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 March 27, 1999
         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              
                                                   -----           -----

As of May 05,  1999,  12,240,865  shares of the  registrant's  common stock were
outstanding.



<PAGE>   2


                         PHAR-MOR, INC. AND SUBSIDIARIES

                                    FORM 10-Q

                      FOR THE QUARTER ENDED MARCH 27, 1999


                                    I N D E X


                                                                            Page

Part I:  Financial Information

         Item 1.  Financial Statements

              Condensed Consolidated Balance Sheets as of March 27, 1999 and
              June 27, 1998                                                    3

              Condensed  Consolidated   Statements  of  Operations  for  the
              Thirteen Weeks Ended March 27, 1999 and March 28, 1998           4

              Condensed  Consolidated   Statements  of  Operations  for  the
              Thirty-nine Weeks Ended March 27, 1999 and March 28, 1998        5

              Condensed  Consolidated  Statements  of  Comprehensive  Income
              (Loss) for the  Thirteen  Weeks Ended March 27, 1999 and March
              28, 1998                                                         6

              Condensed  Consolidated  Statements  of  Comprehensive  Income
              (Loss) for the  Thirty-nine  Weeks  Ended  March 27,  1999 and
              March 28, 1998                                                   7

              Condensed  Consolidated  Statements  of  Cash  Flows  for  the
              Thirty-nine Weeks Ended March 27, 1999 and March 28, 1998        8

              Notes to Condensed Consolidated Financial Statements             9

         Item 2. Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                            11

Part II: Other Information

         Item 1.  Legal Proceedings                                           15
         Item 2.  Changes in Securities                                       15
         Item 3.  Defaults Upon Senior Securities                             15
         Item 4.  Submission of Matters to a Vote of Security Holders         15
         Item 5.  Other Information                                           15
         Item 6.  Exhibits and Reports on Form 8-K                            15
         Signatures                                                           16
         Exhibit Index                                                        17


<PAGE>   3
<TABLE>
<CAPTION>


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

ASSETS                                                                    (Unaudited)
                                                                           March 27,       June 27,
                                                                             1999            1998
                                                                         ------------    ------------
<S>                                                                      <C>             <C>         
Current assets:
 Cash and cash equivalents                                               $     17,020    $     44,655
 Marketable securities                                                          3,469           9,065
 Accounts receivable - net                                                     23,129          20,927
 Merchandise inventories                                                      226,676         176,069
 Prepaid expenses and other current assets                                      2,420           2,703
                                                                         ------------    ------------
     Total current assets                                                     272,714         253,419

Property and equipment - net                                                   93,534          75,512
Goodwill                                                                       16,500           1,667
Deferred tax asset                                                              8,143           9,281
Investments                                                                     7,301           4,275
Investment in Avatex                                                            1,694           3,525
Other assets                                                                    5,402           1,776
                                                                         ------------    ------------

     Total assets                                                        $    405,288    $    349,455
                                                                         ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                                        $    106,796    $     67,091
 Accrued expenses and other current liabilities                                40,160          39,316
 Current portion of long-term debt and capital lease obligations               10,127          10,327
                                                                         ------------    ------------
     Total current liabilities                                                157,083         116,734

Long-term debt and capital lease obligations                                  123,900         130,993
Revolving credit facility                                                      20,050            --
Long-term self insurance reserves                                               7,348           7,680
Deferred rent and unfavorable lease liability - net                            11,649          11,074
                                                                         ------------    ------------
     Total liabilities                                                        320,030         266,481
                                                                         ------------    ------------

Commitments and contingencies

Minority interests                                                                535             535
                                                                         ------------    ------------

Stockholders' equity:
 Preferred stock                                                                 --              --
 Common stock                                                                     122             122
 Additional paid-in capital                                                    90,007          89,976
 Stock options outstanding                                                      1,951           1,401
 Unrealized loss on investment in Avatex, net of related tax
  effect (2,174) of $1,131 and $0, respectively                                (2,174)           (475)
 Retained deficit                                                              (5,183)         (8,585)
                                                                         ------------    ------------
     Total stockholders' equity                                                84,723          82,439
                                                                         ------------    ------------

     Total liabilities and stockholders' equity                          $    405,288    $    349,455
                                                                         ============    ============

