<PAGE>   1

                                  United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the quarterly period ended:     August 4, 2001
                                       OR
[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

For the transition period from __________________ to ________________.

                           Commission File No. 0-21597

                               MAZEL STORES, INC.
                       -----------------------------------
             (Exact name of Registrant as specified in its charter)

               Ohio                                            34-1830097
--------------------------------------                      ---------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                             Identification No.)

                                31000 Aurora Road
                                Solon, Ohio 44139
                               ------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                  440-248-5200
                                ----------------
              (Registrant's telephone number, including area code)

              (Former name, former address and former fiscal year,
                          if changed since last report)

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

 Indicate the number of shares outstanding of each of the issuer's common stock,
as of the latest practical date.

Common Shares, no par value, outstanding as of August 31, 2001: 9,117,093.




                                    1 of 18
<PAGE>   2




                               MAZEL STORES, INC.


                                      INDEX

                                                                        Page No.
                                                                        --------

         PART I - FINANCIAL INFORMATION

         Item 1.   Consolidated Financial Statements

                    Consolidated Balance Sheets -
                    August 4, 2001 (unaudited) and February 3, 2001         4

                    Consolidated Statements of Operations (unaudited) -
                    for the thirteen and twenty-six week periods ended
                    August 4, 2001 and July 29, 2000                        5

                    Consolidated Statements of Cash Flows (unaudited) -
                    for the twenty-six week periods ended
                    August 4, 2001 and July 29, 2000                        6

                    Notes to Consolidated Financial Statements              7

         Item 2.   Management's Discussion and Analysis of Financial       10
                    Condition and Results of Operations


         PART II - OTHER INFORMATION

         Item 1-6.                                                         17


         Signatures                                                        18







                                    2 of 18
<PAGE>   3








                         PART I - FINANCIAL INFORMATION

ITEM 1.           CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

         The Registrant's Consolidated Financial Statements follow this page.









































                                    3 of 18
<PAGE>   4


                               MAZEL STORES, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                      August 4,    February 3,
                                                                        2001          2001
                                                                      --------      --------
<S>                                                                   <C>              <C>
                                                                     (Unaudited)
ASSETS

Current assets
     Cash and cash equivalents                                        $  3,160         2,318
     Receivables, less allowance for doubtful accounts
        of $408 in both periods                                         13,960        14,769
     Notes and accounts receivable-related parties                       4,502         7,432
     Income tax receivable                                                  --         2,625
     Inventories                                                        56,301        53,778
     Prepaid expenses                                                    2,147         1,805
     Deferred income taxes                                               8,093         8,863
                                                                      --------      --------
             Total current assets                                       88,163        91,590

Equipment, furniture, and leasehold improvements, net                   27,791        30,479
Other assets                                                             3,691         3,961
Investment in VCM, Ltd.                                                  8,045         9,421
Goodwill, net                                                            9,604         9,761
Deferred income taxes                                                    2,180         2,570
                                                                      --------      --------

                                                                      $139,474       147,782
                                                                      ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
     Current portion of long-term debt                                $  2,017         2,017
     Accounts payable                                                   26,937        22,763
     Accrued expenses and other current liabilities                      7,440         8,384
                                                                      --------      --------
             Total current liabilities                                  36,394        33,164
Revolving line of credit                                                28,807        35,769
Long-term debt, net of current portion                                   1,008         2,511
Other liabilities                                                        4,866         4,585
                                                                      --------      --------
             Total liabilities                                          71,075        76,029
Stockholders' equity
     Preferred stock, no par value; 2,000,000 shares authorized;
        no shares issued or outstanding                                     --            --
     Common stock, no par value; 14,000,000 shares authorized;
        9,117,100 and 9,141,800 shares issued and
        outstanding, respectively                                       64,246        64,320
     Retained earnings                                                   4,153         7,433
                                                                      --------      --------
             Total stockholders' equity                                 68,399        71,753
        Commitments and contingencies
                                                                      --------      --------
                                                                      $139,474       147,782
                                                                      ========      ========
</TABLE>


           See accompanying notes to consolidated financial statements




                                    4 of 18
<PAGE>   5







                               MAZEL STORES, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)


<TABLE>
<CAPTION>
                                                       Thirteen Weeks Ended               Twenty-six Weeks Ended
                                                  -----------------------------       -----------------------------
                                                    August 4,          July 29,         August 4,        July 29,
                                                      2001              2000              2001              2000
                                                  -----------       -----------       -----------       -----------

