SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K


(Mark One)
[X]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
           SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended      November 2, 1996

                                       OR

[X]        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        0-14900
                           -----------------

                                    PSS, Inc.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                               91-1335798
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

     P.O. Box 21186, Seattle, WA                                   98111-3186
----------------------------------------                           ----------
(Address of principal executive offices)                           (Zip Code)

(Registrant's telephone number, including area code)        (206) 901-3790
                                                            ---------------
                       1511 Sixth Avenue, Seattle WA 98101
         --------------------------------------------------------------
         Former name, former address and former fiscal year, if changed
                               since last report.

Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
  Common stock - $1.00 par value
  7-1/8% Convertible Debentures due July 15, 2006

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 if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Aggregate market value of the registrant's voting stock held by nonaffiliates of
the registrant as of December 1, 1996: $270,000.

The  number of shares  of common  stock  outstanding  as of  November  2,  1996:
19,473,728.

Documents incorporated by reference:  None.

                                  Page 1 of 30

<PAGE>



                                     PART I

ITEM 1 - BUSINESS
-----------------

PSS, Inc. ("PSS"),  through its wholly owned subsidiary,  PNS Inc. ("PNS"), owns
PSSC Inc. ("PSSC");  together, PSS, PNS and PSSC are referred to collectively as
the "Company".

The Company  owns  pass-through  and  participation  certificates  issued by the
Federal  Home  Loan  Mortgage  Corporation  backed  by whole  pool  real  estate
mortgages  ("Mortgage  Certificates"),  and as a result, is primarily engaged in
the  business  of owning  mortgages  and other  liens on and  interests  in real
estate.  At  November 2, 1996,  the  Company's  principal  assets  consisted  of
approximately $5.25 million of Mortgage  Certificates from which interest income
is earned.  The Mortgage  Certificates are financed with borrowings,  payable on
demand,  secured by the Mortgage  Certificates (the "Mortgage  Financing").  The
principal obligations of the Company are the Mortgage Financing borrowings,  the
PNS 12-1/8% Senior Subordinated Notes due July 15, 1996 (the "Senior Notes") and
the PSS 7-1/8% Convertible Debentures due July 15, 2006 (the "Debentures"), upon
which interest expense is incurred.

From July 1986, when the Company was organized, until June 1988, subsidiaries of
PNS (the  "Sellers")  operated  retail stores that sold a variety of traditional
drugstore and general  merchandise items. In June 1988, pursuant to an Agreement
for the Purchase and Sale of Assets the Sellers sold  substantially all of their
assets, comprising the Sellers' entire retail operations, to Thrifty Corporation
(a subsidiary of Pacific Enterprises).  In consideration for such sale of assets
(the  "Asset  Sale"),  the  Sellers  received  5.2  million  shares  of  Pacific
Enterprises  common  stock (the "PET  Shares").  During 1990 through  1993,  the
Company sold its PET Shares for the purpose of servicing and  repurchasing  some
of the Debentures and Senior Notes.

ITEM 2 - PROPERTIES
-------------------

As a result of the Asset Sale, the Company disposed of all its properties.

ITEM 3 - LEGAL PROCEEDINGS
--------------------------

In the opinion of management, there are no material legal proceedings pending to
which the Company is a party or of which any of its assets is the subject.

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

Not applicable.


                                        2

<PAGE>



                                     PART II

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED 
--------------------------------------------------------------
STOCKHOLDER MATTERS
-------------------

MARKET INFORMATION

The Company's common stock is traded  over-the-counter.  The high and low prices
for the  stock by  quarter  for the two  years  ended  November  2, 1996 were as
follows:

     Quarter ended                                  High                Low
     -------------                                  ----                ---
           January 27, 1995                         .02                 .01
           April 28, 1995                           .04                 .01
           July 28, 1995                            .04                 .01
           October 28, 1995                         .02                 .01
           January 27, 1996                         .02                 .01
           April 27, 1996                           .01                 .01
           July 27, 1996                            .01                 .01
           November 2, 1996                         .01                 .01


The high and low prices for each  quarter  are the high and low bids as reported
by National  Quotation  Bureau,  Inc., which are those quoted by dealers to each
other,  exclusive of markups,  markdowns or  commissions,  and do not  represent
actual transactions.

HOLDERS

As of December 1, 1996, there were 968 holders of record of the Company's common
stock.

DIVIDENDS ON COMMON STOCK

The Company has never paid a dividend and does not anticipate  paying  dividends
for the foreseeable future. The indentures  governing the Company's Senior Notes
and Debentures  contain  covenants  which restrict the ability of the Company to
pay dividends (see Note 5 to the financial statements).



