which we do not have an
interest.  These projects may be on parcels adjacent to or near the
Mkuvia gold project.  In addition there were prior negotiations
conducted by the original property owner (and our current partner), which could
have been and may result in conflicts with the current interests the
Company.  We are unable to ascertain these at this time and conflicts
of interest may remain.





We
are subject to risks inherent in the mining industry and at present we do not
have any insurance against such risks.  Any losses we may incur that
are associated with such risks may cause us to incur substantial costs, which
will have a material adverse effect upon our results of operations.


The
business of mining for metals is generally subject to a number of risks and
hazards including environmental hazards, industrial accidents, labor disputes,
unusual or unexpected geological conditions, pressures, cave-ins, changes in the
regulatory environment and natural phenomena such as inclement weather
conditions, floods, and earthquakes.  At present we do not intend to
obtain insurance coverage and even if we were to do so, no assurance can be
given that such insurance will continue to be available or that it will be
available at economically feasible premiums.  Insurance coverage may
not continue to be available or may not be adequate to cover any resulting
liability.  Moreover, insurance against risks such as environmental
pollution or other hazards as a result of exploration and production is not
generally available to companies in the mining industry on acceptable
terms.  We might also become subject to liability for pollution or
other hazards which may not be insured against or which we may elect not to
insure against because of premium costs or other reasons.  Losses from
these events may cause us to incur significant costs that could have a material
adverse effect upon our financial performance and results of
operations.





We
rely on key members of management, the loss of whose services would have a
material adverse effect on our success and development.


Our
success depends to a certain degree upon certain key members of management and
consultants.  These individual are a significant factor in our growth
and success.  The loss of the service of these members could have a
material adverse effect on our success and development.





We
rely on consultants, geologists and engineers to perform our exploration
activities.


Substantial
expenditures are required to develop the exploration infrastructure at any site
chosen for exploration, to establish ore reserves, to carry out environmental
and social impact assessments, and to develop metallurgical processes to extract
the metal from the ore.  We may not be able to discover minerals in
sufficient quantities to justify commercial operation, and we may not be able to
obtain funds required for exploration on a timely basis.  Accordingly,
you could lose your entire investment.





If
we must find another property and because of the fiercely competitive nature of
the mining industry, we may be unable to maintain or acquire attractive mining
properties on acceptable terms, which will materially affect our financial and
other condition.


We
operate in a highly competitive industry, competing with other mining and
exploration companies, and institutional and individual investors, which are
actively seeking minerals exploration properties throughout the world together
with the equipment, labor and materials required to exploit such
properties.  Many of our competitors have financial resources, staff
and facilities substantially greater than ours.  The principal area of
competition is encountered in the financial ability to cost effectively acquire
prime minerals exploration prospects and then exploit such
prospects.  Competition for the acquisition of minerals exploration
properties is intense, with many properties available in a competitive bidding
process in which we may lack technological information or expertise available to
other bidders.  Therefore, we may not be successful in acquiring,
exploring and developing profitable properties in the face of this
competition.  No assurance can be given that a sufficient number of
suitable minerals exploration properties will be available for acquisition,
exploration and development.


20





We
have uninsurable risks.


We may be
subject to unforeseen hazards such as unusual or unexpected geological
formations and other conditions.  We may become subject to liability
for pollution, cave-ins or hazards against which we cannot insure or against
which we may elect not to insure.  The payment of such liabilities may
have a material adverse effect on our financial position.





We
are subject to the volatility of metal and mineral prices.


The
economics of developing metal and mineral properties are affected by many
factors beyond our control including, without limitation, the cost of
operations, variations in the grade ore or resource mined, and the price of such
resources.  The market prices of the metals for which we are exploring
are highly speculative and volatile.  Depending on the price of gold
or other resources, we may determine that it is impractical to commence or
continue commercial production.  The price of gold has fluctuated
widely in recent years.  The price of gold and other metals and
minerals may not remain stable, and such prices may not be at levels that will
make it feasible to continue our exploration activities, or commence or continue
commercial production.





Our
business activities are conducted in Tanzania.


Our
mineral exploration activities in Tanzania may be affected in varying degrees by
political stability and government regulations relating to the mining industry
and foreign investment in that country.  The government of Tanzania
may institute regulatory policies that adversely affect the exploration and
development (if any) of our properties.  Any changes in regulations or
shifts in political conditions in this country are beyond our control and may
materially adversely affect our business.  Our operations may be
affected in varying degrees by government regulations with respect to
restrictions on production, price controls, export controls, foreign exchange
controls, income taxes, expropriation of property, environmental legislation and
mine safety.





Risks
related to our common stock





There
is no significant trading market for our common stock as yet and if a market for
our common stock does not develop, our investors may be unable to sell their
shares.


We
currently have our common stock quoted on the OTC Bulletin Board under the
trading symbol RBYC.  The trading market for our common stock has not
yet developed to any significant level.  We cannot provide our
investors with any assurance that a significant public market will materialize
for our common stock.  Further, the OTC Bulletin Board is not a
listing service or exchange, but is instead a dealer quotation service for
subscribing members.  The market price of our common stock may be
significantly affected by factors such as actual or anticipated fluctuations in
our operation results, general market conditions and other
factors.  In addition, the stock market has from time to time
experienced significant price and volume fluctuations that have particularly
affected the market prices for the shares of developmental stage companies,
which may materially adversely affect the market price of our common
stock.





Our
directors and officers are indemnified for any monies they pay in settlement of
actions performed while a director or officer.


Sections
78.7502 and 78.751 of the Nevada Revised Statutes provide for indemnification of
our officers and directors in certain situations where they might otherwise
personally incur liability, judgments, penalties, fines and expenses in
connection with a proceeding or lawsuit to which they might become parties
because of their position with the Company.  We have authorized the
indemnification of our officers and directors to the full extent available under
the Nevada Revised Statutes.


21





Our
stock is a penny stock.  Trading of our stock may be restricted by the
SEC's penny stock regulations and FINRA's sales practice requirements, which may
limit a stockholder's ability to buy and sell our stock.


Our
common stock is subject to the "Penny Stock" Rules of the SEC, which can make
transactions in our common stock cumbersome and may reduce the value of an
investment in our common stock.  Our stock is quoted on the OTC
Bulletin Board of FINRA, which is generally considered to be a less efficient
market than markets such as NASDAQ or the national exchanges, and which may
cause difficulty in conducting trades and difficulty in obtaining future
financing.  Further, our securities are subject to the "penny stock
rules" adopted pursuant to Section 15(g) of the Exchange Act.  The
penny stock rules apply generally to companies whose common stock trades at less
than $5.00 per share, subject to certain limited exemptions.  Such
rules require, among other things, that brokers who trade "penny stock" to
persons other than "established customers" complete certain documentation, make
suitability inquiries of investors and provide investors with certain
information concerning trading in the security, including a risk disclosure
document and quote information under certain circumstances.  Many
brokers have decided not to trade "penny stock" because of the requirements of
the "penny stock rules" and, as a result, the number of broker-dealers willing
to act as market makers in such securities is limited.  In the event
that we remain subject to the "penny stock rules" for any significant period,
there may develop an adverse impact on the market, if any, for our
securities.  Because our securities are subject to the "penny stock
rules", investors will find it more difficult to dispose of our
securities.  Further, it is more difficult: (i) to obtain accurate
quotations, (ii) to obtain coverage for significant news events because major
wire services, such as the Dow Jones News Service, generally do not publish
press releases about such companies, and (iii) to obtain needed
capital.





In
addition to the "penny stock" rules promulgated by the SEC, FINRA has adopted
rules that require a broker-dealer to have reasonable grounds for believing that
an investment is suitable for a customer when recommending the investment to
that customer.  Prior to recommending speculative low-priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information.  Under
interpretations of these rules, FINRA believes that there is a high probability
that speculative low priced securities will not be suitable for at least some
customers.  FINRA requirements make it more difficult for
broker-dealers to recommend that their customers buy our common stock, which may
limit your ability to buy and sell our stock and have an adverse effect on the
market for our shares.(See “Principal
Shareholders.)


22


ITEM
1B. UNRESOLVED STAFF COMMENTS




None.




ITEM
2. PROPERTIES




Our joint
venture properties are described above under "Our Business".




Our
executive offices are located at 750 3rd Avenue 11th Floor, New York, NY USA
10017. We have a one year lease arrangement, which commenced on June 1, 2010,
for this space with an entity that is affiliated with a director and principal
shareholder.  Consideration for this space was paid in common shares
of the Company, and at a total value which the Company believes was determined
on an arms length basis.





ITEM 3. LEGAL PROCEEDINGSWe
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 Michner 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 Company entered into an
agreement with Lang Michner pursuant to which the Company paid $75,000 in full
settlement of this dispute and mutual releases were exchanged. This amount was
adequately provided for in the Company’s financial statements for the year ended
August 31, 2010.





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




On
January 13, 2009, the shareholders of Ruby Creek Resources Inc. voted in favor
of proposal to change the jurisdiction of incorporation the Company from British
Columbia (Canada) to Nevada. The shareholders also voted in favor of a proposal
to change the Company's authorized share capital from unlimited common shares
without par value to 500,000,000 common shares with a par value of $0.001 per
share.




The
change in jurisdiction and the change in Authorized Share Capital were
accomplished through the adoption by Ruby Creek Resources Inc. shareholders of
certain resolutions and a plan of continuation under Section 308 of the Business
Corporations Act of British Columbia which authorized Ruby Creek Resources Inc.
to complete the jurisdiction change.  Upon completion of the
jurisdiction change, Ruby Creek Resources Inc. commenced its incorporation in
the State of Nevada and was thereafter governed under the Nevada Revised
Statutes.  The Company ceased to be incorporated in British
Columbia.


23




PART
II




ITEM
5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES




Market
Information




Our
common stock has been traded on the OTC Bulletin Board under the symbol "RBYC"
since January 2007.  The following table sets forth the high and low
bid price per share of our common stock for the periods indicated. These
over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not necessarily represent actual
transactions:




Quarter Ended
                    
                    High
                    
                    
                    LowNovember
      30, 2010
                    
                    $
                    0.78
                    
                    
                    $
                    0.51August
      31, 2010
                    
                    $
                    0.60
                    
                    
                    $
                    0.36May
      31, 2010
                    
                    $
                    0.50
                    
                    
                    $
                    0.27February
      28, 2010
                    
                    $
                    0.31
                    
                    
                    $
                    0.11November
      30, 2009
                    
                    $
                    0.17
                    
                    
                    $
                    0.05August
      31, 2009
                    
                    $
                    0.14
                    
                    
                    $
                    0.09May
      31, 2009
                    
                    $
                    0.10
                    
                    
                    $
                    0.03February
      28, 2009
                    
                    $
                    0.07
                    
                    
                    $
                    0.04November
      30, 2008
                    
                    $
                    0.30
                    
                    
                    $
                    0.25





We had
118 registered shareholders of record as of December 3, 2010




Penny
Stock Rule




Our
shares will have to comply with the Penny Stock Reform Act of 1990 which may
potentially decrease your ability to easily transfer our shares. Broker-dealer
practices in connection with transactions in "penny stocks" are regulated. Penny
stocks generally are equity securities with a price of less than $5.00. The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the risks
in the penny stock market.  The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker-dealer make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the
transaction.  These disclosure requirements may have the effect of
reducing the level of trading activity in the secondary market for a stock that
has to comply with the penny stock rules. As our shares will likely have to
comply with such penny stock rules, our shareholders will in all likelihood find
it more difficult to sell their securities.


24


Recent
Sales of Unregistered Securities




On July
23, 2009, the Company issued 400,000 of common stock at a price of $0.05 per
share for net proceeds of $15,000, net of share issuance costs of $5,000. As
part of this private placement, the Company issued 200,000 share purchase
warrants to purchase one share of common stock for each warrant exercisable at
$0.05 for a period of five years. The fair value of these share purchase
warrants, determined using the Black-Scholes option pricing model with a
risk-free interest rate of 2.57%, a dividend rate of 0% and a volatility of 99%,
was 17,492 or $0.09 per warrant. The shares were issued equally to David Bukzin
and Double Trouble Productions, LLC.





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 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 of common stock 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.





On
September 7, 2010 the Company filed a final Form D filed with Securities and
Exchange Commission for the sale of units consisting of one share and one
warrant, between April 3, 2010 and August 26, 2010, 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.





Pursuant
to a Form D filed with Securities and Exchange Commission for the sale of units
consisting of one share and one warrant, between October 20, 2010 and December 3, 2010, the Company
sold a total of 1,780,000
units to41 individuals
and received proceeds of $890,000. Each unit consists of
one share of common stock at a price of $0.50 per share and one warrant to
purchase one share of stock for $1.00 per share, and each warrant has a two year
life.  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.


25





Dividends


There are
no restrictions in our Articles that prevent us from declaring
dividends.  The business act governing corporations in the State of
Nevada (Nevada Revised Statutes, Chapter 78), provides that a corporation may
declare or pay a dividend unless there are reasonable grounds to believe that
the corporation is insolvent or the payment of the dividend would render the
corporation insolvent.




We have
not declared any dividends and we do not plan to declare any dividends in the
foreseeable future.




Securities
Authorized For Issuance Under Compensation Plans




The
Company does not have a formal Compensation Plan.  From time to time,
the Company grants warrants or options to specific directors, officers,
employees or consultants as deemed necessary.




ITEM
6. SELECTED FINANCIAL DATA




We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are
not required to provide the information required under this item.




ITEM
7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS




The
following  discussion of our financial condition, changes in financial
condition, plan of operations and results of operations should be read in
conjunction with (i) our audited financial statements as of August 31, 2010 and
2009 and for the period from inception (May 3, 2006) to August 31, 2010 and (ii)
the section “Business”, included in this annual 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




Based on
the nature of our business, we anticipate incurring operating losses in the
foreseeable future.  We base this expectation, in part, on the fact
that very few prospecting licenses in the exploration stage ultimately develop
into producing, profitable mines.  As noted above, our future
financial results are also uncertain due to a number of factors, some of which
are outside our control.




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 obligations associated with the acquisitions of the Mkuvia Gold
Project, there exists substantial doubt about our ability to continue as a going
concern.  Even if we complete our current exploration and test mining
program 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.


26


Our plan
of operations for the next twelve months is to obtain the funding necessary for
the continued exploration and development of the Mkuvia Gold Project and other
potential exploration properties.




