<PAGE>


                                  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, 2002 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.)

          13 Village Green
         Budd Lake, New Jersey                                     07828
(Address of principal executive offices)                        (Zip code)


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

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

The number of shares outstanding of the issuer's common stock, as of February
19, 2002 is 75,609,909.



<PAGE>


                        PHLO CORPORATION AND SUBSIDIARIES



                                      INDEX


                                                                    Page to Page
                                                                    ------------
Item 1.  Financial Statements

         Condensed Consolidated Balance Sheet as of December 31, 2002       3
         (Unaudited)

         Condensed Consolidated Statements of Operations for the
         three and nine months ended December 31, 2002 and 2001
         (Unaudited)                                                        4

         Condensed Consolidated Statements of Cash Flows for the nine
         months ended December 31, 2002 and 2001 (Unaudited)                5

         Notes to Condensed Consolidated Financial Statements
         (Unaudited)                                                        6

Item 2.  Managements' Discussion and Analysis of Financial
         Condition and Results of Operations                                12

Item 3.  Controls and Procedures                                            14

Signature

Certifications



                                        2



<PAGE>
<TABLE>
<CAPTION>


                        PHLO CORPORATION AND SUBSIDARIES

                CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
                                December 31, 2002

                                     ASSETS

<S>                                                                           <C>


CURRENT ASSETS
   Cash                                                                   $     63,290
   Accounts receivable                                                          17,572
   Prepaid expenses and taxes                                                    1,669
   Inventory                                                                    61,233
                                                                          ------------

              Total Current Assets                                             143,764

PROPERTY PLANT & EQUIPMENT, Net                                                  2,100

OTHER ASSETS
   Licensing fee - Net of accumulated amortization of $45,000                   15,000
   Security and other deposits                                                   8,069
   Due from related party                                                      107,284
                                                                          ------------

              Total Other Assets                                               130,353

                                                                          ------------

TOTAL ASSETS                                                              $    276,217
                                                                          ============
                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES

Accounts payable                                                          $    635,837
Accrued expenses and taxes                                                     913,399
Revolving line of credit                                                       150,000
Current portion of notes payable                                               591,500
                                                                          ------------

           Total Current Liabilities                                         2,290,736

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY

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, 1,333,304 shares outstanding (Liquidation preference $13,333)          133
Series C preferred convertible stock, 15,298 shares subscribed                       1
Common stock, $0.0001 par value, 250,000,000 shares authorized
68,576,576 shares issued and outstanding                                         6,857
Common stock, $0.0001 par value, 13,980,816 shares subscribed                    1,398
Additional paid-in capital                                                   8,739,696
 Unearned Compensation                                                        (121,480)
Accumulated deficit                                                        (10,641,174)
                                                                          ------------
           Total Stockholders' Deficiency                                   (2,014,519)
                                                                          ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                            $    276,217
                                                                          ============
</TABLE>

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

                                        3

<PAGE>

<TABLE>
<CAPTION>

                        PHLO CORPORATION AND SUBSIDARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
         For the Three and Nine Months Ended December 31, 2002 and 2001



                                                             Three Months                       Nine Months
                                                     ----------------------------------------------------------------
                                                        2002              2001              2002              2001
                                                        ----              ----              ----              ----
<S>                                                     <C>               <C>               <C>               <C>

SALES                                                         0            30,807            39,191         1,301,522

COST OF SALES                                            38,849            20,301           134,008           729,595
                                                     ----------        ----------        ----------        ----------

   GROSS (LOSS) PROFIT                                  (38,849)           10,506           (94,817)          571,927

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES            288,245           367,651           948,573         1,305,670
                                                     ----------        ----------        ----------        ----------

   OPERATING (LOSS)                                    (327,094)         (357,145)       (1,043,390)         (733,743)

OTHER INCOME (EXPENSES):
  Interest expenses                                     (32,359)          (20,617)         (101,405)         (156,738)
  Other Income                                          318,369                 0           318,369           236,263
  Financing Cost                                       (214,205)                           (214,205)
                                                     ----------        ----------        ----------        ----------