                                        3

<PAGE>



ITEM 6 - SELECTED FINANCIAL DATA
--------------------------------

The following  selected  financial data should be read in  conjunction  with the
financial statements and related notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations"  included elsewhere herein. As
explained  in  Note 2 to  the  financial  statements,  information  relating  to
November 2, 1996 and October 28, 1995 is presented on a liquidation basis, which
reports  an  excess  of  liabilities  over  assets.  Presentation  of per  share
information  on a liquidation  basis is not  considered  meaningful and has been
omitted.

<TABLE>
<CAPTION>
                                                                  Year ended
                                      -------------------------------------------------------------------
                                      November 2,   October 28,   October 29,   October 30,   October 31,
                                         1996          1995          1994          1993          1992
                                      -----------   -----------   -----------   -----------   -----------
                                                (thousands of dollars, except per share data)
<S>                                    <C>          <C>            <C>          <C>            <C>     
INCOME STATEMENT DATA:
Increase in net liabilities           $ (3,020)     $ (4,231)
Loss before extraordinary items (1)                               $  (2,141)    $ (1,161)     $(32,913)
Net income (2)                                                        9,568       47,454        27,665
Net income per common share                                            0.49         2.44          1.42


BALANCE SHEET DATA:

Total assets                           $  5,591     $  5,927       $ 11,383     $136,634       $217,489
Short-term borrowings                     4,922        5,278         10,192      124,062        171,089
Long-term debt                           28,178       28,178         28,159       48,144        126,634
Total liabilities                        40,517       37,833         39,058      173,877        302,186
Stockholders' deficit                                               (27,675)     (37,243)       (84,697)
Net liabilities                         (34,926)     (31,906)
</TABLE>


(1)  Includes net realized and unrealized losses on Pacific  Enterprises  common
     stock of approximately $37 million during the year ended October 31, 1992.

(2)  Includes pre-tax  extraordinary  gains on early  extinguishment  of debt of
     approximately  $13 million,  $49 million,  and $77 million during the years
     ended  October  29,  1994,   October  30,  1993,   and  October  31,  1992,
     respectively.



                                        4

<PAGE>



ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------


LIQUIDITY AND CAPITAL RESOURCES

At November 2, 1996, the Company's  principal  assets consisted of approximately
$5.25 million of Mortgage  Certificates from which interest income is earned and
its principal  obligations  consisted of Mortgage Financing  borrowings,  Senior
Notes and Debentures upon which interest expense is incurred.

PNS is restricted by terms of its Senior Notes  Indenture from paying  dividends
or making  other  payments to PSS,  except that PNS may pay  dividends to PSS in
amounts  sufficient to enable PSS to meet its obligation on its Debentures  when
due. PNS, like its parent company, has a stockholder's deficit.

At November 2, 1996,  the Company had assets of $5.59  million and  liabilities,
other  than  Senior  Notes  and  Debentures   including   accrued  interest  and
liquidation   costs,  of  $5.06  million,   thus  having  a  net  difference  of
approximately $530,000 available for holders of Senior Notes and Debentures.  At
November 2, 1996, approximately $5.26 million of Senior Notes and $22.92 million
of Debentures remain outstanding.

The Company  failed to pay the  interest  due January 15,  1995,  July 15, 1995,
January 15, 1996,  July 15, 1996 and January 15, 1997 on its Debentures and such
default  continues.  The trustee for the Debentures has indicated to the holders
of the  Debentures  that  it  does  not  intend  to  accelerate  payment  of the
Debentures  "because it is unlikely that the Debenture holders would receive any
payment if the Debentures were accelerated."

Although  PNS paid the  interest  due on January  15,  1995 on its Senior  Notes
within the 30 day "grace" period,  it failed to make the interest payment due on
July  15,  1995,  January  15,  1996 and July  15,  1996 and  failed  to pay the
outstanding  principal  which  became due on July 15,  1996.  All such  defaults
continue.  The trustee has been advised by a representative  of the holders of a
substantial  portion of the Senior Notes that such holders,  together with their
counsel, are in the process of developing a proposal to the Company and PNS, and
has  asked  the  trustee  to  forbear  from  taking  any  action  for so long as
discussions  are  pending  with  the  Company.  The  Company  has met  with  the
representative  of such  holders and is in the  process of  exploring a possible
restructuring.  In the  interim,  the  trustee  has taken no legal  action  with
respect to the default.

