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, 2000         Commission File Number  0-21079

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

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

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

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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the  Securities  and  Exchange Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                         Yes  _X_      No ___


     The  number of shares  outstanding  of the  issuer's  common  stock,  as of
February 15, 2001 is 31,048,149.

<PAGE>



PHLO CORPORATION AND SUBSIDIARIES

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


                                                                    Page to Page
Item 1.  Financial Statements

   Consolidated Balance Sheet as of December 31, 2000
   [Unaudited] .........................................................   1-2

   Consolidated Statements of Operations for the three months
   and nine months ended December 31, 2000 and 1999 [Unaudited].........    3

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

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

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

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


<PAGE>


                                               PHLO CORPORATION AND SUBSIDIARIES

                                          CONSOLIDATED BALANCE SHEET [Unaudited]

                                                              December 31, 2000
--------------------------------------------------------------------------------


                                     ASSETS

CURRENT ASSETS
  Cash                                                                 $ (3,534)
  Accounts receivable                                                    10,277
  Inventory                                                             239,497
                                                                       --------

       Total Current Assets                                            $246,240

PROPERTY AND EQUIPMENT, Net                                              25,378

OTHER ASSETS
  Goodwill - net of accumulated amortization
             of $24,000                                   36,000
  Security deposits                                       30,063
                                                        --------

       Total Other Assets                                                66,063
                                                                       --------

       TOTAL ASSETS                                                    $337,681
                                                                       ========


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



                                                                               1

<PAGE>


                                               PHLO CORPORATION AND SUBSIDIARIES
                                          CONSOLIDATED BALANCE SHEET [Unaudited]

                                                              December 31, 2000
--------------------------------------------------------------------------------

<TABLE>
<S>                                                             <C>             <C>
                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY




CURRENT LIABILITIES
 Accounts payable                                               $ 1,078,286
 Accrued expenses and taxes                                         883,072
 Current portion of long-term debt                                1,546,109
                                                                -----------

       Total Current Liabilities                                                  3,507,467

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

       TOTAL LIABILITIES                                                          3,507,467

COMMITMENTS AND CONTINGENCIES


STOCKHOLDERS' DEFICIENCY Preferred stock, 15,000,000 authorized:
   Series A convertible stock, $0.0001 par value, 500,000 Shares
     authorized, issued and outstanding (liquidation preference $100,000)                50
   Series B non-convertible stock, none issued and outstanding                           --
   Series C convertible stock, $0.0001 par value, 3,000,000 shares
     authorized, 1,592,909 shares subscribed                                            159
   Common stock, $0.0001 par value, 250,000,000 shares authorized,
     26,701,521 shares issued and outstanding                                         2,628
   Common stock, $0.0001 par value, 2,605,622 shares subscribed                         287
   Additional paid-in capital                                                     4,506,944
   Accumulated deficit                                                           (7,679,854)
                                                                                -----------
       TOTAL STOCKHOLDERS' DEFICIENCY                                            (3,169,786)
                                                                                -----------
       TOTAL LIABILITIES AND STOCKHOLDERS'
        DEFICIENCY                                                              $   337,681
                                                                                ===========
</TABLE>




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


                                                                               2


<PAGE>


                                               PHLO CORPORATION AND SUBSIDIARIES

                                CONSOLIDATED STATEMENT OF OPERATIONS [Unaudited]

          For the Three Months and Nine Months Ended December 31, 2000, and 1999
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                               Three Months                     Nine Months

                                           2000            1999            2000            1999
                                       ------------    ------------    ------------    ------------
<S>                                    <C>             <C>             <C>             <C>
SALES                                  $     78,131    $    490,477    $    356,548    $  1,279,856

COST OF SALES                                48,135         367,106         265,573         923,061
                                       ------------    ------------    ------------    ------------

       GROSS PROFIT                          29,996         123,371          90,975         356,795

SELLING, GENERAL, ADMINISTRATIVE
 EXPENSES                                   625,693         347,563       2,236,713       1,746,275
                                       ------------    ------------    ------------    ------------

       OPERATING LOSS                      (595,697)       (224,192)     (2,145,738)     (1,389,480)
                                       ------------    ------------    ------------    ------------

OTHER EXPENSES
 Interest expense                          (103,861)        (36,500)       (269,424)       (104,185)
                                       ------------    ------------    ------------    ------------

TOTAL OTHER EXPENSE                        (103,861)        (36,500)       (269,424)       (104,185)
                                       ------------    ------------    ------------    ------------