   TOTAL OTHER (EXPENSES) INCOME                         71,805           (20,617)            2,759            79,525

   LOSS BEFORE INCOME TAXES                            (255,289)         (377,762)       (1,040,631)         (654,218)

INCOME TAXES                                                  0             1,522                 0             1,522
                                                     ----------        ----------        ----------        ----------

NET (LOSS)                                             (255,289)         (379,284)       (1,040,631)         (655,740)
                                                     ==========        ==========        ==========        ==========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING           72,776,800        40,494,260        66,639,831        37,976,516

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

NET (LOSS)  PER SHARE (BASIC AND DILUTED)                 (0.00)           ($0.01)            (0.02)            (0.02)
                                                     ==========        ==========        ==========        ==========

</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 Nine Months Ended December 31, 2002, and December 31, 2001



                                                            2002         2001
                                                         ---------    ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss)                                              (1,040,631)    (655,740)

Adjustments to reconcile net loss to net
  cash used in operating activities:
Stock-based compensation                                   173,920      130,133
Depreciation and amortization                               14,418       27,803
Financing Cost                                             214,205
Gain on satisfaction of judgment                          (318,369)

Changes in operating assets and liabilities:
         Accounts receivable                                 9,093      (47,090)
         Inventory                                          32,020      (49,351)
         Other current assets                               (1,669)     133,604
         Security deposits                                  47,695      (17,632)
         Accounts payable                                   66,319     (228,109)
         Accrued expenses and taxes                        328,436      444,915
         Employee advances                                               (1,000)
                                                         ----------------------

              TOTAL ADJUSTMENTS                            566,068      393,273
                                                         ----------------------

NET CASH (USED IN) OPERATING ACTIVITIES                   (474,563)    (262,467)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from issuance of debt                                  --       (8,069)
Due from related party                                          --       27,167
Advances-Stockholder/Officer                                           (140,000)
                                                         ----------------------

NET CASH (USED IN) INVESTING ACTIVITIES                         --     (120,902)

CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from revolving note payable                       150,000           --
Proceeds from long-term debt                                80,000      140,000
Repayment of debt                                               --     (104,000)
Proceeds from issuance of equity securities                214,054      339,973
                                                         ----------------------

NET CASH PROVIDED BY FINANCING ACTIVITIES                  444,054      375,973

NET (DECREASE) IN CASH                                   $ (30,509)   $  (7,396)

CASH - Beginning                                         $  93,799    $   7,738
                                                         ----------------------
Cash - Ending                                            $  63,290    $     342
                                                         ======================

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

                                        5
<PAGE>

Note 1. Basis of Presentation

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 nine
months ended December 31, 2002 are not necessarily indicative of the results
that may be expected for the fiscal year ending March 31, 2003. 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, 2002.

Note 2. Company Activities

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, who offer the
products for sale in high volume chain stores, such as supermarkets and drug and
convenience stores. The Company is positioned as a biotechnology company which
is using high volume distribution networks to commercialize its technology.
Central to the Company's strategic development plan is the development,
acquisition, and/or exclusive licensing of proprietary technology,
nutraceutical, biotechnological and/or pharmaceutical in nature, which the
Company initially plans to convey to consumers through the use of liquid
formulations and beverage systems. The Company is focusing its technology
acquisition efforts of those technologies related to preventing or ameliorating
cancer, reducing the effects of aging, and enhancing cognition and personal
performance.

The Company's "ZO - Vital Cell Defense" beverage line features fruit drinks,
lemonades, iced black teas and iced green teas and is offered in 16-ounce
bottles. "ZO - Vital Cell Defense," with its patent-pending Vitamin E
phosphate/phosphatidylcholine (VEP/PC) and sustained release micro-encapsulation
delivery technology is available in Cranberry Berry, Orange Carrot, Pink
Lemonade, Tropical Punch, Kiwi Strawberry, Raspberry Vanilla and Blackberry
Cherry, in addition to four flavors of iced black tea and four flavors of iced
green tea.

