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 September 30, 2000         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 of                (I.R.S. Employer
        incorporation or organization)               Identification No.)

            475 Park Avenue South
                 7th Floor
              New York, New York                            10016
    (Address of principal executive offices)              (Zip code)

Registrant's telephone number, including area code: (212) 447-1322


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  __X__      No _____


     The number of shares outstanding of the issuer's common stock, as of
October 31, 2000 is 24,755,503.

<PAGE>


PHLO CORPORATION AND SUBSIDIARIES

INDEX
--------------------------------------------------------------------------------


                                                                    Page to Page
Item 1.  Financial Statements

   Consolidated Balance Sheet as of September 30, 2000
   [Unaudited] .........................................................   1-2

   Consolidated Statements of Operations for the three months
   and six months ended September 30, 2000 and 1999 [Unaudited].........    3

   Consolidated Statement of Cash Flows [Unaudited] ....................   4-5

   Notes to Consolidated Financial Statements [Unaudited] ..............   6-22

Item 2.  Managements' Discussion and Analysis of the Financial
         Condition and Results of Operations ...........................  23-24

Signature ..............................................................    25

<PAGE>


                                               PHLO CORPORATION AND SUBSIDIARIES

                                          CONSOLIDATED BALANCE SHEET [Unaudited]

                                                              September 30, 2000
--------------------------------------------------------------------------------


                                     ASSETS

CURRENT ASSETS
  Cash                                                                  $29,304
  Accounts receivable                                                    14,886
  Inventory                                                             267,814
                                                                       --------

       Total Current Assets                                            $312,004

PROPERTY AND EQUIPMENT, Net                                              29,951

OTHER ASSETS
  Goodwill - net of accumulated amortization
             of $135,000                                 302,000
  Security deposits                                       30,063
                                                        --------

       Total Other Assets                                               332,063
                                                                       --------

       TOTAL ASSETS                                                    $674,018
                                                                       ========


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


                                                                               1
<PAGE>


                                               PHLO CORPORATION AND SUBSIDIARIES
                                          CONSOLIDATED BALANCE SHEET [Unaudited]

                                                              September 30, 2000
--------------------------------------------------------------------------------


                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY


<TABLE>
<S>                                                             <C>             <C>
CURRENT LIABILITIES
 Accounts payable                                               $ 1,957,855
 Accrued expenses and taxes                                       2,969,574
 Current portion of long-term debt                                2,486,500
                                                                -----------

       Total Current Liabilities                                                  7,413,929

OTHER LIABILITIES
 Long-term debt, less current portion                                                    --
                                                                                -----------

       TOTAL LIABILITIES                                                          7,413,929

COMMITMENTS AND CONTINGENCIES


STOCKHOLDERS' DEFICIENCY Preferred stock, 15,000,000 authorized:
   Series A convertible stock, $0.0001 par value, 500,000 Shares
     authorized, issued and outstanding (liquidation preference $100,000)                50
   Series B non-convertible stock, none issued and outstanding                           --
   Series C convertible stock, $0.0001 par value, 3,000,000 shares
     authorized, 1,592,909 shares subscribed                                            159
   Common stock, $0.0001 par value, 25,000,000 shares authorized,
     24,755,503 shares issued and outstanding                                         2,433
   Common stock, $0.0001 par value, 3,853,223 shares subscribed                         412
   Additional paid-in capital                                                     4,188,311
   Accumulated deficit                                                          (10,931,276)
                                                                                -----------
       TOTAL STOCKHOLDERS' DEFICIENCY                                            (6,739,911)
                                                                                -----------
       TOTAL LIABILITIES AND STOCKHOLDERS'
        DEFICIENCY                                                              $   674,018
                                                                                ===========
</TABLE>


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


                                                                               2

<PAGE>


                                               PHLO CORPORATION AND SUBSIDIARIES

                                CONSOLIDATED STATEMENT OF OPERATIONS [Unaudited]

          For the Three Months and Six Months Ended September 30, 2000, and 1999
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                           Three Months                     Six Months

                                       2000            1999            2000            1999
                                   ------------    ------------    ------------    ------------
<S>                                <C>             <C>             <C>             <C>
SALES                              $     81,977    $    327,670    $    278,417    $    789,379

COST OF SALES                            54,763         256,052         217,438         555,955
                                   ------------    ------------    ------------    ------------

       GROSS PROFIT                      27,214          71,618          60,979         233,424

SELLING, GENERAL, ADMINISTRATIVE
 EXPENSES                               884,410         556,890       1,611,020       1,398,712
                                   ------------    ------------    ------------    ------------

       OPERATING LOSS                  (857,196)       (485,272)     (1,550,041)     (1,165,288)
                                   ------------    ------------    ------------    ------------

OTHER EXPENSES
 Interest expense                       (93,016)        (34,550)       (165,563)        (67,685)
                                   ------------    ------------    ------------    ------------

TOTAL OTHER EXPENSE                     (93,016)        (34,550)       (165,563)        (67,685)
                                   ------------    ------------    ------------    ------------

       NET LOSS                    $   (950,212)   $   (519,822)   $ (1,715,604)   $ (1,232,973)
                                   ============    ============    ============    ============

Weighted Average Common Shares
Outstanding                          24,328,298      11,707,248      24,328,298      11,582,610
                                   ============    ============    ============    ============

Net Loss Per Share (Basic and
 Diluted                           $      (0.04)   $      (0.04)   $      (0.07)   $      (0.11)
                                   ============    ============    ============    ============
</TABLE>


