Desert Mining (DSRM) 10-Q 2009 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period endedJune 30, 2009.

or

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

For the transition period from _______________________  to  ___________________________

Commission File Number:  0-32123

DESERT MINING, INC.

(Exact name of registrant as specified in its charter)

Nevada	87-0664962
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4328 Highway 66, Longmont, CO	80504
(Address of principal executive offices)	(Zip Code)

(970) 535-6213

(Registrant’s telephone number, including area code)

_______________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has 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.      S   Yes    £   No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

  £   Yes   S   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer£

Accelerated filer£

Non-accelerated filer£  (Do not check if a smaller reporting company)

Smaller reporting companyS

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  £   Yes   £   No

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as ofJune 30, 2009:  21,149,260

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

The accompanying financial statements have been prepared by the Company without audit.  In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at June 30, 2009 and 2008 and for the periods then ended have been made.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.  It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2008 audited financial statements.  The results of operations for the periods ended June 30, 2009 and 2008 are not necessarily indicative of the operating results for the full year.

DESERT MINING, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEET - unaudited

June 30, 2009

=========================================================================

		June 30,		December 31,
		2009		2008
ASSETS
CURRENT ASSETS
Cash	$	8,635	$	120,608
Accounts receivable		-		-
Total Current Assets		8,635		120,608
FURNITURE & EQUIPMENT – net of depreciation		21,356		31,489
OTHER ASSETS
Undeveloped oil & gas leases		568,341		576,028
Less accumulated amort’n and valuation allowance		(398,356)		(374,934)
Proved developed properties		1,397,930		1,419,051
Less accumulated depletion		(89,113)		(81,224)
Unevaluated drilling cost		27,406		37,406
Deposits		87,531		102,531
Total Other Assets		1,593,739		1,678,858
	$	1,623,730	$	1,830,955
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	316,907	$	376,825
Accounts payable related parties		-		1,500
Note payable		-		150,000
Accrued interest payable		-		-
Total Current Liabilities		316,907		528,325
STOCKHOLDERS’ EQUITY
Common stock
100,000,000 shares authorized at $0.001 per value
21,149,260 shares issued and outstanding		21,149		20,649
Capital in excess of par value		5,452,930		5,353,430
Accumulated deficit		(4,167,256)		(4,071,449)
Total Stockholders’ Equity		1,306,823		1,302,630
	$	1,623,730	$	1,830,955

The accompanying notes are an integral part of these financial statements.

DESERT MINING, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF OPERATIONS - unaudited

For the Three and Six Months Ended June 30, 2009 and 2008

=========================================================================

		Three Months				Six Months
		6-30-09		6-30-08		6-30-09		6-30-08
REVENUE
Natural Gas Sales	$	5,498	$	48,528	$	21,485	$	115,972
Compression & Operating Cost		(18,909)		(23,629)		(28,313)		(37,095)
Severance & Production Taxes		(660)		(5,823)		(2,578)		(13,969)
Gross Profit		(14,071)		19,076		(9,406)		64,908
EXPENSES
Annual lease payments		1,344		4,260		1,344		4,900
Depreciation, Depletion & Amort’n		24,733		26,791		49,130		49,757
Administrative		141,729		112,473		214,805		262,142
		167,806		143,524		265,279		316,799
NET LOSS FROM OPERATIONS		(181,877)		(124,448)		(274,685)		(251,891)
OTHER EXPENSES
Gain from sale of oil & gas lease		178,878		-		178,878		58,917
Interest expense		4,500		(33,657)		-		(67,314)
NET INCOME/(LOSS)	$	1,501	$	(158,105)	$	(95,807)	$	(260,288)
NET INCOME/(LOSS) PER COMMON SHARE
Basic and diluted	$	(0.00)	$	(0.011)	$	(0.00)	$	(0.018)
AVERAGE OUTSTANDING SHARES –     (stated in 1,000’s)
Basic		21,149		14,162		21,149		14,162
Diluted		21,149		14,162		21,149		14,162

The accompanying notes are an integral part of these financial statements.

