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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 NOVEMBER 2, 1996

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

For the Transition period from to
---------------------------

Commission file number 0-19994
------------------

SOLO SERVE CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 74 - 2048057
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)

1610 Cornerway Blvd., San Antonio, Texas 78219
----------------------------------------------
(Address of principal executive offices)

(210) 662-6262
----------------------------------------------------
(Registrant's telephone number, including area code)

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
------- -------

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 2, 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 NO
------- -------

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares of the issuer's Common Stock, par value $.01 per share,
and Preferred Stock, par value $.01 per share, outstanding as of November 28,
1996, were 2,856,126 and 1,388,889 shares, respectively.

PAGE 1 OF 21 PAGES; EXHIBIT INDEX APPEARS ON PAGE 17.
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INDEX

PART I - FINANCIAL INFORMATION

PAGE

ITEM 1. Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 3

Consolidated Balance Sheets, October 28, 1995 (unaudited),
February 3, 1996 and November 2, 1996 (unaudited) . . . . . . . . . . . . . . . 3

Consolidated Statements of Operations, thirteen and thirty-nine weeks ended
October 28, 1995 (unaudited) and November 2, 1996 (unaudited) . . . . . . . . . 4

Consolidated Statements of Cash Flows, thirty-nine weeks ended
October 28, 1995 (unaudited) and November 2, 1996 (unaudited) . . . . . . . . . 5

Notes to Consolidated Financial Statements
(unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

ITEM 6. Exhibits and Reports on Form 8 - K . . . . . . . . . . . . . . . . . . . . . . . 14

Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

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PART I

ITEM I. Financial Statements

SOLO SERVE CORPORATION
CONSOLIDATED BALANCE SHEETS

OCTOBER 28, FEBRUARY 3, NOVEMBER 2,
ASSETS 1995 1996 1996
--------------------------------------------------
(unaudited) (unaudited)

CURRENT ASSETS:
Cash $ 1,167,497 $ 771,527 $ 1,585,673
Restricted Cash 2,500,000 0 0
Inventory 21,193,533 14,210,180 15,419,498
Other current assets 2,312,881 2,273,630 1,901,533
--------------------------------------------------
Total current assets 27,173,911 17,255,337 18,906,704

Property and equipment, net 16,097,279 15,634,267 13,970,244
Goodwill and service marks, net 439,999 410,000 320,000
--------------------------------------------------

TOTAL ASSETS $ 43,711,189 $ 33,299,604 $ 33,196,948
==================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES NOT SUBJECT TO COMPROMISE:
CURRENT LIABILITIES:
Current portion of long-term debt $ 697,453 $ 683,951 $ 755,675
Pre-petition unsecured indebtedness 3,534,639 0 0
Accounts payable 5,650,528 3,426,821 5,155,994
Accrued expenses 4,152,143 3,210,010 3,351,392
--------------------------------------------------
Total current liabilities 14,034,763 7,320,782 9,263,061

Long-term debt 16,645,243 15,135,885 17,232,516
Postretirement benefit obligation 549,225 565,200 550,200

LIABILITIES SUBJECT TO COMPROMISE 1,156,427 460,612 0
--------------------------------------------------

TOTAL LIABILITIES 32,385,658 23,482,479 27,045,777
--------------------------------------------------
STOCKHOLDERS' EQUITY:
Preferred stock 13,889 13,889 13,889
Common stock 28,562 28,562 28,562

Capital in excess of par value 24,410,290 24,410,290 24,410,290

Accumulated (deficit) (13,127,210) (14,635,616) (18,301,570)
--------------------------------------------------

TOTAL STOCKHOLDERS' EQUITY 11,325,531 9,817,125 6,151,171
--------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 43,711,189 $ 33,299,604 $ 33,196,948
==================================================

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

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SOLO SERVE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
---------------------------------------------------------------------
OCTOBER 28, NOVEMBER 2, OCTOBER 28, NOVEMBER 2,
1995 1996 1995 1996
---------------------------------------------------------------------

NET REVENUES $ 24,248,717 $ 21,207,810 $ 77,696,586 $ 69,537,658
Cost of goods sold (including buying and
distribution, excluding depreciation
shown below) 18,248,635 14,836,369 58,301,729 49,082,697
---------------------------------------------------------------------

GROSS PROFIT 6,000,082 6,371,441 19,394,857 20,454,961
Selling, general, and administrative
expense 7,442,710 6,841,068 22,244,930 21,081,361
---------------------------------------------------------------------

(LOSS) BEFORE DEPRECIATION AND
(1,442,628) (469,627) (2,850,073) (626,400)
AMORTIZATION
Depreciation and amortization expenses 695,939 580,590 2,162,067 1,849,449
---------------------------------------------------------------------

OPERATING (LOSS) (2,138,567) (1,050,217) (5,012,140) (2,475,849)

Interest expense 361,248 421,752 695,176 1,190,102
---------------------------------------------------------------------
(LOSS) BEFORE REORGANIZATION ITEMS, TAXES
AND EXTRAORDINARY ITEM (2,499,815) (1,471,969) (5,707,316) (3,665,951)
---------------------------------------------------------------------

