|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 March 31, 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 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



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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 March 31, 2005 (Unaudited)                                                       | 3  
|Statements of Operations For the Three Month Periods Ended March 31, 2005 and 2004 (Unaudited)    | 4  
|Statements of Cash Flows For the  Three Month Periods Ended March 31, 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                                                | (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                                                                                  | 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                            | $                                        | -        
|                                      |                                             | Prepaid expenses                |                                          | 14,300   
|                                      |                                             |                                 | Total Current Assets                     |          
|                                      |                                             |                                 |                                          |          
|                                      | PROPERTY AND EQUIPMENT, NET OF DEPRECIATION | 1,601                           |                                          | 1,776    
|                                      |                                             |                                 |                                          |          
|                                      | TOTAL ASSETS                                | $                               | 15,901                                   | $        
|                                      |                                             |                                 |                                          |          
|LIABILITIES AND STOCKHOLDER'S DEFICIT |                                             |                                 |                                          |          
|                                      |                                             |                                 |                                          |          
|                                      | CURRENT LIABILITIES                         |                                 |                                          |          
|                                      |                                             | Accounts payable                | $                                        | 32,335   
|                                      |                                             | Related party payable           |                                          | 6,458    
|                                      |                                             | Advances payable                |                                          | 7,000    
|                                      |                                             | State tax liability             |                                          | 23,334   
|                                      |                                             |                                 | Total Current Liabilities                |          
|                                      |                                             |                                 |                                          |          
|                                      | COMMITMENTS AND CONTINGENCIES               |                                 | -                                        |          
|                                      |                                             |                                 |                                          |          
|                                      | STOCKHOLDER'S DEFICIT                       |                                 |                                          |          
|                                      |                                             | Common stock, $0.001 par value; |                                          |          
|                                      |                                             |                                 | 200,000,000 shares authorized,           |          
|                                      |                                             |                                 | 20,245,921 shares issued and outstanding |          
|                                      |                                             | Additional paid-in capital      |                                          | 607,575  
|                                      |                                             | Accumulated deficit             |                                          | (681,048)
|                                      |                                             |                                 | Total Stockholder's Deficit              |          
|                                      | TOTAL LIABILITIES AND                       |                                 |                                          |          
|                                      |                                             | STOCKHOLDER'S DEFICIT           | $                                        | 15,901   



See accompanying condensed notes to these interim financial statements.



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|DISCOVERY OIL, LTD.        |                                     |                          |            |                    |           
|-------------------------- | ----------------------------------- | ------------------------ | ---------- | ------------------ | ----------
|STATEMENTS OF OPERATIONS  
|                           |                                     |                          |            |                    |           
|                           |                                     |                          |            |                    |           
|                           |                                     |                          |            |                    |           
|                           |                                     |                          |            | Three Months Ended |           
|                           |                                     |                          |            | March 31,          |           
|                           |                                     |                          |            | 2005               |           
|                           |                                     |                          |            | (unaudited)        |           
|                           |                                     |                          |            |                    |           
|REVENUES                   |                                     |                          |            |                    |           
|                           | Royalty income                      | $                        | -          | $                  | 3,968     
|                           |                                     |                          |            |                    |           
|OPERATING EXPENSES         |                                     |                          |            |                    |           
|                           | State tax expense                   |                          | 229        |                    | 710       
|                           | General and administrative expenses |                          | 12,776     |                    | 4,371     
|                           |                                     | Total operating expenses |            | 13,005             |           
|                           |                                     |                          |            |                    |           
|LOSS FROM OPERATIONS       |                                     | (13,005)                 |            | (1,113)            |           
|                           |                                     |                          |            |                    |           
|LOSS BEFORE TAXES          |                                     | (13,005)                 |            | (1,113)            |           
|                           |                                     |                          |            |                    |           
|INCOME TAX EXPENSE         |                                     | -                        |            | -                  |           
|                           |                                     |                          |            |                    |           
|NET LOSS                   | $                                   | (13,005)                 | $          | (1,113)            |           
|                           |                                     |                          |            |                    |           
|NET LOSS PER COMMON SHARE, |                                     |                          |            |                    |           
|                           | BASIC AND DILUTED                   | $                        | nil        | $                  | nil       
|                           |                                     |                          |            |                    |           
|WEIGHTED AVERAGE NUMBER    |                                     |                          |            |                    |           
|                           | OF COMMON SHARES OUTSTANDING,       |                          |            |                    |           
|                           | BASIC AND DILUTED                   |                          | 20,245,921 |                    | 20,245,921
|                           |                                     |                          |            |                    |           















See accompanying condensed notes to these interim financial statements.





