**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 December 31, 2007 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.
                  Employerof
                  incorporation or organization)
              Identification
                  No.)6001-21
                  Argyle Forest Blvd.PMB
                  #117Jacksonville,
                  Florida
              32244-5705(Address
                  of principal executive offices)
              (Zip
                  code)





Registrant's
      telephone number, including area code: (904) 505-3834





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 o








The
      number of shares outstanding of the issuer's common stock as of January 30,
      2008, is 661,393,776.










**PHLO
                  CORPORATION AND SUBSIDIARIES****Quarterly
                  Report on Form 10-QSB for the****Quarterly
                  Period Ending December 31, 2007**Table
                  of ContentsPage
                  to PagePART
                  I. FINANCIAL INFORMATIONItem
                  1.
              Financial
                  StatementsCondensed
                  Consolidated Balance Sheet as ofDecember
                  31, 2007 (Unaudited)
              3Condensed
                  Consolidated Statements of Operations for thethree
                  and nine months ended December 31, 2007 and 2006(Unaudited)
              4Condensed
                  Consolidated Statements of Cash Flows for thenine
                  months ended December 31, 2007 and 2006(Unaudited)
              5Notes
                  to Condensed Consolidated Financial Statements(Unaudited)
              6Item
                  2.
              Managements'
                  Discussion and Analysis or Plan of
                  Operation
              10Item
                  3.
              Controls
                  and Procedures
              13PART
                  II.
              OTHER
                  INFORMATION
              13Item
                  1.
              Legal
                  Proceedings
              13Item
                  2.
              Unregistered
                  Sale of Equity Securities and Use of Proceeds
              13Item
                  3.
              Exhibits
              13Signature
              
              13Certifications
              14




2


PHLO
                CORPORATION AND SUBSIDARIESCONDENSED
                CONSOLIDATED BALANCE SHEET (Unaudited)December
                31, 2007ASSETSCURRENT
                ASSETSCash
            
            $
            146,716Inventory
            
            
            147,336Accounts
                Receivable, net
            
            
            184,672Prepaid
                Expense
            
            
            3,112Total
                Current Assets
            
            
            481,836PROPERTY
                PLANT AND EQUIPMENT, Net
            
            
            3,129SECURITY
                DEPOSITS
            
            
            8,486TOTAL
                ASSETS
            
            $
            493,451LIABILITIES
                AND DEFICIENCY IN STOCKHOLDERS' EQUITYCURRENT
                LIABILITIESAccounts
                payable
            
            $
            1,969,996Accrued
                expenses and taxes
            
            
            3,484,143Notes
                payable, current portion
            
            
            821,500Total
                Current Liabilities
            
            
            6,275,639Total
                liabilities
            
            
            6,275,639COMMITMENTS
                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
            
            
            50authorized,
                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 3,000,000authorized,
                1,488,456 shares outstanding (Liquidation preference
                $14,885)
            
            
            149Series
                C preferred convertible stock, 15,298 shares subscribed
            
            
            1Common
                stock, $0.0001 par value, 250,000,000 shares authorized661,393,776
                shares issued and outstanding
            
            
            66,139Common
                stock, $0.0001 par value, 11,940,989 shares subscribed
            
            
            1,194Additional
                paid-in capital
            
            
            22,749,336Accumulated
                deficit
            
            
            (28,599,057
            )Total
                Deficiency in Stockholders' Equity
            
            
            (5,782,188
            )TOTAL
                LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
            
            $
            493,451





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


3


PHLO
                  CORPORATION AND SUBSIDARIESCONDENSED
                  CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)For
                  the Three and Nine Months Ended December 31, 2007 and
                  2006
   Three
                  months ended December 31,
              
              Nine months ended December 31,2007
              
              2006
              
              2007
              
              2006REVENUES
              
              $
              190,072
              
              $
              3,100
              
              $
              320,256
              
              $
              4,723COST
                  OF REVENUES
              
              
              132,149
              
              
              3,045
              
              
              164,671
              
              
              3,213GROSS
                  PROFIT
              
              
              57,923
              
              
              55
              
              
              155,585
              
              
              1,510OPERATING
                  COSTS AND EXPENSESGeneral
                  and Administrative
              
