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, 2004 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
September 16, 2005, is 281,066,784.
<PAGE>

                        PHLO CORPORATION AND SUBSIDIARIES

                     Quarterly Report on Form 10-QSB for the
                      Quarterly Period Ending June 30, 2004

                                Table of Contents

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

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheet as of
            June 30, 2004 (Unaudited)                                   3

         Condensed Consolidated Statements of Operations for the
         three months ended June 30, 2004 and 2003
         (Unaudited)                                                    4

         Condensed Consolidated Statements of Cash Flows for the
         three months ended June 30, 2004 and 2003
          (Unaudited)                                                   5

         Notes to Condensed Consolidated Financial Statements
         (Unaudited)                                                    6

Item 2.  Managements' Discussion and Analysis or Plan
         of Operation                                                   9

Item 3.  Controls and Procedures                                        10

PART II.  OTHER INFORMATION                                             10

Item 1.  Legal Proceedings                                              10

Item 2.  Changes in Securities                                          11

Item 3.  Exhibits
                                                                        11

Signature

Certifications


                                       2
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
                CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
                                  June 30, 2004

<TABLE>
<CAPTION>
                                     ASSETS
<S>                                                                         <C>
CURRENT ASSETS
   Cash                                                                     $    103,431
   Prepaid expense (Note D)                                                      641,323
                                                                            ------------
           Total Current Assets                                                  744,754

PROPERTY PLANT & EQUIPMENT, Net                                                    3,364
                                                                            ------------

TOTAL ASSETS                                                                $    748,118
                                                                            ============
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable                                                            $  1,040,601
Accrued expenses and taxes                                                     2,239,548
Notes payable, current portion                                                   207,500
Revolving credit line (Note B)                                                   100,000
                                                                            ------------

           Total Current Liabilities                                           3,587,649

NOTES PAYABLE, long-term portion                                                 384,000
                                                                            ------------
Total liabilities                                                              3,971,649
                                                                            ------------
COMMITMENTS AND CONTINGENCIES                                                         --

DEFICIENCY IN STOCKHOLDERS' EQUITY (Note C)

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
205,758,912 shares issued and outstanding                                         20,575
Common stock, $0.0001 par value, 15,486,199 shares subscribed                      1,548
Additional paid-in capital                                                    12,165,397
Accumulated deficit                                                          (15,411,235)
                                                                            ------------
           Total Deficiency in Stockholders' Equity                           (3,223,531)
                                                                            ------------
TOTAL LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY                    $    748,118
                                                                            ============
</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, 2004 and 2003

                                                   Three Months  Three Months
                                                 ------------------------------
                                                      2004             2003
                                                 -------------    -------------

REVENUES                                         $          --    $      94,745

COST OF REVENUES                                            --               --
                                                 -------------    -------------

   GROSS PROFIT                                             --           94,745

OPERATING COSTS AND EXPENSES
   General and Administrative                          280,321          246,863
   Research and Development                            108,617               --
                                                 -------------    -------------

   OPERATING LOSS                                     (388,938)        (152,118)
                                                 -------------    -------------
OTHER (EXPENSES)

  Financing Cost                                       (69,578)              --
  Interest expense                                     (16,065)         (25,725)
                                                 -------------    -------------

   TOTAL OTHER (EXPENSES)                              (85,643)         (25,725)
                                                 -------------    -------------
   LOSS BEFORE INCOME TAXES                           (474,581)        (177,843)

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

NET LOSS                                         $    (474,581)   $    (177,843)
                                                 =============    =============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING         196,247,623       87,382,211

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

NET LOSS PER SHARE (BASIC AND DILUTED)           $       (0.00)   $       (0.00)
                                                 =============    =============

   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, 2004 and 2003

                                                            2004         2003
                                                         ---------    ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                 $(474,581)   $(177,843)

Adjustments to reconcile net loss to net
  cash used in operating activities:
Stock-based compensation - amortization of
  deferred compensation                                         --       21,718
Common stock reimbursement to shareholder (Note C)          61,818        1,001
Common stock issued in exchange for other
  financing expense (Note B)                                 6,060           --
Depreciation and amortization                                  976          144

Changes in operating assets and liabilities:
         Prepaid expense                                  (241,323)          --
         Inventory                                              --      (53,784)
         Accounts payable                                    5,612      164,488
         Accrued expenses and taxes                         35,893       41,404
                                                         ----------------------
NET CASH USED IN OPERATING ACTIVITIES                     (605,545)      (2,872)
                                                         ----------------------

