UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                   FORM 10-QSB

                Quarterly Report Pursuant to Section 13 or 15(d)
                     Of the Securities Exchange Act of 1934

       For the quarter ended June 30, 2003 Commission File Number 0-21079

                                PHLO CORPORATION

        (Exact name of small business issuer as specified in its charter)

              Delaware                                         11-3314168
  (State or other jurisdiction                              (I.R.S. Employer
of incorporation or organization)                          Identification No.)

      6001-21 Argyle Forest Blvd.
                PMB #117
        Jacksonville, Florida                                  32244-5705
(Address of principal executive offices)                        (Zip code)

       Registrant's telephone number, including area code: (973) 691-9012

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15 (d) of the Securities and 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 |_| No |X|

The number of shares outstanding of the issuer's common stock as of March 22,
2005, is 218,786,942.

<PAGE>

                        PHLO CORPORATION AND SUBSIDIARIES

                     Quarterly Report on Form 10-QSB for the
                      Quarterly Period Ending June 30, 2003

                                Table of Contents

                                                                    Page to Page
                                                                    ------------
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheet as of June 30, 2003       3
         (Unaudited)

         Condensed Consolidated Statements of Operations for the
         three months ended June 30, 2003 and 2002
         (Unaudited)                                                    4

         Condensed Consolidated Statements of Cash Flows for the
         three months ended June 30, 2003 and 2002 (Unaudited)          5

         Notes to Condensed Consolidated Financial Statements
         (Unaudited)                                                    6

Item 2.  Managements' Discussion and Analysis of Financial
         Condition and Results of Operations                            13

Item 3.  Controls and Procedures                                        15

PART II.  OTHER INFORMATION                                             15

Item 1.  Legal Proceedings

Item 2.  Changes in Securities

Item 3.  Defaults Upon Senior Securities

Item 4.  Submission of Matters to a Vote of Security Holders
Item 5.  Other Information

Item 6.  Exhibits

Signature

Certifications


                                       2
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
                CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
                                June 30, 2003

<TABLE>
<CAPTION>
                                     ASSETS
CURRENT ASSETS
<S>                                                                         <C>
   Cash                                                                     $     27,531
   Inventory, at cost                                                            224,913
                                                                            ------------
           Total Current Assets                                                  252,444

PROPERTY PLANT & EQUIPMENT, Net                                                    1,277
                                                                            ------------

TOTAL ASSETS                                                                $    253,721
                                                                            ============
                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES

Accounts payable                                                            $    804,070
Accrued expenses and taxes                                                     1,817,291
Notes payable (Note C)                                                           591,500
Revolving credit line (Note B)                                                   129,701
Deferred revenue                                                                  12,025
                                                                            ------------

           Total Current Liabilities                                           3,354,587

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY (Note D)

Preferred stock 15,000,000 shares authorized:
Series A convertible stock, $0.0001 par value, 500,000 shares                         50
authorized, issued and outstanding (Liquidation preferences $100,000)
Series B non-convertible stock, none issued and outstanding --
Series C preferred convertible stock, $0.0001 par value 3,000,000
authorized, 1,333,304 shares outstanding (Liquidation preference $13,333)            133
Series C preferred convertible stock, 15,298 shares subscribed                         1
Common stock, $0.0001 par value, 250,000,000 shares authorized
94,695,275 shares issued and outstanding                                           9,469
Common stock, $0.0001 par value, 12,395,534 shares subscribed                      1,238
Additional paid-in capital                                                     9,171,385
Unearned Compensation                                                            (61,782)
Accumulated deficit                                                          (12,221,360)
                                                                            ------------
           Total Stockholders' Deficiency                                     (3,100,866)
                                                                            ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                              $    253,721
                                                                            ============
</TABLE>

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


                                       3
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                For the Three Months Ended June 30, 2003 and 2002

                                                    Three Months   Three Months
                                                   ----------------------------
                                                      2003            2002
                                                   ------------    ------------

REVENUES                                           $     94,745    $     17,418

COST OF REVENUES                                             --          33,149
                                                   ------------    ------------

   GROSS (LOSS) PROFIT                                   94,745         (15,731)

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES            246,863         256,198
                                                   ------------    ------------

   OPERATING (LOSS)                                    (152,118)       (271,929)

OTHER INCOME (EXPENSES)
  Interest expense                                      (25,725)        (32,010)
                                                   ------------    ------------

   TOTAL OTHER (EXPENSES) INCOME                        (25,725)        (32,010)

   LOSS BEFORE INCOME TAXES                            (177,843)       (303,939)

INCOME TAXES                                                 --              --
                                                   ------------    ------------

NET (LOSS)                                         $   (177,843)   $   (303,939)
                                                   ============    ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING           87,382,211      59,140,614

                                                   ============    ============

NET (LOSS)  PER SHARE (BASIC AND DILUTED)          $     (0.002)   $      (0.01)
                                                   ============    ============

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


                                       4
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
           For the Three Months Ended June 30, 2003, and June 30, 2002

<TABLE>
<CAPTION>
                                                                                 2003         2002
                                                                              ---------    ---------
<S>                                                                           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss)                                                                    $(177,843)   $(303,939)

Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation - amortization of
  deferred compensation                                                          21,718        5,000
Common stock reimbursement to shareholder                                         1,001           --

Depreciation and amortization                                                       144        4,806
Changes in operating assets and liabilities:
         Accounts receivable                                                         --          384
         Inventory                                                              (53,784)      32,189
         Other current assets                                                        --       (1,669)
         Security deposits                                                           --       47,695
         Accounts payable                                                       164,488       15,721
         Accrued expenses and taxes                                              41,404       78,089
                                                                              ---------    ---------
NET CASH (USED IN) OPERATING ACTIVITIES                                          (2,872)    (121,724)
                                                                              ---------    ---------

CASH FLOW FROM INVESTING ACTIVITIES                                                  --           --
                                                                              ---------    ---------

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from revolving note payable                                                 --      150,000
Proceeds from issuance of capital stock subscription                                 --       24,500
                                                                              ---------    ---------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                            --      174,500
                                                                              ---------    ---------
NET INCREASE(DECREASE) IN CASH                                                $ ( 2,872)   $  52,776

Cash and cash equivalents at the beginning of the period                         30,403       93,799
                                                                              ---------    ---------
Cash and cash equivalents at the end of the period                            $  27,531    $ 146,575
                                                                              =========    =========

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest                                      $      --    $      --

Income taxes paid                                                                    --           --
Amortization of deferred compensation                                            21,718        5,000

</TABLE>


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


                                       5
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE A - SUMMARY OF ACCOUNTING POLICIES

General

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America for interim financial information. Accordingly, they do
not  include  all  of the  information  and  footnotes  required  by  accounting
principles  generally  accepted  in the United  States of America  for  complete
financial statements. In the opinion of management,  all adjustments (consisting
of  normal  recurring  accruals)  considered  necessary  in  order  to make  the
financial  statements not misleading  have been included.  Results for the three
months ended June 30, 2003 are not  necessarily  indicative  of the results that
may be  expected  for the  fiscal  year  ending  March  31,  2004.  For  further
information refer to the consolidated financial statements and footnotes thereto
included in the Phlo Corporation and Subsidiaries'  annual report on Form 10-KSB
for the year ended March 31, 2003.