During its third fiscal quarter, the Company continued the process of preparing
for the commercial launch of two additional product lines which it developed
during its last fiscal year and successfully completed a financing with private
investors, the proceeds of which have been allocated to the production of its
recently-commercialized personal performance Spray Products (see below). The
Spray Products contain Phlo's patent-pending VEP/PC preparation and Phlo's
biologically-active micro-particle delivery system, delivered through 1-ounce
sprays. The Spray Products provide cellular membrane repair and protection from
toxicants while creating focus and mental alertness without any secondary
depression. The Company completed an initial "test-run" production of its Spray
Products in December, and the finished products were sent to distributors. The
test-run revealed that changes related to the Spray Product labels were
required, which revisions were completed subsequent to the quarter. The Company
plans to produce an additional 19,000 cases of Spray Products and to begin
shipment of such Spray Products by the end of March 2003. The Spray Products are
being marketed to the major natural food chains, the major chain and independent
convenience stores, drug stores, mass merchandisers, and supermarkets.

Additionally, the Company has completed the development of two types of
proprietary oral rehydration solutions (ORS(s)) for sale initially to
institutional purchasers (including the U.S. military) and continues to improve
its biologically active delivery system as well as working on other types of
delivery systems for nutraceutical, biological, and pharmaceutical agents. One
type of the Company's ORS is directed to rehydration while the other type is
therapeutic in nature and treats diarrhea caused by diseases such as dysentery
and cholera. These diseases bring suffering and death to millions of people in
many parts of the world today. Both types of the Company's ORSs contain the
Company's proprietary, biologically active micro-particle delivery system, are
superior to the World Health Organization standard, and meet the criteria
(related to electrolyte payload, carbohydrates and osmolality) which the Company
believes places its ORSs among the most effective in the world. 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.

On October 22, 1998, the Company agreed to acquire the capital stock of a
beverage company, X-Treem Products Corporation (X-Treem), through an exchange of
stock with the shareholders of X-Treem (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 10,031,296 additional
shares of common stock (which are included in the number of shares of common
stock subscribed as set forth below) and 15,298 shares of Series C Preferred
Stock. In November, 2000, X-Treem was formally dissolved.

                                        6
<PAGE>

On December 31, 2002, there were 68,576,576 shares of common stock issued and
outstanding, and 13,980,816 shares of common stock subscribed, and there were
1,333,303 shares of Series C Convertible Preferred Stock issued and outstanding
and 15,298 shares of Series C Convertible Preferred Stock subscribed. In
addition, warrants to purchase 39,627,443 shares of common stock and no options
(see Note 7) were also outstanding, respectively.

Note 3. Going Concern

As shown in the accompanying condensed consolidated financial statements, the
Company had an operating loss of $327,094 for the quarter ended December 31,
2002. As of December 31, 2002, the Company's current liabilities still exceeded
its current assets by $2,146,972, and its total liabilities exceeded its total
assets by $2,014,519. 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 create an uncertainty as to the Company's ability
to continue as a going concern. The condensed consolidated 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 various product lines to
generate future profits.

Management has taken actions and is implementing additional plans to strengthen
the Company's working capital position and generate sufficient cash to meet it's
operating needs through March 31, 2003 and beyond. In its third fiscal quarter,
the Company successfully completed a financing with private investors, the
proceeds of which have been allocated to the production of Phlo's personal
performance Spray Products. The Company completed an initial "test-run"
production of its Spray Products in December, and the finished products were
sent to distributors. The Company plans to produce an additional 19,000 cases of
Spray Products and to begin shipment of such Spray Products by the end of March
2003, which should lead to the creation of receivables and should allow the
Company to generate significant cash flow and facilitate additional financing.
Also included in the actions the Company is taking is the planned commencement
of distribution activities with Coca-Cola Enterprises Inc. upon completion of
the manufacture of the production molds for the Company's proprietary17-ounce
plastic bottle. The Company is currently conducting additional stress tests
related to the 17-ounce plastic bottle design. Additionally, the Company
believes it is more likely than in prior years to raise substantial equity funds
as a result of its expanded distribution base, the 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 is in the process of converting certain existing debts into
equity and will continue to pursue these steps. 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.

