UNITED STATES

SECURITIES AND EXCHANGE COMMISSION,

Washington, D.C. 20549



FORM 10-K



(X)
 Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934

For
the Fiscal Year Ended December 31, 2008



(
 )  Transaction Report Under Section 13 or 15(d) of Securities
Exchange Act of 1934

For
the transition period from ______ to ______



DISCOVERY OIL, LTD.

(Name of Small Business Issuer in its Charter)



|DELAWARE
(State or other jurisdiction of incorporation or
organization) | 333-06718
Commission File Number | 83-0207909
(I.R.S. Employer Identification
Number)
|----------------------------------------------------------------------- | -------------------------------- | --------------------------------------------------



6127
Ramirez Canyon Road,

Malibu, CA 90265

(310) 457-1967

(Address,
including zip code, and telephone number, including area code, of registrants
principal executive offices)



Securities registered under Section
12(b) of the Exchange Act: None

Securities registered under Section
12(g) of the Exchange Act:



Common Stock, $.001 par
value.

(Title of Class)



Indicate by
checkmark if the registrant is a well-know seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No þ Indicate by checkmark if the
registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Act. Yes o No þ

Indicate by check mark
whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes þ No o



Indicate by check mark
if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. þ



Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act. (Check one):



|Large
accelerated filer o | Accelerated filer o | Non-accelerated filer o(Do not check if a smaller
reporting company) | Smaller reporting company þ
|------------------------- | ------------------- | -------------------------------------------------------------------- | ---------------------------



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



State
the aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days.  Based upon the price at close
of market on March 23, 2009 of $0.008, the aggregate market value of the
Registrants common stock held by non-affiliates was $65,651.



The
number of shares outstanding of the registrant's common stock as of March 23,
2009:  25,245,921 shares.



DOCUMENTS
INCORPORATED BY REFERENCE

None.





1



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DISCOVERY OIL,
LTD.

Form 10-K

December 31, 2008



TABLE OF CONTENTS





|                           | Page                                                                                 
|-------------------------- | -------------------------------------------------------------------------------------
|Forward Looking Statements | 3                                                                                    
|                           |                                                                                      
|Part I                    
|Item 1.                    | Business.                                                                            
|                           |                                                                                      
|Item 1A.                   | Risk Factors                                                                         
|                           |                                                                                      
|Item 1B.                   | Unresolved Staff Comments                                                            
|                           |                                                                                      
|Item 2.                    | Description of Properties.                                                           
|                           |                                                                                      
|Item 3.                    | Legal Proceedings.                                                                   
|                           |                                                                                      
|Item 4.                    | Submission of Matters to a Vote of Security
Holders                                  
|                           |                                                                                      
|Part II                   
|Item 5.                    | Market for Common Equity and Related Stockholder
Matters, and Issuer Purchases       
|                           | of Equity Securities                                                                 
|                           |                                                                                      
|Item 6.                    | Selected Financial Data                                                              
|                           |                                                                                      
|Item 7.                    | Managements Discussion and Analysis of Financial
Condition and Results of Operations
|                           |                                                                                      
|Item 7A.                   | Quantitative and Qualitative Disclosures About
Market Risk                           
|                           |                                                                                      
|Item 8.                    | Financial Statements and Supplementary Data                                          
|                           |                                                                                      
|Item 9.                    | Changes in and Disagreement with Accountants on
Accounting and                       
|                           | Financial Disclosure                                                                 
|                           |                                                                                      
|Item 9A.                   | Controls and Procedures                                                              
|                           |                                                                                      
|Item 9B.                   | Other Events                                                                         
|                           |                                                                                      
|Part III                  
|Item 10.                   | Directors, Executive Officers, Promoters and
Control Persons, Compliance             
|                           | Section 16(a) of the Exchange Act.                                                   
|                           |                                                                                      
|Item 11.                   | Executive Compensation.                                                              
|                           |                                                                                      
|Item 12.                   | Security Ownership of Certain Beneficial Owners and
Management                       
|                           |                                                                                      
|Item 13.                   | Certain Relationships and Related Transactions and
Director Independence.            
|                           |                                                                                      
|Item 14.                   | Principal Accountant Fees and Services                                               
|                           |                                                                                      
|Item 15.                   | Exhibits and Financial Statement Schedules                                           
|                           |                                                                                      
|Signatures                 |                                                                                      







2



---





FORWARD-LOOKING STATEMENTS





This Report on Form 10-K contains certain forward-looking
statements. These forward looking statements might include statements regarding
(i) research and development plans, marketing plans, capital and operations
expenditures, and results of operations; (ii) potential financing arrangements;
(iii) potential utility and acceptance of the Registrant's existing and proposed
products; and (iv) the need for, and availability of, additional financing.



Any forward-looking statements included herein are based on
current expectations and involve a number of risks and uncertainties. These
forward-looking statements are based on assumptions regarding the business of
Discovery Oil, Ltd, the ("Company"), which involve judgments with respect to,
among other things, future economic and competitive conditions and future
business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that the assumptions underlying the forward looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore,
actual results may differ materially from those set forth in the forward-looking
statements.



EXPLANATORY NOTE: As used in this report, the terms "we", "us",
and "our" are sometimes used to refer to Discovery Oil, Ltd. and, as the context
requires, its management.



















































3



---



PART
I



Item 1.
Description of Business



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 a 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 formerly had a non-operating working interest in six producing oil wells
having proved reserves.  This interest was sold on August 12, 2004.



Current Strategy



Since
the sale of previous interests, Discovery Oil has no revenue and has become a
shell company.  The Company is currently searching for a new investment
opportunity in the oil industry, which would probably take the form of a merger,
stock- for-stock exchange or stock-for-assets exchange.  No assurances can
be made that we will be successful in locating and negotiating with
 possible merger candidates.



The
Company maintains an office in Malibu, California.



Selection of a Business



Since
we have no current business, our plan of operation will be to seek one or more
suitable business combinations or acquisitions to create value for our
shareholders. Management has adopted a conservative policy of seeking
opportunities that it considers to be of exceptional quality. Therefore, we may
have to wait some time before consummating a suitable transaction. Management
recognizes that the higher the standards it imposes upon us, the greater may be
its competitive disadvantage when vying with other acquiring interests or
entities.



The
Company does not intend to restrict its consideration to any particular business
or industry segment, though management intends to continue its focus on
opportunities related to natural resources. Due to our lack of financial
resources, the scope and number of suitable business ventures is limited. We are
therefore most likely to participate in a single business venture. Accordingly,
the Company will not be able to diversify and will be limited to one merger or
acquisition. The lack of diversification will prevent us from offsetting losses
from one business opportunity against profits from another.



The
decision to participate in a specific business opportunity will be made upon
managements analysis of the quality of the opportunitys management and
personnel, the anticipated acceptability of products or marketing concepts, the
merit of technological changes and numerous other factors which are difficult,
if not impossible, to analyze through the application of any objective criteria.
Further, it is anticipated that the historical operations of a specific venture
may not necessarily be indicative of the potential for the future because of the
necessity to substantially shift a marketing approach, expand operations, change
product emphasis, change or substantially augment management, or make other
changes. The Company will be partially dependent upon the management of any
given business opportunity to identify such problems and to implement, or be
primarily responsible for the implementation of required changes.



