UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                   FORM 10-QSB

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

       For the quarter ended June 30, 2005 Commission File Number 0-21079

                                PHLO CORPORATION

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15 (d) of the Securities and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |_| No |X|

      The number of shares outstanding of the issuer's common stock as of
November 28, 2005, is 368,881,527.

<PAGE>

                        PHLO CORPORATION AND SUBSIDIARIES

                     Quarterly Report on Form 10-QSB for the
                      Quarterly Period Ending June 30, 2005

                                Table of Contents

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

Item 1.  Financial Statements

         Condensed Consolidated Balance Sheet as of
            June 30, 2005 (Unaudited)                                     3

         Condensed Consolidated Statements of Operations for the
         three months ended June 30, 2005 and 2004
         (Unaudited)                                                      4

         Condensed Consolidated Statements of Cash Flows for the
         three months ended June 30, 2005 and 2004
         (Unaudited)                                                      5

         Notes to Condensed Consolidated Financial Statements
         (Unaudited)                                                      6

Item 2.  Managements' Discussion and Analysis or Plan
         of Operation                                                    10

Item 3.  Controls and Procedures                                         11

PART II.  OTHER INFORMATION                                              12

Item 1.  Legal Proceedings                                               12

Item 2.  Changes in Securities                                           12

Item 3.  Exhibits
                                                                         13

Signature                                                                13

Certifications                                                           14


                                        2
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
                CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
                                  June 30, 2005

<TABLE>
<S>                                                                            <C>
                                     ASSETS
CURRENT ASSETS
   Inventory                                                                   $     75,041
                                                                               ------------
           Total Current Assets                                                      75,041

PROPERTY PLANT AND EQUIPMENT, Net                                                     9,292
DEPOSITS                                                                             12,771
                                                                               ------------

TOTAL ASSETS                                                                   $     97,104
                                                                               ============
       LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable                                                               $  1,406,544
Accrued expenses and taxes                                                        2,671,449
Notes payable, current portion                                                      626,500
Revolving credit line (Note B)                                                      119,074
                                                                               ------------

           Total Current Liabilities                                              4,823,567
                                                                               ------------
Total liabilities                                                                 4,823,567
                                                                               ------------

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, 1,302,304 shares outstanding (Liquidation preference $13,023)               130
Series C preferred convertible stock, 15,298 shares subscribed                            1
Common stock, $0.0001 par value, 250,000,000 shares authorized
260,888,239 shares issued and outstanding                                            26,088
Common stock, $0.0001 par value, 16,963,473 shares subscribed                         1,697
Additional paid-in capital                                                       13,623,284
Accumulated deficit                                                             (18,377,713)
                                                                               ------------
           Total Deficiency in Stockholders' Equity                              (4,726,463)
                                                                               ------------
TOTAL LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY                       $     97,104
                                                                               ============
</TABLE>

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


                                        3
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                For the Three Months Ended June 30, 2005 and 2004

<TABLE>
<CAPTION>
                                                     Three Months  Three Months
                                                -----------------------------------
                                                      2005                2004
                                                ---------------     ---------------
<S>                                             <C>                 <C>
OPERATING COSTS AND EXPENSES
   General and Administrative                   $       434,732     $       280,321
   Research and Development                              24,144             108,617
                                                ---------------     ---------------

   LOSS FROM OPERATIONS                                (458,876)           (388,938)
                                                ---------------     ---------------
OTHER (EXPENSES)

  Financing Cost                                       (147,377)            (69,578)
  Interest expense                                      (19,806)            (16,065)
                                                ---------------     ---------------

   TOTAL OTHER (EXPENSES)                              (167,183)            (85,643)
                                                ---------------     ---------------
   LOSS BEFORE INCOME TAXES                            (626,059)           (474,581)

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

NET LOSS                                        $      (626,059)    $      (474,581)
                                                ===============     ===============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING          254,183,421         196,247,623

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

NET LOSS PER SHARE (BASIC AND DILUTED)          $         (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 Three Months Ended June 30, 2005 and 2004