Note 4. 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. Non-saleable and
obsolete inventories have been recorded at cost, or net realizable value,
whichever is lower.

Note 5. Revolving Credit Facility - Note Payable

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. Repayment of advances under the facility are secured by the
Company's assets and are guaranteed by two officers of the Company. The Company
did not repay the advance by the maturity date. As a result thereof, the lender
has exercised its rights provided by the loan documents to sell shares of stock
that were pledged as collateral for the repayment of advances pursuant to the
credit facility.

Note 6. Notes Payable

Notes payable as of December 31, 2002 consists of the following:

Note payable with interest rate of 15% per annum. The note is payable in May,
2003. $80,000.

                                        7
<PAGE>

Note payable with interest at a rate of 10%. The note matured on December 31,
2000, when principal and unpaid interest were due. 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. The holder has agreed
to extend the maturity date of the note to December 31, 2003. $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 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. 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

Note payable with interest accruing at a rate of 10%. Principal and interest
were due in 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. The holder agreed to extend the maturity date of the note to
December 31, 2003. $100,000

Note payable with interest at a rate of 10% per annum. Principal and interest
were due in 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 equivalent. The Company has notified the holder that it has elected to pay
the principal and interest due under the note by the issuance of 136,612 shares
of common stock. $150,000

Note payable with interest accruing at a rate of 10% per annum. Principal and
interest were due in June 2001. In conjunction with this financing, a warrant to
purchase 50,000 shares of common stock at an exercise price of $0.50 per share
is issuable to this holder. The note holder has agreed to extend the maturity
date of the note and in connection therewith, the Company has agreed to issue a
warrant to purchase 25,000 shares of common stock at an exercise price of $0.50
per share. $50,000

Note payable in the original principal amount of $100,000, with an interest rate
of 10% per annum. Principal and interest were due in July 2001. $50,000 of the
loan was repaid in May, 2001. In conjunction with this financing, a warrant to
purchase 100,000 shares of common stock at an exercise price of $0.50 per share
is issuable to the holder. An additional warrant to purchase 12,500 shares of
the Common Stock at the same exercise price is issuable as a result of the
Company's exercising its option to extend to October 2001 the maturity date of
the note with respect to $50,000 of principal and all of the interest payable
pursuant to the note. The holder has agreed to extend the maturity date of the
note to December 31, 2003. $50,000

In April, 2001, the Company was loaned $40,000. A promissory note has not yet
been issued, as that amount was only a partial funding of the transaction. The
note will provide an interest rate of 10% and a term of 120 days. A warrant will
be issuable in conjunction with this financing, however, the amount of shares of
common stock purchasable pursuant to the warrant will be determined once the
full amount of the financing is established. $40,000

                Total Current Notes Payable Outstanding $591,500

Note 7. Stockholders Equity

During the quarter ended December 31, 2002, a stockholder converted 1,162.29
shares of Series C Convertible Preferred Stock into 116,229 shares of Common
Stock. The converting shareholder executed an agreement restricting the sale of
its Common Stock into the public market.

In October and November, 2002, in consideration of $65,000, the Company issued
1,120,688 shares of Common Stock.

In November, 2002, the Company issued 69,781 shares of Common Stock for services
rendered pursuant to an existing agreement.

In November, 2002, the Company issued 500,000 shares of Common Stock for
investment banking services related to financings.

During the quarter, the Company issued 10,710,229 shares of Common Stock to
officers of the Company in connection with a production financing and in
consideration of guarantees and supplying of shares of stock as collateral in
connection with financings.

