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  September 29, 2001  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 November 2, 2001,  there were 12,240,865  shares of the  registrant's  common
stock  outstanding  before  deducting   1,482,424  shares  which  represent  the
Company's  25.2% equity interest in common stock of the Company owned by Avatex,
Inc.

                                       1

<PAGE>


                         PHAR-MOR, INC. AND SUBSIDIARIES
                             (Debtor-in-Possession)

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 29, 2001


                                    I N D E X


                                                                            Page
--------------------------------------------------------------------------------

Part I: Financial Information

        Item 1. Financial Statements

          Condensed Consolidated Balance Sheets as of September 29, 2001
          and June 30, 2001                                                    3

          Condensed Consolidated Statements of Operations for the Thirteen
          Weeks Ended September 29, 2001 and September 30, 2000                4

          Condensed Consolidated Statements of Cash Flows for the Thirteen
          Weeks Ended September 29, 2001 and September 30, 2000                5

          Notes to Condensed Consolidated Financial Statements                 6

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

Part II: Other Information

        Item 1. Legal Proceedings                                             14
        Item 2. Changes in Securities                                         14
        Item 3. Defaults Upon Senior Securities                               14
        Item 4. Submission of Matters to a Vote of Security Holders           14
        Item 5. Other Information                                             14
        Item 6. Exhibits and Reports on Form 8-K                              14
        Signatures                                                            15
        Exhibit Index                                                         16

                                       2

<PAGE>

<TABLE>
<CAPTION>

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


ASSETS                                                             (Unaudited)
                                                                  September 29,        June 30,
                                                                      2001               2001
                                                                      ----               ----
<S>                                                                 <C>                <C>
Current assets:
  Cash and cash equivalents                                         $ 10,964           $ 14,393
  Marketable securities                                                    9                143
  Accounts receivable - net                                           20,414             25,495
  Merchandise inventories                                            156,416            186,226
  Prepaid expenses and other current assets                            5,790              6,595
                                                                    --------           --------
          Total current assets                                       193,593            232,852

Property and equipment - net                                          56,198             67,044
Goodwill                                                               3,925              3,925
Investments                                                            3,155              3,233
Investment in Avatex                                                     583                789
Other assets                                                           5,653              5,593
                                                                    --------           --------
          Total assets                                              $263,107           $313,436
                                                                    ========           ========

LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY

Current liabilities:
  Accounts payable                                                  $    993           $ 78,148
  Accrued expenses and other current liabilities                      14,556             33,387
  Current portion of long-term debt and capital lease                  1,584              7,838
   obligations                                                      --------           --------
          Total current liabilities                                   17,133            119,373

Liabilities subject to compromise                                    152,435                 --
Long-term debt and capital lease obligations                         102,456            160,791
Long-term self insurance reserves                                      5,108              5,503
Deferred rent and unfavorable lease liability - net                   12,883              9,395
                                                                    --------           --------
          Total liabilities                                          290,015            295,062
                                                                    --------           --------

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

Stockholders' (deficiency) equity:
  Preferred stock                                                         --                 --
  Common stock                                                           122                122
  Additional paid-in capital                                          90,326             90,326
  Stock options outstanding                                            1,881              1,881
  Retained deficit                                                  (113,089)           (67,807)
                                                                    --------           --------
                                                                     (20,760)            24,522
  Less: equity, through investment in Avatex, in cost
   of common stock of the Company held by Avatex, Inc.                (6,683)            (6,683)
                                                                    --------           --------
        Total stockholders' (deficiency) equity                      (27,443)            17,839
                                                                    --------           --------

        Total liabilities and stockholders' (deficiency)            $263,107           $313,436
           equity                                                   ========           ========

</TABLE>


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

                                       3

<PAGE>

<TABLE>
<CAPTION>

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


                                                                                 Thirteen              Thirteen
                                                                                Weeks Ended           Weeks Ended
                                                                            September 29, 2001    September 30, 2000
                                                                            ------------------    ------------------
<S>                                                                         <C>                   <C>
Sales                                                                             $ 279,951            $ 308,187

Less:
  Cost of goods sold, including occupancy and
      distribution costs                                                            236,227              255,278
  Selling, general and administrative expenses                                       49,848               50,422
  Depreciation and amortization                                                       3,712                5,374
                                                                                   --------             --------
Loss before interest expense, investment loss,
  reorganization items and equity in loss of affiliates                              (9,836)              (2,887)

Interest expense                                                                     (3,929)              (5,033)
Investment loss                                                                          (3)                (492)
                                                                                   --------             --------
Loss before reorganization items and equity in loss of                              (13,768)              (8,412)
affiliates