              
              636,219
              
              
              299,785
              
              
              1,794,216
              
              
              1,009,345Research
                  and development
              
              
              28,761
              
              
              52,500
              
              
              237,891
              
              
              107,500LOSS
                  FROM OPERATIONS
              
              
              (607,057
              )
              
              (352,230
              )
              
              (1,876,522
              )
              
              (1,115,335
              )OTHER
                  EXPENSESOther
                  Financing Cost
              
              
              (308,838
              )
              
              (1,018,275
              )
              
              (2,525,754
              )
              
              (1,265,083
              )Interest
                  expense, net
              
              
              (19,102
              )
              
              (18,546
              )
              
              (52,777
              )
              
              (52,221
              )TOTAL
                  OTHER EXPENSES
              
              
              (327,940
              )
              
              (1,036,821
              )
              
              (2,578,531
              )
              
              (1,317,304
              )LOSS
                  BEFORE INCOME TAXES
              
              
              (934,997
              )
              
              (1,389,051
              )
              
              (4,455,053
              )
              
              (2,432,639
              )INCOME
                  TAXES
              
              
              --
              
              
              --
              
              
              --
              
              
              --NET
                  LOSS
              
              $
              (943,997
              )
              $
              (1,389,051
              )
              $
              (4,455,053
              )
              $
              (2,432,639
              )WEIGHTED
                  AVERAGE COMMON SHARES OUTSTANDING
              
              
              673,334,765
              
              
              541,068,322
              
              
              664,433,719
              
              
              469,226,024NET
                  (LOSS) PER SHARE (BASIC AND DILUTED)
              
              $
              (0.00
              )
              $
              (0.00
              )
              $
              (0.01
              )
              $
              (0.01
              )





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




4


PHLO
      CORPORATION AND SUBSIDARIES


CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)


For
      the
      Nine Months Ended December 31, 2007 and 2006


2007
              
              2006CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  loss
              
              $
              (4,455,053
              )
              $
              (2,432,639
              )Adjustments
                  to reconcile net loss to netcash
                  used in operating activities:Common
                  stock reimbursement to shareholder
              
              
              2,216,916
              
              
              1,195,083Common
                  stock issued for services
              
              
              527,443
              
              
              198,864Warrants
                  issued for services
              
              
              442,735
              
              
              7,922Financing
                  cost settled with common stock
              
              
              207,420
              
              
              --Beneficial
                  conversion feature of notespayable
              
              
              --
              
              
              70,000Depreciation
                  and amortization
              
              
              1,849
              
              
              1,849Bad
                  debts
              
              
              655
              
              
              --Deposit
                  applied to rent
              
              
              4,100
              
              
              --Interest
                  paid in stock
              
              
              1,891
              
              
              1,534Changes
                  in operating assets and liabilities:Inventory
              
              
              (108,919
              )
              
              (83,651
              )Accounts
                  receivable
              
              
              (184,096
              )
              
              (2,071
              )Settlement
                  receivable
              
              
              --
              
              
              55,000Other
                  receivable
              
              
              --
              
              
              6,964Prepaid
                  Expense
              
              
              (3,112
              )
              
              (798
              )Accounts
                  payable
              
              
              97,002
              
              
              350,808Accrued
                  expenses and taxes
              
              
              238,665
              
              
              128,698NET
                  CASH USED IN OPERATINGACTIVITIES
              
              
              (1,012,504
              )
              
              (502,437
              )CASH
                  FLOW FROM INVESTING ACTIVITIESPurchase
                  of equipment
              
              
              --
              
              
              --NET
                  CASH USED IN INVESTING ACTIVITIES
              
              
              --
              
              
              --CASH
                  FLOW FROM FINANCING ACTIVITIESProceeds
                  from notes payable
              
              
              395,000
              
              
              455,000Proceeds
                  from sale and subscription of equitysecurities
              
              
              721,500
              
              
              383,800NET
                  CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              1,116,500
              
              
              838,800NET
                  INCREASE IN CASH
              
              $
              103,996
              
              $
              336,363Cash
                  and cash equivalents, beginning of the period
              