<TABLE>
<CAPTION>
                                                                               2005                2004
                                                                         ---------------     ---------------
<S>                                                                      <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                                 $      (626,059)    $      (474,581)

Adjustments to reconcile net loss to net cash used in operating
  activities:
Common stock reimbursement to shareholder (Note C)                               127,376              61,818
Common stock issued in exchange for other
  financing expense (Note B)                                                          --               6,060
Common stock issued for services (Note C)                                         80,000                  --
Warrants issued for services (Note C)                                             21,000                  --
Warrants issued for financing expense (Note C)                                    20,000                  --
Depreciation and amortization                                                        616                 976

Changes in operating assets and liabilities:
         Prepaid expense                                                              --            (241,323)
         Accounts payable                                                        123,230               5,612
         Accrued expenses and taxes                                               56,337              35,893
                                                                         -----------------------------------
NET CASH USED IN OPERATING ACTIVITIES                                           (197,500)           (605,545)
                                                                         -----------------------------------

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

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from revolving credit line (Note B)                                     130,000             100,000
Proceeds from sale and subscription of equity
 securities (Note C)                                                              67,500             540,973
                                                                         -----------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                        197,500             640,973
                                                                         -----------------------------------

NET INCREASE IN CASH                                                     $            --     $        34,122

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

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

Non-Cash Financing Activities:
  Common stock issued in exchange for accrued interest
    and accrued liabilities (Note B)                                               1,917             207,345
Common stock issued in exchange for revolving credit
  line (Note B)                                                                   43,584              48,045
Common stock issued in exchange for other financing
  expense (Note B)                                                                    --               6,060
</TABLE>

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


                                        5
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE A - SUMMARY OF ACCOUNTING POLICIES

General

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary in order to make the
financial statements not misleading have been included. Results for the three
months ended June 30, 2005 are not necessarily indicative of the results that
may be expected for the fiscal year ending March 31, 2006. 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, 2005.

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

In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148 ("SFAS No. 148"), "Accounting for Stock-Based Compensation-Transition
and Disclosure - an amendment of SFAS 123." This statement amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in APB Opinion No. 25
and related interpretations. Accordingly, compensation expense for stock options
is measured as the excess, if any, of the fair market value of the Company's
stock at the date of the grant over the exercise price of the related option.
The Company has adopted the annual disclosure provisions of SFAS No. 148 in its
financial reports for the year ended March 31, 2005 and has adopted the interim
disclosure provisions for its financial reports for the subsequent periods. The
Company has no awards of stock-based employee compensation outstanding at June
30, 2005.

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued
FASB Statement No. 123R (revised 2004), "Share-Based Payment" which is a
revision of FASB Statement No. 123, "Accounting for Stock-Based Compensation".
Statement 123R supersedes APB opinion No. 25, "Accounting for Stock Issued to
Employees", and amends FASB Statement No. 95, "Statement of Cash Flows".
Generally, the approach in Statement 123R is similar to the approach described
in Statement 123. However, Statement 123R requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the
income statement based on their fair values. Pro-forma disclosure is no longer
an alternative. On April 14, 2005, the SEC amended the effective date of the
provisions of this statement. The effect of this amendment by the SEC is that
the Company will have to comply with Statement 123R and use the Fair Value based
method of accounting no later than the fourth quarter of its fiscal year 2006.
Management has not determined whether the adoption of this statement may have a
material impact on the Company's consolidated financial statements if the
Company issues stock-based employee compensation awards.


                                       6
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE A - SUMMARY OF ACCOUNTING POLICIES (Continued)

New Accounting Pronouncements

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

Reclassifications

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

NOTE B - REVOLVING CREDIT FACILITY

In June, 2002, the Company closed a revolving credit facility with a one-year
term which provides for advances of up to a maximum principal amount of
$250,000, at the option of the lender, at an interest rate of 10% per annum,
with each advance payable within 30 days. At March 31, 2005, the outstanding
principal balance under the facility was $32,658. Repayment of advances under
the facility are secured by the Company's assets and are guaranteed by two
officers of the Company.