Reorganization items                                                                (31,228)                --
Equity in loss of affiliates                                                           (286)                 (90)
                                                                                   --------             --------
Net loss                                                                           $(45,282)            $ (8,502)
                                                                                   ========             ========


Loss per basic and diluted common share                                             $ (4.21)             $ ( .77)
                                                                                   ========             ========

Weighted average number of basic and diluted common shares
outstanding                                                                      10,764,004           11,019,871

</TABLE>

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

                                       4

<PAGE>

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

                                                                                  Thirteen                 Thirteen
                                                                                 Weeks Ended             Weeks Ended
                                                                              September 29, 2001      September 30, 2000
                                                                              ------------------      ------------------
<S>                                                                           <C>                     <C>
OPERATING ACTIVITIES
  Net loss                                                                         $(45,282)               $ (8,502)
  Adjustments to reconcile net loss to net
    cash provided by (used for) operating activities:
    Items not requiring the outlay of cash:
      Depreciation                                                                    3,622                   4,546
      Amortization of video rental tapes                                               --                       519
      Impairment of long-lived assets                                                12,360                    --
      Write-down inventory to expected liquidation value                             15,895                    --
      Amortization of deferred financing costs and goodwill                             499                     377
      Deferred rent and unfavorable lease liability                                    (273)                   (343)
      Equity in loss of affiliates                                                      286                      90
    Changes in assets and liabilities:
      Accounts receivable                                                             5,511                  (5,038)
      Marketable securities                                                             134                     503
      Merchandise inventories                                                        13,915                 (17,687)
      Prepaid expenses                                                                  805                    (314)
      Other assets                                                                     (758)                   (264)
      Accounts payable                                                               19,497                   5,258
      Accrued expenses and other current liabilities                                 (3,181)                 (5,622)
                                                                                   --------                --------
  Net cash provided by (used for) operating activities                               23,030                 (26,477)
                                                                                   --------                --------

INVESTING ACTIVITIES
  Additions to rental videotapes                                                       --                      (337)
  Additions to property and equipment                                                (1,375)                 (1,251)
  Investment in equity securities                                                      --                      (107)
                                                                                   --------                --------
  Net cash used for investing activities                                             (1,375)                 (1,695)
                                                                                   --------                --------

FINANCING ACTIVITIES
  (Payments) borrowings under revolving credit facility, net                         (7,016)                 26,890
  Debt issuance cost                                                                 (1,511)                   --
  (Decrease) increase in bank overdrafts, net                                       (13,829)                    928
  Principal payments on long-term debt                                               (1,989)                   (502)
  Principal payments on capital lease obligations                                      (739)                 (1,099)
                                                                                   --------                --------
  Net cash (used for) provided by financing activities                              (25,084)                 26,217
                                                                                   --------                --------

  Decrease in cash and cash equivalents                                              (3,429)                 (1,955)
  Cash and cash equivalents, beginning of period                                     14,393                  16,752
                                                                                   --------                --------
  Cash and cash equivalents, end of period                                         $ 10,964                $ 14,797
                                                                                   ========                ========
</TABLE>

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

                                       5

<PAGE>


PHAR-MOR, INC. AND SUBSIDIARIES
(Debtor-in-Possession)
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 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 30,  2001 for  additional  disclosures,  including  a  summary  of the
     Company's  accounting policies,  which have not changed.  Operating results
     for the  thirteen  weeks  ended  September  29,  2001  are not  necessarily
     indicative  of the results  that may be expected  for the  fifty-two  weeks
     ending June 29, 2002.