Business and Basis of Presentation

Phlo Corporation,  a Delaware corporation incorporated in December 1995, and its
affiliates  (hereinafter  collectively  referred  to  as  the  "Company")  is  a
manufacturer  of beverages and liquids  containing  patented and  patent-pending
biotechnologies,  liquids with patented or patent-pending  payloads for the U.S.
Military,  agencies of the United Nations, and humanitarian  organizations.  The
Company is  positioned  as a  biotechnology  company  which is using high volume
distribution networks to commercialize its technology.  Central to the Company's
strategic  development  plan is the  development,  acquisition  and/or exclusive
licensing of  proprietary  technology,  nutraceutical,  biotechnological  and/or
pharmaceutical  in  nature,  which  the  Company  initially  plans to  convey to
consumers  through the use of liquid  formulations  and  beverage  systems.  The
Company is focusing its  technology  acquisition  efforts on those  technologies
related to preventing or ameliorating cancer, reducing the effects of aging, and
enhancing  cognition  and  personal   performance.   The  Company  is  currently
conducting  discussions with major companies  related to the distribution of the
Company's products or joint ventures pertaining to the Company's  technology and
products related thereto.

The consolidated  financial  statements  include the accounts of the Company and
its majority owned subsidiaries and affiliates.

Stock Based Compensation

In December  2002,  the FASB issued SFAS No. 148,  "Accounting  for  Stock-Based
Compensation-Transition and Disclosure-an amendment of SFAS 123." This statement
amends SFAS No.  123,  "Accounting  for  Stock-Based  Compensation,"  to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee  compensation.  In addition,  this
statement  amends  the  disclosure  requirements  of  SFAS  No.  123 to  require
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results.

The Company has chosen to continue to account for stock-based compensation using
the  intrinsic  value  method  prescribed  in APB  Opinion  No.  25 and  related
interpretations. Accordingly, compensation expense for stock options is measured
as the excess,  if any, of the fair market value of the  Company's  stock at the
date of the grant over the exercise price of the related option. The Company has
adopted  the  annual  disclosure  provisions  of SFAS No.  148 in its  financial
reports for the year ended March 31, 2003 and will adopt the interim  disclosure
provisions  for its financial  reports for the subsequent  periods.  The Company
does not  have any  awards  of  stock-based  employee  compensation  issued  and
outstanding at June 30, 2003.

New Accounting Pronouncements

In November 2004, the Financial  Accounting  Standards  Board (FASB) issued SFAS
151,  Inventory  Costs-- an amendment of ARB No. 43,  Chapter 4. This  Statement
amends the guidance in ARB No. 43,  Chapter 4,  "Inventory  Pricing," to clarify
the accounting for abnormal amounts of idle facility expense,  freight, handling
costs,  and  wasted  material  (spoilage).  Paragraph  5 of ARB 43,  Chapter  4,
previously  stated  that ". . . under  some  circumstances,  items  such as idle
facility expense,  excessive spoilage,  double freight, and rehandling costs may
be so abnormal as to require  treatment as current period  charges.  . . ." This
Statement  requires  that those items be recognized  as  current-period  charges
regardless  of whether they meet the  criterion of "so  abnormal."  In addition,
this Statement  requires that  allocation of fixed  production  overheads to the
costs  of  conversion  be  based  on  the  normal  capacity  of  the  production
facilities.  This  Statement is effective for inventory  costs  incurred  during
fiscal  years  beginning  after June 15, 2005.  Management  does not believe the
adoption  of this  Statement  will  have any  immediate  material  impact on the
Company.

In  December  2004,  the FASB issued SFAS  No.152,  "Accounting  for Real Estate
Time-Sharing Transactions--an amendment of FASB Statements No. 66 and 67" ("SFAS
152) The amendments  made by Statement 152 This Statement  amends FASB Statement
No.  66,  Accounting  for  Sales of Real  Estate,  to  reference  the  financial
accounting and reporting guidance for real estate time-sharing transactions that
is  provided in AICPA  Statement  of Position  (SOP) 04-2,  Accounting  for Real
Estate Time-Sharing Transactions.  This Statement also amends FASB Statement No.
67,  Accounting for Costs and Initial Rental Operations of Real Estate Projects,
to state that the guidance for (a) incidental


                                       6
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE A - SUMMARY OF ACCOUNTING POLICIES (Continued)

New Accounting Pronouncements

operations and (b) costs incurred to sell real estate projects does not apply to
real estate time-sharing  transactions.  The accounting for those operations and
costs is subject to the guidance in SOP 04-2.  This  Statement is effective  for
financial statements for fiscal years beginning afterJune 15, 2005. with earlier
application encouraged.  The Company does not anticipate that the implementation
of this standard will have a material impact on its financial position,  results
of operations or cash flows.

On  December  16,  2004,  the  Financial  Accounting  Standards  Board  ("FASB")
published  Statement of Financial  Accounting  Standards No. 123 (Revised 2004),
Share-Based  Payment ("SFAS 123R").  SFAS 123R requires that  compensation  cost
related to  share-based  payment  transactions  be  recognized  in the financial
statements.  Share-based  payment  transactions  within  the  scope of SFAS 123R
include stock options,  restricted stock plans,  performance-based awards, stock
appreciation  rights,  and employee share purchase plans. The provisions of SFAS
123R are  effective  as of the first  interim  period that begins after June 15,
2005. Accordingly,  the Company will implement the revised standard in the third
quarter of fiscal year 2005. Currently, the Company accounts for its share-based
payment  transactions under the provisions of APB 25, which does not necessarily
require  the  recognition  of  compensation  cost in the  financial  statements.
Management is assessing the  implications  of this revised  standard,  which may
materially  impact the  Company's  results of operations in the third quarter of
fiscal year 2005 and thereafter.