REORGANIZATION ITEMS
Loss on disposal of stores 0 0 553,222 0
Other reorganization expenses 0 0 1,421,754 0
Interest earned on accumulated
cash resulting from Chapter 11
Proceedings 0 0 (188,283) 0
---------------------------------------------------------------------
Reorganization items 0 0 1,786,693 0
---------------------------------------------------------------------
(LOSS) BEFORE TAXES AND EXTRAORDINARY
ITEM (2,499,815) (1,471,969) (7,494,009) (3,665,951)
---------------------------------------------------------------------
Income tax expense (benefit)
Current 0 0 0 0
Deferred 0 0 (1,418,200) 0
---------------------------------------------------------------------
0 0 (1,418,200) 0
---------------------------------------------------------------------
(LOSS) BEFORE EXTRAORDINARY ITEM (2,499,815) (1,471,969) (6,075,809) (3,665,951)
Extraordinary item: gain on discharge of
debt (net of tax effect of $1,418,200) 0 0 2,752,975 0
---------------------------------------------------------------------
NET (LOSS) $ (2,499,815) $ (1,471,969) $ (3,322,834) $ (3,665,951)
=====================================================================

(Loss) per common share
before extraordinary item $ (.59) $ (.52) $ (1.80) $ (1.28)

Gain on discharge of debt per common
share 0 0 0.82 0
---------------------------------------------------------------------
Net (loss) per common share $ (.59) $ (.52) $ (0.98) $ (1.28)
---------------------------------------------------------------------

Weighted average common shares
outstanding 4,245,015 2,856,126 3,375,052 2,856,126
=====================================================================

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

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SOLO SERVE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

THIRTY-NINE WEEKS ENDED
OCTOBER 28, NOVEMBER 2,
1995 1996
---------------------------------

NET LOSS $ (3,322,834) $ (3,665,951)
Gain on discharge of debt 2,752,975 0
---------------------------------
Loss before gain on discharge of debt (6,075,809) (3,665,951)
---------------------------------
ADJUSTMENTS TO RECONCILE NET LOSS TO CASH FROM OPERATIONS:
Depreciation and Amortization 2,162,067 1,849,449
Provision (benefit) from deferred taxes (1,418,200) 0
Loss on disposition of leasehold improvements, property and 208,070 127,572
equip.
Changes in Assets and Liabilities:
(Increase) decrease in Inventory (6,244,704) (1,209,318)
(Increase) decrease in Other Current Assets 142,268 372,097
(Increase) decrease in Other Non-Current Assets 1,662,935 0
Increase (decrease) in Accounts Payable 437,427 1,729,173
Increase (decrease) in Accrued Expenses 32,317 141,382
Increase (decrease) in Non Current Liabilities 47,925 (15,000)
---------------------------------
Total adjustments (2,969,895) 2,995,355
---------------------------------
Net cash provided (used) by operations before reorganization items (9,045,704) (670,596)
OPERATING CASH FLOW FROM REORGANIZATION ITEMS:
Payments made on reorganization costs (1,185,823) 0
Non cash items from reorganization (1,132,424) 0
Loss on disposal of facilities 553,222 0
Provision for other reorganization expenses 1,421,754 0
Payment on allowed claims 0 (460,612)
---------------------------------
Net cash provided (used) by operations (9,388,975) (1,131,208)
---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Property & Equipment (717,462) (222,999)
CASH FLOWS FROM INVESTING ACTIVITIES RELATED TO REORGANIZATION
Investment in Restricted Cash (2,500,000) 0
---------------------------------
CASH PROVIDED (USED) IN INVESTING ACTIVITIES: (3,217,462) (222,999)
---------------------------------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Borrowings under line of credit agreement 4,895,003 77,557,780
Payments under line of credit agreement 0 (74,862,780)
Payments on long-term debt (306,088) (526,647)
---------------------------------
Net cash provided (used) by finance activities before 4,588,915 2,168,353
reorganization
FINANCING CASH FLOWS FROM REORGANIZATION ITEMS:
Distributions to Claimants under plan of reorganization (10,398,538) 0
Sale of Preferred Stock 2,500,000 0
---------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES (3,309,623) 2,168,353
---------------------------------
NET INCREASE (DECREASE) IN CASH (15,916,060) 814,146
CASH AT BEGINNING OF YEAR 17,083,557 771,527
---------------------------------
CASH AT END OF PERIOD $ 1,167,497 $ 1,585,673
=================================
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 695,176 $ 1,160,454
Income Taxes 0 0

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

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SOLO SERVE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(unaudited)

NOTE 1:

The financial statements as of October 28, 1995 and November 2, 1996, and for
the thirteen and thirty-nine week periods ended October 28, 1995 and November
2, 1996, are unaudited and reflect all adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial position of Solo
Serve Corporation (the "Company") as of November 2, 1996, and the results of
operations and cash flows for the periods presented. Such adjustments are of a
normal and recurring nature except for the adjustment resulting from the
reorganization discussed in Note 2. The results of operations for the thirteen
week period and the thirty-nine week period may not necessarily be indicative
of the operating results for a full year or of future operations. These
unaudited financial statements should be read in conjunction with financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended February 3, 1996.

With respect to the unaudited financial information of the Company as of
October 28, 1995 and November 2, 1996 and for the thirteen and thirty-nine
weeks ended October 28, 1995 and November 2, 1996, Price Waterhouse LLP has
made a review (based on procedures adopted by the American Institute of
Certified Public Accountants) and not an audit, as set forth in their separate
report appearing as Exhibit 99.