     The accompanying unaudited consolidated condensed financial statements have
     been prepared on a going concern basis,  which  contemplates  continuity of
     operations,  realization  of assets  and  liquidation  of  liabilities  and
     commitments  in the  normal  course  of  business  and do not  reflect  any
     adjustments  that might  result if the  Company is unable to  continue as a
     going concern. The filing of the voluntary Chapter 11 petitions referred to
     below,  losses from operations and negative cash flow from operations raise
     doubt  about the  Company's  ability to continue  as a going  concern.  The
     appropriateness  of using a going  concern basis is dependent  upon,  among
     other things,  confirmation  of a plan or plans of  reorganization,  future
     profitable  operations and the ability to generate cash from operations and
     financing sources sufficient to meet obligations. As a result of the filing
     of the Chapter 11 cases and related  circumstances,  realization  of assets
     and liquidation of liabilities is subject to significant uncertainty. While
     under the  protection  of Chapter 11, the Debtors (as defined below in Note
     2) may sell or  otherwise  dispose  of  assets,  and  liquidate  or  settle
     liabilities  for amounts  other than those  reflected  in the  consolidated
     condensed financial statements.  Further, a plan or plans of reorganization
     could   materially   change  the  amounts   reported  in  the  accompanying
     consolidated  condensed financial  statements.  The consolidated  condensed
     financial   statements   do  not  include  any   adjustments   relating  to
     recoverability  of the value of  recorded  asset  amounts or the amount and
     classification of liabilities that might be necessary as a consequence of a
     plan of reorganization.  The Company anticipates significant adjustments to
     the consolidated condensed financial statements as a result of applying the
     provisions of Statement of Position 90-7  "Financial  Reporting by Entities
     in  Reorganization  Under the Bankruptcy Code" during the  proceedings.  At
     this time,  it is not  possible  to predict  the  outcome of the Chapter 11
     cases or their effect on the Company's  business,  its financial  position,
     results  of  operations  or  cash  flows.  If it  is  determined  that  the
     liabilities  subject to  compromise in the Chapter 11 cases exceed the fair
     value of the assets, unsecured claims may be satisfied at less than 100% of
     their face value and equity  interests of the  Company's  stockholders  may
     have no value.  The Company  believes  the DIP Credit  Facility (as defined
     below in Note 3) should  provide the Company  with  adequate  liquidity  to
     conduct its business while it prepares a reorganization plan.

2.   BANKRUPTCY

     On  September  24,  2001,  the  Company  and  eight  of  its   subsidiaries
     (collectively, the "Debtors") filed voluntary petitions under Chapter 11 of
     the U.S.  Bankruptcy  Code (the  "Bankruptcy  Code") with the United States
     Bankruptcy  Court  for  the  Northern  District  of Ohio  (the  "Bankruptcy
     Court").  The Chapter 11 cases Nos.  01-44007 (REG) through  01-44015 (REG)
     (the  "Chapter 11 Cases") have been  consolidated  for the purpose of joint
     administration.  As of November 12,  2001,  the Debtors are  continuing  to
     operate  their  business as  debtors-in-possession  under Chapter 11 of the
     Bankruptcy  Code and are  subject  to the  jurisdiction  of the  Bankruptcy
     Court.

                                       6

<PAGE>
     As a result of these filings, actions to collect pre-petition  indebtedness
     are stayed and other contractual obligations against the Debtors may not be
     enforceable. In addition, under the Bankruptcy Code, the Debtors may assume
     or reject  executory  contracts,  including real estate leases,  employment
     contracts,  personal property leases, service contracts and other unexpired
     executory  pre-petition  contracts,  subject to Bankruptcy  Court approval.
     Parties  affected by these  rejections  may file claims with the Bankruptcy
     Court in accordance with the Bankruptcy  Code. The Debtors cannot presently
     determine or  reasonably  estimate the ultimate  liability  that may result
     from  the  filing  of  claims  for  all  contracts  that  may be  rejected.
     Substantially all pre-petition  liabilities are subject to settlement under
     a plan of reorganization to be voted on by the creditors and equity holders
     and approved by the Bankruptcy Court. Although the Debtors expect to file a
     reorganization  plan or plans that provide for  emergence  from  bankruptcy
     sometime  during  Fiscal  Year  2002,  there  can  be no  assurance  that a
     reorganization  plan or plans will be proposed by the Debtors or  confirmed
     by the Bankruptcy Court or that any such plan will be consummated.

     As provided by the Bankruptcy Code, the Debtors have the exclusive right to
     submit a plan of reorganization for 120 days from the date of the filing of
     the voluntary petitions. Further extension may be sought and may be granted
     or rejected by the Bankruptcy  Court. If the Debtors fail to file a plan of
     reorganization  during such period or if the  required  number of creditors
     and equity  holders does not accept such plan within the  required  period,
     any party in interest may subsequently  file its own plan of reorganization
     for the Debtors.  The Bankruptcy Court, upon certain findings being made by
     the Bankruptcy Court that are required by the Bankruptcy Code, must confirm
     a plan of  reorganization.  The  Bankruptcy  Court  may  confirm  a plan of
     reorganization  notwithstanding  the  non-acceptance  of  the  plan  by  an
     impaired  class of creditors or equity holders if certain  requirements  of
     the Bankruptcy Code are met. A plan of reorganization  also could result in
     holders  of the  Company's  common  stock  receiving  no  value  for  their
     interest.  The Chapter 11 filing,  the  uncertainty  regarding the eventual
     outcome of the reorganization  case and the effect of other unknown adverse
     factors could threaten the Company's existence as a going concern.

