|OMB APPROVAL                                                                                          
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-QSB

(Mark One)



[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the quarterly period ended June 30, 2005



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 000-06541



DISCOVERY OIL, LTD.

(Exact name of registrant as specified in its charter)



DELAWARE

83-0207909

(State or other jurisdiction of incorporation or organization

(IRS Employer Identification Number)



6127 Ramirez Canyon Road

Malibu, CA

(Address of principal executive offices)



90265

(Zip Code)



(310) 457-1967

(Registrants Telephone Number, Including Area Code)



N/A

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



APPLICABLE ONLY TO CORPORATE ISSUERS



State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: At April 30, 2005 the registrant had outstanding 25,245,921 shares of par value $0.001 common stock.



Transitional Small Business Disclosure format (check one):  Yes [  ]  No [X]



SEC 2334 (3-03)

Potential persons who are to respond to the collection of information contained in this form are not required  to  respond unless the  form displays a currently valid OMB control



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Discovery Oil Ltd

Form 10-QSB

Table of Contents





|Part I  Financial Information                                                                    |    
|------------------------------------------------------------------------------------------------- | ---
|                                                                                                  |    
|Item 1. Financial Statements (Unaudited)                                                          |    
|                                                                                                  |    
|Balance Sheet at June 30, 2005 (Unaudited)                                                        | 3  
|Statements of Operations For the Six Month Periods Ended June 30, 2005 and 2004 (Unaudited)       | 4  
|Statements of Cash Flows For the Six Month Periods Ended June 30, 2005 and 2004 (Unaudited)       | 5  
|Notes to Financial Statements (Unaudited)                                                         | 6  
|                                                                                                  |    
|                                                                                                  |    
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations     | 8  
|                                                                                                  |    
|                                                                                                  |    
|Item 3.  Controls and Procedures                                                                  | 9  
|                                                                                                  |    
|Part II  Other Information                                                                       |    
|                                                                                                  |    
|Item 1.  Legal Proceedings                                                                        | (a)
|                                                                                                  |    
|Item 2.  Changes in Securities and Use of Proceeds                                                | 10 
|                                                                                                  |    
|Item 3. Defaults Upon Senior Securities                                                           | (a)
|                                                                                                  |    
|Item 4. Submission of Matters to a Vote of Security Holders                                       | (a)
|                                                                                                  |    
|Item 5. Other Information                                                                         | (a)
|                                                                                                  |    
|Item 6. Exhibits                                                                                  | 10 
|                                                                                                  |    
|Signature Page                                                                                    | 11 
|                                                                                                  |    
|(a) There are no issues requiring disclosure for these items and they have therefore been omitted









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PART I - FINANCIAL INFORMATION