       LOSS before Extraordinary
         Item                          $   (699,558)   $   (260,692)   $ (2,415,162)   $ (1,493,665)

Extraordinary Item - Gain on the
  Disposition of the net liabilities
  Of a dissolved business              $  3,950,981    $               $  3,950,981    $          0
                                       ------------    ------------    ------------    ------------

         NET INCOME (LOSS)             $  3,251,423    $   (260,692)   $  1,535,819    $ (1,493,665)
                                       ============    ============    ============    ============


Weighted Average Common Shares
 Outstanding                             27,901,826      13,956,637      27,688,202      16,330,664
                                       ============    ============    ============    ============

Net Income (Loss) Per Share (Basic
 and Diluted                           $       0.12    $      (0.02)         $ O.06    $      (0.09)
                                       ============    ============    ============    ============
</TABLE>




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


                                                                               3

<PAGE>



                                               PHLO CORPORATION AND SUBSIDIARIES

                               CONSOLIDATED STATEMENTS OF CASH FLOWS [Unaudited]

                            For the Nine Months Ended December 31, 2000 and 1999
--------------------------------------------------------------------------------


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

CASH FLOWS FROM OPERATING ACTIVITIES
 Net income (loss)                                   $ 1,535,819    $(1,493,665)
                                                     -----------    -----------
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Extraordinary gain                                (3,950,981)            --
    Stock-based compensation                              52,887             --
    Depreciation  and amortization                        61,146         42,163
    Amortization of deferred debt discount                    --             --
     (Increase)decrease in accounts receivable            59,113       (218,846)
     (Increase)decrease in inventory                      95,129       (305,783)
      Decrease in other current assets                        --         68,802
      Increase in accounts payable                       386,648       (145,309)
      Increase in accrued expenses and taxes             403,324         80,654
                                                     -----------    -----------

       TOTAL ADJUSTMENTS                              (2,892,734)      (478,319)
                                                     -----------    -----------

       NET CASH USED IN OPERATING ACTIVITIES          (1,356,915)    (1,971,984)
                                                     -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
      Increase in fixed assets                           (13,386)            --
                                                     -----------    -----------



CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of long term debt                               673,609        854,000
Proceeds from issuance of capital stock                  651,573      1,263,615
                                                     -----------    -----------

       NET CASH PROVIDED BY FINANCING ACTIVITIES     $ 1,325,162    $ 2,117,615
                                                     -----------    -----------


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


                                                                               4



<PAGE>


                                               PHLO CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS [Unudited], Continued

                            For the Nine Months Ended December 31, 2000 and 1999
--------------------------------------------------------------------------------


                                                          2000           1999
                                                      -----------    -----------
       NET (DECREASE) INCREASE IN CASH                $   (45,139)   $   145,631

CASH - Beginning                                           45,139         12,790
                                                      -----------    -----------
CASH - Ending                                         $       --     $   158,421
                                                      ===========    ===========


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


Supplemental Dislosures of Non-Cash Investing and Financing Activities

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

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

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

Non-Cash Investing and Financing Activities Disclosure:


During the nine month period ended  December 31, 2000, the holder of $100,000 of
debt converted such debt into 454,545 shares of common stock subscribed.

                                                                               5

<PAGE>



                                               PHLO CORPORATION AND SUBSIDIARIES

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


NOTE 1 - Company Activities

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

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

In July, 1999, the Company incorporated Phlo Beverage Products Company, a wholly
owned subsidiary, to conduct the business of producing and selling McCoy's
beverages. In August,1999, the Company incorporated Phlo System, Inc., a wholly
owned subsidiary. In October, 2000, Advanced Bio-Delivery, LLC., a limited
liability company formed in June, 2000, became a wholly-owned company of the
Company. Hereafter, the Company will conduct its biotechnology-related
activities through Phlo System, Inc. and Advanced Bio-Delivery, LLC. In November
2000, X-Treem, a former subsidiary was formally dissolved. As a result, the
Company's assets, liabilities and stockholders' deficiency no longer reflect
those of X-Treem. The effect was to reduce liabilities by approximately
$4,211,000, decrease the Company's Stockholders' Deficiency by approximately
$3,951,000, and reduce assets by approximately $260,000. See NOTE 3.

