UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                   FORM 10-QSB

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

     For the quarter ended September 30, 2004 Commission File Number 0-21079

                                PHLO CORPORATION


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



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

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


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

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


          The number of shares outstanding of the issuer's common stock as of
September 30, 2005, is 321,110,073.

<PAGE>

                        PHLO CORPORATION AND SUBSIDIARIES


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

                                Table of Contents


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

Item 1.  Financial Statements

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

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

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

         Notes to Condensed Consolidated Financial Statements
         (Unaudited)                                                    6

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

Item 3.  Controls and Procedures                                        10

PART II.  OTHER INFORMATION                                             10

Item 1.  Legal Proceedings                                              10

Item 2.  Changes in Securities                                          11

Item 3.  Exhibits
                                                                        11


Signature

Certifications


                                        2

<PAGE>

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

<TABLE>
<CAPTION>
                                     ASSETS
<S>                                                                         <C>
CURRENT ASSETS
   Inventory                                                                $     48,323
   Prepaid expense (Note D)                                                      242,808
                                                                            ------------
           Total Current Assets                                                  291,131

PROPERTY PLANT & EQUIPMENT, Net                                                   11,141

SECURITY DEPOSIT                                                                   8,671
                                                                            ------------

TOTAL ASSETS                                                                $    310,943
                                                                            ============
               LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable                                                            $  1,223,978
Accrued expenses and taxes                                                     2,255,724
Notes payable, current portion                                                   207,500
Revolving credit line (Note B)                                                    80,000
                                                                            ------------

           Total Current Liabilities                                           3,767,202

NOTES PAYABLE, long-term portion                                                 384,000
                                                                            ------------
Total liabilities                                                              4,151,202
                                                                            ------------
COMMITMENTS AND CONTINGENCIES                                                         --

DEFICIENCY IN STOCKHOLDERS' EQUITY (Note C)

Preferred stock 15,000,000 shares authorized:
Series A convertible stock, $0.0001 par value, 500,000 shares                         50
authorized, issued and outstanding (Liquidation preferences $100,000)
Series B non-convertible stock, none issued and outstanding                           --
Series C preferred convertible stock, $0.0001 par value 3,000,000
authorized, 1,302,304 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
208,858,912 shares issued and outstanding Common stock, $0.0001 par               20,885
value, 15,486,199 shares subscribed Additional paid-in capital                     1,548
                                                                              12,234,970
Accumulated deficit                                                          (16,097,843)
                                                                            ------------
           Total Deficiency in Stockholders' Equity                           (3,840,259)
                                                                            ------------
TOTAL LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY                    $    310,943
                                                                            ============
</TABLE>


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

                                        3

<PAGE>

                        PHLO CORPORATION AND SUBSIDARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
         For the Three and Six Months Ended September 30, 2004 and 2003


<TABLE>
<CAPTION>
                                             Three months ended September 30,     Six months ended September 30,
                                             --------------------------------    --------------------------------
                                                  2004              2003              2004              2003
                                             --------------    --------------    --------------    --------------
<S>                                          <C>               <C>               <C>               <C>
REVENUES                                     $           --    $      327,704    $           --    $      422,449

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

   GROSS PROFIT                                          --           327,704                --           422,449

OPERATING COSTS AND EXPENSES
   General and Administrative                       601,572           458,480           881,893           705,343
   Research and development                          18,979                --           127,596                --
                                             --------------    --------------    --------------    --------------

   OPERATING LOSS                                  (620,551)         (130,776)       (1,009,489)         (282,894)
                                             --------------    --------------    --------------    --------------

OTHER (EXPENSES)

   Other Financing Cost                             (48,019)               --          (117,597)               --
   Interest expense                                 (18,038)          (12,748)          (34,103)          (38,473)
                                             --------------    --------------    --------------    --------------

   TOTAL OTHER (EXPENSES)                           (66,057)          (12,748)         (151,700)          (38,473)
                                             --------------    --------------    --------------    --------------

   LOSS BEFORE INCOME TAXES                        (686,608)         (143,524)       (1,161,189)         (321,367)

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

NET LOSS                                     $     (686,608)   $     (143,524)   $   (1,161,189)   $     (321,367)
                                             ==============    ==============    ==============    ==============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING      221,589,676       110,139,720       216,403,432        70,036,702
                                             ==============    ==============    ==============    ==============