NOTE 2:

On July 21, 1994 (the "Petition Date"), the Company filed a petition (the
"Filing") under Chapter 11 of the Bankruptcy Code ("Chapter 11") in the United
States Bankruptcy Court for the Western District of Texas (the "Bankruptcy
Court"). On July 6, 1995, the Bankruptcy Court approved a Proposed Plan of
Reorganization (the "Plan") jointly sponsored by the Official Committee of
Unsecured Creditors and Texas Commerce Bank San Antonio, N.A. ("TCB"), which
became effective on July 18, 1995. Under the Plan, the Unsecured Creditors
agreed to a distribution of 72.5% of pre-petition unsecured allowed claims.
The total amount of pre-petition unsecured allowed claims was $15.6 million.
Additionally, the Plan allowed for cash distributions for certain secured and
priority claims which totaled $2.2 million. On the effective date of the Plan,
the Company issued 1,388,889 shares of convertible Preferred Stock for an
aggregate consideration of $2.5 million. All of the Preferred Stock was
purchased by General Atlantic Corporation ("GAC"), the Company's largest
stockholder. On July 31, 1995, the Company disbursed $10.2 million to its
creditors in accordance with the First Distribution as proposed by the Plan.
The second and final distribution, which occurred on December 20, 1995, was
approximately $3.5 million. The second distribution was financed in part by
$2.5 million of funds in escrow which were the proceeds from the sale of the
Company's Preferred Stock. On April 17, 1996, the Bankruptcy Court entered the
Final Decree, which administratively closed Solo Serve's Chapter 11 bankruptcy
case.

Pursuant to the Plan the Company's existing common stock was subject to a
one-for-two reverse split. The Preferred Stock issued in connection with the
Plan has a liquidation value of $1.80 per share, is convertible to an equal
number of common shares, has voting rights on an as converted basis, and pays
no preferential dividends. With the issuance of Preferred Stock mentioned
above, GAC has increased its percentage ownership of the voting shares of the
Company to approximately 62% from its pre-reorganization interest of
approximately 44%.

The settlement of the Company's pre-petition liabilities reduced the Company's
net operating loss carryforwards and other tax credit carryforwards by
approximately $4.2 million. The above mentioned equity infusion by GAC has not
caused an ownership change that would limit the future utilization of the
Company's remaining net operating loss carryforwards and other tax credit
carryforwards. However, future ownership changes could result in such
limitations.

For 1996, management has developed and is implementing a business strategy
which seeks to achieve higher gross margins on lower comparable store sales
than in fiscal 1995. The key elements of this strategy are lower average store
inventories, quick price reduction on slower moving merchandise, constant flow
of fresh merchandise, less promotional pricing, and a reduced expense
structure. Although management believes the current business strategy is
appropriate in

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light of business conditions and recent sales trends, the Company has continued
to experience operating losses, and no assurance can be given that the Company
will be successful in its efforts to improve sales and operations and reverse
recent operating losses.

NOTE 3:

Long-term debt consists of the following:

OCTOBER 28, FEBRUARY 3, NOVEMBER 2,
1995 1996 1996
---------------------------------------------------

Notes payable to bank, interest at prime plus 1/2%
(8.75% at November 2, 1996) secured by properties $ 5,503,405 $ 5,437,572 $ 5,209,681

Note payable to insurance company, interest at 8%; secured by
equipment and properties 1,118,325 1,006,861 744,969

Mortgage notes payable to insurance companies, interest at 9.5%;
secured by the distribution center 5,825,966 5,810,403 5,773,541

Congress Loan Agreement, interest at prime plus 1%
(9.25% at November 2, 1996); secured primarily by inventory 4,895,000 3,565,000 6,260,000
---------------------------------------------------
17,342,696 15,819,836 17,988,191

Less current portion 697,453 683,951 755,675
---------------------------------------------------

Long-term portion $ 16,645,243 $ 15,135,885 $ 17,232,516
===================================================

As part of its Plan of Reorganization, the Company restructured its
pre-petition secured indebtedness. Under the Plan, the Company assumed a $5.8
million mortgage note, secured by the Company's corporate office and
distribution center in San Antonio, Texas. The mortgage note carries an
interest rate of 9.5% per annum and requires monthly payments of $49,773 until
December 2002, when the balance is due. The Company also modified and assumed
a note payable to MetLife Capital Corporation ("MetLife"), which is secured by
various equipment and fixtures located at the corporate office and certain
stores. The MetLife note carries an interest rate of 8.0% and requires equal
monthly payments, including principal and interest, of $35,044 until September
1998, when the balance is due. The Company also entered into a term note
payable to TCB which carries an interest rate of prime plus one-half percent
and is due in equal monthly installments of principal and interest of $64,117
until January 1999, when the balance is due.

The Company entered into a loan agreement with Congress Financial Corporation
(Southwest) ("Congress") on June 20, 1995, which became effective on the
effective date of the Plan. Under the terms of the loan agreement, which is in
effect until July 1998, the Company may borrow up to its borrowing base as
calculated pursuant to the loan agreement, which may not exceed $15 million.
The proceeds of the loan may be used for letters of credit, working capital,
and general corporate purposes. The loan as amended is a revolving loan with a
borrowing base formula which limits the amount of available credit based on a
percent of the Company's eligible inventory, less (i) a percentage of undrawn
amounts on letters of credit and (ii) availability reserves established from
time to time by the lender. The loan bears interest at prime plus 1%. In
addition, the Company pays a commitment fee equal to 1/2% per annum of the
amount of the unused facility. The loan is secured by substantially all the
assets of the Company other than those subject to other existing liens.