              
              42,720
              
              
              --Cash
                  and cash equivalents, end of the period
              
              $
              146,716
              
              $
              336,363Supplemental
                  Disclosures of Cash Flow Information:Cash
                  paid during the period for interest
              
              $
              --
              
              $
              --Income
                  taxes paid
              
              $
              --
              
              
              --Non-Cash
                  Financing Activities:Notes
                  payable settled in common stock
              
              $
              200,000
              
              
              400,000




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




5





**PHLO
      CORPORATION AND SUBSIDARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007**


**(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 nine months ended December 31, 2007 are not necessarily indicative of the
      results that may be expected for the fiscal year ending March 31, 2008. 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, 2007.





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





Revenue
      Recognition





For
      revenue from product sales, the Company follows a policy of recognizing revenues
      as products are shipped. The Company recognizes revenue in accordance with
      Staff
      Accounting Bulletin No. 104, REVENUE RECOGNITION ("SAB104"), which superseded
      Staff Accounting Bulletin No. 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS
      ("SAB101"). SAB 101 requires that four basic criteria must be met before revenue
      can be recognized: (1) persuasive evidence of an arrangement exists; (2)
      delivery has occurred; (3) the selling price is fixed and determinable; and
      (4)
      collectibility is reasonably assured. Determination of criteria (3) and (4)
      are
      based on management’s judgments regarding the fixed nature of the selling prices
      of the products delivered and the collectibility of those amounts. Provisions
      for discounts and rebates to customers, estimated returns and allowances, and
      other adjustments are provided for in the same period the related sales are
      recorded. Except as set forth below, the Company defers any revenue for which
      the product has not been delivered or is subject to refund until such time
      that
      the Company and the customer jointly determine that the product has been
      delivered or no refund will be required.





SAB
      104
      incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"),
      MULTIPLE-DELIVERABLE REVENUE ARRANGEMENTS. EITF 00-21 addresses accounting
      for
      arrangements that may involve the delivery or performance of multiple products,
      services and/or rights to use assets. The effect of implementing EITF 00-21
      on
      the Company's consolidated financial position and results of operations was
      not
      significant.





The
      Company recognizes revenue when persuasive evidence of an arrangement exists,
      the price to the customer is fixed, collectibility is reasonably assured and
      title and risk of ownership is passed to the customer, which is usually upon
      delivery. However, in limited circumstances, certain customers may request
      to
      take title and risk of ownership prior to shipment. Revenue for these
      transactions is recognized only where other evidence supports the four requisite
      elements set forth above, including a written request by the customer for the
      transaction to be on a bill and hold basis.





Reclassifications





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


6




**PHLO
      CORPORATION AND SUBSIDARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007**


**(Unaudited)**





**NOTE
      B - NOTES PAYABLE AND REVOLVING CREDIT FACILITY**





In
      the
      quarter ended December 31, 2007, the Company issued a promissory note in the
      principal amount of $200,000, providing for an interest rate of 10% per annum
      (the “Note”). The Note provided for a first, conditional maturity date of
      December 30, 2007 and a second maturity date 180 days after the making of the
      Note for the repayment of outstanding principal and accrued but unpaid interest
      under the Note (the “Outstanding Balance”). Repayment of the Note was personally
      guaranteed by two officers of the Company. Additionally, 12,038,551 shares
      of
      Common Stock were pledged as collateral by officers to secure repayment of
      all
      obligations of the Company under the Note. As of December 31, 2007, the holder
      of the Note, who had met the required conditions, demanded payment under the
      Note. The Company did not repay the Outstanding Balance under the Notes, and
      the
      holder subsequently foreclosed upon and took title to the 12,038,551 shares
      of
      the Common Stock which had been pledged as collateral to secure all of the
      Company’s obligations thereunder pursuant to the terms of the Notes .
      As a
      result of the foreclosure upon the shares, the Company has recorded a financing
      cost of $207,420, based on the market price of the stock foreclosed upon.
      Additionally, $1,891 of interest expense was settled through the foreclosure
      on
      such shares. Subsequent
      to the quarter ended December 31, 2007, in connection with such note transaction
      and in consideration of guarantees and supplying of shares of stock as
      collateral which were sold to satisfy obligations of the Company in connection
      therewith, the Company issued 30,656 shares of Series C Convertible Preferred
      Stock to officers of the Company.