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


                                                                               3

<PAGE>


                                               PHLO CORPORATION AND SUBSIDIARIES

                               CONSOLIDATED STATEMENTS OF CASH FLOWS [Unaudited]

                            For the Six Months Ended September 30, 2000 and 1999
--------------------------------------------------------------------------------


                                                         2000           1999
                                                     -----------    -----------

CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss                                            $(1,715,604)   $(1,232,973)
                                                     -----------    -----------
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Stock-based compensation                              96,557             --
    Depreciation  and amortization                        50,573         31,687
    Amortization of deferred debt discount                17,619             --
     (Increase)decrease in accounts receivable            54,504       (160,421)
     (Increase)decrease in inventory                      66,812       (263,176)
      Decrease in other current assets                        --         45,471
      Increase in fixed assets                           (13,386)            --
      Increase in accounts payable                       164,298         23,139
      Increase in accrued expenses and taxes             317,231        185,578
      Increase in current portion of long term debt      774,000        354,000
                                                     -----------    -----------

       TOTAL ADJUSTMENTS                               1,528,208        216,278
                                                     -----------    -----------

       NET CASH USED IN OPERATING ACTIVITIES            (187,396)    (1,016,695)
                                                     -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of capital stock                  171,560      1,033,350
                                                     -----------    -----------

       NET CASH PROVIDED BY FINANCING ACTIVITIES     $   171,560    $ 1,033,350
                                                     -----------    -----------


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


                                                                               4

<PAGE>


                                               PHLO CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS [Unudited], Continued

                                 For the Six Months Ended June 30, 2000 and 1999
--------------------------------------------------------------------------------


                                                          2000           1999
                                                      -----------    -----------
       NET (DECREASE) INCREASE IN CASH                $   (15,836)   $    16,655

CASH - Beginning                                           45,139         12,790
                                                      -----------    -----------
CASH - Ending                                         $    29,303    $    29,445
                                                      ===========    ===========


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


Supplemental Dislosures of Non-Cash Investing and Financing Activities

                                                          2000           1999
                                                      -----------    -----------

Conversion of debt into equity                        $   100,000             --
                                                      -----------    -----------

                                                      $   100,000    $        --
                                                      ===========    ===========

Non-Cash Investing and Financing Activities Disclosure:

During the three month period ended September 30, 2000, the holder of $100,000
of debt converted such debt into 454,545 shares of common stock subscribed.

                                                                               5

<PAGE>


                                               PHLO CORPORATION AND SUBSIDIARIES

                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [Unaudited]
--------------------------------------------------------------------------------


NOTE 1 - Company Activities

Phlo Corporation, and its subsidiaries (hereinafter collectively referred to as
the "Company") is a manufacturer of beverages containing patented and
patent-pending biotechnologies. The Company sells its beverages to distributors,
who offer the beverages for sale in high volume chain stores, such as
supermarkets, and in small retail outlets, such as delicatessens and convenience
stores. The Company is positioned as a biotechnology company which is using the
high volume distribution segment of the beverage industry to commercialize a
portion of 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 initlaly plans to convey to consumers through the use of
beverage systems. The Company is focusing its technology acquisition efforts on
those technologies related to preventing or ameliorating cancer, reducing the
effects of aging, assisting in weight loss, and enhancing sexual performance.

The Company's current beverage line has been sold under the McCoy's name and
includes ice teas, green teas, lemonade and fruit drinks. In October 2000, the
Company introduced its newest line of beverages, "ZO - Vital Cell Defense",
featuring its proprietary (patent-pending) composition with controlled-release
capability which is designed to protect cells from the oxidative stress of aging
and to stimulate cell repair. The launch of the Vital Cell Defense line marks
the successful commercialization of one of the Company's biotechnologies.

In July, 1999, the Company incorporated Phlo Beverage Products Company, a wholly
owned subsidiary, to conduct the business of producing and selling McCoy's
beverages. In August,1999, the Company incorporated Phlo System, Inc., a wholly
owned subsidiary. In October, 2000, Advanced Bio-Delivery, LLC., a limited
liability company formed in June, 2000, became a wholly-owned company of the
Company. Hereafter, the Company will conduct its biotechnology-related
activities through Phlo System, Inc. and Advanced Bio-Delivery, LLC. The Company
also has two subsidiaries which were not operating entities during the periods
reported upon, X-Treem Products Corporation ("X-Treem") and Quigley's Orchard,
Inc. In November 2000, X-Treem was formally dissolved. As a result, the
Company's assets, liabilities and stockholders' deficiency will no longer
reflect those of X-Treem. The estimated effect is to reduce liabilities by
approximately $4,300,000, decrease the Company's Stockholders' Deficiency by
approximately $4,010,000, and reduce assets by approximately $290,000. See Note
12 - Subsequent Events.

On October 22, 1998, the Company agreed to acquire the capital stock of a
beverage company, X-Treem, through an exchange of stock with the shareholders of
X-Treem (the "Stock Exchange Transaction"). On April 2, 1999, the agreement was
amended so as not to require Phlo's stock to be reverse-split, as initially
intended. As a result, the additional shares that would be issuable under the
amended agreement could not be issued at that time because Phlo did not have
enough authorized shares to do so. Based on the amendment, Phlo would be
required to issue a total of 156,877,611 shares of common stock (assuming the
conversion of all convertible securities and the exercise of all warrants in
connection with such exchange transaction) in order to acquire 100% of the
outstanding X-Treem capital stock and outstanding warrants to purchase X-Treem
common stock from the holders thereof. Subsequently, the Company authorized an
increase in the number of authorized shares sufficient to complete the stock
exchange transaction.


