SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


   X     Quarterly  report  pursuant  to  Section 13 or 15(d) of the  Securities
-------- Exchange Act of 1934

         For the quarterly  period ended January 1, 2000  Commission File Number
         0-27050
         -------

         Transition  report  pursuant  to Section 13 or 15(d) of the  Securities
-------- Exchange Act of 1934 For the transition period from________ to ________


                                 PHAR-MOR, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         PENNSYLVANIA                                          25-1466309
------------------------------------------------           ---------------------
         (State or other jurisdiction of                   (I.R.S. Employer
         incorporation or organization)                    Identification No.)


         20 Federal Plaza West, Youngstown, Ohio            44501-0400
------------------------------------------------           ---------------------
         (Address of principal executive offices)          (Zip code)


Registrant's telephone number, including area code:        (330) 746-6641
                                                           --------------

         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 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
                                                   -----           -----

         Indicate by check mark whether the  registrant  has filed all documents
and reports  required to be filed by Sections 12, 13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

                                            YES      X        No
                                                   -----           -----

On January 13, 2000,  there were 12,240,865  shares of the  registrant's  common
stock  outstanding  before  deducting   1,207,979  shares  which  represent  the
Company's  25.2% equity interest in common stock of the Company owned by Avatex,
Inc.



<PAGE>2


                         PHAR-MOR, INC. AND SUBSIDIARIES

                                    FORM 10-Q

                      FOR THE QUARTER ENDED JANUARY 1, 2000


                                    I N D E X


                                                                           Page

Part I:  Financial Information

         Item 1.  Financial Statements

              Condensed  Consolidated  Balance Sheets as of January 1,
              2000 and July 3, 1999                                          3

              Condensed Consolidated  Statements of Operations for the
              Thirteen Weeks Ended January 1, 2000 and December 26, 1998     4

              Condensed Consolidated Statements of Operations for the
              Twenty-six Weeks Ended January 1, 2000 and December 26, 1998   5

              Condensed Consolidated Statements of Cash Flows for the
              Twenty-six Weeks Ended January 1, 2000 and December 26, 1998   6

              Notes to Condensed Consolidated Financial Statements           7

         Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                 8

Part II: Other Information

         Item 1.  Legal Proceedings                                         12
         Item 2.  Changes in Securities                                     12
         Item 3.  Defaults Upon Senior Securities                           12
         Item 4.  Submission of Matters to a Vote of Security Holders       12
         Item 5.  Other Information                                         12
         Item 6.  Exhibits and Reports on Form 8-K                          12
         Signatures                                                         13
         Exhibit Index                                                      14


<PAGE>3


                         PHAR-MOR, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In thousands)
<TABLE>
<CAPTION>


ASSETS                                                     (Unaudited)
                                                            January 1,     July 3,
                                                               2000          1999
                                                               ----          ----
<S>                                                         <C>          <C>
Current assets:
  Cash and cash equivalents                                 $  14,275    $  17,346
  Marketable securities                                          --          3,254
  Accounts receivable - net                                    30,917       28,293
  Merchandise inventories                                     220,272      218,945
  Prepaid expenses and other current assets                     5,336        7,418
                                                                -----        -----
          Total current assets                                270,800      275,256

Property and equipment - net                                   94,607       93,738
Goodwill                                                       15,919       16,234
Deferred tax asset                                              6,508        9,049
Investments                                                    18,797        8,314
Investment in Avatex                                            4,366         --
Other assets                                                    4,620        5,133
                                                                -----        -----

          Total assets                                      $ 415,617    $ 407,724
                                                            =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                          $  95,367    $ 119,843
  Accrued expenses and other current liabilities               43,501       37,104
  Current portion of long-term debt and capital
    lease obligations                                           7,554        8,946
                                                                -----        -----
          Total current liabilities                           146,422      165,893

Long-term debt and capital lease obligations                  167,697      142,947
Long-term self insurance reserves                               8,235        8,032
Deferred rent and unfavorable lease liability - net            10,819       11,073
                                                               ------       ------
          Total liabilities                                   333,173      327,945
                                                              -------      -------

Commitments and contingencies                                    --           --
Minority interests                                                535          535
                                                               ------       ------