</TABLE>

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


<PAGE>   4

<TABLE>
<CAPTION>


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


                                                                           Thirteen        Thirteen
                                                                          Weeks Ended     Weeks Ended
                                                                        March 27, 1999   March 28,1998
                                                                         ------------    ------------
<S>                                                                      <C>             <C>         
Sales                                                                    $    290,928    $    277,319

Less:
 Cost of goods sold, including occupancy and
  distribution costs                                                          235,910         223,696
 Selling, general and administrative expenses                                  44,482          44,236
 Chief Executive Officer severance expenses                                      --               720
 Loss on disposal of equipment                                                   --             4,615
 Depreciation and amortization                                                  5,992           5,463
                                                                         ------------    ------------

Income (loss) from operations before interest expense,
 interest income, investment income and income taxes                            4,544          (1,411)

Interest expense                                                               (3,877)         (4,194)
Interest income                                                                   797             839
Investment income                                                                 483              54
                                                                         ------------    ------------
Income (loss) before income taxes                                               1,947          (4,712)

Income taxes                                                                      780            --
                                                                         ------------    ------------
Net Income (loss)                                                        $      1,167    $     (4,712)
                                                                         ============    ============

Basic income (loss) per common share                                     $        .10    $       (.39)
                                                                         ============    ============
Diluted income (loss) per common share                                   $        .09    $       (.39)
                                                                         ============    ============

Weighted average number of basic common shares outstanding                 12,240,865      12,229,071
Weighted average number of diluted common shares outstanding               12,317,051      12,229,071

</TABLE>

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


<PAGE>   5

<TABLE>
<CAPTION>


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


                                                                          Thirty-nine     Thirty-nine
                                                                          Weeks Ended     Weeks Ended
                                                                        March 27, 1999   March 28, 1998
                                                                         ------------    ------------
<S>                                                                      <C>             <C>         
Sales                                                                    $    857,329    $    825,863

Less:
 Cost of goods sold, including occupancy and
  distribution costs                                                          692,792         666,118
 Selling, general and administrative expenses                                 130,681         131,834
 Chief Executive Officer severance expenses                                      --             6,387
 Loss on disposal of equipment                                                   --             4,615
 Depreciation and amortization                                                 17,270          16,518
                                                                         ------------    ------------

Income from operations before interest expense,
 interest income, investment (loss) income and income taxes                    16,586             391

Interest expense                                                              (11,761)        (12,562)
Interest income                                                                 1,568           2,612
Investment (loss) income                                                         (721)             54
                                                                         ------------    ------------

Income (loss) before income taxes                                               5,672          (9,505)

Income taxes                                                                    2,270            --
                                                                         ------------    ------------

Net income (loss)                                                        $      3,402    $     (9,505)
                                                                         ============    ============

Basic income (loss) per common share                                     $        .28    $       (.78)
                                                                         ============    ============
Diluted income (loss) per common share                                   $        .28    $       (.78)
                                                                         ============    ============

Weighted average number of basic common shares outstanding                 12,240,517      12,184,541
Weighted average number of diluted common shares outstanding               12,306,320      12,184,541

</TABLE>

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


<PAGE>   6

<TABLE>
<CAPTION>

                         PHAR-MOR, INC. AND SUBSIDIARIES
        CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                 (In thousands)
                                   (Unaudited)

                                                                           Thirteen         Thirteen
                                                                          Weeks Ended     Weeks Ended
                                                                        March 27, 1999   March 28, 1998
                                                                         ------------    ------------
<S>                                                                      <C>             <C>         
Net income (loss)                                                        $      1,167    $     (4,712)

Other comprehensive loss:
 Unrealized loss on securities:
  Unrealized holding loss on investment in Avatex
   arising during period                                                           (1)           --
Comprehensive income (loss)                                              $      1,166    $     (4,712)
                                                                         ============    ============


</TABLE>

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


<PAGE>   7

<TABLE>
<CAPTION>

                         PHAR-MOR, INC. AND SUBSIDIARIES
        CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                                 (In thousands)
                                   (Unaudited)


                                                                          Thirty-nine     Thirty-nine
                                                                          Weeks Ended     Weeks Ended
                                                                        March 27, 1999   March 28, 1998
                                                                         ------------    ------------
<S>                                                                      <C>             <C>         
Net income (loss)                                                        $      3,402    $     (9,505)

Other comprehensive loss:
 Unrealized loss on securities:
  Unrealized holding loss on investment in Avatex
   arising during period net of tax benefit of $1,131                          (1,699)           --
                                                                         ------------    ------------
Comprehensive income (loss)                                              $      1,703    $     (9,505)
                                                                         ============    ============

