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, 2006 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 | X | No | |


          The number of shares outstanding of the issuer's common stock as of
November 15, 2006, is 492,204,879.

<PAGE>

                        PHLO CORPORATION AND SUBSIDIARIES
                     Quarterly Report on Form 10-QSB for the
                   Quarterly Period Ending September 30, 2006

                                Table of Contents


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

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheet as of
            September 30, 2006 (Unaudited)                                    3

         Condensed Consolidated Statements of Operations for the
         three and six months ended September 30, 2006 and 2005
         (Unaudited)                                                          4

         Condensed Consolidated Statements of Cash Flows for the
         six months ended September 30, 2006 and 2005
          (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                                             11

PART II.  OTHER INFORMATION                                                  12

Item 1.  Legal Proceedings                                                   12

Item 2.  Unregistered Sale of Equity Securities and Use of Proceeds          12

Item 3.  Exhibits                                                            13


Signature                                                                    13

Certifications                                                               14




                                        2
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
                CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
                               September 30, 2006

                                     ASSETS
<TABLE>
<CAPTION>

<S>                                                                       <C>
CURRENT ASSETS
   Inventory                                                              $     36,343
   Accounts Receivable                                                           1,111
                                                                          ------------
           Total Current Assets                                                 37,454

PROPERTY PLANT AND EQUIPMENT, Net                                                6,211

SECURITY DEPOSITS                                                                4,100
                                                                          ------------

TOTAL ASSETS                                                              $     47,765
                                                                          ============

               LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable                                                          $  1,910,245
Accrued expenses and taxes                                                   2,990,338
Notes payable, current portion                                                 626,500
                                                                          ------------

           Total Current Liabilities                                         5,527,083
                                                                          ------------
Total liabilities                                                            5,527,083
                                                                          ------------

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, 500,000 shares authorized,
none issued and outstanding                                                         --
Series C preferred convertible stock, $0.0001 par value 3,000,000
authorized, 1,240,565 shares outstanding (Liquidation preference $12,406)          124
Series C preferred convertible stock, 15,298 shares subscribed                       1
Common stock, $0.0001 par value, 250,000,000 shares authorized
477,204,879 shares issued and outstanding                                       47,720
Common stock, $0.0001 par value, 14,131,654 shares subscribed                    1,414
Additional paid-in capital                                                  16,108,915
Accumulated deficit                                                        (21,637,542)
                                                                          ------------
           Total Deficiency in Stockholders' Equity                         (5,479,318)
                                                                          ------------
TOTAL LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY                  $     47,765
                                                                          ============
</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 and Six Months Ended September 30, 2006 and 2005


<TABLE>
<CAPTION>

                                                    Three months ended September 30,   Six months ended September 30,
                                                    --------------------------------   -----------------------------
                                                         2006              2005             2006           2005
                                                        ------            ------           ------         ------
<S>                                                 <C>                <C>               <C>            <C>
REVENUES                                            $        748                 --      $     1,623             --

COST OF REVENUES                                             168                 --              168             --
                                                    ------------       ------------      -----------    -----------
GROSS PROFIT                                                 580                 --            1,455             --


OPERATING COSTS AND EXPENSES
   General and Administrative                            289,450            254,066         709,560         688,798
   Research and development                               30,000                 --           55,000         24,144
                                                      ----------       ------------      -----------    -----------

   LOSS FROM OPERATIONS                                 (318,870)          (254,066)       (763,105)       (712,942)
                                                       ---------       ------------      -----------    -----------

OTHER (EXPENSES)

   Other Financing Cost                                 (213,412)          (182,243)        (246,808)      (329,620)
   Interest expense, net                                 (16,837)           (19,966)         (33,675)       (39,772)
                                                      ----------       ------------      -----------    -----------

   TOTAL OTHER (EXPENSES)                               (230,249)          (202,209)        (280,483)      (369,392)
                                                      ----------       ------------      -----------    -----------

   LOSS BEFORE INCOME TAXES                             (549,119)          (456,275)      (1,043,588)    (1,082,334)

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

NET LOSS                                            $   (549,119)      $   (456,275)     $(1,043,588)   $(1,082,334)
                                                    ============       ============      ===========    ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING           455,951,670        289,283,484      433,108,584    271,829,354
                                                    ============       ============      ===========    ===========