On October 22, 1998, the Company agreed to acquire the capital stock of a
beverage company, X-Treem, through an exchange of stock with the shareholders of
X-Treem (the "Stock Exchange Transaction"). On April 2, 1999, the agreement was
amended so as not to require Phlo's stock to be reverse-split, as initially
intended. As a result, the additional shares that would be issuable under the
amended agreement could not be issued at that time because Phlo did not have
enough authorized shares to do so. Based on the amendment, Phlo would be
required to issue a total of 156,877,611 shares of common stock (assuming the
conversion of all convertible securities and the exercise of all warrants in
connection with such exchange transaction) in order to acquire 100% of the
outstanding X-Treem capital stock and outstanding warrants to purchase X-Treem
common stock from the holders thereof. Subsequently, the Company authorized an
increase in the number of authorized shares sufficient to complete the stock
exchange transaction, and in December 2000, the Company began issuing stock in
accordance with the Stock Exchange Transaction.


                                                                               6

<PAGE>

As of December 31, 2000, 28,838 shares of X-Treem capital stock representing
96.47% of the total outstanding shares have been exchanged for Phlo shares which
have been issued out of authorized shares or are yet to be issued. In order to
complete the Stock Exchange Transaction with respect to those shareholders of
X-Treem who have elected to participate in the exchange transaction, the Company
is required to issue 941,160 additional shares of common stock and 1,112,010
shares of Series C Preferred Stock.

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

As of December 31, 2000, there are 26,701,521 common shares issued and
outstanding and 2,605,622 common shares subscribed. In addition, options and
warrants to purchase 2,438,333 and 9,076,413 shares of common stock are also
outstanding, respectively.

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


                                                                               7

<PAGE>



NOTE 2 - Summary of Significant Account Policies

Basis of Presentation and Reporting

     The accompanying unaudited financial statements have been prepared in
     accordance with generally accepted accounting principles for interim
     financial information. Accordingly, they do not include all of the
     information and footnotes required by generally accepted accounting
     principles for complete financial statements. In the opinion of
     management,all adjustments (consisting of normal recurring accruals)
     considered necessary in order to make the financial statements not
     misleading have been included. Results for the nine months ended December
     31, 2000 are not necessarily indicative of the results that may be expected
     for the fiscal year ending March 31, 2001. For further information, refer
     to the consolidated financial statements and footnotes thereto included in
     the Company's annual report on Form 10-KSB for the year ended March 31,
     2000.

Principles of Consolidation

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

Use of Estimates

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

Goodwill

     Goodwill in connection with acquisitions is amortized on a straight-line
     basis over a five-year period. Amortization of goodwill charged to
     operations for the nine months ended December 31, 2000 and December 30,
     1999 amounted to $52,000 and $20,000 respectively.

Inventories

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

Advertising Expense

     Advertising costs are expensed as incurred during the period.

Furniture and Equipment

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

Depreciation and Amortization

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

Revenue Recognition

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

Slotting Fees

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

Research and Development

     Research and development costs of $106,193 and $0 are expensed as incurred
     during the nine months ended December 31, 2000 and December 30, 1999.

Income Taxes

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


                                                                               8


<PAGE>


Fair Value of Financial Instruments

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

Impairment of Long-Lived Assets

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

Stock Issued to Employees

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

Net (Loss) Per Share

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

Reporting of Segments

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


                                                                               9

<PAGE>



Accounting Developments

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

NOTE 3 - Disolutionment of Subsidiary:

     On November 13, 2000, X-Treem was formally dissolved in accordance with the
     General Corporation Law of the State of Delaware. For approximately two
     years prior thereto X-Treem had been inactive and had no revenues. As a
     result of the disolutionment, the Company's assets, liabilities and
     stockholders' deficiency no longer reflect those of X-Treem. The effect was
     to reduce the Company's liabilities by approximately $4,211,000, reduce the
     Stockholders'Deficiency by approximately $3,951,000, and reduce the assets
     by approximately $260,000.

NOTE 4 - Going Concern

     As shown in the accompanying financial statements, although the Company
     incurred a net income of $1,535,819 during the nine months ended December
     31, 2000, the Company's current liabilities exceeded its current assets by
     $3,261,227 and its total liabilities exceeded its total assets by
     $3,169,786. In addition the Company is delinquent in connection with
     various obligations including, trade payables, accrued payroll taxes, and
     notes payable. These factors and uncertain conditions that the Company has
     faced in its day-to-day operations have created an uncertainty as to the
     Company's ability to continue as a going concern. The financial statements
     do not include any adjustments that might be necessary if the Company is
     unable to continue as a going concern. The continuation of the Company as a
     going concern is dependent upon the success of future financing and
     generating sufficient revenue through the expansion of its beverage product
     lines.