CASH FLOW FROM INVESTING ACTIVITIES
Purchase of equipment                                       (1,306)          --
                                                         ----------------------
NET CASH USED IN FINANCING ACTIVITIES                       (1,306)          --
                                                         ----------------------

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from revolving credit line (Note B)               100,000           --
Proceeds from sale and subscription of equity
 securities (Note C)                                       540,973           --
                                                         ----------------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                  640,973           --
                                                         ----------------------
NET INCREASE (DECREASE) IN CASH                          $  34,122    $  (2,872)

Cash and cash equivalents, beginning of the period          69,309       30,403
                                                         ----------------------
Cash and cash equivalents, end of the period             $ 103,431    $  27,531
                                                         ======================

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

Non-Cash Financing Activities:
  Common stock issued in exchange for accrued interest
    and accrued liabilities (Note B)                       207,345           --
  Common stock issued in exchange for revolving credit
    line (Note B)                                           48,045           --
  Common stock issued in exchange for other financing
    expense (Note B)                                         6,060           --

   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, 2004
                                   (Unaudited)

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, 2004 are not  necessarily  indicative  of the results that
may be  expected  for the  fiscal  year  ending  March  31,  2005.  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, 2004.

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. The Company sells its products to distributors, which offer the
products for sale in high volume chain stores, such as supermarkets and drug and
convenience stores. Additionally,  the Company develops 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.

New Accounting Pronouncements

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections  - A  Replacement  of APB Opinion No. 20 and FASB  Statement No. 3".
SFAS No. 154 changes the  requirements  with respect to the accounting  for, and
reporting of, a change in accounting principle. Previously, voluntary changes in
accounting principle were required to be recognized,  by including in net income
of the period of change, the cumulative effect of changing to the new accounting
principle.  SFAS No. 154  requires  retrospective  application  to prior  period
financial  statements,  unless  it is  impractical  to do so.  SFAS  No.  154 is
effective for accounting  changes and corrections of errors made in fiscal years
beginning  after December 15, 2005. The Company does not expect that adoption of
SFAS No. 154 will have a material impact on its financial statements.

Reclassifications

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

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.

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.


                                       6
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004
                                   (Unaudited)

Also in June  2004,  the  Company  issued  3,500,000  shares of Common  Stock in
exchange for the conversion by the Lender of $46,000 of accrued interest and the
waiver of the $150,000  financing fee owed in connection  with a prior  advance.
Additionally, 595,000 collateral shares, valued at $65,450 were used to pay down
$48,045 of debt and $11,345 of related accrued interest. Other financing expense
of $6,060 was charged to operations in connection with this transaction.

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  previously  issued and pledged as collateral for
the repayment of advances pursuant to the credit facility.  As of June 30, 2004,
the sale of collateral has reduced the outstanding principal to $100,000.

NOTE C - 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;  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, 2004, the Company has 500,000 shares
of  Series  A  convertible  preferred  stock,   1,333,304  shares  of  Series  C
convertible  preferred stock, and 205,758,912  shares of common stock issued and
outstanding.  The Company has no Series B non-convertible preferred stock issued
and outstanding at June 30, 2004.

In April  2004,  in  consideration  of  $240,973,  the  Company  agreed to issue
2,190,665 shares of stock. The common shares  subscribed have not been issued as
of June 30, 2004.

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  1,030,303 shares of Common Stock to officers of the Company.
These shares were valued at $61,818,  which  approximately the fair value of the
common stock at the time the shares were issued.

In the quarter ended June 30, 2004, in  consideration  of $300,000,  the Company
agreed to issue 5,000,000 shares of Common Stock, 4,100,000 shares of which have
been issued as of June 30, 2004.

NOTE D - PREPAID EXPENSE

In the fiscal year ended March 31, 2004,  the Company  entered into an agreement
with a  company  which is  providing  services  to the  Company  related  to the
enhancement  of the  Company's  biotechnologies,  including the  supervision  of
further  research and  development,  protocols,  and testing  pertaining  to the
enhancement and protection of the intellectual  property related thereto and the
commercialization,  production,  marketing  and  distribution  of  the  products
containing  such  biotechnologies.  In conjunction  therewith,  the Company made
payments  thereto  of  $400,000  during  the year  ended  March 31,  2004 and an
additional  $398,300 during the quarter ended June 30, 2004 to such company,  to
be used for the  activities  set forth above.  The Company has accounted for the
payment as a prepaid expense at June 30, 2004. Additionally,  the Company agreed
to pay to the other party two percent of net  revenues  generated by the sale of
products with respect to which the company provided services under the agreement
during  the term of the  agreement,  subject to  certain  limitations  set forth
therein.