</TABLE>

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


<PAGE>   8

<TABLE>
<CAPTION>

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

                                                                          Thirty-nine     Thirty-nine
                                                                          Weeks Ended     Weeks Ended
                                                                        March 27, 1999   March 28, 1998
                                                                         ------------    ------------
<S>                                                                      <C>             <C>         
OPERATING ACTIVITIES
 Net income (loss)                                                       $      3,402    $     (9,505)
 Adjustments  to  reconcile  net  income  (loss) to net
  cash used for operating activities:
  Items not requiring the outlay of cash:
   Depreciation                                                                11,813          10,470
   Amortization of video rental tapes                                           5,374           6,048
   Loss on disposal of equipment                                                 --             4,615
   Stock option expense                                                           549           1,218
   Amortization of deferred financing costs and goodwill                          183             315
   Deferred income taxes                                                        2,270            --
   Deferred rent                                                                 (483)           (438)
   Gain on equity method investment                                              (735)           --
  Changes in assets and liabilities:
   Accounts receivable                                                           (586)         (4,429)
   Marketable securities                                                        5,596         (11,546)
   Merchandise inventories                                                    (15,271)        (14,832)
   Prepaid expenses                                                               586             511
   Other assets                                                                   (21)           (516)
   Accounts payable                                                            (5,711)          9,428
   Accrued expenses and other current liabilities                              (9,960)         (4,245)
                                                                         ------------    ------------
 Net cash used for operating activities                                        (2,994)        (12,906)
                                                                         ------------    ------------

INVESTING ACTIVITIES
 Additions to rental videotapes                                                (6,000)         (6,377)
 Additions to property and equipment                                          (18,631)        (14,539)
 Proceeds on sale of property and equipment                                       110            --
 Investment in Avatex                                                          (1,000)           --
 Investment in Pharmhouse Corp., net of $3,292 cash acquired                   (4,608)           --
 Investment in equity securities                                               (2,291)           --
                                                                         ------------    ------------
 Net cash used for investing activities                                       (32,420)        (20,916)
                                                                         ------------    ------------

FINANCING ACTIVITIES
 Borrowings under revolving credit facility                                    20,050            --
 Principal payments on long-term debt                                         (28,959)         (1,694)
 Principal payments on capital lease obligations                               (5,280)         (5,399)
 Bank overdrafts                                                               21,687            --
 Additions to long-term debt                                                      250            --
 Issuance of common stock                                                          31             574
                                                                         ------------    ------------
 Net cash provided by (used for) financing activities                           7,779          (6,519)
                                                                         ------------    ------------

 Decrease in cash and cash equivalents                                        (27,635)        (40,341)
 Cash and cash equivalents, beginning of period                                44,655          79,847
                                                                         ------------    ------------
 Cash and cash equivalents, end of period                                $     17,020    $     39,506
                                                                         ============    ============
</TABLE>


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


<PAGE>   9


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 June
         27,  1998  for  additional  disclosures,  including  a  summary  of the
         Company's  accounting  policies,  which  have not  changed,  except  as
         discussed in Note 3. Operating  results for the thirty-nine weeks ended
         March 27, 1999 are not  necessarily  indicative of the results that may
         be expected for the fifty-three weeks ending July 3, 1999.

2.       CHIEF EXECUTIVE OFFICER RESIGNATION
         On September 19, 1997,  Robert Haft and Avatex  Corporation  ("Avatex")
         finalized  an  agreement   regarding  Hamilton  Morgan  LLC  ("Hamilton
         Morgan"), (the "Hamilton Morgan Agreement").  In exchange for 3,750,000
         shares of the Company's stock and the return of a voting proxy on other
         Company  shares,  Hamilton Morgan redeemed the 69.8% Avatex interest in
         Hamilton  Morgan,   repaid  certain  indebtedness  and  received  other
         consideration.   Avatex   beneficially  owns  39.1%  of  the  Company's
         outstanding  common  stock.  In  conjunction  with the Hamilton  Morgan
         Agreement,  the Company entered into a Severance  Agreement with Robert
         Haft  whereby he resigned his  positions  as Chairman of the  Company's
         Board of Directors and as the  Company's  Chief  Executive  Officer and
         received  a lump sum cash  payment  of  $4,417.  Under the terms of the
         Severance  Agreement,  the Company will continue to provide benefits to
         him through  September 19, 2000. He is indemnified  and entitled to tax
         reimbursement  in  respect  to  any  payments  that  constitute  excess
         parachute  payments  under  Federal  Income Tax laws.  The  Company has
         provided  a letter of credit in the amount of  approximately  $2,900 to
         secure its contractual obligations under the Severance Agreement.