On July 2, 1996, the Company amended its credit facility with Congress to,
among other things, increase the advance rate, which is a key factor in
calculating the borrowing base. As a result of the amendment, the advance
rates under the credit facility have been increased to sixty percent (60%) of
the value of eligible inventory for any date from July 1 through December 10
and fifty-five percent (55%) of the value of eligible inventory for any other
date. The increased advance rates compare to previous allowances of up to
fifty-two percent (52%) of the value of eligible inventory for any date from
September 1 through December 10 and forty-two percent (42%) for any other date
of determination. Under the loan agreement, eligible inventory is reduced by
the availability reserve, which may be established and revised by Congress in
its discretion to cover risks or events it perceives may affect its security
under the loan. As of the end of November 1996, the availability reserve under
the loan agreement is approximately $1.2 million. In addition to the
adjustments to the advance rates described above, the Company and Congress have
amended the credit facility in certain other respects, including, as of July
1996, a reduction in the Company's adjusted net

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worth requirement from $7.5 million for the remainder of fiscal 1996 to $4.25
million for the remaining term of the loan, and, as of September 1996, a
reduction of minimum required working capital from $7.2 million for the
remainder of fiscal 1996 to $4.5 million for the remaining term of the loan.
The loan continues to be secured by a first lien on substantially all of the
assets of the Company, including inventory and accounts receivable.

In order to facilitate the amendments to the credit facility, General Atlantic
Corporation, the Company's principal stockholder, furnished to Congress a
standby letter of credit in the amount of $1.5 million to serve as additional
collateral for the loan. The Company agreed, among other things, to reimburse
General Atlantic for any amounts drawn under the letter of credit and to grant
General Atlantic a second lien security interest (behind Congress) on
substantially all of the assets of the Company.

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ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

NUMBER OF STORES

FISCAL 1995 FISCAL 1996
----------- -----------

Beginning of year 30 29
Second Quarter Dispositions 1 0
Third Quarter Dispositions 0 1
----------- -----------

End of Third Quarter 29 28
=========== ===========

On August 24, 1996, the Company closed a store, reducing its number of stores
to 28. The closing did not have a material impact on the Company's operating
results for the thirty-nine weeks ended November 2, 1996, and is not expected
to have a material impact on future operating results.

RESULTS OF OPERATIONS

The following table sets forth certain financial data of the Company expressed
as a percentage of net revenues for the thirteen weeks and thirty-nine weeks
ended October 28, 1995 and November 2, 1996.

PERCENTAGE OF NET SALES

THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
OCTOBER 28, NOVEMBER 2, OCTOBER 28, NOVEMBER 2,
1995 1996 1995 1996
-------------------------------------------------------------

NET REVENUES 100.0% 100.0% 100.0% 100.0%
Cost of goods sold, including buying and
distribution costs 75.3 70.0 75.0 70.6

-------------------------------------------------------------
GROSS PROFIT 24.7 30.0 25.0 29.4
Selling, general and administrative expenses 30.7 32.3 28.6 30.3
Depreciation and amortization 2.8 2.7 2.8 2.7
-------------------------------------------------------------
OPERATING (LOSS) (8.8) (5.0) (6.4) (3.6)
Interest expense 1.5 1.9 0.9 1.7
-------------------------------------------------------------
(LOSS) BEFORE REORGANIZATION ITEMS, TAXES AND
EXTRAORDINARY ITEM (10.3) (6.9) (7.3) (5.3)
Reorganization items 0.0 0.0 2.3 0.0
-------------------------------------------------------------
(LOSS) BEFORE PROVISION FOR TAXES AND
EXTRAORDINARY ITEM (10.3) (6.9) (9.6) (5.3)
Income Tax Benefit 0.0 0.0 1.8 0.0
-------------------------------------------------------------
(LOSS) BEFORE EXTRAORDINARY ITEM (10.3) (6.9) (7.8) (5.3)
Extraordinary item: gain on debt discharge 0.0 0.0 3.5 0.0
-------------------------------------------------------------
NET (LOSS) (10.3)% (6.9)% (4.3)% (5.3)%
=============================================================

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THIRTEEN WEEKS (THIRD QUARTER) AND THIRTY-NINE WEEKS (YEAR-TO-DATE) ENDED
NOVEMBER 2, 1996 VERSUS
THIRTEEN WEEKS AND THIRTY-NINE WEEKS ENDED OCTOBER 28, 1995

Plan of Reorganization

Pursuant to the Plan, the Company's existing common stock was subject to a
one-for-two reverse split. The Preferred Stock issued in connection with the
Plan has a liquidation value of $1.80 per share, is convertible to an equal
number of common shares, has voting rights on an as-converted basis, and pays
no preferential dividends. With the issuance of Preferred Stock mentioned
above, GAC has increased its percentage ownership of the voting shares of the
Company to approximately 62% from its pre-reorganization interest of
approximately 44%.

In an effort to improve the Company's financial performance and in connection
with the Company's bankruptcy reorganization, the Company reduced the number of
stores, implemented expense reductions commensurate with the downsizing of the
total stores in operation, and improved liquidity by restructuring its
pre-petition debt and obtaining a new credit facility. Since the effective
date of the Plan, the Company has continued to experience lower than
anticipated sales and continuing operating losses. The Company's business has
been affected by a number of factors, including, but not limited to, the
general weakness in the apparel industry, increased competitive pressures in
its market areas and other business risks, many of which are not within the
Company's control. While the Company has maintained inventory at planned
levels and management believes that trade credit constraints have not had a
material impact on their ability to acquire inventory for the 1996 holiday
season, unfavorable conditions and financial performance could heighten vendor
and factor concern regarding the Company's creditworthiness, which could
adversely affect the Company's ability to receive sufficient trade credit
support to acquire adequate levels of inventory in the future.