<S>                                               <C>                    <C>              <C>               <C>
Net sales                                         $    78,574            73,141           154,349           145,931
Cost of sales                                          51,119            46,499           100,236            93,089
                                                  -----------       -----------       -----------       -----------
     Gross profit                                      27,455            26,642            54,113            52,842
Selling, general and administrative expense            28,474            26,728            56,527            51,808
                                                  -----------       -----------       -----------       -----------
     Operating (loss) profit                           (1,019)              (86)           (2,414)            1,034
Interest expense, net                                    (830)           (1,110)           (1,586)           (1,950)
Other income (expense)                                   (901)              107            (1,376)             (161)
                                                  -----------       -----------       -----------       -----------
     Loss before income taxes                          (2,750)           (1,089)           (5,376)           (1,077)
Income tax benefit                                     (1,072)             (435)           (2,096)             (429)
                                                  -----------       -----------       -----------       -----------
     Net loss                                     $    (1,678)             (654)           (3,280)             (648)
                                                  ===========       ===========       ===========       ===========

Net loss per common share -
     basic and diluted                            $     (0.18)            (0.07)            (0.36)            (0.07)

Weighted average common shares outstanding -
     basic and diluted                              9,135,000         9,141,800         9,138,400         9,141,800
</TABLE>








           See accompanying notes to consolidated financial statements



                                    5 of 18
<PAGE>   6



                               MAZEL STORES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                   Twenty-six Weeks Ended
                                                                   -----------------------
                                                                  August 4,       July 29,
                                                                     2001           2000
                                                                   --------       --------

<S>                                                                <C>                <C>
Cash flows from operating activities
     Net loss                                                      $ (3,280)          (648)
     Adjustments to reconcile net loss
         to net cash used in operating activities
            Depreciation and amortization                             3,750          2,795
            Equity in net loss from VCM, Ltd.                         1,376            187
            Changes in operating assets and liabilities
              Receivables                                             6,364         (2,603)
              Inventories                                            (2,523)       (17,366)
              Prepaid expenses                                         (342)          (705)
              Deferred taxes                                          1,160            (99)
              Other assets                                              (69)         1,930
              Accounts payable                                        4,174          4,207
              Accrued expenses and other liabilities                   (663)        (1,896)

                                                                   --------       --------
                Net cash provided (used) by operating activities      9,947        (14,198)
                                                                   --------       --------

Cash flows from investing activities
      Capital expenditures                                             (566)        (6,248)
                                                                   --------       --------
                Net cash used by investing activities                  (566)        (6,248)
                                                                   --------       --------
Cash flows from financing activities
      Debt repayments                                               (38,982)       (24,203)
      Debt borrowings                                                30,517         45,225
      Purchase of Common Shares                                         (74)            --
                                                                   --------       --------
                Net cash (used) provided by financing activities     (8,539)        21,022
                                                                   --------       --------

Net increase in cash and cash equivalents                               842            576
Cash and cash equivalents at beginning of period                      2,318          2,367
                                                                   --------       --------
Cash and cash equivalents at end of period                         $  3,160          2,943
                                                                   ========       ========
Supplemental disclosures:
     Cash paid for interest                                        $  1,682          1,660
     Cash (received) paid for taxes - net                          $ (4,508)         1,835
                                                                   ========       ========
</TABLE>



           See accompanying notes to consolidated financial statements




                                    6 of 18
<PAGE>   7


                               MAZEL STORES, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
               FOR THE THIRTEEN AND TWENTY-SIX WEEK PERIODS ENDED
                        AUGUST 4, 2001 AND JULY 29, 2000
                  (DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)

(1)  Basis of Presentation

The consolidated financial statements for the thirteen week (fiscal second
quarter) and twenty-six week (fiscal first half) periods ended August 4, 2001
and July 29, 2000, respectively, represent the consolidated retail and wholesale
operations of Mazel Stores, Inc. All significant intercompany accounts and
transactions are eliminated in the consolidated financial statements.

In the opinion of management, this information includes all adjustments that are
normal and recurring in nature and necessary to present fairly the results of
the interim periods shown in accordance with generally accepted accounting
principles. Operating results for the interim period are not necessarily
indicative of the results that may be expected for the full fiscal year.