                                        8
<PAGE>

In December, 2002, the Company issued a warrant to purchase 2,600,000 shares of
the Common Stock at an exercise price of $0.058 per share in connection with
financing activities.

The Company has determined that the prior management did not validly issue
(under the applicable provisions (including Section 157) of the General
Corporation Law of the State of Delaware) any of the options to purchase an
aggregate of 1,613,333 shares of Common Stock which it had purportedly issued,
and that, pursuant to Delaware law, these options are void. Therefore, the
Company has removed such options from its books and shall not issue any shares
of Common Stock under such void options.

Note 8. Commitments and Contingencies

                                 Loan Guarantee

Phlo Corporation is a guarantor of a 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. The amount outstanding on the loan at December
31, 2002 was approximately $65,000. Payment of the loan is secured by shares of
common stock owned by the unrelated party. The holder of the loan has initiated
legal action against the primary obligor and Phlo Corporation as guarantor,
claiming outstanding principal, interest and late fees in the aggregate amount
of approximately $105,000. The Company believes that it no longer has any
liability under the guaranty as a result of the actions or inactions of the
lender, including the lender's failure to mitigate its damages by selling
collateral pledged by the primary obligor at a time when the value of such
collateral exceeded all amounts due.

                                   Litigation

The Company is involved in litigation with a note holder with respect to which
an appeal is pending in federal court. The note holder obtained a summary
judgment against the Company in the amount of the principal and interest due
under the note. The Company appealed the decision and posted an appeal bond with
respect thereto, but did not prevail on appeal. This judgment has been satisfied
in full through payment pursuant to the appeal bond. Additionally, the Company
filed an action in federal court against the note holder. The U.S. District
Court granted the defendants' motion for summary judgment related to the
pleading of the causes of action and has required the Company to issue 391,229
shares of common stock to the holder related to previously-issued cashless
warrants. The Company believes that the federal court had no jurisdiction to
order the issuance of shares and that the order compelling the issuance of
shares was unlawful and contrary to applicable federal and state law. Therefore,
the Company has appealed the decision to the U.S. Court of Appeals. The Company
is unable to predict the outcome of the pending litigation and, accordingly, no
adjustments have been made related thereto in the consolidated financial
statements.

The Company is involved in litigation related to an agreement it entered into
for investment banking services. The Company executed a promissory note in the
principal amount of $500,000 which represents a bridge loan as part of an
agreement by an investment banking firm to provide at least $2.5 million in
financing. The financing did not occur. The bridge note holder sued for
equitable relief, claiming that it is due a warrant to purchase 1 million shares
of the Company's common stock. The Company disputes any obligation to issue such
warrant. Pursuant to the terms of the note, the Company issued a warrant in full
payment of the principal and interest thereunder. The Company will join
additional parties in the litigation or will bring a separate action in a more
convenient forum against the additional parties. Additionally, the Company will
assert counterclaims, and the Company anticipates that these counterclaims would
far outweigh any award related to the bridge note. However, the Company is
unable to predict the outcome of the pending litigation and, accordingly, no
adjustments have been made related thereto in the consolidated financial
statements.

In August, 2001, the Company filed a lawsuit against a related party and his
affiliates asserting, among other things, breach of contract, breach of
fiduciary duty, and negligence, and seeking an accounting of financing activity,
the recovery of amounts due to the Company, and damages in the amount of $20
million. The case was dismissed on motion of the plaintiffs related to
jurisdiction and forum non conveniens. The Company is free to bring the action
in Pennsylvania against all defendants.