Recent Developments

Since the close of the second quarter, David Dash, the Company's Chief
Executive Officer and President, resigned. Charles Siegel, who was a
consultant and the Acting Chief Operating Officer at Solo Serve, has been hired
to fill that position. During the second quarter, the Company hired Ross E.
Bacon as Chief Financial Officer to replace the former Chief Operating
Officer/Chief Financial Officer, who had resigned. Subsequent to the hiring of
Mr. Siegel, Mr. Bacon assumed the duties of Chief Operating Officer and has
been named Executive Vice President.

Management is continuing to implement a business strategy which seeks to
achieve higher gross margins on lower comparable store sales than in fiscal
1995. The key elements of this strategy are lower average store inventories,
quick price reduction on slower moving merchandise, constant flow of fresh
merchandise, less promotional pricing, and a reduced expense structure. The
Company has implemented cost reduction programs designed to increase labor

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productivity, reduce advertising costs, and restructure associate benefit
plans. During the quarter, management reorganized the duties and reporting
responsibilities of certain Company employees and eliminated other positions.
Management believes that these and other expense reduction initiatives will
result in aggregate expense savings of approximately $3 million on an
annualized basis. During fiscal 1996 management expects the Company to realize
aggregate expense savings of approximately $2 million over fiscal 1995 due to
implementation of such expense reduction initiatives. The Company is continuing
to evaluate additional opportunities to reduce expenses. Although management
believes the current business strategy is appropriate in light of business
conditions and recent sales trends, the Company has continued to experience
operating losses and no assurance can be given that the Company will be
successful in its efforts to improve operations and reverse recent operating
trends.

Results of Operations

The Company's net revenues for the third quarter and year-to-date period ended
November 2, 1996 were $22.2 million and $69.5 million, respectively, as
compared to $24.2 million and $77.7 million in the prior year. The majority of
the year-to-date revenue decrease is attributable to a decline in comparable
store sales of 10% for the period. Management attributes the comparable store
sales decrease principally to increased competitive pressures in its market
areas, continuing unfavorable economic conditions in some of the Company's
principal markets, and less promotional activities than in the comparable
periods of fiscal 1995.

Gross profit for the third quarter of 1996 increased by $371,000 to $ 6.4
million from $6.0 million in the third quarter of the prior year. Gross
profit for the first three quarters of 1996 increased $1.1 million to $20.5
million from $19.4 million during the comparable period of the prior year. The
increased gross profit during the first three quarters of 1996 resulted
principally from reduced promotional activity and selectively higher initial
markups than in the comparable periods of fiscal 1995.

For the third quarter of fiscal 1996, selling, general and administrative
expenses decreased $602,000 to $6.8 million from $7.4 million in 1995. This is
due primarily to reductions in personnel and the associated costs, and to a
decrease in professional fees, which are generally lower since the Company came
out of bankruptcy. For the first three quarters of fiscal 1996, selling,
general and administrative expenses decreased $1.2 million to $21.0 million
from $22.2 million in 1995. This is principally a result of reduced
advertising costs. Selling, general and administrative expenses as a
percentage of revenue increased to 30.3% from 28.6% for the comparable
thirty-nine week period of the prior year. This is due to the decrease in net
revenues.

Depreciation and amortization in the third quarter of 1996 decreased 17% to
$581,000 from $696,000 for the same period in 1995. Depreciation and
amortization for the thirty-nine weeks ended November 2, 1996, decreased 14% to
$1.8 million from $2.2 million during the comparable period in 1995. These
reductions are due to certain assets becoming fully depreciated in 1995.

The Company recorded an operating loss of $1.0 million and $2.5 million for the
thirteen and thirty-nine weeks ended November 2, 1996, respectively. This is
compared to the operating loss of $2.1 million and $5.0 million for the
thirteen and thirty-nine weeks ended October 28, 1995. The Company's improved
operating results on lower comparable sales are primarily a result of improved
gross profit and reduced expenses.

The Company recorded net interest expense for the first three quarters of 1996
of approximately $1.2 million as compared to $695,000 during the same period in
1995. As a result of the Chapter 11 filing, the Company did not accrue
interest on unsecured pre-petition indebtedness during the reorganization
period. After July 18, 1995, the effective date upon which the Company's Plan
was adopted, the Company commenced accruing interest expense on all interest
bearing obligations.

Liquidity and Capital Resources

During the first three quarters of 1996, $1.1 million of cash was used for
operating activities. Capital expenditures were $223,000, the majority of
which were for replenishment and refurbishment of existing equipment and
facilities.

As part of its Plan of Reorganization, the Company restructured its
pre-petition secured indebtedness. Under the Plan, the Company assumed a $5.8
million mortgage note, secured by the Company's corporate office and
distribution center in San Antonio, Texas. The mortgage note carries an
interest rate of 9.5% per annum and requires monthly payments of $49,773 until
December 2002, when the balance is due. The Company also modified and assumed
a $1.2 million note payable to MetLife Capital Corporation ("MetLife"), which
is secured by various equipment and fixtures located at the corporate office
and certain stores. The MetLife note carries an interest rate of 8.0% and
requires equal monthly payments, including principal and interest,

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of $35,044 until September 1998, when the balance is due. The Company also
entered into a $5.6 million term note payable to TCB which carries an interest
rate of prime plus one-half percent and is due in equal monthly installments of
principal and interest of $64,117 until January 1999, when the balance is due.
The Company continues to evaluate opportunities related to its owned real
estate, including the possible sale and leaseback of its distribution center,
corporate offices, and its three owned store locations.