Liquidity
and Financial Condition




At August
31, 2010, we had cash of $325,756 and a working capital deficit of $ 772,620,
including an aggregate of $911,453 due to Douglas Lake Minerals at discounted
value.  In addition to working capital requirements, our need for
liquidity includes payment obligations remaining under our Mkuvia Gold Property
purchases. With respect to the 125 Sq Km Mkuvia Property rights acquisition, the
Company will be required to make (i) a payment of $400,000 to Douglas Lake
Minerals upon the issuance of the initial mining license which is anticipated to
occur in the first half of fiscal 2011; and (ii) three additional payments of
$750,000 within 12, 24 months and 36 months of that date.  The Company
has the option to satisfy the final $750,000 payment (which would be due on
September, 2013, should the mining license be issued in September 2010) by
issuing shares of its common stock based upon the Volume Weighted Average Price
(“VWAP”) for the 10 days immediately preceding the payment date.  In
connection with the acquisition of the rights to the 225 sq km of the Mkuvia
Gold Project on June 16, 2010 we have remaining obligations to pay $450,000 on
June 1, 2011; $1,000,000 on June 1, 2012; and $1,000,000 on June 1
2013.  The Company has the option to satisfy the final
$1,000,000  payment due on June 1, 2013, by issuing shares of its
common stock based upon the Volume Weighted Average Price (“VWAP”) for the 20
days immediately preceding the payment date. Complete details of these
agreements are included elsewhere in this document.




The
Purchase Agreements also provide us with the option to increase our interest
from the current 70% to 75% of the Project by making an aggregate payment of an
additional $2,000,000 to Douglas Lake. Therefore, in total with respect to the
entire 380 sq km of the Project, we have the option to increase our interest
from 70% to 75% for $2,000,000.




We will
require an additional $475,000 if we determine to complete the Kapinga
acquisition.




In fiscal 2010 and through December 3, 2010, we received
additional financing as follows:




From
December 29, 2009 to February 19, 2010 we raised $200,000 and filed a Form D
pursuant to Rule 506 of the SEC, Notice of Exempt Offering of
Securities.  Under this offering we issued 1,600,000 shares of our
common stock at $0.125 per share and warrants to purchase an additional 800,000
common shares for 2 years at $0.25 per share.




For the
period from April 3, 2010 to August 26, 2010, we conducted an offering of our
securities under Regulations D and S offering pursuant to Rule 506 of the SEC
for $350,000. We ultimately sold 5,356,000 Units at a price of $0.25 per Unit
and received total proceeds of $1,339,000 on this offering.  Each Unit
consisted of one  common share and one warrant.  Two warrants are
required to buy one  common share at a price of $0.50 per share for a
period of up to two years.




On
October 18, 2010, we commenced another offering of our equity securities
pursuant to Rule 506 of Regulation D and Regulation S for up to $3,000,000
consisting of 6,000,000 million units.  Through December 3, 2010, the
Company received $890,000 in proceeds for the sale of 1,780,000 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,  at a price of $1.00 per share exercisable for a period
of up to two years. This offering is continuing and we anticipate, but cannot
guarantee, receiving additional funds.




27


On
November 27, 2010, the holders of our 11% convertible debentures and accrued
interest in the aggregate amount of $111,000 elected to convert these securities
into 2,220,000 common shares, extinguishing this
obligation.




Subsequent to August 31, 2010, three
holders of an aggregate of 450,000 warrants issued in the private placement
described in Note 8b to the Notes to the Consolidated Financial Statements
exercised their right to purchase 225,000 shares of common stock for which we
received $56,250.




On
December 1, 2010, the holder of a 1,500,000 common share default warrant issued
in connection with a $75,000 bridge loan (which itself was converted in March
2010) exercised this warrant, for which we received proceeds of
$75,000.




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.  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 joint venture prospecting licenses for the Mkuvia
Gold Mining Project and the Kapinga and our business plan could
fail.  Even if we are successful in obtaining debt or equity financing
to fund our acquisition and exploration program, 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 abandon our
plan of operations.




Results of Operations for the year ended August 31,
2010.




Mining
exploration and preoperating costs




In the
year ended August 31, 2010, we incurred approximately $126,000 of these costs as
compared to no such costs in the immediately preceding year. These costs include
the establishment of base camp operations on the Mkuvia, housing facilities,
salaries of full time and part time personnel, security and rental of test
mining equipment in preparation to obtain a mining license and commencement of
commercial operations and rental of office space in Dar es Salaam.




Consulting
Services




In the
year ended August 31, 2010, we incurred approximately $661,000 in consulting
costs as compared to $26,000 in the immediately preceding year. This substantial
increase is support of our accelerating operating activities. We have engaged
board advisors and members to assist us in operations in Tanzania and in support
of board of directors and financing activities and strategies, investor
relations and other legal and administrative support. Of the total amount
incurred, approximately $84,000 was in payments requiring cash, and $576,000 was
in stock based compensation.


28


Interest
and Financing Fees




In the
year ended August 31, 2010, we incurred approximately $1,085,000 in such costs
as compared to no such costs in the immediately preceding year. Approximately
$11,000 was actual interest expense incurred and substantially all was non-cash
financing costs related to the fair value of derivative instruments issued in
connection with the bridge loan and the 11% convertible debentures ($934,000)
and the amortization of debt discount related to the amounts due Douglas Lake
minerals ($147,000).




Management
Services




In the
year ended August 31, 2010, we incurred approximately $246,000 of these costs as
compared to $15,000 in the immediately preceding year. The increase reflects the
full time services and a full year of services of the our CEO in the current
year as compared to the preceding year, and the retention of a CFO in February
1, 2009 to deal with greater complexity in financial reporting, SEC compliance
and business transactions. Of the 2010 amount $97,000 represents non cash- stock
based compensation comprised of the fair value of compensation warrants and
common share issuances earned in 2010.




Office
and General, Professional Fees, and Shareholder and Investor
Relations




In the
year ended August 31, 2010, we incurred approximately $414,000 of these costs as
compared to $157,000 in the immediately preceding year. These expenses increased
in a manner consistent with the increased complexity and scope or operations of
the company, including the retention of investor relations firms to enhance our
profile in the public markets, travel and related costs arising from attendance
at various industry and investor conferences, directors and officers insurance
and additional support staff and facilities costs.




Net
Loss




We
had a net loss of $2,500,000 for the year ended August 31, 2010 as compared to a
net loss of $208,000 in the immediately preceding year.  Our net loss
from inception on May 3, 2006 until August 31, 2010 was 2,997,000. The
preceding discussions explain the increase in our net loss. Of our 2010 net
loss, $657,000 was stock based compensation and shares issued for services and
$1,077,000 was for non-cash financing costs for an aggregate of $1,734,000 in
non-cash costs.


29


Going Concern




We are in
the exploration stage and have not generated revenues since
inception.  We have incurred significant losses to date and further
losses are anticipated raising substantial doubt about the ability of our
Company to continue operating as a going concern.  The continuation of
our Company as a going concern is dependent upon our ability to obtain necessary
equity financing to continue operations, meet the Douglas Lake and other
obligations and to determine the existence, discovery and successful
exploitation of economically recoverable reserves on our resource properties and
ultimately on the attainment of future profitable operations.  Since
inception to August 31, 2010, we had accumulated losses of
$2,997,000.  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 we 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.


30


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.  As of August 31, 2010, any potential costs related to
the retirement of the Company's mineral property interests have not yet been
determined.




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




Effective
September 1, 2009, the Company adopted ASC 855, Subsequent
Events.  ASC 855 requires companies to recognize in the financial
statements the effects of subsequent events that provide additional evidence
about conditions that existed at the date of the balance sheet, including the
estimates inherent in the process of preparing financial
statements.  An entity shall disclose the date through which
subsequent events have been evaluated, as well as whether that date is the date
the financial statements were issued.  Companies are not permitted to
recognize subsequent events that provide evidence about conditions that did not
exist at the date of the balance sheet but arose after the balance sheet date
and before financial statements are issued.  Some non recognized
subsequent events must be disclosed to keep the financial statements from being
misleading.  For such events a company must disclose the nature of the
event, an estimate of its financial effect, or a statement that such an estimate
cannot be made.  This Statement applies prospectively for interim or
annual financial periods ending after June 15, 2009.  The adoption of
ASC 855 did not have an impact on the Company’s results of operations and
financial position.


31


In
January 2010, the FASB issued ASC No. 2010-06, “Fair Value Measurement and
Disclosures (Topic 820): Improving Disclosure and Fair Value Measurements”,
which requires that purchases, sales, issuances, and settlements for Level 3
measurements be disclosed.  ASC No. 2010-06 is effective for its fiscal
quarter beginning after December 15, 2010.  The adoption of ASC No. 2010-06
is not expected to have a material impact on the Company’s consolidated
financial statements.




In
February 2010, the FASB issued ASU No. 2010-11, “Derivatives and Hedging (Topic
815): Scope Exception Related to Embedded Credit Derivatives”. ASU No. 2010-11
clarifies the type of embedded credit derivative that is exempt from embedded
derivative bifurcation requirements. Specifically, only one form of embedded
credit derivative qualifies for the exemption – one that is related only to the
subordination of one financial instrument to another. As a result, entities that
have contracts containing an embedded credit derivative feature in a form other
than such subordination may need to separately account for the embedded credit
derivative feature. The amendments in ASU No. 2010-11 are effective for each
reporting entity at the beginning of its first fiscal quarter beginning after
June 15, 2010. Early adoption is permitted at the beginning of each entity’s
first fiscal quarter beginning after March 5, 2010. The adoption of ASC No.
2010-11 is not expected to have a material impact on the Company’s consolidated
financial statements.




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




ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are
not required to provide the information required under this
item.


32




ITEM
8. CONSOLIDATED FINANCIAL STATEMENTS




RUBY
      CREEK RESOURCES, INC.(An
      Exploration Stage Company)August
      31, 2010INDEXReport
      of Independent Registered Public Accounting Firm
                    F -
      1Consolidated
      Balance Sheets
                    F -
      2Consolidated
      Statements of Operations
                    F -
      3Consolidated
      Statement of Stockholders’ Equity (Deficit)
                    F -
      4Consolidated
      Statements of Cash Flows
                    F -
      5Notes
      to Consolidated Financial Statements
                    F -
      6-19




33




REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Stockholders and Board of Directors of Ruby Creek Resources Inc.
 
 We have
audited the accompanying balance sheets of Ruby Creek Resources Inc (an
exploration stage company) as of August 31, 2010 and  2009 and the
related statements of operations, stockholders’ equity (deficit) and cash flows
for the years ended August 31, 2010 and 2009 and the period from May 3, 2006
(inception) through August 31, 2010.  These financial statements are
the responsibility of the Company's management.  Our responsibility is
to express an opinion on these financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement.  The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, these financial statements present fairly, in all material respects,
the financial position of Ruby Creek Resources Inc. as of August 31, 2010 and
2009 and the results of its operations and its cash flows for the years ended
August 31, 2010 and 2009 and the period from May 3, 2006 (inception) through
August 31, 2010 in conformity with accounting principles generally accepted in
the United States of America.
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern.  As discussed in Note 1 to the
financial statements, to date the Company has reported losses since inception
from operations and requires additional funds to meet its obligations and fund
the costs of its operations.  These factors raise substantial doubt
about the Company’s ability to continue as a going
concern.  Management’s plans in this regard are described
in   Note 1.  The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
 
 
 “DMCL”
 
 DALE
MATHESON CARR-HILTON LABONTE LLP
 CHARTERED
ACCOUNTANTS
 Vancouver,
Canada
 December
10, 2010
 
 
 
 
  F-1




RUBY CREEK RESOURCES, INC.


(An
Exploration Stage Company)


CONSOLIDATED
BALANCE SHEETS




August 31,2010
                        
                        
                        2009ASSETSCURRENT
      ASSETSCash
                        
                        $
                        325,756
                        
                        
                        $
                        5,838GST
      receivable
                        
                        
                        -
                        
                        
                        
                        371Due
      from related party
                        
                        
                        7,668
                        
                        
                        
                        -Prepaid
      expenses and other current assets
                        
                        
                        42,824
                        
                        
                        
                        285Total
      current assets
                        
                        
                        376,248
                        
                        
                        
                        6,494PROPERTY
      AND EQUIPMENT, net of accumulated depreciation of $4,614 and $649,
      respectively
                        
                        
                        35,808
                        
                        
                        
                        810MINERAL
      PROPERTIES
                        
                        
                        6,796,170
                        
                        
                        
                        -TOTAL
      ASSETS
                        
                        $
                        7,208,226
                        
                        
                        $
                        7,304LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)CURRENT
      LIABILITIESAccounts
      payable
                        
                        $
                        142,342
                        
                        
                        $
                        107,308Accrued
      interest
                        
                        
                        8,349
                        
                        
                        
                        -Loan
      payable
                        
                        
                        10,833
                        
                        
                        
                        -Convertible
      notes - related parties, net of discount
                        
                        
                        75,890
                        
                        
                        
                        -Due
      to Douglas Lake Minerals Inc.
                        
                        
                        911,453
                        
                        
                        
                        -Due
      to related parties
                        
                        
                        -
                        
                        
                        
                        29,293Total
      current liabilities
                        
                        
                        1,148,868
                        
                        
                        
                        136,601LONG-TERM
      LIABILITIESDue
      to Douglas Lake Minerals Inc., net of discount
                        
                        
                        3,311,988
                        
                        
                        
                        -4,460,856
                        
                        
                        
                        136,601COMMITMENTS
      AND CONTINGENCIES (Note 7)STOCKHOLDERS'
      EQUITY (DEFICIT)Common
      stock, 500,000,000 shares authorized, par value $0.001 22,727,912 and
      8,737,000 shares issued and outstanding, respectively
                        
                        
                        22,728
                        
                        
                        
                        8,737Additional
      paid-in capital
                        
                        
                        5,720,423
                        
                        
                        
                        314,010Comprehensive
      income (loss) from foreign exchange translation
                        
                        
                        890
                        
                        
                        
                        -Deficit
      accumulated during the exploration stage
                        
                        
                        (2,996,671
                        )
                        
                        
                        (452,044
                        )Total
      Stockholders' Equity (Deficit)
                        
                        
                        2,747,370
                        
                        
                        
                        (129,297
                        )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                        
                        $
                        7,208,226
                        
                        
                        $
                        7,304




See
accompanying notes to consolidated financial statements.




F-2




RUBY CREEK RESOURCES, INC.