In
      the
      quarter ended December 31, 2007, the Company issued a credit line promissory
      note in the outstanding principal amount, at December 31, 2007, of $195,000,
      providing for an interest rate of 10% per annum (the “Note”). The Note provides
      for a first maturity date of 60 days after the making of the note and a second
      maturity date of 180 days after the making of the Note for the repayment of
      outstanding principal and accrued but unpaid interest under the Note (the
“Outstanding Balance”). Repayment of the Note was personally guaranteed by two
      officers of the Company. Additionally, 41,233,333 shares of Common Stock and
      9,870 shares of Series C Preferred Stock were pledged as collateral to secure
      repayment of all obligations of the Company under the Note. Subsequent to the
      fiscal quarter, additional advances were made in the amount of
      $408,500.





**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 714 shares of Common Stock.





During
      the fiscal quarter ended December 31, 2007, the Company’s Board of Directors
      approved and recommended to the stockholders, and stockholders holding a
      majority of the shares entitled to vote thereon adopted and approved, the
      following actions:





(1)
            That
                the Certificate of Incorporation of the Company be amended to provide
                for
                staggered three- year terms for directors, and in order to effectuate
                the
                staggered board, that three persons are elected to the Board, the
                Class
                One Director to serve for one year and then for periods of three
                years;
                the Class Two Director to serve for a period of two years and then
                for
                periods of three years; and the Class Three Director to serve for
                periods
                of three years; in each case until the appropriate Annual Meeting
                of
                Stockholders, or execution of written consent in lieu of the Annual
                Meeting and until their successors are duly elected and qualified;
                and the
                election of Joseph P. Nolan as the Class One Director, Anne P. Hovis
                as
                the Class Two Director, and James B. Hovis as the Class Three Director;
                and




7


**PHLO
      CORPORATION AND SUBSIDARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007**


**(Unaudited)**





**NOTE
      C - CAPITAL STOCK (Continued)**





(2)
            That
                the appointment of RBSM, LLP as the Company's independent certified
                public
                accountant for the fiscal year ending March 31, 2008 is ratified;
                and


(3)
            That
                the Certificate of Incorporation of the Company be amended to provide
                for
                a one for one hundred reverse split of the outstanding shares of
                the
                Company’s capital stock, without changing the par value, rights, terms,
                conditions and limitations of such shares of stock, to be effective
                as of
                the filing of an amendment to the Company's Certificate of Incorporation
                with the Delaware Secretary of State and an ex-dividend date set
                by the
                NASD.





The
      Company has filed with the SEC Preliminary and Definitive Information Statements
      pursuant to Section 14C of the Exchange Act and filed the amendment to its
      Articles of Incorporation incorporating such changes on February 5,
      2008.





Since
      the
      1:100 reverse stock split has not yet been reflected in the public market,
      the
      following is a pro forma share and per share information as of December 31,
      2007
      as follows:





As
                  Reported
              
              Pro
                  FormaShares
                  outstanding
              
              
              
              
              
              661,393,776
              
              6,613,938Common
                  Stock
              
              
              
              
              
              66,139
              
              661Additional
                  paid-in capital
              
              
              
              
              
              22,749,336
              
              22,814,814Three
                  Months ended December 31,
              
              Nine
                  Months ended December 31,2007
              
              2006
              
              2007
              
              2006Loss
                  per share - as reported
              
              
              -
              
              
              -
              
              
              (0.01
              )
              
              (0.01
              )Loss
                  per share - pro forma
              
              
              (0.14
              )
              
              (0.26
              )
              
              (0.67
              )
              
              (0.52
              )Weighted
                  average shares outstandingAs
                  reported
              
              
              673,334,765
              
              
              541,068,322
              
              
              664,433,719
              
              
              469,226,024Pro
                  forma
              
              
              6,733,348
              
              
              5,410,683
              
              
              6,644,337
              
              
              4,692,260


As
      of
      December 31, 2007, the Company has 500,000 shares of Series A convertible
      preferred stock, 1,488,456 shares of Series C convertible preferred stock,
      and
      661,393,776 shares of common stock issued and outstanding. The Company has
      no
      Series B non-convertible preferred stock issued and outstanding at December
      31,
      2007.





