UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
Commission file number 0-6541
DISCOVERY OIL, LTD.
(Exact name of registrant as specified in its charter)
DELAWARE 83-0207909
(State or other jurisdiction of (IRS Employer Id. Number)
incorporation or organization)
6127 Ramirez Canyon Road
Malibu, CA
(Address of principal executive offices)
90265
(Zip Code)
(310) 457-1967
(Registrant's Telephone Number, Including Area Code)
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 (X) No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of October 23, 2001: 20,039,971
DISCOVERY OIL, LTD.
FORM 10-Q
For the period ended September 30, 2001
TABLE OF CONTENTS
PART I
PAGE
ITEM 1 - Financial Statements
Balance Sheets as of September 30, 2001
and December 31, 2000 3
Statement of Operations For the Three and Nine Month
Periods Ended September 30, 2001 and 2000 4
Statement of Cash Flows For the Nine Month Periods
Ended September 30, 2001 and 2000 5
Notes to Financial Statements 6
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II
ITEM 1 Legal Proceedings 8
ITEM 2 Changes in Securities 8
ITEM 3 Defaults Upon Senior Securities 8
ITEM 4 Submission of Matters to a Vote of Security Holders 8
ITEM 5 Other Information 8
ITEM 6 Exhibits and Reports on Form 8-K 8
Signatures 9
DISCOVERY OIL, LTD.
FORM 10-Q
For the period ended September 30, 2001
ITEM 1: FINANCIAL STATEMENTS
BALANCE SHEETS AS OF SEPTEMBER 30, 2001
DISCOVERY OIL, LTD. AND DECEMBER 31, 2000
- --------------------- ----------------------------------------------
September 30, December 31,
2001 2000
(Unaudited)
------------- -------------
ASSETS
CURRENT ASSET - Cash $ 3,400 $ -
------------- -------------
TOTAL ASSETS $ 3,400 $ -
============= =============
LIABILITIES AND STOCKHOLDERSDEFICIT
- -------------------------------------
CURRENT LIABILITIES
Related party payable $ - $ 172,457
Interest payable to related party - 268,904
Convertible notes payable - -
Interest payable - -
Accounts payable 4,631 -
------------- -------------
Total Current Liabilities 4,631 441,361
------------- -------------
STOCKHOLDERSEQUITY (DEFICIT)
Preferred stock; $1.00 par value;
5,000,000 shares
authorized; no shares outstanding
Common stock; $.01 par value;
25,000,000 shares authorized;
9,313,352 shares issued and outstanding - 93,134
Common stock; $.001 par value;
100,000,000 shares authorized;
20,039,971 shares issued and outstanding 20,041 -
Additional paid-in capital 568,596 -
Discount on common stock (4,634) (4,634)
Accumulated deficit (585,234) (529,861)
------------- -------------
Total Stockholders' Deficit (1,231) (441,361)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 3,400 $ -
============= =============
See the accompanying notes.
<page>
DISCOVERY OIL, LTD. STATEMENT OF OPERATIONS FOR THE THREE AND SIX MONTH
(UNAUDITED) PERIODS ENDED SEPTEMBER 30, 2001 AND 2000
- ----------- ---------------------------------------------------
September 30, 2001 September 30, 2000
-------------------------- --------------------------
Three Nine Three Nine
Months Months Months Months
------------ ------------ ------------ ------------
REVENUES $ 5,394 $ 15,721 $ 6,501 $ 17,143
------------ ------------ ------------ ------------
OPERATING EXPENSES
General and administrative
expenses 37,439 56,772 3,797 17,335
------------ ------------ ------------ ------------
Total Operating Expenses 37,439 56,772 3,797 17,335
------------ ------------ ------------ ------------
GAIN (LOSS) FROM OPERATIONS (32,045) (41,051) 2,704 (192)
OTHER EXPENSES
Interest expense 3,687 14,322 5,068 15,169
------------ ------------ ------------ ------------
Total Other Expenses 3,687 14,322 5,068 15,169
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME
TAXES (35,732) (55,373) (2,364) (15,361)
INCOME TAXES - - - -
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (35,732) $ (55,373) $ (479) $ (10,539)
============ ============ ============ ============
NET (LOSS) PER SHARE $ nil $ nil $ nil $ nil
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - BASIC
AND DILUTED 15,297,173 11,329,878 9,313,352 9,313,352
============ ============ ============ ============
See the accompanying notes.