(An
Exploration Stage Company)


CONSOLIDATED
STATEMENTS OF OPERATIONS





Cumulativefor the PeriodfromMay 3, 2006(Inception) toYear Ended August 31,
                    
                    
                    August 31,2010
                    
                    
                    2009
                    
                    
                    2010EXPENSESMining
      exploration and preoperating costs
                    
                    $
                    125,797
                    
                    
                    $
                    -
                    
                    
                    $
                    125,797Consulting
      services
                    
                    
                    660,812
                    
                    
                    
                    25,595
                    
                    
                    
                    686,407Depreciation
                    
                    
                    3,965
                    
                    
                    
                    272
                    
                    
                    
                    4,615Interest
      and financing fees
                    
                    
                    1,085,150
                    
                    
                    
                    -
                    
                    
                    
                    1,085,150Management
      services
                    
                    
                    245,655
                    
                    
                    
                    15,335
                    
                    
                    
                    314,289Office
      and general
                    
                    
                    210,588
                    
                    
                    
                    36,590
                    
                    
                    
                    260,347Professional
      fees
                    
                    
                    141,737
                    
                    
                    
                    117,969
                    
                    
                    
                    403,897Property
      impairment and costs on disposed mineral property
                    
                    
                    9,431
                    
                    
                    
                    9,772
                    
                    
                    
                    49,617Shareholder
      and investor relations
                    
                    
                    61,492
                    
                    
                    
                    2,344
                    
                    
                    
                    66,552Total
      expenses
                    
                    
                    2,544,627
                    
                    
                    
                    207,877
                    
                    
                    
                    2,996,671NET
      LOSS
                    
                    $
                    (2,544,627
                    )
                    
                    $
                    (207,877
                    )
                    
                    $
                    (2,996,671
                    )NET
      LOSS PER COMMON SHARE, BASIC AND DILUTED
                    
                    $
                    (0.20
                    )
                    
                    $
                    (0.02
                    )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND
    DILUTED
                    
                    
                    12,450,771
                    
                    
                    
                    8,383,027


See
accompanying notes to consolidated financial statements.




F-3




RUBY
CREEK RESOURCES, INC.


(An
Exploration Stage Company)


Consolidated
Statement of Stockholders' Equity (Deficit)





From May
3, 2006 (Date of Inception) to August 31, 2010




ComprehensiveDeficit
                      
                      
                      income (loss) from
                      
                      
                      TotalCommon Stock
                      
                      
                      Additional
                      
                      
                      
                      
                      
                      Accumulated During
                      
                      
                      foreign exchange
                      
                      
                      Stockholders'Shares
                      
                      
                      Amount
                      
                      
                      Paid-in capital
                      
                      
                      Subscriptions
                      
                      
                      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
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      45,000August
      31, 2006 - issuance of common shares for cash at $0.05 per
      share
                      
                      
                      2,970,000
                      
                      
                      
                      2,970
                      
                      
                      
                      145,530
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      148,500August
      31, 2006 - issuance of common shares for cash at $0.10 per
      share
                      
                      
                      867,000
                      
                      
                      
                      867
                      
                      
                      
                      85,833
                      
                      
                      
                      (5,000
                      )
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      81,700August
      31, 2006 - donated rent and management services
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      3,000
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      3,000Net
      loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (19,696
                      )
                      
                      
                      -
                      
                      
                      
                      (19,696
                      )Balance
      - August 31, 2006
                      
                      
                      8,337,000
                      
                      
                      
                      8,337
                      
                      
                      
                      274,863
                      
                      
                      
                      (5,000
                      )
                      
                      
                      (19,696
                      )
                      
                      
                      -
                      
                      
                      
                      258,504September
      5, 2006 - cash received for stock subscription
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      5,000
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      5,000Net
      loss
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      
                      
                      
                      
                      (127,497
                      )
                      
                      
                      -
                      
                      
                      
                      (127,497
                      )Balance
      - August 31, 2007
                      
                      
                      8,337,000
                      
                      
                      
                      8,337
                      
                      
                      
                      274,863
                      
                      
                      
                      -
                      
                      
                      
                      (147,193
                      )
                      
                      
                      -
                      
                      
                      
                      136,007Net
      loss
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (96,974
                      )
                      
                      
                      -
                      
                      
                      
                      (96,974
                      )Balance
      - August 31, 2008
                      
                      
                      8,337,000
                      
                      
                      
                      8,337
                      
                      
                      
                      274,863
                      
                      
                      
                      -
                      
                      
                      
                      (244,167
                      )
                      
                      
                      -
                      
                      
                      
                      39,033July
      23. 2009 - issuance of common shares for cash at $0.05 per
      share
                      
                      
                      400,000
                      
                      
                      
                      400
                      
                      
                      
                      14,600
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      15,000Stock
      based compensation
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      24,547
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      24,547Net
      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
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      50,000December
      24, 2009 to February 19, 2010 - issuance of common shares for cash at
      $0.125 per share
                      
                      
                      1,600,000
                      
                      
                      
                      1,600
                      
                      
                      
                      198,400
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      200,000February
      1, 2010 - issuance of common shares for services at $0.20 per
      share
                      
                      
                      110,000
                      
                      
                      
                      110
                      
                      
                      
                      21,890
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      22,000December
      22, 2009 to January 22, 2010 - issuance of common shares and warrants for
      finance fee
                      
                      
                      180,000
                      
                      
                      
                      180
                      
                      
                      
                      61,120
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      61,300Fair
      value - beneficial conversion feature, warrants and discount in connection
      with issuance of 11%  convertible notes
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      100,000
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      100,000March
      3, 2010 - issuance of common shares for finance fee at $0.25 per
      share
                      
                      
                      10,000
                      
                      
                      
                      10
                      
                      
                      
                      2,490
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,500March
      23, 2010 - issuance of common shares for bridge loan default conversion at
      $0.05 per share
                      
                      
                      1,544,877
                      
                      
                      
                      1,545
                      
                      
                      
                      75,699
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      77,244March
      23, 2010 - fair value of warrants on default of bridge
loan
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      787,369
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      787,369June
      4, 2010 - issuance of common stock for services at $0.35 per
      share
                      
                      
                      50,000
                      
                      
                      
                      50
                      
                      
                      
                      19,450
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      19,500June
      30, 2010 - Issuance of common stock for services at $0.25 per
      share
                      
                      
                      8,608
                      
                      
                      
                      9
                      
                      
                      
                      2,143
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,152July
      26, 2010 - Issuance of common stock for services at $0.25 per
      share
                      
                      
                      30,000
                      
                      
                      
                      30
                      
                      
                      
                      7,470
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      7,500April
      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
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,339,000August
      16, 2010 - Issuance of common stock on exercise of options
                      
                      
                      101,427
                      
                      
                      
                      101
                      
                      
                      
                      3,445
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      3,546August
      27, 2010 - Issuance of common stock for mineral property
                      
                      
                      4,000,000
                      
                      
                      
                      4,000
                      
                      
                      
                      2,116,000
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,120,000Stock
      based compensation
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      628,293
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      628,293Comprehensive
      income - foreign exchange translation
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      890
                      
                      
                      
                      890Net
      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




See
accompanying notes to consolidated financial statments.


F-4




RUBY CREEK RESOURCES, INC.


(An
Exploration Stage Company)


CONSOLIDATED
STATEMENTS OF CASH FLOWS





Cumulativefor
      the PeriodfromYear
                
                
                May
      3, 2006Ended
                
                
                (Inception)
      toAugust
      31,
                
                
                August
      31,2010
                
                
                2009
                
                
                2010Cash
      Flows From Operating ActivitiesNet
      loss
                
                $
                (2,544,627
                )
                
                $
                (207,877
                )
                
                $
                (2,996,671
                )Adjustments
      to reconcile net loss to net cash (used in) operating
      activities:Depreciation
      and amortization
                
                
                3,963
                
                
                
                272
                
                
                
                4,613Donated
      rent
                
                
                -
                
                
                
                -
                
                
                
                1,500Donated
      services
                
                
                -
                
                
                
                -
                
                
                
                1,500Interest
      and financing fees, including discount accretion - non
cash
                
                
                1,076,575
                
                
                
                -
                
                
                
                1,076,575Common
      stock issued for services
                
                
                29,152
                
                
                
                
                
                
                
                29,152Property
      impairment
                
                
                -
                
                
                
                9,771
                
                
                
                9,771Stock
      based compensation
                
                
                628,293
                
                
                
                24,547
                
                
                
                652,840Net
      changes in noncash working capital items:(Increase)
      decrease - GST receivable
                
                
                371
                
                
                
                4,442
                
                
                
                -(Increase)
      decrease - Prepaid expenses
                
                
                (20,539
                )
                
                
                (285
                )
                
                
                (20,824
                )Increase
      (decrease)- Accounts payable
                
                
                47,820
                
                
                
                60,718
                
                
                
                155,128Increase
      (decrease) - Dues to related parties
                
                
                13,039
                
                
                
                29,180
                
                
                
                42,332Net
      cash flows  (used in) operating activities
                
                
                (765,953
                )
                
                
                (79,232
                )
                
                
                (1,044,084
                )Cash
      flows from investing activitiesPurchase
      of equipment
                
                
                (38,962
                )
                
                
                (528
                )
                
                
                (40,422
                )Acquisition
      of mineral properties
                
                
                (600,000
                )
                
                
                (5,594
                )
                
                
                (609,771
                )Net
      cash flows (used in) investing activities
                
                
                (638,962
                )
                
                
                (6,122
                )
                
                
                (650,193
                )Cash
      flows from financing activitiesGross
      proceeds on issuance of common shares for cash - private
      placements
                
                
                1,539,000
                
                
                
                15,000
                
                
                
                1,834,200Gross
      proceeds of loan
                
                
                19,500
                
                
                
                -
                
                
                
                19,500Repayment
      of loan
                
                
                (8,667
                )
                
                
                -
                
                
                
                (8,667
                )Gross
      proceeds on bridge loan- related party
                
                
                75,000
                
                
                
                -
                
                
                
                75,000Gross
      proceeds on convertible notes - related parties
                
                
                100,000
                
                
                
                -
                
                
                
                100,000Net
      cash flows provided by financing activities
                
                
                1,724,833
                
                
                
                15,000
                
                
                
                2,020,033Net
      increase (decrease) in cash
                
                
                319,918
                
                
                
                (70,354
                )
                
                
                325,756Cash
      - beginning of year
                
                
                5,838
                
                
                
                76,192
                
                
                
                -Cash
      - end of year
                
                $
                325,756
                
                
                $
                5,838
                
                
                $
                325,756Supplemental
      disclosuresInterest
      paid
                
                $
                228
                
                
                $
                57
                
                
                $
                228Taxes
      paid
                
                
                -
                
                
                
                -
                
                
                
                -Conversion
      of related party debt to shares of common stock and
    warrants
                
                
                127,244
                
                
                
                -
                
                
                
                127,244Mineral
      property costs acquired for short term debt
                
                
                1,100,000
                
                
                
                -
                
                
                
                1,100,000Mineral
      property costs acquired for long term debt, net of
discount
                
                
                3,576,170
                
                
                
                -
                
                
                
                3,576,170Mineral
      property costs acquired - Fair value of common shares
    issued
                
                
                2,120,000
                
                
                
                -
                
                
                
                2,120,000




See
accompanying notes to consolidated financial statments.


F-5




Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
  NOTE
1 – ORGANIZATION, BUSINESS AND BASIS OF PRESENTATION
  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, exploration
and mining 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. Ruby Creek Resources (Tanzania) Limited (“RCRTz) was incorporated on
May 21, 2010 in Tanzania, a company which is 70% owned by the
Company.
  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 August 31, 2010 approximating
$2,997,000 and has a working capital deficit of approximately $773,000 at August
31, 2010, raising substantial doubt about the ability of the Company to continue
as a going concern.  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 determine the existence, discovery
and successful exploitation of economically recoverable mineral reserves on its
resource properties and ultimately on the attainment of future profitable
operations.   During the year ended August 31, 2010, the Company
raised approximately $1.6 million in two private placements of its common shares
and warrants to purchase common shares, and has raised approximately $890,000
subsequent to August 31, 2010. However substantial additional working capital
and capital funds will be required to finance the Company’s operations and meet
the funding obligations of the agreement with Douglas Lake Minerals, Inc.
(“Douglas Lake”) until commercial operations commence and positive cash flow
could be achieved.  While management believes that additional financing
will be available on terms acceptable to the Company, there can be no assurance
of this, nor 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.
  Basis
of Presentation
 These
consolidated financial statements and related notes are presented in accordance
with accounting principles generally accepted in the United States, and are
expressed in U.S. dollars. These consolidated financial statements include the
accounts of the Company and its 70% owned subsidiary, RCRTz. The Company's
fiscal year-end is August 31. Under the terms of its joint venture agreement,
the Company has voting, operating and financial control of RCRTz and is required
to fund all of the development and operational costs until commercial production
commences. Therefore 100% of the operating results of RCRTz are included in the
consolidated results of operations for the year ended August 31,
2010.
  F-6
  Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 a)
              Property
      and equipment
 Property
and equipment is stated at cost less accumulated depreciation. Depreciation is
provided principally using the straight-line and declining balance methods over
the estimated useful lives of the assets, which range from 3 to 10 years. The
cost of repairs and maintenance is charged to operations as incurred.
Expenditures for property betterments and renewals are capitalized. Upon sale or
other disposition of a depreciable asset, cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in the statement of
operations.
 
 The
Company periodically evaluates whether events and circumstances have occurred
that may warrant revision of the estimated useful life of property and equipment
or whether the remaining balance of property and equipment should be evaluated
for possible impairment. If events and circumstances warrant evaluation, the
Company uses an estimate of the related undiscounted cash flows over the
remaining life of the property and equipment in measuring their
recoverability.
 
 b)
                  Impairment of long-lived
      assets
 The
Company reviews and evaluates long-lived assets for impairment when events or
changes in circumstances indicate the related carrying amounts may not be
recoverable. The assets are subject to impairment consideration under ASC
360-10-35-17, Measurement of
an Impairment Loss, if events or circumstances indicate that their
carrying amount might not be recoverable. As of August 31, 2010, exploration and
evaluation activities continue consistent with the Company’s plans and no events
or circumstances have happened to indicate the related carrying values of the
properties may not be recoverable. When the Company determines that an
impairment analysis should be done, the analysis will be performed using the
rules of ASC 930-360-35, Asset
Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived
Assets.
 
 Various
factors could impact the Company’s ability to achieve forecasted production
schedules. Additionally, commodity prices, capital expenditure requirements and
reclamation costs could differ from the assumptions the Company may use in cash
flow models used to assess impairment. The ability to achieve the estimated
quantities of recoverable minerals from exploration stage mineral interests
involves further risks in addition to those factors applicable to mineral
interests where proven and probable reserves have been identified, due to the
lower level of confidence that the identified mineralized material can
ultimately be mined economically.
 