     Schedules will be filed with the Bankruptcy  Court setting forth the assets
     and  liabilities  of the  Debtors  as of the  filing  date as  shown by the
     Company's  accounting  records.  Differences  between  amounts shown by the
     Company  and  claims  filed  by  creditors  will be  investigated  and,  if
     necessary,  unresolved disputes will be determined by the Bankruptcy Court.
     The ultimate settlement terms for such liabilities are subject to a plan of
     reorganization, and accordingly, are not presently determinable.

     Management  determined  that the  reorganization  was  necessary to address
     operational and liquidity  difficulties resulting from the slowing economy,
     changes in consumer buying habits, increased competition from larger retail
     chains, the geographic diversity of some Phar-Mor locations,  the reduction
     of credit terms by vendors and the service of high-cost debt.

     As part of the restructuring,  Phar-Mor plans to close  approximately 65 of
     its  139   stores.   These   stores   have   been   identified   as  either
     under-performing  or outside the Company's  core  markets.  The decision to
     close the 65 stores resulted in an impairment  charge of $12,360,  recorded
     in the thirteen  weeks ended  September 29, 2001, to reduce the  long-lived
     assets of the 65 stores to their net  realizable  value.  The Company  will
     focus continuing operations on the approximately 74 remaining stores, while
     reducing  corporate  overhead and solidifying its position in the market it
     serves.  During the thirteen  weeks ended  September 29, 2001,  the Company
     identified  certain store and corporate  employee  positions  that would be
     terminated  as part of the  reorganization  resulting  in  severance  costs

                                       7

<PAGE>
     recorded in the amount of $1,485.  On October 3, 2001 the Company  sold its
     pharmacy  prescription files for the stores that will close through a court
     approved auction for $23,475.  The Company also sold the pharmacy inventory
     in the closing  stores as part of the pharmacy  prescription  file sale for
     $8,619,  100% of cost,  and sold the  remaining  inventory  in the  closing
     stores to a liquidator on October 11, 2001 for  approximately  65% of cost,
     estimated at $31,000.  The Company  recorded a write-down of $15,895 in the
     thirteen weeks ended  September 29, 2001 to reduce the inventory to its net
     realizable value.

     In October  2001,  the NASDAQ  notified the Company that as a result of the
     Company's  bankruptcy,  the Company's securities would be delisted from the
     NASDAQ as of  10/10/2001,  subject to the  Company's  right of appeal.  The
     Company  has  determined  not to  appeal  the  NASDAQ's  decision  but will
     consider,  when  appropriate,  making  application  to be listed on the OTC
     Bulletin Board.

3.   Debtor-in-Possession Credit Facility

     On   September   24,   2001,   the   Company   secured   a   $135   million
     Debtor-in-Possession  ("DIP") Credit Facility through Fleet Retail Finance,
     the  Company's  principal  secured  lender,  which will be used to fund the
     Company's  operations  through the reorganization  process.  The DIP Credit
     Facility  received final approval from the Bankruptcy  Court on October 23,
     2001.

     Borrowings  under the DIP Credit  Facility may be used for working  capital
     needs and general corporate purposes.  Up to $20,000 of the facility at any
     time may be used  for  standby  and  documentary  letters  of  credit.  The
     facility  includes  restrictions  on, among other things,  additional debt,
     investments,  dividends and other distributions,  mergers and acquisitions.
     The facility  contains a financial  covenant  that  requires the Company to
     maintain a minimum  excess  availability  of the greater of $8,000 or 7% of
     total availability.

     Credit availability under the DIP Credit Facility at any time is the lesser
     of the  Availability  (as defined in the  Facility)  or  $135,000.  Maximum
     credit  availability  under the DIP Credit Facility declines to $100,000 on
     the earlier of the Company's  election or December 23, 2001. The DIP Credit
     Facility  establishes a first priority lien and security interest in all of
     the assets of the Company.

     Advances  made under the DIP Credit  Facility  bear  interest  at the Fleet
     National Bank prime rate plus 0% to .5% or LIBOR plus 2% to 2.5%  depending
     on the average  unused credit  availability  during the preceding  quarter.
     Under the terms of the DIP Credit Facility,  the Company is required to pay
     a commitment fee of 0.375% per annum on the unused portion of the facility,
     letter of credit fees and certain other fees.

     The DIP Credit Facility  expires on the earlier of the Company's  emergence
     from bankruptcy as a reorganized entity or September 24, 2003.