In April, 2005, an additional advance was authorized under the Company's
revolving credit facility of up to $150,000, $130,000 of which has been advanced
as of June 30, 2005. Subsequent to June 30, 2005, an additional $10,000 was
advanced. In conjunction with this additional advance, the Company issued
13,700,000 shares of Common Stock which serve as collateral to secure repayment
of advances made to the Company under the facility and the meeting of all
obligations of the Company under the facility loan documents. Also in connection
with such advance, the Company granted to the Lender the option, after the
expiration of a period of one year from such advance, to take title to 4,600,000
shares (or any portion thereof) of such stock collateral; agreed to deliver to
the Lender, until such advance has been repaid, net proceeds received by the
Company generated by the sale of its rehydration beverage of up to $50,000; and
agreed to increase the interest rate with respect to the current advance and the
outstanding principal balance on prior advances from 10% to 12%.

The Company did not repay the advance by the maturity date. As a result thereof,
the lender has exercised its rights provided by the loan documents to sell
shares of stock that were previously issued and pledged as collateral for the
repayment of advances pursuant to the credit facility. During the quarter ended
June 30, 2005, 1,585,000 collateral shares, valued at $45,501 were used to pay
down $43,584 of debt and $1,917 of related accrued interest. As of June 30,
2005, the sale of collateral has reduced the outstanding principal to $119,074.

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.

Subsequent to the fiscal quarter ended June 30, 2005, 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 June 30, 2005, the Company has 500,000 shares of Series A convertible
preferred stock, 1,302,304 shares of Series C convertible preferred stock, and
260,888,239 shares of common stock issued and outstanding. The Company has no
Series B non-convertible preferred stock issued and outstanding at June 30,
2005.

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


                                       7
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE C - CAPITAL STOCK (Continued)

In May and June, 2005, in consideration of $67,500, the Company agreed to issue
4,950,000 shares of Common Stock, 4,500,000 of which have been issued at June
30, 2005. Additionally, the Company issued 2,550,000 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 sold to
satisfy obligations of the Company. The Company accounted for and charged to
operation such shares in the amount of $38,250, which approximated the fair
value of the Common Stock at the time the shares were issued.

In June 2005, the Company issued 4,000,000 shares of the Common Stock, valued at
$80,000 in exchange for services rendered pursuant to existing agreements. The
valuation of common stock issued for services were based upon the value of the
services rendered, which did not differ materially from the fair value of the
Company's common stock during the period the services were rendered. The Company
also issued 2,060,606 shares of Common Stock to officers of the Company in
connection with such agreements and in consideration of guarantees and supplying
of shares of stock as collateral. The Company accounted for and charged to
operation such shares in the amount of $20,606, which approximated the fair
value of the Common Stock at the time the shares were issued.

In the quarter ended June 30, 2005, in consideration of guarantees and supplying
of shares of stock as collateral in connection with financings, the Company
issued 6,852,055 shares of Common Stock to officers of the Company. The Company
accounted for and charged to operations such shares in the amount of $68,520,
which approximated the fair value of the Common Stock at the time the shares
were issued.

In April 2005, in consideration for extended payment terms relating to a Company
obligation, the Company agreed to extend the expiration date of a warrant
previously granted to the recipient from March 2005 to March 2007. Additionally,
the number of shares of the Company's common stock purchasable pursuant to the
warrant was increased from 200,000 shares to 750,000 shares and the warrant
exercise price was decreased from $0.05 to $0.03. The warrant was valued at
$20,000 using the Black Scholes method at the date of grant of the options based
on the following assumptions: (1) risk free interest rate of 3.5%; (2) dividend
yield of 0%; (3) volatility factor of the expected market price of our common
stock of 222%; and (4) an expected life of the warrant of 2 years. This amount
has been charged to expense as a financing cost.

In May 2005, the Company issued previously subscribed warrants to purchase an
aggregate of 250,000 shares of Common Stock at an exercise price of $0.02 per
share. The value of such warrants had been accounted for and charged to
operation in the prior fiscal year.

