UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              Washington D.C. 20549

                                    ---------

                                   FORM 10-QSB

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

For the quarter ended June 30, 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 July 31,
2000 is 24,755,503.


<PAGE>


PHLO CORPORATION AND SUBSIDIARIES

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


                                                                    Page to Page
Item 1.  Financial Statements

   Consolidated Balance Sheet as of June 30, 2000
   [Unaudited] .........................................................   1-2

   Consolidated Statements of Operations for the three months
   ended June 30, 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]

                                                                   June 30, 2000
--------------------------------------------------------------------------------

                                     ASSETS

CURRENT ASSETS
 Cash                                                                   $311,781
 Accounts receivable                                                      16,008
 Inventory                                                               230,902
                                                                        --------

       Total Current Assets                                             $558,691

PROPERTY AND EQUIPMENT, Net                                               19,186

OTHER ASSETS
 Goodwill - net of accumulated amortization
              of $135,000                                325,000
 Security deposits                                        30,063
                                                        --------

       Total Other Assets                                                355,063
                                                                        --------

       TOTAL ASSETS                                                     $932,940
                                                                        ========


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


                                                                               1

<PAGE>

                                               PHLO CORPORATION AND SUBSIDIARIES
                                          CONSOLIDATED BALANCE SHEET [Unaudited]

                                                                   June 30, 2000
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY

<S>                                                             <C>           <C>
CURRENT LIABILITIES
 Accounts payable                                               $ 1,847,283
 Accrued expenses and taxes                                       2,789,335
 Current portion of long-term debt                                1,911,500
                                                                -----------

       Total Current Liabilities                                              6,548,118

OTHER LIABILITIES
 Long-term debt, less current portion                                           400,000
                                                                            -----------

       TOTAL LIABILITIES                                                      6,948,118

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, 25,000,000 shares authorized,
     24,328,298 shares issued and outstanding                                     2,476
   Common stock, $0.0001 par value, 3,244,888 shares subscribed                     324
   Additional paid-in capital                                                 3,962,878
   Accumulated deficit                                                       (9,981,065)
                                                                            -----------
       TOTAL STOCKHOLDERS' DEFICIENCY                                        (6,015,178)
                                                                            -----------
       TOTAL LIABILITIES AND STOCKHOLDERS'
        DEFICIENCY                                                          $   932,940
                                                                            ===========
</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 Ended June 30, 2000, and 1999
--------------------------------------------------------------------------------


                                                       2000             1999
                                                   -----------      -----------
SALES                                             $    196,440     $    461,709

COST OF SALES                                          162,675          299,903
                                                  ------------     ------------

       GROSS PROFIT                                     33,765          161,806

SELLING, GENERAL AND ADMINISTRATIVE
 EXPENSES                                              726,610          841,822
                                                  ------------     ------------

       OPERATING LOSS                                 (692,845)        (680,016)
                                                  ------------     ------------

OTHER EXPENSES
 Interest expense                                      (72,547)         (33,135)
                                                  ------------     ------------

       TOTAL OTHER EXPENSE                             (72,547)         (33,135)
                                                  ------------     ------------

       NET LOSS                                   $   (765,392)    $   (713,151)
                                                  ============     ============

Weighted Average Common Shares Outstanding          20,884,282       14,645,456
                                                  ============     ============
Net Loss Per Share (Basic and Diluted)            $      (0.04)    $      (0.05)
                                                  ============     ============


   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 Three Months Ended June 30, 2000 and 1999
--------------------------------------------------------------------------------


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

CASH FLOWS FROM OPERATING ACTIVITIES
 Net loss                                            $  (765,392)   $  (713,151)
                                                     -----------    -----------
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Stock-based compensation                              12,770             --
    Depreciation  and amortization                        24,952         15,843
     (Increase)decrease in accounts receivable            53,382       (173,351)
     (Increase)decrease in inventory                     103,724       (263,276)
      Decrease in other current assets                                   33,804
      Increase in security deposits                                      25,607
      Increase in accounts payable                        53,726        178,170
      Increase in accrued expenses and taxes             136,991        354,000
      Increase in current portion of long term debt      499,000             --
                                                     -----------    -----------

       TOTAL ADJUSTMENTS                                 884,545        170,897
                                                     -----------    -----------