DESERT MINING, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2009 and 2008

=========================================================================

		June 30,		June 30,
		2009		2008
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income/(loss)	$	(95,809)	$	(260,288)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Depreciation, depletion & amortization		49,130		49,757
Changes in accounts receivable		-		6,481
Changes in deposits		150,000		6,545
Changes in notes and accounts payable		(211,418)		106,103
Contributions to capital – expenses				-
Issuance of capital stock for expenses				-
Net Decrease in Cash From Operations		(243,095)		(91,402)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of office equipment		-		-
Proceeds from sale of oil & gas leases		200,000		160,985
Cost of oil & gas leases sold		(21,122)		(102,068)
Purchase/development of oil & gas leases		(147,756)		(98,088)
		31,122		(39,171)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from note payable		-		-
Proceeds from issuance of common stock		100,000		-
Net Increase in Cash		(111,973)		(130,573)
Cash at Beginning of Period		120,608		148,306
Cash at End of Period	$	8,635	$	17,733

The accompanying notes are an integral part of these financial statements.

DESERT MINING, INC. AND SUBSIDIARY

STATEMENT OF CHANGES IN STOCKHOLDER’ EQUITY

For the Period December 31, 2004 to June 30, 2009

=========================================================================

					Capital in
	Common Stock				Excess of		Accumulated
	Shares		Amount		Par Value		Deficit
Balance December 31, 2004	12,398,000	$	12,398	$	3,402,926	$	(1,198,542)
Issuance of common stock for cash
at $1.00 – January - March 2005	210,000		210		209,790		-
Issuance of common stock for services
– March 2005	600,000		600		89,400		-
Issuance of common stock for payment
of debt – June 2005	99,124		99		88,492		-
Issuance of common stock for expenses
at $0.75 – August 2005	46,801		47		35,053		-
Issuance of common stock for payment
of debt – October 2005	18,722		19		14,021		-
Issuance of common stock for cash
at $1.00 – November 2005	200,000		200		199,800		-
Net operating loss for the year ended
December 31, 2005	-		-		-		(1,616,121)
Balance December 31, 2005	13,572,647		13,573		4,039,482		(2,814,663)
Issuance of common stock for wells
at $0.53 – May 2006	150,000		150		79,350		-
Issuance of common stock for services
at $0.33 – June 2006	360,000		360		118,440		-
Net operating loss for the year ended
December 31, 2006	-		-		-		(249,323)
Balance December 31, 2006	14,082,647	$	14,083	$	4,237,272	$	(3,063,986)
Issuance of common stock for cash
at $0.25 – January 2007	80,000		80		19,920
Net operating loss for the year ended
December 31, 2007	-		-		-		(496,807)
Balance December 31, 2007	14,162,647	$	14,163	$	4,257,192	$	(3,560,793)
Issuance of common stock in exchange for
debt at $0.17 – December, 2008	6,486,613		6,486		1,096,238
Net operating loss for the year ended
December 31, 2008	-		-		-		(510,656)
Balance December 31, 2008	20,649,260	$	20,649	$	5,353,430	$	(4,071,449)
Issuance of common stock in exchange for cash at $0.20 – May 27, 2009	500,000		500		99,500		-
Net operating loss for period ending June 30, 2009							(95,807)
Balance June 30, 2009	21,149,260	$	21,149	$	5,452,930	$	(4,167,256)

The accompanying notes are an integral part of these financial statements.

DESERT MINING, INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENT

June 30, 2009

___________________________________________________________________________________________________

1.

ORGANIZATION

The Company was incorporated under the laws of the state of Nevada on June 6, 1979 with the name Holidays of America, Inc. with authorized common stock of 2,500 shares at no par value.  On November 28, 2000 the name was changed to Desert Mining, Inc. and the authorized common stock was increased to 100,000,000 shares with a par value of $0.001 in connection with a forward stock split of two hundred shares for each outstanding share.

This report has been prepared showing after stock split shares from inception with a par value of $0.001.