The  Company's  future  operating  results,  liquidity,  capital  resources  and
requirements  are  primarily  dependent  upon actions  which may be taken by the
trustees  for the  Senior  Notes  and the  Debentures  to  collect  amounts  due
thereunder, the payment of

                                        5

<PAGE>


LIQUIDITY  AND CAPITAL RESOURCES (continued)

amounts due on and  purchases  of Senior Notes and  Debentures  and, to a lesser
extent,  interest  rate  fluctuations  as they  relate  to the  market  value of
Mortgage  Certificates  and to the  spread of  interest  income  therefrom  over
interest expense on related borrowings.  The Company is exclusively  invested in
Mortgage Certificates,  and, accordingly, is presently relying solely on such as
its source of cash funds.  It has not been  determined what course of action the
Company may pursue with respect to debt service of Senior Notes and Debentures.


RESULTS OF OPERATIONS

     Interest income
     ---------------

Interest income for each of the years ended November 2, 1996,  October 28, 1995,
and October 29, 1994  decreased  as  compared to the  immediate  preceding  year
primarily as a result of lower balances of investments in Mortgage Certificates.
Included in investment  income for the years ended  November 2, 1996 and October
28, 1995 is  approximately  $25,000 and  $100,000,  respectively,  of unrealized
gains resulting from mark-to-market  adjustments.  The weighted average interest
income rate earned on the Mortgage  Certificates  approximated  7.9%,  7.3%, and
5.0% during the years ended November 2, 1996,  October 28, 1995, and October 29,
1994, respectively.

     Interest expense
     ----------------

Interest expense for each of the years ended November 2, 1996, October 28, 1995,
and October 29, 1994  decreased  as  compared to the  immediate  preceding  year
primarily  due  to  lower  investments  in  Mortgage  Certificates  and  related
borrowings  upon  which  interest  expense is  incurred.  The  weighted  average
interest expense rate on Mortgage  Certificate  related borrowings  approximated
5.6%, 6.0%, and 3.9% during the years ended November 2, 1996,  October 28, 1995,
and October 29, 1994, respectively.  Interest expense also decreased during each
of the years  ended  October  28,  1995 and  October 29, 1994 as compared to the
preceding  year  as a  result  of  having  fewer  Debentures  and  Senior  Notes
outstanding due to bond repurchases.

     Write off of deferred financing costs and original issue discount
     -----------------------------------------------------------------

As a result of the continued  default due to the  non-payment of interest on the
Debentures and Senior Notes,  during the year ended October 28, 1995 the Company
expensed remaining deferred financing costs and original issue discount.



                                        6

<PAGE>





     Extraordinary items
     -------------------

During the year ended October 29, 1994, the Company purchased  approximately $14
million and $6 million of its Senior Notes and Debentures,  respectively, and as
a result,  after the write-off of related deferred financing costs,  recorded an
extraordinary  gain on early  extinguishment  of debt,  before income taxes,  of
approximately $13 million.




                                       7

<PAGE>



ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
----------------------------------------------------

INDEX TO FINANCIAL STATEMENTS
-----------------------------

     Financial statements                                                   Page
     --------------------                                                   ----

     Report of Independent Accountants                                        9
     Consolidated Statements of Net Liabilities                              10
     Consolidated Statements of Change in Net Liabilities                    11
     Consolidated Statement of Operations                                    11
     Consolidated Statements of Cash Flows                                   12
     Notes to Financial Statements                                           13

     Financial statement schedules
     -----------------------------

     Financial statement schedule information is presented in the
     financial statements.

SUPPLEMENTARY FINANCIAL INFORMATION

     Selected quarterly financial data (unaudited)                           20


                                        8

<PAGE>



                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders 
of PSS, Inc.:


We have audited the  accompanying  consolidated  statements  of net  liabilities
(liquidation basis) of PSS, Inc. and its subsidiaries as of November 2, 1996 and
October 28,  1995,  and the related  consolidated  statements  of changes in net
liabilities  (liquidation  basis) and of cash flows (liquidation  basis) for the
years ended November 2, 1996 and October 28, 1995. In addition,  we have audited
the  consolidated  statements of operations and of cash flows for the year ended
October 29, 1994.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the  consolidated  financial  statements  audited by us present
fairly, in all material  respects,  the financial  position of PSS, Inc. and its
subsidiaries  at November 2, 1996 and October 28, 1995, and the changes in their
net liabilities (liquidation basis) and their cash flows (liquidation basis) for
the years  ended  November  2, 1996 and  October  28,  1995,  and the results of
operations  and their  cash  flows  for the year  ended  October  29,  1994,  in
conformity with generally accepted accounting principles.