4.   LIABILITIES SUBJECT TO COMPROMISE

     Liabilities  subject  to  compromise  are  subject  to  future  adjustments
     depending on Bankruptcy Court actions and further developments with respect
     to disputed claims.  Liabilities  subject to compromise as of September 29,
     2001 were as follows:

          Accounts payable                                     $83,561
          Unsecured senior notes                                41,312
          Accrued expenses                                      15,540
          Capital lease obligations                              7,110
          Term debt                                              4,912
                                                              --------
                                                              $152,435
                                                              ========

     Liabilities subject to compromise under reorganization  proceedings include
     substantially  all current and long-term  unsecured  liabilities  as of the
     date of the Filing.  Pursuant to the  provisions  of the  Bankruptcy  Code,
     payment of those  liabilities  may not be made except pursuant to a plan of
     reorganization  or  Bankruptcy  Court order  while the Debtors  continue to
     operate as debtors-in-possession.

                                       8

<PAGE>
5.   REORGANIZATION ITEMS

     Reorganization  items  that were  directly  associated  with the  Company's
     Chapter 11  reorganization  proceedings and the resulting  restructuring of
     its  operations  consisted of the  following  for the thirteen  weeks ended
     September  29,  2001  (See  Note  2  for  a  description   of   significant
     reorganization items):


          Impairment of long-lived assets                                $12,360
          Write-down inventory to expected liquidation value              15,895
          Severance costs                                                  1,485
          Professional fees                                                  636
          Other                                                              852
                                                                         -------
          Total provision for reorganization                             $31,228
                                                                         =======

6.   NEW ACCOUNTING PRONOUNCEMENTS

     In July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS
     No. 142, Goodwill and Other Intangible  Assets.  SFAS No. 141 requires that
     all business  combinations  initiated after June 30, 2001, be accounted for
     using the purchase method of accounting.  After giving consideration to the
     guidance  provided by SFAS No. 141, we do not believe  that the adoption of
     this statement will have a material  impact on our  consolidated  financial
     position, results of operations or cash flows for fiscal 2002. SFAS No. 142
     changes the  accounting  for goodwill and certain other  intangible  assets
     from an amortization method to an impairment only approach.  The Company is
     currently  assessing  but has not  determined  the impact of SFAS No.  142,
     effective  June  30,  2002,  on  its  financial  position  and  results  of
     operations.

     In  October  2001,  the  FASB  issued  SFAS  No.  144,  Accounting  for the
     Impairment or Disposal of Long-Lived  Assets,  which provides guidance that
     will eliminate inconsistencies in accounting for the impairment or disposal
     of long-lived assets under existing accounting pronouncements.  The Company
     will apply the provisions of this standard prospectively beginning June 30,
     2002 and does not expect  the  adoption  to have a  material  impact on its
     financial position or results of operations.

7.   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, results of operations or cash flows.

                                       9

<PAGE>


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

The following  discussion and analysis  should be read in  conjunction  with the
consolidated  condensed  financial  statements  and footnotes  presented in this
report.

CHAPTER 11 FILING

On September 24, 2001 the Company and eight of its  subsidiaries  (collectively,
the "Debtors") filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy
Code (the  "Bankruptcy  Code") with the United States  Bankruptcy  Court for the
Northern  District of Ohio (the "Bankruptcy  Court").  The Chapter 11 cases Nos.
01-44007  (REG)  through  01-44015  (REG) (the  "Chapter  11  Cases")  have been
consolidated for the purpose of joint  administration.  As of November 12, 2001,
the Debtors are  continuing to operate their  business as  debtors-in-possession
under Chapter 11 of the Bankruptcy  Code and are subject to the  jurisdiction of
the Bankruptcy Court.

As a result of these filings,  actions to collect pre-petition  indebtedness are
stayed  and  other  contractual  obligations  against  the  Debtors  may  not be
enforceable.  In addition,  under the Bankruptcy Code, the Debtors may assume or
reject executory contracts,  including real estate leases, employment contracts,
personal  property  leases,  service  contracts  and other  unexpired  executory
pre-petition contracts,  subject to Bankruptcy Court approval.  Parties affected
by these rejections may file claims with the Bankruptcy Court in accordance with
the  Bankruptcy  Code.  The Debtors  cannot  presently  determine or  reasonably
estimate  the ultimate  liability  that may result from the filing of claims for
all contracts that may be rejected.  Substantially all pre-petition  liabilities
are subject to settlement under a plan of  reorganization  to be voted on by the
creditors and equity holders and approved by the Bankruptcy Court.  Although the
Debtors expect to file a reorganization plan or plans that provide for emergence
from bankruptcy sometime during Fiscal Year 2002, there can be no assurance that
a  reorganization  plan or plans will be proposed by the Debtors or confirmed by
the Bankruptcy Court or that any such plan will be consummated.