Stockholders' equity:
  Preferred stock                                                --           --
  Common stock                                                    122          122
  Additional paid-in capital                                   90,007       90,007
  Stock options outstanding                                     2,200        2,105
  Retained deficit                                             (4,061)      (7,989)
                                                               ------       ------
                                                               88,268       84,245
  Less: equity in cost of common stock of the Corporation
      held by Avatex, Inc.                                     (6,359)      (5,001)
                                                               ------       ------
        Total stockholders' equity                             81,909       79,244
                                                               ------       ------

        Total liabilities and stockholders' equity          $ 415,617    $ 407,724
                                                            =========    =========
</TABLE>



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


<PAGE>4



                         PHAR-MOR, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in thousands, except per share amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>


                                                               Thirteen             Thirteen
                                                              Weeks Ended         Weeks Ended
                                                            January 1, 2000    December 26, 1998
                                                            ---------------    -----------------

<S>                                                            <C>             <C>
Sales                                                          $    350,411    $    296,989

Less:
  Cost of goods sold, including occupancy and
      distribution costs                                            280,350         238,285
  Selling, general and administrative expenses                       53,993          43,595
  Depreciation and amortization                                       6,092           5,683
                                                                      -----           -----
Income from operations before interest expense, interest
 income, investment income (loss), income taxes and
 extraordinary gain                                                   9,976           9,426


Interest expense                                                     (4,884)         (3,893)
Interest income                                                          11             283

Investment income (loss)                                              5,290            (579)
                                                                      -----            ----
Income before income taxes and extraordinary gain                    10,393           5,237

Income taxes                                                          2,481           1,490
                                                                      -----           -----
Income before extraordinary gain                                      7,912           3,747

Extraordinary gain on extinguishment of debt - net of
  $137 tax                                                              206             --
                                                                      -----           -----
Net income                                                     $      8,118    $      3,747
                                                               ============    ============
Income per basic common share:
  Income before extraordinary gain                             $        .69    $        .33
  Extraordinary gain                                                    .02              --
                                                                      -----           -----
  Net income                                                   $        .71    $        .33
                                                               ============    ============
Income per diluted common share:
  Income before extraordinary gain                             $        .69    $        .32
  Extraordinary gain                                                    .02              --
                                                                      -----           -----
  Net income                                                   $        .71    $        .32
                                                               ============    ============

Weighted average number of basic common shares outstanding       11,383,411      11,516,220
Weighted average number of diluted common shares outstanding     11,383,411      11,637,444

</TABLE>

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


<PAGE>5



                         PHAR-MOR, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                (Dollars in thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                Twenty-six        Twenty-six
                                                               Weeks Ended       Weeks Ended
                                                             January 1, 2000    December 26, 1998
                                                             ---------------    -----------------

<S>                                                             <C>             <C>
Sales                                                           $    668,246    $    566,401

Less:
 Cost of goods sold, including occupancy and
      distribution costs                                             537,133         456,882
  Selling, general and administrative expenses                       107,448          86,056
  Depreciation and amortization                                       13,267          11,421
                                                                      ------          ------
Income from operations before interest expense, interest
 income, investment income (loss), income taxes and
 extraordinary gain                                                   10,398          12,042


Interest expense                                                      (9,438)         (7,884)
Interest income                                                           20             771

Investment income (loss)                                               5,222          (1,204)
                                                                       -----          ------
Income before income taxes and extraordinary gain                      6,202           3,725

Income taxes                                                           2,481           1,490
                                                                       -----           -----
Income before extraordinary gain                                       3,721           2,235

Extraordinary gain on extinguishment of debt- net of $137 tax            206            --
                                                                       -----           -----

Net income                                                      $      3,927    $      2,235
                                                                ============    ============
Income per basic common share:
  Income before extraordinary gain                              $        .32    $        .19
  Extraordinary gain                                                     .02            --
                                                                       -----           -----
  Net income                                                    $        .34    $        .19
                                                                ============    ============
Income per diluted common share:
  Income before extraordinary gain                              $        .32    $        .19
  Extraordinary gain                                                     .02            --
                                                                       -----           -----
  Net income                                                    $        .34    $        .19
                                                                ============    ============

Weighted average number of basic common shares outstanding        11,449,798      11,529,110
Weighted average number of diluted common shares outstanding      11,449,798      11,589,722