                                                                               6

<PAGE>


As of September 30, 2000, 28,838 shares of X-Treem capital stock representing
96.47% of the total outstanding shares have been exchanged for Phlo shares which
have been issued out of authorized shares or are yet to be issued. In order to
complete the Stock Exchange Transaction with respect to those shareholders of
X-Treem who have elected to participate in the exchange transaction, the Company
is required to issue 941,160 additional shares of common stock and 1,112,010
shares of Series C Preferred Stock.

On June 1, 1999, 281,866 shares of the Series C Convertible Preferred Stock (the
"Series C Preferred") were issued to X-Treem shareholders, along with 2,608,316
shares of Phlo common stock, in exchange for such X-Treem shareholders'
tendering their shares of X-Treem stock. In addition, 731,683 shares of Series C
Preferred and 6,770,835 shares of common stock were also issued to three
shareholders who had previously tendered their X-Treem shares at the outset of
the Stock Exchange Transaction. These share issuances were intended as a partial
issuance until there were sufficient authorized shares to complete the Stock
Exchange Tranaction. When the Stock Exchange Transaction is completed, all
former X-Treem shareholders who participated in the Stock Exchange Transaction
will have received Phlo shares on a pro rata basis based on their ownership of
X-Treem stock.

As of September 30, 2000, there are 24,755,503 common shares issued and
outstanding and 3,853,223 common shares subscribed. In addition, options and
warrants to purchase 2,438,333 and 9,293,762 shares of common stock are also
outstanding, respectively.

On December 22, 1999, the Company notified its transfer agent that its legal
counsel believed that no outstanding shares of preferred stock, including both
the Series A and C, had been validly issued, although the Company's prior
outside counsel had issued an opinion that all capital stock had been validly
issued and that the board of directors had authority to approve the issuance of
the classes and series of securities so issued. In November 2000, the Company
amended its Certificate of Incorporation to confer on the Board of Directors
blank check authority to create different classes and series of preferred stock
without further shareholder vote, and to enable the Company to issue all shares
that are subscribed.


                                                                               7

<PAGE>


NOTE 2 - Summary of Significant Account Policies

Basis of Presentation and Reporting

     The accompanying unaudited financial statements have been prepared in
     accordance with generally accepted accounting principles for interim
     financial information. Accordingly, they do not include all of the
     information and footnotes required by generally accepted accounting
     principles 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 six months ended September 30, 2000 are not
     necessarily indicative of the results that may be expected for the fiscal
     year ending March 31, 2001. For further information, refer to the
     consolidated financial statements and footnotes thereto included in the
     Company's annual report on Form 10-KSB for the year ended March 31, 2000.

Principles of Consolidation

     The consolidated financial statements include the accounts of the Company
     and its subsidiaries, collectively referred to as the "Company and
     subsidiaries". All significant inter-company transactions and balances have
     been eliminated in consolidation.

Use of Estimates

     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     disclosure of contingent assets and liabilities at the date of the
     financial statements and the reported amounts of revenues and expenses
     during the reporting period. Actual results could differ from those
     estimates.

Goodwill

     Goodwill in connection with acquisitions is amortized on a straight-line
     basis over a five-year period. Amortization of goodwill charged to
     operations for the six months ended September 30, 2000 and September 30,
     1999 amounted to $46,000 and $20,000 respectively.

Inventories

     Inventories are stated at the lower of cost or market. Costs, which include
     purchases, freight and packaging, raw materials, packing fees and finished
     products, are determined on the first-in, first-out basis.

Advertising Expense

     Advertising costs are expensed as incurred during the period.

Furniture and Equipment

     Furniture and equipment is stated at cost. Maintenance and repair costs are
     charged to expense as incurred, costs of major additions and betterments
     are capitalized. When furniture and equipment is sold or otherwise disposed
     of, the cost and related accumulated depreciation are eliminated from the
     accounts and any resulting gain or loss is reflected in income.

Depreciation and Amortization

     The cost of furniture and equipment is depreciated using the straight-line
     method over five years.

Revenue Recognition

     Revenue is recognized at the time products are shipped and title passes.

Slotting Fees

     Slotting fees are paid to individual supermarkets and supermarket chains to
     obtain initial shelf space for new products. Fees vary from store to store,
     however, their payment does not guarantee that a company's product will be
     carried for any definite period of time. The Company pays for such fees by
     issuing a check, providing free goods or issuing credits for previously
     said goods. The cost of the slotting fees is valued at the amount of cash
     paid or the cost to the Company of the goods provided. The Company expenses
     slotting fees when the obligation is incurred.

Research and Development

     Research and development costs of $85,621 and $0 are expensed as incurred
     during the six months ended September 30, 2000 and September 30, 1999.

Income Taxes

     Deferred income tax assets and liabilities are computed annually for
     differences between the consolidated financial statements and tax basis of
     assets and liabilities that will result in taxable or deductible amounts in
     the future based on enacted laws and rates applicable to the periods in
     which the differences are expected to affect taxable income. A valuation
     allowance is established when necessary to reduce deferred tax assets to
     the amount expected to be realized.


                                                                               8

<PAGE>


Fair Value of Financial Instruments

     The financial instruments of the Company are reported in the consolidated
     balance sheet at market or fair values, or at carrying amounts that
     approximate fair values because of the short maturity of the instruments.