The unaudited interim consolidated financial statements have been prepared using
the same accounting principles that were used in the preparation of the
Company's Annual Report on Form 10-K for the fiscal year ended February 3, 2001
and should be read in conjunction with the consolidated financial statements and
the notes thereto.


(2) Investment in VCM, Ltd.

On August 3, 1997, the Company commenced the operation of VCM, Ltd. ("VCM"), a
50 percent owned joint venture with Value City Department Stores ("VCDS"),
whereby VCM operates the toy, sporting goods, and general merchandise
departments for the Value City Department Stores chain. The Company coordinates
merchandise purchasing on behalf of VCM, some of which is sourced from the
Company's wholesale segment. The Company's original investment in VCM, which is
accounted for under the equity method, was $9,637. In addition to its 50 percent
equity share of VCM's net profit or loss, the Company receives a management fee
equal to three percent of net sales. The Company recorded management fee revenue
totaling $769,000 and $809,000 for the fiscal 2001 and 2000 second quarters,
respectively, and $1.5 million for both fiscal 2001 and 2000 first halves,
respectively.

On July 19, 2001, the Company received a notice from VCDS with respect to its
election to terminate the VCM joint venture by fiscal 2001 year-end. VCDS has
the option to continue the business of VCM and acquire the net assets at book
value or liquidate the net assets. The Company has not received notice of VCDS's
election and is in discussion with VCDS regarding the notice of termination. As
of August 4, 2001, the Company and VCDS have not reached an agreement as to the
book value of VCM.



                                    7 of 18
<PAGE>   8



(3) Earnings Per Share

The following data shows the amounts used in computing earnings per share and
the effect on the weighted-average number of shares of dilutive potential common
stock.

<TABLE>
<CAPTION>
                                                        Thirteen Weeks Ended                Twenty-six Weeks Ended
                                                    -----------------------------       -----------------------------
                                                     August 4,          July 29,         August 4,          July 29,
                                                       2001               2000             2001               2000
                                                    -----------       -----------       -----------       -----------

<S>                                                 <C>                      <C>             <C>                 <C>
NUMERATOR:
Net loss attributable to common shareholders
   used in basic and diluted net loss per share     $    (1,678)             (654)           (3,280)             (648)

DENOMINATOR:
Weighted-average number of Common Shares
   used in basic earnings per share                   9,135,000         9,141,800         9,138,400         9,141,800
Net dilutive effect of stock options                         --                --                --                --
                                                    -----------       -----------       -----------       -----------

Weighted-average number of Common Shares
   and dilutive potential Common Shares used
   in diluted net loss per share                      9,135,000         9,141,800         9,138,400         9,141,800
                                                    ===========       ===========       ===========       ===========

Basic net loss per share                            $     (0.18)            (0.07)            (0.36)            (0.07)
Diluted net loss per share                          $     (0.18)            (0.07)            (0.36)            (0.07)
</TABLE>


(4) Business Segment Information

The Company's business segments are: retail, wholesale, and corporate.
Summarized financial information by business segment is as follows:

<TABLE>
<CAPTION>
                               Thirteen Weeks Ended          Twenty-six Weeks Ended
                              -----------------------       -----------------------
                              August 4,      July 29,       August 4,      July 29,
                                2001           2000           2001           2000
                              --------       --------       --------       --------

<S>                           <C>              <C>           <C>            <C>
Sales:
   Retail                     $ 60,135         52,830        115,050        100,251
   Wholesale                    19,672         22,725         42,442         50,353
   Intersegment sales           (1,233)        (2,414)        (3,143)        (4,673)
                              --------       --------       --------       --------
                              $ 78,574         73,141        154,349        145,931
                              ========       ========       ========       ========

Operating (loss) profit:
   Retail                     $ (1,446)        (1,574)        (4,005)        (4,106)
   Wholesale                     1,058          1,442          3,043          5,100
   Corporate                      (631)            46         (1,452)            40
                              --------       --------       --------       --------
                              $ (1,019)           (86)        (2,414)         1,034
                              ========       ========       ========       ========
</TABLE>