</TABLE>

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


<PAGE>6


                         PHAR-MOR, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                          Twenty-six       Twenty-six
                                                          Weeks Ended      Weeks Ended
                                                        January 1, 2000   December 26, 1998
                                                        ---------------   -----------------

<S>                                                           <C>         <C>
OPERATING ACTIVITIES
  Net income                                                  $  3,927    $  2,235
  Adjustments to reconcile net income to net
    cash (used for) provided by operating activities:
    Items not requiring the outlay of cash:
      Depreciation                                               9,257       7,712
      Amortization of video rental tapes                         3,306       3,566
      Stock option expense                                          95         367
      Amortization of deferred financing costs and goodwill        838         138
      Deferred income taxes                                      2,618       1,490
      Deferred rent                                               (254)        414
      Gain on equity method investment                          (5,883)       (387)
      Gain on extinguishment of debt                              (343)       --
    Changes in assets and liabilities:
      Accounts receivable                                       (2,624)     (5,646)
      Marketable securities                                      3,254       5,417
      Merchandise inventories                                   (3,828)    (10,723)
      Prepaid expenses                                           2,005         618
      Other assets                                                 (10)        164
      Accounts payable                                         (20,151)      9,693
      Accrued expenses and other current liabilities             6,615      (1,025)
                                                                 -----      ------
  Net cash (used for) provided by operating activities          (1,178)     14,033
                                                                ------      ------

INVESTING ACTIVITIES
  Additions to rental videotapes                                  (805)     (3,889)
  Additions to property and equipment                          (10,161)    (14,831)
  Proceeds on sale of property and equipment                        33         113
  Investment in Avatex                                          (5,724)     (1,000)
  Loan to Pharmhouse Corp.                                        --        (2,000)
  Investment in equity securities                               (4,600)     (2,041)
                                                                ------      ------
  Net cash used for investing activities                       (21,257)    (23,648)
                                                               -------     -------

FINANCING ACTIVITIES
  Borrowings under revolving credit facility                    31,032        --
  Bank overdrafts                                               (4,337)       --
  Principal payments on long-term debt                          (3,672)     (1,828)
  Principal payments on capital lease obligations               (3,659)     (3,518)
  Additions to long-term debt                                     --           250
  Issuance of common stock                                        --            31
                                                               -------     -------
  Net cash provided by (used for) financing activities          19,364      (5,065)
                                                               -------     -------

  Decrease in cash and cash equivalents                         (3,071)    (14,680)
  Cash and cash equivalents, beginning of period                17,346      44,655
                                                               -------     -------
  Cash and cash equivalents, end of period                    $ 14,275    $ 29,975
                                                              ========    ========
</TABLE>

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


<PAGE>7


PHAR-MOR, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
--------------------------------------------------------------------------------
1.       BASIS OF PRESENTATION
         The accompanying  unaudited  interim condensed  consolidated  financial
         statements  have been prepared in accordance  with  generally  accepted
         accounting  principles for interim financial  information.  They do not
         include  all  information  and  footnotes  which  would be  required by
         generally  accepted   accounting   principles  for  complete  financial
         statements.  In the  opinion  of  management  of  Phar-Mor,  Inc.  (the
         "Company") and its  subsidiaries,  these interim  financial  statements
         contain all adjustments considered necessary for a fair presentation of
         financial position, results of operations,  comprehensive income (loss)
         and cash flows for the periods  presented.  Reference should be made to
         the Company's Annual Report on Form 10-K for the fiscal year ended July
         3,  1999  for  additional  disclosures,  including  a  summary  of  the
         Company's  accounting  policies,  which  have  not  changed.  Operating
         results  for  the  twenty-six  weeks  ended  January  1,  2000  are not
         necessarily  indicative  of the results  that may be  expected  for the
         fifty-two weeks ending July 1, 2000.

2.       NEW ACCOUNTING  PRONOUNCEMENTS  In June 1998, the Financial  Accounting
         Standards  Board  ("FASB")  issued  Statement of  Financial  Accounting
         Standards ("SFAS") No. 133, "Accounting for Derivative  Instruments and
         Hedging   Activities,"  which  establishes   accounting  and  reporting
         standards for derivative  instruments  and for hedging  activities.  It
         requires that an entity  recognize all  derivatives as either assets or
         liabilities  in the  statement of financial  position and measure those
         instruments  at fair value,  with the  potential  effect on  operations
         dependent upon certain  conditions  being met. SFAS No. 133 (as amended
         by SFAS No. 137) is effective  for all fiscal  quarters of fiscal years
         beginning  after June 15,  2000.  Management  does not believe that the
         adoption of SFAS No. 133 will have a material  impact on its  financial
         position or results of operations.