NET (LOSS) PER SHARE (BASIC AND DILUTED)     $        (0.00)   $        (0.00)   $        (0.01)   $        (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 September 30, 2004 and 2003

<TABLE>
<CAPTION>
                                                               2004            2003
                                                           ------------    ------------
<S>                                                        <C>             <C>
   CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                $ (1,161,189)   $   (321,367)

   Adjustments to reconcile net loss to net cash used in
     operating activities:
   Stock-based compensation - amortization of
     deferred compensation                                           --          43,432
   Common stock reimbursement to shareholder (Note C)            61,818           3,551
   Common stock issued in exchange for other
     financing expense (Note B)                                  54,079              --
   Common stock issued for services                                  --          15,000
   Depreciation and amortization                                  1,593             288

   Changes in operating assets and liabilities:
            Prepaid expense                                     157,192              --
            Inventory                                           (48,323)        (33,123)
            Other current assets                                     --         (10,000)
            Deposit                                              (8,671)             --
            Accounts payable                                    188,988         249,861
            Accrued expenses and taxes                           53,931         103,331
                                                           ------------    ------------
   NET CASH (USED IN) PROVIDED BY OPERATING
   ACTIVITIES                                                  (700,582)         50,973
                                                           ------------    ------------

   CASH FLOW FROM INVESTING ACTIVITIES
   Purchase of equipment                                         (9,700)             --
                                                           ------------    ------------
   NET CASH USED IN INVESTING ACTIVITIES                         (9,700)             --
                                                           ------------    ------------

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

   NET (DECREASE) INCREASE IN CASH                         $    (69,309)   $     50,973

   Cash and cash equivalents, beginning of the period            69,309          30,403
                                                           ------------    ------------
   Cash and cash equivalents, end of the period            $         --    $     81,376
                                                           ============    ============
   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)                              209,206              --
Common stock issued in exchange for revolving credit
  line (Note B)                                                  68,045              --
   Common stock issued in exchange for other financing
  expense (Note B)                                               54,079              --
</TABLE>

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

                                        5

<PAGE>

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


NOTE A - SUMMARY OF ACCOUNTING POLICIES

General

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary in order to make the
financial statements not misleading have been included. Results for the six
months ended September 30, 2004 are not necessarily indicative of the results
that may be expected for the fiscal year ending March 31, 2005. For further
information refer to the consolidated financial statements and footnotes thereto
included in the Phlo Corporation and Subsidiaries' annual report on Form 10-KSB
for the year ended March 31, 2004.

Business and Basis of Presentation

Phlo Corporation, a Delaware corporation incorporated in December 1995, and its
affiliates (hereinafter collectively referred to as the "Company") is a
manufacturer of beverages and liquids containing patented and patent-pending
biotechnologies. The Company sells its products to distributors, which offer the
products for sale in high volume chain stores, such as supermarkets and drug and
convenience stores. Additionally, the Company develops liquids with patented or
patent-pending payloads for the U.S. Military, agencies of the United Nations,
and humanitarian organizations. The Company is positioned as a biotechnology
company which is using high volume distribution networks to commercialize its
technology. Central to the Company's strategic development plan is the
development, acquisition and/or exclusive licensing of proprietary technology,
nutraceutical, biotechnological and/or pharmaceutical in nature, which the
Company initially plans to convey to consumers through the use of liquid
formulations and beverage systems. The Company is focusing its technology
acquisition efforts on those technologies related to preventing or ameliorating
cancer, reducing the effects of aging, and enhancing cognition and personal
performance. The Company is currently conducting discussions with major
companies related to the distribution of the Company's products or joint
ventures pertaining to the Company's technology and products related thereto.

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

Reclassifications

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

NOTE B - REVOLVING CREDIT FACILITY

In June, 2002, the Company closed a revolving credit facility with a one-year
term which provides for advances of up to a maximum principal amount of
$250,000, at the option of the lender, at an interest rate of 10% per annum,
with each advance payable within 30 days. An initial advance was made in the
amount of $150,000. In February 2003, a second advance was made in the amount of
$70,000. In June 2004, a third advance was made in the amount of $100,000.
Repayment of advances under the facility are secured by the Company's assets and
are guaranteed by two officers of the Company. In connection with securing the
repayment of the three advances under this facility, the Company issued a total
of 13,700,000 shares of Common Stock. In connection with the third advance, the
Company granted to the Lender the option, after the expiration of a period of
one year from such advance, to take title to 1,785,715 shares (or any portion
thereof) of such stock collateral.