                                    8 of 18
<PAGE>   9


(5) Long-term Debt

  On August 21, 2001, the Company entered into a $70.0 million three-year
  revolving credit facility with IBJ Whitehall Retail Finance. Under this
  facility, the Company also borrowed $8.0 million through a Tranche B term loan
  with Wingate Capital, and $1.0 million through a Tranche C term loan with The
  Provident Bank and National City Bank. Borrowings under the revolving credit
  facility bear interest, at the Company's option, at either the banks' prime
  rate or LIBOR plus a spread based upon an availability grid. Interest on the
  Tranche B loan is based upon the greater of the banks' prime rate plus 750
  basis points or 15%, plus a deferred interest payment of $300,000 due upon
  payment of the Tranche B loan. Interest on the Tranche C loan is 20% through
  November 2001 and 25% thereafter. The Tranche C loan also provided for the
  issuance of warrants for 2.5% of the Company's outstanding shares at $0.01 per
  share in the event that the loan exists as of June 3, 2002. The warrants are
  not yet exercisable and will terminate in their entirety if the Tranche C loan
  is repaid by June 3, 2002. Availability on the revolving credit facility and
  the Tranche B loan is the lesser of the total credit commitment or a borrowing
  base calculation based primarily upon the Company's accounts receivable and
  inventories. The entire facility contains restrictive covenants that require
  minimum EBITDA levels, maximum annual capital expenditure levels, and minimum
  inventory leverage ratios.

  In the fiscal 2001 third quarter, the Company will record an extraordinary
  loss as a result of the early extinguishment of debt relating to the Company's
  former revolving credit facility. The extraordinary loss consists of the
  write-off of debt issuance costs and will total approximately $400,000, or
  $250,000 net of tax.


(6) New Accounting Pronouncements

  On July 20, 2001, The Financial Accounting Standards Board issued SFAS No.
  141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
  Assets." SFAS No. 141 requires all business combinations initiated after June
  30, 2001 to be accounted for using the purchase method. SFAS No. 142 replaces
  the requirement to amortize intangible assets with indefinite lives and
  goodwill with a requirement for an impairment test. This statement also
  requires an evaluation of intangible assets and their useful lives and a
  transitional impairment test for goodwill and certain intangible assets.
  After transition, the impairment tests will be performed annually. The
  Company must adopt SFAS No. 142 at the beginning of the fiscal year 2002
  (beginning February 3, 2002). As of August 4, 2001, unamortized goodwill
  totals $9.6 million, including accumulated amortization totaling
  $1.8 million. Management is currently analyzing the effect of SFAS No. 142
  will have on the Company's financial position or results of operations.






                                    9 of 18
<PAGE>   10




  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

  OVERVIEW

  The Company consists of two complementary operations: (i) a major regional
  closeout retail business; and (ii) the nation's largest closeout wholesale
  business. The Company sells quality, value-oriented consumer products at a
  broad range of price points offered at a substantial discount to the original
  retail or wholesale price. The Company's merchandise primarily consists of
  new, frequently brand-name, products that are available to the Company for a
  variety of reasons, including overstock positions of a manufacturer,
  wholesaler or retailer; the discontinuance of merchandise due to a change in
  style, color, shape or repackaging; a decrease in demand for a product through
  traditional channels; or the termination of business by a manufacturer,
  wholesaler or retailer.

  The Company was founded in 1975 as a wholesaler of closeout merchandise. The
  Company's business strategy has expanded from a primary focus on wholesale
  operations to an emphasis on the growth of its retail operation, which began
  with the 1995 acquisition of the 12 store "Odd Job" chain. The Company
  currently operates 79 closeout retail stores under the names "Odd Job," "Odd
  Job Trading," and "Mazel's," including 31 in New York (nine of which are in
  Manhattan), 24 in New Jersey, eight in Ohio, seven in Pennsylvania, four in
  Michigan, three in Connecticut, and one each in Delaware and Kentucky.

  The growth of the Company's retail operations, coupled with the fiscal 1997
  investment in VCM, Ltd., has transformed the Company into a "retailer," with
  quarterly sales and earnings patterns similar to other retail operations. The
  Company does not expect to open new retail stores in fiscal 2001.



















                                    10 of 18
<PAGE>   11


  MANAGEMENT'S ANALYSIS OF RESULTS OF OPERATIONS

  The results of operations set forth below describe the Company's retail and
  wholesale segments and the Company's combined corporate structure.


