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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, 2003



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

(IRS Employer Identification Number)

incorporation or organization)



6127 Ramirez Canyon Road

Malibu, CA

(Address of principal executive offices)



90265

(Zip Code)



(310) 457-1967

(Registrants Telephone Number, Including Area Code)

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



APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]

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 August 14, 2003, the registrant had outstanding 20,245,921 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 number.

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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, 2003 (Unaudited)                                                            | 3  
|Statements of Operations For the Three and Six Month Periods Ended June 30, 2003 and 2002 (Unaudited) | 4  
|Statements of Cash Flows For the Six Month Periods Ended June 30, 2003 and 2002 (Unaudited)           | 5  
|Notes to Financial Statements (Unaudited)                                                             | 6  
|                                                                                                      |    
|                                                                                                      |    
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations         | 7  
|                                                                                                      |    
|                                                                                                      |    
|Item 3.  Controls and Procedures                                                                      | 8  
|                                                                                                      |    
|Part II  Other Information                                                                           |    
|                                                                                                      |    
|Item 1.  Legal Proceedings                                                                            | (a)
|                                                                                                      |    
|Item 2.  Changes in Securities and Use of Proceeds                                                    | (a)
|                                                                                                      |    
|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 and Reports on Form 8-K                                                              | 9  
|                                                                                                      |    
|Signature Page                                                                                        | 10 
|                                                                                                      |    
|Index to Exhibits                                                                                     | 11 
|                                                                                                      |    
|                                                                                                      |    
|(a) There are no issues requiring disclosure for these items and they have therefore been omitted    



















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PART I



ITEM 1:  FINANCIAL STATEMENTS





|Discovery Oil LTD
Balance Sheet
(Unaudited)
|-------------------------------------------
|Assets                                     
|                                           
|                                           
|                                           
|                                           
|Current Assets                             
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|Liabilities and Shareholder's Equity       
|                                           
|Current Liabilities                        
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|Shareholder's Equity                       
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           
|                                           





Read the accompanying significant accounting notes to financial statements, which are an integral part of this financial statement.

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|Discovery Oil LTD
Statements of Operations
For the Three Months and Six Months Ended June 30, 2003 and 2002
(Unaudited)
|-----------------------------------------------------------------------------------------------------------------------
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|Revenues                                                                                                               
|Sales of Oil                                                                                                           
|                                                                                                                       
|Cost of Revenue                                                                                                        
|                                                                                                                       
|Gross Profit                                                                                                           
|                                                                                                                       
|Operating expenses:                                                                                                    
|General and administrative expenses                                                                                    
|Total operating expenses                                                                                               
|                                                                                                                       
|                                                                                                                       
|Net Income/(Loss)                                                                                                      
|                                                                                                                       
|Basic weighted average common shares outstanding                                                                       
|                                                                                                                       
|Basic and diluted Loss per common share                                                                                















































Read the accompanying significant accounting notes to financial statements, which are an integral part of this financial statement.

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|Discovery Oil LTD.
Statements of Cash Flows
For the Six Months Ended July 30, 2003 and 2002
(Unaudited)
|-------------------------------------------------------------------------------------------------------
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                  
|                                                                                                       
|Net Income (Loss)                                                                                      
|Adjustments to reconcile net income (loss) to net cash                                                 
|used in operating activities:                                                                          
|                                                                                                       
|Changes in Operating assets and liabilities:                                                           
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Net cash provided by/(used in) operating activities                                                    
|                                                                                                       
|                                                                                                       
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                  
|                                                                                                       
|                                                                                                       
|Net cash provided by/(used in) investing activities                                                    
|                                                                                                       
|                                                                                                       
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                  
|                                                                                                       
|                                                                                                       
|                                                                                                       
|                                                                                                       
|Net cash provided by/(used in) financing activities                                                    
|                                                                                                       
|                                                                                                       
|Net increase (decrease) in cash and cash equivalents                                                   
|Cash and cash equivalents, beginning of period                                                         
|                                                                                                       
|Cash and cash equivalents, end of period                                                               
|                                                                                                       
|                                                                                                       
|Supplemental information:                                                                              
|                                                                                                       
|None                                                                                                   
|                                                                                                       



Read the accompanying significant accounting notes to financial statements, which are an integral part of this financial statement.

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DISCOVERY OIL, LTD.

Notes to Financial Statements

(Unaudited)



1.