As provided by the  Bankruptcy  Code,  the Debtors have the  exclusive  right to
submit a plan of reorganization  for 120 days from the date of the filing of the
voluntary  petitions.  Further  extension  may be sought  and may be  granted or
rejected  by the  Bankruptcy  Court.  If the  Debtors  fail  to  file a plan  of
reorganization  during  such  period  or if  such  plan is not  accepted  by the
required number of creditors and equity holders within the required period,  any
party in interest may subsequently file its own plan of  reorganization  for the
Debtors.  The  Bankruptcy  Court,  upon  certain  findings  being  made  by  the
Bankruptcy  Court that are required by the Bankruptcy  Code, must confirm a plan
of  reorganization.  The Bankruptcy  Court may confirm a plan of  reorganization
notwithstanding the non-acceptance of the plan by an impaired class of creditors
or equity holders if certain requirements of the Bankruptcy Code are met. A plan
of  reorganization  also could result in holders of the  Company's  common stock
receiving no value for their  interest.  The Chapter 11 filing,  the uncertainty
regarding  the  eventual  outcome of the  reorganization  case and the effect of
other unknown adverse factors could threaten the Company's  existence as a going
concern.

Schedules will be filed with the  Bankruptcy  Court setting forth the assets and
liabilities  of the  Debtors  as of the  filing  date as shown by the  Company's
accounting records.  Differences between amounts shown by the Company and claims
filed by creditors will be investigated  and, if necessary, unresolved  disputes
will be determined by the Bankruptcy  Court.  The ultimate  settlement terms for
such liabilities are subject to a plan of reorganization,  and accordingly,  are
not presently determinable.

Management   determined  that  the   reorganization  was  necessary  to  address
operational  and  liquidity  difficulties  resulting  from the slowing  economy,
changes in consumer  buying  habits,  increased  competition  from larger retail
chains, the geographic  diversity of some Phar-Mor  locations,  the reduction of
credit terms by vendors and the service of high-cost debt.

In  October  2001,  the  NASDAQ  notified  the  Company  that as a result of the
Company's bankruptcy, the Company's securities would be delisted from the NASDAQ
as of  10/10/2001,  subject to the  Company's  right of appeal.  The Company has
determined  not  to  appeal  the  NASDAQ's  decision  but  will  consider,  when
appropriate, making application to be listed on the OTC Bulletin Board.

                                       10

<PAGE>
STORE CLOSINGS

As part of the  restructuring,  Phar-Mor plans to close  approximately 65 of its
139 stores.  These stores have been  identified  as either  under-performing  or
outside the Company's core markets. The Company will focus continuing operations
on the approximately 74 remaining stores,  while reducing corporate overhead and
solidifying its position in the market it serves. On October 3, 2001 the Company
sold its pharmacy  prescription  files for the stores that will close  through a
court approved auction for $23,475. The Company also sold the pharmacy inventory
in the closing stores as part of the pharmacy prescription file sale for $8,619,
100% of cost,  and sold the  remaining  inventory  in the  closing  stores  to a
liquidator  on October  11, 2001 for  approximately  65% of cost,  estimated  at
$31,000.

FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY

Certain  statements in this report contain  "forward-looking"  information  that
involves  risk and  uncertainty,  including  our  ability to continue as a going
concern,  the timeframe for filing a plan of  reorganization,  our planned store
closings,  the  adequacy  of our  DIP  financing,  our  reduction  of  corporate
overhead,  solidifying  our market  position and our attempt to manage  interest
rate  risk.  This  forward-looking   information  is  based  upon  a  number  of
assumptions including  assumptions relating to our successful  negotiations with
creditors,  a plan of  reorganization  will be timely  proposed or  consummated,
future profitable  operations,  the ability to generate cash from operations and
financing sources sufficient to meet obligations,  general economic  conditions,
current and future markets for the Company's products,  demand for the Company's
products and performance of internal plans. Actual results and future trends may
differ  materially  depending on a variety of factors,  including  those factors
contained in the  Company's  SEC filings,  including,  without  limitation,  the
Company's Annual Report on Form 10-K for the year ended June 30, 2001.