NET (LOSS) PER SHARE (BASIC AND DILUTED)            $      (0.00)      $      (0.00)     $     (0.00)      $ (0.00)
                                                    ============       ============      ===========    ===========
</TABLE>




   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 Six Months Ended September 30, 2006 and 2005

                                                           2006         2005
                                                         ---------   ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                               $(1,043,588) $(1,082,334)

Adjustments to reconcile net loss to net
  cash used in operating activities:
Common stock reimbursement to shareholder                  246,808      309,619
Common stock issued for services                           103,150       80,000
Warrants issued for services                                 7,922       21,000
Warrants issued for financing expense                           --       20,000
Depreciation and amortization                                1,232        1,232

Changes in operating assets and liabilities:
         Prepaid expense                                        --      (80,519)
         Inventory                                         (36,343)          --
         Accounts receivable                                   156           --
         Settlement receivable                              55,000           --
         Other receivable                                    6,964           --
         Accounts payable                                  394,111      156,652
         Accrued expenses and taxes                         92,588      116,350
                                                         ---------   ----------
NET CASH USED IN OPERATING
ACTIVITIES                                                (172,000)    (458,000)
                                                         ---------   ----------

CASH FLOW FROM INVESTING ACTIVITIES
Purchase of equipment                                           --           --
                                                         ---------   ----------
NET CASH USED IN INVESTING ACTIVITIES                           --           --
                                                         ---------   ----------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from revolving credit line                             --      140,000
Proceeds from sale and subscription of equity
 securities                                                172,000      318,000
                                                         ---------   ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES                  172,000      458,000
                                                         ---------   ----------

NET DECREASE IN CASH                                     $      --    $      --

Cash and cash equivalents, beginning of the period              --           --
                                                         ---------   ----------
Cash and cash equivalents, end of the period             $      --    $      --
                                                         =========   ==========
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                                      --        5,207
  Common stock issued in exchange for revolving credit
   line                                                         --       83,181
  Warrants issued for deferred compensation                     --       27,800
  Subscription receivable on settlement                         --       80,000




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


                                        5
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (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
and six months ended September 30, 2006 are not necessarily indicative of the
results that may be expected for the fiscal year ending March 31, 2007. 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, 2006.

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 markets its products to institutional purchasers,
such as colleges and universities and sports teams, and 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.

Stock-based Compensation

Prior to the January 1, 2006 adoption of the Financial Accounting Standards
Board ("FASB") Statement No. 123(R), "Share-Based Payment" ("SFAS 123R"), the
Company accounted for stock-based compensation using the intrinsic value method
prescribed in Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. As permitted by
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"),
stock-based compensation was included as a pro forma disclosure in the notes to
the consolidated financial statements.

Effective January 1, 2006, the Company adopted the fair value recognition
provisions of SFAS 123R, using the modified-prospective transition method. Under
this transition method, stock-based compensation expense is recognized in the
consolidated financial statements for granted, modified, or settled stock
options. Compensation expense recognized included the estimated expense for
stock options granted on and subsequent to January 1, 2006, based on the grant
date fair value estimated in accordance with the provisions of SFAS 123R, and
the estimated expense for the portion vesting in the period for options granted
prior to, but not vested as of January 1, 2006, based on the grant date fair
value estimated in accordance with the original provisions of SFAS 123. Results
for prior periods have not been restated, as provided for under the
modified-prospective method.

The Company has no awards of stock-based employee compensation issued and
outstanding at September 30, 2006 and 2005.

Reclassifications

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


                                        6
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (Unaudited)

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. At March 31, 2006, the Company had
repaid in full the outstanding balance of principal and accrued interest.

During the term of the credit facility, the lender has exercised its rights
provided by the loan documents to sell shares of Common Stock that were
previously issued and pledged as collateral for the repayment of advances
pursuant to the credit facility. During the six-month period ended September 30,
2006, the lender paid $6,964 in excess proceeds from the liquid of stock to the
Company.

Also during the six-month period ended September 30, 2006, the lender exercised
its rights under the terms of the credit facility to take title to 10,521,000
shares of Common Stock which had served as collateral under the facility but
which were not liquidated. During the quarter ended June 30, 2006, the lender
returned to the Company 7,500,000 shares of Common Stock that had served as
collateral under the facility. The return of these shares reduced the number of
the Company's outstanding shares of Common Stock.
..
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 (the "Common Stock").