/s/ PRICE WATERHOUSE LLP

PRICE WATERHOUSE LLP


Seattle, Washington
January 31, 1997

                                        9

<PAGE>



                                    PSS, INC.
                    Consolidated Statement of Net Liabilities
                               (Liquidation Basis)
                             (thousands of dollars)

                                                     November 2,    October 28,
                                                         1996          1995
                                                       --------      --------

Assets:

  Cash and short-term investments                      $    276      $     11

  Investment in mortgage certificates                     5,250         5,840

  Accrued interest receivable                                65            76
                                                       --------      --------
Total assets                                              5,591         5,927
                                                       --------      --------

Liabilities:

  Borrowings under mortgage certificate
   financing agreement                                    4,922         5,278

  Accounts payable and accrued liabilities                  143            92

  Reserve for estimated costs during
   period of liquidation                                     90            50

  PNS 12-1/8% senior notes                                5,258         5,258
  Interest payable on PNS notes                           1,152           504
  Reserve for interest on PNS notes
   during period of liquidation                             636           456

  PSS 7-1/8% debentures                                  22,920        22,920
  Interest payable on PSS debentures                      3,767         2,107
  Reserve for interest on PSS debentures
   during period of liquidation                           1,629         1,168
                                                       --------      --------
Total liabilities                                        40,517        37,833
                                                       --------      --------

Net Liabilities                                        $(34,926)     $(31,906)
                                                       ========      ========




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

                                       10

<PAGE>

                                    PSS, INC.
              Consolidated Statements of Changes in Net Liabilities
                               (Liquidation Basis)
           Consolidated Statement of Operations (Going Concern Basis)
                             (thousands of dollars)
<TABLE>
<CAPTION>

                                                           Year ended
                                        -----------------------------------------------
                                         November 2,      October 28,      October 29,
                                             1996             1995             1994
                                        -------------    -------------    -------------
                                             (Liquidation Basis)         (Going Concern
                                                                              Basis)
<S>                                        <C>              <C>              <C>    
Investment income                          $   459          $   582          $ 4,804
                                                                          
Interest expense                            (2,601)          (2,765)          (7,841)
                                                                          
Write off of deferred financing                                           
 costs and original issue discount                             (226)      
                                                                          
General and administrative expense            (197)            (148)            (207)
                                                                          
Decrease in reserve for estimated                                         
 costs and interest during                                                
 period of liquidation                       1,674                        
Provision for estimated costs and                                         
 interest during period of liquidation      (2,355)          (1,674)      
                                           -------          -------          -------
                                                                          
Increase in Net Liabilities                $(3,020)         $(4,231)      
                                           =======          =======       
                                                                          
Loss before income taxes and                                              
 extraordinary items                                                          (3,244)
                                                                          
Income tax benefit                                                             1,103
                                                                             -------
                                                                          
Loss before extraordinary items                                               (2,141)
                                                                          
Extraordinary items:                                                      
  Gain on early extinguishment of                                         
   debt, net of income taxes of $4,356                                         8,456
  Tax benefit resulting from                                              
   utilization of net operating                                           
   loss carryforwards                                                          3,253
                                                                             -------
                                                                          
Net income                                                                   $ 9,568
                                                                             =======
</TABLE>

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

                                       11
<PAGE>



                                    PSS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (thousands of dollars)
<TABLE>
<CAPTION>

                                                                        Year ended
                                                             -----------------------------------
                                                            November 2,  October 28,  October 29,
                                                                1996         1995         1994
                                                             ---------    ---------    ---------
<S>                                                          <C>          <C>       
Cash flows from operating activities:
  Increase in Net Liabilities                                $  (3,020)   $  (4,231)
  Net income                                                                           $   9,568
  Adjustments to reconcile to net cash flows
  from operating activities:
    Extraordinary gain on early extinguishment of debt                                   (12,812)
    Amortization                                                                127          963
    Write off of deferred financing
     costs and original issue discount                                          226
    Increase in estimated costs and interest during
     period of liquidation                                         681        1,674
    Decrease in accrued interest receivable                         11           36        1,240
    Increase (decrease) in accrued interest payable              2,308        1,945         (754)
    Other                                                           26          (49)        (208)
                                                             ---------    ---------    ---------

     Net cash provided (used) by operating activities                6         (272)      (2,003)
                                                             ---------    ---------    ---------

Cash flows from investing activities:
  Proceeds from sale of mortgage certificates                                 4,426       98,653
  Principal repayments on mortgage certificates                    615          726       23,664
                                                             ---------    ---------    ---------