 Material
changes to any of these factors or assumptions discussed above could result in
future impairment charges to operations.
 
 c)   
Use of Estimates
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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
reporting period.  Actual results could differ from those
estimates.
 
 d) Basic and Diluted Net
Loss Per Share
 The
Company computes loss per share in accordance with generally accepted accounting
principles which requires presentation of both basic and diluted earnings
per share on the face of the statement of operations.  Basic loss per share
is computed by dividing net loss available to common shareholders by the
weighted average number of outstanding common shares during the period.
 Dilutive loss per share excludes all potential common shares if their
effect is anti-dilutive.
 
 e)
Other Comprehensive Income (Loss)
 ASC 220,
Comprehensive Income
establishes standards for the reporting and display of comprehensive loss and
its components in the financial statements. For the years ended August 31, 2010
and 2009, the only components of comprehensive loss were foreign currency
translation adjustments.
  F-7
  Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
 NOTE
2 – SUMMAR OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
 f)
    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 properties.  The
Company classifies its mineral rights as tangible assets and accordingly
acquisition costs are initially 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 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.  As of August 31,
2010, the Company has not incurred any potential costs related to the retirement
of mineral property interests since operation have not commenced.
 
 g)  Reclamation
and Remediation Costs (Asset Retirement Obligation)
 Upon
commencement of commercial operations, the Company will accrue costs associated
with environmental remediation obligations in accordance with ASC 410-20, Asset Retirement Obligations.
In accordance with ASC 410-20-25, Asset Retirement Obligations
-Recognition, the Company will record a liability for the present value
of the estimated environmental remediation costs in the period in which the
liability is incurred and becomes determinable, with an offsetting increase in
the carrying amount of the associated asset. The liability will be accreted and
the asset will be depreciated over the life of the related assets. Adjustments
for changes resulting from the passage of time and changes to either the timing
or amount of the original present value estimate underlying the obligation will
be made. As reclamation work is performed or liabilities are otherwise settled,
the recorded amount of the liability will be reduced.
 
 The
Company will accrue costs associated with any environmental remediation
obligation when it is probable that such costs will be incurred and they are
reasonably estimable. Estimates for reclamation and other closure costs are
prepared in accordance with ASC 450, Contingencies, or ASC
410-30-25, Asset Retirement
and Environmental Obligations - Recognition. Costs of future expenditures
for environmental remediation will not be discounted to their present value
unless subject to a contractually obligated fixed payment schedule. Such costs
will be based on management’s then current best estimate of amounts to be
incurred when the remediation work is performed, within current laws and
regulations.
 
 Future
reclamation and environmental-related expenditures are difficult to estimate, in
many circumstances, due to the early stage nature of the exploration project,
and uncertainties associated with defining the nature and extent of
environmental disturbance and the application of laws and regulations by
regulatory authorities and changes in reclamation or remediation technology. The
Company will be required to periodically review accrued liabilities for such
reclamation and remediation costs as evidence becomes available indicating that
the liabilities have potentially changed. Changes in estimates will be reflected
in the statement of operations in the period an estimate is revised.
  F-8
  Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
 h)   
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.
 
 i)     Fair
Value of Financial Instruments
 Fair
value is defined as the price that would be received upon sale of an asset or
paid upon transfer of a liability in an orderly transaction between market
participants at the measurement date and in the principal or most advantageous
market for that asset or liability. The fair value should be calculated based on
assumptions that market participants would use in pricing the asset or
liability, not on assumptions specific to the entity. In addition, the fair
value of liabilities should include consideration of non-performance risk
including the entity’s own credit risk.
 
 A fair
value hierarchy for valuation inputs is established.  The hierarchy
prioritizes the inputs into three levels based on the extent to which inputs
used in measuring fair value are observable in the market.  Each fair
value measurement is reported in one of the three levels and which is determined
by the lowest level input that is significant to the fair value measurement in
its entirety.
 
 These
levels are:
 
 Level 1 –
inputs are based upon unadjusted quoted prices for identical instruments traded
in active markets.
 
 Level 2 –
inputs are based upon quoted prices for similar instruments in active markets,
quoted prices for identical or similar instruments in markets that are not
active, and model-based valuation techniques for which all significant
assumptions are observable in the market or can be corroborated by observable
market data for substantially the full term of the assets or
liabilities.
 
 Level 3 –
inputs are generally unobservable and typically reflect management’s estimates
of assumptions that market participants would use in pricing the asset or
liability. The fair values are therefore determined using model-based techniques
that include option pricing models, discounted cash flow models, and similar
techniques.
 
 The
Company’s financial instruments consist of cash, accounts payable, accrued
interest, loan payable, convertible notes and amounts due to Douglas Lake. The
carrying value of these financial instruments approximates their fair value
based on their liquidity, their short-term nature or application of appropriate
risk based discount rates to determine fair value. These financial assets and
liabilities are valued using level 3 inputs, except for cash which is at level
1. The Company is not exposed to significant interest, exchange or credit risk
arising from these financial instruments.
  j)   
Stock-Based Compensation
 The
Company records stock-based compensation by using the fair value method.
 All transactions in which goods or services are the consideration received
for the issuance of equity instruments are accounted for based on the fair value
of the consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable.  Equity instruments issued to
employees and the cost of the services received as consideration are measured
and recognized based on the fair value of the equity instruments issued. Certain
warrants and options include cashless exercise provisions.
  F-9
  Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
 NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued
 
 k)  Income
Taxes
 The
Company accounts for income taxes using the asset and liability method in
accordance with ASC 740, Income Taxes. The asset and
liability method provides that deferred tax assets and liabilities are
recognized for the expected future tax consequences of temporary differences
between the financial reporting and tax bases of assets and liabilities, and for
operating loss and tax credit carryforwards. Deferred tax assets and liabilities
are measured using the currently enacted tax rates and laws that will be in
effect when the differences are expected to reverse. The Company records a
valuation allowance to reduce deferred tax assets to the amount that is believed
more likely than not to be realized.
 
 l)   
Recent Accounting Pronouncements
 
 Accounting
Standards Codification
 
 The
Accounting Standards Codification (ASC) has become the source of authoritative
U.S. generally accepted accounting principles (“GAAP”).  The ASC only
changes the referencing of financial accounting standards and does not change or
alter existing GAAP.
 
 Effective
September 1, 2009, the Company adopted ASC 855, Subsequent
Events.  ASC 855 requires companies to recognize in the financial
statements the effects of subsequent events that provide additional evidence
about conditions that existed at the date of the balance sheet, including the
estimates inherent in the process of preparing financial
statements.  An entity shall disclose the date through which
subsequent events have been evaluated, as well as whether that date is the date
the financial statements were issued.  Companies are not permitted to
recognize subsequent events that provide evidence about conditions that did not
exist at the date of the balance sheet but arose after the balance sheet date
and before financial statements are issued.  Some non recognized
subsequent events must be disclosed to keep the financial statements from being
misleading.  For such events a company must disclose the nature of the
event, an estimate of its financial effect, or a statement that such an estimate
cannot be made.  This Statement applies prospectively for interim or
annual financial periods ending after June 15, 2009.  The adoption of
ASC 855 did not have an impact on the Company’s results of operations and
financial position.
 
 In
January 2010, the FASB issued ASC No. 2010-06, “Fair Value Measurement and
Disclosures (Topic 820): Improving Disclosure and Fair Value
Measurements”, which requires that purchases, sales, issuances, and
settlements for Level 3 measurements be disclosed.  ASC No. 2010-06 is
effective for its fiscal quarter beginning after December 15, 2010.  The
adoption of ASC No. 2010-06 is not expected to have a material impact on the
Company’s consolidated financial statements.
 
 In
February 2010, the FASB issued ASU No. 2010-11, “Derivatives and Hedging (Topic
815): Scope Exception Related to Embedded Credit Derivatives”. ASU No.
2010-11 clarifies the type of embedded credit derivative that is exempt from
embedded derivative bifurcation requirements. Specifically, only one form of
embedded credit derivative qualifies for the exemption – one that is related
only to the subordination of one financial instrument to another. As a result,
entities that have contracts containing an embedded credit derivative feature in
a form other than such subordination may need to separately account for the
embedded credit derivative feature. The amendments in ASU No. 2010-11 are
effective for each reporting entity at the beginning of its first fiscal quarter
beginning after June 15, 2010. Early adoption is permitted at the beginning of
each entity’s first fiscal quarter beginning after March 5, 2010. The adoption
of ASC No. 2010-11 is not expected to have a material impact on the Company’s
consolidated financial statements.
 
 Other
recent pronouncements issued are not expected to have a material effect on the
Company’s consolidated financial statements.
  F-10
  Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
 NOTE
3 – MINERAL PROPERTIES
 
 (a)   
Pursuant to an agreement dated July 15, 2006, as amended on July 9, 2008, the
Company acquired an option to earn a 100% interest in the Moore Creek Property
(the “Property”) located in the Iskut River region, British Columbia, Canada in
exchange for cash payments totaling CDN$100,000 over four years.  In
November 2009, the option agreement was terminated by the Company.  As a
result, the Company expensed approximately $10,000 in the year ended August 31,
2009 which was previously paid and capitalized.  No material obligations
remain with respect to this transaction.
  (b)   
On November 7, 2009, the Company entered into a Purchase Agreement (the
“Agreement”) with Douglas Lake, for the right to acquire and develop a portion
of Douglas Lake’s Mkuvia Gold Project.  Pursuant to the terms of the
Agreement, the Company acquired a seventy percent (70%) interest in 125 square
kilometers of the 380 square kilometers Mkuvia Gold Project for total gross
consideration of $3,000,000, payable over three years.  In accordance with
the terms of the Agreement, the Company initially paid $250,000, and upon
satisfactory due diligence paid an additional $100,000.  For financial
reporting purposes, the transaction contemplated by the Agreement has an
effective date of March 15, 2010.
 
 Upon
issuance and receipt of the first mining license, the Company will be required
to make (i) an additional payment of $400,000 to
Douglas Lake (this amount has been classified as a current liability in the
accompanying balance sheet);  and (ii) three additional payments of
$750,000 within 12, 24 months and 36 months of that date, respectively. The
Company has the option to satisfy the final $750,000 payment by
issuing  shares of its common stock valued based upon the Volume
Weighted Average Price (“VWAP”) for the 10 days immediately preceding the
payment date.  For financial reporting purposes, the series of future
payments in the gross amount of $2,250,000 were recorded at their estimated fair
value of $1,694,042 determined utilizing a discount rate of 12% per annum
resulting in a discount of $555,958.  Interest expense for the year
ended August 31, 2010 includes amortization of $86,413 of this debt discount,
resulting in a remaining net balance of these future payments as of August 31,
2010 of $1,780,455.
 
 Additionally,
the Agreement provides that within 12 months of receipt of the initial mining
license, the Company has the option to increase its interest to 75 percent of
the 125 square kilometers by making an additional $1,000,000 payment to Douglas
Lake.  In all cases, the original owner of the four prospecting licenses,
Mr. Maita Mkuvia, retains a 3 percent Net Smelter Royalty as per the original
agreement between Mr. Mkuvia and Douglas Lake.
 
 The
Mkuvia Gold Project is located in the Liwale and Nachingwea Districts,
Lindi Region of the United Republic of Tanzania.
  (c) On
March 7, 2010, the Company entered into an agreement for the creation of a
Tanzanian joint venture company (“RCRTz”) formed for the ownership and
management of the 125 square kilometer Mkuvia Gold Project. The joint
venture company is owned 70% by the Company, 25% by Douglas Lake and 5% by Mr.
Maita Mkuvia (subject to conditions as described below), the original
Prospecting License owner. The joint venture company was officially formed in
Tanzania on May 21, 2010. RCRTz will be the operating company holding the
mineral rights to the 125 square kilometers of land relating to Mkuvia Gold
Project as well as the additional 255 sq km of the Mkuvia Gold Project acquired
on June 16, 2010 as described below. A second Joint Venture Agreement (the
“JVA”) was entered into by the parties with respect to the additional 255 sq km
of the Mkuvia Gold Project whereby RCRTz assumed control of the permitting and
licensing processes.  The JVA provides that Mr. Mkuvia’s 5% interest
shall vest when RCRTz obtains a mining license over a portion of the area
covered by the Prospecting Licenses relating to the 380 sq km of the Project and
a retention license over the balance for the area.
  F-11
  Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
 NOTE
3 – MINERAL PROPERTIES, continued
 
 (d) Effective
on June 16, 2010, the Company acquired the exclusive mineral and mining rights
to the remaining 255 square kilometers of the Mkuvia Gold Project in Tanzania
from Douglas Lake. As consideration, the Company is required to pay Douglas Lake
$6,000,000 over a three-year period in a combination of cash and common
shares. The Company has paid $250,000 and issued 4,000,000 common shares of
the Company with a fair market value of $2,120,000 at $0.53 per share (fair
market value on date of issuance), which was due within 30 days of receipt of
governmental Certificates of Acknowledgement. For contractual purposes these
four million shares had a value of $4 million, based upon a stated value of
$0.80 per share. In addition $450,000 is due on June 1, 2011; $1,000,000 is due
on June 1, 2012; and $1,000,000 is due on June 1 2013. An additional $100,000
due to Douglas Lake is being retained to satisfy Douglas Lake’s financial
obligation to deliver an environmental study and an initial mining license. The
Company has the option to satisfy the final $1,000,000 payment due on June 1,
2013 by issuing  shares of its common stock based upon the Volume
Weighted Average Price (“VWAP”) for the 20 days immediately preceding the
payment date.  Scheduled cash payments can be accelerated in the event of
future equity financing or obtaining additional mining licenses.  The new
Purchase Agreement also provides that the Company has the option to increase its
interest from the current 70% to 75% of the Project by making an additional
$1,000,000 payment to Douglas Lake.  For financial reporting purposes, the
series of future payments in the gross amount of $2,450,000 were recorded at
their fair value of $1,882,127 (of which $398,565 was current as of the
transaction date) determined utilizing a discount rate of 12% per annum
resulting in a discount of $567,872.  Interest expense for the year
ended August 31, 2010 includes amortization of $60,859 of this debt discount,
resulting in a remaining net balance of these future payments as of August 31,
2010 of $1,942,986.
 
 As a
result of the transactions above  the Company owns 70% of the mineral
and mining rights to the entire 380 sq km of the Mkuvia Gold Project,
and  has the option to increase its interest from 70% to 75% for
$2,000,000.
 