RESULTS OF OPERATIONS

Thirteen Weeks Ended September 29, 2001 versus
    Thirteen Weeks Ended September 30, 2000

Total and  comparable  store  sales for the first  quarter  of fiscal  year 2002
("Fiscal 2002") decreased 9.2% compared to the first quarter of fiscal year 2001
("Fiscal 2001"). Comparable store pharmacy sales increased 4.3% while comparable
store  front-end  sales  decreased  15.7%.  Front-end  sales  were  affected  by
interruptions in supply in September prior to and after the Company's bankruptcy
filing on September  24, 2001.  The Company did not advertise the last two weeks
in September as a result of the difficulty in obtaining sufficient quantities of
goods for products featured in its weekly advertising circulars.

Cost of sales as a  percentage  of sales was 84.4% in Fiscal  2002  compared  to
82.8% in Fiscal 2001,  an increase of 1.6% of sales.  The increase was primarily
due to lower vendor  allowances for  promotional  activity and higher  occupancy
costs as a percentage of sales due to the decrease in sales.

Selling, general and administrative expenses as a percentage of sales were 17.8%
in Fiscal 2002  compared to 16.4% in Fiscal 2001,  an increase of 1.4% of sales.
This  increase was  primarily due to higher store wages as a percentage of sales
due primarily to the decrease in sales and higher utility costs.

The  Company  recorded  $31,228  in  reorganization  items  in  connection  with
Company's  bankruptcy filing on September 24, 2001 and the planned closing of 65
of the Company's stores. The reorganization items consisted of the following:

          Impairment of long-lived assets                                $12,360
          Write-down inventory to expected liquidation value              15,895
          Severance costs                                                  1,485
          Professional fees                                                  636
          Other                                                              852
                                                                         -------
          Total provision for reorganization                             $31,228
                                                                         =======

                                       11

<PAGE>
Depreciation  and  amortization  expense was $3,712 in Fiscal  2002  compared to
$5,374 in Fiscal 2001, a decrease of $1,662.  The decrease was  primarily due to
lower  depreciation  expense  in the 30  stores  that the  Company  recorded  an
impairment  of the fixed  assets at June 29, 2001 and a $591  reduction in video
rental tape amortization due to the elimination of the video rental  departments
in March 2001.

Interest  expense  was $3,929 in Fiscal 2002  compared  to  interest  expense of
$5,033 in Fiscal 2001, a $1,104  decrease.  The decrease in interest expense was
due to lower  interest  expense on the  senior  notes due to the  repurchase  of
$40,001 in senior notes in Fiscal 2001 partially offset by increased  borrowings
under the revolving credit facility.

Equity in loss of affiliates  increased from a $90 loss in Fiscal 2001 to a $286
loss in Fiscal  2002,  primarily  due a decrease  in the net income of Avatex in
Fiscal 2002 compared to Fiscal 2001.


FINANCIAL CONDITION AND LIQUIDITY (all dollar amounts in thousands)

The Company's  liquidity  position  deteriorated  in the first quarter of fiscal
year 2002  primarily  due to a  reduction  in trade  accounts  payable  due to a
reduction  in credit  terms from the  Company's  suppliers  that  resulted  in a
significant deficiency in cash necessary for operating activities.  As described
above under  "Chapter 11 Filing," on  September  24, 2001,  the Company  filed a
voluntary  petition for reorganization  under Chapter 11 of the U.S.  Bankruptcy
Code.

On September  24, 2001 the Company  secured a $135 million  Debtor-in-Possession
("DIP") Credit Facility  through Fleet Retail Finance,  the Company's  principal
secured lender,  which will be used to fund the Company's operations through the
reorganization process. The DIP Credit Facility received final approval from the
Bankruptcy Court on October 23, 2001.

Borrowings  under the DIP Credit  Facility may be used for working capital needs
and general corporate purposes. Up to $20,000 of the facility at any time may be
used for  standby  and  documentary  letters of credit.  The  facility  includes
restrictions on, among other things, additional debt, investments, dividends and
other distributions, mergers and acquisitions. The facility contains a financial
covenant that requires the Company to maintain a minimum excess  availability of
the greater of $8,000 or 7% of total availability.

Credit  availability  under the DIP Credit Facility at any time is the lesser of
the  Availability  (as defined in the  Facility)  or  $135,000.  Maximum  credit
availability  under the DIP Credit Facility  declines to $100,000 on the earlier
of the  Company's  election  or  December  23,  2001.  The DIP  Credit  Facility
establishes a first priority lien and security  interest in all of the assets of
the Company.