In
      the
      fiscal quarter ended June 30, 2007, in consideration of $187,500, the Company
      issued 15,866,665 shares of Common Stock and warrants to purchase 3,000,000
      shares of Common Stock at an exercise price of $0.05 per share. It also issued
      20,833,333 shares of Common Stock, valued at $446,396, in exchange for services.
      Additionally, the Company issued 29,618,179 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 $634,628, which approximated the fair
      value of the Common Stock at the time the shares were issued. In the fiscal
      quarter ended June 30, 2007, the Company also issued 2,190,665 shares of Common
      Stock that had been previously subscribed.





In
      the
      quarter ended September 30, 2007, in connection with $534,000 in financing
      received by the Company, the Company issued warrants to purchase an aggregate
      of
      29,700,000 shares of common stock at an exercise price of $0.05. Additionally,
      in connection therewith and in consideration of guarantees and supplying of
      shares of stock as collateral which were sold to satisfy obligations of the
      Company in connection therewith, the Company issued 238,702 shares of Series
      C
      Convertible Preferred Stock to officers of the Company. The Company accounted
      for and charged to operations a finance cost attributable to the preferred
      shares in the amount of $1,582,288.




8


**PHLO
      CORPORATION AND SUBSIDARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007**


**(Unaudited)**





**NOTE
      C - CAPITAL STOCK (Continued)**





In
      the
      quarter ended September 30, 2007, the Company issued 9,189 shares of Series
      C
      Preferred Stock in connection with a sales incentive program. The Company
      accounted for and charged to operations such shares in the amount of $81,047,
      which approximated the fair value of the stock at the time the shares were
      issued.





In
      the
      quarter ended September 30, 2007, the Company issued a warrant to purchase
      3,000,000 shares of Common Stock at an exercise price of $0.018 per share,
      valued at $112,186, in exchange for the provision of services.





In
      the
      quarter ended September 30, 2007, a warrant holder met the conditions required
      to vest the right to purchase an additional 3,000,000 shares of Common Stock
      at
      a purchase price of $0.03 per share pursuant to a warrant previously issued
      in
      the fiscal year ended March 31, 2007. The Company recorded an expense of $87,891
      related to this event.





In
      the
      quarter ended December 31, 2007, the Company issued a warrant with a three-year
      term to purchase up to 6,000,000 shares of Common Stock at an exercise price
      of
      $0.04 per share in exchange for the provision of services. The right to purchase
      4,000,000 of the shares of Common Stock vest on a pro rata basis monthly over
      a
      period of 24 months (166,666.66 per month on that last day of each month) and
      the right to purchase 2,000,000 shares is contingent on the achievement of
      certain performance guidelines.





The
      Company also issued two warrants with four-year terms, each to purchase
      3,300,000 shares of the Common Stock, one at an exercise price of $0.06 shares
      and one at an exercise price of $0.04 shares, in exchange for the provision
      of
      services. These warrants vested upon grant and were valued at $242,658, using
      the Black Scholes method at the date of grant of the respective warrants based
      on the following weighted average assumptions: (1) risk free interest rate
      of
      3.125%, (2) dividend yield of 0%, (3) volatility factor of the expected market
      price of the Common Stock of 272%, and (4) an expected life of the warrant
      of 2
      years.