 NOTE
4 – BRIDGE LOAN
  On
December 22, 2009, the Company received $75,000 in proceeds of a bridge loan
transaction (the “loan”) from a significant shareholder and special advisor who
became a director in September 2010 (“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 due date of
the loan of January 22, 2010 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 securities 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.
 The fair value of this consideration of $61,300 was included in interest
expense for the year ended August 31, 2010.  This amount consisted of
$31,500 which was the fair value of the common shares, and $29,800 which was the
fair value of the warrants based upon the Black-Scholes option pricing
model.   On March 23, 2010, the Company defaulted on the payment of
interest and principal on the loan.  Pursuant to terms of the loan, upon
the occurrence of the default, the holder gave notice to the Company of his
intention to convert the outstanding balance of the note ($75,000) and accrued
interest ($2,244) into shares of common stock of the Company at the default
conversion price of $0.05 per share.  This resulted in the issuance of
1,544,877 common shares.  In addition, under contractual default
provisions, the Company was obligated to issue the holder a two year
warrant to purchase 1,500,000 common shares at an exercise price of $0.05 per
share.  This  resulted in a non-cash financing charge of
$787,369, included in interest and financing fees for the year ended August 31,
2010, comprised of the $386,219 fair value of common shares issued in excess of
the book value of liabilities and $401,150 fair value of the 1,500,000 common
share warrants issued on that date.  The Company estimated the fair value
of the warrant using the Black-Scholes option pricing model with the following
assumptions: an expected life of two years, a risk-free interest rate of 1.02%,
a dividend rate and forfeiture rate of 0% and an expected volatility of 136%.
Refer to Note 10f.
  F-12
  Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
 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 consultant to the
Company (a director in September 2010) and to another significant
shareholder.  These notes are due and payable on November 27, 2010.
 Upon maturity, each note, at the sole discretion of the note holder, is
convertible, in part or in full, into shares of the Company’s common stock at a
conversion price of $0.05 per common share.  Interest is to be paid
quarterly in arrears and, at each note holders’ sole option, each may elect to
receive payment in shares of Company common stock valued at $0.05 per
share.  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 funds were used to make the first payment on
the Mkuvia Alluvial Gold Project.  The Company calculated an associated
beneficial conversion feature and discount of $100,000 which amount was
reflected as additional paid-in capital. The amount was determined using the
relative fair value method and is limited to the loan proceeds.  This
discount is being amortized to interest expense over the term of the
notes.  As of August 31, 2010, $75,890 has been amortized and is included
in interest expense for the year ended August 31, 2010.  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 and expected forfeiture
rate of 0%, and an expected volatility of 116%.
  NOTE
6 - OTHER RELATED PARTY TRANSACTIONS
  At August
31, 2010, the Chief Executive Officer (“CEO”) was indebted to the Company in the
amount of $39,668.  This represents net amounts advanced for travel
and mining related expenses to be incurred while in Tanzania. At August 31,
2009, the Company was indebted to a former director in the amount of
$29,293.  These funds are unsecured, do not bear interest and have no fixed
terms of repayment. During the year ended August 31, 2010, the CEO purchased
1,000,000 shares of common stock of the Company at $0.05 per share by
applying $50,000 of his balance due from the Company on that date.  On
September 1, 2009, the Company granted 1,100,000 compensation warrants to the
CEO at an exercise price of $0.05 per share for a term of 5 years.  These
warrants vest 25% every three months over a period of one year.  The
Company estimated the fair value of these warrants to be $72,500 at the date of
grant, using the Black-Scholes option pricing model with the following
assumptions: expected life of three years, a risk-free interest rate of 2.57%, a
dividend yield of 0%, an expected volatility and forfeiture rate of 100%. 
Stock-based compensation of $72,500 was recorded during the year ended August
31, 2010 as management services (2009 - Nil).
 
 At August
31, 2010 $32,000 was owing to a significant shareholder and special advisor who
became a director of the Company in September 2010 for services.
 
 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
 
 a.
              On
      March 8, 2010, the Company was served with a Writ of Summons by 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.  The Company has retained
      counsel for this matter and intends to vigorously dispute these charges.
       Management believes that it has adequately provided for any
      potential liability in the matter in its financial statements (accounts
      payable).  Subsequent to August 31, 2010 the matter was
      settled.  Refer to Note 10.b.
              Commencing
      June 1, 2010, the Company entered into an arrangement with a company
      affiliated with a significant shareholder for the use of its office space
      and facilities in New York City for a one year period in the gross amount
      of $36,000. This amount will be satisfied by the issuance of
      144,000  common shares of the Company valued at $0.25 per share,
      the fair value at the date of the arrangement.  This amount will
      be recognized as rent expense in over the term of the arrangement. The
      shares were issued subsequent to August 31,
  2010.
  F-13
 
 Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
 NOTE 7 – COMMITMENTS AND
      CONTINGENCIES, continuedc.
              On
      April 24, 2010, the Company entered into an Advisory
      Agreement.  The initial term of the agreement is for one year
      and is renewable for successive one-year periods on mutually acceptable
      terms. The Advisor may terminate this Agreement at any time by giving the
      other party ten business days prior written  notice of
      termination. The terms of the agreement provide that the Advisor will be
      available to provide advice on developing conditions in Tanzania as they
      pertain to establishing commercially viable mining operation on the Mkuvia
      Gold Project property or other properties of interest to the Company.
      Compensation is comprised of $6,000 and warrants to purchase 50,000 shares
      of the common stock of the Company at $0.35 per share vested upon
      execution and $6,000 and warrants to purchase 50,000 shares of the common
      stock of the Company at $0.35 per share  payable  and vested on
      October 24, 2010. The warrants have a five year life and contain a
      cashless exercise provision. The Company estimated the fair value of the
      warrants granted upon execution to be $13,609 at the date of grant, using
      the Black-Scholes option pricing model with the following
      assumptions:  an expected life of two years, a risk-free interest
      rate of 1.68%, a dividend rate and forfeiture rate  of 0%, and
      an expected volatility of 139%.  Stock-based compensation of $13,609
      was included in consulting services during the year ended August 31,
      2010.
 
 d.
              On
      May 15, 2010, the Company entered into a financial advisory and media
      services agreement for a six month period. The agreement is cancellable on
      60 days written notice by either party and may be extended for an
      additional six months if mutually agreed by the
      parties.  Compensation is comprised of £2,000 per month plus
      reimbursement of expenses and warrants to purchase 200,000 shares of the
      Company’s  common stock at $0.35 per share, vesting 20% upon
      execution and 20% for each of the subsequent four quarters. These warrants
      have a two-year life and include a cashless exercise provision. The
      Company estimated the fair value of these warrants to be $64,684 at the
      date of grant (which is subject to re-measurement on each vesting date),
      using the Black-Scholes option pricing model with the following
      assumptions:  an expected life of two years, a risk-free interest
      rate of 1.28%, a dividend rate and forfeiture rate of 0%, and an expected
      volatility of 139%.  Stock-based compensation of $20,098 was recorded
      as consulting services during the year ended August 31,
    2010.e.
              Effective
      June 4, 2010, the Company entered into an Advisory Agreement with Mr.
      Maita Mkuvia (“Advisor”), the original owner of the prospecting licenses
      of the Mkuvia Gold 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 shares
      of 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 The Company recognized $2,000 in
      fees paid and $19,500 in stock based compensation relating to the 50,000
      shares issued.f.
              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. The term of the agreement is two years,
      automatically renewable for successive one year terms unless terminated by
      either party on 60 days advance notice. Annual salary shall be $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.  In addition, the employee shall be granted
      non-qualified stock options to purchase 300,000 shares
      of  common stock, which shall vest at the rate of 37,500 options
      per quarter. The options granted have a five year
      life.  Notwithstanding the vesting provision, all options shall
      become fully vested in the event of a change in control, as defined in the
      agreement.  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 will be amortized
      ratably over the initial expected two years of
  service.
  F-14
  Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
  NOTE
8 - COMMON STOCK
 
 Shares of
common stock issuable upon conversion or exercise of potentially dilutive
securities at August 31, 2010 are as follows:
  Shares
      issuable upon exercise of warrants  - July 2009 private
      placement
                  
                  
                  200,000Shares
      issuable for November 27, 2009 convertible notes and related
      warrants
                  
                  
                  4,000,000Compensatory
      warrant exercisable for shares to CEO
                  
                  
                  1,100,000Compensatory
      warrants exercisable for shares to significant
shareholders
                  
                  
                  1,500,000Compensatory
      warrant/options exercisable for shares – others
                  
                  
                  1,677,500Bridge
      Loan – principal investor – shares issuable upon conversion of related
      warrants and penalty warrant issued upon default
conversion
                  
                  
                  1,890,000Shares
      issuable upon conversion of warrants issued in December 2009 private
      placement
                  
                  
                  800,000Shares
      issuable upon conversion of warrants issued in March 2010 private
      placement
                  
                  
                  2,678,000Shares
      reserved for employment agreement
                  
                  
                  200,000Total
                  
                  
                  14,045,500
 
 a)           Effective
January 29, 2009, the Company re-domiciled 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.
  b)          During
the period from December 24, 2009 to February 10, 2010, the Company conducted an
offering of equity securities pursuant to Rule 506 of Regulation D and
Regulation S.  The Company sold 1,600,000 Units at a price of $0.125 per
Unit for a total of $200,000.  Each Unit consisted of one  common
share and one warrant.  Two warrants are required to buy
one  common share at a price of $0.25 per share for a period of up to
two years.  The Company estimated the fair value of these warrants to be
approximately $89,000 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 ranging from 0.77%-1.00%, a dividend rate and forfeiture
rate of 0% and an expected average volatility of approximately 117%, which is
reflected as a component of additional paid-in capital.
  c)           On
January 29, 2010, the Company entered into an agreement with a consultant to
assist management on a part time basis in the role of interim chief financial
officer (“Consultant”) for a six-month period which commenced on February 1,
2010.  Compensation for these services is at the rate of $6,500 per month,
60,000 shares of common stock, plus a signing bonus of 50,000 shares of common
stock, with a combined fair value of $22,000 at the date of grant.  The
fair value of these has been expensed in the year ended August 31, 2010.
 Approximately $47,000 is included in management services for the year
ended August 31, 2010 associated with this arrangement.  The agreement can
be extended on terms and for a period agreeable to both parties.
 
 d)          During
the period from April 3, 2010 through August 26, 2010, the Company conducted an
offering of equity securities pursuant to Rule 506 of Regulation D and
Regulation S.  The Company sold 5,356,000 Units at a price of $0.25 per
Unit for a total of $1,339,000. Each Unit consists of one  common
share and one warrant.  Two warrants are required to buy
one  common share at a price of $0.50 per share for a period of up to
two years. The Company estimated the fair value of these warrants to be
approximately $1,126,000 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 ranging from 0.50%-1.18%, a dividend rate and forfeiture
rate of 0% and an expected range of volatility from 139.7% to 144.6%. This
amount is reflected as a component of additional paid-in
capital.
  F-15
  Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
  NOTE
8 - COMMON STOCK, continued
 
 Stock
Options and Warrants
  On July
15, 2009, the Company granted 50,000 compensation warrants to a former director
at an exercise price of $0.05 per share for a term of 5 years.  These
options vested on November 1, 2009.  The Company estimated the fair value
of these warrants 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%, a dividend and forfeiture rate of 0% and an expected
volatility of 99%.  Stock-based compensation of $2,202 and $2,905 was
recorded as management fees during the years ended August 31, 2009 and August
31, 2010, respectively.
  On July
15, 2009, the Company granted 1,750,000 stock options to consultants at an
exercise price of $0.05 per share for a term of 5 years. These options vest 25%
per quarter from the date of grant until fully vested. These options vest 25%
every three months over a period of one year.  The Company estimated the
fair value of the options using the Black-Scholes option pricing model with the
following assumptions: an initial expected life of three years, a risk-free
interest rate of 0.95% to 2.57%, and a dividend and forfeiture rate of 0% and an
expected volatility of between 99% and 117%.  Stock-based compensation of
$22,345 and $354,816 was recorded as consulting fees during the years ended
August 31, 2009 and 2010, respectively. All of these options vested by August
31, 2010.
  On September 1, 2009, the Company granted 1,100,000
compensation warrants to the President at an exercise price of $0.05 per share
for a term of 5 years.  These options vested 275,000 on December 1, 2009
and 275,000 each successive quarter until fully vested. The Company estimated
the fair value of these warrants to 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%, a dividend rate and forfeiture rate of 0% and an
expected volatility of 100%.  Stock-based compensation of $72,500 was
recorded at as management fees during the year ended August 31,
2010.
  On
October 1, 2009, the Company granted 350,000 stock options to a consultant at an
exercise price of $0.05 per share for a term of 5 years.  These options
vested 80,000 on grant and 90,000 for each of the successive quarters. The
Company estimated the fair value of these options using the Black-Scholes option
pricing model with the following assumptions: an initial expected life of three
years, a risk-free interest rate of 0.95% to 2.57%, a dividend rate and
forfeiture rate of 0% and an expected volatility of 99% to 117%. 
Stock-based compensation of $70,110 was recorded as consulting fees during the
year ended August 31, 2010.
 
 On
October 15, 2009, the Company granted 150,000 stock options to a consultant at
an exercise price of $0.05 per share for a term of 5 years.  These options
vest 25% per quarter from the date of grant until fully vested. The Company
estimated the fair value of these options using the Black-Scholes option pricing
model with the following assumptions: an initial expected life of three years, a
risk-free interest rate of 0.95% to 2.57%, a dividend rate and forfeiture rate
of 0% and an expected volatility of 104% to 117%.  Stock-based compensation
of $24,628 was recorded as consulting fees during the year ended August 31,
2010.
  On
November 1, 2009, the Company granted 250,000 stock options to a consultant at
an exercise price of $0.05 per share for a term of 5 years.  These options
vest 25% per quarter from the date of grant until fully vested. The Company
estimated the fair value of these options 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%, a dividend rate and forfeiture rate of 0% and
an expected volatility of 108%.  Stock-based compensation of $33,803 was
recorded as consulting fees during the year ended August 31, 2010.
  On
November 1, 2009, the Company granted 150,000 stock options to a consultant at
an exercise price of $0.05 per share for a term of 5 years.  These options
vest 25% per quarter from the date of grant until fully vested. The Company
estimated the fair value of these options using the Black-Scholes option pricing
model with the following assumptions: an expected initial life of three years, a
risk-free interest rate of .095% to 2.57%, a dividend rate and forfeiture rate
of 0% and an expected volatility of 103% to 117%.  Stock-based compensation
of $28,592 was recorded as consulting fees during the year ended August 31,
2010.
  On
January 20, 2010, the Company granted 40,000 stock options to a consultant at an
exercise price of $0.05 per share for a term of 5 years.  These options
vest 25% per quarter from the date of grant until fully vested. The Company
estimated the fair value of these options using the Black-Scholes option pricing
model with the following assumptions: an expected initial life of three years, a
risk-free interest rate of .095% to 2.57%, a dividend rateand
forfeiture rate of 0% and
an expected volatility of 117%.  Stock-based compensation of $7,230 was
recorded as consulting fees during the year ended August 31,
2010.
    F-16
  Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
 NOTE
8 - COMMON STOCK, continued
  On April
24, 2010, the Company granted 50,000 stock options to a consultant at an
exercise price of $0.35 per share for a term of two years.  These options
vested on grant.  The Company estimated the fair value of the options to be
$13,609 using the Black-Scholes option pricing model with the following
assumptions: an expected life of two years, a risk-free interest rate of 1.68%,
a dividend rate and forfeiture rate of 0% and an expected volatility of 139%.
Stock-based compensation of $13,609 was recorded as consulting fees during the
year ended August 31, 2010.
  On May
15, 2010, the Company granted 200,000 stock options to a consultant at an
exercise price of $0.35 per share for a term of two years. These options vest
20% on grant and 20% every three months over a period of one year. The Company
estimated the fair value of the options that vested to be $12,937 using the
Black-Scholes option pricing model with the following assumptions: an expected
life of two years, a risk-free interest rate of 1.28%, a dividend rate and
forfeiture rate of 0% and an expected volatility of 139%, Stock-based
compensation of $21,460 was recorded as consulting fees during the year ended
August 31, 2010 and the remainder will be recorded over the term of
vesting.
 