On December 16, 2004, FASB issued  Statement of Financial  Accounting  Standards
No. 153,  Exchanges of Nonmonetary  Assets,  an amendment of APB Opinion No. 29,
Accounting for Nonmonetary Transactions (" SFAS 153"). This statement amends APB
Opinion 29 to  eliminate  the  exception  for  nonmonetary  exchanges of similar
productive  assets and  replaces it with a general  exception  for  exchanges of
nonmonetary assets that do not have commercial  substance.  Under SFAS 153, if a
nonmonetary  exchange of similar productive assets meets a  commercial-substance
criterion and fair value is determinable,  the transaction must be accounted for
at fair  value  resulting  in  recognition  of any  gain or  loss.  SFAS  153 is
effective for  nonmonetary  transactions in fiscal periods that begin after June
15,  2005.  The Company  does not  anticipate  that the  implementation  of this
standard  will have a  material  impact on its  financial  position,  results of
operations or cash flows.

Reclassifications

Certain reclassifications have been made in prior year's financial statements to
conform to classifications used in the current year.

NOTE B - REVOLVING CREDIT FACILITY

In June,  2002, the Company closed a revolving  credit  facility with a one-year
term  which  provides  for  advances  of up to a  maximum  principal  amount  of
$250,000,  at the option of the lender,  at an  interest  rate of 10% per annum,
with each advance  payable  within 30 days.  An initial  advance was made in the
amount of  $150,000  and,  in February  2003,  a second  advance was made in the
amount  of  $70,000.  Repayment  of  advances  under the  facility  and a fee of
$150,000  charged  by the lender are  secured  by the  Company's  assets and are
guaranteed  by two  officers of the Company.  In  connection  with  securing the
repayment of the two advances under this facility, the Company issued a total of
11,700,000 shares of Common Stock. The Company did not repay the advances by the
maturity date. As a result thereof, the lender has exercised its rights provided
by the loan  documents to sell shares of stock that were  pledged as  collateral
for the repayment of advances  pursuant to the credit  facility.  As of June 30,
2003 the sale of collateral has reduced the outstanding principal to $129,701.

NOTE C - NOTES PAYABLE

Notes payable as of June 30, 2003 consist of the following:

<TABLE>
<S>                                                                                                                        <C>
  Note payable with interest rate of 15% per annum. The note matured on May, 2003. The holder has agreed to extend
  the maturity date of the note to June 30, 2006.                                                                          $ 80,000

  Note payable with interest at a rate of 10%. The note matured on December 31, 2000, when principal and unpaid
  interest were due. In consideration of this loan and two prior bridge loans, the Company agreed to issue shares of
  the Company's common and convertible preferred stock to the holder representing approximately 200,000 shares of
  common stock on a fully converted basis. The holder has agreed to extend the maturity date of the note to June 30,
  2006.                                                                                                                     104,000

  Note payable in the original principal amount of $25,000 with interest at a rate of 10% per annum. The Note matured
  on July 2, 1999, when principal and unpaid interest was due. The note is currently in default, although partial
  payment has been made subsequent to the maturity date. No action has been taken against the Company to enforce the
  note. In connection with the note, the Company issued a warrant to purchase 5,000 shares of common stock at an
  exercise price of $0.04 per share.                                                                                         17,500
</TABLE>


                                       7
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE C - NOTES PAYABLE (Continued)

<TABLE>
<S>                                                                                                                         <C>
  (Continued)
  Note payable with interest accruing at a rate of 10%. Principal and interest were due in February 2001. In
  conjunction with this financing, the Company issued a warrant to purchase 200,000 shares of common stock at a
  exercise price of $0.50 per share. The holder agreed to extend the maturity date of the note to June 30, 2006.            100,000

  Note payable with interest at a rate of 10% per annum. Principal and interest were due in November 2000. In
  conjunction with this financing, the Company issued a warrant to purchase 300,000 shares of common stock at a
  exercise price of $0.50 per share. The Company, at its option, may pay the Note in common stock or equivalent. The        150,000
  Company has notified the holder that it has elected to pay the principal and interest due under the note by the
  issuance of 136,612 shares of common stock.

  Note payable with interest accruing at a rate of 10% per annum. Principal and interest were due in June 2001. In
  conjunction with this financing, a warrant to purchase 50,000 shares of common stock at an exercise price of $0.50
  per share is issuable to this holder. The note holder has agreed to extend the maturity date of the note to June
  30, 2006 and in connection therewith, the Company has agreed to issue a warrant to purchase 25,000 shares of common
  $50,000 stock at an exercise price of $0.50 per share.                                                                     50,000

  Note payable in the original principal amount of $100,000, with an interest rate of 10% per annum. Principal and
  interest were due in July 2001. $50,000 of the loan was repaid in May, 2001. In conjunction with this financing, a
  warrant to purchase 100,000 shares of common stock at an exercise price of $0.50 per share is issuable to the
  holder. An additional warrant to purchase 12,500 shares of the Common Stock at the same exercise price is issuable
  as a result of the Company's exercising its option to extend to October 2001 the maturity date of the note with
  respect to $50,000 of principal and all of the interest payable pursuant to the note. The holder has agreed to
  extend the maturity date of the note to June 30, 2006.                                                                     50,000

  In April, 2001, the Company was loaned $40,000. A promissory note has not yet been issued, as that amount was only
  a partial funding of the transaction. The note will provide an interest rate of 10% and a term of 120 days. A
  warrant will be issuable in conjunction with this financing, however, the amount of shares of common stock
  purchasable pursuant to the warrant will be determined once the full amount of the financing is established.               40,000
                                                                                                                             ------
  Total                                                                                                                   $ 591,500
  Less: current portion                                                                                                    (591,500)
                                                                                                                          ---------
  Long-term portion                                                                                                       $      --
                                                                                                                          =========
</TABLE>

NOTE D - CAPITAL STOCK

The Company has authorized  15,000,000  shares of preferred stock,  with 500,000
shares  designated  as Series A  convertible  preferred  stock with par value of
$.0001 per share;  and 500,000  shares  designated  as Series B  non-convertible
preferred  stock  with par value of  $0.0001  per share;  and  3,000,000  shares
designated as Series C convertible  preferred stock with par value of $.0001 per
share. The Company also has authorized  250,000,000  shares of common stock with
par value $0.0001 per share. As of June 30, 2003, the Company has 500,000 shares
of  Series  A  convertible  preferred  stock,   1,333,304  shares  of  Series  C
convertible  preferred stock,  and 94,695,275  shares of common stock issued and
outstanding.  The Company has no Series B non-convertible preferred stock issued
and outstanding at June 30, 2003.