3.       LITIGATION
         The Company and its  subsidiaries  are  involved in legal  proceedings,
         claims and litigation  arising in the ordinary  course of business.  In
         the  opinion  of   management,   the  outcome  of  such  current  legal
         proceedings,  claims and litigation  will not have a material impact of
         the Company's consolidated financial position or results of operations.

4.       INVESTMENT IN AVATEX On December 6, 1999, the Company  invested  $5,724
         to purchase an  additional  2,862,400  shares of Avatex  common  stock,
         increasing its investment from 15.1% to approximately 25.2% of Avatex's
         total outstanding  common stock.  Accordingly,  the Company changed its
         method of accounting  for the  investment  from cost to equity basis as
         required  by  generally  accepted  accounting   principles  and  treats
         Avatex's  investment in the Company's  common stock similar to treasury
         stock,  with a  reduction  in the  number  of  shares  outstanding  for
         calculating  earnings per share of 1,207,979.  The financial statements
         of prior years have been restated to reflect the adoption of the equity
         method in a manner  consistent  with the  accounting for a step-by-step
         acquisition of Avatex.  The effect of the  restatement  was to increase
         net income for fiscal 1999 by $2,188,  eliminate  comprehensive  income
         (loss)  for all  prior  periods  and  reclassify  all of the  Company's
         investment in Avatex common stock prior to fiscal 2000 from  Investment
         in Avatex to Equity in cost of common stock of the Corporation  held by
         Avatex, Inc. on the Condensed Consolidated Balance Sheets.

         The Company's  investment in Avatex includes the unamortized  excess of
         the Company's  investment over its equity in Avatex's net assets.  This
         excess  was  $3,628  at  January  1, 2000 and is being  amortized  on a
         straight-line basis over 20 years.



<PAGE>8


PHAR-MOR, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS (all dollar amounts in thousands)

Thirteen Weeks Ended January 1, 2000 versus
    Thirteen Weeks Ended December 26, 1998

Sales for the second quarter of fiscal year 2000 ("Fiscal 2000") increased 18.0%
compared to the second quarter of fiscal year 1999 ("Fiscal 1999") primarily due
to the  acquisition  of the 32  Pharmhouse  stores which were  acquired in March
1999.  Comparable  store sales  increased  3.2% from $293,338 for Fiscal 1999 to
$302,720 for Fiscal 2000.  The increase in comparable  store sales was primarily
due to an 10.7% increase in comparable pharmacy store sales.

Cost of sales as a  percentage  of sales was 80.0% in Fiscal  2000  compared  to
80.2% in Fiscal  1999,  a decrease  of 0.2% of sales.  The  decrease  was due to
higher product  margins in the Pharmhouse  stores  combined with lower occupancy
costs as a percentage of sales.

Selling, general and administrative expenses as a percentage of sales were 15.4%
in Fiscal 2000  compared to 14.7% in Fiscal 1999,  an increase of 0.7% of sales.
This  increase  was  primarily  due to higher  wages and other  store  operating
expenses as a percentage of sales partially  offset by lower corporate  expenses
as a percentage of sales.  The increase in wages was due to the inclusion of the
lower volume Pharmhouse stores and a 5% increase in the average hourly rate paid
to store level employees.  The market for pharmacists is very competitive and as
a result the average hourly rate paid to  pharmacists  has increased 9% over the
past year.  The increase in other expenses was primarily due to the inclusion of
the lower volume  Pharmhouse  stores and increases in credit card fees due to an
increase  in the  interchange  fees  charged by VISA and Master  Card and higher
repairs and maintenance expenses due to the relamping of approximately one third
of the Phar-Mor stores in the first six months of the fiscal year.