3.       NEW ACCOUNTING PRONOUNCEMENTS
         In June 1997, the Financial Accounting Standards Board issued Statement
         of  Financial   Accounting   Standard   ("SFAS")  No.  130   "Reporting
         Comprehensive Income." SFAS No. 130 establishes standards for reporting
         comprehensive  income  and its  components,  some of  which  have  been
         historically excluded from the Consolidated Statement of Operations and
         recorded  directly to the equity  section of an entities  statement  of
         financial  position.  SFAS No. 130 also  requires  that the  cumulative
         balance  of these  items of other  comprehensive  income  are  reported
         separately from retained earnings and additional paid-in capital in the
         equity section of a statement of financial position.  This statement is
         effective  for fiscal years  beginning  after  December  15, 1997.  The
         Company  adopted  SFAS No. 130 in 1998 and has  elected to include  the
         required  items  of  other   comprehensive   income  in  its  Condensed
         Consolidated Statements of Comprehensive Income (Loss).

4.       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.



<PAGE>  10

PHAR-MOR, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)

5.       INVESTMENT IN AVATEX
         During the thirty-nine weeks ended March 27, 1999, the Company invested
         $1,000 to purchase  approximately 3.4% of Avatex common stock, bringing
         its total investment in Avatex to approximately 15.1% of Avatex's total
         outstanding common stock. This investment is carried at market value as
         available-for-sale  securities.  Unrealized  losses on these securities
         are excluded from net income but are included as a comprehensive income
         (loss) in the Condensed Consolidated Statements of Comprehensive Income
         (Loss).  As of March 27, 1999, the quoted market price of Avatex common
         stock was $.812 per share as  compared to $2.1875 per share at June 27,
         1998.  To the extent that the Company  determines in the future that an
         other than  temporary  decline in the common stock value has  occurred,
         the write-down of the investment  will be included in the  Consolidated
         Statement of Operations.

6.       BUSINESS COMBINATION
         On March 15, 1999, Phar-Mor,  Inc. ("Phar-Mor") completed the merger of
         its wholly owned subsidiary Pharmacy Acquisition Corp. ("PAC") with and
         into  Pharmhouse  Corp.  ("Pharmhouse"),  pursuant to the Agreement and
         Plan of Merger  dated as of December 17, 1998 among  Phar-Mor,  PAC and
         Pharmhouse  (the  "Merger  Agreement").  As  a  result  of  the  merger
         Pharmhouse  became a wholly owned subsidiary of Phar-Mor.  In addition,
         subject to the terms of the Merger Agreement,  each share of the common
         stock of Pharmhouse  was converted  into the right to receive $2.88 per
         share in cash (the "Merger").

         Phar-Mor and PAC  financed  the payment of the  purchase  price and all
         other fees and expenses  associated  with the Merger  through cash from
         operations and from  borrowings  under the Company's  revolving  credit
         facility.

         The Merger was accounted for under the purchase  method of  accounting.
         The results of  operations  of  Pharmhouse  from March 16, 1999 through
         March  27,  1999  have  been  included  in the  Condensed  Consolidated
         Statements of Operations  for both the thirteen and  thirty-nine  weeks
         ended March 27, 1999.  The total  purchase  price payable in connection
         with the Merger was  approximately  $34.2  million,  consisting of $7.5
         million in cash and the  assumption of $26.7 million in debt.  Goodwill
         is being amortized using the  straight-line  method over a period of 25
         years.  The fair value of the assets acquired and  liabilities  assumed
         was as follows:

               Identifiable assets acquired             $54,962
               Liabilities assumed                      (61,954)
               Goodwill                                  14,866
                                                        -------
               Cash paid                                 $7,874
                                                        =======

         The following supplemental pro forma information is presented as though
         the companies combined at the beginning of the respective periods:

<TABLE>
<CAPTION>
                                                         Thirty-nine weeks        Thirty-nine weeks
                                                        ended March 27, 1999     ended March 28, 1998
                                                        --------------------     --------------------
               <S>                                      <C>                      <C>                 
               Sales                                    $            988,012     $            972,605
                                                        ====================     ====================
               Net loss                                 $             (3,074)    $            (13,549)
                                                        ====================     ====================
               Basic and diluted loss per common share  $               (.25)    $              (1.11)
                                                        ====================     ====================
</TABLE>