 In August
2010, the holder of 112,500 vested options, issued at $0.05 per share, exercised
a cashless exercise provision included in the agreement and received
101,427  common shares. The total intrinsic value of these options
exercised at August 31, 2010 was $54,000.
 
 The following is a summary of stock options and
warrants outstanding for the periods shown:
 
 Share
Purchase Options
 
 Options
                              
                              
                              Weighted
                                Average
                                Exercise
                                PriceBalance,
      August 31, 2008
                              
                              
                              -Granted
                              
                              
                              1,800,000
                              
                              
                              $
                              0.05Exercised
                              
                              
                              -Cancelled/Expired
                              
                              
                              -Balance,
      August 31, 2009
                              
                              
                              1,800,000
                              
                              
                              $
                              0.05Granted
                              
                              
                              2,590,000
                              
                              
                              $
                              0.14Exercised
                              
                              
                              (112,500
                              )
                              
                              $
                              0.05Cancelled/Expired
                              
                              
                              -
                              
                              
                              
                              -Balance,
      end of  year
                              
                              
                              4,277,500
                              
                              
                              $
                              0.10Exercisable,
      at end of year
                              
                              
                              3,762,500
                              
                              
                              $
                              0.06
 
 Options
                                                      
                                                      
                                                      Weighted
                                                        Average
                                                        grant-date
                                                        fair valueNonvested
      balance, August 31, 2009
                                                      
                                                      
                                                      1,800,000
                                                      
                                                      
                                                      $
                                                      0.10Granted
                                                      
                                                      
                                                      2,590,000
                                                      
                                                      
                                                      $
                                                      0.13Vested
      during the year
                                                      
                                                      
                                                      3,875,000
                                                      
                                                      
                                                      $
                                                      0.04Nonvested,
      August 31, 2010
                                                      
                                                      
                                                      515,000
                                                      
                                                      
                                                      $
                                                      0.34
  F-17
  Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
 NOTE
8 - COMMON STOCK, continued
 
 As of
August 31, 2010, 3,875,500 stock options have vested and 515,000 stock options
remain unvested. The weighted average remaining life of the vested and unvested
stock options is 3.9 years and 1.17 years, respectively.   As of
August 31, 2010, the intrinsic value of the vested options was $1,767,000.
Future Compensation expense based upon the fair value of unvested stock options
at August 31, 2010 approximates $215,000.
 
 Share
Purchase Warrants
 
 Shares
                              
                              
                              Weighted
                                Average
                                Exercise
                                PriceBalance,
      August 31, 2008
                              
                              
                              -Issued
                              
                              
                              200,000
                              
                              
                              $
                              0.05Exercised
                              
                              
                              -Cancelled/Expired
                              
                              
                              -Balance,
      August 31, 2009
                              
                              
                              200,000
                              
                              
                              $
                              0.05Issued
                              
                              
                              7,368,000
                              
                              
                              $
                              0.24Exercised
                              
                              
                              -
                              
                              
                              
                              -Cancelled/Expired
                              
                              
                              -
                              
                              
                              
                              -Balance,
      end of  period, August 31, 2010
                              
                              
                              7,568,000
                              
                              
                              $
                              0.24Exercisable,
      end of period
                              
                              
                              7,568,000
                              
                              
                              $
                              0.24
 
 The
weighted average remaining life of all outstanding share purchase warrants is
1.74 years.  As of August 31, the intrinsic value of these warrants was
$2,238,290.
 
 NOTE 9 - INCOME
TAXES
 
 The
provision for income taxes differs from the result which would be obtained by
applying the statutory income tax rate to income before income taxes.  The
difference results from the following items:
  August 31, 20102010
                        
                        
                        2009Net
      loss before income taxes
                        
                        $
                        (2,544,627
                        )
                        
                        $
                        (207,877
                        )Statutory
      tax rate
                        
                        
                        34
                        %
                        
                        
                        35
                        %Expected
      tax expense (recovery)
                        
                        
                        (865,173
                        )
                        
                        
                        (72,757
                        )NYS
      franchise tax, net of Federal benefit
                        
                        
                        (44,777
                        )
                        
                        
                        -Stock
      based compensation not deductible for tax purposes
                        
                        
                        213,620
                        
                        
                        
                        8,591Mineral
      property expenditure not deducted for tax purposes
                        
                        
                        37,739
                        
                        
                        
                        -Other
      unrecognized items for tax purposes
                        
                        
                        (592
                        )
                        
                        
                        28,589Effect
      of tax rate difference in Tanzania
                        
                        
                        4,110
                        
                        
                        
                        -Increase
      in valuation allowance
                        
                        
                        655,073
                        
                        
                        
                        35,577Income
      tax provision
                        
                        $
                        -
                        
                        
                        $
                        -
 
 Effective
January 29, 2009, the Company changed its jurisdiction from the Province of
British Columbia to the State of Nevada.  As a result, the Company
relinquished approximately $293,000 in non-capital losses and $33,000 in capital
pool losses. As of August 31, 2010 and 2009, the Company has US net operating
loss carry-forwards of approximately $1,795,000 and $102,000, respectively, and
Tanzanian net operating loss carry-forwards of $103,000 at August 31, 2010,
which may be available
to reduce future year’s taxable income.  These carry-forwards will expire,
if not utilized, commencing in 2029. Management believes that the realization of
the benefits from this deferred tax assets appears uncertain due to the
Company’s limited operating history and continuing losses.  Accordingly a
full, deferred tax asset valuation allowance has been provided and no deferred
tax asset benefit has been recorded.
  F-18
 
 Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
 NOTE 9 - INCOME TAXES,
continued
 
 The
Company’s tax-effected deferred income tax assets are estimated as
follows:
 
 August
      31, 20102010
                    
                    
                    2009Potential
      future income tax assets:Net
      operating losses available
                    
                    $
                    641,000
                    
                    
                    $
                    36,000Other
                    
                    
                    (9,400
                    )
                    
                    
                    -Mining
      exploration costs expensed
                    
                    
                    38,000
                    
                    
                    
                    -Less:
      valuation allowance
                    
                    
                    (669,600
                    )
                    
                    
                    (36,000
                    )Net
      deferred income tax asset
                    
                    $
                    -
                    
                    
                    $
                    -
 
 The Company has uncertain tax positions for which the possible
liability for penalties and interest is not currently reliably estimable by
management.  Management has considered the likelihood and significance of
possible penalties associated with its current and intended filing positions and
has determined, based on their assessment, that such penalties, if any, would
not be expected to be material.
  As the
Company has incurred losses since inception there would be no known or
anticipated exposure to penalties for income tax liability.
  Inherent
uncertainties arise over tax positions taken, or expected to be taken, with
respect to transfer pricing, financing charges, fees, related party
transactions, tax credits, tax based incentives and stock based
transactions.  Management has not recognized any tax benefits related to
these uncertainties.
  Disclosure
concerning certain carry-forward tax pools, temporary and permanent timing
differences in tax basis versus reported amounts may be impacted by assessing
practices and tax code regulations when income tax returns are filed up to date.
As a 100% valuation allowance has been provided against deferred tax assets
reported in these financial statements, there would be no significant net impact
to the current and deferred income tax disclosures or reconciliations
reported.
 
 NOTE
10 - SUBSEQUENT EVENTS
 
 (a)           On
September 9, 2010,the Company signed an
option to acquire the exclusive mineral and mining rights to the 340 sq km
Kapinga property for a fixed purchase price of $500,000. Should the Company
exercise its purchase option in the six month period ended March 9, 2011, the
Kapinga Property will be transferred into a joint venture company, Ruby Creek
Gold (Tanzania) Limited.  The Company will own 85% of the joint venture,
Mr. Kapinga 10% and other parties 5%.  According to the terms of the
agreement, if the Company exercises its right to purchase the property within
six months of signing, a total of $250,000 will be paid at that time.  The
final $250,000 payment will be made when the first mining license is issued.
 Payments can be made in cash, in the Company equity, or a combination of
both.
 
 Both the
Kapinga Project and the Company’s Mkuvia Gold Project are located in the Liwale
and Nachingwea Districts, Lindi Region of the United Republic of Tanzania.
  F-19
  Ruby
Creek Resources, Inc.
 (An
Exploration Stage Company)
 Notes
to Consolidated Financial Statements
 August
31, 2010
 
 NOTE
10 - SUBSEQUENT EVENTS, continued
 
 (b)           
Commencing on October 18, 2010, the Company commenced an offering of its equity
securities pursuant to Rule 506 of Regulation D and Regulation S.  Through
December 3, 2010, the Company received $890,000 in proceeds for the sale of
1,780,000 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
1,780,000 common shares, at a price of $1.00 per share exercisable for a period
of up to two years.
 
 (c)           Subsequent
to August 31, 2010, three holders of an aggregate of 450,000 warrants issued in
the private placement described in Note 8b above exercised their rights to
purchase 225,000 shares of common stock for which the Company received
$56,250.
 
 (d)           On
November 23, 2010, the Company entered into an arrangement for the satisfaction
of the litigation discussed in Note 7a above, pursuant to which the Company paid
C$75,000 in full settlement of this dispute. Mutual releases were
exchanged.
 
 (e)           On
November 27, 2010, the holders of the convertible notes described in Note 5
elected to convert these notes in the amount of $100,000, plus an aggregate of
$11,000 in interest earned, into 2,220,000 shares of  common shares of
the Company.
 
 (f)           On
December 1, 2010, 1,500,000 warrants were exercised for
1,500,000  shares of common stock at a price of $0.05 per share for
which the Company received $75,000 in proceeds.
 
 The
Company evaluated subsequent events through the financial statement filing
date.
  F-20




ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE




We have
had no disagreements with our principal independent accountants.




ITEM
9A(T). CONTROLS AND PROCEDURES




Evaluation
of Disclosure Controls and Procedures




Our
principal executive officer and our principal financial officer have 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 financial reporting as
discussed below.




Internal
Control Over Financial Reporting




Management
of Ruby Creek Resources Inc. is responsible for establishing and maintaining
adequate internal control over financial reporting. Ruby Creek Resources Inc.'s
internal control over financial reporting is a process, under the supervision of
the Chief Executive Officer and the Chief Financial Officer, designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of the Company's financial statements for external purposes in
accordance with United States generally accepted accounting principles
(GAAP).  Internal control over financial reporting includes those
policies and procedures that:




·
            Pertain
      to the maintenance of records that in reasonable detail accurately and
      fairly reflect the transactions and dispositions of the Company's
      assets;




·
            Provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of the financial statements in accordance with generally
      accepted accounting principles, and that receipts and expenditures are
      being made only in accordance with authorizations of management and the
      Board of Directors; and




·
            Provide
      reasonable assurance regarding prevention or timely detection of
      unauthorized acquisition, use, or disposition of the Company's assets that
      could have a material effect on the financial
  statements.




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance
with the policies or procedures may deteriorate.




Ruby
Creek Resources Inc.'s management conducted an assessment of the effectiveness
of the Company's internal control over financial reporting as of August 31, 2010
based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO"). As a result of this assessment, management
believes that steps have been taken to overcome previously identified material
weaknesses in internal control over financial reporting.


53


A
material weakness is a control deficiency, or a combination of deficiencies, in
internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of the Company's annual or interim
financial statements will not be prevented or detected on a timely
basis.




The
previous material weaknesses and their remediation, which was effective as of
August 31, 2010, are identified are disclosed below.




However,
we have commenced operations in Tanzania during the year ended August 31, 2010.
We are currently in the process of establishing adequate systems of internal
control over safeguarding company assets deployed in Tanzania.




Appropriate Independent Oversight.The Company believes that it has established an appropriate level of
oversight of the Company's financial reporting and procedures for internal
control over financial reporting, including appropriate authorization of
transactions for its current operations. There are, at present, two directors of
the Company, but no independent Directors who could provide an appropriate level
of oversight, including challenging management's accounting for and reporting of
the transactions. On February 1, 2010, the Company retained a Chief Financial
officer who is CPA and has extensive experience in SEC reporting and in
establishing systems of internal control.





Segregation of Duties.During
the current year, the Company has retained a qualified Chief Financial Officer,
and added member of its Board of Directors who is an SEC accounting and
reporting expert, a CPA and a partner in a major CPA firm. In prior periods, the
Company has historically had limited accounting resources as a result of its
lack of revenues and limited working capital and therefore relied on outside
consultants for all accounting and financial reporting resources. While the
Company still has limited resources, the Company has a CFO and other accounting
personnel who prepare the general ledger (including the preparation of routine
and non-routine journal entries) and the preparation of accounting
reconciliations; and has a member of its Board of Directors, who together with
the CFO have adequate expertise in the selection of accounting principles, and
in the preparation of interim and annual financial statements (including
footnote disclosures) in accordance with generally accepted accounting
principles. The Company believes that has adequate oversight and monitoring of
its financial accounting and reporting systems.




As a
result of these remedial activities to strengthen its systems
of  internal control over financial reporting described above, Ruby
Creek’s management has concluded that, as of August 31, 2010, the Company's
internal control over financial reporting was effective based on the criteria in
Internal Control - Integrated Framework issued by the COSO.




This
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management's report
in this annual report.




Changes
in Internal Control over Financial Reporting




We added
a member to our Board of Directors described above, which has significantly
strengthened our internal control over financial reporting during our fourth
fiscal quarter of our fiscal year ended August 31, 2010.


54


ITEM
9B. OTHER INFORMATION




Not
applicable.




ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE




Officers
and Directors




The
Company's present officers and directors are as follows.




Name
                Age
                
                PositionsRob
      Slavik
                58
                
                President,
      Chief Executive Officer, Principal Executive Officer and
      DirectorDavid
      Bukzin
                45
                
                DirectorMyron
      Landin
                62
                
                Chief
      Financial Officer





The
following sets forth certain information concerning our officers and
directors:





Robert
Slavik, President, Chief Executive Officer, Director


In
addition to his executive and board positions with the Company, Mr. Slavik has
served as the President, Chief Executive Officer and as a member of the board of
directors of Tanzanian Goldfields Company, a mining company, since 2008,
President of Vitalstate since 2008, President of Ariel Resources since 2004, and
as President and a member of the board of directors of Pacific Gems Trading
Company, a gem and resources company, since 1999. Mr. Slavik served as the
President of T-Rex Vehicles Corporation, a specialty vehicles company, from 2007
through 2008 and as a consultant for Notre Dame Capital, a Canadian venture
capital company, from 2006 through 2007. He served as a consultant to Groupe
InterCapital, another Canadian venture capital company, from 2006 through
2007.  Mr. Slavik was the Operations Manager of Savoy Resources Corp,
a China-based mining company, from 2004 through 2005 and served as that
company’s president in 2004 and 2005. Mr. Slavik graduated in engineering and
business administration from the British Columbia Institute of
Technology.