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|DISCOVERY OIL, LTD.                          |                                                      |                                                  |        |          |                   
|-------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------ | ------ | -------- | ------------------
|STATEMENTS OF CASH FLOWS                     |                                                      |                                                  |        |          |                   
|                                             |                                                      |                                                  |        |          |                   
|                                             |                                                      |                                                  |        |          | Three Months Ended
|                                             |                                                      |                                                  |        |          | March 31,         
|                                             |                                                      |                                                  |        |          | 2005              
|                                             |                                                      |                                                  |        |          | (unaudited)       
|                                             |                                                      |                                                  |        |          |                   
|CASH FLOWS FROM OPERATING ACTIVITIES:        |                                                      |                                                  |        |          |                   
|                                             | Net gain (loss)                                      |                                                  | $      | (13,005) | $                 
|                                             | Adjustments to reconcile net loss to net cash        |                                                  |        |          |                   
|                                             | provided (used) by operating activities:             |                                                  |        |          |                   
|                                             |                                                      | Depreciation                                     |        |          | 175               
|                                             | Decrease (increase) in                               |                                                  |        |          |                   
|                                             |                                                      | Prepaid Expenses                                 |        |          | (6,800)           
|                                             | Increase (decrease) in                               |                                                  |        |          |                   
|                                             |                                                      | Accounts payable                                 |        |          | (2,229)           
|                                             |                                                      | Related party payables                           |        |          | (2,357)           
|                                             |                                                      | State tax liability                              |        |          | 229               
|                                             |                                                      | Net cash provided (used) by operating activities |        |          | (23,987)          
|                                             |                                                      |                                                  |        |          |                   
|CASH FLOWS PROVIDED BY INVESTING ACTIVITIES: |                                                      |                                                  | -      |          | -                 
|                                             |                                                      |                                                  |        |          |                   
|CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: |                                                      |                                                  |        |          |                   
|                                             |                                                      | Related party payable proceeds                   |        |          | -                 
|                                             |                                                      | Net cash provided by financing activities        |        |          | -                 
|                                             |                                                      |                                                  |        |          |                   
|                                             | Net increase (decrease) in cash and cash equivalents |                                                  |        | (23,987) |                   
|                                             |                                                      |                                                  |        |          |                   
|Cash at beginning of period                  |                                                      |                                                  | 23,987 |          | 1,722             
|                                             |                                                      |                                                  |        |          |                   
|Cash at end of period                        |                                                      | $                                                | -      | $        | 1,319             
|                                             |                                                      |                                                  |        |          |                   
|                                             |                                                      |                                                  |        |          |                   
|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

March 31, 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 three month period ended March 31, 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  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



This summary of significant accounting policies of the Company is presented to assist in understanding the financial statements.  The financial statements and notes are representations of the Companys management, which is responsible for their integrity and objectivity.  These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.



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 suffered material recurring losses from operations since inception. At March 31, 2005, the Company has a deficit of $681,048 and has negative cash flows from operations. 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

March 31, 2005



Use of Estimates

The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses.  Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements.  Accordingly, upon settlement, actual results may differ from estimated amounts.  At March 31, 2005, the Company had not participated in consignment or conditional sales; therefore, there are no unsettled transactions related to sales or cost of sales.



NOTE 3  PREPAID EXPENSES



Prepaid expenses consists of amounts paid for legal fees and rent.  During 2004, the Company prepaid $10,000 to its attorney for 12 months of retainers.  The Company is expensing $2,500 each quarter for legal fees.  The balance of the fees remaining is $5,000.



Also included in prepaid expenses is the remaining $9,300 of prepaid rent.  See Note 5.



NOTE 4  STATE TAX LIABILITY



For the three months ended March 31, 2005 the Company estimated its California corporate tax liability to be $23,126.  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.



Subsequent to the date of the financial statements, the State of Delaware suspended the Company for failure to remit the annual corporate taxes.  The Company has since paid the amounts owed and is again in good standing with Delaware, the state within which it is incorporated.



NOTE 4  RELATED PARTY TRANSACTIONS



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.  During the three months ended March 31, 2005 the Company reimbursed this executive $2,454 for travel, general and administrative expenses.  The remaining amount due to the executive at March 31, 2005 is $6,458.



During the three months ended March 31, 2005, the Company signed a new lease with this executive under the same terms as the prior year and prepaid rent of $13,200, of which $9,300 is included in prepaid expenses on the financial statements.









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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, 2003, 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 March 31, 2005 compared to the three month period ended March 31, 2004.



For the three months ended March 31, 2005, the Company had a net loss of $13,005 compared to a net loss of $1,113 during the comparable period in the previous year.  Revenue decreased from $3,968 during the first three months of 2003 to $0 during the same period in 2005.  General and administrative expenses during this period increased from $4,371 in 2004 to $12,776 in 2005.  The increase is reflects expenses due to the company's search for investment opportunities and an increase in rent.







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Financial Condition and Liquidity



During the three month period ended March 31, 2005, the Company generated a loss of $13,005 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 6. EXHIBITS.





Exhibit 10

Lease Agreement



Exhibit 31.1

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



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.































































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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: May 25, 2005





Andrew V. Ippolito

President, Director and

Chief Financial Officer























































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