Since
we may participate in a business opportunity with a newly organized business or
with a business which is entering a new phase of growth, it should be emphasized
that the Company may incur risk due to the failure of



4



---

the targets management to have proven its abilities or
effectiveness, or the failure to establish a market for the targets products or
services, or the failure to realize profits.



The
Company will not acquire or merge with any company for which audited financial
statements cannot be obtained. Management anticipates that any opportunity in
which we participate will present certain risks. Many of these risks cannot be
adequately identified prior to selection of a specific opportunity. Our
shareholders must therefore depend on the ability of management to identify and
evaluate such risks. Further, in the case of  opportunities available to
us, it may be anticipated that some opportunities are yet to develop as going
concerns or that some  opportunities are in the development stage and have
not generated significant revenues from principal business activities prior to
our participation.



Acquisition of Business



Implementation of a structure for any particular business
acquisition may involve a merger, consolidation, reorganization, joint venture,
franchise or licensing agreement with another corporation or entity. The Company
may also purchase stock or assets of an existing business. On the completion of
a transaction, it is possible that present management and shareholders of the
Company would not remain in control of the Company. Further, our sole officer
and director may, as part of the terms of any transaction, resign, to be
replaced by new officers and directors without a vote of our shareholders.



We
anticipate that any securities issued in any such reorganization would be issued
in reliance on exemptions from registration under applicable federal and state
securities laws. However, in certain circumstances, as a negotiated element of
any transaction, the Company may agree to register securities either at the time
a transaction is consummated, under certain conditions, or at a specified time
thereafter. The issuance of substantial additional securities and their
potential sale into any trading market may have a depressive effect on such
market.



While
the actual terms of a transaction to which the Company may be a party cannot be
predicted, it may be expected that the parties to a business transaction will
find it desirable to avoid the creation of a taxable event and thereby structure
the acquisition in a so called tax-free reorganization under Section 368(a)(1)
of the Internal Revenue Code of 1986, as amended (the Code). In order to
obtain tax-free treatment under the Code, it may be necessary for the owners of
the acquired business to own 80% or more of the voting stock of the surviving
entity. In such event, our shareholders would retain less than 20% of the issued
and outstanding shares of the surviving entity, which could result in
significant dilution in the equity of such shareholders.



Our due
diligence process will require that management meet personally with the
personnel involved in any given transaction, visit and inspect material
facilities, obtain independent analysis or verification of the information
provided, check references for management and key persons, and take other
reasonable investigative measures, to the extent of our limited financial
resources and management expertise.



The
manner in which we participate in an opportunity will depend on the nature of
the opportunity, the respective needs and desires of the Company and other
parties, the management of the opportunity, and the our relative negotiating
strengths. Negotiations that involve mergers or acquisitions will focus on the
percentage of the Company that the target company shareholders would acquire in
exchange for their shareholdings in the target company. Depending upon, among
other things, the target companys assets and liabilities, our shareholders will
in all likelihood hold a lesser percentage ownership interest in the Company
following any merger or acquisition. The percentage ownership may be subject to
significant reduction in the event the Company acquires a target company with
substantial assets. Any merger or acquisition effected by the Company can be
expected to have a significant dilutive effect on the percentage of shares held
by our current shareholders.





5



---

Operation of Business After Acquisition



The
Companys operation following its merger or acquisition of a business will be
dependent on the nature of the business and the interest acquired. We are unable
to determine at this time whether the Company will be in control of the business
or whether present management will be in control of the Company following the
acquisition. We may expect that any future business will present various
challenges that cannot be predicted at the present time.



Government Regulation



The
Company cannot anticipate the government regulations, if any, to which we may be
subject until we have acquired an interest in a business. The use of assets to
conduct a business that we may acquire could subject us to environmental, public
health and safety, land use, trade, or other governmental regulations and state
or local taxation. Our selection of a business in which to acquire an interest
will include an effort to ascertain, to the extent of the limited resources of
the Company, the effects of any government regulation on the prospective
business of the Company. However, in certain circumstances, such as the
acquisition of an interest in a new or start-up business activity, it may not be
possible to predict with any degree of accuracy the impact of government
regulation.



Competition



We will
be involved in intense competition with other business entities, many of which
will have a competitive edge over us by virtue of their stronger financial
resources and prior experience in business. The Company can provide no assurance
that we will be successful in obtaining a suitable business opportunity.



Marketability



As we
currently are not involved in selling products or services, there can be no
assurance that we will be successful in marketing any such products or services
or whether a market will develop.



Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements and Labor Contracts



We
currently have no patents, trademarks, licenses, franchises, concessions,
royalty agreements or labor contracts.



Research and Development



We
spent no amounts on research and development activities during each of the last
two fiscal years.



Employees



The
Company has no employees.  Neither of the Company's executive officers are
employed by the Company.  Management services are provided on an "as
needed" basis.  The Company has no oral or written contracts for services
with any member of management.



Perceived
Benefits



There
are certain perceived benefits to being a reporting company with a class of
publicly-traded securities. These are commonly thought to include the
following:



·

the
ability to use registered securities to make acquisitions of assets or
businesses;

·

increased
visibility in the financial community;

·

the
facilitation of borrowing from financial institutions;

·

improved
trading efficiency;



6



---

·

shareholder
liquidity;

·

greater
ease in subsequently raising capital;

·

compensation
of key employees through stock options for which there may be a market
valuation;

·

enhanced
corporate image;

·

presence
in the United States capital market.



Item 1A.
 Risk Factors



As a smaller
reporting company, we are not required to provide the information required by
this item.



Item
1B.  Unresolved staff comments.



As a smaller
reporting company, we are not required to provide the information required by
this item.  However, there are no unresolved staff comments as of the year
ended December 31, 2008 or subsequently.



Item 2.
Description of Properties



We
currently own no properties.  The Company leased furnished office space
from our President, Andrew Ippolito for $1,300 per month through December 31,
2006.  The lease expired and has not been renewed.



Oil and gas
interests



In
April of 1984, the Company purchased a non-operating working interest in six
producing oil wells near the city of Signal Hill, California.  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 and gas produced and sold
from each well.  Said working interest was sold on August 12, 2004.



Discovery is actively
seeking new investment opportunities.



Item 3. Legal
Proceedings



None.



Item 4. Submission
of Matters to a Vote of Security Holders



None.

















7



---

PART II



Item 5. Market for
Registrant's Common Equity and Related Stockholder Matters



The
following table sets forth the range of high and low bid prices as reported by
the Over the Counter Bulletin Board (OTCBB) for the periods indicated.  The
quotations reflect inter-dealer prices without retail mark-up, markdown, or
commission, and may not necessarily represent actual transactions. Currently the
stock is traded on the OTCBB under the symbol "DSCY.OB".



|                         | HIGH    | LOW    
|------------------------ | ------- | -------
|Quarter ended
3-31-2007  | $0.0275 | $0.0125
|Quarter ended
6-30-2007  | $0.0275 | $0.02  
|Quarter ended
9-30-2007  | $0.025  | $0.0125
|Quarter ended
12-31-2007 | $0.02   | $0.01  
|Quarter ended
3-31-2008  | $0.0175 | $0.0075
|Quarter ended
6-30-2008  | $0.0075 | $0.005 
|Quarter ended
9-30-2008  | $0.0175 | $0.007 
|Quarter ended
12-31-2008 | $0.0025 | $0.025 
|At March 23,
2009        | .0007   | .0005  



Currently, there are
eight broker-dealers making a market on the Companys common stock.