Each share of Series C Preferred Stock initially was convertible into 100 shares
of Common Stock without the payment of any additional consideration at any time
after September 30, 2001. However, the conversion rate is subject to adjustment
in the case of certain corporate transactions or events, including stock splits
and combinations; certain dividends and distributions; reclassification,
exchange or substitution of the Common Stock; reorganizations, mergers
consolidations or sale of assets; and the sale of shares of Common Stock at a
price that is less than the then-effective Series C Conversion Price. In the
event of a sale of shares of Common Stock at a price that is less than the
then-effective Series C Conversion Price, then, in each such event, an
adjustment to such conversion price is made to allow the holder of the Series C
Preferred Stock to convert into shares of Common Stock at a rate greater than
the rate effective immediately preceding such issuance. Currently, as a result
of the foregoing applicable adjustments, each share of Series C Preferred Stock
is convertible into 490 shares of Common Stock.

During the fiscal year ended March 31, 2006, the Company's Board of Director's
voted to amend the Company's articles of incorporation to increase the number of
authorized shares of Common Stock from 250,000,000 to 600,000,000. The board of
directors' vote shall be followed by shareholder approval of such increase by
shareholders holding the majority of the shares entitled to vote on such matter
through shareholder written consent and the issuance of an Information Statement
to shareholders to inform them of the amendment to the Company's articles of
incorporation.

As of September 30, 2006, the Company has 500,000 shares of Series A convertible
preferred stock, 1,240,565 shares of Series C convertible preferred stock, and
477,204,879 shares of common stock issued and outstanding. The Company has no
Series B non-convertible preferred stock issued and outstanding at September 30,
2006.


                                        7
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (Unaudited)

NOTE C - CAPITAL STOCK (Continued)

In the fiscal quarter ended June 30, 2006, in consideration of $55,500, the
Company agreed to issue 2,493,332 shares of Common Stock (of which 1,993,332
shares were issued during the quarter ended June 30, 2006, and 500,000 shares
were issued during the quarter ended September 30, 2006) and agreed to issue
warrants to purchase 750,000 shares of Common Stock at an exercise price of
$0.05 per share (all of which were issued as of September 30, 2006).
Additionally, the Company agreed to issue 1, 284,444 shares of Common Stock to
officers of the Company in connection with such financing and in consideration
of guarantees and supplying of shares of stock as collateral which were used to
satisfy obligations of the Company (of which 951,112 shares were issued during
the quarter ended June 30, 2006, and 333,332 shares were issued during the
quarter ended September 30, 2006). The Company accounted for and charged to
operation such shares in the amount of $33,396, which approximated the fair
value of the Common Stock at the time the shares were issued.

In the fiscal quarter ended June 30, 2006, the Company issued a
previously-subscribed warrant to purchase 1,250,000 shares of Common Stock at an
exercise price of $0.03. The value of such warrant had been accounted for and
charged to operations in the prior fiscal year.

In the quarter ended September 30, 2006, the Company issued 1,300,000 shares of
Common Stock previously subscribed.

In the quarter ending September 30, 2006, the Company issued 30,252,110 shares
of Common Stock to shareholders upon their conversion of 61,739 shares of Series
C Convertible Preferred Stock.

In the quarter ended September 30, 2006, in consideration of $116,500, the
Company issued 15,459,998 shares of Common Stock and warrants to purchase
4,289,166 shares of Common Stock at exercise prices ranging from $0.03 to $0.05.
The Company issued 1,000,000 shares of Common Stock and a warrant to purchase
1,087,500 shares of stock at an exercise price of $0.03 for services rendered,
and issued 10,500,000 shares of Common Stock pursuant to agreements involving,
among other things, services rendered to the Company. The shares issued for
services were valued at $103,150 and the warrants issued for services were
valued at $7,921 using the Black-Scholes model with the following assumptions:
(1) dividend yield of 0%; (2) expected volatility of 342%; (3) risk-free
interest rate of 5%; and (4) expected life of two years. Additionally, the
Company issued 22, 058,181 shares of Common Stock to officers of the Company in
connection with such financings and in consideration of guarantees and supplying
of shares of stock as collateral which were used to satisfy obligations of the
Company. The Company accounted for and charged to operation such shares in the
amount of $213,413, which approximated the fair value of the Common Stock at the
time the shares were issued.