     Net cash provided by investing activities                     615        5,152      122,317
                                                             ---------    ---------    ---------

Cash flows from financing activities:
  Repayment of borrowings under mortgage
   certificates financing agreement                               (356)      (4,914)    (113,870)
  Repurchases of long-term debt                                                           (6,971)
                                                             ---------    ---------    ---------

     Net cash used by financing activities                        (356)      (4,914)    (120,841)
                                                             ---------    ---------    ---------

Net increase (decrease) in cash and short-term investments         265          (34)        (527)

Cash and short-term investments at
 beginning of year                                                  11           45          572
                                                             ---------    ---------    ---------

Cash and short-term investments at
 end of year                                                 $     276    $      11    $      45
                                                             =========    =========    =========
</TABLE>


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

                                       12

<PAGE>



                                    PSS, INC.
                          NOTES TO FINANCIAL STATEMENTS

NOTE 1 - THE COMPANY
--------------------

The consolidated financial statements of PSS, Inc. ("PSS"),  includes its direct
subsidiary  PNS  Inc.   ("PNS")  and  its  subsidiary   PSSC,   Inc.   ("PSSC"),
collectively,  the "Company".  The Company is principally owned by Seacorp, Inc.
("Seacorp") and Zimmerman  Retailing Group Limited ("Zimco").  Seacorp and Zimco
own approximately 41% and 24%, respectively, of the Company's outstanding common
stock, with the remainder publicly owned.

The Company,  through PSSC, owns  pass-through  and  participation  certificates
issued by the Federal Home Loan Mortgage  Corporation  backed by whole pool real
estate  mortgages  ("Mortgage  Certificates"),  and as a  result,  is  primarily
engaged in the business of owning  mortgages and other liens on and interests in
real  estate.  The  principal  obligations  of the Company  are PSSC  borrowings
secured by Mortgage Certificates, PNS 12-1/8% Senior Subordinated Notes due July
15, 1996 (the "Senior Notes") and PSS 7-1/8% Convertible Debentures due July 15,
2006 (the "Debentures").

The Company  failed to pay the  interest  due January 15,  1995,  July 15, 1995,
January 15, 1996,  July 15, 1996 and January 15, 1997 on its Debentures and such
default  continues.  The trustee for the Debentures has indicated to the holders
of the  Debentures  that  it  does  not  intend  to  accelerate  payment  of the
Debentures  "because it is unlikely that the Debenture holders would receive any
payment if the Debentures were accelerated."

Although  PNS paid the  interest  due on January  15,  1995 on its Senior  Notes
within the 30 day "grace" period,  it failed to make the interest payment due on
July  15,  1995,  January  15,  1996 and July  15,  1996 and  failed  to pay the
outstanding  principal  which  became due on July 15,  1996.  All such  defaults
continue.  The trustee has been advised by a representative  of the holders of a
substantial  portion of the Senior Notes that such holders are in the process of
developing  a proposal  to the  Company  and PNS,  and has asked the  trustee to
forbear from taking any action for so long as  discussions  are pending with the
Company.  The Company has met with the  representative of such holders and is in
the process of exploring a possible  restructuring.  In the interim, the trustee
has taken no legal action with respect to the default.

At November 2, 1996, the Company had assets of  approximately  $5.59 million and
liabilities,  other  than the  Senior  Notes and  Debentures  including  accrued
interest and liquidation  costs, of approximately  $5.06 million,  thus having a
net difference of approximately  $530,000  available for holders of Senior Notes
and Debentures. At November 2, 1996, approximately $5.26 million of Senior Notes
and $22.92 million of Debentures

                                       13

<PAGE>



NOTE 1 - THE COMPANY (continued)
--------------------------------

remain  outstanding and, annual interest  thereon,  in the absence of additional
repurchases,   approximates  $636,000  and  $1.63  million,   respectively.  The
Company's   future  operating   results,   liquidity,   capital   resources  and
requirements  are  primarily  dependent  upon actions  which may be taken by the
trustees  for the  Senior  Notes  and the  Debentures  to  collect  amounts  due
thereunder,  the payment of amounts  due on and  purchases  of Senior  Notes and
Debentures and, to a lesser extent, interest rate fluctuations as they relate to
the market value of Mortgage  Certificates  and to the spread of interest income
therefrom  over  interest  expense  on  related   borrowings.   The  Company  is
exclusively invested in Mortgage  Certificates,  and, accordingly,  is presently
relying solely on such as its source of cash funds.  It has not been  determined
what course of action the Company may pursue with respect to debt service on the
Senior Notes and Debentures.