Impairment of Long-Lived Assets

     Certain long-term assets of the Company are reviewed at least annually as
     to whether their carrying value has become impaired, pursuant to guidance
     established in Statement of Financial Standards ("SFAS") No. 121,
     "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
     Assets to be Disposed Of." Management considers assets to be impaired if
     the carrying value exceeds the future projected cash flows from related
     operations (undiscounted and without interest charges). If impairment is
     deemed to exist, the assets will be written down to fair value or projected
     discounted cash flows from related operations. Management also re-evaluates
     the periods of amortization to determine whether subsequent events and
     circumstances warrant revised estimates of useful lives.

Stock Issued to Employees

     The Company adopted SFAS No. 123, "Accounting for Stock-Based Compensation"
     on April 1, 1996 for financial note disclosure purposes and will continue
     to apply the intrinsic value method of Accounting Principles Board ("APB")
     Opinion No. 25, "Accounting for Stock Issued to Employees" for financial
     reporting purposes.

Net (Loss) Per Share

     The Company adopted the provision of SFAS No. 128, "Earnings Per Share".
     Basic EPS is computed by dividing income (losses) available to common
     stockholders by the weighted-average number of common shares outstanding
     for the period adjusted retroactively to April 1, 1997 for the shares
     issued in the recapitalization. Diluted EPS is based on the
     weighted-average number of shares of common stock and common stock
     equivalents outstanding during the year. Common stock equivalents have been
     excluded from the calculation of diluted EPS for 2000 and 1999, as such
     inclusion is anti-dilutive.

Reporting of Segments

     In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
     an Enterprise and Related Information," effective for fiscal years
     beginning after December 15, 1997, with reclassification of earlier periods
     required for comparative purposes. The Company has determined that under
     SFAS No. 131, it operates in one segment of business and its customers and
     operations are within the United States.


                                                                               9

<PAGE>


Accounting Developments

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
     Instruments and Hedging Activities", effective for fiscal years beginning
     after June 15, 1999, which has been deferred to June 30, 2000 by publishing
     of SFAS No. 137. SFAS No. 133 establishes accounting and reporting
     standards for derivative instruments, including certain derivative
     instruments embedded in other contracts (collectively referred to as
     derivatives), and for hedging activities. This Statement requires that an
     entity recognize all derivatives as either assets or liabilities in the
     statement of financial condition and measure those instruments at fair
     value. The accounting for changes in the fair value of a derivative
     instrument depends on its intended use and the resulting designation. The
     Company does not expect that the adoption of this standard will have a
     material impact on its financial statements.

NOTE 3 - Going Concern

     As shown in the accompanying financial statements, the Company incurred a
     net loss of $1,715,604 during the six months ended September 30, 2000. As
     of September 30, 2000, the Company's current liabilities exceeded its
     current assets by $7,101,925 and its total liabilities exceeded its total
     assets by $6,739,911. The Company is delinquent in connection with various
     obligations including, but not limited to, trade payables, accrued payroll
     taxes, and notes payable. These factors, as well as the uncertain
     conditions that the Company faces in its day-to-day operations, create an
     uncertainty as to the Company's ability to continue as a going concern. The
     financial statements do not include any adjustments that might be necessary
     if the Company is unable to continue as a going concern. The continuation
     of the Company as a going concern is dependent upon the success of future
     financing and generating sufficient revenue through the expansion of its
     beverage product lines.

     Management has taken action and is formulating additional plans to
     strengthen the Company's working capital position and generate sufficient
     cash to meet its operating needs through September 30, 2001 and beyond. In
     this regard, and as more fully described within Note 12 - Subsequent
     Events, in November 2000, X-Treem was formally dissolved. As a result, the
     Company's assets, liabilities and stockholders' deficiency will no longer
     reflect those of X-Treem. The estimated effect is to reduce the excess
     amount by which current liabilities exceeds current assets and the amount
     by which total liabilities exceed total assets by approximately $4,300,000
     and $4,010,000, respectively. On a proforma basis, the Company's current
     liabilities will exceed its current assets by approximately $2,801,925 and
     its total liabilities would exceed its total assets by $2,729,911. Among
     other actions taken, the Company anticipates generating more revenue
     through the expansion of its newest beverage line, "Zo - Vital Cell
     Defense", which was introduced in October 2000, and the Company plans to
     raise additional funds through the private placement of its securities. No
     assurance can be made that the management will be successful in achieving
     its plan.

NOTE 4 - Property and Equipment

     Property and equipment consists of the following at September 30, 2000:

     Furniture and fixtures                                         $46,618
     Less: Accumulated depreciation                                  16,667
                                                                    -------
            Net                                                     $29,951
                                                                    =======

     Depreciation expense for the six months ended September 30, 2000 and 1999
     was $4,573 and $11,787, respectively.


                                                                              10

<PAGE>


NOTE 5 - Inventories

     Inventories are stated at the lower of cost (first-in, first-out basis) or
     market value and consist of the following at September 30, 2000:

     Raw materials                                                 $171,532
     Finished goods                                                  96,282
                                                                   --------
          Total                                                    $267,814
                                                                   ========

NOTE 6 - Income Taxes

     No provision has been made in the accompanying consolidated financial
     statements for income tax expense as a result of the current operating loss
     and net operating loss ("NOL") carryforwards.

     Differences between income tax benefits computed at the Federal statutory
     rate (34%) and reported income taxes for 2000 and 1999 are primarily
     attributable to the valuation allowance for the NOL and other permanent
     differences.