ITEM 1: FINANCIAL STATEMENTS



|DISCOVERY OIL, LTD.                            |                                             |                                 |                                                         |          
|---------------------------------------------- | ------------------------------------------- | ------------------------------- | ------------------------------------------------------- | ---------
|BALANCE SHEETS                                 |                                             |                                 |                                                         |          
|                                               |                                             |                                 |                                                         |          
|                                               |                                             |                                 |                                                         |          
|                                               |                                             |                                 |                                                         |          
|                                               |                                             |                                 |                                                         |          
|ASSETS                                         |                                             |                                 |                                                         |          
|                                               |                                             |                                 |                                                         |          
|                                               | CURRENT ASSETS                              |                                 |                                                         |          
|                                               |                                             | Cash                            | $                                                       | 755      
|                                               |                                             | Prepaid expenses                |                                                         | 10,400   
|                                               |                                             |                                 | Total Current Assets                                    |          
|                                               |                                             |                                 |                                                         |          
|                                               | PROPERTY AND EQUIPMENT, NET OF DEPRECIATION |                                 | 1,424                                                   |          
|                                               |                                             |                                 |                                                         |          
|                                               | TOTAL ASSETS                                | $                               | 12,579                                                  | $        
|                                               |                                             |                                 |                                                         |          
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |                                             |                                 |                                                         |          
|                                               |                                             |                                 |                                                         |          
|                                               | CURRENT LIABILITIES                         |                                 |                                                         |          
|                                               |                                             | Accounts payable                | $                                                       | 25,945   
|                                               |                                             | Related party payable           |                                                         | 26,569   
|                                               |                                             | Advances payable                |                                                         | 7,000    
|                                               |                                             | State tax liability             |                                                         | 23,355   
|                                               |                                             |                                 | Total Current Liabilities                               |          
|                                               |                                             |                                 |                                                         |          
|                                               | COMMITMENTS AND CONTINGENCIES               |                                 | -                                                       |          
|                                               |                                             |                                 |                                                         |          
|                                               | STOCKHOLDERS' EQUITY (DEFICIT)              |                                 |                                                         |          
|                                               |                                             | Common stock, $0.001 par value; |                                                         |          
|                                               |                                             |                                 | 200,000,000 shares authorized,                          |          
|                                               |                                             |                                 | 25,245,921 and 20,245,921 shares issued and outstanding |          
|                                               |                                             | Additional paid-in capital      |                                                         | 902,575  
|                                               |                                             | Accumulated deficit             |                                                         | (998,112)
|                                               |                                             |                                 | Total Stockholders' Equity (Deficit)                    |          
|                                               | TOTAL LIABILITIES AND                       |                                 |                                                         |          
|                                               |                                             | STOCKHOLDERS' EQUITY (DEFICIT)  | $                                                       | 12,579   



See accompanying condensed notes to these interim financial statements.



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|DISCOVERY OIL, LTD.        |                                     |                          |                    |             |                  |             |           |            |            
|-------------------------- | ----------------------------------- | ------------------------ | ------------------ | ----------- | ---------------- | ----------- | --------- | ---------- | -----------
|STATEMENTS OF OPERATIONS   |                                     |                          |                    |             |                  |             |           |            |            
|                           |                                     |                          |                    |             |                  |             |           |            |            
|                           |                                     |                          |                    |             |                  |             |           |            |            
|                           |                                     |                          |                    |             |                  |             |           |            |            
|                           |                                     |                          | Three Months Ended |             | Six Months Ended
|                           |                                     |                          | June 30,           |             | June 30,        
|                           |                                     |                          |                    | 2005        |                  | 2004        |           |            | 2005       
|                           |                                     |                          |                    | (unaudited) |                  | (unaudited) |           |            | (unaudited)
|                           |                                     |                          |                    |             |                  |             |           |            |            
|REVENUES                   |                                     |                          |                    |             |                  |             |           |            |            
|                           | Royalty income                      | $                        | -                  | $           | 7,343            |             | $         | -          | $          
|                           |                                     |                          |                    |             |                  |             |           |            |            
|OPERATING EXPENSES         |                                     |                          |                    |             |                  |             |           |            |            
|                           | State tax expense                   |                          | 229                |             | 710              |             |           | 458        |            
|                           | Consulting expense - related party  |                          | 300,000            |             | -                |             |           | 300,000    |            
|                           | General and administrative expenses |                          | 16,835             |             | 17,676           |             |           | 29,611     |            
|                           |                                     | Total Operating Expenses |                    | 317,064     |                  | 18,386      |           |            | 330,069    
|                           |                                     |                          |                    |             |                  |             |           |            |            
|LOSS FROM OPERATIONS       |                                     | (317,064)                |                    | (11,043)    |                  |             | (330,069) |            | (12,156)   
|                           |                                     |                          |                    |             |                  |             |           |            |            
|LOSS BEFORE TAXES          |                                     | (317,064)                |                    | (11,043)    |                  |             | (330,069) |            | (12,156)   
|                           |                                     |                          |                    |             |                  |             |           |            |            
|INCOME TAX EXPENSE         |                                     | -                        |                    | -           |                  |             | -         |            | -          
|                           |                                     |                          |                    |             |                  |             |           |            |            
|NET LOSS                   | $                                   | (317,064)                | $                  | (11,043)    |                  | $           | (330,069) | $          | (12,156)   
|                           |                                     |                          |                    |             |                  |             |           |            |            
|                           |                                     |                          |                    |             |                  |             |           |            |            
|NET LOSS PER COMMON SHARE, |                                     |                          |                    |             |                  |             |           |            |            
|                           | BASIC AND DILUTED                   | $                        | (0.01)             | $           | nil              |             | $         | (0.02)     |            
|                           |                                     |                          |                    |             |                  |             |           |            |            
|                           |                                     |                          |                    |             |                  |             |           |            |            
|WEIGHTED AVERAGE NUMBER    |                                     |                          |                    |             |                  |             |           |            |            
|                           | OF COMMON SHARES OUTSTANDING,       |                          |                    |             |                  |             |           |            |            
|                           | BASIC AND DILUTED                   |                          | 21,357,032         |             | 20,245,921       |             |           | 20,801,477 |            