9





**PHLO
      CORPORATION AND SUBSIDARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**DECEMBER
      31, 2007**


**(Unaudited)**





**NOTE
      D - COMMITMENTS AND CONTINGENCIES**





Litigation





The
      Company is a party to certain 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 - SHAREHOLDER VOTE**





During
      the fiscal quarter ended December 31, 2007, the Company’s Board of Directors
      approved and recommended to the stockholders, and stockholders holding a
      majority of the shares entitled to vote thereon adopted and approved, the
      following actions:





1.
            That
                the Certificate of Incorporation of the Company be amended to provide
                for
                staggered three- year terms for directors, and in order to effectuate
                the
                staggered board, that three persons are elected to the Board, the
                Class
                One Director to serve for one year and then for periods of three
                years;
                the Class Two Director to serve for a period of two years and then
                for
                periods of three years; and the Class Three Director to serve for
                periods
                of three years; in each case until the appropriate Annual Meeting
                of
                Stockholders, or execution of written consent in lieu of the Annual
                Meeting and until their successors are duly elected and qualified;
                and


2.
            That
                the appointment of RBSM, LLP as the Company's independent certified
                public
                accountant for the fiscal year ending March 31, 2008 is ratified;
                and


3.
            That
                the Certificate of Incorporation of the Company be amended to provide
                for
                a one for one hundred reverse split of the outstanding shares of
                the
                Company’s capital stock, without changing the par value, rights, terms,
                conditions and limitations of such shares of stock, to be effective
                as of
                the filing of an amendment to the Company's Certificate of Incorporation
                with the Delaware Secretary of State and an ex-dividend date set
                by the
                NASD.





Additionally,
      the shareholders elected Joseph P. Nolan as the Class One Director, Anne P.
      Hovis as the Class Two Director, and James B. Hovis as the Class Three
      Director.





The
      Company has filed with the SEC Preliminary and Definitive Information Statements
      pursuant to Section 14C of the Exchange Act and filed the amendment to its
      Articles of Incorporation incorporating such changes on February 5,
      2008.





**NOTE
      F - SUBSEQUENT EVENTS**





Subsequent
      to the date of the consolidated financial statements, the Company filed with
      the
      SEC the Definitive Information Statement referenced above pursuant to Section
      14C of the Exchange Act and filed with the Secretary of State of Delaware the
      amendment to its Articles of Incorporation related thereto.





Subsequent
      to the date of the consolidated financial statements, in connection with a
      note
      transaction and in consideration of guarantees and supplying of shares of stock
      as collateral which were sold to satisfy obligations of the Company in
      connection therewith, the Company issued 30,656 shares of Series C Convertible
      Preferred Stock to officers of the Company.








**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 2007 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.




10




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 December 31,
      2007 and results of operations for the three and nine months ended December
      31,
      2007 and 2006 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 year ended March 31, 2007, the Company announced that it had
      commenced shipments of its ready-to-drink version of its vitality beverage
      to
      fill orders of the product. Initial shipments were primarily to accounts in
      the
      Northern California area. During the fiscal quarter ended June 30, 2007, the
      Company announced that, as a result of the excellent response to the
      ready-to-drink product from the initial test markets in this region, the Company
      had commenced a roll-out of the beverage line in Northern California to a
      significant account base. The roll-out has included accounts (both on and off
      premises) in all channels of distribution, including independent grocers,
      independent convenience stores, mass merchandisers, chain grocers, chain
      convenience stores, and chain drug stores.





During
      the quarter ended December 31, 2007, the Company reported that distribution
      in
      California has been expanded to system-wide coverage within Northern California
      and that its vitality product had also been introduced into Southern California
      territories commencing with the Palm Desert/Palm Springs area. It also announced
      that its vitality beverage was authorized for sale in 450 7-Eleven stores from
      Bakersfield, California to the Oregon border. Currently, the Company’s beverages
      are offered for sale in approximately 150 of the 450 7-Eleven stores, and
      placement in the remaining 7-Eleven stores is continuing.





Also
      during the quarter ended December 31, 2007, the Company announced that it has
      shipped product to launch its vitality beverage on the East Coast, initially
      in
      the greater metropolitan New York City area, including Manhattan, Brooklyn,
      Queens, the Bronx, and Long Island. The East Coast launch also includes all
      channels of distribution. The Company also announced that it hired a Chief
      Marketing Officer with extensive worldwide experience directing the branding,
      marketing, and communications programs of major international corporations,
      as
      well as a Director of Marketing to support the Chief Marketing Officer.