     With respect to those factors cited above, including the uncertain
     conditions, management has taken action and is formulating additional plans
     intended to remove the going concern uncertainty. Specifically, as more
     fully described in NOTE 3 - Disolutionment of Subsidiary, in November 2000,
     X-Treem was formally dissolved. As a result, the Company's assets,
     liabilities and stockholders' deficiency no longer reflect those of
     X-Treem. The effect is to reduce the excess amount by which current
     liabilities exceeds current assets and the amount by which total
     liabilities exceed total assets by approximately $3,951,000. With respect
     to sales and operations, as a result of the Company's newest beverage line,
     "Zo - Vital Cell Defense", which was introduced in October 2000, the
     Company was successful in materially expanding its distribution base by
     signing a distribution agreement with one of the largest independent
     Coca-Cola bottling and distribution companies in the world. The Company
     expects the demand for its products to grow rapidly and anticipates
     achieving profitability during an upcoming quarter. In addition these
     events contributed to the Company executing a definitive agreement
     providing for at least $1,400,000 of production financing. The Company
     plans to raise additional funds to meet demands for its products and
     satisfy existing obligations. No assurance can be made that the management
     will be successful in achieving its plan.

NOTE 4 - Property and Equipment

     Property and equipment consists of the following at December 31, 2000:

     Furniture and fixtures                                         $46,618
     Less: Accumulated depreciation                                  21,240
                                                                    -------
            Net                                                     $25,378
                                                                    =======


     Depreciation expense for the nine months ended December 31, 2000 and 1999
     was $19,146 and $12,163, respectively.


                                                                              10

<PAGE>



NOTE 5 - Inventories

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

     Raw materials                                                 $171,532
     Finished goods                                                  67,966
                                                                   --------
          Total                                                    $239,497
                                                                   ========

NOTE 6 - Income Taxes


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

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

     As of September 30, 2000, the Company estimated the available NOL
     carryforwards to be approximately $9,056,000, and the Company's total
     deferred tax assets relating to the carryforwards amounted to approximately
     $3,079,000 which expire though March 31, 2020. The Company has a valuation
     allowance for the full assessment of the deferred tax assets at December
     31, 2000 as management does not believe it is more likely than not that the
     valuation of the asset is recoverable.

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

NOTE 7 - Stock Options

     1996 Stock Option Plan

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

     Options Granted Separate from the Stock Option Plan

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

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


                                                                              11


<PAGE>


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

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

     A summary of stock option activity is as follows:

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

     Balance - April 1, 1997                           58,333        $ 7.20

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

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

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

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

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

     Exercisable at December 31, 2000               2,438,333          0.33

----------

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

NOTE 8 - Stockholders' Equity

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

     Preferred Stock

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

     Series A Convertible Preferred Stock

     At December 31, 2000, the Company has 500,000 shares of Series A
     Convertible Preferred Stock ("Series A Preferred") issued and outstanding.
     The Series A Preferred holders are entitled to one vote per share on all
     matters presented to the stockholders with certain exceptions as defined in
     the Certificate of Designation. In addition, the Series A Preferred is
     subject to certain conversion, redemption and liquidation provisions, as
     defined.


                                                                              12


<PAGE>


     Series B Non-Convertible Preferred Stock

     At December 31, 2000, none of Series B Non-Convertible Preferred Stock
     ("Series B Preferred") was issued and outstanding. The Series B Preferred
     holders are entitled to one vote per share on all matters presented to the
     stockholders with certain exceptions as defined in the Certificate of
     Designation. In addition, the Series B Preferred is subject to certain
     redemption and liquidation provisions, as defined.

     Series C Convertible Preferred Stock

     At December 31, 2000, none of Series C preferred was issued and outstanding
     and 1,592,869 shares were subscribed in connection with the private
     placement offering (see below). The Series C Preferred is subject to
     certain conversion, redemption and liquidation provisions, as defined. In
     addition, each share of Series C Preferred is convertible into 100 shares
     of the Company's common stock.

     Common Stock

     On November 9, 2000, the Company filed an Amended and Restated Certificate
     of Incorporation which increased the number of authorized shares of common
     stock from 25,000,000 to 250,000,000. At December 31, 2000, 26,701,521
     common shares were issued and outstanding at December 31, 2000.

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

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

5)   In December, 2000, the Company issued 1,290,725 shares of common stock in
     consideration for financial and accounting services rendered, and as
     marketing and sales incentives. Approximately 850,000 of such shares were
     recorded as compensation expense during the period ended September 30,
     2000.