The Company entered into a loan agreement with Congress Financial Corporation
(Southwest) ("Congress") on June 20, 1995, which became effective on the
effective date of the Plan. Under the terms of the loan agreement, which is in
effect until July 1998, the Company may borrow up to its borrowing base as
calculated pursuant to the loan agreement, which may not exceed $15 million.
The proceeds of the loan may be used for letters of credit, working capital,
and general corporate purposes consistent with past practices. The loan as
amended is a revolving loan with a borrowing base formula which limits the
amount of available credit to a percentage of the Company's eligible inventory
less (i) a percentage of undrawn amounts on letters of credit and (ii)
availability reserves established from time to time by the lender. The loan
bears interest at prime plus 1%. In addition, the Company pays a commitment
fee equal to 1/2% per annum of the amount of the unused facility. The loan is
secured by substantially all the assets of the Company other than those subject
to other existing liens.

On July 2, 1996, the Company amended its credit facility with Congress to,
among other things, increase the advance rate, which is a key factor in
calculating the borrowing base. As a result of the amendment, the advance
rates under the credit facility have been increased to sixty percent (60%) of
the value of eligible inventory for any date from July 1 through December 10
and fifty-five percent (55%) of the value of eligible inventory for any other
date. The increased advance rates compare to previous allowances of up to
fifty-two percent (52%) of the value of eligible inventory for any date from
September 1 through December 10 and forty-two percent (42%) for any other date
of determination. Under the loan agreement, eligible inventory is reduced by
the availability reserve, which may be established and revised by Congress in
its discretion to cover risks or events it perceives may affect its security
under the loan. As of the end of November 1996, the availability reserve under
the loan agreement is approximately $1.2 million. The July amendment also
reduced the Company's required minimum net worth to $4.25 million from $7.5
million, and a further amendment in September 1996 reduced the minimum required
working capital from $7.2 million to $4.5 million.

At the end of October 1996, the Company had decreased the comparable store
inventories by 28.9% below October 1995. Additionally, the Company has
decreased the packaway inventories at the San Antonio distribution center by
83% from October 1995. These levels of decreases in store and distribution
center inventory levels are a part of the Company's business strategy for
fiscal 1996. The Company increases its inventory levels periodically in
anticipation of key selling periods. Inventory peaks in late November, in
anticipation of the Christmas selling season.

Short-term trade credit represents a significant source of financing for
merchandise inventories. Trade credit arises from the willingness of the
Company's vendors to grant payment terms for inventory purchases and is either
financed by the vendor or a third-party factor. Since September 1996 the
Company's ability to acquire product on normal payment terms has not been
significantly impaired and is improved over what was experienced in the second
quarter of fiscal 1996. Management does not believe that trade credit
constraints have materially impacted the Company's ability to acquire
inventory for the 1996 holiday season.

As described above, the Company has recently experienced changes in its two
most senior management positions, Chief Executive Officer and Chief Operating
Officer/Chief Financial Officer. The Company has terminated its arrangement
with a financial advisor that was assisting in the evaluation of strategic
alternatives for the Company. Although current management believes the
Company's business strategy is appropriate in light of business conditions and
recent sales trends, the Company has continued to experience operating losses
and no assurance can be given that the Company will be successful in its
efforts to improve sales and operations and reverse recent operating losses.

Forward-looking Statements

Forward-looking statements in this Quarterly Report are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
There are certain important factors that could cause results to differ
materially from those anticipated by some of the statements made above.
Investors are cautioned that all forward- looking statements involve risks and
uncertainty. In addition to the factors discussed above, among the other
factors that could cause actual results to differ materially are the following:
market dynamics, availability of financing, relationships with vendors and
competition. Additional information concerning those and other factors are
contained in the Company's Securities and

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Exchange Commission filings, including but not limited to the Form 10-K, copies
of which are available from the Company without charge.

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PART II

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation relating to
claims arising out of its operations in the normal course of business. In the
opinion of management, the outcome of this litigation will not have a material
effect on the Company.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

The following Exhibits are incorporated by reference to the filing
indicated or are included following the Index to Exhibits:

Exhibit
Number Description of Exhibit
- ------- ----------------------

2.1 First Amended Plan of Reorganization of Solo Serve Corporation dated May 17, 1995 (6)

2.2 Non-material Modifications to First Amended Plan of Reorganization of Solo Serve
Corporation, entered July 6, 1995 (6)

3.1 Restated Certificate of Incorporation of the Company (7)

3.2 Certificate of Designation of Rights and Preferences of Preferred Stock (7)

3.3 Bylaws of the Company, as amended and restated (9)

4.1 Specimen Certificate for Common Stock of the Registrant (representing shares of common
stock of the Company after giving effect to the previously reported 1-for-2 reverse
split effected July 18, 1995) (9)