During
      the fiscal quarter ended December 31, 2007, the Company’s Board of Directors
      approved and recommended to the stockholders, and stockholders holding a
      majority of the shares entitled to vote thereon, adopted and approved, the
      following actions:





1.
            That
                the Certificate of Incorporation of the Company be amended to provide
                for
                staggered three- year terms for directors, and in order to effectuate
                the
                staggered board, that three persons are elected to the Board, the
                Class
                One Director to serve for one year and then for periods of three
                years;
                the Class Two Director to serve for a period of two years and then
                for
                periods of three years; and the Class Three Director to serve for
                periods
                of three years; in each case until the appropriate Annual Meeting
                of
                Stockholders, or execution of written consent in lieu of the Annual
                Meeting (at which time each such term expires) and until their successors
                are duly elected and qualified; and


2.
            That
                the appointment of RBSM, LLP as the Company's independent certified
                public
                accountant for the fiscal year ending March 31, 2008 is ratified;
                and


3.
            That
                the Certificate of Incorporation of the Company be amended to provide
                for
                a one for one hundred reverse split of the outstanding shares of
                the
                Company’s capital stock, without changing the par value, rights, terms,
                conditions and limitations of such shares of stock, to be effective
                as of
                the filing of an amendment to the Company's Certificate of Incorporation
                with the Delaware Secretary of State and an ex-dividend date set
                by the
                NASD.





The
      Company has filed with the SEC Preliminary and Definitive Information Statements
      pursuant to Section 14C of the Exchange Act and expects to file the amendment
      to
      its Articles of Incorporation incorporating such changes on or about February
      5,
      2008.




11




**RESULTS
        OF OPERATIONS**
 
 The
        Company generated revenue during the three and nine-month periods ended December
        31, 2007, of $190,072 and $320,256, respectively, as compared with revenue
        during the three and nine-month periods ended December 31, 2006, of $3,100
        and
        $4,723, respectively, and incurred cost of sales during the three and nine-month
        periods ended December 31, 2007, of $132,149 and $164,671, respectively,
        as
        compared with cost of sales during the comparative three and nine-month periods
        of 2006 of $3,045 and $3,213 respectively. This represents an increase in
        revenue of $186,972 for the three months ended December 31, 2007, as compared
        with the three-month period ended December 31, 2006, and an increase in revenue
        of $315,533 for the nine-month period ended December 31, 2007, as compared
        with
        the nine-month period ended December 31, 2006. Further, revenue increased
        substantially from $116,560 during the three months ended September 30, 2007,
        to
        $190,072 during the three months ended December 31, 2007. The Company’s gross
        profit margin for the nine-month period ended December 31, 2007 was
        49%.
 
 The
        selling, general and administrative expenses for the three and nine-month
        periods ended December 31, 2007 were $636,219 and $1,794,216, respectively,
        as
        compared to $299,785 and $1,009,345 for the comparable three and nine month
        periods during 2006. The Company incurred research and development costs
        during
        the three and nine-month periods ended December 31, 2007 of $28,761 and
        $237,891, respectively, as compared with $52,500 and $107,500 for the comparable
        three and nine month periods of 2006.
 
 The
        Company's loss from operations for the three and nine-month periods ended
        December 31, 2007, was $607,057 and $1,876,522, respectively, as compared
        with
        an operating loss of $352,230 and $1,115,335 for the comparable three and
        nine-month periods ended December 31, 2006.
 
 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 during the nine-month period ended December
        31, 2007, increased $131,199, to $5,793,803, from $5,662,604 at March 31,
        2007.
        In addition, the Company's Stockholders' Deficiency increased from $5,645,040
        to
        $5,782,188 during the same nine-month period.
  During
      the fiscal year ending March 31, 2008 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
      distribution of its products through joint venture undertakings with entities
      possessing marketing 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, 2007 Form 10-KSB, that the Company has
      incurred operating losses in the last two years, and that the Company is
      dependent upon management's ability to develop profitable operations. These
      factors among others may raise substantial doubt about the Company's ability
      to
      continue as a going concern.