During the period  ended June 30,  2003,  the  Company  issued an  aggregate  of
938,761 shares of Common Stock which were previously  subscribed.  Additionally,
the  Company  issued an  aggregate  of  10,013,334  shares  of  Common  Stock to
shareholders  as  reimbursement  for common shares the  shareholders  previously
owned,  pledged as collateral for the Company's  revolving credit line (Note B),
and  subsequently  used to repay the  outstanding  principal  of the  loan.  The
Company charged to operations the reimbursement  common shares issued at its par
value during the period ended June 30, 2003.


                                       8
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE E - STOCK OPTIONS AND WARRANTS

Stock Options

As of February 19, 2003, the Company had determined that the prior management
did not validly (under the applicable provisions (including Section 157) of the
General Corporation Law of the State of Delaware) issue any of the options to
purchase an aggregate of 1,613,333 shares of Common Stock which it had
purportedly issued, and that, pursuant to Delaware law, these options are void.
Therefore, the Company has removed such options from its records and shall not
issue any shares of Common stock under such void options.

Warrants

The  following  table  summarizes  the changes in warrants  outstanding  and the
related  prices  for  the  shares  of  the  Company's  common  stock  issued  to
non-employees  of the  Company.  These  warrants  were  granted  in lieu of cash
compensation for services performed or  non-compensatory  warrants in connection
with financing activities.

                                        9
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE E - STOCK OPTIONS AND WARRANTS (Continued)

Warrants (Continued)

<TABLE>
<CAPTION>

                              Warrants Outstanding                                 Warrants Exercisable
                              --------------------                                 --------------------
                                       Weighted Average        Weighed                           Weighted
                        Number       Remaining Contractual     Average           Number           Average
 Exercise Prices      Outstanding        Life (Years)       Exercise Price    Exercisable      Exercise Price
 ---------------      -----------        ------------       --------------    -----------      --------------
<C>                         <C>                  <C>      <C>                        <C>        <C>
$          2.00             50,000               3.00     $         2.00             50,000     $        2.00
      0.10~0.50          2,841,619               4.00               0.34          2,846,619              0.34
           0.09          1,000,000               7.00               0.09          1,000,000              0.09
     0.04~0.058          2,605,000               5.00              0.058          2,600,000             0.058
           0.03         33,629,487               5.00               0.03         33,629,487              0.03
                    --------------     --------------     --------------     --------------     -------------
                        40,126,106               4.98     $         0.06         40,126,106     $        0.06
                    ==============     ==============     ==============     ==============     =============

</TABLE>

Transactions involving warrants are summarized as follows:

                                                     Weighted Average
                                 Number of Options    Price Per Share
                                 -----------------    ---------------
Outstanding at April 1, 2001           8,291,604      $        0.15
   Granted                            33,426,265               0.04
   Exercised                          (5,870,426)              0.13
   Cancelled or expired                       --                 --
                                  --------------      -------------
Outstanding at March 31, 2002         35,847,443      $        0.05
                                  ==============      =============
   Granted                             5,280,000               0.06
   Exercised                                  --                 --
   Cancelled or expired               (1,001,337)              0.50
                                  --------------      -------------
Outstanding at March 31, 2003         40,126,106      $        0.06
                                  ==============      =============
   Granted                                    --                 --
   Exercised                                  --                 --
   Cancelled or expired                       --                 --
                                  --------------      -------------
Outstanding at June 30, 2003          40,126,106      $        0.06
                                  ==============      =============


The Company did not grant any compensatory  warrants to non-employees during the
period ended June 30, 2003 and 2002.  Amortization of deferred  compensation for
previously  granted  warrants  issued in  exchange  for  prepaid  services  fees
amounted  $21,718  and  $5,000  for the  period  ended  June 30,  2003 and 2002,
respectively.

NOTE F - COMMITMENTS AND CONTINGENCIES

Loan Guarantee

Phlo  Corporation  is a guarantor of a loan  obtained by an  unrelated  party in
connection  with a purchase  agreement.  In  addition,  payments of the loan are
secured by the Company's assets.  The amount outstanding on the loan at June 30,
2003 was  approximately  $65,000.  Payment  of the loan is  secured by shares of
common stock owned by the unrelated  party. The holder of the loan has initiated
legal action  against the primary  obligor and Phlo  Corporation  as  guarantor,
claiming outstanding  principal,  interest and late fees in the aggregate amount
of  approximately  $105,000.  The  Company  believes  that it no longer  has any
liability  under the  guaranty  as a result of the actions or  inactions  of the
lender,  including  the  lender's  failure to  mitigate  its  damages by selling
collateral  pledged  by the  primary  obligor  at a time  when the value of such
collateral exceeded all amounts due.

                                       10
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE F - COMMITMENTS AND CONTINGENCIES (Continued)

Litigation

The Company is involved in  litigation  with a note holder with respect to which
an appeal is  pending  in  federal  court.  The note  holder  obtained a summary
judgment  against the Company in the amount of the  principal  and  interest due
under the note. The Company appealed the decision and posted an appeal bond with
respect thereto, but did not prevail on appeal. This judgment has been satisfied
in full through payment pursuant to the appeal bond.  Additionally,  the Company
filed an action in federal  court  against the note  holder.  The U.S.  District
Court  granted  the  defendants'  motion  for  summary  judgment  related to the
pleading of the causes of action and has required  the Company to issue  391,229
shares of common  stock to the  holder  related  to  previously-issued  cashless
warrants.  The Company  believes that the federal court had no  jurisdiction  to
order the  issuance  of shares and that the order  compelling  the  issuance  of
shares was unlawful and contrary to applicable federal and state law. Therefore,
the Company appealed the decision to the U.S. Court of Appeals, which upheld the
district  court's  decision after failing to give the Company notice of the date
for oral argument of the appeal. The Company has filed a disciplinary  complaint
against the district court judge for what it believes is the judge's  misconduct
in this case.