NOTE D - COMMITMENTS AND CONTINGENCIES

Litigation

A Phlo affiliate is currently engaged in litigation with a contract research and
development facility. Such affiliate terminated its agreement with the R&D
facility, asserting that the facility had breached its agreement with the
Company and committed fraud, and the Company demanded payment from the R&D
facility as required by the agreement. Phlo is not a party to this litigation,
was not a party to the contract at issue, and no claims have been made against
Phlo. The Company insisted that an independent scientific lab perform an audit
of the work allegedly performed by the R&D facility for the Company (for which
the Company has rendered substantial consideration, including $225,000 in cash).
As a defensive measure, the R&D facility initiated legal action claiming
wrongful termination. The Company has asserted as counterclaims breach of
contract, fraud, and negligence. As Advanced Bio-Delivery, the operating entity
involved in the litigation, has been dissolved by operation of the provisions of
its operating agreement and is no longer conducting business, the Company did
not continue to dedicate additional financial resources to the defense of the
claims and the prosecution of its counterclaims. Therefore, a decision was
entered by a Delaware Court of Chancery in the fiscal quarter ended September
30, 2006, that the plaintiff's allegations are true. A decision has not yet been
rendered with respect to the amount of damages, if any, suffered by the
plaintiff or with respect to what relief, if any, may be awarded. Management
believes that grounds for appeal currently exist which may be asserted once a
final determination is made in the case. Management is uncertain as to the final
outcome of this matter and, therefore, is unable currently to assess any
potential material adverse effect on the Company's consolidated financial
position or results of operations that may result from this litigation.

                                        8
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2006
                                   (Unaudited)

NOTE D - COMMITMENTS AND CONTINGENCIES (Continued)

Litigation  (continued)

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. The
Company disputed the allegations and vigorously defended the SEC action.
Additionally, the Company became completely current in its financial reporting
prior to the issuance of an initial decision on this matter.

On February 17, 2006, an Initial Decision was rendered by the Administrative Law
Judge ("ALJ") in the matter. The ALJ determined that the registration Phlo's
public securities should not be revoked. He entered cease and desist orders with
respect to Phlo and James Hovis against future violations of reporting
requirements. With respect to alleged transfer agent violations, the ALJ revoked
Phlo's status as transfer agent and entered a cease and desist order against
Phlo and Anne Hovis against future violations and barred Anne Hovis from future
association with a transfer agent. The ALJ also assessed civil penalties against
Phlo in the amount of $100,000, against James Hovis in the amount of $25,000,
and against Anne Hovis in the amount of $50,000.

The Company has appealed the Initial Decision, which stays the sanctions imposed
for the duration of the appeal. Among other things, the Company argued that the
ALJ had no jurisdiction to impose a fine against James Hovis; that many of the
ALJ's findings of fact were wrong in light of the evidence presented; that fines
against Anne Hovis and Phlo were unduly harsh in light of the evidence; and that
the ALJ ignored the SEC's burden of proof. All appeal briefs have been filed by
both sides. While the Company can make no assurances with respect to the outcome
of this matter, management believes the ultimate disposition of this matter will
not have a material adverse effect on the Company's consolidated financial
position or results of operation.

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.

NOTE E - SUBSEQUENT EVENTS

Equity

Subsequent to the quarter ended September 30, 2006, in consideration of
$153,000, the Company agreed to issue 42,277,833 shares of Common Stock
(15,000,000 of which were issued by the filing date hereof) and warrants to
purchase 3,000,000 shares of Common Stock at an exercise price of $0.02 per
share, which has not yet been issued.


                                     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 2006 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.


                                        9
<PAGE>

OVERVIEW

The following discussion of the Company's financial condition as of September
30, 2006 and results of operations for the three and six months ended September
30, 2006and 2005 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

During the fiscal quarter ended June 30, 2006, the Company announced that it had
commenced online sales of its AQUIS(TM) Rapid Response Rehydration product
through its website, and initial revenue has been generated therefrom in the
three and six month periods ended September 30, 2006. The AQUIS(TM) product line
contains the Company's MEDS (Micro-Encapsulation Delivery System)
biologically-active delivery technology. This technology creates immediate
absorption of the electrolyte payload into the bloodstream, beginning through
the mucous membranes of the mouth.