       NET CASH USED IN OPERATING ACTIVITIES             119,153        542,254
                                                     -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
 (Pay-down)Proceeds from long-term debt
 Proceeds from issuance of capital stock                 147,489        580,020
                                                     -----------    -----------

       NET CASH PROVIDED BY FINANCING ACTIVITIES     $   147,489    $   580,020
                                                     -----------    -----------



      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 Years Ended June 30, 2000 and 1999
--------------------------------------------------------------------------------

                                                         2000             1999
                                                       --------         --------
       NET INCREASE IN CASH                            $266,642         $ 37,766

CASH - Beginning                                         45,139           12,790
                                                       --------         --------
CASH - Ending                                          $311,781         $ 50,556
                                                       ========         ========


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

                                                                               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 engaged in the distribution and sale of beverages. 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. Additionally, the Company has been
developing, acquiring, and exclusively licensing proprietary (patented and
patent-pending) technology of a nutraceutical, biotechnological, and/or
pharmaceutical nature.

The Company's current beverage line is sold under the McCoy's name and includes
ice teas, green teas, lemonade and fruit drinks. In June 2000, the Company
announced the introduction of 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 to
conduct the business of producing and selling McCoy's beverages. In August,
1999, the Company incorporated Phlo System, Inc. to conduct the Company's
biotechnology-related activities. The Company also has two subsidiaries which
were not operating entities during the fiscal quarter, X-Treem Products
Corporation ("X-Treem") and Quigley's Orchard, Inc.

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 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) to acquire 100% of the outstanding X-Treem capital
stock and outstanding warrants to purchase X-Treem common stock from the holders
thereof.


                                                                               6
<PAGE>


As of March 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 Tranaction. When sufficient shares are authorized and 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.

In addition, as disclosed above and in Note 8, the Company has issued additional
shares of common stock which, after taking into consideration the total
outstanding stock warrants and options, would, if such warrants and options were
fully exercised, cause the overall outstanding shares to exceed the 25,000,000
shares the Company presently has authorized. As of June 30, 2000, there are
24,328,298 common shares issued and outstanding. In addition, options and
warrants to purchase 2,438,333 and 8,743,762 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. The Company is in the process of
amending 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. Once this has been accomplished, the Company
intends to replace the old Series A and C preferred stock certificates with
shares of preferred stock which are validly issued.

Contemporaneously with the filing of this Form 10-QSB, the Company is filing an
information statement with the Securities and Exchange Commission. Following a
brief comment period, a mailing of the information statement to shareholders,
and a waiting period of 20 days, the Company will file an amended certificate of
incorporation with the State of Delaware increasing the number of authorized
shares of common stock to accommodate the shares currently due under the terms
of the Stock Exchange Transaction.


                                                                               7
<PAGE>


NOTE 2 - Summary of Significant Account Policies

Basis of Reporting

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 being amortized on a
     straight-line basis over a five-year period. Amortization of goodwill
     charged to operations for the years ended June 30, 2000 and June 30, 1999
     amounted to $23,000 and $10,000 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.

Research and Development

     Research and development costs of $0 and $0 are expensed as incurred during
     the three months ended June 30, 2000 and June 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.

Accounting Developments


                                                                               9
<PAGE>



     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 - Going Concern

     As shown in the accompanying financial statements, the Company incurred a
     net loss of $765,392 during the three months ended June 30, 2000. As of
     June 30, 2000, the Company's current liabilities exceeded its current
     assets by $5,489,427 and its total liabilities exceeded its total assets by
     $5,515,178. The Company is delinquent in connection with various
     obligations including, but not limited to, trade payables, accrued payroll
     taxes, and notes payable. These factors, as well as the uncertain
     conditions that the Company faces in its day-to-day operations, create 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.