                               MAZEL STORES, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                  (DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA)



<TABLE>
<CAPTION>
                                             Thirteen Weeks Ended                            Twenty-six Weeks Ended
                                  -------------------------------------------     -------------------------------------------
                                  August 4,                July 29,               August 4,               July 29,
                                    2001          %         2000         %         2001          %         2000         %
                                  --------     ------     --------     ------     --------     ------     --------     ------

<S>                               <C>           <C>         <C>         <C>        <C>          <C>        <C>          <C>
Net sales
  Retail                          $ 60,135      76.53%      52,830      72.33%     115,050      74.54%     100,251      68.70%
  Wholesale                         18,439      23.47%      20,311      27.77%      39,299      25.46%      45,680      31.30%
                                  --------     ------     --------     ------     --------     ------     --------     ------
                                    78,574     100.00%      73,141     100.00%     154,349     100.00%     145,931     100.00%
Gross profit
  Retail                            22,590      37.57%      21,268      40.26%      43,455      37.77%      40,137      40.04%
  Wholesale                          4,865      26.38%       5,374      26.46%      10,658      27.12%      12,705      27.81%
                                  --------     ------     --------     ------     --------     ------     --------     ------
                                    27,455      34.94%      26,642      36.43%      54,113      35.06%      52,842      36.21%
Segment operating (loss) profit
  Retail                            (1,446)     (2.40%)     (1,574)     (2.98%)     (4,005)     (3.48%)     (4,106)     (4.10%)
  Wholesale                          1,058       5.74%       1,442       7.10%       3,043       7.74%       5,100      11.16%
  Corporate                           (631)     (0.80%)         46       0.06%      (1,452)     (0.94%)         40       0.03%
                                  --------     ------     --------     ------     --------     ------     --------     ------
                                    (1,019)     (0.12%)        (86)     (0.12%)     (2,414)     (1.56%)      1,034       0.71%

Interest expense, net                  830       1.06%       1,110       1.52%       1,586       1.03%       1,950       1.34%
Other (income) expense, net            901       1.15%        (107)     (0.15%)      1,376       0.89%         161       0.11%
Income tax benefit                  (1,072)     (1.36%)       (435)     (0.59%)     (2,096)     (1.36%)       (429)     (0.29%)
                                  --------     ------     --------     ------     --------     ------     --------     ------
   Net loss                       $ (1,678)     (2.14%)       (654)     (0.89%)     (3,280)     (2.13%)       (648)     (0.44%)
                                  ========     ======     ========     ======     ========     ======     ========     ======

Net loss per common share -
   basic and diluted              $  (0.18)                  (0.07)                  (0.36)                  (0.07)
</TABLE>








                                    11 of 18
<PAGE>   12


  RETAIL SEGMENT

  Thirteen Weeks 2001 versus Thirteen Weeks 2000 (Fiscal Second Quarter)

  Net sales for the fiscal 2001 second quarter were $60.1 million, compared to
  $52.8 million for the second quarter 2000, an increase of $7.3 million, or
  13.8%. The sales increase resulted from a comparable store net sales increase
  of 5.7% and from the new stores opened during fiscal 2000.

  Gross profit for the fiscal 2001 second quarter was $22.6 million, compared to
  $21.3 million in second quarter 2000, an increase of $1.3 million, or 6.2%.
  Gross margin decreased to 37.6% in the second quarter 2001, from 40.3% in the
  second quarter 2000. The decrease in gross margin was due primarily to lower
  realized product markup.

  Selling, general and administrative expense was $24.0 million for second
  quarter 2001, compared to $22.8 million in the prior year second quarter, an
  increase of $1.2 million, or 5.2%. Selling, general and administrative
  expense, as a percentage of net sales, decreased to 40.0% in the second
  quarter 2001, from 43.2% in the second quarter 2000. The dollar increase
  primarily resulted from a $1.4 million increase in store level expenses, of
  which $933,000 related to the new stores opened during fiscal 2000, primarily
  payroll and occupancy. In the fiscal 2000 second quarter, the Company had new
  store preopening expenses that totaled $611,000; no such expenses were
  incurred in the fiscal 2001 second quarter. Administrative expenses decreased
  $285,000 due primarily to lower payroll expenses.

  In the fiscal 2001 second quarter, retail reported an operating loss of $1.4
  million, compared to an operating loss of $1.6 million for the second quarter
  2000. As a percentage of net sales, operating margin increased to -2.4%, from
  -3.0%. This increase was primarily due to the factors described above.