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

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


                                                                              13


<PAGE>



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

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


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

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

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

     Unit Offerings

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

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

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

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


                                                                              14


<PAGE>


NOTE 9 - Debt

     Debt as of December 31, 2000 consists of the following:

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


                                                                              15

<PAGE>



     Note payable with interest at a rate of 10%. Principal and
     interest are payable at the note's maturity date of December
     31, 2000. In consideration of this loan and two prior bridge
     loans, the Company agreed to issue shares of the Company's
     common and convertible preferred stock to the holder
     representing approximately 200,000 shares of common stock on
     a fully converted basis.                                           104,000

     Note payable in the original principal amount of $25,000
     with interest at a rate of 10% per annum. The Note matured
     on July 2, 1999, when principal and unpaid interest was due.
     The the note is currently in default, although partial
     payment has been made subsequent to the maturity date. No
     action has been taken against the Company to enforce the
     note. The Company continues to accrue interest on this note.
     In connection with the note, the Company issued a warrant to
     purchase 5,000 shares of common stock at an exercise price
     of $0.04 per share.                                                 17,500

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

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

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

     In August, 2000, a Note in the principal amount of $100,000
     was entered into with interest of 10% per annum, payable
     February 2001. In conjunction with this financing, the Company
     issued a warrant to purchase 200,000 shares of common stock
     at a exercise price of $0.50 per share.                            100,000

     In September, 2000, a Note in the principal amount of
     $150,000 was entered into with interest of 10% per annum,
     payable November 2000. In conjunction with this financing,
     the Company issued a warrant to purchase 300,000 shares of
     common stock at a exercise price of $0.50 per share. The
     Company, at its option, may pay the Note in common stock
     or equivalents.                                                    150,000

     In September, 2000, a Note in the principal amount of
     $25,000 was entered into with interest of 10% per annum,
     payable February 2001. In conjunction with this financing,
     the Company issued a warrant to purchase 50,000 shares of
     common stock at a exercise price of $0.50 per share. The
     Company, at its option, may pay the Note in common stock
     or Equivalents                                                      25,000
                                                                     ----------

          Total Long-Term Debt                                       $1,546,500

     Less: Current Portion                                           $1,546,500
                                                                     ----------
     Long-Term Debt, net of current portion                          $     --
                                                                     ==========


                                                                              16

<PAGE>


NOTE 10 - Commitments and Contingencies

     Employment Agreement

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

     Loan Guarantee

     The Company is a guarantor of loan obtained by an unrelated party in
     connection with a purchase agreement. In addition, payments of the loan are
     secured by the Company's assets. Total outstanding balance of the loan at
     December 31, 2000 was approximately $89,000.

     Litigation

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

     On February 12, 1999, a judgment in the amount of $1,064,616 was entered
     against X-Treem. Such amount had been accrued and included in accrued
     expenses at September 30, 2000, the date of the Company prior Form 10Q. In
     November, 2000, as more fully described in Note 3 - Disolutionment of
     Subsidiary, X-Treem was formally dissolved in Novemeber 2000 and as a
     result the liabilities, including the February 1999 judgment in the amount
     of $1,064,616 has been removed from the Company's Consolidated Balance
     Sheet. Management does not believe the Company has any current or future
     liability or will incur any material loss in the future as a result of the
     X-Treem liabilities.

     Payroll Taxes

     The Company has unpaid payroll taxes since the fourth quarter 1997. The
     Company is in the process of filing all unfiled returns and has accrued
     estimated penalties and interest of $255,500.

     Lease

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

     Future minimum payments under an operating lease are as follows at December
     31, 2000.

       For the Year Ending
          December 30,                                    Amount
       ----------------------------------------------------------
             2001                                         121,805
             2002                                         121,805
             2003                                         121,805
                                                        ---------
       Total minimum lease payments                     $ 365,415
                                                        =========


     Rent expense for the nine months ended December 31, 2000 and 1999 was
     $91,662 and $100,964, respectively. In connection with the lease, a
     refundable security deposit of $30,063 is held by the landlord.

NOTE 11 - Economic Dependency

     Major Customers

     The Company sells a substantial portion of its products to three customers
     for the six months ended December 31, 2000.

     Major Suppliers

     The Company purchased a substantial portion of its raw materials from one
     supplier for the nine months ended December 31, 2000.



                                                                              17

<PAGE>


Item 2:

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

For the nine months ended December 31, 2000 compared with the nine months ended
December 30, 1999.