The Company is engaged in the activity of acquiring, exploring, developing and operating oil and gas leases.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Methods

The Company recognizes income and expenses based on the accrual method of accounting.

Dividend Policy

The Company has not yet adopted a policy regarding payment of dividends.

Income Taxes

The Company utilizes the liability method of accounting for income taxes.  Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to reverse.  An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.  

On June 30, 2009, the Company had a net operating loss available for carry forward of $3,319,256. The tax benefit of approximately $496,000 from the loss carry forward has been fully offset by a valuation reserve because the use of the future tax benefit is doubtful since the Company has limited operations and has been unable to project a reliable estimate of future profits.  The net operating loss will expire starting in 2019 through 2029.

Financial and Concentrations Risk

The Company does not have any concentration or related financial credit risks except the Company maintains bank accounts over the insured amount of $100,000. However, they are maintained in banks with high quality.

Statement of Cash Flows

For the purposes of the statement of cash flows, the Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents.  

DESERT MINING, INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (Continued)

June 30, 2009

___________________________________________________________________________________________________

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Revenue Recognition

The Company is in the business of exploring for, developing, producing and selling crude oil and natural gas.  Crude oil revenue is recognized when the product is taken from the storage tanks on the lease and delivered to the purchaser.  Natural gas revenues are recognized when the product is delivered into a third party pipeline downstream of the lease.  Occasionally the Company may sell specific leases and the gain or loss associated with those transactions will be shown separately from the profit or loss from normal ongoing operations.  

Advertising and Market Development

The company expenses advertising and market development costs as incurred.

Estimates and Assumptions

Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles.  Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.  Actual results could vary from the estimates that were assumed in preparing these financial statements.

Financial Instruments

The carrying amounts of financial instruments are considered by management to be their estimated fair values due to their short term maturities.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiary from its inception.  All significant intercompany accounts and balances have been eliminated in consolidation.

Recent Accounting Pronouncements

The Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.

DESERT MINING, INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (Continued)

June 30, 2009

___________________________________________________________________________________________________

3.  OIL & GAS LEASES

During 2003, 2004, and 2005 the Company purchased 32,734 net acres of oil and gas leases consisting of 19,799 acres from the State of Wyoming, 11,451 acres from the BLM and 1,484 net acres from private individuals.  The terms of the BLM leases are for ten years and require yearly payments of $17,177 starting one year after the issuance of the leases. The terms of the State of Wyoming leases are for five years with yearly payments of $19,799 starting one year after the date of issuance of the leases.  The private leases vary from 19 months to 52 months and do not require any annual payments.  The required yearly payments are expensed as paid.  The company acquired 2,856 BLM acres in the second quarter of 2007.  Due to the short term remaining on the leases, no consideration was paid to the vendor but the vendor retained an overriding royalty on the leases.  This transaction added $5,712 to our annual BLM rental obligations.  An additional 2,953 BLM acres were acquired in the second quarter of 2008 adding $4,430 to our annual BLM payments.

During 2004 the Company sold 240 net acres of State leases retaining an overriding royalty of 4.34% and reducing annual payments by $240.  In June 2005, the Company sold 2,103 net BLM acres retaining a 2.5% overriding royalty and reducing annual payments by $3,155.  In March 2006 the Company sold 640 State acres reducing the annual payments by $640 and in December 2006 the Company sold 640 State acres reducing annual payments by $640.  In the first half of 2007, 1,278 acres of private leases were allowed to expire.  In September 2007 the Company sold 6,045 BLM acres and retained a 5% overriding royalty interest.  This reduced our annual BLM obligation by $9,068.  In January 2008 we sold a total of 10,625 acres (4,826 BLM acres and 6,799 State acres) reducing our annual BLM payments by $7,239 and our annual State payments by $5,799.  We retained an overriding royalty of 3.333% on the State leases and an overriding royalty of 7.5% on some o f the BLM leases.  An additional 4,760 acres of State leases was allowed to expire in September 2008 reducing annual payments by $4,760.  680 federal acres was allowed to expire in June 2009 reducing our annual payments by $1,360.  In May 2009 the Company sold a 20% working interest in its Spotted Horse project.