  Twenty-six Weeks 2001 versus Twenty-six Weeks 2000 (Fiscal First Half)

  Net sales for the fiscal 2001 first half were $115.0 million, compared to
  $100.3 million for the fiscal 2000 first half, an increase of $14.7 million,
  or 14.8%. The sales increase resulted from a comparable store net sales
  increase of 4.3% and from the new stores opened during fiscal 2000.

  Gross profit for the fiscal 2001 first half was $43.5 million, compared to
  $40.1 million in the fiscal 2000 first half, an increase of $3.4 million, or
  8.2%. Gross margin decreased to 37.8% in the fiscal 2001 first half, from
  40.0% in the prior year first half. The decrease in gross margin was due
  primarily to lower realized product markup and reduced vendor allowances.

  Selling, general and administrative expense was $47.5 million for the fiscal
  2001 first half, compared to $44.2 million in the prior year, an increase of
  $3.2 million, or 7.3%. Selling, general and administrative expense, as a
  percentage of net sales, decreased to 41.2% in the fiscal 2001 first half,
  from 44.1% in the fiscal 2000 first half. The dollar increase primarily
  resulted from a $3.7 million increase in store level expenses, primarily
  payroll and occupancy. In addition, there were no new store preopening
  expenses incurred in the fiscal 2001 first half,


                                    12 of 18
<PAGE>   13

  compared to $1.3 million for fiscal 2000 first half. Administrative expenses
  decreased $533,000 due primarily to lower payroll expenses and general
  operating expenses.

  In the fiscal 2001 first half, retail reported an operating loss of $4.0
  million, compared to an operating loss of $4.1 million for the same prior year
  period. As a percentage of net sales, operating margin increased to -3.5%,
  from -4.1%. This increase was primarily due to the factors described above.


  WHOLESALE SEGMENT

  Thirteen Weeks 2001 versus Thirteen Weeks 2000 (Fiscal Second Quarter)

  Net sales for the fiscal 2001 second quarter were $18.4 million, compared to
  $20.3 million in the fiscal 2000 second quarter, an decrease of $1.9 million,
  or 9.2%. The decrease was due primarily to lower drop-shipped sales and the
  continued liquidation of inventory specifically targeted in the special charge
  recorded in the fiscal 2000 fourth quarter.

  Gross profit for the fiscal 2001 second quarter was $4.9 million, compared to
  $5.4 million in the fiscal 2000 second quarter, a decrease of $509,000, or
  9.5%. However, gross margin was 26.4%, unchanged from the second quarter 2000
  which included higher levels of vendor allowances.

  Selling, general and administrative expense for the fiscal 2001 second quarter
  was $3.8 million, compared to $3.9 million in the fiscal 2000 second quarter,
  a decrease of $125,000, or 3.2%. The decrease is primarily attributable to
  lower warehouse, sales and marketing, and administrative expense, partially
  offset by higher levels of bad debt expense. As a percentage of net sales,
  selling, general and administrative expense increased to 20.7% in the second
  quarter 2000, from 19.4% in last year's second quarter.

  Wholesale operating profit decreased to $1.1 million in the second quarter of
  fiscal 2001, from $1.4 million in the second quarter 2000. As a percentage of
  net sales, operating margin decreased to 5.7%, from 7.1%, due to the factors
  described above.

  Twenty-six Weeks 2001 versus Twenty-six Weeks 2000 (Fiscal First Half)

  Net sales for the fiscal 2001 first half were $39.3 million, compared to $45.7
  million in the fiscal 2000 first half, a decrease of $6.4 million, or 14.0%.
  The decrease was due primarily to lower drop-shipped sales and the impact of
  lower per case value of inventory liquidated pursuant to the special charge
  recorded in the fiscal 2000 fourth quarter.

  Gross profit for the fiscal 2001 first half was $10.7 million, compared to
  $12.7 million in the fiscal 2000 first half, a decrease of $2.0 million, or
  16.1%. Gross margin was 27.1% for the fiscal 2001 first half, compared to
  27.8% for the same period last year. This decrease was due primarily to lower
  margin on stock sales and lower levels of vendor allowances.


                                    13 of 18
<PAGE>   14

  Selling, general and administrative expense for the fiscal 2001 first half was
  $7.6 million, unchanged from the fiscal 2000 first half. As a percentage of
  net sales, selling, general and administrative expense increased to 19.4% in
  the fiscal 2001 first half, from 16.6% in the last year's first half, due to
  the lower sales level.