See accompanying condensed notes to these interim financial statements.



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|DISCOVERY OIL, LTD.                          |                                                      |                                                  |        |           |                 
|-------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------ | ------ | --------- | ----------------
|STATEMENTS OF CASH FLOWS                     |                                                      |                                                  |        |           |                 
|                                             |                                                      |                                                  |        |           | Six Months Ended
|                                             |                                                      |                                                  |        |           | June 30,        
|                                             |                                                      |                                                  |        |           | 2005            
|                                             |                                                      |                                                  |        |           | (unaudited)     
|                                             |                                                      |                                                  |        |           |                 
|                                             |                                                      |                                                  |        |           |                 
|CASH FLOWS FROM OPERATING ACTIVITIES:        |                                                      |                                                  |        |           |                 
|                                             | Net income (loss)                                    |                                                  | $      | (330,069) | $               
|                                             | Adjustments to reconcile net loss to net cash        |                                                  |        |           |                 
|                                             | provided (used) by operating activities:             |                                                  |        |           |                 
|                                             |                                                      | Issuance of common stock for services            |        |           | 300,000         
|                                             |                                                      | Depreciation                                     |        |           | 352             
|                                             |                                                      | Accounts receivable                              |        |           | -               
|                                             |                                                      | Accounts payable                                 |        |           | (8,619)         
|                                             |                                                      | Prepaid expenses                                 |        |           | (2,900)         
|                                             |                                                      | State tax liability                              |        |           | 250             
|                                             |                                                      | Net cash provided (used) by operating activities |        |           | (40,986)        
|                                             |                                                      |                                                  |        |           |                 
|CASH FLOWS PROVIDED BY INVESTING ACTIVITIES: |                                                      |                                                  | -      |           | -               
|                                             |                                                      |                                                  |        |           |                 
|CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: |                                                      |                                                  |        |           |                 
|                                             |                                                      | Advances payable                                 |        |           | -               
|                                             |                                                      | Related party payable proceeds                   |        |           | 17,754          
|                                             |                                                      | Net cash provided by financing activities        |        |           | 17,754          
|                                             |                                                      |                                                  |        |           |                 
|                                             | Net increase (decrease) in cash and cash equivalents |                                                  |        | (23,232)  |                 
|                                             |                                                      |                                                  |        |           |                 
|Cash at beginning of period                  |                                                      |                                                  | 23,987 |           | 1,722           
|                                             |                                                      |                                                  |        |           |                 
|Cash at end of period                        |                                                      | $                                                | 755    | $         | 486             
|                                             |                                                      |                                                  |        |           |                 
|                                             |                                                      |                                                  |        |           |                 
|SUPPLEMENTAL CASH FLOW DISCLOSURES:          |                                                      |                                                  |        |           |                 
|                                             | Income taxes paid                                    |                                                  | $      | -         | $               
|                                             | Interest paid                                        |                                                  | $      | -         | $               





See accompanying condensed notes to these interim financial statements.