     As of September 30, 2000, the Company estimated the available NOL
     carryforwards to be approximately $12,306,000, and the Company's total
     deferred tax assets relating to the carryforwards amounted to approximately
     $4,183,000 which expire though March 31, 2020. Of these amounts,
     approximately $4,010,000 of the NOL carryforward will be eliminated as a
     result of the dissolution of X-Treem. See Note 12 - Subsequent Events. The
     Company has a valuation allowance for the full assessment of the deferred
     tax assets at September 30, 2000 as management does not believe it is more
     likely than not that the valuation of the asset is recoverable.

     Further, the Company has not filed any federal, state or local income or
     franchise tax returns. Such failure may have a material adverse effect on
     the amount of any net operating loss carryforwards and may subject the
     Company to fines.

NOTE 7 - Stock Options

     1996 Stock Option Plan

     In March 1996, the Board of Directors of the Company adopted, and the
     stockholders of the Company approved the adoption of, the 1996 Stock Option
     Plan. The maximum number of shares of common stock with respect to which
     awards may be granted pursuant to the 1996 Plan is initially 2,000,000
     shares. No options are outstanding under this plan.

     Options Granted Separate from the Stock Option Plan

     In connection with an initial public offering, the Company granted to its
     underwriter in July 1996 an option to purchase 58,333 shares of common
     stock at a purchase price of $7.20 per share exercisable commencing July
     1997 and expiring July 2001.

     During the year ended March 31, 1998, the Company granted a total of
     1,350,000 options to purchase common stock with an exercise price equal to
     fair market value at time of issuance to certain officers, directors and
     employees. In addition, the Company issued options to two consultants to
     purchase 100,000 shares each of its common stock each for services rendered
     during the year ended March 31, 1998. Accordingly, the Company recorded
     compensation expense of $46,000 for options issued.


                                                                              11

<PAGE>


     In December 1998, the Company issued options to purchase an aggregate of
     850,000 shares of its common stock to two officers in exchange for the
     return of 450,000 shares of common stock from these officers. These options
     have an exercise price of $0.05 per share and expire in December 2003.

     In December, 1999, a former officer and director of the Company exercised
     options to purchase 20,000 shares of common stock at an exercise price of
     $0.05 per share.

     A summary of stock option activity is as follows:

                                                                Weighted Average
                                                      Number     Exercise Price
                                                    of Options    Common Stock
                                                    ---------        ------

     Balance - April 1, 1997                           58,333        $ 7.20

     Options granted                                1,550,000          0.46
     Options exercised                                     --
     Options cancelled                                     --
                                                    ---------

     Balance - March 31, 1998                       1,608,333          0.48

     Option granted                                 1,600,000         0.075
     Option cancelled                                      --
     Option exercised                                      --
                                                    ---------

     Balance - March 31, 1999                       3,208,333        $ 0.26
                                                    ---------

     Options granted                                       --
     Options exercised                                 20,000          0.05
     Options cancelled                                750,000          0.10
                                                    =========
     Balance - March 31, 2000                       2,438,333          0.33
     Balance - June 30, 2000                        2,438,333          0.33
     Balance - September 30, 2000                   2,438,333          0.33

     Exercisable at September 30, 2000              2,438,333          0.33

----------
     The options issued to officers, directors and employees expire in four (4)
     to nine (9) years and may be exercised at anytime. The options issued to
     consultants to purchase 200,000 shares of its common stock, at an exercise
     price of $0.875, have a weighted average remaining contractual life of
     approximately 6 years.

NOTE 8 - Stockholders' Equity

     Preferred Stock

     The Company has 15,000,000 shares of preferred stock, $0.0001 par value,
     authorized.

     Series A Convertible Preferred Stock

     At September 30, 2000, the Company has 500,000 shares of Series A
     Convertible Preferred Stock ("Series A Preferred") issued and outstanding.
     The Series A Preferred holders are entitled to one vote per share on all
     matters presented to the stockholders with certain exceptions as defined in
     the Certificate of Designation. In addition, the Series A Preferred is
     subject to certain conversion, redemption and liquidation provisions, as
     defined.


                                                                              12

<PAGE>


     Series B Non-Convertible Preferred Stock

     At September 30, 2000, none of Series B Non-Convertible Preferred Stock
     ("Series B Preferred") was issued and outstanding. The Series B Preferred
     holders are entitled to one vote per share on all matters presented to the
     stockholders with certain exceptions as defined in the Certificate of
     Designation. In addition, the Series B Preferred is subject to certain
     redemption and liquidation provisions, as defined.

     Series C Convertible Preferred Stock

     At September 30, 2000, none of Series C preferred was issued and
     outstanding and 1,592,869 shares were subscribed in connection with the
     private placement offering (see below). The Series C Preferred is subject
     to certain conversion, redemption and liquidation provisions, as defined.
     In addition, each share of Series C Preferred is convertible into 100
     shares of the Company's common stock.

     Common Stock

     Phlo has 25,000,000 authorized shares of common stock, par value of $0.0001
     per share (the "Common Stock"), of which 24,328,255 shares were issued and
     outstanding at September 30, 2000. Subsequently, the Company authorized an
     increased the number of authorized shares of common stock to 250,000,000.
     See Note 12 - Subsequent Events.

3)   In April and May, 2000, in consideration of $147,500, the Company issued an
     aggregate of 98,333 shares of common stock.