<PAGE>  11


PHAR-MOR, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (dollar amounts in thousands, except per share amounts)



On March 15,  1999,  Phar-Mor,  Inc.  ("Phar-Mor")  completed  the merger of its
wholly  owned  subsidiary  Pharmacy  Acquisition  Corp.  ("PAC")  with  and into
Pharmhouse  Corp.  ("Pharmhouse"),  pursuant to the Agreement and Plan of Merger
dated as of December 17, 1998 among  Phar-Mor,  PAC and Pharmhouse  (the "Merger
Agreement").  As a  result  of the  merger  Pharmhouse  became  a  wholly  owned
subsidiary  of  Phar-Mor.  In  addition,  subject  to the  terms  of the  Merger
Agreement,  each share of the common stock of Pharmhouse  was converted into the
right to  receive  $2.88 per share in cash (the  "Merger").  The total  purchase
price  payable  in  connection  with  the  Merger  was  approximately   $34,200,
consisting of $7,500 in cash and the  assumption of $26,700 in debt. See "NOTE 6
- Business Combination of Notes to Condensed Consolidated Financial Statements."

The Company  used its excess cash  position  and excess  availability  under its
revolving credit facility to pay off $26,700 in debt that was assumed as part of
the merger with Pharmhouse.

Pharmhouse  operates  32  discount  drug  stores in eight  mid-Atlantic  and New
England  states  under the names  "Pharmhouse"  and "Rx  Place"  and has  annual
revenues of approximately $200 million.

RESULTS OF OPERATIONS (all dollar amounts in thousands)

Thirteen Weeks Ended March 27, 1999 versus
    Thirteen Weeks Ended March 28, 1998

Sales for the third quarter of fiscal year 1999 ("Fiscal  1999")  increased 4.9%
compared to the third  quarter of fiscal year 1998 ("Fiscal  1998").  Comparable
store sales  increased 2.5% from $272,780 for Fiscal 1998 to $279,489 for Fiscal
1999.  The  increase in  comparable  store sales was  primarily  due to an 12.0%
increase in comparable  pharmacy  store sales and the  continued  success of the
"Super Phar-Mor" store remodel  program.  Sales for the eleven stores which were
remodeled into the "Super  Phar-Mor" format between the end of the third quarter
of Fiscal  1998 and the  beginning  of the  third  quarter  of fiscal  year 1999
increased  13.7% in the thirteen  weeks ended March 27, 1999 over the comparable
period in the prior year.  Approximately  $6,000 of sales for the 32  Pharmhouse
and Rx Place stores was included in the thirteen weeks ended March 27, 1999.

Cost of sales as a  percentage  of sales was 81.1% in Fiscal  1999,  compared to
80.7% in Fiscal 1998.  Lower vendor  allowances and higher  occupancy costs were
partially  offset by a $2,505  partial  settlement  received from a class action
lawsuit  against  pharmaceutical  manufacturers,   related  to  certain  product
overcharges to retailers.

Selling, general and administrative expenses as a percentage of sales were 15.3%
in Fiscal 1999  compared to 16.0% in Fiscal  1998,  a decrease of 0.7% of sales.
This decrease was due to lower advertising  expenses and lower  professional fee
expenses.

In Fiscal 1998 the Company  incurred  $720 in  executive  severance  and related
costs  associated with the  resignation of the Company's  former Chairman of the
Board and Chief Executive Officer.

In Fiscal 1998 the Company  recorded a charge of $4,615 for the write-off of the
Company's  mainframe  computer and other equipment which was replaced during the
third quarter of Fiscal 1998 with the latest  technology IBM mainframe  computer
equipment.

Depreciation  and  amortization  expense was $5,992 in Fiscal  1999  compared to
$5,463 in Fiscal 1998, an increase of $529. The increase is the result of higher
video  rental  tape  amortization  expense,   depreciation  expense  on  capital
expenditures  made since the second  quarter of Fiscal 1998 and the inclusion of
twelve days depreciation and amortization expense from Pharmhouse.

<PAGE>  12

Interest  income was $797 in Fiscal 1999 compared to interest  income of $839 in
Fiscal  1998,  a $42  decrease.  The  decrease in  interest  income was due to a
decrease in the amount of excess funds available for investment in Fiscal 1999.