The Company is involved in litigation with a former officer and director of the
Company who did not remain with the Company after the Stock Exchange
Transaction. The former officer and director claimed, among other things, breach
of contract based on his allegation that he had exercised options to purchase
the Company's common stock but that the Company had not issued the common stock.
The U.S. District Court found that he had not properly exercised his options.
The former officer and director again attempted to exercise, then filed an order
to show cause why the Company should not be held in contempt for failing to

                                        9
<PAGE>

issue shares of stock, and the District Court against found that he had not
properly exercised his options. The former officer and director has attempted to
exercise his options yet a third time and again filed an order to show cause why
the Company should not be held in contempt for failing to issue shares of stock.
After a full briefing of the legal issues, the former officer and director has
withdrawn his motion (order to show cause). The Company also believes, based on
new information that has come to its attention, that the options issued to the
former officer and director (which were issued by former management of the
Company) are void. The Company also believes that it has substantial claims
against the former officer and director, which it will pursue at the appropriate
time if it determines the prosecution of such claims to be in the best interest
of the Company and its shareholders.

With respect to approximately $159,999 which is currently reflected as a payable
of the Company, the Company will vigorously dispute such amount and shall assert
certain claims against the account creditor. The Company has been informed by
counsel to the account creditor that the account creditor has obtained a default
judgment in the amount of such payable. The Company has received no notice of
the judgment, did not receive proper service of the initial complaint, and
believes that the default judgment was not properly obtained. The Company will
seek to set aside the default judgment and assert (as counterclaims) claims
against the creditor in an aggregate amount significantly greater than the
payable reflected on the Company's financial statements.

                                  Payroll Taxes

The Company has not paid payroll taxes since the third quarter of 1999 and
currently owes approximately $282,105. The Company is in the process of filing
all returns and has accrued estimated penalties and interest of approximately
$66,726.

                                      Lease

The Company executed a lease in September 2001 with a term of five years,
providing for the payment of a fixed monthly rent. During its first fiscal
quarter, the Company decided to relocate its offices to reduce overhead and
therefore terminated the lease. The landlord holds a security deposit in the
amount of $47,695. The Company is in the process of negotiating a new long-term
office lease. It is currently leasing office space from an employee on an
informal, rent-free basis pending execution of a long-term lease.

Note 9. Earnings (Loss) Per Share

The Company has adopted the provisions of Statements of Financial Accounting
Standards (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 and shares of common stock
which are presently issuable by the Company. Diluted earnings per share includes
the potential dilution that occurs if securities or other contracts to issue
common stock were exercised or converted into common stock.

Note 10. Recent Accounting Pronouncements

On December 31, 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure." SFAS 148 amends SFAS 123, "Accounting
for Stock-Based Compensation" to provide an alternative method of transition to
SFAS 123's fair value method of accounting for stock-based employee
compensation. SFAS 148 also amends the disclosure provisions of SFAS 123 and APB
opinion No. 28, Interim Financing Reporting, to require disclosure in the
summary of significant accounting policies of the effects of an entity's
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
While the statement does not amend SFAS 123 to require companies to account for
employee stock options using the fair value method, the disclosure provisions of
SFAS are applicable to all companies with stock-based employee compensation,
regardless of whether they account for that compensation using the fair value
method of SFAS 123 or the intrinsic value method of APB opinion No. 25. The
Company will continue to account for stock-based compensation according to APB
opinion No. 25, while its adoption of SFAS 148 requires the Company to comply
with aforementioned disclosure requirements. The Company does not expect the
adoption of SFAS 148 will have a significant impact on the consolidated
financial position or results of operations.

In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires a company, at
the time it issues a guarantee, to recognize an initial liability for the faire
value of obligations assumed under the guarantee and elaborates on existing
disclosure requirements related to guarantees and warranties. The initial
recognition requirements of FIN 45 are effective for guarantees issued or
modified after December 31, 2002. Adoption of the disclosure requirements were
effective for interim and annual period ending after December 15, 2002, and did
not have a significant impact on the Company's Consolidated Financial
Statements. The Company does not expect the adoption of the initial recognition
requirements of FIN 45 to have a significant effect on its consolidated
financial position or results of operations.