4)   In June, 2000, the Company issued an aggregate of 22,250 shares of common
     stock and warrants to purchase an aggregate of 84,166 shares of common
     stock in consideration for services rendered, including legal services,
     advertising and marketing services, and financial services. Additionally,
     the Company is obligated, pursuant to various existing agreements, to issue
     550,000 shares of common stock (or equivalents) in connection with the
     provision of services to the Company.

5)   In September, 2000, the Company is obligated to issue 365,000 shares of
     common stock in consideration for financial and accounting services
     rendered.

     Pro forma information regarding net income and earnings per share is
     required by SFAS 123, and has been determined as if the Company had
     accounted for its warrants under the fair value method of SFAS 123. The
     weighted-average fair value of warrants granted was $0.12 per share. The
     fair market value for these warrants was estimated at the date of grant
     using a Black-Scholes warrant-pricing model with the following
     weighted-average assumptions for the year ended March 31, 2000:

                                   ASSUMPTIONS
     ---------------------------------------------------------------------------
     Risk-free rate                                                   5.00%
     Dividend yield                                                     --
     Volatility factor of the expected market price                 182.70%
     Average life                                                  5 Years


                                                                              13

<PAGE>


     The Black-Scholes valuation model was developed for use in estimating the
     fair value of traded options and warrants which have no vesting
     restrictions and are fully transferable. In addition, option valuation
     models require the input of highly subjective assumptions including the
     expected stock price volatility. Because the Company's stock options and
     warrants have characteristics significantly different from those of traded
     options and warrants, and because changes in the subjective input
     assumptions can materially affect the fair value estimated, in management's
     opinion, the existing models do not necessarily provide a reliable single
     measure of the fair value of its stock options and warrants.

     For purposes of pro forma disclosures, the estimated fair value of the
     warrants is amortized to expense over the vesting period of the warrants.
     The Company's pro forma information for the year ended March 31, 2000 is as
     follows:


     Net Loss - As reported                                    $(2,831,579)
     Net Loss - Pro forma                                      $(3,482,030)

     Pro forma net loss per share:
                   - Basic                                          $(0.14)
                   - Diluted                                        $(0.14)

     The warrants issued during the year ended March 31, 2000, have a weighted
     average remaining contractual life of 4.5 years. All existing warrants are
     exercisable as of June 30, 2000.

     Unit Offerings

1)   On March 30, 1999, the Company completed the sale, as part of a private
     placement offering, of 984,364 units of securities for an aggregate
     purchase price of $0.46 per unit (the "Unit Offering"). Each unit consists
     of two shares of the common stock, par value $0.0001, 0.216 of a share of
     the Series C Preferred and the right to purchase one (1) additional share
     of the common stock and 0.108 of additional share of Series C Preferred.
     Total proceeds from the sale of these units amounted to $453,031. None of
     the rights to purchase additional shares of common stock and Series C
     Preferred Stock was exercised prior to the expiration of such rights. As of
     June 30, 2000, such common stock and Series C Preferred Stock have not been
     issued. Accordingly, these common stock and Series C Preferred are
     presented as shares subscribed but not yet issued on the accompanying
     balance sheet.

     In connection with the Unit Offering, the Company has agreed to issue a
     cashless warrant providing for the purchase of 9,606,682 shares of Common
     Stock at an exercise price of $0.01 per share.

2)   In June 1999, in consideration for $500,000, the Company sold 2,312,872
     shares of Common Stock and 238,051.5 shares of Series C Preferred. All of
     the Common Stock and none of shares of the Series C Preferred have been
     issued as of September 30, 2000 (See Note 1).

3)   In April and May, 1999, in consideration for $80,000, the Company sold
     units representing an aggregate of 173,913 shares of Common Stock and
     18,782 shares of Series C Preferred. All of the shares of Stock and no
     shares of the Series C Preferred issuable in connection with this
     transaction have been issued as of September 30, 2000 (See Note 1).


                                                                              14

<PAGE>


NOTE 9 - Debt

     Debt as of September 30, 2000 consists of the following:

     Term note payable with interest due monthly at a rate of 12%
     per annum. The note matured on March 31, 1998 when principal
     and unpaid interest was due. The note is currently in
     default. No action has been taken or threatened against the
     Company to enforce the note. The Company continues to accrue
     interest on this note.                                            $600,000

     Term note payable with interest at a rate of 12% per annum.
     Principal and accrued interest are payable at the note's
     maturity date on February 12, 2001. The Company continues to
     accrue interest on this note.                                       50,000

     Note payable with principal plus an interest payment of
     $10,000 are payable at the note's maturity on June 27, 1997.
     The holder of the note has initiated an action to enforce
     the note.                                                          100,000

     Note payable with interest at a rate of 12% per annum.
     Principal and interest are payable at the note's maturity
     date on November 24, 2000. The Company continues to accrue
     interest on this note.                                             100,000

     Note payable with principal plus an interest payment of
     $5,000 were payable at the loan's maturity date on March 31,
     1998. The parties agreed to convert this debt into equity,
     however, this conversion has not taken place to date, and
     therefore, the note is in default. The Company continues to
     accrue interest on this note. The holder has agreed
     informally to extend the date of maturity in order to
     consummate the conversion.                                          45,000

     Note payable with principal plus an interest payment of
     $5,000 was payable on the note's maturity date on March 30,
     1998. The parties agreed to revise the terms of the note to
     provide for an increase in interest payable from $5,000 to
     $10,000 and a maturity date of December 31, 1998. The note
     is currently in default. No action has been taken or
     threatened against the Company to enforce the note. The
     Company continues to accrue interest on this note.                  45,000

