|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 September 30, 2004



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 18, 2004, 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 September 30, 2004 (Unaudited)                                                   | 3  
|Statements of Operations For the Nine Month Periods Ended September 30, 2004 and 2003 (Unaudited) | 4  
|                                                                                                  |    
|Statements of Cash Flows For the Nine Month Periods Ended September 30, 2004 and 2003 (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 and Reports on Form 8-K                                                          | 10 
|                                                                                                  |    
|Signature Page                                                                                    | 11 
|                                                                                                  |    
|Index to Exhibits                                                                                 | 12 
|(a) There are no issues requiring disclosure for these items and they have therefore been omitted



2

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PART I - FINANCIAL INFORMATION



ITEM 1:  FINANCIAL STATEMENTS



|DISCOVERY OIL, LTD.                            |                                |                                 |                                          |          
|---------------------------------------------- | ------------------------------ | ------------------------------- | ---------------------------------------- | ---------
|BALANCE SHEETS                                 |                                |                                 |                                          |          
|                                               |                                |                                 |                                          |          
|                                               |                                |                                 |                                          |          
|                                               |                                |                                 |                                          |          
|                                               |                                |                                 |                                          |          
|ASSETS                                         |                                |                                 |                                          |          
|                                               |                                |                                 |                                          |          
|                                               | CURRENT ASSETS                 |                                 |                                          |          
|                                               |                                | Cash                            | $                                        | 52,129   
|                                               |                                |                                 | Total Current Assets                     |          
|                                               |                                |                                 |                                          |          
|                                               | TOTAL ASSETS                   | $                               | 52,129                                   | $        
|                                               |                                |                                 |                                          |          
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |                                |                                 |                                          |          
|                                               |                                |                                 |                                          |          
|                                               | CURRENT LIABILITIES            |                                 |                                          |          
|                                               |                                | Accounts payable                | $                                        | 26,897   
|                                               |                                | Related party payable           |                                          | -        
|                                               |                                | Advances payable                |                                          | 7,000    
|                                               |                                | State tax liability             |                                          | 23,323   
|                                               |                                |                                 | Total Current Liabilities                |          
|                                               |                                |                                 |                                          |          
|                                               | COMMITMENTS AND CONTINGENCIES  |                                 | -                                        |          
|                                               |                                |                                 |                                          |          
|                                               | STOCKHOLDERS' EQUITY (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             |                                          | (632,913)
|                                               |                                |                                 | Total Stockholders' Equity (Deficit)     |          
|                                               |                                |                                 |                                          |          
|                                               | TOTAL LIABILITIES AND          |                                 |                                          |          
|                                               |                                | STOCKHOLDERS' EQUITY (DEFICIT)  | $                                        | 52,129   



See accompanying condensed notes to these interim financial statements.

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|DISCOVERY OIL, LTD.
STATEMENTS OF OPERATIONS
|--------------------------------------------
|                                            
|                                            
|                                            
|                                            
|                                            
|REVENUES                                    
|                                            
|OPERATING EXPENSES                          
|                                            
|                                            
|                                            
|INCOME (LOSS) FROM OPERATIONS               
|OTHER INCOME                                
|                                            
|LOSS BEFORE TAXES                           
|INCOME TAX EXPENSE                          
|NET INCOME (LOSS)                           
|                                            
|NET LOSS PER COMMON SHARE,                  
|                                            
|                                            
|WEIGHTED AVERAGE NUMBER                     
|                                            
|                                            



See accompanying condensed notes to these interim financial statements.