Depreciation  and  amortization  expense was $6,092 in Fiscal  2000  compared to
$5,683 in Fiscal 1999, an increase of $409.  Depreciation expense increased $588
as a result of an increase in  depreciation on capital  expenditures  made since
the second quarter of Fiscal 1999 and the depreciation on the assets acquired in
the  Pharmhouse  acquisition.  Amortization  of goodwill  and other  intangibles
increased $317 as a result of the assets acquired in the Pharmhouse acquisition.
These  increases  were  partially  offset  by a  $496  decrease  in  video  tape
amortization  due to  the  closure  of  approximately  one  half  of its  poorer
performing  video rental  departments in the past year combined with lower video
rental tape purchases in continuing video rental departments.

Interest  income was $11 in Fiscal 2000  compared to interest  income of $283 in
Fiscal  1999,  a $272  decrease.  The  decrease in interest  income was due to a
decrease in the amount of excess funds available for investment in Fiscal 2000.

Investment  income was $5,290 in Fiscal 2000 compared to an  investment  loss of
$579 in Fiscal 1999, a $5,869  increase.  The  increase was  primarily  due to a
$5,347,  or 81%,  increase  in the value of the  Company's  limited  partnership
interest in an investment partnership.

The Company  repurchased $3,110 of its 11.72% senior notes during Fiscal 2000 at
a discount that resulted in a pretax extraordinary gain of $343.



<PAGE>9


Twenty-six Weeks Ended January 1, 2000 versus
    Twenty-six Weeks Ended December 26, 1998

Sales for the twenty-six  weeks ended January 1, 2000 increased 18.0% due to the
acquisition  of the 32  Pharmhouse  stores  which were  acquired  in March 1999.
Comparable  store sales  increased 3.3% from $559,489 for the  twenty-six  weeks
ended  December 26, 1998 to $577,787 for the  twenty-six  weeks ended January 1,
2000.  The  increase  in  comparable  store sales was  primarily  due to a 10.0%
comparable store pharmacy sales increase.

Cost of sales as a percentage of sales was 80.4% in the  twenty-six  weeks ended
January 1, 2000,  compared to 80.7% in the  twenty-six  weeks ended December 26,
1998, a 0.3%  improvement.  The improvement is primarily due to increased vendor
income  related  to the  remerchandising  activities  in the  Pharmhouse  stores
partially  offset by lower video rental tape sales. In the last year the Company
closed  approximately one half of its poorer performing video rental departments
and liquidated the video rental tape inventory in those stores.


Selling, general and administrative expenses as a percentage of sales were 16.1%
in the  twenty-six  weeks  ended  January  1,  2000  compared  to  15.2%  in the
twenty-six  weeks ended  December 26, 1998.  This  increase was primarily due to
higher wages,  advertising and other store operating expenses as a percentage of
sales due to the  inclusion  of the lower  volume  Pharmhouse  stores  partially
offset by lower corporate expenses as a percentage of sales.

Depreciation and amortization  expense was $13,267 in the twenty-six weeks ended
January 1, 2000 compared to $11,421 in the  twenty-six  weeks ended December 26,
1998,  an increase of $1,846.  The  increase  is the result of  depreciation  on
capital  expenditures  made  since the  second  quarter  of Fiscal  1999 and the
depreciation   and  amortization  on  the  assets  acquired  in  the  Pharmhouse
acquisition.

Interest  income was $20 in the twenty-six  weeks ended January 1, 2000 compared
to interest  income of $771 in the  twenty-six  weeks ended December 26, 1998, a
$751  decrease.  The  decrease in  interest  income was due to a decrease in the
amount of excess funds  available for investment in the  twenty-six  weeks ended
January 1, 2000.

Investment  income was $5,222 in Fiscal 2000 compared to an  investment  loss of
$1,204 in Fiscal 1999, a $6,426  increase.  The increase was  primarily due to a
$5,980,  or 100%,  increase in the value of the  Company's  limited  partnership
interest in an investment partnership.

The Company  repurchased $3,110 of its 11.72% senior notes during the twenty-six
weeks  ended   January  1,  2000  at  a  discount  that  resulted  in  a  pretax
extraordinary gain of $343.

FINANCIAL CONDITION AND LIQUIDITY (all dollar amounts in thousands)

The  Company's  cash  position as of January 1, 2000 was $14,275.  The Company's
cash  position may fluctuate as a result of seasonal  merchandise  purchases and
timing of payments.

