ITEM 2. PLAN OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION

FORWARD-LOOKING STATEMENT NOTICE

This Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "estimate" or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control.
These factors include but are not limited to economic conditions generally and in the industries in which we may participate; competition within our chosen industry, including competition from much larger competitors; technological advances and failure to successfully develop business relationships.

Description of Business.

Desert Mining is engaged in the activity of seeking developmental mineral properties. In particular Desert is focusing on the oil and gas industry and is actively pursuing oil and gas leases along with joint ventures or acquisitions to complement the intended business operation.

We have approximately 4,200 Federal acres, no State acres and 187 private acres of oil and gas leases. In addition to our leases, we have minimal office equipment, vehicles and no other assets. In September 2008, we allowed 4,760 acres of State leases to expire. 680 federal acres was allowed to expire in June 2009 reducing our annual payments by $1,360. In May 2009 we sold a 20% working interest in our various leases.

The Spotted Horse project located in Campbell County, Wyoming had been on production since the third quarter of 2006. In April 2009 the Company shut in its three existing wells. We are evaluating development options for our undrilled acreage in the Prospect. Our Dripping Rock Prospect has two approved drilling permits and we are preparing for a sixteen well drilling program on the lease in the first quarter of 2010.

At June 30, 2009, we have no producing gas wells.

As a part of our planned operations, Desert is actively seeking to develop joint ventures or acquire businesses with current operations or seeks a merger with a company in the oil and gas production areas.

Plan of Operation

We intend to drill for oil and natural gas on our leases. Drilling costs will be treated as work in progress until such time as the well has been finished and its commercial potential evaluated.

Results of Operations - Three Months Ended June 30, 2009 Compared to the Three Months Ended June 30, 2008

For the three months ended June 30, 2009 we had revenue from natural gas sales of $5,498 with compression and operating costs of $18,909 and severance and production taxes of $660 resulting in a gross loss of $14,071, compared to $48,528 in revenue from natural gas sales with compression and operating costs of $23,629 and severance and production taxes of $5,823 resulting in a gross profit of $19,076 for the three months ended June 30, 2008.

For the three months ended June 30, 2009 our expenses consisted of $1,344 in annual lease payments, $24,733 in depreciation, depletion and amortization and $141,729 in administrative expenses and interest expense of $4,500. During this period we had a gain from sale of oil & gas lease of $178,878 which resulted in a net income of $1,501 or $(0.000) per share. For the three months ended June 30, 2008, our expenses consisted of $4,260 in annual lease payments, $26,791 in depreciation, depletion and amortization and $112,473 in administrative expenses, and $33,657 in interest expense for a net loss for the corresponding period of 2008 of $(158,105) or $(0.011) per share.

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Results of Operations - Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008

For the six months ended June 30, 2009 we had revenue from natural gas sales of $21,485 with compression and operating costs of $28,313 and severance and production taxes of $2,578 resulting in a gross loss of $9,406, compared to $115,972 in revenue from natural gas sales with compression and operating costs of $37,095 and severance and production taxes of $13,969 resulting in a gross profit of $64,908 for the six months ended June 30, 2008.

For the six months ended June 30, 2009 our expenses consisted of $1,344 in annual lease payments, $49,130 in depreciation, depletion and amortization and $214,805 in administrative expenses. During this period we had a gain from sale of oil & gas lease of $178,878 which resulted in a net loss of $95,807 or $(0.000) per share. For the six months ended June 30, 2008, our expenses consisted of $4,900 in annual lease payments, $49,757 in depreciation, depletion and amortization and $262,142 in administrative expenses, and $67,314 in interest expense for a net loss for the corresponding period of 2008 of $(260,288) or $(0.018) per share.

Capital Resources and Liquidity

As of June 30, 2009, we had total assets of $1,623,730 and liabilities of $316,907. Our assets consist of $8,635 in cash, $21,356 in furniture and equipment, net of depreciation, undeveloped oil and gas leases of $568,341 less accumulated amortization and valuation allowance of $398,356, proved developed properties of $1,397,9030 less accumulated depletion of $89,113, unevaluated drilling costs of $27,406 and deposits of $87,531.

Our liabilities consist of $316,907 in accounts payable.

We have placed deposits with the US Department of the Interior - Bureau of Land Management ($10,000) and State of Wyoming Oil and Gas Conservation Commission ($75,000). State and Federal regulations require all oil and gas well operators to have on deposit with the appropriate regulatory agency, an amount sufficient to reclaim any wells the Operator is responsible for.

During the last quarter of 2008, the Company borrowed $150,000 from a shareholder. The note was due March 31, 2009 and subsequently extended indefinitely. The note bears interest at a rate of 12% per annum. As a condition to the note, the Company granted the shareholder a 1% royalty override on our various leases. During the second quarter of 2009 we paid off the note.

The Company intends to drill for oil and natural gas on their leases. Drilling costs will be treated as work in progress until such time as the well has been finished and its commercial potential evaluated. The Company follows the successful efforts method of accounting and will capitalize successful wells and related leasehold costs. These costs will be amortized using the unit of production method. Dry hole and related leasehold costs will be expensed. At June 30, 2009, the Company had no wells producing.

Continuation of the Company in its planned activity is dependent upon obtaining additional working capital and Management has developed a strategy which it believes will accomplish this objective through additional equity funding, long term financing and reallocation of certain assets which will enable the Company to be successful in its efforts.