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DISCOVERY OIL, LTD.

Condensed Notes to Interim Financial Statements

June 30, 2005



NOTE 1 - BASIS OF PRESENTATION



The foregoing unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Regulation S-B as promulgated by the Securities and Exchange Commission (SEC).  Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles in the United States of America for complete financial statements.  These unaudited interim financial statements should be read in conjunction with the Companys audited financial statements for the year ended December 31, 2004.  In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.  Operating results for the six month period ended June 30, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.



The preparation of financial statements in accordance with generally accepted accounting principles in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period.  Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Companys financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of the Companys financial position and results of operations.





NOTE 2  GOING CONCERN



The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has limited cash and has suffered material recurring losses from operations since inception. At June 30, 2005, the Company has a deficit of $998,112. These factors raise substantial doubt about the Companys ability to continue as a going concern.



The Companys management is currently exploring new business opportunities, which will, if successful, mitigate these factors that raise substantial doubt about the Companys ability to continue as a going concern.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.











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DISCOVERY OIL, LTD.

Condensed Notes to Interim Financial Statements

June 30, 2005



NOTE 3  STATE TAX LIABILITY



For the six months ended June 30, 2005, the Company estimated its California corporate tax liability to be $23,355.  The Company has not filed a return with the State of California for several years and because of that the Company has been suspended from operating as a corporation in California.  In order to revive its authorized corporation status in California, the Company must file all delinquent tax returns and pay all related California corporate income taxes, penalties and interest.



During the six months ended June 30, 2005, the State of Delaware suspended the Company for failure to remit the annual corporate taxes.  The Company has paid the amounts owed and is again in good standing with Delaware, the state within which it is incorporated.





NOTE 4  PREPAID EXPENSES



Prepaid expenses principally consist of amounts paid for legal fees and office rent.



During the year ended December 31, 2004, the Company prepaid twelve months of legal retainer fees of $10,000.  During the six months ended June 30, 2005, the Company expensed $5,000 of this amount.



Also included in prepaid expenses are amounts paid to the Companys president for use of office space under a 1-year lease.  The Company prepaid a total of $9,300, of which $3,900 was expensed during the six months ended June 30, 3005.  The remaining balance of $5,400 will be expensed during the remainder of the year.



NOTE 5  RELATED PARTY TRANSACTIONS



At December 31, 2003, the Company had a related party payable to its president, who advanced funds on an unsecured and noninterest-bearing basis to the Company.  This amount was repaid in 2004.  During the year ended December 31, 2004, the Companys president paid expenses on behalf of the Company.  Additionally the Company signed a lease with this executive for the use of office space for $1,300 per month, or $15,600 per year.  The Company also agreed to pay mileage for his travels relating to the Company.  During 2004, the Company reimbursed this executive approximately $32,235 for rent, travel, general and administrative expenses incurred.    At June 30, 2005, the Company had a related party payable to its president, who advanced funds on an unsecured and noninterest-bearing basis to the Company.  The amount due to the executive at June 30, 2005 was $26,569.



During the six months ended June 30, 2005, the Company issued to its officers 5,000,000 shares of common stock for consulting services provided during the year.  The stock was valued at the fair market value of $0.06 per share, or $300,000.







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ITEM 2 - MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION



General



Discovery Oil, Ltd. (the Company, Registrant, or Discovery Oil), was originally organized under the laws of the State of Wyoming in 1964.  The Company became a Delaware corporation through a merger with a wholly owned subsidiary in 1981.  Prior to 1992, the Company was involved as a general partner in several limited partnerships for the purpose of drilling oil and gas wells in Ohio, Wyoming, Colorado, Kansas, and Texas.  In 1988 the Company filed a petition in Bankruptcy pursuant to Chapter 11 of the Bankruptcy code in the United States Bankruptcy Court.  On July 10, 1996, the Court entered its order and Final Decree, confirming the execution of the Companys reorganization plan and concluding all proceedings and jurisdiction of the bankruptcy.