During the latter part of the fiscal year ended March 31, 2006, the Company
developed a new delivery system for its AQUIS(TM) beverages and a new method of
producing such delivery system. Among other things, the Company significantly
reduced the size of the vesicles contained in its delivery system as a result of
its enhanced nano-technology. These nano-particles increase the effectiveness of
AQUIS(TM) and substantially increase the speed of delivery of electrolytes. In
addition, the Company's VEP/PPC technology is now an integral part of its
AQUIS(TM) beverages, which provides potent cell protection and repair in
addition to rapid rehydration. This is particularly important to athletes, who
sustain significant cell damage during strenuous physical exertion. To reflect
the significant changes in its beverages, the Company has also completely
changed the packaging of its new AQUIS(TM) beverage products.

During the fiscal year ended March 31, 2006, the Company's Board of Director's
voted to amend the Company's articles of incorporation to increase the number of
authorized shares of Common Stock from 250,000,000 to 600,000,000. The board of
directors' vote shall be followed by shareholder approval of such increase by
shareholders holding the majority of the shares entitled to vote on such matter
through shareholder written consent and the issuance of an Information Statement
to shareholders to inform them of the amendment to the Company's articles of
incorporation.

Subsequent to the quarter ended September 30, 2006, the Company has established
distribution capabilities related to AQUIS(TM) in certain domestic and
international markets in the elite athlete market segment, primarily in the
areas of organized sports, team sales, sales at sporting events, and
institutional sales.

RESULTS OF OPERATIONS

The Company had revenues of $748 and $1,623, respectively, and cost of sales of
$168 and $168, respectively, during the three and six-month periods ended
September 30, 2006, as compared with no revenue and no cost of sales for the
three and six-month periods ended September 30, 2005. The selling, general and
administrative expenses for the three and six month periods ended September 30,
2006 were $289,450 and $709,560, respectively, as compared to $254,066 and
$688,798 for the comparable three and six month periods during 2005. The Company
incurred research and development costs of $30,000 and $55,000, respectively,
during the three and six month periods ended September 30, 2006, as compared
with $0 and $24,144 for the comparable three and six month periods during 2005.

The Company's loss from operations was $318,870 and $763,105, respectively, for
the three and six-month periods ended September 30, 2006, as compared with an
operating loss of $254,066 and $712,942 for the comparable three and six month
periods ended September 30, 2005.

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 over the
long term significantly greater positive operating results and greater
shareholder value than would otherwise be possible.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital deficit increased $493,805 during the six-month
period ended September 30, 2006, to $5,489,629. In addition, the Company's
Stockholders' Deficiency increased from $4,975,610 to $5,479,318 during the same
six-month period.


                                       10
<PAGE>

During the fiscal year ending March 31, 2007 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 financing as a result of its prospects for
national and global distribution of its products through joint venture
undertakings with entities possessing marketings and distribution infrastructure
and capabilities, the existence of products 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 debt 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, 2006 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 continue to finance the Company's
operations or 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.


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<PAGE>

                                     PART II

ITEM 1.  LEGAL PROCEEDINGS

A Phlo affiliate is currently engaged in litigation with a contract research and
development facility. Such affiliate terminated its agreement with the R&D
facility, asserting that the facility had breached its agreement with the
Company and committed fraud, and the Company demanded payment from the R&D
facility as required by the agreement. Phlo is not a party to this litigation,
was not a party to the contract at issue, and no claims have been made against
Phlo. The Company insisted that an independent scientific lab perform an audit
of the work allegedly performed by the R&D facility for the Company (for which
the Company has rendered substantial consideration, including $225,000 in cash).
As a defensive measure, the R&D facility initiated legal action claiming
wrongful termination. The Company has asserted as counterclaims breach of
contract, fraud, and negligence. As Advanced Bio-Delivery, the operating entity
involved in the litigation, has been dissolved by operation of the provisions of
its operating agreement and is no longer conducting business, the Company did
not continue to dedicate additional financial resources to the defense of the
claims and the prosecution of its counterclaims. Therefore, a decision was
entered by a Delaware Court of Chancery in the fiscal quarter ended September
30, 2006, that the plaintiff's allegations are true. A decision has not yet been
rendered with respect to the amount of damages, if any, suffered by the
plaintiff or with respect to what relief, if any, may be awarded. Management
believes that grounds for appeal currently exist which may be asserted once a
final determination is made in the case. Management is uncertain as to the final
outcome of this matter and, therefore, is unable currently to assess any
potential material adverse effect on the Company's consolidated financial
position or results of operations that may result from this 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. The
Company disputed the allegations and vigorously defended the SEC action.
Additionally, the Company became completely current in its financial reporting
prior to the issuance of an initial decision on this matter.