Holders.



The number of
stockholders of record at March 23, 2009 was 5,894.



Dividends.



No dividends have
been paid or declared during the last five years; and the registrant does not
anticipate paying dividends on its common stock in the foreseeable future.



Securities
Authorized for Issuance Under Equity Compensation Plans



The company does not
have securities authorized for issuance under a equity compensation plan.



Purchases of
Equity Securities by the Small Business Issuer and Affiliated
Purchasers.



The company did not
effect any repurchases of securities during the years ended December 2008 or
2007.



Recent Sales of
Unregistered Securities; Use of Proceeds From Registered Securities:



During
the period covered by this report the Company sold no equity securities that
were registered under the Security Act of 1933, as amended.



Item 6. Selected
Financial Data



As a smaller
reporting company, we are not required to provide the information required by
this item.





8



---

Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations



Management's discussion and analysis is intended to be read in
conjunction with the Company's audited financial statements and notes thereto.
 The following statements may be forward-looking in nature and actual
results may differ materially.



Plan
of Operation



Since
the sale of previous interests, Discovery Oil has no revenue and has become a
shell company.  The Company is currently search for a new investment
opportunity in the oil industry, which would probably take the form of a merger,
stock-for-stock exchange or stock-for-assets exchange.  No assurances can
be made that we will be successful in locating and negotiating with any possible
merger candidates.



The
Company's major shareholders have undertaken to make funds available to the
Company in amounts sufficient to enable us to satisfy our reporting and other
obligations as a public Company, and to commence, on a limited basis, the
process of investigating possible merger and acquisition candidates.



Given
our lack of cash or other assets, Discovery Oil will be extremely limited in our
attempts to locate potential business situations for investigation.  We do
not know when, or if, we may be able to locate investment opportunities or
potential merger candidates.  Business opportunities, if any arise, are
expected to become available to the Company principally from the personal
contacts of our officers and directors.  Although the current focus of
management is to find investment opportunities or merger candidates within the
oil industry, we will also consider other ventures and reserve the right to
evaluate and to enter into any type of business opportunity, in any stage of
development, in any location.



We may
seek a business opportunity with a firm which only recently commenced
operations, or a developing company in need of additional funds for expansion
into new products or markets, an entity seeking to develop a new product or
service, or an established business which may be experiencing financial or
operating difficulties and is in need of additional capital which is perceived
to be easier to raise by a public company.  In some instances, a business
opportunity may involve the acquisition or merger with a corporation which does
not need substantial additional cash but which desires to establish a public
trading market for its common stock.



We may
purchase assets and establish wholly owned subsidiaries in various businesses or
purchase existing businesses as subsidiaries.  We anticipate that the
selection of a business opportunity in which to participate will be complex and
extremely risky.  Because of general economic conditions, rapid
technological advances being made in some industries, and shortages of available
capital, management believes that there are numerous firms seeking the benefits
of a publicly traded corporation.  Such perceived benefits of a publicly
traded corporation may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for the
principals of a business, creating a means for providing incentive stock options
or similar benefits to key employees, providing liquidity (subject to
restrictions of applicable statutes) for all shareholders, and other factors.
 Potentially available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex.  At the present time, management does not
anticipate paying any finder's fee for locating an acquisition prospect.



As part
of our investigation of acquisition possibilities, we may meet with executive
officers of the business and its personnel, inspect its facilities, obtain
independent analysis or verification of the information provided and conduct
other reasonable measures, to the extent permitted by the Company's limited
resources and management's limited expertise. Generally, we intend to analyze
and make a determination based upon all available information without reliance
upon any single factor as controlling.  We can give no assurance that we
will be able to find suitable a suitable business opportunity which may desire
to combine with Discovery Oil.





9



---

Results
of Operations



For the year ended
December 31, 2008, compared to the year ended December 31, 2007.



The
Company reported a net loss of $59,828 for the year ended December 31, 2008,
compared to a net loss of $51,982 for the year ended December 31, 2007.
 Revenues were $0 in both years.



Financial
Condition and Liquidity



Total
assets at December 31, 2008 were $3,371, stockholder's deficit was $291,439, and
the accumulated deficit was $1,219,261.  Net loss from operations was
$45,740 during the year ended December 31, 2008.  The majority of the cash
was expended for normal company operations as well as the continuing search for
new investment opportunities.



The
Company's liabilities increased to $294,810 at December 31, 2008 compared to
$237,498 at December 31, 2008, primarily due to an increase in a related party
payable.



The
Company plans to fund its operations during fiscal year 2009 through advances
from related parties, and possibly through the sale of the Company's common
stock, although there can be no assurance that the Company would be successful
in selling its common stock.  It is anticipated that any revenue in 2009
would be negligible as the Company has yet to locate a new investment
opportunity.



Off
Balance-Sheet Arrangements



During
the 12 months ended December 31, 2008, the Company did not engage in any
off-balance sheet arrangements as defined in Item 303(c) of the SEC's Regulation
S-B.



Contractual Obligations



None.



Inflation

We do
not believe that inflation has had a significant impact on our results of
operations or financial condition.



Critical Accounting Policies



We have
identified our critical accounting policies, the application of which may
materially affect the financial statements, either because of the significance
of the financials statement item to which they relate, or because they require
managements judgment in making estimates and assumptions in measuring, at a
specific point in time, events which will be settled in the future.



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.



Fair Value of
Financial Instruments

The
Company's financial instruments as defined by Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments,"
include cash, trade accounts receivable, accounts payable and related party
payables. All instruments are accounted for on a historical cost basis, which,
due to the short maturity of these financial instruments, approximates fair
value at December 31, 2008 and 2007.



10



---



Significant Equipment Purchases and Requirements



None.



Item
7A.  Quantitative and Qualitative Disclosures About Market Risk



As a smaller
reporting company, we are not required to provide the information required by
this item.