                                       10
<PAGE>

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" which nullifies EITF No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146
requires, among other things, that a liability for costs associated with an exit
or disposal activity be recognized when the liability is incurred rather than
when a company commits to such an activity and also establishes fair value as
the objective for initial measurement of the liability. The Company will adopt
SFAS No. 146 for exit or disposal activities that are initiated after March 31,
2003, and it is not expected to have a material impact on the Company's results
of operations, financial position or cash flows.

In July 2001, the FASB Issued Statement of Financial Accounting Standards No.
141, Business Combinations, or SFAS No. 141, and Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets, or SFAS No.
142. The Company has adopted the provisions of SFAS No. 141which requires
purchase accounting for business combinations occurring after June 30, 2001. The
Company has adopted the provisions of SFAS 142 as of April 1, 2002 and is in the
process of determining the potential impact on financial results, which at this
time does not appear to be significant.

In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment of
Disposal of Long-Lived Assets. SFAS No. 144 addressed the accounting model for
long-lived assets to be disposed of by sale and resulting implementation issues.
This statement requires that those long-lived assets be measured at the lower of
carrying amount or fair value less costs to sell, whether reported in continuing
operations or in discontinued operations. Therefore, discontinued operations
will no longer be measured at net realizable value or include amounts for
operating losses that have not yet occurred. It also broadens the reporting of
discontinued operations to include all components of an entity with operations
that can be distinguished from the rest of the entity and that will be
eliminated from the ongoing operations of the entity in a disposal transaction.
The Company has adopted SFAS No. 144 and is evaluating the effect on the
Company's financial position, which does not appear to be significant.

Note 11. Subsequent Events

In February, an additional advance was made under the Company's revolving credit
facility (see Note 5) in the amount of $70,000. In conjunction therewith, the
Company issued 6,700,000 shares of Common Stock which serve as collateral to
secure repayment of advances made to the Company under the facility and the
meeting of all obligations of the Company under the facility loan documents.

In February, in consideration of $5,000, the Company issued 333,333 shares of
Common Stock.

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Item 2.

PHLO CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

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 2002 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 December 31,
2002 and results of operations for the quarters ended December 31, 2002 and 2001
includes Phlo Corporation and its affiliates (collectively, the Company) and
should be read in conjunction with the condensed consolidated financial
statements and notes appearing elsewhere in this 10-QSB.

RECENT DEVELOPMENTS

During its third fiscal quarter, the Company continued the process of preparing
for the commercial launch of two additional product lines which it developed
during its last fiscal year and successfully completed a financing with private
investors, the proceeds of which have been allocated to the production of its
recently-commercialized personal performance Spray Products (see below). The
Spray Products contain Phlo's patent-pending VEP/PC preparation and Phlo's
biologically-active micro-particle delivery system, delivered through 1-ounce
sprays. The Spray Products provide cellular membrane repair and protection from
toxicants while creating focus and mental alertness without any secondary
depression. The Company completed an initial "test-run" production of its Spray
Products in December, and the finished products were sent to distributors. The
test-run revealed that changes related to the Spray Product labels were
required, which revisions were completed subsequent to the quarter. The Company
plans to produce an additional 19,000 cases of Spray Products and to begin
shipment of such Spray Products by the end of March 2003. The Spray Products are
being marketed to the major natural food chains, the major chain and independent
convenience stores, drug stores, mass merchandisers, and supermarkets.

Additionally, the Company has completed the development of two types of
proprietary oral rehydration solutions (ORS(s)) for sale initially to
institutional purchasers (including the U.S. military) and continues to improve
its biologically active delivery system as well as working on other types of
delivery systems for nutraceutical, biological, and pharmaceutical agents. One
type of the Company's ORS is directed to rehydration while the other type is
therapeutic in nature and treats diarrhea caused by diseases such as dysentery
and cholera. These diseases bring suffering and death to millions of people in
many parts of the world today. Both types of the Company's ORSs contain the
Company's proprietary, biologically active micro-particle delivery system, are
superior to the World Health Organization standard, and meet the criteria
(related to electrolyte payload, carbohydrates and osmolality) which the Company
believes places its ORSs among the most effective in the world. 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.