10.1 Registration Rights Agreement among General Atlantic Corporation, Robert J. Grimm and
the Company (1)

10.2 Agreement Regarding Tax Consequences of Deconsolidation between the Company and General
Atlantic Corporation (1)

10.3 Tax Allocation Agreement between the Company and General Atlantic Corporation (1)

10.4 Form of Indemnity Agreement between Directors, Executive Officers and the Company (1)

10.5 Associate Stock Purchase Plan of the Company (2)

10.6 Retirement Savings Plan and Trust of the Company (2)

10.7 Mortgage Note A, dated November 20, 1992, in principal amount of $4,940,000, with the
Company as Maker and Nationwide Life Insurance Company as Holder (2)

10.8 Mortgage Note B, dated November 20, 1992, in principal amount of $1,000,000, with the
Company as Maker and Employers Life Insurance Company of Wausau as Holder (2)

10.9 Asset Purchase Agreement between the Company and Ross Stores, Inc. (3)

10.10 Employment Agreement between the Company and David P. Dash (4)

10.11 Employment Agreement between the Company and Robert J. Grimm, as amended (5)

10.12 Subscription Agreement between the Company and General Atlantic Corporation (7)

10.13 Solo Serve Corporation 1995 Stock Incentive Plan (8)

10.14 Solo Serve Corporation Director Stock Option Plan (8)

10.15 Escrow Agreement, dated July 18, 1995, by and between Texas Commerce Bank, National
Association, Borrower, General Atlantic Corporation and the Official Committee of
Unsecured Creditors of Solo Serve Corporation (7)

10.16 Loan and Security Agreement, dated as of June 20, 1995, by and between Solo Serve
Corporation and Congress Financial Corporation (Southwest) (7)

10.17 Amended Loan and Security Agreement, dated July 18, 1995, by and between Solo Serve
Corporation and MetLife Capital Corporation (8)

10.18 Loan Modification Agreement, dated July 18, 1995, by and among Solo Serve Corporation,
Nationwide Life Insurance Company, and Employers Life Insurance Company (8)

10.19 Promissory Note, dated July 31, 1995, in principal amount of $5,565,000, with the
Company as Maker, and Texas Commerce Bank National Association as Holder (8)

10.20 Loan Modification Agreement, dated October 27, 1995, by and between Solo Serve
Corporation and Congress Financial Corporation (Southwest) (9)

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10.21 Employment Agreement between the Company and Timothy L. Grady (9)

10.22 Employment Agreement between the Company and Janet Pollock (9)

10.23 Consulting Services Agreement between the Company and Robert J. Grimm (10)

10.24 Second Amendment to Loan and Security Agreement, dated January 31, 1996, by and between
Solo Serve Corporation and Congress Financial Corporation (Southwest) (11)

10.25 Letter Agreement dated January 23, 1996 by and between the Company and MetLife Capital
Corporation modifying the Loan and Security Agreement between the Company and MetLife
Capital Corporation, as amended on July 18, 1995 (11)

10.26 Amendment No. 3 to Loan and Security Agreement by and between Solo Serve Corporation and
Congress Financial Corporation (Southwest) dated as of June 26, 1996 (12)

10.27 Letter of Credit and Security Agreement between Solo Serve Corporation and General
Atlantic Corporation dated as of June 26, 1996 (12)

10.28 Intercreditor and Subordination Agreement between Congress Financial Corporation
(Southwest) and General Atlantic Corporation dated as of June 26, 1996, as acknowledged
and agreed to by Solo Serve Corporation (12)

10.29 Consulting Agreement between the Company and Charles Siegel (13)

10.30 Employment Agreement between the Company and Charles Siegel (13)

10.31 Amendment No. 4 to Loan and Security Agreement by and between Solo Serve Corporation and
Congress Financial Corporation (Southwest) dated as of September 1, 1996 (13)

15 Independent Accountant's Awareness Letter *

27 Financial Data Schedule *

99 Review Report of Price Waterhouse *

- --------------
* Filed herewith.

(1) Incorporated by reference to the Exhibits to the Company's
Registration Statement on Form S-1 (No. 33- 46324), as filed
on March 11, 1992, and amended by Amendment No. 1, filed on
March 26, 1992, Amendment No. 2, filed on April 20, 1992, and
Amendment No. 3, filed on April 24, 1992.
(2) Incorporated by reference to the Exhibits to the Company's
Annual Report on Form 10-K for the Fiscal year ended January
30, 1993.
(3) Incorporated by reference to the Exhibits filed to the
Company's Quarterly Report on Form 10-Q for the Quarter ended
July 30, 1994.
(4) Incorporated by reference to the Exhibits filed to the
Company's Annual Report on Form 10-K for the Fiscal Year ended
January 28, 1995.
(5) Incorporated by reference to the Exhibits filed to the
Company's Quarterly Report on Form 10-Q for the Quarter ended
April 29, 1995.
(6) Incorporated by reference to the Exhibits filed to the
Company's Current Report on Form 8-K for July 6, 1995.
(7) Incorporated by reference to the Exhibits filed to the
Company's Current Report on Form 8-K for July 18, 1995.
(8) Incorporated by reference to the Exhibits filed to the
Company's Quarterly Report on Form 10-Q for the Quarter ended
July 29, 1995.
(9) Incorporated by reference to the Exhibits filed to the
Company's Quarterly Report on Form 10-Q for the Quarter ended
October 28, 1995.
(10) Incorporated by reference to the Exhibits filed to the
Company's Annual Report on Form 10-K for the Fiscal Year ended
February 3, 1996.
(11) Incorporated by reference to the Exhibits filed to the
Company's Current Report on Form 8-K for February 8, 1996.
(12) Incorporated by reference to the Exhibits filed to the
Company's Current Report on Form 8-K for July 2, 1996.
(13) Incorporated by reference to the Exhibits filed to the
Company's Quarterly Report on Form 10-Q for the Quarter ended
August 3, 1996.