On February 17, 2006, an Initial Decision was rendered by the Administrative Law
Judge ("ALJ") in the matter. The ALJ determined that the registration of Phlo's
public securities should not be revoked. He entered cease and desist orders with
respect to Phlo and James Hovis against future violations of reporting
requirements. With respect to alleged transfer agent violations, the ALJ revoked
Phlo's status as transfer agent and entered a cease and desist order against
Phlo and Anne Hovis against future violations and barred Anne Hovis from future
association with a transfer agent. The ALJ also assessed civil penalties against
Phlo in the amount of $100,000, against James Hovis in the amount of $25,000,
and against Anne Hovis in the amount of $50,000.

The Company has appealed the Initial Decision, which stays the sanctions imposed
for the duration of the appeal. Among other things, the Company argued that the
ALJ had no jurisdiction to impose a fine against James Hovis; that many of the
ALJ's findings of fact were wrong in light of the evidence presented; that fines
against Anne Hovis and Phlo were unduly harsh in light of the evidence; and that
the ALJ ignored the SEC's burden of proof. All appeal briefs have been filed by
both sides. While the Company can make no assurances with respect to the outcome
of this matter, management believes the ultimate disposition of this matter will
not have a material adverse effect on the Company's consolidated financial
position or results of operation.

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.     UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

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

In the fiscal quarter ended June 30, 2006, in consideration of $55,500, the
Company agreed to issue 2,493,332 shares of Common Stock (of which 1,993,332
shares were issued during the quarter ended June 30, 2006, and 500,000 shares
were issued during the quarter ended September 30, 2006) and agreed to issue
warrants to purchase 750,000 shares of Common Stock at an exercise price of
$0.05 per share (all of which were issued as of September 30, 2006).
Additionally, the Company agreed to issue 1, 284,444 shares of Common Stock to
officers of the Company in connection with such financing and in consideration
of guarantees and supplying of shares of stock as collateral which were used to
satisfy obligations of the Company (of which 951,112 shares were issued during
the quarter ended June 30, 2006, and 333,332 shares were issued during the
quarter ended September 30, 2006).

In the fiscal quarter ended June 30, 2006, the Company issued a
previously-subscribed warrant to purchase 1,250,000 shares of Common Stock at an
exercise price of $0.03.


                                       12
<PAGE>

In the quarter ended September 30, 2006, the Company issued 1,300,000 shares of
Common Stock previously subscribed.

In the quarter ending September 30, 2006, the Company issued 30,252,110 shares
of Common Stock to shareholders upon their conversion of 61,739 shares of Series
C Convertible Preferred Stock.

In the quarter ended September 30, 2006, in consideration of $116,500, the
Company issued 15,459,998 shares of Common Stock and warrants to purchase
4,289,166 shares of Common Stock at exercise prices ranging from $0.03 to $0.05.
The Company issued 1,000,000 shares of Common Stock and a warrant to purchase
1,087,500 shares of stock at an exercise price of $0.03 for services rendered,
and issued 10,500,000 shares of Common Stock pursuant to agreements involving,
among other things, services rendered to the Company. Additionally, the Company
issued 22, 058,181 shares of Common Stock to officers of the Company in
connection with such financings and in consideration of guarantees and supplying
of shares of stock as collateral which were used to satisfy obligations of the
Company.


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

November 20, 2006                     By:  /s/ James B. Hovis
                                         --------------------------------------
                                          James B. Hovis
                                          President and Chief Executive Officer


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