Thirty-nine Weeks Ended March 27, 1999 versus
    Thirty-nine Weeks Ended March 28, 1998

Sales for the thirty-nine  weeks ended March 27, 1999 increased 3.8% compared to
the  thirty-nine  weeks ended March 28, 1998.  Comparable  store sales increased
2.6% from  $808,278 for the  thirty-nine  weeks ended March 28, 1998 to $828,905
for the thirty-nine weeks ended March 27, 1999. The increase in comparable store
sales was primarily due to an 9.7% increase in comparable  pharmacy store sales.
Approximately  $6,000 of sales for the 32  Pharmhouse  and Rx Place  stores  was
included in the thirty-nine weeks ended March 27, 1999.


Cost of sales as a percentage of sales was 80.8% in the thirty-nine  weeks ended
March 27, 1999, Compared to 80.7% in the thirty-nine weeks ended March 28, 1998.
The  settlement  from  the  pharmaceutical   manufacturers   lawsuit  and  lower
warehousing  costs  were  offset  by  higher  promotional  expenses  and  higher
occupancy costs.

Selling, general and administrative expenses as a percentage of sales were 15.2%
in the  thirty-nine  weeks  ended  March  27,  1999  compared  to  16.0%  in the
thirty-nine  weeks  ended  March  28,  1998.  This  decrease  was  due to  lower
advertising expenses and corporate  professional fees partially offset by higher
corporate travel expenses.

In the  thirty-nine  weeks ended March 28, 1998 the Company  incurred  $6,387 in
executive  severance and related costs  associated  with the  resignation of the
Company's former Chairman of the Board and Chief Executive Officer.

Depreciation and amortization expense was $17,270 in the thirty-nine weeks ended
March 27,  1999  compared  to $16,518 in the  thirty-nine  weeks ended March 28,
1998, an increase of $752. The increase is the result of depreciation on capital
expenditures  made since the second quarter of Fiscal 1998  partially  offset by
lower video rental tape amortization.

Interest  income  was  $1,568 in the  thirty-nine  weeks  ended  March 27,  1999
compared to interest income of $2,612 in the  thirty-nine  weeks ended March 28,
1998, a $1,044  decrease.  The decrease in interest income was due to a decrease
in the amount of excess funds available for investment in the thirty-nine  weeks
ended March 27, 1999.

FINANCIAL CONDITION AND LIQUIDITY (all dollar amounts in thousands)

The Company's cash position as of March 27, 1999 was $17,020. The Company's cash
position may fluctuate as a result of seasonal merchandise  purchases and timing
of payments.

On September 11, 1995, the Company  entered into the Revolving  Credit  Facility
(the "Facility") with BankAmerica Business Credit, Inc. ("BABC"),  as agent, and
other financial institutions  (collectively,  the "Lenders"), that established a
credit facility in the maximum amount of $100,000.

Borrowings  under the Facility  were  available  for working  capital  needs and
general  corporate  purposes.  Up to  $50,000  of the  Facility  at any time was
available for standby and documentary  letters of credit.  The Facility included
restrictions  on, among other things,  additional  debt,  capital  expenditures,
investments,   restricted   payments  and  other   distributions,   mergers  and
acquisitions,  and contained covenants requiring the Company to meet a specified
quarterly  minimum EBITDA Coverage Ratio (the sum of earnings  before  interest,
taxes, depreciation and amortization,  as defined, divided by interest expense),
calculated  on a rolling four  quarter  basis,  and a monthly  minimum net worth
test.

<PAGE>  13

Credit  availability  under  the  Facility  at any  time was the  lesser  of the
Aggregate  Availability  (as defined in the Facility) or $100,000.  The Facility
established 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 Facility would have borne interest at the BABC reference
rate plus 1/2% or London  Interbank  Offered Rate  ("LIBOR") plus the applicable
margin.  The applicable margin ranged between 1.50% and 2.00% and was determined
by a formula based on a ratio of (a) the  Company's  earnings  before  interest,
taxes,  depreciation  and  amortization to (b) interest.  Under the terms of the
Facility, the Company was required to pay a commitment fee of 0.28125% per annum
on the unused  portion of the Facility,  letter of credit fees and certain other
fees.

There have been no borrowings under the Facility.

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.

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 BABC  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.

