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  December 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  February  1, 2002,  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.



<PAGE>2


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

                                                  FORM 10-Q

                                      FOR THE QUARTER ENDED DECEMBER 29, 2001

                                                 I N D E X


                                                                            Page
--------------------------------------------------------------------------------
Part I:  Financial Information

        Item 1.  Financial Statements

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

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

          Condensed Consolidated Statements of Operations for the
          Twenty-six Weeks Ended December 29, 2001 and December 30, 2000       5

          Condensed Consolidated Statements of Cash Flows for the
          Twenty-six Weeks Ended December 29, 2001 and December 30, 2000       6

          Notes to Condensed Consolidated Financial Statements                 7

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

Part II: Other Information

         Item 1.  Legal Proceedings                                           17
         Item 2.  Changes in Securities                                       17
         Item 3.  Defaults Upon Senior Securities                             17
         Item 4.  Submission of Matters to a Vote of Security Holders         17
         Item 5.  Other Information                                           17
         Item 6.  Exhibits and Reports on Form 8-K                            17
         Signatures                                                           18
         Exhibit Index                                                        19


<PAGE>3

<TABLE>
<CAPTION>

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


ASSETS
                                                                   December 29,        June 30,
                                                                       2001              2001
                                                                       ----              ----
<S>                                                                  <C>             <C>
Current assets:
  Cash and cash equivalents                                          $   8,746       $  14,393
  Marketable securities                                                   --               143
  Accounts receivable - net                                             29,536          27,459
  Merchandise inventories                                              111,883         186,226
  Prepaid expenses and other current assets                              3,690           6,595
                                                                     ---------       ---------

          Total current assets                                         153,855         234,816

Property and equipment - net                                            52,080          67,044
Goodwill                                                                 3,851           3,925
Investments                                                              1,301           3,233
Investment in Avatex                                                      --               789
Other assets                                                             3,250           5,593
                                                                     ---------       ---------

          Total assets                                               $ 214,337       $ 315,400
                                                                     =========       =========

LIABILITIES AND STOCKHOLDERS' (DEFICIENCY) EQUITY

Current liabilities:
  Accounts payable                                                   $  24,413       $  80,112
  Accrued expenses and other current liabilities                        17,626          33,387
  Current portion of long-term debt and capital lease
   obligations                                                           2,894           7,838
                                                                     ---------       ---------

          Total current liabilities                                     44,933         121,337

Liabilities subject to compromise                                      165,428            --
Long-term debt and capital lease obligations                            29,235         160,791
Long-term self insurance reserves                                        4,974           5,503
Deferred rent and unfavorable lease liability - net                      6,118           9,395
                                                                     ---------       ---------
          Total liabilities                                            250,688         297,026
                                                                     ---------       ---------

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                                                    (122,518)        (67,807)
                                                                     ---------       ---------
                                                                       (30,189)         24,522
  Less: equity, through investment in Avatex, in cost
    of common stock of the Company held by Avatex, Inc.                 (6,697)         (6,683)
                                                                     ---------       ---------
        Total stockholders' (deficiency) equity                        (36,886)         17,839
                                                                     ---------       ---------

        Total liabilities and stockholders' (deficiency) equity      $ 214,337       $ 315,400
                                                                     =========       =========

</TABLE>


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


<PAGE>4
<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
                                                           December 29, 2001     December 30, 2000
                                                           -----------------     -----------------

<S>                                                             <C>                <C>
Sales                                                           $    199,611       $    342,326

Less:
  Cost of goods sold, including occupancy and
      distribution costs                                             171,951            283,053
  Selling, general and administrative expenses                        34,945             53,560
  Depreciation and amortization                                        3,284              4,924
                                                                ------------       ------------
(Loss) income from operations before interest expense,
  investment income (loss),reorganization items,
  equity in loss of affiliates and extraordinary item                (10,569)               789

Interest expense                                                      (1,288)            (5,382)
Investment income (loss)                                                   1             (3,359)
                                                                ------------       ------------
Loss before reorganization items, equity in loss of
  affiliates and extraordinary item                                  (11,856)            (7,952)


Reorganization items                                                   4,849               --
Equity in loss of affiliates                                            --               (1,303)
                                                                ------------       ------------
Loss before extraordinary item                                        (7,007)            (9,255)