During the current  three month  period,  the Company  charged  $156,977 of this
prepayment  to  operations  to reflect the services  rendered and the payment of
overhead related to the scientific development of the Company's technology.

NOTE E - COMMITMENTS AND CONTINGENCIES

Litigation

The Securities and Exchange  Commission  instituted  public  administrative  and
cease and desist proceedings  against Phlo Corporation  ("Phlo"),  its President
James B. Hovis,  and its Executive Vice  President,  Anne P. Hovis, on April 21,
2005,  alleging violations by Phlo Corporation related to certain transfer agent
regulations and related to the late filing of its required periodic reports.

In the quarter ended June 30, 2005, litigation was commenced against the Company
based on the liability of one of its affiliates. The Company vigorously defended
the action,  but, subsequent to the fiscal quarter, a judge turned over $103,431
of the Company to the creditor.  The Company's  counsel  believed that the judge
exceeded his authority  under law in ruling  against the Company on a procedural
basis prior to a decision  through trial on the merits.  The Company has filed a
complaint  against the judge for his  actions  and intends to seek  disciplinary
action against the creditor's lawyers.


                                       7
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004
                                   (Unaudited)

NOTE F - SUBSEQUENT EVENTS

Financing

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, $130,000 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 to collateralize the 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;  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; and
agreed to increase the interest rate with respect to the current advance and the
outstanding principal balance on prior advances from 10% to 12%.

Equity

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
1,515,152 shares of Common Stock, 333,333 of which have been issued to date.

In the quarter  ended 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 1,803,030 shares of Common Stock
to officers of the Company.

In the quarter  ended March 31, 2005,  the Company  issued  7,575,758  shares of
Common Stock in connection with the provision of services related to the further
development and enhancement of its intellectual property.

In the quarter ended March 31, 2005, in  consideration  of $60,000,  the Company
issued  5,000,000  shares of Common Stock  (4,700,000  which have been issued to
date) and agreed to issue warrants to purchase 250,000 shares of Common Stock at
an exercise price per share of $0.02.

In April 2005,  the Company  issued  454,545  shares of Common Stock  previously
subscribed.

In April 2005 in consideration  for extended payment terms relating to a Company
obligation,  the  Company  agreed to  extend  the  expiration  date of a warrant
granted  the  recipient  from March 2005 to 2007.  Additionally,  the numbers of
shares of the Company's  common stock  purchasable  pursuant to the warrant were
increased  from 200,000  shares to 750,000  shares and a decrease in the warrant
exercise price from $0.05 to $0.03.

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.

In May and June, 2005, in consideration of $67,500,  the Company agreed to issue
7,500,000 shares of Common Stock, all of which have been issued to date.

In June,  2005,  the  Company  issued  6,060,606  shares of the Common  Stock in
connection with an existing agreement.

In the quarter  ending  September 30, 2005,  in  consideration  of $45,500,  the
Company agreed to issue 7,933,333 shares of Common Stock, all of which have been
issued to date

In August,  2005, in conjunction with a settlement  agreement  providing for the
payment to the Company of up to $100,000,  and the  provision of services to the
Company, the Company issued 12,1212,212 shares of Common Stock.


                                       8
<PAGE>

                                     Item 2.

PHLO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

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 2004 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,
2004 and results of operations for the three months ended June 30, 2004 and 2003
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/PPC 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.

RESULTS OF OPERATIONS

The Company had no revenues  during the three month  period ended June 30, 2004,
as compared to  revenues  of $94,745 for the three month  period  ended June 30,
2003. There was no cost of sales for the three month period ended June 30, 2004,
and for the three month  period ended June 30,  2003,  as the revenue  generated
during the three month period 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,
2004 were  $280,321,  as  compared to $246,863  for the  comparable  three month
period  during 2003.  The Company  incurred  research and  development  costs of
$108,617  during the three month period  ended June 30, 2004,  with none for the
comparable  three month period  during 2003.  The Company's  operating  loss was
$388,938 for the three month period ended June 30, 2004,  an increase of 156% as
compared with an operating loss of $152,118 for the comparable period ended June
30, 2003. However,  during the period ended June 30, 2004, the Company conducted
increased  activities  related to its technological base and focused its efforts
on 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.


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<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital deficit decreased  $389,330 during the three month
period  ended  June  30,  2004,  to  $2,842,895.   In  addition,  the  Company's
Stockholders' Deficiency decreased from $3,613,191 to $3,223,531 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  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.