The Company is involved in  litigation  related to an  agreement it entered into
for investment  banking services.  The Company executed a promissory note in the
principal  amount  of  $500,000  which  represents  a bridge  loan as part of an
agreement  by an  investment  banking  firm to provide at least $2.5  million in
financing.  The  financing  did not  occur.  The  bridge  note  holder  sued for
equitable relief, claiming that it is due a warrant to purchase 1 million shares
of the Company's common stock. The Company disputes any obligation to issue such
warrant. Pursuant to the terms of the note, the Company issued a warrant in full
payment of the principal and interest thereunder. Although the Company initially
appeared in the action, it subsequently suffered a default judgment. The Company
believes  that it has grounds to bring a separate  action  against the  judgment
creditor (which has gone out of business) and related persons and entities.

The Company was involved in litigation with a former officer and director of the
Company. The former officer and director claimed,  among other things, breach of
contract based on his allegation  that he had exercised  options to purchase the
Company's Common Stock but that the Company had not issued the Common Stock. The
U.S.  District Court found that he had not properly  exercised his options.  The
former officer and director again attempted to exercise,  then filed an order to
show cause why the Company  should not be held in contempt  for failing to issue
shares of stock,  and the  District  Court again found that he had not  properly
exercised his options. The former officer and director attempted to exercise his
options yet a third time and filed  another  order to show cause why the Company
should not be held in  contempt  for failing to issue  shares of stock.  After a
full briefing of the legal issues, the former officer and director has withdrawn
his motion (order to show cause). The Company believes, based on new information
that has come to its  attention,  that the options  issued to the former officer
and director  (which were issued by former  management of the Company) are void.
The Company also  believes  that it has  substantial  claims  against the former
officer  and  director,  which  it will  pursue  at the  appropriate  time if it
determines  the  prosecution  of such  claims to be in the best  interest of the
Company and its shareholders.

With  respect to  approximately  $159,999  which is  currently  reflected  as an
accounts payable of the Company, the Company will vigorously dispute such amount
and shall assert certain claims  against the account  creditor.  The Company has
been informed by counsel to the account  creditor that the account  creditor has
obtained a default  judgment  in the amount of such  payable.  The  Company  has
received  no notice of the  judgment,  did not  receive  proper  service  of the
initial  complaint,  and  believes  that the default  judgment  (if any) was not
properly  obtained.  The Company will seek to set aside the default judgment and
assert (as  counterclaims)  claims  against the creditor in an aggregate  amount
significantly  greater  than the payable  reflected on the  Company's  financial
statements.

The Company is a party to certain  other legal  matters  arising in the ordinary
course of  business.  Management  believes  the  ultimate  disposition  of these
matters and the matter referred to above will not have a material adverse effect
on the Company's financial position or results of operations.

NOTE G - SUBSEQUENT EVENTS

Organization

On July 10, 2003, the Company announced its intension to spin-off the portion of
its  business   that  involves  the   development   and   commercialization   of
biotechnologies  capable of being  incorporated  into primarily  liquid products
(for oral  consumption) and foods, the  manufacturing  and marketing of products
resulting therefrom, and the licensing or sublicensing of other biotechnologies.
The  Company   anticipates  that  the  spin-off  will  be  accomplished  by  the
distribution to Company  shareholders of capital stock of an affiliated company.
In connection with its intention,  the Company has engaged in efforts  regarding
the identification of suitable  intellectual  property,  the evaluation thereof,
and the  valuation  thereof.  The Company  still  intends to pursue the spin-off
process when the required preliminary steps are completed.

                                       11

<PAGE>


                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2003

NOTE F - COMMITMENTS AND CONTINGENCIES (Continued)

Financing

In June,  2004,  an additional  advance was made under the  Company's  revolving
credit facility in the amount of $100,000. In conjunction therewith, the Company
issued  2,000,000  shares of Common  Stock which serve as  collateral  to secure
repayment of advances  made to the Company under the facility and the meeting of
all  obligations  of the Company  under the  facility  loan  documents.  Also in
connection  with such  advance,  the  Company  granted to the Lender the option,
after the expiration of a period of one year from such advance, to take title to
1,785,715 shares (or any portion thereof) of such stock collateral.

In the quarter  ended June 30,  2004,  the Company  issued  3,500,000  shares of
Common  Stock in  exchange  for the  conversion  by a debt  holder of $46,000 of
accrued  interest  and  the  waiver  of a  financing  fee of  $150,000  owed  in
connection with a prior advance.

In January,  2005, an additional advance was made under the Company's  revolving
credit facility in the amount of $40,000. In conjunction therewith,  the Company
issued  3,500,000  shares of Common  Stock which serve as  collateral  to secure
repayment of advances  made to the Company under the facility and the meeting of
all  obligations  of the Company  under the  facility  loan  documents.  Also in
connection  with such  advance,  the  Company  granted to the Lender the option,
after the expiration of a period of one year from such advance, to take title to
1,212,121 shares (or any portion thereof) of such stock collateral.

In April,  2005,  an  additional  advance  was  authorized  under the  Company's
revolving credit facility of up to $150,000,  $90,000 of which has been advanced
as of the date of this filing.  In  conjunction  therewith,  the Company  issued
13,700,000  shares of Common Stock which serve as collateral to secure repayment
of  advances  made to the  Company  under the  facility  and the  meeting of all
obligations of the Company under the facility loan documents. Also in connection
with such  advance,  the  Company  granted to the Lender the  option,  after the
expiration of a period of one year from such advance, to take title to 4,600,000
shares (or any portion  thereof) of such stock  collateral and agreed to deliver
to the Lender,  until such advance has been repaid, net proceeds received by the
Company generated by the sale of its rehydration beverage of up to $50,000.

Equity

In July,  2003,  the Company  issued  666,667 shares of Common Stock in order to
fulfill its obligations pursuant to an agreement.

In the quarter ended September 30, 2003, the Company issued 25,333,333 shares of
Common  Stock  in order to  fulfill  its  obligations  pursuant  to an  existing
agreement.

In the quarter ended December 31, 2003, the Company issued  12,000,000 shares of
Common  Stock  in order to  fulfill  its  obligations  pursuant  to an  existing
agreement.