     Note payable with interest at a rate of 14% per annum. The
     Note matured on December 31, 1999, when principal and unpaid
     interest was due. The holder has obtained a summary judgment
     against the Company. The Company believes that the holder
     engaged in intentional conduct which resulted in damage to
     the Company and has filed an action against the holder in
     federal court which is currently pending. In connection with
     the note, the Company issued warrants to the holder and
     another individual to purchase an aggregate of 500,000
     shares of common stock at an exercise price of $0.20 per
     share upon issuance of the note and warrants to the holder
     to purchase an aggregate of 200,000 shares of the common
     stock in connection with its option to extend the maturity
     date of the note to December 31, 1999. In addition, to
     secure repayment of the note, the Company issued to a
     trustee of the holder 105,875 shares of common stock and
     11,441 shares of Series C Convertible Preferred Stock.             250,000


                                                                              15

<PAGE>


     Note payable with interest at a rate of 10%. Principal and
     interest are payable at the note's maturity date of December
     31, 2000. 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.                                           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 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. The Company continues to accrue interest on this 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

     Convertible notes payable with interest accruing at a rate
     of one percentage point (1%) above the prime rate. Principal
     and interest are payable at the notes' maturity dates which
     fall within May and June, 2001. After December 31, 1999, the
     principal under the notes is convertible, at the option of
     the holder, into shares of the Company's common stock at a
     conversion price of $0.22 per share.                               300,000

     Bridge notes with interest at a rate of one percentage point
     (1%) above the prime rate. The notes matured on March 31,
     2000, when principal and unpaid interest was due. The notes
     are currently in default. No action has been taken or
     threatened against the Company to enforce the notes. The
     Company continues to accrue interest on these notes.               100,000

     In June, 2000, a Senior Subordinated Note in the principal
     amount of $500,000 was entered into with simple interest
     accruing at an annual rate of six percent (6%) and payable
     of the note's mauturity date of December 22, 2000. Principal
     and interest are payable in stock at the option of the
     Company. In connection therewith, the Company agreed to
     issue to the holders of the notes warrants to purchase an
     aggregate of 1,000,000 shares of common stock at an exercise
     price of $0.50 per share.                                          500,000

     In August, 2000, a Note in the principal amount of $100,000
     was entered into with interest of 10% per annum, payable
     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.                            100,000

     In September, 2000, a Note in the principal amount of
     $150,000 was entered into with interest of 10% per annum,
     payable 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 equivalents.                                                    150,000

     In September, 2000, a Note in the principal amount of
     $25,000 was entered into with interest of 10% per annum,
     payable February 2001. In conjunction with this financing,
     the Company issued a warrant to purchase 50,000 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 Equivalents                                                      25,000
                                                                     ----------

          Total Long-Term Debt                                       $2,486,500

     Less: Current Portion                                           $2,486,500
                                                                     ----------
     Long-Term Debt, net of current portion                          $     --
                                                                     ==========


                                                                              16

<PAGE>

NOTE 10 - Commitments and Contingencies

     Employment Agreement

     The Company has one employment agreement with a former executive of the
     Company that expires in the year 2001. The annual commitment for
     compensation is approximately $150,000 each year.

     Loan Guarantee

     The Company is a guarantor of 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. Total outstanding balance of the loan at
     September 30, 2000 was approximately $89,000.

     Litigation

     The Company is involved in litigation through the normal course of
     business. The Company believes that the resolution of these matters will
     not have a material adverse effect on the financial position of the
     Company.

     On February 12, 1999, a judgment in the amount of $1,064,616 was entered
     against X-Treem. Such amount has been accrued and included in accrued
     expenses at September 30, 2000. In November, 2000, as more fully described
     in Note 12 - Subsequent Events, X-Treem was formally dissolved.

     Payroll Taxes

     The Company has unpaid payroll taxes since the fourth quarter 1997. The
     Company is in the process of filing all unfiled returns and has accrued
     estimated penalties and interest of $220,500.

     Lease

     The Company occupies its premises subject to a noncancelable lease
     agreement expiring in March 2004. The Company will pay a fixed monthly rent
     plus real estate taxes.

     Future minimum payments under an operating lease are as follows at
     September 30, 2000.

       For the Year Ending
          September 30,                                  Amount
       ----------------------------------------------------------
             2001                                         121,805
             2002                                         121,805
             2003                                         121,805
             2004                                          30,450
                                                        ---------
       Total minimum lease payments                     $ 395,865
                                                        =========

     Rent expense for the six months ended September 30, 2000 and 1999 was
     $61,108 and $70,410, respectively. In connection with the lease, a
     refundable security deposit of $30,063 is held by the landlord.

NOTE 11 - Economic Dependency

     Major Customers

     The Company sells a substantial portion of its products to three customers
     for the six months ended September 30, 2000.

     Major Suppliers

     The Company purchased a substantial portion of its raw materials from one
     supplier for the six months ended September 30, 2000.

NOTE 12 - Subsequent Events

A)   On November 9, 2000, the Company filed an Amended and Restated Certificate
     of Incorporation which increased the number of authorized shares of common
     stock from 25,000,000 to 250,000,000 and conferred on the board of
     directors blank check authority to issue classes and series of stock
     without further shareholder action.