NOTE 2 - LIQUIDATION BASIS OF ACCOUNTING
----------------------------------------

Effective  October 28,  1995,  the  Company  adopted  the  liquidation  basis of
accounting for presenting its consolidated  financial statements.  This basis of
accounting is considered appropriate when, among other things,  liquidation of a
company  appears  imminent  and the  net  realizable  value  of its  assets  are
reasonably determinable.  Under this basis of accounting, assets and liabilities
are  stated at their  net  realizable  value and  estimated  costs  through  the
liquidation date are provided to the extent reasonably determinable.

The net effect of converting  from the going  concern  basis to the  liquidation
basis of accounting as of October 28, 1995 was an increase in net liabilities of
approximately  $1.7  million,  as a result  of  recording  estimated  costs  and
interest expense to the liquidation date. No adjustment to the reported value of
assets was required.  Under the  liquidation  basis,  the Company accrued future
liabilities  and  estimated  future net revenues  from interest and other income
associated with mortgage certificates to the liquidation date.

A summary of significant  estimates and judgments utilized in preparation of the
November 2, 1996 and October 28, 1995  consolidated  financial  statements  on a
liquidation basis follows:

     *    The  Company's  next  fiscal  year end,  November  1,  1997,  has been
          utilized as the  liquidation  date for the November 2, 1996  financial
          statements. The Senior Notes July 15,

                                       14

<PAGE>


NOTE 2 - LIQUIDATION BASIS OF ACCOUNTING (continued)
----------------------------------------------------

          1996 due date was utilized as the liquidation date for the October 28,
          1995 financial statements.


     *    Mortgage  Certificates and related  interest  receivable are stated at
          estimated market value.

     *    Borrowings secured by Mortgage  Certificates are stated at face value,
          which approximates market value.

     *    The  reserve  for  estimated  costs  during the period of  liquidation
          represents  estimates  of  future  costs to be  incurred  through  the
          liquidation date.

     *    Net estimated interest income to be earned on Mortgage Certificates in
          excess of interest  expense on related  borrowings has been considered
          in  determining  the reserve for estimated  costs during the period of
          liquidation.

     *    Senior Notes and Debentures and related interest accrued are stated at
          face value.

     *    The reserve for interest  during the period of liquidation  represents
          interest on Senior Notes and  Debentures  for the period from the date
          of the  Consolidated  Statements of Net  Liabilities  to the estimated
          liquidation date, as applicable.

All of the above  estimates  and judgments may be subject to change as facts and
circumstances   change.   Similarly,   actual  costs  and  expenses  may  differ
significantly  depending on a number of factors,  particularly the length of the
liquidation period.

During the fiscal year ended November 2, 1996,  the Company's  actual net excess
of costs incurred over net investment income reasonably approximated the reserve
for  estimated  costs  provided in the October  28, 1995  financial  statements.
Inasmuch as July 15, 1996 was utilized as the liquidation  date, the October 28,
1995 reserve for interest was for a period of  approximately  8.5 months whereas
interest  expense for the fiscal year ended  November 2, 1996 included 12 months
of interest,  which resulted in actual  interest  expense in excess of estimated
amounts reserved.


                                       15

<PAGE>



NOTE 3 - SUMMARY OF ACCOUNTING PRINCIPLES
-----------------------------------------

Cash and Short-Term Investments
-------------------------------

Cash and short-term investments,  having maturities of three months or less when
purchased, are primarily comprised of interest-bearing short-term bank deposits.

Investment in Mortgage Certificates
-----------------------------------

The  investment in Mortgage  Certificates  is recorded at estimated  fair value,
based upon market prices  obtained from  traders.  Gains and losses  realized on
sale are determined utilizing the specific  identification method. Premiums paid
are amortized utilizing the interest method. Gains and losses realized upon sale
of  Mortgage  Certificates  and  unrealized  gains  and  losses  resulting  from
mark-to-market adjustments are included in investment income.

Income (loss) per Common Share
------------------------------

As explained in Note 2,  effective  October 28,  1995,  the Company  adopted the
liquidation  basis of accounting,  which reports an excess of  liabilities  over
assets.  Accordingly,  the  presentation  of per common share  information  on a
liquidation basis is not considered meaningful and has been omitted.