11



---

Item
8. Financial Statements and Supplementary Data



[discovery10k2008002.gif]







12



---



|DISCOVERY OIL,
LTD.                            |                                             |                                 |                                                        |            
|---------------------------------------------- | ------------------------------------------- | ------------------------------- | ------------------------------------------------------ | -----------
|BALANCE
SHEETS                                 |                                             |                                 |                                                        |            
|                                               |                                             |                                 |                                                        |            
|                                               |                                             |                                 |                                                        |            
|                                               |                                             |                                 |                                                        |            
|ASSETS                                         |                                             |                                 |                                                        |            
|                                               |                                             |                                 |                                                        |            
|                                               | CURRENT
ASSETS                              |                                 |                                                        |            
|                                               |                                             | Cash                            | $                                                      | 3,135      
|                                               |                                             | Prepaid
expenses                |                                                        | -          
|                                               |                                             |                                 | Total Current
Assets                                   |            
|                                               |                                             |                                 |                                                        |            
|                                               | PROPERTY AND
EQUIPMENT, NET OF DEPRECIATION | 236                             |                                                        | 467        
|                                               |                                             |                                 |                                                        |            
|                                               | TOTAL
ASSETS                                | $                               | 3,371                                                  | $          
|                                               |                                             |                                 |                                                        |            
|LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) |                                             |                                 |                                                        |            
|                                               |                                             |                                 |                                                        |            
|                                               | CURRENT
LIABILITIES                         |                                 |                                                        |            
|                                               |                                             | Accounts
payable                | $                                                      | 95,431     
|                                               |                                             | Related party
payable           |                                                        | 157,873    
|                                               |                                             | Advances
payable                |                                                        | 7,000      
|                                               |                                             | Accrued expense                 |                                                        | 845        
|                                               |                                             | State tax
liability             |                                                        | 33,661     
|                                               |                                             |                                 | Total Current
Liabilities                              |            
|                                               |                                             |                                 |                                                        |            
|                                               | COMMITMENTS AND
CONTINGENCIES               |                                 | -                                                      |            
|                                               |                                             |                                 |                                                        |            
|                                               | STOCKHOLDERS'
 (DEFICIT)                    |                                 |                                                        |            
|                                               |                                             | Common stock, $0.001
par value; |                                                        |            
|                                               |                                             |                                 | 200,000,000 shares
authorized,                         |            
|                                               |                                             |                                 | 25,245,921 shares
issued and outstanding, respectively |            
|                                               |                                             | Additional paid-in
capital      |                                                        | 902,575    
|                                               |                                             | Accumulated
deficit             |                                                        | (1,219,261)
|                                               |                                             |                                 | Total Stockholders'
 (Deficit)                         |            
|                                               |                                             |                                 |                                                        |            
|                                               | TOTAL LIABILITIES
AND                       |                                 |                                                        |            
|                                               |                                             | STOCKHOLDERS'
(DEFICIT)         | $                                                      | 3,371      





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



13



---



|DISCOVERY OIL,
LTD.        |                                     |                               |            |             
|-------------------------- | ----------------------------------- | ----------------------------- | ---------- | ------------
|STATEMENTS OF OPERATIONS   |                                     |                               |            |             
|                           |                                     |                               |            |             
|                           |                                     |                               |            | Years Ended 
|                           |                                     |                               |            | December 31,
|                           |                                     |                               |            | 2008        
|                           |                                     |                               |            |             
|REVENUES                   |                                     |                               |            |             
|                           | Royalty income                      | $                             | -          | $           
|                           |                                     |                               |            |             
|OPERATING EXPENSES         |                                     |                               |            |             
|                           | State tax expense                   |                               | 2,093      |             
|                           | Legal and accounting                |                               | 30,625     |             
|                           | Stock transfer expense              |                               | 8,159      |             
|                           | General and administrative expenses |                               | 4,863      |             
|                           |                                     | Total operating expenses      |            | 45,740      
|                           |                                     |                               |            |             
|LOSS FROM OPERATIONS       |                                     | (45,740)                      |            | (41,919)    
|                           |                                     |                               |            |             
|OTHER INCOME (EXPENSES)    |                                     |                               |            |             
|                           | Other income                        |                               | -          |             
|                           | Interest income                     |                               | -          |             
|                           | Interest expense                    |                               | (14,088)   |             
|                           |                                     | TOTAL OTHER INCOME (EXPENSES) | (14,088)   |             
|                           |                                     |                               |            |             
|LOSS BEFORE TAXES          |                                     | (59,828)                      |            | (51,982)    
|                           |                                     |                               |            |             
|INCOME TAX EXPENSE         |                                     | -                             |            | -           
|                           |                                     |                               |            |             
|NET LOSS                   | $                                   | (59,828)                      | $          | (51,982)    
|                           |                                     |                               |            |             
|NET LOSS PER COMMON SHARE, |                                     |                               |            |             
|                           | BASIC AND DILUTED                   | $                             | nil        | $           
|                           |                                     |                               |            |             
|WEIGHTED AVERAGE NUMBER    |                                     |                               |            |             
|                           | OF COMMON SHARES OUTSTANDING,       |                               |            |             
|                           | BASIC AND DILUTED                   |                               | 25,245,921 |             
|                           |                                     |                               |            |             





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



14



---



|DISCOVERY OIL,
LTD.                         |                    |            |   |              |   |         |   |             |          |              
|------------------------------------------- | ------------------ | ---------- | - | ------------ | - | ------- | - | ----------- | -------- | -------------
|STATEMENT OF STOCKHOLDERS' EQUITY
(DEFICIT) |                    |            |   |              |   |        
|                                            |                    |            |   |              |   |         |   |             |          |              
|                                            |                    |            |   |              |   |         |   | Additional  |          |              
|                                            |                    |            |   | Common Stock |   | Paid-in |   | Accumulated |          | Stockholders'
|                                            |                    |            |   | Shares       |   | Amount  |   | Capital     |          | Deficit      
|                                            |                    |            |   |              |   |         |   |             |          |              
|                                            |                    |            |   |              |   |         |   |             |          |              
|Balance December 31, 2006                   |                    | 25,245,921 | $ | 25,247       | $ | 902,575 | $ | (1,107,451) | $        | (179,629)    
|                                            |                    |            |   |              |   |         |   |             |          |              
|Net loss for the year ended                 |                    |            |   |              |   |         |   |             |          |              
|                                            | December  31, 2007 |            | - |              | - |         | - |             | (51,982) |              
|                                            |                    |            |   |              |   |         |   |             |          |              
|Balance December 31, 2007                   |                    | 25,245,921 |   | 25,247       |   | 902,575 |   | (1,159,433) |          | (231,611)    
|                                            |                    |            |   |              |   |         |   |             |          |              
|                                            |                    |            |   |              |   |         |   |             |          |              
|Net loss for the period ended               |                    |            |   |              |   |         |   |             |          |              
|                                            | December 31, 2008  |            |   |              |   |         |   |             | (59,828) |              
|                                            |                    |            |   |              |   |         |   |             |          |              
|Balance December 31, 2008                   |                    | 25,245,921 | $ | 25,247       | $ | 902,575 | $ | (1,219,261) | $        | (291,439)    