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|DISCOVERY OIL, LTD.                          |                                                      |                                                  |        |        |                  
|-------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------ | ------ | ------ | -----------------
|STATEMENTS OF CASH FLOWS                     |                                                      |                                                  |        |        |                  
|                                             |                                                      |                                                  |        |        |                  
|                                             |                                                      |                                                  |        |        |                  
|                                             |                                                      |                                                  |        |        | Nine Months Ended
|                                             |                                                      |                                                  |        |        | September 30,    
|                                             |                                                      |                                                  |        |        | 2004             
|                                             |                                                      |                                                  |        |        | (unaudited)      
|                                             |                                                      |                                                  |        |        |                  
|                                             |                                                      |                                                  |        |        |                  
|CASH FLOWS FROM OPERATING ACTIVITIES:        |                                                      |                                                  |        |        |                  
|                                             | Net income (loss)                                    |                                                  | $      | 38,244 | $                
|                                             | Adjustments to reconcile net loss to net cash        |                                                  |        |        |                  
|                                             | provided (used) by operating activities:             |                                                  |        |        |                  
|                                             |                                                      | Accounts receivable                              |        |        | -                
|                                             |                                                      | Accounts payable                                 |        |        | 6,888            
|                                             |                                                      | State tax liability                              |        |        | 2,130            
|                                             |                                                      | Net cash provided (used) by operating activities |        |        | 47,262           
|                                             |                                                      |                                                  |        |        |                  
|CASH FLOWS PROVIDED BY INVESTING ACTIVITIES: |                                                      |                                                  | -      |        | -                
|                                             |                                                      |                                                  |        |        |                  
|CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: |                                                      |                                                  |        |        |                  
|                                             |                                                      | Advances payable                                 |        |        | 7,000            
|                                             |                                                      | Related party payable                            |        |        | (3,855)          
|                                             |                                                      | Net cash provided by financing activities        |        |        | 3,145            
|                                             |                                                      |                                                  |        |        |                  
|                                             | Net increase (decrease) in cash and cash equivalents |                                                  |        | 50,407 |                  
|                                             |                                                      |                                                  |        |        |                  
|Cash at beginning of period                  |                                                      |                                                  | 1,722  |        | -                
|                                             |                                                      |                                                  |        |        |                  
|Cash at end of period                        |                                                      | $                                                | 52,129 | $      | 279              
|                                             |                                                      |                                                  |        |        |                  
|                                             |                                                      |                                                  |        |        |                  
|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

September 30, 2004

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.  Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles 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, 2003.  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.



The preparation of financial statements in accordance with generally accepted accounting principles 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 that could have a material effect on the reported amounts of the Company's financial position and results of operations.



Certain amounts from prior periods have been reclassified to conform to the current period presentation.  This reclassification has resulted in no changes to the Companys accumulated deficit or net losses presented.



Operating results for the nine-month period ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.



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 suffered material recurring losses from operations since inception. At September 30, 2004, the Company has a deficit of $632,913 and has negative working capital. 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

September 30, 2004



NOTE 3  SALE OF WORKING INTEREST



On August 12, 2004, the Company sold all of its 12.5% non-operating working interest in six oil wells for $62,850. This amount has been included as other income on the statement of operations. Although a gain was realized on the sale, the tax effect to the Company is offset by the available accumulated losses from prior periods.



NOTE 4  CORRECTION OF AN ERROR



Subsequent to the issuance of the original financial statements for the year ended December 31, 2002, management discovered that accounting for certain transactions was incorrect and incomplete. The correction necessary to fairly restate the financial statements for years prior to 2002 was the recording of a previously unrecorded state tax liability of approximately $16,460.

The financial statements for the three and nine months ended September 30, 2003 were also corrected due to an understatement of state tax expense in the amounts of $611 and $1,833, respectively. The effects of the restatement were to decrease net income by $611 in the three months ended March 31, 2003 and increase the accumulated deficit by $611 and to decrease net income by $1,833 in the nine months ended September 30, 2003 and increase the accumulated deficit by $1,833. This correction had no material effect upon the loss per share reported in 2003.



NOTE 5  STATE TAX LIABILITY



In the nine months ended September 30, 2004, the Companys state tax liability increased by $710. See Note 4.



NOTE 6  ADVANCES PAYABLE



In the nine months ended September 30, 2004, the Company was loaned $7,000 from an unrelated party. This advance is uncollateralized, bears 8% interest and is payable upon demand. The Company has accrued $140 in interest and this amount is included in accounts payable and accrued expenses in the balance sheet.





















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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 nine month period ended September 30, 2004 compared to the nine month period ended September  30, 2003.



For the nine months ended September 30, 2004, the Company had a net loss of $24,606 compared to a net loss of $2,236 during the comparable period in the previous year.  Oil revenue increased from $12,590 during the first nine months of 2003 to $16,693 during the same period in 2004.  The increase in revenue was due to a slight increase in oil production.  General and administrative expenses during this period increased from $12,993 in 2003 to $39,169 in 2004.



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Financial Condition and Liquidity



During the nine month period ended September 30, 2004, the Company generated a loss of $24,606 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 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 - OTHER INFORMATION





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

Date: November 19, 2004



Andrew V. Ippolito

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. | 
|                                                                                                                                                                                                                                 | 













































































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