In the quarter ended March 31, 2004,  the Company  issued  18,666,667  shares of
Common  Stock  in order to  fulfill  its  obligations  pursuant  to an  existing
agreement.

In the quarter ended March 31, 2004, in consideration  of $505,000,  the Company
issued 43,766,667 shares of Common Stock.

In June, 2004, in connection with a financing and in consideration of guarantees
and supplying of shares of stock as collateral  in connection  with  financings,
the Company issued 1,000,300 shares of Common Stock to officers of the Company.

In the quarter ended June 30, 2004, in  consideration  of $300,000,  the Company
agreed to issue 4,400,000 shares of Common Stock, 4,100,000 shares of which have
been issued to date.

In September  2004,  the Company  issued  3,100,000  shares of Common Stock to a
shareholder  upon his  conversion  of  31,000  shares  of  Series C  Convertible
Preferred Stock.

In October  2004,  in  consideration  of $50,000,  the  Company  agreed to issue
1,333,333 shares of Common Stock, none of which have been issued to date.

In the quarter ending March 31, 2005, in consideration  of $35,000,  the Company
issued 1,750,000 shares of Common Stock.

In the quarter  ending March 31, 2005,  in  connection  with a financing  and in
consideration  of  guarantees  and supplying of shares of stock as collateral in
connection with financings,  the Company issued 1,750,525 shares of Common Stock
to officers of the Company.

                                       12
<PAGE>

In the quarter  ending March 31, 2005, the Company  issued  7,500,750  shares of
Common Stock in connection with the provision of services related to the further
development  and  enhancement of its  intellectual  property.  All valuations of
common stock issued for services were based upon value of the services rendered,
which did not  differ  materially  from the fair value of the  Company's  common
stock during the period the services were rendered.

During February through April,  2005, in  consideration of $60,000,  the Company
issued 4,000,000 shares of Common Stock and agreed to issue warrants to purchase
250,000 shares of Common Stock at an exercise  price per share of $0.02.  In the
quarter   ending  June  30,  2005,  in  connection   with  a  financing  and  in
consideration  of  guarantees  and supplying of shares of stock as collateral in
connection with financings,  the Company issued 6,852,055 shares of Common Stock
to officers of the Company.

Item 2.

PHLO CORPORATION
MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

SAFE HARBOR STATEMENT

The  Company  has  made,  and may  continue  to  make,  various  forward-looking
statements with respect to its financial position,  business strategy, and plans
and objectives of management.  Such forward-looking statements are identified by
the use of forward-looking phrases such as "anticipates",  "intends", "expects",
"plans",  "believe",  "estimates",  or words or phrases of similar import. These
forward-looking  statements  are subject to  numerous  assumptions,  risks,  and
uncertainties,  and the  statements  looking  forward beyond 2002 are subject to
greater uncertainty because of the increased likelihood of changes in underlying
factors and  assumptions.  Actual  results  could differ  materially  from those
anticipated by the forward-looking statements.

The  Company's  forward-looking  statements  represent  its judgment only on the
dates such statements are made. By making any  forward-looking  statements,  the
Company assumes no duty to update them to reflect new, changed, or unanticipated
events or circumstances.

OVERVIEW

The following  discussion of the  Company's  financial  condition as of June 30,
2003 and results of  operations  for the  quarters  ended June 30, 2003 and 2002
includes Phlo Corporation and its affiliates  (collectively,  the "Company") and
should  be  read  in  conjunction  with  the  condensed  consolidated  financial
statements and notes appearing elsewhere in this 10-QSB.

RECENT DEVELOPMENTS

The  Company was  granted a patent on its  VEP/PPC  technology.  The Company has
licensed  VEP/PPC  on an  exclusive  basis,  worldwide,  for all uses  including
nutraceutical,  biotechnological,  and pharmaceutical. The VEP/PC technology has
been shown to be effective in repairing  cell damage in all human tissues and in
protecting cells from damage related to oxidative stress and exposure to toxins.
Cell injury  related to  oxidative  stress is  associated  with  aging,  cancer,
emphysema,  heart disease,  Alzheimer's  disease,  alcoholic liver disease,  and
drug-induced  tissue injury.  The Company  believes that, with clinical  trials,
VEP/PPC may have applications for treating such diseases.

During the fiscal  quarter ended June 30, 2003,  further tests were completed by
some of the world's top  scientists in the  rehydration  field  confirming  that
Aquis is superior to current  solutions  formulated in accordance with the World
Health  Organization's most advanced  specifications.  Tests were conducted by a
team of scientists at the  International  Center for Diarrheal Disease Research,
Bangladesh  ("ICDDRB") and demonstrate that the use of Aquis results in superior
and faster absorption of both electrolytes and water as compared with the use of
other leading oral rehydration solutions in the world,  including those based on
the World Health Organization's most advanced specifications. These results have
been  presented at two of the most highly  regarded  conferences in the world in
the field of rehydration, the American  Gastroenterological  Association meeting
in New  Orleans,  May 15,  2004  and the 10th  Asian  Conference  on  Diarrhoeal
Diseases and Nutrition (10th ASCODD) in Dhaka, Bangladesh (December,  7-9 2003).
Additionally,  Aquis has a superior taste which is conducive to increased  fluid
intake  by those  drinking  it.  The  ICDDRB  pioneered  the  discovery  of oral
rehydration solutions and recently received the Gates Award for Global Health in
recognition of this contribution.

During the fiscal  quarter  ended  June 30,  2003,  the  Company  continued  its
marketing  efforts with respect to its  recently-commercialized  Oesis  Personal
Performance  Spray Products.  Oesis Personal  Performance Spray Products contain
the   Company's   patented   Vitamin   E   phosphate/polyenylphosphatidylcholine
("VEP/PPC")  preparation and the Company's  biologically  active  micro-particle
delivery system,  delivered through 1-ounce sprays. Oesis Spray Products provide
cellular  membrane repair and protection from toxicants while creating focus and
mental alertness without the secondary depression.  Although, during this fiscal
quarter,  the Company  gained  approval for  distribution  of its Oesis Personal
Performance   Spray  Products   throughout  the  Eastern  United  States,  in  a
distribution  system  involving  over 15,000  customers in the United States and
Canada, the Company  determined that the technology  contained in Oesis would be
better suited for purchasers  more  concerned  about  maintaining  top levels of
performance for extended periods, such as the U.S. Military.