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



15



---



|DISCOVERY OIL,
LTD.                          |                                                      |                                                  |       |          |             
|-------------------------------------------- | ---------------------------------------------------- | ------------------------------------------------ | ----- | -------- | ------------
|STATEMENTS OF CASH FLOWS                     |                                                      |                                                  |       |          |             
|                                             |                                                      |                                                  |       |          |             
|                                             |                                                      |                                                  |       |          | Years Ended 
|                                             |                                                      |                                                  |       |          | December 31,
|                                             |                                                      |                                                  |       |          | 2008        
|                                             |                                                      |                                                  |       |          |             
|                                             |                                                      |                                                  |       |          |             
|CASH FLOWS FROM OPERATING ACTIVITIES:        |                                                      |                                                  |       |          |             
|                                             | Net gain (loss)                                      |                                                  | $     | (59,828) | $           
|                                             | Adjustments to reconcile net loss to net cash        |                                                  |       |          |             
|                                             | provided (used) by
operating activities:             |                                                  |       |          |             
|                                             |                                                      | Depreciation                                     |       |          | 231         
|                                             |                                                      | Accounts payable                                 |       |          | 10,434      
|                                             |                                                      | Prepaid expenses                                 |       |          | 3,500       
|                                             |                                                      | Accrued expense                                  |       |          | 680         
|                                             |                                                      | State tax liability                              |       |          | 2,093       
|                                             |                                                      | Net cash provided (used) by operating
activities |       |          | (42,890)    
|                                             |                                                      |                                                  |       |          |             
|CASH FLOWS PROVIDED BY INVESTING
ACTIVITIES: |                                                      |                                                  |       |          |             
|                                             |                                                      |                                                  |       |          | -           
|CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES: |                                                      |                                                  |       |          |             
|                                             |                                                      | Related party payable proceeds                   |       |          | 44,105      
|                                             |                                                      | Net cash provided by financing activities        |       |          | 44,105      
|                                             |                                                      |                                                  |       |          |             
|                                             | Net increase (decrease) in cash and cash
equivalents |                                                  |       | 1,215    |             
|                                             |                                                      |                                                  |       |          |             
|Cash at beginning of period                  |                                                      |                                                  | 1,920 |          | 1,323       
|                                             |                                                      |                                                  |       |          |             
|Cash at end of period                        |                                                      | $                                                | 3,135 | $        | 1,920       
|                                             |                                                      |                                                  |       |          | -           
|                                             |                                                      |                                                  |       |          |             
|SUPPLEMENTAL CASH FLOW DISCLOSURES:          |                                                      |                                                  |       |          |             
|                                             | Income taxes paid                                    |                                                  | $     | -        | $           
|                                             | Interest paid                                        |                                                  | $     | -        | $           





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



16



---

DISCOVERY
OIL, LTD.

Notes to Financial
Statements

DECEMBER
31, 2008 and 2007



NOTE
1  DESCRIPTION OF BUSINESS



Discovery Oil, Ltd. (hereinafter the Company) was originally
organized in the State of Wyoming in 1964 and 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.  On August 12, 2004, the Company sold all of its 12.5%
non-operating working interest in six oil wells for $62,850.



NOTE 2 - SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES



This
summary of significant accounting policies 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.



Accounting
Methods

The
Companys financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.



Accounting Pronouncements

In May,
2008, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 163, Accounting for Financial Guarantee Insurance
Contractsan interpretation of FASB Statement No. 60 (SFAS 163). This Statement
requires that an insurance enterprise recognize a claim liability prior to an
event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This Statement
also clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account for
premium revenue and claim liabilities. Those clarifications will increase
comparability in financial reporting of financial guarantee insurance contracts
by insurance enterprises. This Statement requires expanded disclosures about
financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements. This Statement is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and all
interim periods within those fiscal years, except for some disclosures about the
insurance enterprises risk-management activities. This Statement requires that
disclosures about the risk-management activities of the insurance enterprise be
effective for the first period (including interim periods) beginning after
issuance of this Statement. Except for those disclosures, earlier application is
not permitted.  The adoption of this statement will have no material effect
on the Companys financial condition or results of operations.



In May,
2008, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 162, The Heirarchy of Generally Accepted Accounting
Principles (SFAS No. 162). This Statement identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy). The sources of accounting principles1
that are generally accepted are categorized in descending order of authority as
follows:





17



---

DISCOVERY
OIL, LTD.

Notes to Financial
Statements

DECEMBER
31, 2008 and 2007



a. FASB Statements of Financial Accounting Standards and
Interpretations, FASB Statement 133 Implementation Issues, FASB Staff Positions,
and American Institute of Certified Public Accountants (AICPA) Accounting
Research Bulletins and Accounting Principles Board Opinions that are not
superseded by actions of the FASB



b. FASB Technical Bulletins and, if cleared by the FASB, AICPA
Industry Audit and Accounting Guides and Statements of Position



c. AICPA Accounting Standards Executive Committee Practice
Bulletins that have been cleared by the FASB, consensus positions of the FASB
Emerging Issues Task Force (EITF), and the Topics discussed in Appendix D of
EITF Abstracts(EITF D-Topics)



d. Implementation guides (Q&As) published by the FASB staff,
AICPA Accounting Interpretations, AICPA Industry Audit and Accounting Guides and
Statements of Position not cleared by the FASB, and practices that are widely
recognized and prevalent either generally or in the industry.



The
adoption of this statement will have no material effect on the Companys
financial condition or results of operations.



In
March 2008, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 161, Disclosures about Derivative
Instruments and Hedging Activitiesan amendment of FASB Statement No. 133 (SFAS
No. 161). This statement changes the disclosure requirements for derivative
instruments and hedging activities. Entities are required to provide enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under
Statement 133 and its related interpretations, and (c) how derivative
instruments and related hedged items affect an entitys financial position,
financial performance, and cash flows. This Statement is intended to enhance the
current disclosure framework in Statement 133. The Statement requires that
objectives for using derivative instruments be disclosed in terms of underlying
risk and accounting designation. This disclosure better conveys the purpose of
derivative use in terms of the risks that the entity is intending to manage.
Disclosing the fair values of derivative instruments and their gains and losses
in a tabular format should provide a more complete picture of the location in an
entitys financial statements of both the derivative positions existing at
period end and the effect of using derivatives during the reporting period.
Disclosing information about credit-risk-related contingent features should
provide information on the potential effect on an entitys liquidity from using
derivatives. Finally, this Statement requires cross-referencing within the
footnotes, which should help users of financial statements locate important
information about derivative instruments.  The adoption of this statement
will have no material effect on the Companys financial condition or results of
operations.



Cash and Cash
Equivalents

For
purposes of the statements of cash flows, the Company considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents.





18



---

DISCOVERY
OIL, LTD.

Notes to Financial
Statements

DECEMBER
31, 2008 and 2007



Derivative
Instruments

The
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133), as amended by SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities  Deferral of the Effective Date
of FASB No. 133, and SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities, and SFAS No. 149, Amendment of
Statement 133 on Derivative Instruments and Hedging Activities.  These
statements establish accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. They require that an entity recognize all
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value.



If
certain conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging derivative with the recognition of (i) the changes in the fair
value of the hedged asset or liability that are attributable to the hedged risk
or (ii) the earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized in income in the period of change.



Historically, the Company has not entered into derivatives
contracts to hedge existing risks or for speculative purposes.



At
December 31, 2008, the Company has not engaged in any transactions that would be
considered derivative instruments or hedging activities.



Earnings (Loss)
Per Share

On
January 1, 1998, the Company adopted Statement of Financial Accounting Standards
No. 128, which provides for calculation of "basic" and "diluted" earnings per
share.  Basic earnings per share includes no dilution and is computed by
dividing net income (loss) available to common shareholders by the weighted
average common shares outstanding for the period.  Diluted earnings per
share reflect the potential dilution of securities that could share in the
earnings of an entity similar to fully diluted earnings per share.  The
Company had no outstanding options or warrants at December 31, 2008 and 2007;
accordingly, only basic earnings (loss) are presented.