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

The Company did not repay the advances by the maturity date. As a result
thereof, the lender has exercised its rights provided by the loan documents to
sell shares of stock that were previously issued and pledged as collateral for
the repayment of advances pursuant to the credit facility. During the quarter
ended September 30, 2004, 873,500 collateral shares, valued at $69,880 were used
to pay down $20,000 of debt and $1,861 of related accrued interest. Other
financing expense of $48,019 was charged to operations in connection with this
transaction. As of September 30, 2004, the sale of collateral has reduced the
outstanding principal to $80,000.


                                        6

<PAGE>

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


NOTE C - CAPITAL STOCK

The Company has authorized 15,000,000 shares of preferred stock, with 500,000
shares designated as Series A convertible preferred stock with par value of
$.0001 per share; 500,000 shares designated as Series B non-convertible
preferred stock with par value of $0.0001 per share; and 3,000,000 shares
designated as Series C convertible preferred stock with par value of $.0001 per
share. The Company also has authorized 250,000,000 shares of common stock with
par value $0.0001 per share. As of September 30, 2004, the Company has 500,000
shares of Series A convertible preferred stock, 1,302,304 shares of Series C
convertible preferred stock, and 208,858,912 shares of common stock issued and
outstanding. The Company has no Series B non-convertible preferred stock issued
and outstanding at September 30, 2004.

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

In June, 2004, in connection with a financing and in consideration of guarantees
and supplying of shares of stock as collateral in connection with financings,
the Company issued 1,030,303 shares of Common Stock to officers of the Company.
These shares were valued at $61,818, which approximated the fair value of the
common stock at the time the shares were issued.

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

In September 2004, the Company issued 3,100,000 shares of Common Stock to a
shareholder upon his conversion of 31,000 shares of Series C Convertible
Preferred Stock.

Subsequent to the fiscal quarter ended September 30, 2004, the Company's Board
of Directors voted to amend the Company's articles of incorporation to increase
the number of authorized shares of Common Stock from 350,000,000 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.

NOTE D - PREPAID EXPENSE

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

During the six and three month periods ended September 30, 2004, the Company
charged $555,492 and $398,515, respectively, of this prepayment to operations to
reflect the services rendered and the payment of overhead related to the
scientific development of the Company's technology.

NOTE E - COMMITMENTS AND CONTINGENCIES

Litigation

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

In the quarter ended June 30, 2004, litigation was commenced against the Company
based on the liability of one of its affiliates. The Company vigorously defended
the action, but, in the fiscal quarter ended September 30, 2004, a judge turned
over $103,431 of the Company to the creditor. The Company's counsel believed
that the judge exceeded his authority under law in ruling against the Company on
a procedural basis prior to a decision through trial on the merits. The Company
has filed a complaint against the judge for his actions and intends to seek
disciplinary action against the creditor's lawyers.



                                        7

<PAGE>

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


NOTE F - SUBSEQUENT EVENTS

Financing

In January, 2005, an additional advance was made under the Company's revolving
credit facility in the amount of $40,000. In conjunction therewith, the Company
issued 3,500,000 shares of Common Stock which serve as collateral to secure
repayment of advances made to the Company under the facility and the meeting of
all obligations of the Company under the facility loan documents. Also in
connection with such advance, the Company granted to the Lender the option,
after the expiration of a period of one year from such advance, to take title to
1,212,121 shares (or any portion thereof) of such stock collateral.

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

Equity

In October 2004, in consideration of $50,000, the Company agreed to issue
1,515,152 shares of Common Stock, 333,333 of which have been issued to date.

In the quarter ended March 31, 2005, in connection with a financing and in
consideration of guarantees and supplying of shares of stock as collateral in
connection with financings, the Company issued 1,803,030 shares of Common Stock
to officers of the Company.

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

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

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

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

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

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

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

In 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.

In the quarter ended September 30, 2005, in consideration of $230,500, the
Company issued 51,006,925 shares of Common Stock.

                                        8

<PAGE>

                                     Item 2.