     Management has taken action and is formulating additional plans to
     strengthen the Company's working capital position and generate sufficient
     cash to meet its operating needs through March 31, 2001 and beyond. Among
     the actions taken, the Company anticipates generating more revenue through
     the expansion of its beverage lines, particularly through the introduction
     of beverage products containing proprietary (patented and/or
     patent-pending) biotechnology, and the raising of additional funds through
     private placement offerings of its securities. 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 June 30, 2000:

     Furniture and fixtures                                         $33,232
     Less: Accumulated depreciation                                  14,046
                                                                    -------
            Net                                                     $19,186
                                                                    =======

     Depreciation expense for the years ended June 30, 2000 and 1999 was $1,952
and $5,843, 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 June 30, 2000:

     Raw materials                                                 $ 62,176
     Finished goods                                                 168,726
                                                                   --------
          Total                                                    $230,902
                                                                   ========

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 June 30, 2000, the Company estimated the available NOL carryforwards
     to be approximately $10,616,000 and the Company's total deferred tax assets
     relating to the carryforwards amounted to approximately $3,609,000 which
     expire though March 31, 2020. The Company has a valuation allowance for the
     full assessment of the deferred tax assets at March 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.

     In July 1998, in connection with the acquisition of Leroux Creek applesauce
     brand, the Company agreed to grant options to purchase of 750,000 shares of
     its common stock to Leroux Creek and a former stockholder of Leroux Creek
     with an exercise price of $0.10 per share. None of these options were
     issued and the Company has been relieved of its obligation to issue any of
     these options by agreement of all parties in June 1999 (see note 8).


                                                                              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

     Exercisable at June 30, 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 6.25
     years.

     In June, 1999, the Company entered into a settlement agreement with Leroux
     Creek Food Corporation and its President, which resulted in the Company
     being relieved of its prior agreement to issue to Leroux Creek and its
     President options to purchase an aggregate of 750,000 shares of Common
     Stock at an aggregate purchase price of $75,000.

NOTE 8 - Stockholders' Equity

     Preferred Stock

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

     Series A Convertible Preferred Stock

     At June 30, 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 June 30, 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 June 30, 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.

     Immediately subsequent to the filing of this Form 10-KSB, the Company is
     filing an information statement with the SEC. Following a brief comment
     period, a mailing of the information statement to shareholders, and a
     waiting period of 20 days, the Company will file an amended certificate of
     incorporation with the Secretary of State of Delaware increasing the number
     of authorized shares of common stock to accommodate the shares currently
     due to be issued under the terms of the Stock Exchange Transaction and to
     confer on the board of directors blank check authority to issue classes and
     series of stock without further shareholder action.

     Common Stock

     Phlo has 25,000,000 authorized shares of common stock, par value of $0.0001
     per share (the "Common Stock"), of which 24,328,255 shares were issued and
     outstanding at March 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.


     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 year ended March 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 year 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 year ended March 31, 2000, have a weighted
     average remaining contractual life of 4.5 years. All existing warrants are
     exercisable as of June 30, 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, which warrant has not been
     issued as of March 31, 2000.

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 March 31, 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 March 31, 2000 (See Note 1).


                                                                              14
<PAGE>


NOTE 9 - Debt

     Debt as of June 30, 2000 consists of the following:

     Term note payable with interest due monthly at a rate
     of 12% per annum. The note matured on March 31, 1998
     when principal and unpaid interest was due. The note is
     currently in default. No action has been taken or
     threatened against the Company to enforce the note. The
     Company continues to accrue interest on this note.                $600,000

     Term note payable with interest at a rate of 12% per
     annum. Principal and accrued interest are payable at
     the note's maturity date on February 12, 2001. The
     Company continues to accrue interest on this note.                  50,000

     Note payable with principal plus an interest payment of
     $10,000 are payable at the note's maturity on June 27,
     1997. The holder of the note has initiated an action to
     enforce the note.                                                  100,000

     Note payable with interest at a rate of 12% per annum.
     Principal and interest are payable at the note's
     maturity date on November 24, 2000. The Company
     continues to accrue interest on this note.                         100,000

     Note payable with principal plus an interest payment of
     $5,000 were payable at the loan's maturity date on
     March 31, 1998. The parties agreed to convert this debt
     into equity, however, this conversion has not taken
     place to date, and therefore, the note is in default.
     The Company continues to accrue interest on this note.
     The holder has agreed informally to extend the date of
     maturity in order to consummate the conversion.                     45,000

     Note payable with principal plus an interest payment of
     $5,000 was payable on the note's maturity date on March
     30, 1998. The parties agreed to revise the terms of the
     note to provide for an increase in interest payable
     from $5,000 to $10,000 and a maturity date of December
     31, 1998. The note is currently in default. No action
     has been taken or threatened against the Company to
     enforce the note. The Company continues to accrue
     interest on this note.                                              45,000

     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.                          400,000

     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
                                                                     ----------

        Total Long-Term Debt                                         $2,311,500

     Less: Current Portion                                           $1,911,500
                                                                     ----------
     Long-Term Debt, net of current portion                          $  400,000
                                                                     ==========


                                                                              16
<PAGE>


NOTE 10 - Commitments and Contingencies

     Employment Agreement

     The Company has one employment agreement with an executive of the Company
     is 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
     June 30, 2000 was approximately $65,000.