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.



Fair Value of
Financial Instruments

The
Company's financial instruments as defined by Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments,"
include cash, trade accounts receivable, accounts payable and related party
payables. All instruments are accounted for on a historical cost basis, which,
due to the short maturity of these financial instruments, approximates fair
value at December 31, 2008 and 2007.





19



---

DISCOVERY
OIL, LTD.

Notes to Financial
Statements

DECEMBER
31, 2008 and 2007



SFAS
No. 157, Fair Value Measurements(SFAS 157), define fair value, establishes a
framework for measuring fair value in accordance with generally accepted
accounting principles, and expands disclosures about fair value measurements.
 SFAS 157 establishes a three-tier fair value hierarchy which prioritizes
the inputs used in measuring fair value as follows:



Level 1.  Observable inputs such as quoted prices in active
markets for identical assets or liabilities that are accessible at the
measurement date. The Company has no Level 1 assets or liabilities; and



Level 2. Inputs from other than quoted prices in active markets,
that are observable either directly or indirectly. The Company has no Level 2
assets or liabilities; and



Level 3.  Unobservable inputs in which there is little of no
market data, which require the reporting entity to develop its own assumptions.
The Company has no Level 3 assets or liabilities.



The
Company has not applied the provisions of SFAS No. 157 to non-financial assets
and liabilities that are of a nonrecurring nature in accordance with FASB Staff
Position (FSP) Financial Accounting Standard 157-2, Effective Date of FASB
Statement No. 157 (FSP 157-2). FSP 157-2 delayed the effective date of
application of SFAS 157 to non-financial assets and liabilities that are of a
nonrecurring nature until January 1, 2009. FSP 157-2 will not have a material
effect on the Companys financial position, results of operations and cash
flows.



Going Concern

The
accompanying financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and satisfaction of liabilities in
the normal course of business. The Company has limited cash, negative working
capital, and has suffered material recurring losses from operations since
inception. These factors raise substantial doubt about the Companys ability to
continue as a going concern. Management estimates that the Company will need to
raise an additional $60,000 to continue operations for the upcoming year.



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.



Provision for
Taxes

Income
taxes are provided based upon the liability method of accounting pursuant to
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes. Under this approach, deferred income taxes are recorded to reflect the
tax consequences in future years of differences between the tax basis of assets
and liabilities and their financial reporting amounts at each year-end.  A
valuation allowance is recorded against deferred tax assets if management does
not believe the Company has met the more likely than not standard imposed by
SFAS No. 109 to allow recognition of such an asset.



At
December 31, 2008 and December 31, 2007, the Company had deferred tax assets
calculated at an expected rate of 34% of approximately $414,500 and $387,000,
respectively, principally arising from operating loss carryforwards for income
tax purposes.  As management of the Company cannot determine that it is
more likely than not that the Company will realize the benefit of the deferred
tax asset, a valuation allowance equal to the net deferred tax asset has been
established at December 31, 2008. The significant components of the deferred tax
asset at December 31, 2008 and 2007 were as follows:



20



---

DISCOVERY
OIL, LTD.

Notes to Financial
Statements

DECEMBER
31, 2008 and 2007





|                                       |   |                   |   |                  
|-------------------------------------- | - | ----------------- | - | -----------------
|                                       |   | December 31,
2008 |   | December 31,
2007
|Net operating
loss carryforward        | $ | 1,219,300         | $ | 1,159,000        
|                                       |   |                   |   |                  
|Deferred tax
asset                     | $ | 414,500           | $ | 394,000          
|Deferred tax
asset valuation allowance | $ | (414,500)         | $ | (394,000)        



At
December 31, 2008 and December 31, 2007, the Company has net operating loss
carryforwards of approximately $1,219,300 and $1,159,000 respectively, which
expire in the years 2021 through 2027. Utilization of the net operating losses
is contingent upon the Companys filing of federal income tax returns, currently
in arrears.  See Note 4 regarding Companys liability for state income tax
reporting.  The Companys valuation allowance increased $20,500 from
December 31, 2007 to December 31, 2008.



Effective November 1, 2007, the Company adopted the Financial
Accounting Standards Board (FASB) Interpretation No. 48, Accounting
for Uncertainty in Income Taxesan interpretation of FASB Statement
No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in an enterprises financial statements in accordance
with FASB Statement No. 109, Accounting for Income Taxes. FIN 48
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. Additionally, FIN 48 provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. The adoption of FIN 48 did not have a material
impact on the Companys financial position, results of operation or liquidity.



The
current company policy is to recognize accrued interest and penalties related to
uncertain tax positions as a component of income tax expense. The Company files
income tax returns in the U.S. federal jurisdiction and in various state
jurisdictions. The statue of limitations remains open for U.S. and certain state
income tax examinations for tax years from 1991 and forward, due to non filing.
 State Income tax expense for the year ended December 31, 2008
includes $20,061 in interest and penalties. As of December 31, 2008, we
have no accrued interest and penalties related to uncertain tax positions. As of
December 31, 2008, we do not expect our unrecognized tax benefits to change
significantly over the next 12 months. As a result of the adoption of
FIN 48, we did not recognize any adjustment to the liability for uncertain
tax position and therefore did not record any adjustment to the beginning
balance of accumulated deficit on the consolidated balance sheet.



NOTE 3 -
STOCKHOLDERS' DEFICIT



Common
Stock

The
Company has one class of issued and outstanding common stock. Prior to 2001, the
par value of the common stock was $0.01, and 25 million shares were authorized
for issue. Pursuant to a majority shareholders meeting held in August 2001, the
Company's Certificate of Incorporation was amended to increase the number of
shares of common stock authorized for issue to 200 million shares, to decrease
the par value of the Company's common stock to $0.001 per share and to eliminate
the provision authorizing preferred stock of the Company.



In the
year ended December 31, 2007, the Company issued no stock.



In the
year ended December 31, 2008, the Company issued no stock.



21



---

DISCOVERY
OIL, LTD.

Notes to Financial
Statements

DECEMBER
31, 2008 and 2007



NOTE
4 - PROPERTY AND EQUIPMENT



Property and equipment are stated at cost.  Depreciation is
provided using the accelerated balance method over the estimated useful lives of
the assets.  The useful lives of property, plant and equipment for purposes
of computing depreciation are five to forty years. The following is a summary of
property, equipment, and accumulated depreciation:



|                              |  |  | December 31,
2008 |  | December 31,
2007 
|----------------------------- |  |  | ----------------- |  | ------------------
|Office equipment              |  |  | 2,037             |  | 2,037             
|Total assets                  |  |  | 2,037             |  | 2,037             
|Less accumulated depreciation |  |  | (1,801)           |  | (1,570)           
|Total Net Equipment           |  |  | $
         236    |  | $
             467



Depreciation and amortization expense for the year ended December
31, 2008 was $231.  The Company evaluates the recoverability of property
and equipment when events and circumstances indicate that such assets might be
impaired.  The Company determines impairment by comparing the undiscounted
future cash flows estimated to be generated by these assets to their respective
carrying amounts.  The cost and related reserves of assets sold or retired
are removed from the accounts, and any resulting gain or loss is reflected in
results of operations.