The following discussion of the Company's financial condition as of December 31,
2000 and results of operations for the nine months ended December 31, 2000 and
1999 includes Phlo Corporation and its subsidiary (collectively, the "Company")
and should be read in conjunction with the consolidated financial statements and
notes appearing elsewhere in this 10-QSB.

OVERVIEW

General

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

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

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

Note Regarding Forward Looking Information

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


                                                                              18

<PAGE>

RESULTS OF OPERATIONS

The Company had a net income of $1,535,819 for the nine months ended December
31, 2000 as compared to a net loss of $1,493,665 for the nine months ended
December 31, 1999. The decrease in net loss is the result of the gain on the
disposition of the net liabilities of a dissolved business of $3,950,981. For
the same periods, sales decreased from $1,279,856 to $356,548.

The decrease in sales resulted from the discontinuance of all of the fruit
beverages and lemonades of the McCoy's line of beverages in preparation for the
substitution thereof by the "ZO-Vital Cell Defense" beverage line and the
Company's decision to change its packaging from 20 ounce to 16 ounce bottles
(which required significant changes to labels etc.). In conjunction therewith,
the existing finished goods inventory was depleted to levels insufficient to
satisfy a significant portion of the orders from the Company's distributors. The
change to 16 ounce bottles is the result of the Company's desire to achieve
greater margins more consistent with the patented nature of its beverage
products and the result of the request of certain of its major new distributors.
ZO was first produced in October, 2000, and sales immediately followed. However,
as the new 16 ounce bottle will not be available from the Company's supplier
until the end of February, 2001, the initial demand for ZO had to be met using
20 ounce bottles, of which there was very little inventory. The Company has not
been able to meet the significant demand for ZO, but expects to be able to meet
such demand with the planned production of approximately 200,000 cases of its
beverages in March, 2001 using the new 16 ounce packaging.

The launch of the Vital Cell Defense line of beverages marks the successful
commercialization of one of the Company's biotechnologies and is expected to
lead to significantly higher future sales. The Company currently has open
(unfilled) purchase orders providing for the shipment of approximately 100,000
cases of beverages representing gross revenues of $750,000. In December, the
Company signed a distribution agreement with one of the largest independent
Coca-Cola bottling and distribution companies in the world, Hondo, Inc. and its
affiliates.

LIQUIDITY AND CAPITAL RESOURCES

As shown in the accompanying financial statements, although the Company incurred
a net income of $1,535,819 during the nine months ended December 31, 2000. The
Company's current liabilities exceeded its current assets by $3,261,227 and its
total liabilities exceeded its total assets by $3,169,786. In addition the
Company is delinquent in connection with various obligations including, trade
payables, accrued payroll taxes, and notes payable. These factors and uncertain
conditions that the Company has faced in its day-to-day operations have created
an uncertainty as to the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern. The continuation of the
Company as a going concern is dependent upon the success of future financing and
generating sufficient revenue through the expansion of its beverage product
lines.

With respect to those factors cited above, including the uncertain conditions,
management has taken action and is formulating additional plans intended to
remove the going concern uncertainty. Specifically, as more fully described in
NOTE 3 - Disolutionment of Subsidiary, in November 2000, X-Treem was formally
dissolved. As a result, the Company's assets, liabilities and stockholders'
deficiency no longer reflect those of X-Treem. The effect is to reduce the
excess amount by which current liabilities exceeds current assets and the amount
by which total liabilities exceed total assets by approximately $3,951,000. The
financial statements of the Company have been prepared by management without a
review, pursuant to Statement on Auditing Standards No. 71 being done by the
Company's Independednt Accountants. With respect to sales and operations, as a
result of the Company's newest beverage line, "Zo - Vital Cell Defense", which
was introduced in October 2000, the Company was successful in materially
expanding its distribution base by signing a distribution agreement with one of
the largest independent Coca-Cola bottling and distribution companies in the
world. The Company expects the demand for its products to grow rapidly and
anticipates achieving profitability during an upcoming quarter. In addition
these events contributed to the Company executing a definitive agreement
providing for at least $1,400,000 of production financing. The Company plans to
raise additional funds to meet demands for its products and satisfy existing
obligations. No assurance can be made that the management will be successful in
achieving its plan.


                                                                              19


<PAGE>


                                   Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.


                                      Phlo Corporation



February 20, 2000                     By:  /s/ James B. Hovis
                                           -----------------------------------
                                           James B. Hovis
                                           President and Chief Executive Officer


                                                                              20