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.  On March 31, 2008 the Company had three producing gas wells.

4.  CONTINUING LIABILITIES

The Company is obligated under a two year office lease of $2,375 per month which expired September 30, 2006.  The lease also includes two one year extensions and the Company has exercised the second year option.

5.  DEPOSITS

The Company has 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.  

DESERT MINING, INC. AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS (Continued)

June 30, 2009

___________________________________________________________________________________________________

6.  RELATED PARTY TRANSACTIONS

Officers-directors and a Company manager have acquired 4% of the common capital stock issued.

7.  GOING CONCERN

On the balance sheet date the Company did not have sufficient working capital to service its debt and for its planned activity for the coming year.  Continuation of the Company in its planned activity is dependent upon obtaining additional working capital and the management of the Company has developed a strategy, which it believes will accomplish this objective through seeking additional equity funding, and long term financing, which will enable the Company to be successful in its efforts.

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 compet itors; 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 3,400 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 has been on production since the third quarter of 2006.  It continues to produce 62 mcfd from the 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 drilling program on the lease in the third quarter of 2009. 

At June 30, 2009, we had three producing gas wells.

As a part of our planned operations, Desert is actively seeking to develop joint ventures or acquire businesses with current operations 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.

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 three 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.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required by smaller reporting companies.

ITEM 4T.  CONTROLS AND PROCEDURES.

(a)

Evaluation of Disclosure Controls and Procedures.  The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, management has concluded that the Company’s internal control over financial reporting and procedures was effective as of June 30, 2009.

(b)

Changes in Internal Control over Financial Reporting.  There were no changes in the Company's internal controls over financial reporting, known to the chief executive officer or the chief financial officer, that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

The Company was named in a complaint dated July 27, 2007 which was filed in the State of Wyoming, County of Campbell, District Court, Sixth Judicial District with Civil No. 28144.  The complaint was brought by Cammeran Petroleum, Inc., an Oklahoma corporation and named Desert Mining, Inc. and its subsidiary, 44 Mag Production, Inc. among other parties.  The complaint relates to mining leases and royalties in Wyoming and the plaintiff is requesting the Court to quiet title on the properties in dispute.  The Company has attempted to settle the dispute amicably and now intends to fully defend its position.  The can be no assurance of a positive outcome and any negative outcome could have an adverse affect on the Company.

The Company has been served with a complaint dated September 15, 2008 which was filed in the State of Nevada, Clark County District Court with Case No. A571579.  The complaint was brought by seven of the Company’s shareholders and names the Company, Gabriel K. Holt, an individual (the Company’s officer and director) and Does I-X and Roe Corporations I – X.  The complaint alleges breach of fiduciary duty, conversion, fraud and breach of shareholders rights to inspect among other issues.  The plaintiffs are requesting injunctive relief, damages in excess of $10,000, appointment of a receiver for the Company and costs. Management believes the lawsuit is frivolous, fails to state a cause of action and is without merit. Management is attempting to negotiate a favorable settlement.

Further, to the knowledge of management, no director or executive officer is party to any action in which any has an interest adverse to the Company.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On May 27, 2009, the Company issued 500,000 shares of its restricted common stock at $0.20 per share to an individual.  The shares were issued pursuant to an exemption from registration under Regulation D, Rule 506.  No brokers or dealers were involved in the transaction and no commission were paid.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES.

None

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

No matters were submitted during the period covered by this report to a vote of security holders.

ITEM 5.   OTHER INFORMATION.

None

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K.

(a)  Exhibits

Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

Exhibit No.	Title of Document	Location
31	Certification of the Principal Executive Officer/ Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Attached
32	Certification of the Principal Executive Officer/ Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*	Attached

(b)  Reports on Form 8-K

None

*

The Exhibit attached to this Form 10-Q shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.

SIGNATURES

Pursuant to the requirements 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.

DESERT MINING, INC.

Date: August 19, 2009

By:/s/ Gabriel Holt                

Gabriel Holt, President and Chief Financial Officer