                                       12
<PAGE>

RESULTS OF OPERATIONS

The Company had no sales for the three month period ended December 31, 2002, as
compared to sales of $30,807 for the three month period ended December 31,
2001. The selling, general and administrative expenses for the three month
period ended December 31, 2002 were $288,245, as compared to $367,651 for
the comparable three month period during 2001. The Company's operating loss was
$327,094 for the three month period ended December 31, 2002 as compared with
an operating loss of $357,145 for the three month period ended December 31,
2001.

During the Company's preparation to launch its beverage products in plastic
bottles and its new Spray Products and ORSs (which activities included revising
all aspects of its beverage packaging and the manufacture of the production
molds for proprietary 17-ounce plastic bottles for use in all beverage
products), the Company produced very little revenue. The revenue generated
consisted of that resulting from the Company's sale of existing beverage
inventory in glass bottles represented by odd amounts of a limited number of
flavors of its beverages. The amounts of existing inventory were not conducive
to sales to the Company's large distributors at undiscounted prices because of
the inadequacy of the existing inventory, both with respect to amount and flavor
type, to fulfill reorders. Moreover, the Company has incurred costs associated
with preparing new products for launch later this year while revenue associated
therewith will not be generated until such launches are officially commenced.

The Company is currently conducting additional stress tests related to the
17-ounce plastic bottle design for its beverage products. Upon completion of the
manufacture of the 17-ounce plastic bottle molds, the Company plans to commence
its distribution activities with Coca-Cola Enterprises Inc.

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 from $1,701,505 during the
quarter ended December 31, 2001, to $2,146,972 during the quarter ended
December 31, 2002. In addition, the Company's Stockholders' Deficiency increased
from $1,450,116 during the quarter ended December 31, 2001, to $2,014,519
during the same three month period in 2002.

During the fiscal year ending March 31, 2003, the Company is taking steps to
reduce or eliminate the Stockholders' Deficiency and to create a positive
working capital position. In its third fiscal quarter, the Company successfully
completed a financing with private investors, the proceeds of which have been
allocated to the production of Phlo's personal performance Spray Products. The
Company completed an initial "test-run" production of its Spray Products in


                                       13
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December, and the finished products were sent to distributors. The Company plans
to produce an additional 19,000 cases of Spray Products and to begin shipment of
such Spray Products by the end of March 2003, which should lead to the creation
of receivables and should allow the Company to generate significant cash flow
and facilitate additional financing. Also included in the actions the Company is
taking is the planned commencement of distribution activities with Coca-Cola
Enterprises Inc. upon completion of the manufacture of the production molds for
the Company's proprietary17-ounce plastic bottle. Additionally, the Company
believes it is more likely than in prior years to raise substantial equity funds
as a result of its expanded distribution base, the 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.

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.

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.

Item 3.

CONTROLS AND PROCEDURES

The Company's chief executive officer has supervised and participated in an
evaluation of the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days of the date of this report, and based on
such evaluation, he believes that the Company's disclosure controls and
procedures (as defined in Rule 13a-14(c) of the Securities Exchange Act of 1934,
as amended) are designed to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported, within the
time periods specified in the Commission's rules and forms. As a result of the
evaluation, there were no significant changes in the Company's internal controls
or in other factors that could significantly affect those controls subsequent to
the date of such evaluation.

                                       14
<PAGE>

                                   Signatures

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

                                Phlo Corporation





February 19, 2003                        By: /s/ James B. Hovis
                                           -------------------------------------
                                           James B. Hovis
                                           President and Chief Executive Officer


                                       15
<PAGE>



                                 CERTIFICATIONS

I, James B. Hovis, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: February 19, 2003


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

                                       16
<PAGE>


                                 CERTIFICATIONS

                            Certificate Pursuant to

18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

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

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

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

Date: February 19, 2003


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



                                       17
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