NOTE
5 STATE TAX LIABILITY



For the
year ended December 31, 2008 the Company estimated its California corporate tax
liability to be $33,661.  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.



NOTE
6  RELATED PARTY PAYABLE



The
Company has a related party payable to its, president and director, for funds
advanced on an unsecured and noninterest-bearing basis to the Company. The
amount due to the president at December 31, 2008 and December 31, 2007 is
$157,873 and $113,768, respectively.



NOTE
7  ADVANCES PAYABLE



In the
year ended December 31, 2004, the Company was loaned $7,000 from an unrelated
party. This advance is uncollateralized, bears no interest and is payable upon
demand.  As of December 31, 2008, the outstanding balance remains
unpaid.













22



---





Item 9. Changes In
and Disagreements With Accountants on Accounting and Financial
Disclosure



None.



Item 9a.
 Controls and Procedures



Evaluation of Disclosure Controls and Procedures.



In
connection with the preparation of this annual report on Form 10-K, an
evaluation was carried out by the companys management, with the participation
of the Chief Executive Officer and the Chief Financial Officer, of the
effectiveness of Discovery Oil, Ltd.s disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934 (Exchange Act)) as of December 31, 2008.  Disclosure controls and
procedures are designed to ensure that information required to be disclosed in
reports filed or submitted under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the SEC rules and
forms and that such information is accumulated and communicated to management,
including the Chief Executive Officer and the Chief Financial Officer, to allow
timely decisions regarding required disclosures.



During
the evaluation of disclosure controls and procedures as of December 31, 2008,
management identified material weaknesses in internal control over financial
reporting, which management considers an integral component of disclosure
controls and procedures.  As a result of these material weaknesses,
management concluded that the companys disclosure controls and procedures were
ineffective.



Managements Report on Internal Control over Financial
Reporting



Management is responsible for establishing and maintaining
adequate internal control over financial reporting.  Internal control over
financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under
the Securities Exchange Act of 1934, as amended, as a process designed by, or
under the supervision of, a companys principal executive and principal
financial officers and effected by a companys board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:



·

Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the assets of
the company;

·

Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management
and directors of the company; and

·

Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the companys
assets that could have a material effect on the financial statements.



All
internal control systems, no matter how well designed, have inherent limitations
and can provide only reasonable, not absolute, assurance that the objectives of
the control system are met.  Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs.  Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within our company have been detected.  Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation.



Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2008.  In making this assessment, management
used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control  Integrated
Framework.  In the



23



---

course of the evaluation, management identified a material
weakness in internal control over financial reporting.



A
material weakness is a deficiency, or a combination of deficiencies, in internal
control over financial reporting such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements will
not be prevented or detected on a timely basis.



The
material weakness identified is disclosed below:



Insufficient Knowledgeable and Competent Personnel in Key
Positions.  There are insufficient knowledgeable and competent
personnel in key positions within the Company.  Because Discovery Oil is a
shell corporation, the Company has virtually no operations.  The two
Directors are the only individuals who remain involved with the Company, with
the exception of the Companys outside accountant providing bookkeeping
services.  The two Directors are not independent, and have insufficient
technical and reporting expertise to provide adequate oversight of financial
reporting.  In addition, fundamental elements of an effective control
environment were not present as of December 31, 2008, including independent
oversight of management and financial reporting, a code of conduct or ethics,
and controls to address the risk of management override.  This deficiency
led to identification by the auditors of required material adjustments to the
financial statements.



Based
on the material weakness described above, management concluded that, as of
December 31, 2008, internal control over financial reporting was not
effective.



This
annual report does not include an attestation report of the companys registered
public accounting firm regarding internal control over financial
reporting.  Managements report was not subject to attestation by the
companys registered public accounting pursuant to temporary rules of the
Securities and Exchange Commission that permit the company to provide only
managements report in this annual report.



We do
not intend to remedy the material weakness identified, because the company has
virtually no operations and is, at present, in existence for the purposes of a
reverse merger, if a candidate should arise.



Changes in Internal Control Over Financial
Reporting



There
has been no change in our internal control over financial reporting that
occurred during our most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.



Item 9b. Other
Events



None.



24



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PART
III



Item 10. Directors
and Executive Officers of the Registrant



|Name of
Executive Officers and |     | Principal
Occupation, Five-Year                 
|------------------------------ | --- | ------------------------------------------------
|Directors
and Positions Held   | Age | Business
History and Directorships              
|Andrew V.
Ippolito, President  | 77  | Currently and
for the past 30 years,            
|and Chairman of
the Board of   |     | Mr. Ippolito
functioned as a                    
|Directors                      |     | business
executive, diplomat, Honorary Consul   
|                               |     | General of
Liberia and General Secretary of the 
|                               |     | Los Angeles
Consular Corps, representing more   
|                               |     | than 86
countries and providing access to       
|                               |     | international
finance and trade markets. Current
|                               |     | President and
Chairman of the Board of Discovery
|                               |     | Oil, LTD.                                       
|                               |     |                                                 
|M. Jeanett
Ippolito, Secretary | 67  | Mrs. Ippolito
has been a real estate broker     
|                               |     | and a Director
for over 20 years.               



Identification of Certain Significant Employees



The company has no employees.



Family Relationships



Andrew Ippolito and M. Jeanette Ippolito are husband and wife.
 There are no other family relationships known to the Company.



Involvement in Certain Legal Proceedings



So far as the Company is aware, no Director or Executive Officer
has been involved in any material legal proceedings during the past five
years.



Audit
Committee



Due to
our inactivity, the Company has not established an Audit Committee and has no
audit committee financial expert.  When we resume active operations, the
Board of Directors will review current requirements and establish an Audit
Committee as soon as practicable.



Section 16(a)
Beneficial Ownership Reporting Compliance.



Officers, Directors, and beneficial owners of 10% or more of the
Registrant's Common Stock are required to file on a timely basis the reports
required by section 16(a) of the Exchange Act based on a review of Forms 3, 4,
and 5.



To the
Companys knowledge, the required Forms 3, 4, and 5 have been filed.





25



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Code of Ethics



Due to
the inactivity of the Company, the Board of Directors has not yet adopted a Code
of Ethics other than such direction as is supplied in our by-laws, a copy of
which is was filed with the Companys Report on Form 10KSB on April 17, 2006 and
is hereby incorporated by reference.



When we
resume active operations, the Board of Directors will review current
requirements and establish a Code of Ethics as soon as practicable.