     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 has been accrued and included in accrued
     expenses at June 30, 2000.

     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 $220,500.

     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 June 30,
     2000.

         For the Year Ending
            June 30,                                      Amount
         --------------------------------------------------------
             2001                                         121,805
             2002                                         121,805
             2003                                         121,805
             2004                                          30,450
                                                        ---------
       Total minimum lease payments                     $ 395,865
                                                        =========

     Rent expense for the years ended June 30, 2000 and 1999 was $94,772 and
     $70,410, respectively. In connection with the above lease, a refundable
     security deposit in the amount of $30,063 is being held by the landlord.

     NOTE 11 - Economic Dependency

     Major Customers

     The Company sells a substantial portion of its products to three customers.
     During the three months ended June 30, 2000.

     Major Suppliers

     The Company purchased a substantial portion of its raw materials from one
     supplier for the year ended June 30, 2000.

                                                                              17
<PAGE>


Item 2:

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

For the three months ended June 30, 2000 compared with the three months ended
June 30, 1999.

The following discussion of the Company's financial condition as of June 30,
2000 and results of operations for the three months ended June 30, 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 engaged
in the creation, distribution and sale of a complete line of new-age beverages.
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. Additionally, the Company
has been actively developing a proprietary product base the result of which
could dramatically increase the intrinsic value of the Company and its valuation
within the financial community and financial markets. 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 chain store 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 current beverage line is sold under the brand name "McCoy's" and
includes ice teas, green teas, lemonade and fruit drinks. In August 2000, the
Company announced the introduction of 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.

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 loss of $765,392 for the three months ended June 30, 2000
as compared to a net loss of $713,151 for the three months ended June 30, 1999.
The loss from operations for the three months ended June 30, 2000 is primarily
due to the effect of increased selling costs including, but not limited to,
promotional programs related to distribution of the Company's products to chain
supermarkets and other costs related to the development of proprietary products.

The net sales for the Company for the three months ended June 30, 2000 was
$196,440 as compared to $461,709 for the three months ended June 30, 1999. The
Company had a gross profit of $33,765 or 17% as compared to a gross profit of
$161,806 or 35% for the three months ended June 30, 2000 and 1999, respectively.
The decrease in net sales is primarily due to the anticipation of the Company's
distributor's of the introduction of the Company's new ZO-Vital Cell Defense
beverage line and the discontinuance of a number of the McCoy's flavors which
are being replaced by ZO-Vital Cell Defense.

LIQUIDITY AND CAPITAL RESOURCES

The Company incurred a net loss for the year ended March 31, 2000 and the period
from April 1, 1999 through June 30, 1999 equal to $2,505,653 and $765,392,
respectively. In addition the Company has a working capital deficit at June 30,
2000 equal to $5,489,427, approximately $4,100,000 is attributable to a
non-operating subsidiary. Management anticipates that a significant portion of
the current deficit of the Company will ultimately be eliminated. Other steps
and actions are also expected to reduce or, possible, eliminate the current
deficit, including plans to raise additional capital involving private placement
of securities and plans for reducing losses from operations and ultimately
realizing profitability by increasing sales.

Although the Company believes it will raise additional funding and make strides
towards achieving profitable operations by the latter part of the fiscal year
ending March 31, 2001, there can be no assurance that such additional funding
will be successfully completed or that profitable operations will be achieved or
achieved within the necessary time peroid. These conditions raise doubt about
the Company's ability to continue as a going concern.


                                                                              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



August 18, 2000                         By: /s/ James B. Hovis
                                           -------------------------------------
                                           James B. Hovis
                                           President and Chief Executive Officer



                                                                              20