Extraordinary item                                                      --               17,097
                                                                ------------       ------------
Net (loss) income                                               $     (7,007)      $      7,842
                                                                ============       ============

(Loss) income per basic and diluted common share:
  Loss before extraordinary gain                                $       (.65)      $       (.84)
  Extraordinary gain                                                    --                 1.56
                                                                ------------       ------------
  Net (loss) income                                             $       (.65)      $        .72
                                                                ============       ============

Weighted average number of basic and diluted common shares
outstanding                                                       10,758,441         10,932,841


</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)


                                                               Twenty-six            Twenty-six
                                                              Weeks Ended           Weeks Ended
                                                           December 29, 2001     December 30, 2000
                                                           -----------------     -----------------

<S>                                                             <C>                <C>
Sales                                                           $    479,562       $    650,513

Less:
  Cost of goods sold, including occupancy and
      distribution costs                                             408,178            538,331
  Selling, general and administrative expenses                        84,793            103,982
  Depreciation and amortization                                        6,996             10,298
                                                                ------------       ------------
Loss from operations before interest expense, investment
  loss,reorganization items, equity in loss of affiliates
  and extraordinary item                                             (20,405)            (2,098)

Interest expense                                                      (5,207)           (10,404)
Investment loss                                                          (12)            (3,862)
                                                                ------------       ------------
Loss before reorganization items, equity in loss of
  affiliates and extraordinary item                                  (25,624)           (16,364)


Reorganization items                                                 (26,379)              --
Equity in loss of affiliates                                          (2,709)            (1,393)
                                                                ------------       ------------
Loss before extraordinary item                                       (54,712)           (17,757)

Extraordinary item                                                      --               17,097
                                                                ------------       ------------

Net loss                                                        $    (54,712)      $       (660)
                                                                ============       ============


Loss per basic and diluted common share:
  Loss before extraordinary gain                                $      (5.08)      $      (1.62)
   Extraordinary gain                                                   --                 1.56
                                                                ------------       ------------
  Net loss                                                      $      (5.08)      $       (.06)
                                                                ============       ============

Weighted average number of basic and diluted common shares
   outstanding                                                    10,761,222         10,976,356

</TABLE>




<PAGE>6
<TABLE>
<CAPTION>


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

                                                             Twenty-six          Twenty-six
                                                             Weeks Ended        Weeks Ended
                                                         December 29, 2001    December 30, 2000
                                                         -----------------    -----------------
OPERATING ACTIVITIES
<S>                                                               <C>            <C>
  Net loss                                                        $(54,712)      $   (660)
  Adjustments to reconcile net loss to net
    cash provided by (used for) operating activities:
    Items not requiring the outlay of cash:
      Depreciation                                                   6,818          8,832
      Amortization of video rental tapes                              --              864
      Non cash reorganization items                                 19,969           --
      Amortization of deferred financing costs and goodwill            847          1,087
      Deferred rent and unfavorable lease liability                   (349)          (704)
      Equity in loss of affiliates                                   2,709          2,393
      Gain on extinguishment of debt                                  --          (17,097)
    Changes in assets and liabilities:
      Accounts receivable                                           (1,647)        (6,401)
      Marketable securities                                            143          2,862
      Merchandise inventories                                       57,949         (1,932)
      Prepaid expenses                                               2,905            411
      Other assets                                                     556         (1,166)
      Accounts payable                                              36,768          5,092
      Liabilities subject to compromise                             (1,116)          --
      Accrued expenses and other current liabilities                  (281)        (2,329)
                                                                  --------       --------
  Net cash provided by (used for) operating activities              70,559         (8,748)
                                                                  --------       --------

INVESTING ACTIVITIES
  Proceeds from the sale of equity securities                         --            3,500
  Additions to rental videotapes                                      --             (631)
  Additions to property and equipment                               (1,588)        (2,248)
  Proceeds on sale of property and equipment                         1,150             23
  Proceeds on the sale of pharmacy files                            23,475           --
  Investment in equity securities                                     --             (229)
                                                                  --------       --------
  Net cash provided by investing activities                         23,037            415
                                                                  --------       --------