  Wholesale operating profit decreased to $3.0 million in the first half of
  fiscal 2001, from $5.1 million in the fiscal 2000 first half. As a percentage
  of net sales, operating margin decreased to 7.7%, from 11.2%, due to the
  factors described above.


  CORPORATE

  Thirteen Weeks 2001 versus Thirteen Weeks 2000 (Fiscal Second Quarter)

  Corporate consists of the cost of senior management and shared administrative
  resources that are utilized by both segments of the business, offset by the
  income generated by the management fee revenue from VCM, Ltd., and other
  buying commissions. For the fiscal 2001 second quarter, corporate expense
  totaled $631,000, compared to corporate income of $46,000 in the fiscal 2000
  second quarter. Corporate expenses increased $677,000 reflecting lower
  management incentive compensation accruals for the fiscal 2000 second quarter,
  and a reduction in buying commission revenue.

  Twenty-six Weeks 2001 versus Twenty-six Weeks 2000 (Fiscal First Half)

  Corporate expense for the fiscal 2001 first half was $1.5 million, compared to
  corporate income of $40,000 in the prior year first half. This increase in
  corporate expenses reflects a reduction on buying commission revenue, and
  lower management incentive compensation accruals for the fiscal 2000 first
  half.

  LIQUIDITY AND CAPITAL RESOURCES

  The Company's primary requirements for capital consist of inventory purchases,
  expenditures related to new store openings, existing store remodeling, MIS
  initiatives, and other working capital needs. The Company takes advantage of
  closeout and other special situation purchasing opportunities that frequently
  result in large volume purchases, and as a consequence, its cash requirements
  are not constant or predictable during the year and can be affected by the
  timing and size of its purchases. The Company's high level of committed credit
  allows it to take immediate advantage of special situation purchasing
  opportunities.

  On an annual basis, the Company's growth is financed through cash flow from
  operations, borrowings under its revolving credit facility and the extension
  of trade credit. On August 21, 2001, the Company entered into a $70.0 million
  three-year revolving credit facility with IBJ


                                    14 of 18
<PAGE>   15

  Whitehall Retail Finance. Under this facility, the Company also borrowed $8.0
  million through a Tranche B term loan with Wingate Capital, and $1.0 million
  through a Tranche C term loan with The Provident Bank and National City Bank.
  Borrowings under the revolving credit facility bear interest, at the Company's
  option, at either the banks' prime rate or LIBOR plus a spread based upon an
  availability grid. Interest on the Tranche B loan is based upon the greater of
  the banks' prime rate plus 750 basis points or 15%, plus a deferred interest
  payment of $300,000 due upon payment of the Tranche B loan. Interest on the
  Tranche C loan is 20% through November 2001 and 25% thereafter. The Tranche C
  loan also provided for the issuance of warrants for 2.5% of the Company's
  outstanding shares at $0.01 per share in the event that the loan exists as of
  June 3, 2002. The warrants are not yet exercisable and will terminate in their
  entirety if the Tranche C loan is repaid by June 3, 2002. Availability on the
  revolving credit facility and the Tranche B loan is the lesser of the total
  credit commitment or a borrowing base calculation based primarily upon the
  Company's accounts receivable and inventories. The entire facility contains
  restrictive covenants that require minimum EBITDA levels, maximum annual
  capital expenditure levels, and minimum inventory leverage ratios.

  For the fiscal 2001 first half, cash provided by consolidated operating
  activities was $9.9 million, comprised primarily of an increase in accounts
  payable, a decrease in accounts receivable related to the lower sales levels
  in the wholesale division, and the collection of income tax receivables
  related to the fiscal 2000 net loss. Cash used in operating activities the
  fiscal 2000 first half totaled $14.2 million comprised primarily of an
  increase in inventories for both the retail and wholesale divisions, and an
  increase in accounts receivable due to the higher sales levels. Cash used in
  investing activities in the first half 2001 decreased to $566,000, from $6.3
  million in the same 2000 period. The decrease is reflective of the suspension
  of new store openings in fiscal 2001 and the completion of the retail
  warehouse racking and automation project in fiscal 2000. Cash used in
  financing activities was $8.5 million for the fiscal 2001 first half, as
  excess operating cashflow was used to reduce borrowings on the Company's
  revolving credit facility. This compares to cash provided by financing
  activities of $21.0 million for the 2000 first half, and was the result of
  additional borrowings from the Company's credit facility to fund operating and
  investing cashflow requirements.