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

SAFE HARBOR STATEMENT

The Company has made, and may continue to make, various forward-looking
statements with respect to its financial position, business strategy, and plans
and objectives of management. Such forward-looking statements are identified by
the use of forward-looking phrases such as "anticipates", "intends", "expects",
"plans", "believe", "estimates", or words or phrases of similar import. These
forward-looking statements are subject to numerous assumptions, risks, and
uncertainties, and the statements looking forward beyond 2004 are subject to
greater uncertainty because of the increased likelihood of changes in underlying
factors and assumptions. Actual results could differ materially from those
anticipated by the forward-looking statements.

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

OVERVIEW

The following discussion of the Company's financial condition as of September
30, 2004 and results of operations for the six months ended September 30, 2004
and 2003 includes Phlo Corporation and its affiliates (collectively, the
"Company") and should be read in conjunction with the condensed consolidated
financial statements and notes appearing elsewhere in this 10-QSB.

RECENT DEVELOPMENTS

Subsequent to the fiscal quarter ended September 30, 2004, the Company's Board
of Directors voted to amend the Company's articles of incorporation to increase
the number of authorized shares of Common Stock from 350,000,000 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.

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 September 30, 2004, the Company announced that
its Aquis Rapid Response Rehydration beverages were available for sale to the
general public through MadLax Sports, the largest lacrosse specialty store in
the Washington, DC area. MadLax continues to sell Aquis through its website
(madlax.com) and in its three stores located in McLean and Alexandria, Virginia
and Olney, Maryland.

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

RESULTS OF OPERATIONS

The Company had no revenues during the three and six month periods ended
September 30, 2004, as compared to $327,704 and $422,449 in revenues for the
three and six month periods ended September 30, 2003, respectively. There was no
cost of sales for the three and six month periods ended September 30, 2004, and
for the three and six month periods ended September 30, 2003, as the revenue
generated during the three and six month periods ended September 30, 2003,
resulted from the receipt of product distribution rights fees rather than from
product sales. The selling, general and administrative expenses for the three
and six month periods ended September 30, 2004 were $601,572 and $881,893,
respectively, as compared to $458,480 and $705,343 for the comparable three and
six month periods during 2003. The Company incurred research and development
costs of $18,979 and $127,596, respectively, during the three and six month
periods ended September 30, 2004, with none for the comparable three and six
month periods during 2003.


                                        9

<PAGE>

The Company's loss from operations was $620,551 and $1,009,489, respectively,
for the three and six month periods ended September 30, 2004, as compared with
an operating loss of $130,776 and $282,894 for the comparable three and six
month periods ended September 30, 2003. However, during the period ended
September 30, 2004, the Company conducted increased activities related to its
technological base and focused its efforts on developing its marketing plan and
establishing key marketing relationships with respect to its Aquis Rapid
Response Rehydration beverages.

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

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital deficit increased $243,846 during the six month
period ended September 30, 2004, to $3,476,071. In addition, the Company's
Stockholders' Deficiency increased from $3,613,191 to $3,840,259 during the same
six-month period.

During the fiscal year ending March 31, 2005 and beyond, the Company is taking
steps to reduce or eliminate the Stockholders' Deficiency and to create a
positive working capital position. The Company believes it is more likely than
in prior years to raise substantial equity funds as a result of its prospects
for national and global distribution of its products and joint venture
activities with major international entities, the existence now of three product
lines containing commercialized biotechnology, the prospects for numerous
additional products based on the Company's biotechnology foundation, and
significantly increased scientific and commercialization capabilities. Finally,
the Company has taken steps to convert certain existing debts into equity and
will continue to pursue these steps.

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

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

The Company's independent certified public accountants have stated in their
report included in the Company's March 31, 2004 Form 10-KSB, that the Company
has incurred operating losses in the last two years, and that the Company is
dependent upon management's ability to develop profitable operations. These
factors among others may raise substantial doubt about the Company's ability to
continue as a going concern.

Impact of Inflation

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

Off-Balance Sheet Arrangements

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


Item 3.

CONTROLS AND PROCEDURES

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

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

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<PAGE>

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


                                     PART II

ITEM 1.  LEGAL PROCEEDINGS

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

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

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

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

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

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


ITEM 2.     CHANGES IN SECURITIES

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

In September 2004, the Company issued 3,100,000 shares of Common Stock to a
shareholder upon his conversion of 31,000 shares of Series C Convertible
Preferred Stock.


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

October 5, 2005                By: /s/ James B. Hovis
                               -------------------------------------
                               James B. Hovis
                               President and Chief Executive Officer


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