The Company entered into an Amended and Restated  Revolving Credit Facility (the
"Amended Facility")  effective September 10, 1998 with BABC, as agent, and other
financial  institutions that establishes a credit facility in the maximum amount
of $100,000.

Borrowings  under the Amended Facility may be used for working capital needs and
general  corporate  purposes.  Up to $50,000 of the Amended Facility at any time
may be used for standby and documentary  letters of credit. The Amended Facility
includes  restrictions  on, among other things,  additional  debt,  investments,
dividends  and other  distributions,  mergers and  acquisitions  and contains no
financial covenants.

<PAGE>10

Credit  availability under the Amended Facility at any time is the lesser of the
aggregate  availability  (as defined in the Amended  Facility) or $100,000.  The
Amended Facility  establishes a first priority lien and security interest in the
current  assets of the Company,  including,  among other items,  cash,  accounts
receivable and inventory.

Advances  made under the  Amended  Facility  bear  interest  at the  BankAmerica
reference  rate plus 1/2% or LIBOR plus  2.00%.  Under the terms of the  Amended
Facility,  the Company is required to pay a commitment  fee of between 0.25% and
0.35% per annum on the unused portion of the facility, letter of credit fees and
certain other fees.

Unused  availability under the Amended Facility,  after subtracting amounts used
for outstanding letters of credit, was $43,818, at January 1, 2000.

The Amended Facility expires on March 14, 2002.

Twenty-six weeks ended January 1, 2000

During the  twenty-six  weeks ended January 1, 2000, the Company's cash position
decreased by $3,071.  Net cash used for  operating  activities  was $1,178.  The
major  sources  of cash from  operating  activities  were net  income of $3,927,
depreciation  expense of $9,257,  amortization  of video rental tapes of $3,306,
decrease in marketable  securities of $3,254 and an increase in accrued expenses
and other current liabilities of $6,615 offset by a decrease in accounts payable
of $20,151, an increase in merchandise  inventories of $3,828 and an increase in
accounts receivable of $2,624.

Capital  expenditures  of $10,161,  additions to video rental tapes of $805,  an
investment in equity securities of $4,600 and an additional $5,724 investment in
Avatex were paid for with the Company's revolving credit facility.

Net cash  provided by financing  activities  of $19,364  consisted of borrowings
under the  revolving  credit  facility  partially  offset by  decreases  in bank
overdrafts,  principal  payments on lease obligations and principal  payments on
term debt.

The  Company  is  exposed to certain  market  risks from  transactions  that are
entered into during the normal course of business. The Company's policies do not
permit active trading of, or speculation in, derivative  financial  instruments.
The Company's  primary  market risk exposure  relates to interest rate risk. The
Company manages its interest rate risk in order to balance its exposure  between
fixed and variable rates while attempting to minimize its interest costs.

Trends,  Demands,  Commitments,  Events or Uncertainties  (all dollar amounts in
thousands)

Certain  Company  information  systems  had  potential  operational  problems in
connection  with  applications  that  contain  a date  and/or  use a  date  in a
comparative  manner as the date  transitions  into the Year  2000.  The  Company
implemented a comprehensive program to identify and remediate potential problems
related to the Year 2000 in its information systems,  infrastructure,  logistics
and retail facilities.  In addition,  the Company initiated formal communication
with all of its significant  vendors and other external  interfaces to determine
the extent to which the Company was  vulnerable  to a  third-party's  failure to
remediate their own potential  problems  related to the Year 2000. The inability
of the Company or significant  vendors and/or external interfaces of the Company
to  adequately  address  Year 2000 issues  could have caused  disruption  of the
Company's systems.

The Company  completed all of the software  modifications  necessary to make its
systems Year 2000 compliant and as a result has not  experienced any operational
problems or disruptions as of January 28, 2000

<PAGE>11

The Company  incurred  approximately  $1,300  related to the  assessment of, and
efforts in connection  with,  its Year 2000 program and  remediation  plan.  The
Company  accelerated  by one  year  the  purchase  of  approximately  $5,000  in
replacement  hardware  in order to ensure  the  associated  system was Year 2000
compliant.