<page>
DISCOVERY OIL, LTD. STATEMENT OF CASH FLOWS FOR THE NINE MONTH
(UNAUDITED) PERIODS ENDED SEPTEMBER 30, 2001 AND 2000
- ---------------------- ------------------------------------------------
2001 2000
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (55,373) $ (15,361)
Items not requiring the use of cash
Issuance of common stock for services 20,400 -
Increase in accounts payable 4,631 -
Increase (decrease) in interest payable (28,266) 15,168
------------- -------------
Net cash flow (used provided from
operating activities (58,608) (193)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in related party payable (14,992) 2,231
Convertible notes issued 77,000 -
------------- -------------
Net cash flows provided (used) from
financing activities 62,008 2,231
------------- -------------
NET (DECREASE) INCREASE IN CASH 3,400 2,038
CASH AT BEGINNING OF PERIOD - 897
------------- -------------
CASH AT END OF PERIOD $ 3,400 $ 2,935
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
INFORMATION
Cash paid during the year for:
Interest $ 42,588 $ -
============= =============
Income tax $ - $ -
============= =============
Non-cash investing and financing transactions:
Conversion of shareholder debt to additional
paid-in capital $ 215,516 $ -
Conversion of shareholder debt to
common stock 279,986 -
------------- -------------
$ 495,502 $ -
============= =============
See the accompanying notes.
<page>
DISCOVERY OIL, LTD.
(UNAUDITED) NOTES TO FINANCIAL STATEMENTS
- ----------- -------------------------------------
The financial statements of Discovery Oil, LTD. included herein, have been
prepared without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Although certain information normally included in
financial statements prepared in accordance with generally accepted accounting
principles has been condensed or omitted, Discovery Oil, LTD. believes that the
disclosures are adequate to make the information presented not misleading.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in Discovery Oil, LTD.'s annual report on
Form 10-K for the fiscal year ended December 31, 2000.
The financial statements included herein reflect all normal recurring
adjustments that, in the opinion of management, are necessary for a fair
presentation. The results for interim periods are not necessarily indicative of
trends or of results to be expected for a full year.
[The balance of this page left intentionally blank.]
DISCOVERY OIL, LTD.
FORM 10-Q
For the period ended September 30, 2001
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
GENERAL
This report contains both historical and prospective statements concerning the
Company and its operations. Prospective statements (known as "forward-looking
statements") may or may not prove true with the passage of time because of
future risks and uncertainties. The Company cannot predict what factors might
cause actual results to differ materially from those indicated by prospective
statements.
RESULTS OF OPERATIONS
For the nine-month period ended September 30, 2001 compared to the nine-month
period ended September 30, 2000
For the nine months ended September 30, 2001, the Company generated a net loss
of $55,373 compared to a net loss of $15,361 experienced during the comparable
period in the previous year. The increase in net loss from 2000 to 2001 was
primarily due to increased general and administrative expenses associated with
the Company's audit of its financial statements and other transfer agent fees.
During the nine-month periods ended September 30, 2001 and 2000, the Company
generated revenue from operations of $15,721 and $17,143.
For the three-month period ended September 30, 2001 compared to the three-month
period ended September 30, 2000
For the three months ended September 30, 2001, the Company had a net loss of
$35,732 compared to a net loss of $2,364 during the comparable period in 2000.
The increase in the third quarter loss in 2001 as compared to the net loss
during the same quarter in 2000 is primarily due to increased general and
administrative expenses associated with the audit of its financial statements
and the preparation and filing of reports necessary to be in compliance with the
Securities and Exchange Commission.
FINANCIAL CONDITION AND LIQUIDITY
During the nine-month period ended September 30, 2001, the Company used $58,608
of cash in operating activities and generated $62,008 of cash through the
issuance of debt to be converted into stock in the near future less amounts paid
on related party notes. The Company has minimal recurring revenue from
operating activities and plans to fund its future operations through additional
sales of its common stock.
DISCOVERY OIL, LTD.
FORM 10-Q
For the period ended September 30, 2001
PART II
ITEM 1 LEGAL PROCEEDINGS
NONE
ITEM 2 CHANGES IN SECURITIES
NONE
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
NONE
ITEM 5 OTHER INFORMATION
NONE
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
NONE
DISCOVERY OIL, LTD.
FORM 10-Q
For the period ended September 30, 2001
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Discovery Oil, LTD.
-------------------
(Registrant)
/s/ Andrew V. Ippolito
- ---------------------------
Andrew V. Ippolito Date: November 14, 2001
President and Director