Item
11. Executive Compensation



No
executive officers  received compensation of any kind during the fiscal
year ended December 31, 2008.



|                                           | Annual Compensation | Long Term Compensation
|------------------------------------------ | ------------------- | ----------------------
|(a)                                        | (b)                 | (
c)                  
|Name and
Principal
Position                | Year                | Salary ($)            
|Andrew
Ippolito
President and
Director     | 2008                | 0                     
|M. Jeanett
Ippolito
Secretary and
Director | 2008                | 0                     
|                                           |                     |                       





The
following table sets forth information with respect to the executive officer
listed above, concerning the grants of options and Stock Appreciation Rights
("SAR") during the fiscal year ended December 31, 2008:



Option/SAR Grants In Last Fiscal Year



|Name                 | Number of
Securities Underlying Options/SARs Granted  (1) | Percent of
Total Options/SARs Granted to Employees in Fiscal Year | Exercise or
Base Price ($/Sh) | Expiration
Date
|-------------------- | --------------------------------------------------------- | ----------------------------------------------------------------- | ----------------------------- | ---------------
|Andrew
Ippolito      | 0                                                         | 0                                                                 | 0                             | 0              
|M. Jeanette
Ippolito | 0                                                         | 0                                                                 | 0                             | 0              
|                     |                                                           |                                                                   |                               |                



Exercise of Options:



The
Company has no stock options outstanding.



Long-Term Incentives



The
Company has no long term incentive plan at this time.



Compensation of Directors:



Directors are not compensated for their activity as directors.
 The Board of Directors is empowered to vote compensation to directors for
their performance of duties to the Company.  In addition, directors are
reimbursed for their accountable expenses incurred in attending meetings and
conducting their duties on behalf of the Company.  No director received
compensation for services during the year ended December 31, 2008.



There
are no compensatory plans or arrangements for compensation of any Director in
the event of his termination of office, resignation or retirement.



26



---



There
is no employment agreement between the Company and our other executive officers.
 See Item 6, Plan of Operations, for additional discussion of the Companys
relationship with our officers and directors.



Item 12. Security
Ownership of Certain Beneficial Owners and Management



The
following table sets forth certain information regarding the beneficial
ownership of shares of the Companys common stock as of December 31, 2008
by:



·

each person who is known by us to beneficially own more than 5% of
the Companys issued and outstanding shares of common stock;

·

the Companys named executive officers;

·

the Companys directors; and

·

all of the Companys executive officers and directors as a
group.



|Name of
Shareholder                                     | Amount and
Nature of Beneficial Ownership |  | Percent of
Class(1)
|------------------------------------------------------- | ----------------------------------------- |  | -------------------
|Directors
and Executive Officers                       
|Andrew V.
Ippolito, President and Chairman of the Board | 4,480,173                                 |  | 17.7%              
|M. Jeanett
Ippolito, Secretary                          | 2,500,000                                 |  | 9.9%               
|Andrew and
Jeanett Ippolito                             | 10,059,350                                |  | 39.8%              
|                                                        |                                           |  |                    
|All current
executive officers and directors as a group | 17,039,523                                |  | 67.4%              
|5%
or greater shareholders                             
|CEDE &
CO                                               | 2,859,155                                 |  | 11.4%              
|PO
Box 222, Bowling Green Station                       |                                           |  |                    
|New
York NY 10274                                       |                                           |  |                    



Andrew
V. Ippolito, president and a director, and his wife M. Jeanett Ippolito,
secretary and a director, collectively own 17,039,523 shares of the Registrant's
common stock representing 67.4% of the total outstanding shares as of March 23,
2009.



The
Company has no knowledge of any other arrangements, including any pledge by any
person of the Companys securities, the operation of which may at a subsequent
date result in a change in control of the company.



The
Company is not, to the best of its knowledge, directly or indirectly owned or
controlled by another corporation or foreign government.



Changes in Control



There
are no arrangements known to the Company the operation of which may at a
subsequent time result in the change of control of the Company.  We are
presently engaged in a search for new investment or merger opportunities.
 Control of the Company may change in the event of a business
re-organization resulting in the issuance of additional common stock or other
voting securities of the Company.



Item 13. Certain
Relationships and Related Transactions



At
December 31, 2002, the Company had a related party payable to its president and
director for funds advanced on an unsecured and noninterest-bearing basis to the
Company. The amount due to the president at December 31, 2008 and December 31,
2007 is $157,873 and $113,768, respectively.



27



---



The
Company signed a lease with its president for the use of office space for $1,300
per month, or $15,600 per year.  The lease expired at December 31, 2006 and
has not been renewed.  The Company also agreed to pay mileage for his
travels relating to the Company. During 2008 and 2007, the Company accrued $0
for rent, travel, general and administrative expenses.



ITEM 14.
 PRINCIPAL ACCOUNTANT FEES AND SERVICES



The
Companys board of directors reviews and approves audit and permissible
non-audit services performed by the authorized independent public accountants as
well as the fees charged by the authorized independent public accountants for
such services.  In its review of non-audit service fees and its appointment
of the authorized independent public accountants as the Company's independent
accountants, the board of directors considered whether the provision of such
services is compatible with maintaining the authorized independent public
accountants independence. All of the services provided and fees charged by the
authorized independent public accountants in 2005 were pre-approved by the board
of directors.



Audit Fees



The
aggregate fees billed by the authorized independent public accountants for
professional services for the audit of the annual financial statements of the
Company and the reviews of the financial statements included in the Company's
quarterly reports on Form 10-Q for 2008 and 2007 were $27,689 and $27,776
respectively, net of expenses.



Audit-Related Fees



There
were no other fees billed by the authorized independent public accountants
during the last two fiscal years for assurance and related services that were
reasonably related to the performance of the audit or review of the Company's
financial statements and not reported under "Audit Fees" above.



Tax Fees



The
aggregate fees billed by the authorized independent public accountants during
the last two fiscal years for professional services rendered by the authorized
independent public accountants for tax compliance for 2008 and 2007 were $0 and
$0, respectively.



All Other Fees



There
were no other fees billed by the authorized independent public accountants
during the last two fiscal years for products and services provided by
authorized independent public accountants.



Item 15.
Exhibits



|Exhibit
Number |  | Description                                                  
|-------------- |  | -------------------------------------------------------------
|3.1            |  | Amended
Articles of Incorporation*                           
|3.2            |  | By-laws*                                                     
|10.1           |  | Lease
Agreement*                                             
|31             |  | Rule
13a-14(a)/15d-14(a) Certifications                      
|               |  | (31)(i)
  Certification of Andrew V. Ippolito                
|               |  | (31)(ii)
 Certification of M. Jeanett Ippolito               
|32             |  | Section 1350
Certifications                                  
|               |  | (32)(i)
  Certification of Andrew V. Ippolito                
|               |  | (32)(ii)
 Certification of M. Jeanett Ippolito               
|               |  |                                                              
|               |  | *Incorporated by
reference to Form 10KSB filed April 17, 2006



28



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SIGNATURES



Pursuant to the requirements of Section 143 of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf of the undersigned, thereunto duly  authorized.





DISCOVERY OIL,
LTD.



/s/
Andrew V. Ippolito

By
 __________________________________

Andrew V. Ippolito

President, Chairman
of the Board

Date:  March 31,
2009







Pursuant to the requirements of the Securities Act of 1934 this
report signed below by the following person on  behalf of the Registrant
and in the capacities on the date indicated.







/s/
M. Jeanett Ippolito

By
 ____________________________________

M. Jeanett
Ippolito

Secretary

Date:  March 31,
2009

















29