In May, 2005, the Company issued a warrant to purchase 750,000 shares of Common
Stock at an exercise price of $0.05 per share for the provision of
production-related and other services. The warrant was valued at $21,000 using
the Black Scholes method at the date of grant of the options based on the
following assumptions: (1) risk free interest rate of 3.5%; (2) dividend yield
of 0%; (3) volatility factor of the expected market price of our common stock of
222%; and (4) an expected life of the warrant of 2 years. This amount has been
charged to expense.

NOTE D - OTHER ASSETS

In the fiscal year ended March 31, 2004, the Company entered into an agreement
with a company which is providing services to the Company related to the
enhancement of the Company's biotechnologies, including the supervision of
further research and development, protocols, and testing pertaining to the
enhancement and protection of the intellectual property related thereto and the
commercialization, production, marketing and distribution of the products
containing such biotechnologies. In conjunction therewith, the Company made
payments thereto of $196,600 during the quarter ended June 30, 2005 to be used
for the activities set forth above. During the fiscal quarter ended June 30,
2005, all of the funds advanced had been expended. Additionally, the Company
agreed to pay to the other party two percent of net revenues generated by the
sale of products with respect to which the company provided services under the
agreement during the term of the agreement, subject to certain limitations set
forth therein.

NOTE E - COMMITMENTS AND CONTINGENCIES

Litigation

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

The Company disputes all allegations made by the Division of Enforcement (except
for the fact that Phlo did not timely make certain periodic filings) and is
vigorously defending the SEC action. The Company expects to be completely
current in its financial reporting prior to the


                                       8
<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2005
                                   (Unaudited)

NOTE E - COMMITMENTS AND CONTINGENCIES (Continued)

Litigation (Continued)

issuance of an initial decision on this matter. The Company has also provided to
the SEC evidence of the existence of extraordinary circumstances related to its
former outside auditing firms resulting in Phlo not being able to maintain
timely financial filings. Finally, the Company can make no assurances with
respect to the outcome of this matter.

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 F - SUBSEQUENT EVENTS

Equity

In August 2005, the Company issued 450,000 shares of Common Stock in exchange
for Common Stock subscribed in May and June 2005.

In August, 2005, the Company issued a warrant to purchase up to 3,000,000 shares
of Common Stock at an exercise price of $0.02 per share. However, the holder's
right to exercise the warrant is contingent upon the attainment of certain
sales-related performance goals within a specified time. To date, the warrant
may not be exercised with respect to any shares of Common Stock.

In August 2005, in conjunction with a settlement agreement providing for the
payment to the Company of up to $100,000, and the provision of services to the
Company, the Company issued 12,121,212 shares of Common Stock, 4,121,212 shares
of which were issued to officers of the Company in consideration of guarantees
and supplying of stock as collateral in connection with such agreement.

In the quarter ended September 30, 2005, in consideration of $230,500, the
Company agreed to issue 34,307,428 shares of Common Stock, all of which were
issued as of the date of this filing. Additionally, the Company issued
17,673,523 shares of Common Stock to officers of the Company in connection with
such financing and in consideration of guarantees and supplying of stock as
collateral.

In October 2005, the Company issued 1,081,819 shares previously subscribed.

In the quarter ending December 2005, in consideration of $198,000, the Company
issued 42,359,306 shares of Common Stock and a warrant to purchase 500,000
shares of stock at an exercise price of $0.03 per share. Additional shares of
Common Stock may be issuable in connection with such financing, however, the
amount thereof has not yet been determined.


                                       9
<PAGE>

                                     Item 2.

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

SAFE HARBOR STATEMENT

The Company has made, and may continue to make, various forward-looking
statements with respect to its financial position, business strategy, and plans
and objectives of management. Such forward-looking statements are identified by
the use of forward-looking phrases such as "anticipates", "intends", "expects",
"plans", "believe", "estimates", or words or phrases of similar import. These
forward-looking statements are subject to numerous assumptions, risks, and
uncertainties, and the statements looking forward beyond 2005 are subject to
greater uncertainty because of the increased likelihood of changes in underlying
factors and assumptions. Actual results could differ materially from those
anticipated by the forward-looking statements.