                                       13
<PAGE>

In May, 2001, Coca-Cola Hondo, Inc. and its affiliates  (Coca-Cola  Hondo)(which
signed an  agreement  with the  Company in December  2000 to sell the  Company's
products in the entire  Coca-Cola  Hondo  distribution  territory  consisting of
Illinois, Wisconsin,  Michigan, and parts of Indiana, Ohio, Pennsylvania and New
York) and Coca-Cola  Enterprises (CCE), the master distributor on a global basis
of all of The Coca-Cola  Company's beverage products,  announced the acquisition
of  Coca-Cola  Hondo  by  CCE.  On  a  short-term  basis,  the  Coca-Cola  Hondo
acquisition by CCE caused the full execution of the Company's launch of its ZO -
Vital Cell Defense beverage line to be suspended indefinitely, and the Company's
revenue was significantly adversely affected as a result thereof. Initially, CCE
requested  that the Company  change the  packaging  of its  beverages to plastic
bottles to enable CCE to sell the  Company's  beverages in all CCE  distribution
segments  (including in vending  machines) and desired to re-launch the beverage
line in the new plastic bottles.  Extended  negotiations by the Company with CCE
and The Coca-Cola  Company (CCC)  regarding a joint effort,  followed by a major
management overhaul at CCC, prolonged the delay. CCE has recently requested that
the Company  propose a joint venture between the Company and CCC to be sponsored
by  CCE  involving  the  Company's  beverage  technologies  and  products.   The
manufacture and sale of ZO will remain suspended pending this process.

The Company has no  assurances  that any joint  venture  will result from such a
proposal or, if such a transaction  were consummated with CCC, of the success of
the venture.

On July 10, 2003, the Company announced its intension to spin-off the portion of
its  business   that  involves  the   development   and   commercialization   of
biotechnologies  capable of being  incorporated  into primarily  liquid products
(for oral  consumption) and foods, the  manufacturing  and marketing of products
resulting therefrom, and the licensing or sublicensing of other biotechnologies.
The  Company   anticipates  that  the  spin-off  will  be  accomplished  by  the
distribution to Company  shareholders of capital stock of an affiliated company.
In connection with its intention,  the Company has engaged in efforts  regarding
the identification of suitable  intellectual  property,  the evaluation thereof,
and the  valuation  thereof.  The Company  still  intends to pursue the spin-off
process when the required preliminary steps are completed.

The Company  believes that the proposed  spin-off will provide  greater value to
shareholders  by creating two public  corporate  entities that focus on separate
scientific  platforms and businesses.  In addition,  the spin-off will allow the
management of each company to better focus on the  individual  businesses of the
respective companies and facilitate the establishment of executive  compensation
that is  more  closely  tied to the  performance  of each  individual  company's
results.  Finally,  the Company believes that the proposed spin-off will enhance
each company's access to financing.

RESULTS OF OPERATIONS

The  Company's  revenues  increased  by $77,327 to $94,745  for the three  month
period  ended June 30,  2003,  as  compared to revenues of $17,418 for the three
month period ended June 30, 2002. There was no cost of sales for the three month
period  ended June 30,  2003,  as compared to $33,149 for the three month period
ended June 30, 2002, as the revenue  generated during the quarter ended June 30,
2003, resulted from the receipt of product  distribution rights fees rather than
from product sales.  The selling,  general and  administrative  expenses for the
three month period ended June 30, 2003 were $246,863 as compared to $256,198 for
the comparable three month period during 2002. The Company's  operating loss was
$152,118  for the three month  period ended June 30, 2003, a decrease of 44%, as
compared  with an  operating  loss of $271,929  for the three month period ended
June 30, 2002.

The  Company   focused  its  efforts   during  the  quarter  on  marketing   its
newly-commercialized  Oesis  Personal  Performance  Spray  Products,  which were
initially  manufactured  in March 2003, and in developing its marketing plan and
establishing  key  marketing  relationships  with  respect  to its  Aquis  Rapid
Response Rehydration beverages.

The Company's  proprietary  biotechnology base (including its  commercialization
and  manufacturing   capabilities  related  thereto),   the  products  generated
therefrom,  and the access to major  markets as a result  thereof  represent the
core of the Company's  business  plan,  which  emphasizes the building of major,
long-term  fundamental  value.  Although the process of executing  this business
plan  requires   significant  time,  the  Company  should  be  able  to  produce
significantly  greater positive operating results and greater  shareholder value
than would otherwise be possible.

LIQUIDITY AND CAPITAL RESOURCES

The Company's  working capital deficit  increased by $396,010 during the quarter
ended June 30, 2003, to  $3,354,587.  In addition,  the Company's  Stockholders'
Deficiency  increased from $2,957,156 to $3,100,866  during the same three month
period.

During the fiscal year ending  March 31, 2005 and beyond,  the Company is taking
steps to  reduce  or  eliminate  the  Stockholders'  Deficiency  and to create a
positive working capital  position.  The Company believes it is more likely than
in prior years to raise  substantial  equity  funds as a result of its  expanded
distribution  base,  the prospects for national and global  distribution  of its
products and joint venture  activities with major  international  entities,  the
existence now of three product lines  containing  commercialized  biotechnology,
the  prospects  for  numerous   additional   products  based  on  the  Company's
biotechnology   foundation,   and   significantly   increased   scientific   and
commercialization capabilities.  Finally, the Company has taken steps to convert
certain existing debts into equity and will continue to pursue these steps.

                                       14
<PAGE>

While  the  Company  has  raised  sufficient   capital  to  meet  its  operating
requirements in the past, additional financing is required in order to meet such
operating  requirements  in the future.  The Company can give no assurances that
the necessary funding will be completed or, if completed,  on terms favorable to
the Company.

There  can  be no  assurance  that  management's  plans  will  be  realized  and
therefore,  until the present conditions referred to above are either removed or
substantially  improved,  there is substantial doubt about the Company's ability
to continue as a going concern.

The Company's  independent  certified  public  accountants  have stated in their
report  included in the Company's  March 31, 2003 Form 10-KSB,  that the Company
has  incurred  operating  losses in the last two years,  and that the Company is
dependent upon  management's  ability to develop  profitable  operations.  These
factors among others may raise  substantial doubt about the Company's ability to
continue as a going concern.

Impact of Inflation

The Company does not believe that inflation has had a material adverse effect on
sales or income during the past periods.  Future  increases in supplies or other
operating costs could adversely affect the Company's  operations;  however,  the
Company  believes it could increase prices to offset increases in costs of goods
sold or other operating costs.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3.