David
Bukzin, Director


Mr.
Bukzin Is the Partner-in-Charge of Marcum LLP's SEC Practice
Group.  Marcum is one of the nation’s largest independent public
accounting and advisory services firms.  In addition to working as a
Certified Public Accountant, Mr. Bukzin is a specialist in the area of business
valuation, especially as it applies to mergers and acquisitions, and corporate
finance transactions.  He also provides services in the areas of
turnaround and workout consulting, reorganizations and
recapitalizations.  He received his B.B.A. from Baruch College in
1988.  Mr. Bukzin maintains memberships with the American Institute of
Certified Public Accountants and the New York State Society of Certified Public
Accountants.





Myron
Landin, Chief Financial Officer


CPA Myron
W. Landin was appointed acting Chief Financial Officer pursuant to a six month
consulting agreement with the Company on February 1, 2010.  Mr. Landin
brings more than 35 years of financial experience to Ruby Creek
Resources.  For the period 2003-2010 Mr. Landin principal activity has
been providing consulting services to a number of publicly traded companies
through his consulting firm, JTL Enterprises, Inc.  His services have
included accounting support services, financial statement preparation, and
business, SEC advisory and Sarbanes-Oxley consulting.  Mr. Landin has
participated in numerous forward and reverse-mergers, acquisitions,
reorganizations and restructurings, private placements, and SEC and Sarbanes-
Oxley compliance projects.  Major assignments included the CFO
responsibilities in a $115 million public SPAC funding for the successful
acquisition of an oil and gas exploration company, including all pre and post
acquisition activities, over a three year period
(2006-2008).   Mr. Landin held senior executive and Board level
positions with an entrepreneurial public company in the telecommunications
industry (1984-1991) and the subsequent spinoff of a subsidiary where he served
as Chairman of the BOD and CFO (1992-1999).  This entity was
eventually merged into a NYSE listed company in 1999.  Mr. Landin
served as senior assurance manager with a Big Four accounting firm, (now
Deloitte) (1972-1981) and as an audit partner (1981-1984) of a regional and
internationally affiliated PCAOB registered accounting firm.  Mr.
Landin holds a B.A. in economics from Stony Brook University and attended Pace
University Graduate School of Business.  He is a Certified Public
Accountant licensed in the state of New York.  Mr. Landin maintains
memberships with the American Institute of Certified Public Accountants and the
New York State Society of Certified Public Accountants.


55





ADVISORS





Professor
Dr. Abdul Mruma, BSc MSc PhD – Advisor, Tanzanian Geology


Dr. Mruma
is a Professor of Geology and was the head of the Department of Geology,
University of Dar es Salaam from 1994 to 2004.  Since 2004 he has been
the Vice Chairman of the Association of Geological Surveys of Africa and is the
Chief Executive Officer of the Geological Survey of Tanzania, Ministry of Energy
and Minerals reporting directly to the Minister of Energy and
Mines.  Other positions he has held include: National Coordinator,
International Geological Correlation Programs; External Examiner, Department of
Geology of the University of Nairobi in Kenya and the University of Makerere in
Uganda.  He has also had extensive involvement as a board and steering
committee member of numerous geological and environmental research projects and
groups.  Dr. Mruma has published over thirty international
publications, mainly in the fields of Structural Geology, Precambrian Geology,
Stratigraphy and Mineral Deposits.  He has also consulted on and
authored more than twenty technical reports in the fields of Resource
Assessments and Engineering Geology.  He is currently a member of the
Geological Society of Africa and the Tanzania Geological Society.





Charles
Rwechungura, Advisor – Tanzanian Mining and Financial Law


Mr.
Rwechungura Is the founder and Partner-in-Charge of CRB Attorneys.  He
played a key role working with the  World Bank in the re-drafting of
the Tanzanian Mining Laws of the late 90’s and was lead attorney for the
American Barrick takeover of Jim Sinclair’s Sutton Resources.  He is a
seasoned consultant in the fields of mining, corporate, banking and financial
law.  He is an advisor to mining companies on such issues as joint
venture agreements, transfers or assignments of mineral rights, mining license
applications and has conducted multiple large-scale due diligence exercises for
foreign investors in the Tanzanian mining sector.  Mr. Rwechungura
acts for many of the national and foreign banks operating in Tanzania, advising
them on the range of financial and banking law issues.  In recognition
of his industry knowledge and legal expertise, he is often appointed as an
arbitrator on complex commercial disputes. He received his LLB (Hons) from the
University of Dar es Salaam in 1977.  He was President of the
Tanganyika Law Society from 2005 to 2006, 2nd Deputy Treasurer for the East
African Law Society from 2005 to 2007, Vice President of the East Africa Law
Society from 2008 to 2010 and has been a board member of the International
Commercial Bank Limited since 2006.  He is a member of the Council of
the Tanganyika Law Society, and a member of the Governing Council and the
Executive Committee of the SADCC Lawyers Association.





Term
of Office




Our
directors are appointed for a one-year term to hold office until the next annual
general meeting of our shareholders or until they resign or are removed from the
board in accordance with our Articles of Incorporation. Our officers are
appointed by our Board of Directors and hold office until they resign or are
removed from office by the Board of Directors.


56


Significant
Employees




Toby
Hansen, Process Engineering and Corporate Communications


Mr.
Hansen has been an engineer for over 20 years. He began his career designing
rare earth magnetostrictive transducers for medical, oil/gas and industrial
applications where he obtained a wealth of knowledge of diverse materials and
processes.  Subsequent to transducer design he has spent the last six
years leading research and development efforts to enhance electromagnetic
devices.  Over his career he has been granted four US patents
(#6,012,521, #6,227,853, #6,624,539 and #6,909,666) and has four additional
patents pending.  Mr. Hansen has earned a bachelor in Mechanical
Engineering at the University of Utah and a Masters Degree in Engineering
Mechanics at Iowa State University. Mr. Hansen is also the editor of the Heavy
Metal Investor featuring a quarterly market newsletter. This endeavor has
resulted in a vast accumulation of knowledge in the gold and mining industry.
The newsletter began in 2003 with a dozen readers and has grown in popularity
with readership presently approaching 1700 people worldwide.  Through
his newsletter, he identified the potential of the Mkuvia Gold
Project.  Mr. Hansen has just committed to a two year contract with
Ruby Creek. Mr. Hansen’s responsibilities will be two-fold, Corporate
Communications and Operations. Onsite his focus will be the reviewing of
processes and analysis of systems and materials as well as developing strategies
for maximizing returns on gold and other mineral concentrates.




Our
subsidiary in Tanzania now employs personnel to conduct our mining operations
and control accounting and administrative functions.




Family
Relationships




There are
no family relationships among our directors or executive officers.




Committees
of the Board of Directors




We
presently have an Audit Committee comprised the president, Rob Slavik. We
presently do not have a compensation committee, a nominating committee, an
executive committee of our Board of Directors, stock plan committee or any other
committees. However, our Board of Directors is considering establishing various
committees during the current fiscal year.




Our Board
of Directors has determined that at present there is no audit committee
financial expert serving on the Audit Committee.  The Company is in
the exploration stage and has limited financial resources and plans to add an
audit committee financial expert to the Audit Committee as the Company's
operations ramp up and financial resources permit.




Code
of Ethics




Our Board
of Directors has adopted a code of ethics applicable to its principal executive
officer, its principal financial officer, its principal accounting officer or
controller, or persons performing similar functions. We have not done so due to
our limited operating history to date.


Our
Board of Directors intends to consider and adopt a code of ethics in the near
future.




Involvement
in Certain Legal Proceedings




None of
our directors, executive officers and control persons have been involved in any
of the following events during the past five years other than as
disclosed:




·
            any
      bankruptcy petition filed by or against any business of which such person
      was a general partner or executive officer either at the time of the
      bankruptcy or within two years prior to that
  time;


o
            Rob
      Slavik, president of Ruby Creek Resources, Inc., is a director of T-Rex
      Vehicles Corporation, a Nevada corporation and served as president the
      company’s Quebec subsidiary, T-Rex Vehicles, Inc., in the winding down and
      eventual bankruptcy proceedings of the subsidiary from October 2007 to
      March 2008.


57




•
            any
      conviction in a criminal proceeding or being subject to a pending criminal
      proceeding (excluding traffic violations and other minor
      offences);




•
            being
      subject to any order, judgment, or decree, not subsequently reversed,
      suspended or vacated, of any court of competent jurisdiction, permanently
      or temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities;
      or




•
            being
      found by a court of competent jurisdiction (in a civil action), the
      Commission or the Commodity Futures Trading Commission to have violated a
      federal or state securities or commodities law, and the judgment or
      decision has not been reversed, suspended, or
  vacated.





Section
16(a) Beneficial Ownership Reporting Compliance




Section
16(a) of the Exchange Act requires our executive officers and directors, and
persons who beneficially own more than 10% of our equity securities, to file
reports of ownership and changes in ownership with the SEC.  Officers,
directors and greater than 10% shareholders are required by SEC regulation to
furnish us with copies of all Section 16(a) forms they file.  Based on
our review of the copies of such forms we received, we believe that during the
fiscal year ended August 31, 20 all such filing requirements applicable to our
officers and directors were complied with.




Limitation
of Liability of Directors




Pursuant
to our Sections 78.7502 and 78.751 of the Nevada Revised Statutes and our
bylaws, we may indemnify an officer or director who is made a party to any
proceeding, because of his position as such, to the fullest extent authorized by
the Nevada Revised Statutes, as the same exists or may hereafter be amended. In
certain cases, we may advance expenses incurred in defending any such
proceeding.




To the
extent that indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling our Company pursuant
to the foregoing provisions, we have been informed that, in the opinion of the
SEC, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. If a claim for indemnification
against such liabilities (other than the payment by us of expenses incurred or
paid by a director, officer or controlling person of our Company in the
successful defense of any action, suit or proceeding) is asserted by any of our
directors, officers or controlling persons in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by us is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of that issue.


58


ITEM
11. EXECUTIVE COMPENSATION




Compensation
Discussion and Analysis




The
following table sets forth the compensation paid to our executive officers
during the following fiscal years:




Summary
Compensation Table




Name and
                                                      Principal
                                                      Position
                                                    
                                                    Year
                                                      Ended
                                                      August31,
                                                    
                                                    Salary
                                                      ($)
                                                    
                                                    Bonus
                                                      ($)
                                                    
                                                    Stock
                                                      Awards
                                                    
                                                    Option
                                                      Awards
                                                    
                                                    Non-Equity
                                                      Incentive Plan
                                                      Compensation
                                                    
                                                    Non Qualified
                                                      Deferred
                                                      Compensation
                                                      Earnings ($)
                                                    
                                                    All Other
                                                      Compensation
                                                      ($)
                                                    
                                                    Total
                                                      ($)RobSlavik
                                                      President,
                                                    
                                                    2010
                                                    
                                                    $
                                                    100,000
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    1,100.000
      warrants at $0.05
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    $
                                                    100,000CEO,
      Director
                                                      (5)
                                                    
                                                    2009
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    NilDavid
      Bukzin
                                                      Director
      (6)
                                                    
                                                    2010
                                                    
                                                    $
                                                    32,000
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    $
                                                    32,000Myron
      Landin
                                                      CFO
      (7)
                                                    
                                                    2010
                                                    
                                                    $
                                                    47,000
                                                    
                                                    Nil
                                                    
                                                    
                                                    110,000
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    $
                                                    47,000Brian
      Roberts
                                                      (former)
                                                      President
      (1)
                                                    
                                                    2009
                                                    
                                                    
                                                    11,286
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    50,000
                                                      warrants
      at
                                                      $0.05
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    
                                                    11,286Ian
      Foreman,
                                                      (former)
                                                      CFO(2)
                                                    
                                                    2009
                                                    
                                                    
                                                    2,697
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    
                                                    2,697Wayne
                                                      Waters
                                                      (former)
                                                      Director
      (4)
                                                    
                                                    2009
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil
                                                    
                                                    Nil


59


1)  Mr.
Roberts was appointed President and CEO of our Company in May
2006.  He tendered his resignation as President on June 18, 2009 and
as a Director on November 7, 2009.




(2)  Mr.
Foreman was appointed CFO of our Company in September 2006.  Mr.
Foreman tendered his resignation as of June 18, 2009. The Company paid $2,697
during the year ended August 2008 and $1,505 during the year ended August 31,
2008 to Foremost Geological Consulting, of which Ian Foreman is the principal,
as payment for certain geological consulting work rendered by that
entity.  Mr. Foreman did not receive any compensation for serving as
an executive officer of our company.




(4)  Mr.
Waters was appointed to the Board in the position of Director in May
2006.  Mr. Waters tendered his resignation as of June 18,
2009.




(5) Mr.
Slavik was appointed President and CEO in June 2009. Effective January 1, 2010,
Mr. Slavik has been receiving compensation at the rate of $10,000 per month. On
September 1, 2009 Mr. Slavik was awarded 1,100,000 compensation warrants to
purchase an equal number of shares at an exercise price of $.05 per share. The
warrants vested over the year ended August 31, 2010.




(6) Mr.
Bukzin has been a special advisor to the Board of Directors and has been
receiving compensation of $4,000 per month since January 1, 2010. At August 31,
2010 the Company was indebted to Mr. Bukzin for the amount of
$32,000.




(7)
Pursuant to a February 2, 2010 six month consulting agreement, Mr. Landin became
interim Chief Financial Officer of the Company. Terms provided for $6,500 per
month for a portion of his time, a signing bonus of 50,000 common shares and
60,000 common shares as compensation earned over the six month
term.  Additional compensation is due for time in excess of that
stipulated in the agreement.




Outstanding
Equity Awards




On July
15, 2009, the Company granted 50,000 compensation warrants to Brian Roberts a
director at the time of issuance, at an exercise price of $0.05 per share for a
term of 5 years. These compensation warrants vested on November 1,
2009.




On July
15, 2009, the Company granted a total of 1,750,000 stock options to consultants
at an exercise price of $0.05 per share for a term of 5 years.  These
options vest 25% quarterly over a period of one year. The stock options were
issued as follows: 600,000 to a consulting firm, 900,000 to David Bukzin,
100,000 to Ian Foreman and 75,000 each to 2 to consultants.  These
options fully vested as of July 15, 2010.




On
September 1, 2009, the Company granted 1,100,000 options to Rob Slavik, an
officer and director of the Company. The options have no vesting
provisions.




On
October 1, 2009, the Company granted 350,000 options to a consultant to the
Company.  The options fully vested on July 1, 2010.




On
October 15, 2009, the Company granted 150,000 options to a New York-based law
firm for services. The options fully vested on October 15, 2010




On
November 1, 2009, the Company granted 150,000 options to a California-based law
firm for services.  The options fully vested on November 1,
2010.


60


On
November 1, 2009, the Company granted 250,000 options to Ron Shenton. The
options fully vested on August 1, 2010.