The Company had outstanding  borrowings of $20,050 under the Amended Facility as
of March 27,  1999.  Unused  availability  under  the  Amended  Facility,  after
subtracting amounts used for outstanding letters of credit, was $75,941 at March
27, 1999.

On March 15, 1999 the Amended  Facility was amended to include  Pharmhouse  as a
borrower and to extend the term of the Amended Facility to March 14, 2002.

Thirty-nine weeks ended March 27, 1999

During the  thirty-nine  weeks ended March 27, 1999, the Company's cash position
decreased by $27,635.  Net cash used for operating  activities  was $2,994.  The
major  sources  of cash from  operating  activities  were net  income of $3,402,
depreciation  expense of $11,813,  amortization  of video rental tapes of $5,374
and a decrease  in  marketable  securities  of $5,596  offset by an  increase in
merchandise  inventories  of $15,271,  a decrease in accrued  expenses and other
current liabilities of $9,960 and a decrease in accounts payable of $5,711.

Capital expenditures of $18,631,  additions to video rental tapes of $6,000, the
cash expended in the purchase of  Pharmhouse of $4,608,  an investment in equity
securities of $2,291 and an additional $1,000 investment in Avatex were paid for
with the  Company's  excess cash  position and  borrowings  under the  Company's
revolving credit facility.

<PAGE>  14

Net cash  provided by financing  activities  of $7,779  consisted of  borrowings
under the revolving  credit  facility of $20,050 and bank  overdrafts of $21,687
partially  offset  by  principal   payments  on  long-term  debt  including  the
Pharmhouse  debt  assumed of $28,959 and  principal  payments  on capital  lease
obligations of $5,280.

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 have  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 has
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  has  initiated  formal
communication with all of its significant  vendors and other external interfaces
to determine the extent to which the Company is  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 cause disruption of the
Company's systems.

Management  believes,  based on its  assessment of all of its systems,  that its
purchasing  and  pharmacy  systems  pose the  greatest  risk of  disrupting  its
business if Year 2000 system  modifications  are not completed in time.  Without
modification, the Company may not be able to issue purchase orders with delivery
dates  after  December  31,  1999 or dispense  prescriptions  with refill  dates
extending  beyond  December  31,  1999.  The Company has  developed or is in the
process of developing contingency plans that include manually performing work in
place of affected systems and the renting of back-up systems.

Most of the Company's  systems are Year 2000  compliant,  or have been scheduled
for replacement in the Company's  on-going  systems plans. As of March 27, 1999,
the Company has incurred  approximately  $650 related to the  assessment of, and
preliminary  efforts in connection  with, its Year 2000 program and  remediation
plan.  Future spending for software  modifications and testing required for Year
2000  compliance  are  currently  estimated  to be  approximately  $400 with the
majority  expected  to be incurred  by the end of Fiscal  1999.  The Company has
accelerated  by one year the  purchase of  approximately  $5,000 in  replacement
hardware in order to ensure the associated  system is Year 2000  compliant.  The
Company's  target date for  completing its Year 2000  modifications  is June 30,
1999,  including  additional  testing and  refinements  to identify  the systems
planned for 1999. These  expenditures are not expected to have a material impact
on the Company's operating results, liquidity and capital resources.

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial  Accounting  Standards  ("SFAS")  No. 131,  "Disclosures  about an
Enterprise and Related  Information," in February 1998, the FASB issued SFAS No.
132, "Employer's  Disclosures about Pensions and Other Postretirement  Benefits"
and in June 1998,  the FASB  issued  SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging Activities." Management does not believe the adoption of
any of these standards will have a material effect on its financial  position or
results of operations.


<PAGE>  15


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

         None.

ITEM 5.  OTHER INFORMATION

         None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)  Exhibits

         See Exhibit Index on page 18.

    (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 March 27, 1999


         Date of Report       Date of Filing              Description
         --------------       --------------       ----------------------------
         March 15, 1999       March 15, 1999       Completion of acquisition of
                                                   Pharmhouse Corp.






<PAGE>  16



                                   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:  May 11, 1999                    By:   /s/ Sankar Krishnan  
                                             -----------------------------------
                                                 Sankar Krishnan
                                                 Senior Vice President and Chief
                                                   Financial Officer



Date:  May 11, 1999                    By:   /s/ John R. Ficarro   
                                             -----------------------------------
                                                 John R. Ficarro
                                                 Senior Vice President and Chief
                                                   Administrative Officer


<PAGE>  17


                                 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.

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