(b) Reports on Form 8-K. None were filed during the period covered by
this report.

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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:

SOLO SERVE CORPORATION

By: /s/ Charles Siegel
-----------------------------------------
Charles Siegel,
President and Chief Executive Officer

By: /s/ Ross E. Bacon
-----------------------------------------
Ross E. Bacon,
Executive Vice President and Chief
Operating Officer/Chief Financial Officer

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EXHIBIT INDEX

Exhibit Sequential
Number Description of Exhibit Page No.
- ------- ---------------------- ----------

2.1 First Amended Plan of Reorganization of Solo Serve Corporation dated May 17, 1995 (6) *

2.2 Non-material Modifications to First Amended Plan of Reorganization of Solo Serve *
Corporation, entered July 6, 1995 (6)

3.1 Restated Certificate of Incorporation of the Company (7) *

3.2 Certificate of Designation of Rights and Preferences of Preferred Stock (7) *

3.3 Bylaws of the Company, as amended and restated (9) *

4.1 Specimen Certificate for Common Stock of the Registrant (representing shares of common *
stock of the Company after giving effect to the previously reported 1-for-2 reverse
split effected July 18, 1995) (9)

10.1 Registration Rights Agreement among General Atlantic Corporation, Robert J. Grimm and *
the Company (1)

10.2 Agreement Regarding Tax Consequences of Deconsolidation between the Company and General *
Atlantic Corporation (1)

10.3 Tax Allocation Agreement between the Company and General Atlantic Corporation (1) *

10.4 Form of Indemnity Agreement between Directors, Executive Officers and the Company (1) *

10.5 Associate Stock Purchase Plan of the Company (2) *

10.6 Retirement Savings Plan and Trust of the Company (2) *

10.7 Mortgage Note A, dated November 20, 1992, in principal amount of $4,940,000, with the *
Company as Maker and Nationwide Life Insurance Company as Holder (2)

10.8 Mortgage Note B, dated November 20, 1992, in principal amount of $1,000,000, with the *
Company as Maker and Employers Life Insurance Company of Wausau as Holder (2)

10.9 Asset Purchase Agreement between the Company and Ross Stores, Inc. (3) *

10.10 Employment Agreement between the Company and David P. Dash (4) *

10.11 Employment Agreement between the Company and Robert J. Grimm, as amended (5) *

10.12 Subscription Agreement between the Company and General Atlantic Corporation (7) *

10.13 Solo Serve Corporation 1995 Stock Incentive Plan (8) *

10.14 Solo Serve Corporation Director Stock Option Plan (8) *

10.15 Escrow Agreement, dated July 18, 1995, by and between Texas Commerce Bank, National *
Association, Borrower, General Atlantic Corporation and the Official Committee of
Unsecured Creditors of Solo Serve Corporation (7)

10.16 Loan and Security Agreement, dated as of June 20, 1995, by and between Solo Serve *
Corporation and Congress Financial Corporation (Southwest) (7)

10.17 Amended Loan and Security Agreement, dated July 18, 1995, by and between Solo Serve *
Corporation and MetLife Capital Corporation (8)

10.18 Loan Modification Agreement, dated July 18, 1995, by and among Solo Serve Corporation, *
Nationwide Life Insurance Company, and Employers Life Insurance Company (8)

10.19 Promissory Note, dated July 31, 1995, in principal amount of $5,565,000, with the *
Company as Maker, and Texas Commerce Bank National Association as Holder (8)

10.20 Loan Modification Agreement, dated October 27, 1995, by and between Solo Serve *
Corporation and Congress Financial Corporation (Southwest) (9)

10.21 Employment Agreement between the Company and Timothy L. Grady (9) *

10.22 Employment Agreement between the Company and Janet Pollock (9) *

10.23 Consulting Services Agreement between the Company and Robert J. Grimm (10) *

10.24 Second Amendment to Loan and Security Agreement, dated January 31, 1996, by and between *
Solo Serve Corporation and Congress Financial Corporation (Southwest) (11)

10.25 Letter Agreement dated January 23, 1996 by and between the Company and MetLife Capital *
Corporation modifying the Loan and Security Agreement between the Company and MetLife
Capital Corporation, as amended on July 18, 1995 (11)

10.26 Amendment No. 3 to Loan and Security Agreement by and between Solo Serve Corporation and *
Congress Financial Corporation (Southwest) dated as of June 26, 1996 (12)

10.27 Letter of Credit and Security Agreement between Solo Serve Corporation and General *
Atlantic Corporation dated as of June 26, 1996 (12)

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10.28 Intercreditor and Subordination Agreement between Congress Financial Corporation *
(Southwest) and General Atlantic Corporation dated as of June 26, 1996, as acknowledged
and agreed to by Solo Serve Corporation (12)

10.29 Consulting Agreement between the Company and Charles Siegel (13) *

10.30 Employment Agreement between the Company and Charles Siegel (13) *

10.31 Amendment No. 4 to Loan and Security Agreement by and between Solo Serve Corporation and *
Congress Financial Corporation (Southwest) dated as of September 1, 1996 (13)

15 Independent Accountant's Awareness Letter 19

27 Financial Data Schedule 20

99 Review Report of Price Waterhouse 21

*Incorporated by reference--see page 15 for references.