FINANCING ACTIVITIES
  (Payments) borrowings under revolving credit facility, net       (84,495)        28,446
  Retirement of senior notes                                          --          (17,556)
  Debt issuance cost                                                (1,511)          --
  (Decrease) increase in bank overdrafts, net                       (9,672)           964
  Principal payments on long-term debt                              (2,181)          (990)
  Principal payments on capital lease obligations                   (1,384)        (2,062)
                                                                  --------       --------
  Net cash (used for) provided by financing activities             (99,243)         8,802
                                                                  --------       --------

  Decrease in cash and cash equivalents                             (5,647)           469
  Cash and cash equivalents, beginning of period                    14,393         16,752
                                                                  --------       --------
  Cash and cash equivalents, end of period                        $  8,746       $ 17,221
                                                                  ========       ========
</TABLE>

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


<PAGE>7


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  and  twenty-six  weeks  ended  December  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  substantial  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 February 1, 2002, 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.

<PAGE>8

          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 calendar
          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.  On  January  11,  2002,  the
          Bankruptcy  Court granted the Company an additional  180 day extension
          of the period of exclusivity.  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
          submit its own plan of reorganization for the Debtors.  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  raise
          substantial  doubts  concerning  the  Company's  existence  as a going
          concern.

          Schedules have been 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  has  closed  65 of its 139
          stores.  These stores were  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 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 recorded in the amount of $1,485.  On October 3, 2001
          the Company sold its pharmacy  prescription  files for the stores that
          closed  through a court  approved  auction for $23,475  resulting in a
          gain of $21,148.  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 $30,630,  approximately
          65% of cost. The Company  recorded  write-downs of $499 and $16,394 in
          the  thirteen   and   twenty-six   weeks  ended   December  29,  2001,
          respectively,  to reduce the inventory to its net realizable value. On
          December  1,  2001,  the  Company  rejected  the leases for the closed
          stores and  recorded a reserve for lease  rejection  claims of $19,069
          and  eliminated   deferred  rent  and  unfavorable  lease  liabilities
          associated with the rejected leases totaling $6,689.

<PAGE>9

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 declined to
          $100,000 on November 1, 2001 at the Company's election. 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  $65,081  at
          December 29, 2001.

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
          December 29, 2001 were as follows:

                  Accounts payable                                       $83,784
                  Unsecured senior notes                                  41,312
                  Lease rejection costs                                   19,069
                  Accrued expenses                                        14,136
                  Term debt                                                4,525
                  Capital lease obligations                                2,602
                                                                         -------
                                                                        $165,428
                                                                        ========

          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.

<PAGE>10

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 and
          twenty six weeks ended December 29, 2001 (See Note 2 for a description
          of significant reorganization items):
<TABLE>

                                                                         13 weeks ended     26 weeks ended
                                                                        December 29, 2001  December 29, 2001
                                                                        -----------------  -----------------

<S>                                                                             <C>                <C>
               Gain on sale of prescription files                               $ (21,148)         $ (21,148)
               Write-down inventory to expected net realizable value                  499             16,394
               Lease rejection costs, net                                          12,380             12,380
               Impairment of long-lived assets                                        (17)            12,343
               Professional fees                                                    2,644              3,280
               Severance and retention costs                                          593              2,078
               Other                                                                  200              1,052
                                                                                ---------           --------
               Total provision (credit) for reorganization                      $  (4,849)          $ 26,379
                                                                                =========           ========
</TABLE>

6.       NEW ACCOUNTING PRONOUNCEMENTS

          In June 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 August  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.

<PAGE>11


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 February 1, 2002,
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 calendar 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.  On January 11, 2002,  the  Bankruptcy  Court  granted the
Company an additional  180 day extension of the period of  exclusivity.  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  submit its
own plan of reorganization  for the Debtors.  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 raise  substantial
doubts concerning the Company's existence as a going concern.

Schedules have been 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.

<PAGE>12

STORE CLOSINGS

As part of the  restructuring,  Phar-Mor has closed 65 of its 139 stores.  These
stores were identified as either  under-performing or outside the Company's core
markets.  The  Company  will focus  continuing  operations  on the 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 closed 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 $30,630, approximately 65% of cost.