Basis of Presentation:



The financial statements of Discovery Oil, LTD. included herein, have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Although certain information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America has been condensed or omitted, Discovery Oil, LTD. believes that the disclosures are adequate to make the information presented not misleading.  These financial statements should be read in conjunction with the financial statements and notes thereto for the fiscal year ended December 31, 2002 included in Discovery Oils, LTD.s annual report on Form 10-KSB.



The financial statements included herein reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation.  The results for interim periods are not necessarily indicative of trends or of results to be expected for the full year ending December 31, 2003.



Included in the Companys production expenses as presented are all direct expenses of oil production, including severance taxes and royalties, not included in production expenses are depreciation, depletion, and amortization (DD&A) expenses and corporate administration expenses.  All information is presented on the accrual basis of accounting.



2.

Commitments and Contingencies:



In connection with its 12.5% non-operating working interest in six oil wells, the Company entered into an operating agreement with the majority owner and operator of the wells.  The agreement, modeled after agreements standard and customary to the oil industry, commits the Company to pay its share of joint interest operating costs incurred in the operation, maintenance, and potential future development of the wells.  Oil prices are extremely volatile and instances may occur where the Companys revenues from oil sales are less than its corresponding production expenses.  In addition, oil well repair and maintenance activities may interrupt oil sale revenue and add to overall operation costs.



Domestic oil operations are also subject to extensive federal regulation and potential interruption or termination by governmental authorities on account of environmental and other regulatory considerations.  The recent trend towards stricter standards in environmental legislation and regulation may continue, and this could increase the overall costs to the Company.



3.

Going Concern:



The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  Although the company reported a net profit of $3,448 for the six months ended June 30, 2003, (unaudited) it has an accumulated deficit since inception (unaudited).   Managements plans for the continuation of the Company as a going concern include financing the Companys operations through locating an entity that wishes to engage in a business combination with the Company.  There are no assurances, however, with respect to the future success of these plans.  The financial statements do not contain any adjustments, which might be necessary, if the Company is unable to continue as a going concern.





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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 has a non-operating working interest in six producing oil wells having proved reserves.  The working interest grants 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.  The oil wells are near the city of Signal Hill, California; 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, 2002, 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 three month period ended June 30, 2003 compared to the three month period ended June 30, 2002.



For the three months ended June 30, 2003, the Company had a net income of $2,841 compared to a net loss of $28,849 during the comparable period in the previous year.  Oil revenue decreased from $11,489 during the second quarter of 2002 to $6,435 during the second quarter of 2003.  This decrease was primarily due to decreased oil production.  General and administrative expenses decreased from $34,248 in the second quarter of 2002 to $3,594 in the second quarter of 2003.



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For the six month period ended June 30, 2003 compared to the six month period ended June 30, 2002.



For the six months ended June 30, 2003, the Company had a net income of $3,448 compared to a net loss of $27,978 during the comparable period in the previous year.  Oil revenue decreased from $19,885 during the six months of 2002 to $11,489 during the six months of 2003.  This decrease was primarily due to decreased oil production.  General and administrative expenses decreased from $38,487 in the first six months of 2002 to $34,248 in the first six months of 2003.



Financial Condition and Liquidity



During the six month period ended June 30, 2003, the Company generated $3,331 of cash from operating activities.  Management plans to fund future short-term operating needs through profits from its oil producing properties and advances from related party shareholders, although there can be no assurances that oil production profits and advances from related parties will be sufficient to fund 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 financial 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





ITEM 1.

LEGAL PROCEEDINGS



NONE



ITEM 2.

CHANGES IN SECURITIES



NONE



ITEM 3.

DEFAULTS UPON SENIOR SECURITIES



NONE



ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY

HOLDERS



NONE



ITEM 5.

OTHER INFORMATION



NONE



ITEM 6.

EXHIBITS AND REPORTS ON FORM 8K.



(a)

Exhibits



Exhibit 31.1  Certification required by Rule 13a-14(a) or Rule 15d-14(a).



Exhibit 32.1  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.





(b) Reports on Form 8K.  The company filed no Forms 8K during the period covered by this report.

























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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

August 14, 2003



Andrew V. Ippolito

Date

President, Director and

Chief Financial Officer











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|INDEX TO EXHIBITS                                                                                                                                                                                                                | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Exhibit 31.1  Certification required by Rule 13a-14(a) or Rule 15d-14(a).

Exhibit 32.1  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. | 
|                                                                                                                                                                                                                                 |