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, 2004 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

The Company does 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 the Company in
the  reports  that the  Company  files or  submits  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 the Company in the reports
that the Company files under the Exchange Act is accumulated and communicated to
the  Company's  management,  including  its  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,  the Company  conducted an evaluation,
under the supervision and with the  participation of its chief executive officer
and chief financial officer, of the Company's disclosure controls and procedures
(as defined in Rules 13a-15(e) of the Exchange Act).  Based on this  evaluation,
the Company's chief executive officer and chief financial officer concluded that
its disclosure  controls and procedures are effective to ensure that information
required to be  disclosed  by the Company in reports  that the Company  files or
submits 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 the  Company's  internal  controls,  which  are  included  within  disclosure
controls and procedures,  during its most recently completed fiscal quarter that
has  materially  affected,  or is reasonably  likely to materially  affect,  the
Company's internal controls.

                                     PART II

ITEM 1.  LEGAL PROCEEDINGS

1) The Securities and Exchange Commission  instituted public  administrative and
cease and desist proceedings  against Phlo Corporation  ("Phlo"),  its President
James B. Hovis,  and its Executive Vice  President,  Anne P. Hovis, on April 21,
2005,  alleging violations by Phlo Corporation related to certain transfer agent
regulations and related to the late filing of its required periodic reports.


                                       10
<PAGE>

More specifically, the Division of Enforcement has alleged the violation by Phlo
of Sections  17A(d)(1) and 17(b)(1) of the  Securities  Exchange Act of 1934, as
amended (the "Exchange Act") and Rules 17Ad-2 (which requires transfer agents to
turnaround  within  three  business  days of receipt at least 90% of all routine
items received for transfer during a month) and 17Ad-5 (which requires  transfer
agents to respond within five business days to any written inquiry regarding the
status  of items  presented  for  transfer  within  the  preceding  six  months)
thereunder.  The Division of Enforcement  also alleged that Anne Hovis aided and
abetted such violations.

The Division also alleges that Phlo violated  Section 13(a) of the Exchange Act,
and Rules 13a-1 and 13a-13  thereunder  (which  require the filing of annual and
quarterly  reports with the SEC), and alleged that James Hovis aided and abetted
such violations.

The Company disputes all allegations made by the Division of Enforcement (except
for the fact that Phlo did not timely  make  certain  periodic  filings)  and is
vigorously  defending  the SEC  action.  The  Company  expects to be  completely
current in its financial  reporting prior to the issuance of an initial decision
on this  matter.  The  Company  has also  provided  to the SEC  evidence  of the
existence of extraordinary  circumstances related to its former outside auditing
firms  resulting in Phlo not being able to maintain  timely  financial  filings.
Finally,  the Company can make no assurances with respect to the outcome of this
matter.

2) In the quarter  ended June 30, 2005,  litigation  was  commenced  against the
Company based on the liability of one of its affiliates.  The Company vigorously
defended the action,  but, subsequent to the fiscal quarter, a judge turned over
$103,431 of the Company to the creditor. The Company's counsel believed that the
judge  exceeded  his  authority  under law in ruling  against  the  Company on a
procedural  basis prior to a decision  through trial on the merits.  The Company
has filed a  complaint  against  the judge for his  actions  and intends to seek
disciplinary action against the creditor's lawyers.

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  will not have a  material  adverse  effect on the  Company's  financial
position or results of operations.

ITEM 2. CHANGES IN SECURITIES

During the period  covered by this  report,  the  Company  issued  shares of its
common stock as follows:

In April,  2004, in  consideration  of $240,973.17,  the Company agreed to issue
2,190,665 shares of stock.

In June,  2004, in  conjunction  with an advance of $100,000 under the Company's
revolving credit  facility,  the Company issued 2,000,000 shares of Common Stock
which serve as collateral to secure  repayment of the advance and the meeting of
all  obligations of the Company under the facility loan  documents.  The Company
also issued  3,500,000  shares of Common Stock in exchange for the conversion by
the  Lender of  $46,000  of  accrued  interest  and the  waiver of the  $150,000
financing fee owed in connection with a prior advance.

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 1,030,303 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 5,000,000 shares of Common Stock, 4,100,000 shares of which have
been issued as of June 30, 2004.

ITEM 3. 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

September 23, 2005                     By: /s/ James B. Hovis
                                           -------------------------------------
                                           James B. Hovis
                                           President and Chief Executive Officer


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