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

Total sales for the second quarter of fiscal year 2002 ("Fiscal 2002") decreased
41.7%  compared  to the second  quarter  of fiscal  year 2001  ("Fiscal  2001").
Comparable store sales for the continuing 74 stores declined 16.4% from $226,481
in Fiscal 2001 to $189,361  in Fiscal  2002.  Comparable  store  pharmacy  sales
increased 5.0% while comparable store front-end sales decreased 25.3%. Front-end
sales were affected by  interruptions in supply prior to and after the Company's
bankruptcy filing on September 24, 2001. The Company did not advertise the first
two weeks in  October  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 86.1% in Fiscal  2002  compared  to
82.7% in Fiscal 2001,  an increase of 3.4% of sales.  The increase was primarily
due to lower  product  margins due to the  decrease in higher  margin  front end
sales,  lower cash discounts,  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 17.5%
in Fiscal 2002  compared to 15.7% in Fiscal 2001,  an increase of 1.8% of sales.
This  increase was  primarily due to higher store wages as a percentage of sales
due  primarily to the  decrease in sales,  higher  advertising  costs and higher
utility costs.

The Company  recorded a net credit of $4,849 during the second quarter of fiscal
year 2002 for  reorganization  items in  connection  with  Company's  bankruptcy
filing on September 24, 2001 and the closing of 65 of the Company's stores.

<PAGE>13

The reorganization items consisted of the following:

        Gain on sale of prescription files                         $(21,148)
        Lease rejection costs, net                                   12,380
        Professional fees                                             2,644
        Severance and retention costs                                   593
        Write-down inventory to expected net realizable value           499
        Impairment of long-lived assets                                 (17)
        Other                                                           200
                                                                   --------
        Total provision for reorganization                         $ (4,849)
                                                                   ========

Depreciation  and  amortization  expense was $3,284 in Fiscal  2002  compared to
$4,924 in Fiscal 2001, a decrease of $1,640.  The decrease was  primarily due to
lower depreciation  expense in the 30 and 35 stores that the Company recorded an
impairment  of the  fixed  assets  at June 29,  2001  and  September  29,  2001,
respectively,  and a $345 reduction in video rental tape amortization due to the
elimination of the video rental departments in March 2001.

Interest  expense  was $1,288 in Fiscal 2002  compared  to  interest  expense of
$5,382 in Fiscal 2001, a $4,094  decrease.  The decrease in interest expense was
primarily due to the elimination of interest  expense on the senior notes due to
the  bankruptcy  filing and  decreased  borrowings  under the  revolving  credit
facility.

The Company  recorded an equity in loss of  affiliates of $1,303 in Fiscal 2001.
There  was no equity  loss in  affiliates  recorded  in  Fiscal  2002  since the
Company's investment in its affiliates was reduced to zero in the thirteen weeks
ended September 29, 2001.

The Company recorded an extraordinary  gain on the early  extinguishment of debt
of $17,097 in Fiscal 2001 from the  repurchase  of $34,653 of its 11.72%  senior
notes.

Twenty-six Weeks Ended December 29, 2001 versus
    Twenty-six Weeks Ended December 30, 2000

Total sales for the twenty-six  weeks ended  December 29, 2001  decreased  26.3%
compared to the twenty-six weeks ended December 30, 2000. Comparable store sales
for the  continuing 74 stores  declined  12.2% from $430,097 for the  twenty-six
weeks  ended  December  30,  2000 to  $377,488  for the  twenty-six  weeks ended
December  29,  2001.  Comparable  store  pharmacy  sales  increased  5.2%  while
comparable store front-end sales decreased 19.7%.  Front-end sales were affected
by interruptions in supply prior to and after the Company's bankruptcy filing on
September  24,  2001.  The  Company  did not  advertise  the last  two  weeks in
September  and the first two weeks in October 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 85.1% in the  twenty-six  weeks ended
December 29, 2001 compared to 82.8% in the  twenty-six  weeks ended December 30,
2000,  an increase of 2.3% of sales.  The  increase was  primarily  due to lower
product margins due to the decrease in higher margin front end sales, lower cash
discounts, 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 17.7%
in the  twenty-six  weeks  ended  December  29,  2001  compared  to 16.0% in the
twenty-six  weeks ended  December 30, 2000,  an increase of 1.7% of sales.  This
increase was  primarily  due to higher store wages as a percentage  of sales due
primarily to the decrease in sales,  higher advertising costs and higher utility
costs.