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

OVERVIEW

The following discussion of the Company's financial condition as of June 30,
2005 and results of operations for the three months ended June 30, 2005 and 2004
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

Subsequent to the fiscal quarter ended June 30, 2005, 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 fiscal quarter ended June 30, 2005, the Company announced that
it has commenced initial sales to the athletic departments of colleges and
universities of its AQUIS(TM) Rapid Response Rehydration product line.

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

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

RESULTS OF OPERATIONS

The Company had no revenue and no cost of sales during the three month periods
ended June 30, 2005 and June 30, 2004. The selling, general and administrative
expenses for the three month period ended June 30, 2005 were $434,732, as
compared to $280,321 for the comparable three month period during 2004. The
Company incurred research and development costs of $24,144 during the three
month period ended June 30, 2005, as compared with $108,617 for the comparable
three month period during 2004. The Company's operating loss was $458,876 for
the three month period ended June 30, 2005, as compared with an operating loss
of $388,938 for the comparable period ended June 30, 2004. However, during the
period ended June 30, 2005, the Company conducted increased activities related
to its technological base and focused its efforts on developing its marketing
plan, establishing key marketing relationships, and obtaining initial sales with
respect to its AQUIS(TM) Rapid Response Rehydration beverages.


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<PAGE>

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

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital deficit increased by $648,066 during the three
month period ended June 30, 2005, to $4,748,526. In addition, the Company's
Stockholders' Deficiency increased from $4,461,781 to $4,726,463 during the same
three-month period.

During the fiscal year ending March 31, 2006 and beyond, the Company is taking
steps to reduce or eliminate the Stockholders' Deficiency and to create a
positive working capital position. The Company believes it is more likely than
in prior years to raise substantial equity funds as a result of its prospects
for national and global distribution of its products and joint venture
activities with major international entities, the existence now of three product
lines containing commercialized biotechnology, the prospects for numerous
additional products based on the Company's biotechnology foundation, and
significantly increased scientific and commercialization capabilities. Finally,
the Company has taken steps to convert certain existing debts into equity and
will continue to pursue these steps.

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

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

The Company's independent certified public accountants have stated in their
report included in the Company's March 31, 2005 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

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

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

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

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

ITEM 2. CHANGES IN SECURITIES

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

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

In May and June, 2005, in consideration of $67,500, the Company agreed to issue
4,950,000 shares of Common Stock, 4,500,000 of which have been issued at June
30, 2005. Additionally, the Company issued 2,550,000 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 sold to
satisfy obligations of the Company.

In June 2005, the Company issued 4,000,000 shares of the Common Stock, valued at
$80,000 in exchange for services rendered pursuant to existing agreements. The
valuation of common stock issued for services were based upon the value of the
services rendered, which did not differ materially from the fair value of the
Company's common stock during the period the services were rendered. The Company
also issued 2,060,606 shares of Common Stock to officers of the Company pursuant
to such agreements and in consideration of supplying of shares of stock. The
Company accounted for and charged to operation such shares in the amount of
$20,606, which approximated the fair value of the Common Stock at the time the
shares were issued.

In the quarter ended June 30, 2005, in consideration of guarantees and supplying
of shares of stock as collateral in connection with financings, the Company
issued 6,852,055 shares of Common Stock to officers of the Company.

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

In May, 2005, the Company issued a warrant to purchase 750,000 shares of Common
Stock at an exercise price of $0.05 per share for the provision of
production-related and other services and previously subscribed warrants to
purchase an aggregate of 250,000 shares of Common Stock at an exercise price of
$0.02 per share.


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<PAGE>

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 28, 2005                By: /s/ James B. Hovis
                                           -------------------------------------
                                           James B. Hovis
                                           President and Chief Executive Officer


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