**Impact
      of Inflation**





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





**Off-Balance
      Sheet Arrangements**




The
      Company does not have any off-balance sheet arrangements.




12


**Item
      3.**





**CONTROLS
      AND PROCEDURES**





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




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




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







**PART
      II**





**ITEM
      1. LEGAL PROCEEDINGS**





The
      Company is a party to certain 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**





In
      the
      quarter ended December 31, 2007, the Company issued warrant to purchase up
      to an
      aggregate maximum amount of 12,600,000 with exercise prices ranging from $0.04
      to $0.06 per share in exchange for the provision of services.





**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**


*February
                  14, 2008*
              *By:
                  /s/ James B. Hovis**James
                  B. Hovis**President
                  and Chief Executive
                  Officer*


13


**CERTIFICATIONS**








I,
      James
      B. Hovis, certify that:





1.
      I have
      reviewed this quarterly report on Form 10-QSB of Phlo Corporation and
      Subsidiaries;





2.
      Based
      on my knowledge, this quarterly report does not contain any untrue statement
      of
      a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were
      made, not misleading with respect to the period covered by this quarterly
      report;





3.
      Based
      on my knowledge, the financial statements, and other financial information
      included in this quarterly report, fairly present in all material respects
      the
      financial condition, results of operations and cash flows of the registrant
      as
      of, and for, the periods presented in this quarterly report;





4.
      The
      registrant's other certifying officers and I are responsible for establishing
      and maintaining disclosure controls and procedures (as defined in Exchange
      Act
      Rules 13a-14 and 15d-14) for the registrant and have:





a.
      designed such disclosure controls and procedures to ensure that material
      information relating to the registrant, including its consolidated subsidiaries,
      is made known to us by others within those entities, particularly during the
      period in which this quarterly report is being prepared;





b.
      evaluated the effectiveness of the registrant's disclosure controls and
      procedures as of a date within 90 days prior to the filing date of this
      quarterly report (the "Evaluation Date"); and





c.
      presented in this quarterly report our conclusions about the effectiveness
      of
      the disclosure controls and procedures based on our evaluation as of the
      Evaluation Date;





5.
      The
      registrant's other certifying officers and I have disclosed, based on our most
      recent evaluation, to the registrant's auditors and the audit committee of
      registrant's board of directors (or persons performing the equivalent function):





a.
      all
      significant deficiencies in the design or operation of internal controls which
      could adversely affect the registrant's ability to record, process, summarize
      and report financial data and have identified for the registrant's auditors
      any
      material weaknesses in internal controls; and





b.
      any
      fraud, whether or not material, that involves management or other employees
      who
      have a significant role in the registrant's internal controls; and





6.
      The
      registrant's other certifying officers and I have indicated in this quarterly
      report whether there were significant changes in internal controls or in other
      factors that could significantly affect internal controls subsequent to the
      date
      of our most recent evaluation, including any corrective actions with regard
      to
      significant deficiencies and material weaknesses.





Date:
      February 14, 2008






*/s/
                James B.
                Hovis*
              *James
                B. Hovis*
              *Chief
                Executive Officer*
              *Principal
                Financial Officer*




14







**CERTIFICATIONS**





**Certificate
      Pursuant to**





18
      U.S.C.
      Section 1350, as Adopted Pursuant to


Section
      906 of the Sarbanes-Oxley Act of 2002





In
      connection with the Quarterly Report of Phlo Corporation and Subsidiaries (the
      "Company") the Company on Form 10-QSB for the quarter ended December 31, 2007
      as
      filed with the Securities and Exchange Commission on the date hereof (the
      "Report"), I, James B. Hovis, Chief Executive Officer, certify, pursuant to
      18
      U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002,
      that:





(1)
      The
      Report fully complies with the requirements of Section 13(a) or 15(d) of the
      Securities Exchange Act of 1934; and





(2)
      The
      information contained in the Report fairly presents, in all material respects,
      the financial condition and results of operations of the Company.





Date:
      February 14, 2008









*/s/
                James B.
                Hovis*
              *James
                B. Hovis*
              *Chief
                Executive Officer*
              *Principal
                Financial Officer*







15