CONTROLS AND PROCEDURES

      Disclosure  controls and procedures are controls and other procedures that
are  designed to ensure that  information  required to be disclosed by us in the
reports that we file or submit  under the  Exchange Act is recorded,  processed,
summarized and reported, within the time periods specified in the Securities and
Exchange  Commission's  rules and  forms.  Disclosure  controls  and  procedures
include,  without  limitation,  controls and procedures  designed to ensure that
information required to be disclosed by us in the reports that we file under the
Exchange Act is accumulated and  communicated  to our management,  including our
principal  executive  and financial  officers,  as  appropriate  to allow timely
decisions regarding required disclosure.

      Evaluation of Disclosure and Controls and Procedures. As of the end of the
period covered by this Quarterly Report,  we conducted an evaluation,  under the
supervision and with the  participation of our chief executive officer and chief
financial  officer,  of our  disclosure  controls and  procedures (as defined in
Rules  13a-15(e)  of the  Exchange  Act).  Based on this  evaluation,  our chief
executive  officer and chief  financial  officer  concluded  that our disclosure
controls and procedures are effective to ensure that information  required to be
disclosed  by us in reports  that we file or submit  under the  Exchange  Act is
recorded,  processed,  summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms.

      Changes in Internal Controls Over Financial Reporting. There was no change
in our internal  controls,  which are included  within  disclosure  controls and
procedures,   during  our  most  recently  completed  fiscal  quarter  that  has
materially affected,  or is reasonably likely to materially affect, our internal
controls.

                                     PART II

ITEM 1 LEGAL PROCEEDINGS

The Company is involved in  litigation  with a note holder with respect to which
an appeal is  pending  in  federal  court.  The note  holder  obtained a summary
judgment  against the Company in the amount of the  principal  and  interest due
under the note. The Company appealed the decision and posted an appeal bond with
respect thereto, but did not prevail on appeal. This judgment has been satisfied
in full through payment pursuant to the appeal bond.  Additionally,  the Company
filed an action in federal  court  against the note  holder.  The U.S.  District
Court  granted  the  defendants'  motion  for  summary  judgment  related to the
pleading of the causes of action and has required  the Company to issue  391,229
shares of common  stock to the  holder  related  to  previously-issued  cashless
warrants.  The Company  believes that the federal court had no  jurisdiction  to
order the  issuance  of shares and that the order  compelling  the  issuance  of
shares was unlawful and contrary to applicable federal and state law. Therefore,
the Company appealed the decision to the U.S. Court of Appeals, which upheld the
district  court's  decision after failing to give the Company notice of the date
for oral argument of the appeal. The Company has filed a disciplinary  complaint
against the district court judge for what it believes is the judge's  misconduct
in this case.

                                       15
<PAGE>

The Company is involved in  litigation  related to an  agreement it entered into
for investment  banking services.  The Company executed a promissory note in the
principal  amount  of  $500,000  which  represents  a bridge  loan as part of an
agreement  by an  investment  banking  firm to provide at least $2.5  million in
financing.  The  financing  did not  occur.  The  bridge  note  holder  sued for
equitable relief, claiming that it is due a warrant to purchase 1 million shares
of the Company's common stock. The Company disputes any obligation to issue such
warrant. Pursuant to the terms of the note, the Company issued a warrant in full
payment of the principal and interest thereunder. Although the Company initially
appeared in the action, it subsequently suffered a default judgment. The Company
believes  that it has grounds to bring a separate  action  against the  judgment
creditor (which has gone out of business) and related persons and entities.

The Company was involved in litigation with a former officer and director of the
Company. The former officer and director claimed,  among other things, breach of
contract based on his allegation  that he had exercised  options to purchase the
Company's Common Stock but that the Company had not issued the Common Stock. The
U.S.  District Court found that he had not properly  exercised his options.  The
former officer and director again attempted to exercise,  then filed an order to
show cause why the Company  should not be held in contempt  for failing to issue
shares of stock,  and the  District  Court again found that he had not  properly
exercised his options. The former officer and director attempted to exercise his
options yet a third time and filed  another  order to show cause why the Company
should not be held in  contempt  for failing to issue  shares of stock.  After a
full briefing of the legal issues, the former officer and director has withdrawn
his motion (order to show cause). The Company believes, based on new information
that has come to its  attention,  that the options  issued to the former officer
and director  (which were issued by former  management of the Company) are void.
The Company also  believes  that it has  substantial  claims  against the former
officer  and  director,  which  it will  pursue  at the  appropriate  time if it
determines  the  prosecution  of such  claims to be in the best  interest of the
Company and its shareholders.

With  respect to  approximately  $159,999  which is  currently  reflected  as an
accounts payable of the Company, the Company will vigorously dispute such amount
and shall assert certain claims  against the account  creditor.  The Company has
been informed by counsel to the account  creditor that the account  creditor has
obtained a default  judgment  in the amount of such  payable.  The  Company  has
received  no notice of the  judgment,  did not  receive  proper  service  of the
initial  complaint,  and  believes  that the default  judgment  (if any) was not
properly  obtained.  The Company will seek to set aside the default judgment and
assert (as  counterclaims)  claims  against the creditor in an aggregate  amount
significantly  greater  than the payable  reflected on the  Company's  financial
statements.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

In April, 2003, the Company issued an aggregate of 66,667 shares of Common Stock
to fulfill its obligations pursuant to an existing agreement. These transactions
were exempt from registration  pursuant to Section 4(2) of the Securities Act of
1933

In April through June,  2003,  the Company issued 938,761 shares of Common Stock
which  were  previously   subscribed.   These   transactions  were  exempt  from
registration pursuant to Section 4(2) of the Securities Act of 1933

In the quarter  ended June 30,  2003,  the Company  issued  9,946,667  shares of
Common  Stock  in order to  fulfill  its  obligations  pursuant  to an  existing
agreement.  These transactions were exempt from registration pursuant to Section
4(2) of the Securities Act of 1933

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        (a) None

ITEM 5. OTHER INFORMATION

        None

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<PAGE>

ITEM 6. EXHIBITS

                                   Signatures

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

                                Phlo Corporation

April 15, 2005                        By: /s/ James B. Hovis
                                          -------------------------------------
                                          James B. Hovis
                                          President and Chief Executive Officer

                                       17