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments and Hedging Activities," which establishes  accounting and reporting
standards for derivative  instruments  and for hedging  activities.  It requires
that an entity  recognize all derivatives as either assets or liabilities in the
statement of financial  position and measure  those  instruments  at fair value,
with the potential effect on operations  dependent upon certain conditions being
met.  SFAS No. 133 (as  amended  by SFAS No.  137) is  effective  for all fiscal
quarters of fiscal  years  beginning  after June 15, 2000.  Management  does not
believe  that the  adoption  of SFAS No. 133 will have a material  impact on its
financial position or results of operations.



<PAGE>12


PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

                  None.

ITEM 2.  CHANGES IN SECURITIES

                  None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

                  None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                  The  Company's  Annual  Meeting  of  Shareholders  was held on
                  December 10, 1999. The Company  received  proxies from holders
                  of  11,283,354  shares of the  Company's  common  stock  which
                  constituted  more than a  majority  of all  shares  issued and
                  outstanding  (12,240,865  shares) at the close of  business on
                  October 1, 1999. The holders of at least 11,007,713  shares of
                  common  stock  voted for the  election  of Monroe  Osterman as
                  director  of the  Corporation  to hold  office for three years
                  until the 2002 Annual  Meeting and until his successor is duly
                  elected and qualified or until his resignation or removal.

                  The  second  proposal  was for an  amendment  to the  Phar-Mor
                  Director Stock Plan to change the annual  automatic grant date
                  to July 1. The proposal passed as follows:  10,530,734  shares
                  in  favor;   362,108  shares   against;   and  390,512  shares
                  abstaining.

                  The  third  proposal  was for the  appointment  of the firm of
                  Deloitte  &  Touche  LLP  to  be  the  Company's   independent
                  accountants  for the fiscal  year  ending  July 1,  2000.  The
                  proposal  passed  as  follows:  11,080,703  shares  in  favor;
                  194,011 shares against; and 8,640 shares abstaining.

ITEM 5.  OTHER INFORMATION

                  None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits

                  See Exhibit Index on page 14.

         (b)      Reports on Form 8-K

                  The  following  reports  on  Form  8-K  were  filed  with  the
                  Securities  and Exchange  Commission  during the quarter ended
                  January 1, 2000

                  None.




<PAGE>13



                                   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.




                                 PHAR-MOR, INC.


Date:  February 7, 2000                By:   /s/ Sankar Krishnan
                                         -----------------------
                                                 Sankar Krishnan
                                                 Senior Vice President and Chief
                                                   Financial Officer



Date:  February 7, 2000               By:   /s/ John R. Ficarro
                                        -----------------------
                                                John R. Ficarro
                                                Senior Vice President and Chief
                                                   Administrative Officer


<PAGE>14





                                 PHAR-MOR, INC.

                                INDEX TO EXHIBITS


Exhibit No.

*3.1              Amended and Restated Articles of Incorporation

**3.2             Amended and Restated By-laws

*4.1              Indenture dated September 11, 1995  between Phar-Mor, Inc. and
                  IBJ Schroder Bank & Trust Company

*4.2              Warrant  Agreement dated September 11, 1995 between  Phar-Mor,
                  Inc. and Society National Bank

***10.1           Loan and Security  Agreement,  dated as of September 10, 1998,
                  by  and  among  the  financial   institutions  listed  on  the
                  signature pages therein, BankAmerica Business Credit, Inc., as
                  agent, and Phar-Mor,  Inc.,  Phar-Mor,  Inc., LLC, Phar-Mor of
                  Delaware,  Inc., Phar-Mor of Florida,  Inc., Phar-Mor of Ohio,
                  Inc.,  Phar-Mor of Virginia,  Inc., and Phar-Mor of Wisconsin,
                  Inc.

****10.2          Amendment  to  the Supply  Agreement  dated  November  5, 1999
                  between Phar-Mor, Inc. LLC and  its  affiliates  and  McKesson
                  Drug Company, a division of McKesson HBOC, Inc.

27                Financial Data Schedule
--------------------------------------------------------------------------------
*        Previously filed  in connection with  the filing of Phar-Mor's Form 10,
         on October 23, 1995

**       Previously filed in connection  with the filing of Phar-Mor's quarterly
         report on Form 10-Q, on May 1, 1998

***      Previously filed in connection with the filing  of Phar-Mor's quarterly
         report on Form 10-Q, on November 2, 1998

****     Confidential treatment  requested.  The redacted material, indicated by
         [*], has been separately filed with the Commission.