Advances made under the DIP Credit  Facility bear interest at the Fleet National
Bank prime rate plus 0% to .5% or LIBOR plus 2% to 2.5% depending on the average
unused credit availability during the preceding quarter.  Under the terms of the
DIP Credit  Facility,  the Company is required to pay a commitment fee of 0.375%
per annum on the  unused  portion  of the  facility,  letter of credit  fees and
certain other fees.

The DIP Credit Facility  expires on the earlier of the Company's  emergence from
bankruptcy as a reorganized entity or September 24, 2003.

Unused  availability  under the DIP Credit Facility,  after subtracting  amounts
used for outstanding letters of credit, was $33,772 at September 29, 2001.


Thirteen weeks ended September 29, 2001

                                       12

<PAGE>
During the thirteen weeks ended  September 29, 2001, the Company's cash position
decreased by $3,429. Net cash provided by operating  activities was $23,030. The
major sources of cash from operating  activities  were a decrease in inventories
of $13,915 and an increase in accounts  payable of $19,497 due  primarily to the
disruption in merchandise  receipts and payments of accounts  payable  resulting
from the Company's bankruptcy filing on September 24, 2001. These were partially
offset by a net loss of  $45,282  less  non-cash  charges  for  depreciation  of
$3,622,  impairment of long-lived assets of $12,360, the write-down of inventory
to expected  liquidation value of $15,895 and amortization of deferred financing
costs and goodwill of $499.

Capital expenditures of $1,375 were paid for with borrowings under the Company's
revolving credit facility.

Net cash used by financing  activities of $25,084 consisted of repayments of the
revolving credit facility of $7,016, debt issuance cost of $1,511,  decreases in
bank overdrafts of $13,829,  principal payments on lease obligations of $739 and
principal payments on long-term debt of $1,989.

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)

In July 2001, the FASB issued SFAS No. 141, Business Combinations,  and SFAS No.
142,  Goodwill  and Other  Intangible  Assets.  SFAS No. 141  requires  that all
business combinations  initiated after June 30, 2001, be accounted for using the
purchase  method of  accounting.  After  giving  consideration  to the  guidance
provided by SFAS No. 141, we do not believe that the adoption of this  statement
will have a material impact on our consolidated  financial position,  results of
operations  or cash flows for fiscal 2002.  SFAS No. 142 changes the  accounting
for goodwill and certain other intangible assets from an amortization  method to
an  impairment  only  approach.  The Company is currently  assessing but has not
determined the impact of SFAS No. 142, effective June 30, 2002, on its financial
position and results of operations.

In October 2001, the FASB issued SFAS No. 144,  Accounting for the Impairment or
Disposal of Long-Lived  Assets,  which  provides  guidance  that will  eliminate
inconsistencies  in  accounting  for the  impairment  or disposal of  long-lived
assets  under  existing  accounting  pronouncements.  The Company will apply the
provisions of this standard  prospectively  beginning June 30, 2002 and does not
expect the  adoption  to have a material  impact on its  financial  position  or
results of operations.

                                       13

<PAGE>


PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

               On  September  24,  2001,  the  Debtors  filed  their   voluntary
               petitions for  reorganization  under Chapter 11 of the Bankruptcy
               Code with the United  States  Bankruptcy  Court for the  Northern
               District  of Ohio,  Case Nos.  01-44007  (REG)  through  01-44015
               (REG). All civil litigation  commenced  against the Debtors prior
               to that date has been stayed by operation of law.

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 11.

          (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  September 29,
               2001

               A Current  Report on Form 8-K  reporting  one item under Item 3 -
               Bankruptcy or Receivership and one item under Item 7(c) was filed
               on September 24, 2001.

               A Current  Report on Form 8-K  reporting  one item under Item 5 -
               Other  Events one item under Item 7(c) was filed on November  11,
               2001

                                       14

<PAGE>


                                   SIGNATURES



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




                                 PHAR-MOR, INC.


Date:  November 12, 2001                 By: /s/ Martin S. Seekely
                                            -------------------------
                                                 Martin S. Seekely
                                                 Vice President and Chief
                                                   Financial Officer



Date:  November 12, 2001                 By: /s/ John R. Ficarro
                                            -----------------------
                                                 John R. Ficarro
                                                 Senior Vice President and Chief
                                                   Administrative Officer

                                       15

<PAGE>




                                 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  September 24, 2001 by  and
                 among the financial  institutions listed on the signature pages
                 therein, Fleet Retail Finance, 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., Phar-Mor of Wisconsin, Inc., and Pharmhouse Corp

--------------------------------------------------------------------------------
*    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 Form 10-K, on
     October 15, 2001

                                       16