The Company had a non-operating working interest in six producing oil wells having proved reserves.  The working interest granted the Company a 12.5% working interest, or a 9.32% net revenue interest after underlying royalty payments, in the oil produced and marketed from each well.  On August 12, 2004, the Company sold all of its 12.5% non-operating working interest in the six producing wells for $62,850.  The Company maintains an office in Malibu, California.



The financial statements are presented on the basis that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time.  The Company has incurred operating losses for several years and has a stockholders deficit.  These conditions raise substantial doubt as to the Companys ability to continue as a going concern.  The Companys financial statements for the year ended December 31, 2004, were audited by the Companys independent certified public accountants, whose report includes an explanatory paragraph stating that the financial statements have been prepared assuming the Company will continue as a going concern and that the Company has incurred operating losses since its inception that raise substantial doubt about its ability to continue as a going concern.



This report contains both historical and prospective statements concerning the Company and its operations.  Prospective statements (known as "forward-looking statements") may or may not prove true with the passage of time because of future risks and uncertainties.  The Company cannot predict what factors might cause actual results to differ materially from those indicated by prospective statements.



Results of Operations



For the six month period ended June 30, 2005 compared to the six month period ended June 30, 2004.



For the six months ended June 30, 2005, the Company had a net loss of $330,069 compared to a net loss of $12,156 during the comparable period in the previous year.  Revenue decreased from $11,311 during the first three months of 2004 to $0 during the same period in 2005.  General and administrative expenses during this period increased from $22,047 in 2004 to $29,611 in 2005.  In addition, the Company incurred consulting expenses of $300,000 in 2005 up from $0 in2004.  The increase reflects expenses related to the Company's search for business opportunities in the oil and gas industry.







8





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Financial Condition and Liquidity



During the six month period ended June 30, 2005, the Company generated a loss of $330,069 from operating activities.  Management plans to fund future short-term operating needs through advances from related party shareholders and loans from unrelated parties, although there can be no assurances that funds so obtained will be sufficient to continue the Companys operations.



The Companys management hopes to acquire an interest in a business opportunity presented to it by persons or entities who or which desire the perceived advantages of an Exchange Act registered corporation.  There are no assurances, however, that management will be successful in its plans in acquiring such interests.



ITEM 3. CONTROLS AND PROCEDURES



Based on their most recent evaluation, which was completed within 90 days of the filing of this Form 10-QSB, the Companys president and principle financial officer believes the Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) are effective to ensure that information required to be disclosed by the Company in this report is accumulated and communicated to the Companys management, including its principal officer, as appropriate, to allow timely decisions regarding required disclosure.  There were no significant changes in the Companys internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation and there were no corrective actions with regard to significant deficiencies and material weaknesses.

















































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PART II - OTHER INFORMATION





ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS



During the quarter ended June 30, 2005 the Company issued to Andrew Ippolito, President, Chief Financial Officer and a director, and to Jan Ippolito, Secretary and a director, a total of 5,000,000 shares of common stock for services rendered.  Mr. and Mrs. Ippolito now hold jointly a total of 17,045,893 shares of the Company's outstanding stock representing 67.5%.  The Company valued these shares at the fair market value of the day of issuance, $0.6 per share, or $300,000.





ITEM 6. EXHIBITS.





Exhibit 31

Certification required by Rule 13a-14(a) or Rule 15d-14(a) and section 302 of the Sarbanes-Oxley Act of 2002



Exhibit 32

Certification required by Rule 13a-14(b) or Rule 15d-14(b) and section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

























































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SIGNATURES







Pursuant to the requirements of Section 13 of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.







Discovery Oil, LTD.

(Registrant)





By:/s/Andrew V. Ippolito

Date: August 15, 2005





Andrew V. Ippolito

President, Director and

Chief Financial Officer























































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