The  Company  recorded a charge of $26,379  during the  twenty-six  weeks  ended
December  29,  2001  for  reorganization  items  in  connection  with  Company's
bankruptcy  filing on September  24, 2001 and the closing of 65 of the Company's
stores.

<PAGE>14

The reorganization items consisted of the following:

        Gain on sale of prescription files                         $(21,148)
        Write-down inventory to expected net realizable value        16,394
        Lease rejection costs, net                                   12,380
        Impairment of long-lived assets                              12,343
        Professional fees                                             3,280
        Severance and retention costs                                 2,078
        Other                                                         1,052
                                                                   --------
        Total provision for reorganization                         $ 26,379
                                                                   ========

Depreciation and  amortization  expense was $6,996 in the twenty-six weeks ended
December 29, 2001 compared to $10,298 in the twenty-six weeks ended December 30,
2000, a decrease of $3,302. The decrease was primarily due to lower depreciation
expense in the 30 and 35 stores that the Company  recorded an  impairment of the
fixed assets at June 29, 2001 and  September 29, 2001,  respectively  and a $864
reduction in video rental tape  amortization due to the elimination of the video
rental departments in March 2001.

Interest  expense was $5,207 in the  twenty-six  weeks ended  December  29, 2001
compared to interest  expense of $10,404 in the twenty-six  weeks ended December
30, 2000, a $5,197 decrease.  The decrease in interest expense was primarily due
to the  elimination of interest  expense on the senior notes after September 24,
2001 due to the bankruptcy  filing and decreased  borrowings under the revolving
credit facility.

Equity in loss of  affiliates  increased  from a $1,393  loss in the  twenty-six
weeks ended  December  30, 2000 to a $2,709 loss in the  twenty-six  weeks ended
December  29, 2001,  primarily  due to a decrease in the net income of Avatex in
the twenty-six  weeks ended  December 29, 2001 compared to the twenty-six  weeks
ended December 30, 2000 and an impairment of long lived asset charge recorded by
one of the Company's affiliates.

The Company recorded an extraordinary  gain on the early  extinguishment of debt
of $17,097 in the  twenty-six  weeks ended December 30, 2000 from the repurchase
of $34,653 of its 11.72% senior notes.

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  declined to $100,000 on November 1,
2001 at the  Company's  election.  The DIP Credit  Facility  establishes a first
priority lien and security interest in all of the assets of the Company.

<PAGE>15

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 $65,081 at December 29, 2001.


Twenty-six weeks ended December 29, 2001

During the twenty six weeks ended December 29, 2001, the Company's cash position
decreased by $5,647. Net cash provided by operating  activities was $70,559. The
major sources of cash from operating  activities  were a decrease in inventories
of  $57,949  due mainly to the  liquidation  of the  inventory  in the 65 stores
closed  during the period and an  increase  in  accounts  payable of $36,768 due
primarily to the disruption in payments of accounts  payable  resulting from the
Company's  bankruptcy  filing on September 24, 2001. These were partially offset
by a net loss of $54,712 less non-cash charges for depreciation and amortization
of $7,665 and non-cash reorganization items of $19,969.

Cash  provided  by  investing  activities  consisted  of proceeds on the sale of
pharmacy  files of $23,475 and  proceeds on the sale of the  equipment of the 65
stores  closed  during  the period of $1,150.  These  were  partially  offset by
capital expenditures of $1,588.

Net cash used by financing  activities of $99,243 consisted of repayments of the
revolving credit facility of $84,495, debt issuance cost of $1,511, decreases in
bank overdrafts of $9,672, principal payments on lease obligations of $1,384 and
principal payments on long-term debt of $2,181.

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.


Recently issued accounting standards

In June 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.

<PAGE>16

In August 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.


<PAGE>17


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
                  December 29, 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 October 11,
                  2001


<PAGE>18



                              SIGNATURES



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




                                              PHAR-MOR, INC.


Date:  February 8, 2002                By:   /s/ Martin S. Seekely
                                           -------------------------
                                                 Martin S. Seekely
                                                 Vice President and Chief
                                                  Financial Officer



Date:  February 8, 2002                By:   /s/ John R. Ficarro
                                          -----------------------
                                                 John R. Ficarro
                                                 Senior Vice President and Chief
                                                  Administrative Officer


<PAGE>19


                                             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