Basis of Presentation
---------------------

Effective  October 28,  1995,  the  Company  adopted  the  liquidation  basis of
accounting  for   presenting  its   consolidated   financial   statements.   The
consolidated  financial  statements  for fiscal  1994 were  prepared  on a going
concern  basis of  accounting  which  contemplates  realization  of  assets  and
satisfaction of liabilities in the normal course of business.

Accounting Estimates
--------------------

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  requires  manangement to make estimates and  assumptions
that affect the reported  amounts of assets and  liabilities  and  disclosure of
contingent assets and liabilities at the date of the financial statments and the
reported  amounts of revenues and expenses during the reporting  period.  Actual
results could differ from those amounts.


                                       16

<PAGE>



NOTE 4 - INVESTMENT IN MORTGAGE CERTIFICATES
--------------------------------------------

Mortgage  Certificates  are financed with  borrowings  provided by an investment
bank pursuant to a letter  agreement  (the  "Financing  Agreement").  Borrowings
pursuant to the Financing  Agreement (the "Mortgage  Financing")  are secured by
the Mortgage  Certificates.  In the event of a decrease in the aggregate  market
value of the  Mortgage  Certificates  below the  requirements  of the  Financing
Agreement,  additional  collateral is required.  Principal and interest payments
received on Mortgage  Certificates are maintained in an interest earning account
and are  released to the  Company,  at its  request,  after all interest and any
"mark-to-market" indebtedness then due have been paid. The Mortgage Financing is
payable on demand and generally bears interest at rates approximating LIBOR plus
10 basis  points.  Mortgage  Financing  borrowings  and related  interest  rates
approximated $4.9 million and 5.5% at November 2, 1996 and $5.3 million and 6.0%
at October 28,  1995,  respectively.  During the years  ended  November 2, 1996,
October 28, 1995, and October 29, 1994, the average balance of mortgage  related
borrowings outstanding approximated $5 million, $5 million, and $91 million, and
the weighted annual average interest expense rates  approximated 5.6%, 6.0%, and
3.9%,respectively.

At  November  2, 1996,  the annual  interest  rate to be earned on the  Mortgage
Certificates  approximated  7.7% as determined on a basis that interest rates do
not change.  The rate of interest on the  Mortgage  Certificates  is  adjustable
based on general interest rate trends with certain maximums, including limits of
2% for annual interest rate changes and interest rate maximums of  approximately
13%.  The  weighted  average  interest  income  rates  earned  on  the  Mortgage
Certificates approximated 7.9%, 7.3% and 5.0% during the years ended November 2,
1996, October 28, 1995 and October 29, 1994, respectively.

The  Company  sold   approximately  $1  million  and  $99  million  of  Mortgage
Certificates  during the years ended  October  28,  1995 and  October 29,  1994,
respectively.


                                       17

<PAGE>



NOTE 5 - SUBORDINATED DEBT
--------------------------

Subordinated  debt and related  interest payable through the balance sheet dates
are summarized as follows (thousands of dollars):

                                          November 2,     October 28,
                                              1996            1995
                                            -------         -------

PNS 12-1/8% Senior Notes                    $ 5,258         $ 5,258
Interest payable on Senior Notes              1,152             504
                                            -------         -------
                                            $ 6,410         $ 5,762
                                            =======         =======

PSS 7-1/8% Debentures                       $22,920         $22,920
Interest payable on Debentures                3,767           2,107
                                            -------         -------
                                            $26,687         $25,027
                                            =======         =======

In July 1986,  the Company  completed  three public  securities  offerings  (the
"Public  Offerings").  PNS issued  $150  million of Senior  Notes (at a price of
98.6%) and PSS sold 3.25  million  shares of its common  stock and issued at par
$150 million of Debentures  convertible  to PSS common stock at $19.68 per share
(the  conversion  price is subject to adjustment  in the case of dilution).  PSS
invested  the net  proceeds  from  its two  offerings  in PNS,  in the form of a
contribution to capital and an intercompany  debenture  between PNS and PSS (the
"Intercompany  Debenture") in the amount of $150 million with  substantially the
same interest rate and redemption  provisions as the Debentures.  Debt financing
costs and the discount on the Senior Notes have been  amortized over the term of
the borrowings.  As explained in Note 1, the Company is in default on the Senior
Notes and  Debentures,  and as a result,  during the year ended October 28, 1995
the Company  expensed  remaining  deferred  financing  costs and original  issue
discount.  At November 2, 1996, the  Intercompany  Debenture  approximated  $6.5
million.