  Total assets were $139.5 million at the end of the fiscal 2001 second quarter,
  compared to $147.8 million at fiscal 2000 year-end. Working capital decreased
  to $51.8 million at the fiscal 2001 first half-end, from $58.4 million at
  fiscal 2000 year-end, primarily the result of a decrease in receivables and an
  increase in accounts payable. The current ratio was 2.4 to 1 at the 2001 first
  half-end, compared to 2.8 to 1 at fiscal 2000 year-end.


  SEASONALITY

  The Company, with the growth of its retail operations and the retail
  orientation of the VCM, Ltd. joint venture, has shifted its business mix more
  toward retail. This shift will effect the net sales and earnings pattern of
  the Company, with a greater weighting toward the second half of the fiscal
  year.



                                    15 of 18
<PAGE>   16

  NEW ACCOUNTING PRONOUNCEMENTS

  On July 20, 2001, The Financial Accounting Standards Board issued SFAS No.
  141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
  Assets." SFAS No. 141 requires all business combinations initiated after June
  30, 2001 to be accounted for using the purchase method. SFAS No. 142 replaces
  the requirement to amortize intangible assets with indefinite lives and
  goodwill with a requirement for an impairment test. This statement also
  requires an evaluation of intangible assets and their useful lives and a
  transitional impairment test for goodwill and certain intangible assets.
  After transition, the impairment tests will be performed annually. The
  Company must adopt SFAS No. 142 at the beginning of the fiscal year 2002
  (beginning February 3, 2002). As of August 4, 2001, unamortized goodwill
  totals $9.6 million, including accumulated amortization totaling
  $1.8 million. Management is currently analyzing the effect of SFAS No. 142
  will have on the Company's financial position or results of operations.


  FORWARD LOOKING STATEMENTS

  Forward-looking statements in this release are made pursuant to the safe
  harbor provisions of the Private Securities Litigation Reform Act of 1995.
  Such forward-looking statements are subject to certain risks and uncertainties
  that could cause actual results to differ materially from those projected.
  Such risks and uncertainties include, but are not limited to, (i) the
  Company's execution of a plan to restore its retail stores to profitability
  and the profitability of its wholesale division; (ii) the ability to purchase
  sufficient quality closeout and other merchandise at acceptable terms; and
  (iii) the ability of the Company to attract and retain qualified management
  and store personnel. Please refer to the Company's SEC filings for further
  information.




                                    16 of 18
<PAGE>   17



                                     PART II
                                OTHER INFORMATION

  Item 1.      Legal Proceedings
               None

  Item 2.      Changes in Securities
On August 21, 2001, the Company refinanced its entire credit facility and
entered into a Tranche C loan that provided for the issuance of warrants for
2.5% of the Company's outstanding shares at $0.01 per share in the event that
the loan exists as of June 3, 2002. The warrants are not yet exercisable and
will terminate in their entirety if the Tranche C loan is repaid by June 3,
2002.

As a result of the refinancing, the warrant agreement for 10% of the Company's
outstanding shares, issued early in fiscal 2001, was terminated.

  Item 3.      Default upon Senior Securities
               None

  Item 4.      Submission of matters to a vote of security holders
               None

  Item 5.      Other Information
On July 19, 2001, the Company received a notice from Value City Department
Stores (VCDS) with respect to its election to terminate the VCM joint venture by
fiscal 2001 year-end. VCDS has the option to continue the business of VCM and
acquire the net assets at book value or liquidate the net assets. The Company
has not received notice of VCDS's election and is in discussion with VCDS
regarding the notice of termination. As of August 4, 2001, the Company and VCDS
have not reached an agreement as to the book value of VCM.

  Item 6.      Exhibits and Reports on Form 8K
A Form 8-K was filed on September 5, 2001 to report the new credit facility.






                                    17 of 18
<PAGE>   18






                                   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, thereunto duly authorized.


                                        MAZEL STORES, INC.
                                        (Registrant)


  9/18/01                               /s/ Peter J. Hayes
---------------                         ------------------
Date                                    Peter J. Hayes
                                        Chief Executive Officer



  9/18/01                               /s/ Edward Cornell
---------------                         ------------------
Date                                    Edward Cornell
                                        Acting Chief Financial Officer









                                    18 of 18