B)   On November 13, 2000, X-Treem was formally dissolved in accordance with the
     General Corporation Law of the State of Delaware. As a result, the
     Company's assets, liabilities and stockholders' deficiency will no longer
     reflect those of X-Treem. The estimated effect is to reduce the Company's
     liabilities by approximately $4,300,000, reduce the Stockholders'
     Deficiency by approximately $4,010,000, and reduce the assets by
     approximately $290,000. Because X-Treem has been inactive for approximately
     two years and had no revenues, its dissolution will have no impact on
     future revenues of the Company.


                                                                              17
<PAGE>


Item 2:

PHLO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS [Unaudited]
--------------------------------------------------------------------------------

For the six months ended September 30, 2000 compared with the six months ended
September 30, 1999.

The following discussion of the Company's financial condition as of September
30, 2000 and results of operations for the six months ended September 30, 2000
and 1999 includes Phlo Corporation and its subsidiary (collectively, the
"Company") and should be read in conjunction with the consolidated financial
statements and notes appearing elsewhere in this 10-QSB.

OVERVIEW

General

Phlo Corporation, a Delaware corporation incorporated in December, 1995, and its
subsidiaries (hereinafter collectively referred to as the "Company") is a
manufacturer of beverages containing patented and patent-pending
biotechnologies. The Company sells its beverages to distributors, who offer the
beverages for sale in high volume chain stores, such as supermarkets, and in
small retail outlets, such as delicatessens and convenience stores. Central to
the Company's strategic development plan is the development, acquisition and/or
exclusive licensing of proprietary (patented or patent-pending) technology of a
nutraceutical, biotechnological, and/or pharmaceutical nature, which the Company
initially plans to convey to consumers through beverages.

The Company is positioned as a biotechnology company which is using the
high-volume distribution segment of the beverage industry to commercialize a
portion of the technology. The Company is focusing its technology acquisition
and development efforts of those technologies related to reducing the effects of
aging, preventing or ameliorating cancer, assisting in weight loss, and
enhancing sexual performance.

The Company's beverage line is sold under the brand name "McCoy's" and includes
ice teas, green teas, lemonade and fruit drinks. In October 2000, the Company
introduced its newest line of beverages, "ZO - Vital Cell Defense", featuring
its proprietary (patent-pending) composition with controlled-release capability
which protects cells from the oxidative stress of aging and stimulates cell
repair. The launch of the Vital Cell Defense line marks the successful
commercialization of one of the Company's biotechnologies.

Note Regarding Forward Looking Information

Certain statements contained in this Annual Report constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Sections
21E of the Exchange Act. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, levels of activity, performance or achievements of the Company, or
industry results, to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following:
general economic and business conditions; the ability of the Company to
implement its business strategy; the ability of the Company to obtain financing
for general corporate purposes; competition; availability of key personnel; and
changes in, or the failure to comply with, governmental regulations. As a result
of the foregoing and other factors, no assurance can be given as to the future
results, levels of activity and achievements, and neither the Company nor any
person assumes responsibility for the accuracy and completeness of these
statements.


                                                                              18

<PAGE>


RESULTS OF OPERATIONS

The Company had a net loss of $1,550,041 for the six months ended September 30,
2000 as compared to a net loss of $1,165,288 for the six months ended September
30, 1999. The increase in net loss is the result of a decrease in sales, which
for the same periods decreased from $789,379 to $278,417, while selling, general
and administrative costs increased from $1,398,712 to $1,611,020.

The decrease in sales resulted from the discontinuance of all of the fruit
beverages and lemonades of the McCoy's line of beverages in preparation for the
substitution thereof by "ZO-Vital Cell Defense" beverage line. In conjuction
therewith, the finished goods inventory pertaining to this portion of the
McCoy's line to be discontinued was depleted to levels insufficient to satisfy a
significant portion of the orders from the Company's distributors. ZO was first
produced in October 2000, and sales immediately followed. The launch of the
Vital Cell Defense line of beverages marks the successful commercialization of
one of the Company's biotechnologies, and is expected to lead to significantly
higher future sales. At this time the Company plans to immediately produce its
complete line of "ZO-Vital Cell Defense" in order to satisfy demand by its
existing distributors and new distributors waiting to launch the "Vital Cell
Defense" line of beverages.

LIQUIDITY AND CAPITAL RESOURCES

The Company incurred a net loss for the year ended March 31, 2000 and the period
from April 1, 2000 through September 30, 2000 equal to $2,505,653 and
$1,550,041, respectively. In addition the Company has a working capital deficit
at September 30, 2000 equal to $7,101,925, approximately $4,010,000 of which is
attributable to X-Treem which has been formally dissolved (see Note 11). As a
result of the dissolution of X-Treem, the Company's assets, liabilities and
stockholders' deficiency will no longer reflect those of X-Treem. The estimated
effect is to reduce liabilities by approximately $4,300,000, reduce
stockholders' deficiency by approximately $4,010,000, and reduce assets by
approximately $290,000. Other steps and actions are also expected to reduce or
eliminate the current deficit, including plans to raise additional capital
involving private placement of securities and plans for reducing losses from
operations and ultimately realizing profitability by increasing sales.

Although the Company believes it will raise additional funding and make strides
towards achieving profitable operations by the latter part of the fiscal year
ending March 31, 2001, there can be no assurance that such additional funding
will be successfully completed or that profitable operations will be achieved or
achieved within the necessary time period. These conditions raise doubt about
the Company's ability to continue as a going concern.


                                                                              19

<PAGE>


                                   Signatures

Pursuant to the requirements of the Securities 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



November 17, 2000                     By:  /s/ James B. Hovis
                                           -----------------------------------
                                           James B. Hovis
                                           President and Chief Executive Officer


                                                                              20