Dr. Mruma
Consulting Agreement – Board of Advisors granted 50,000 options on April 24,
2010 at $0.35


Maita
Mkuvia – granted shares 50,000 shares on June 2, 2010 in connection with
consulting agreement.





Myron
Landin was awarded 110,000 shares in connection with his 6 month consulting
agreement on February 1, 2010, which vested over the period through July 31,
2010.





Toby
Hansen was awarded 200,000 shares and 300,000 non-qualified common stock
purchase options in connection with his employment agreement effective July 28,
2010 and executed on December 4, 2010. Common shares vest The options are
exercisable at $0.60 per share and vest quarterly over the two year term of the
agreement.





Compensation
of Directors




Some of
our directors may cash or non-cash compensation for their services. They are,
also, reimbursed for any out-of-pocket expenses they may incur in connection
with our business.




In the
year ended August 31, 2010 we had one Director, Robert Slavik, also our
President and Chief Executive Officer. He earned $100,000 in salary and received
a compensation warrant to purchase 1.1 million common shares of the Company at
$.05 per share, expiring in 5 years. Commencing on January 1, 2010 he was
entitled to receive a fee of $10,000 per month as approved by the Board of
Directors.




Mr.
Bukzin became a director in September 2010. Mr. Bukzin has been a special
advisor to the Company since July 2009. He was awarded non-qualified stock
options to purchase 900,000 shares at $0.05 per share on July 15, 2009.
Commencing on January 1, 2010 he was entitled to receive a fee of $4,000 per
month as approved by the Board of Directors. This total fee of $32,000 was
accrued and unpaid as of August 31, 2010.




ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS




The
following table sets forth information regarding the beneficial ownership of our
shares of common stock as of December 3, 2010 by (i) each person known by us to
be the beneficial owner of more than 5% of our outstanding shares of common
stock, (ii) each of our directors, (iii) each of our executive officers, and
(iv) by all of our directors and executive officers as a group. Each person
named in the table, has sole voting and investment power with respect to all
shares shown as beneficially owned by such person and can be contacted at our
executive office address.





61


Name and address of beneficial owner
                                            
                                            Amount and nature of
                                              Beneficial Owner(1)
                                            
                                            
                                            Percentage of
                                              Class(2)Directors
      and Officers:Rob
      Slavik, President CEO, Director
                                              750
      3rd Avenue 11th Floor, New York, NY
                                            
                                            
                                            5,945,000
                                            
                                            
                                            
                                            19.8
                                            %David
      Bukzin, Director
                                              750
      3rd Avenue 11th Floor, New York, NY
                                            
                                            
                                            8,234,877
                                            
                                            
                                            
                                            26.1
                                            %Myron
      Landin, Chief Financial Officer
                                              750
      3rd Avenue 11th Floor, New York, NY
                                            
                                            
                                            155,000
                                            
                                            
                                            
                                            0.5
                                            %All
      officers and directors as a group (three individuals)
                                            
                                            
                                            10,529,877
                                            
                                            
                                            
                                            43.8
                                            %5%
      Shareholders:Douglas
      Lake Minerals, Inc.
                                            
                                            
                                            4,000,000
                                            
                                            
                                            
                                            13.8
                                            %Double
      Trouble Productions, LLC.
                                            
                                            
                                            3,260,000
                                            
                                            
                                            
                                            10.6
                                            %




(1) Under
Rule 13d-3 of the Exchange Act a beneficial owner of a security includes any
person who, directly or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise has or shares: (i) voting power, which
includes the power to vote, or to direct the voting of shares; and (ii)
investment power, which includes the power to dispose or direct the disposition
of shares.  Certain shares may be deemed to be beneficially owned by
more than one person (if, for example, persons share the power to vote or the
power to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the shares
(for example, upon exercise of an option) within 60 days of the date as of which
the information is provided. In computing the percentage ownership of any
person, the amount of shares outstanding is deemed to include the amount of
shares beneficially owned by such person (and only such person) by reason of
these acquisition rights.


(2) Based
on 28,883,642 shares of our common stock issued and outstanding as of December
3, 2010.


62


Changes
in Control




On June
17, 2009, Rob Slavik acquired an aggregate of 4,520,000 shares of common stock
(the “Shares”) of Ruby Creek Resources, Inc. (the “Company”) from Brian Roberts,
Ron Shenton, Shannon May, and Shayne May.  In addition, on June 18,
2009, Rob Slavik was elected as the Company’s President and
Director.  These transactions constituted a change of control of the
Company.




ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE




Except as
described below or in Item 11 above, none of the following parties has, in the
last two fiscal years, had any material interest, direct or indirect, in any
transaction with us or in any presently proposed transaction that has or will
materially affect us:




•           any
of our directors or officers;




•           any
person proposed as a nominee for election as a director;




•           any
person who beneficially owns, directly or indirectly, shares carrying more than
10% of the voting rights attached to our outstanding shares of common stock;
or




•           any
member of the immediate family (including spouse, parents, children, siblings
and in-laws) of any of the above persons.





Brian
Roberts




On August
22, 2006, Brian Roberts, our President, Chief Executive Officer, Principal
Executive Officer and a director, acquired 1,500,001 shares of our common stock
at a price of $0.01 per share, for a total purchase price of $15,000. On June
17, 2009, Mr. Slavik, our current President and a Director purchased all
1,500,000 from Mr. Roberts in a private transaction. Mr. Roberts resigned as
president on June 18, 2009.




On July
15, 2009, the Company granted 50,000 warrants to Brian Roberts a director at the
time of issuance, at an exercise price of $0.05 per share for a term of 5 years,
these options fully vested on November 1, 2009.  Mr. Roberts resigned
as a director on November 7, 2009.




As at
August 31, 2009, the Company was indebted to Mr. Roberts for $113 (2008 -
$113.).  The amount due is non-interest bearing, unsecured and due on
demand.  Mr. Roberts was also paid fees of $11,286 during the year
ended August 31, 2009.




Ron
Shenton




On August
31, 2006, Ron Shenton acquired 1,500,000 shares of our common stock at a price
of $0.01 per share. Mr. Shenton paid a total purchase price of $15,000 for these
shares. On June 17, 2009, Mr. Slavik, our current President and a Director
purchased all 1,500,000 from Mr. Shenton in a private transaction.




Shannon
May




On August
31, 2006, Shannon May acquired 1,500,000 shares of our common stock at a price
of $0.01 per share.  Ms. May paid a total purchase price of $15,000
for these shares. On June 17, 2009, Mr. Slavik, our current President and a
Director purchased all 1,500,000 from Shannon May in a private
transaction.


63


Rob
Slavik




As at
August 31, 2009, the Company was indebted to Mr. Slavik for
$29,000.  The amount due is non-interest bearing, unsecured and due on
demand. On August 31, 2010 Mr. Slavik was indebted to the Company in the amount
of $7,668.




On
September 1, 2009, the Company granted 1,100,000 warrants to Rob Slavik, an
officer and director of the Company, subject to his acceptance. Also, on
November 7, 2009, the Board unanimously approved the right of Rob Slavik to
effect a debt conversion of up to $50,000 based on the price of the Company’s
stock at the time of the closing of the OTC Bulletin Board, immediately
following the announcement of the Mkuvia Joint Venture Agreement with Douglas
Lake Minerals Inc. and the next level financing. As Mr. Slavik was an officer
and director of the Company at the time of these transactions, they were not at
arm’s-length. On November 16, 2009 Mr. Slavik effected this debt conversion and
received $1,000,000 shares of common stock of the Company.




ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES




Dale
Matheson Carr-Hilton LaBonte LLP served as our independent registered public
accounting firm and audited our financial statements for the fiscal years ended
August 31, 2010 and 2009.  Aggregate fees for professional services
rendered to us by our auditor are set forth below:





Year Ended
                                      August 31, 2010
                                    
                                    
                                    Year Ended
                                      August 31, 2009Audit
      Fees
                                    
                                    $
                                    17,272
                                    
                                    
                                    $
                                    11,644Audit-Related
      Fees
                                    
                                    
                                    25,720
                                    
                                    
                                    
                                    10,100Tax
      Fees
                                    
                                    
                                    
                                    
                                    
                                    –All
      Other Fees
                                    
                                    
                                    
                                    
                                    
                                    –Total
                                    
                                    $
                                    43,022
                                    
                                    
                                    $
                                    21,744





Audit
Fees




Audit
fees are the aggregate fees billed for professional services in the period
rendered by our independent auditors for the audit of our annual financial
statements and services provided in connection with statutory and regulatory
filings or engagements.


64


Audit
Related Fees




Audit
related fees are the aggregate fees billed by our independent auditors in the
period for assurance and related services that are reasonably related to the
review of the financial statements included in each of our quarterly reports and
are not described in the preceding category.




Tax
Fees




Tax fees
will be billed by our independent auditors for tax compliance services provided.




All
Other Fees All




Other
fees include fees billed by our independent auditors for products or services
other than as described in the immediately preceding three
categories.




Policy
on Pre-Approval of Services Performed by Independent Auditors




It is our
audit committee's policy to pre-approve all audit and permissible non-audit
services performed by the independent auditors.  We approved all
services that our independent accountants provided to us in the past two fiscal
years.




ITEM
15. EXHIBITS




The
following exhibits are filed with this Annual Report on Form 10-K unless filed
previously as noted below.




Number
              
              Description
      of Exhibit3.1
              
              Articles
      of Incorporation (1)3.2
              
              Bylaws
      (5)10.1
              
              Founder's
      Seed Capital Share Private Placement Subscription Agreement
      (1)10.2
              
              Subscriber's
      $0.05 Seed Capital Share Private Placement Subscription
      Agreement.(1)10.3
              
              Subscriber's
      $0.05 Seed Capital Share Private Placement Subscription
      Agreement.(1)10.4
              
              Mineral
      Claims Option Agreement between Ruby Creek Resources, Inc. and Carl von
      Einsiedel, dated July 15, 2006, as amended August 15, 2006
    (1)10.5
              
              More
      Creek Claims - Payment Schedule Agreement dated July 9, 2008.
      (2)10.6
              
              Amendments
      to Mineral Claims Option Agreement between Ruby Creek Resources Inc. and
      Carl von Einsiedel dated July 9, 2008 (3)10.7
              
              Consulting
      Agreement between Ruby Creek Resources, Inc. and Brian Roberts dated June
      18, 2008 and of July 15, 2009 respectively (5)10.8
              
              Amendment
      to the Consulting Agreement between Ruby Creek Resources, Inc. and Brian
      Roberts, dated November 1, 2009 (5)10.9
              
              Form
      of Ruby Creek Resources, Inc. Consulting Warrant
  (5)


65




10.10
                      
                      Advisory
      Agreement between Ruby Creek Resources, Inc. and Foremost Geological
      Consulting dated July 15, 2009. (4)10.11
                      
                      Consulting
      Agreement between Ruby Creek Resources, Inc. and David Bukzin dated July
      17, 2009. (4)10.12
                      
                      Consulting
      Agreement between Ruby Creek Resources, Inc. and Double Trouble
      Productions LLC dated July 17, 2009. (4)10.13
                      
                      Purchase
      Agreement for shares between Ruby Creek Resources, Inc. and Double Trouble
      Productions LLC/Booha Family Partners dated July 20, 2009
    (5)10.14
                      
                      Consulting
      Agreement for shares between Ruby Creek Resources, Inc. and M. Littman
      dated July 20, 2009 (5)10.15
                      
                      Consulting
      Agreement for shares between Ruby Creek Resources, Inc. and B. Krooks
      dated July 20, 2009(5)10.16
                      
                      Consulting
      Agreement between Ruby Creek Resources, Inc. Kouzelne Mesto Ltd. dated
      October 1, 2009 (5)10.17
                      
                      Advisory
      Agreement between Ruby Creek Resources, Inc. and R. Shenton dated November
      1, 2009 (5)10.18
                      
                      Joint
      Venture Agreement between Ruby Creek Resources, Inc., and Douglas Lake
      Minerals, Inc. Dated November 7, 2009 (5)10.19
                      
                      Letter
      Agreement (payment extension) between Ruby Creek Resources, Inc., and
      Douglas Lake Minerals, Inc. dated December 18, 2009 (6)10.20
                      
                      Bridge
      Note dated December 22, 2009 (6)10.21
                      
                      Consulting
      Agreement between the Company and Myron W. Landin (7)10.22
                      
                      Joint
      Venture Development Agreement among between Ruby Creek Resources, Inc.,
      and Douglas Lake Minerals, Inc. and Maita Mkuvia dated March 7, 2010
      (8)10.23
                      
                      Purchase
      Agreement by and between Ruby Creek Resources, Inc. and DouglasLake
      Minerals, Inc., effective as of June 16, 2010 (9)10.24
                      
                      Purchase
      Agreement by and between Ruby Creek Resources, Inc. and Carlos John Kolos
      Kapinga, effective as of September 9, 2010 (10)10.25
                      
                      Employment
      Agreement between Ruby Creek Resources, Inc. and  T. Toby Hansen
      dated December 4, 2010 (Filed herewith)31.1
                      
                      Certification
      of Chief Executive (Filed herewith)31.2
                      
                      Certification
      of Chief Financial Officer (Filed herewith)32.1
                      
                      Certification
      of Chief Executive Officer  (Filed herewith)32.2
                      
                      Certification
      of Chief Financial Officer (Filed
herewith)




66




(1.)
            Incorporated
      by reference. Filed as an exhibit to the Company's Registration Statement
      on Form SB-2, as filed with the SEC on November 7, 2006, and incorporated
      herein by this reference.




(2.)
            Incorporated
      by reference. Filed as an exhibit to the Company's Form 10-K for the year
      ended August 31, 2008.




(3.)
            Incorporated
      by reference. Filed as an exhibit to the Company's Form 10-Q for the
      period ended February 28, 2009.




(4.)
            Incorporated
      by reference. Filed as an exhibit to the Company's Form 10-Q for the
      period ended May 31, 2009.




(5.)
            Incorporated
      by reference. Filed as an exhibit to the Company's annual report on Form
      10-K, filed with the SEC on December 10,
2009.





(6.)
            Incorporated
      by reference. Filed as an exhibit to the Company's Form 10-Q for the
      period ended November 30, 2009.





(7.)
            Incorporated
      by reference. Filed as an exhibit to the Company's Form 8-K dated February
      11, 2010.





(8.)
            Incorporated
      by reference.  Filed as an exhibit to the Company's Form 8-K
      dated March 17, 2010.





(9.)
            Incorporated
      by reference.  Filed as an exhibit to the Company's Form 8-K
      dated June 16, 2010.





(10.)
            Incorporated
      by reference.  Filed as an exhibit to the Company's Form 8-K
      dated September 15, 2010.




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/
      ROB SLAVIKRob
      Slavik, President, Chief Executive Officer, DirectorDate:
      December 13, 2010





/s/
      MYRON LANDINMyron
      Landin, Chief Financial OfficerDate:
      December 13, 2010


67