The indenture  governing  the Senior Notes  restricts the ability of PNS and its
subsidiaries  to pay  dividends or make other  payments to PSS. The Senior Notes
indenture  permits PNS to pay  dividends to PSS in amounts  sufficient to enable
PSS to meet its  obligations on the Debentures  when due (to the extent payments
are not made to PSS when due pursuant to the Intercompany  Debenture),  provided
that no event of default (as defined in the Senior Notes indenture) has occurred
and is continuing. PNS, like its parent company, has a stockholder's deficit.

The Senior Notes and Debentures provide for semiannual interest payments and are
unsecured.  Principal  repayment on the Senior Notes was due in full on July 15,
1996. The Debentures  require annual  principal  payments of  approximately  $11
million commencing July 15, 1996 until July 15, 2006 when the balance is due; by
utilizing Debentures which the Company has previously acquired, there will be no
scheduled maturity payments required before 2006.


                                       18

<PAGE>




NOTE 5 - SUBORDINATED DEBT (continued)
--------------------------------------

The indentures for the Senior Notes and Debentures  contain certain  restrictive
covenants which, among other things,  limit dividends and similar  distributions
to  stockholders,  essentially  prohibit  redemptions  and  retirements  of  the
Company's equity, limit the Company's ability to incur debt, and restrict action
and  agreements  by the  Company  that  would  prohibit  dividends  and  similar
distributions to the Company from its subsidiaries.

During the year ended October 29, 1994, the Company purchased  approximately $14
million of Senior Notes and $6 million of Debentures and, as a result, after the
write-off of related deferred financing costs, recorded an extraordinary gain on
early extinguishment of debt of approximately $13 million.

Interest  paid  approximated  $319,000  and $8 million  during  the years  ended
October 28, 1995 and October 29, 1994, respectively.


NOTE 6 - RELATIONSHIP WITH AFFILIATES
-------------------------------------

Prior  to  fiscal  1995,   affiliates  of  Seacorp  provided  the  Company  with
accounting,  legal,  tax and  other  services.  Fees for  services  approximated
$56,000 for the year ended October 29, 1994.


NOTE 7 - INCOME TAXES
---------------------

Due to losses for each of the years ended November 2, 1996 and October 28, 1995,
there was no provision for income taxes recorded.  During the year ended October
29,  1994,  the Company  recognized  an income tax benefit as a result of income
taxes provided on the  extraordinary  gain on early  extinguishment of debt. The
Company also recorded a provision for income taxes representing a charge in lieu
of income  taxes that would have been  provided in the absence of net  operating
loss  carryforwards.  The income tax benefit  resulting from  utilization of net
operating loss carryforwards is presented as an extraordinary item.

AS  of  November  2,  1996,   for  income  tax  purposes,   net  operating  loss
carryforwards,  which begin to expire in 2001,  approximate  $140  million,  and
capital  loss  carryforwards  approximate  $120  million,  $115 million of which
expire  in 1997 and  1998.  If  certain  substantial  changes  in the  Company's
ownership should occur, there would be an annual limitation on the amount of the
carryforwards which could be utilized.




                                       19

<PAGE>




NOTE 8 - STOCKHOLDERS' DEFICIT
------------------------------

The Company's  common stock  consists of 60 million  authorized  shares,  $1 par
value,  19,473,728 shares of which are issued and outstanding.  The Company also
has 10 million authorized shares of preferred stock, $1 par value, none of which
have been issued.  There have been no changes in common stock or additional paid
in capital  since  October 29, 1994.  Effective  October 28, 1995 as a result of
presenting  financial statements on the liquidation basis, changes in components
of stockholders' deficit are not presented.  The Company's stockholders' deficit
and the changes  therein  during the year ended October 29, 1994, are summarized
as follows (thousands of dollars):

<TABLE>
<CAPTION>
                                                                            Total
                                             Additional                     Stock-
                                  Common       Paid-in     Accumulated      holders'
                                   Stock       Capital       Deficit        Deficit

<S>                              <C>          <C>           <C>            <C>      
Balances at October 30, 1993     $ 19,474     $149,110      $(205,827)     $(37,243)
Net income                                                      9,568         9,568
                                  -------      -------       --------        ------

Balances at October 29, 1994     $ 19,474     $149,110      $(196,259)     $(27,675)
                                  =======      =======       ========       =======
</TABLE>


NOTE 9 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------------------------

Selected quarterly  financial data are as follows (thousands of dollars):

<TABLE>
<CAPTION>

                                                                   Fiscal quarters ended
                                                    --------------------------------------------
                                                    November 2,   July 27,    April 27,  January 27,
                                                       1996         1996        1996        1996
                                                    -----------   ---------   --------   ----------
<S>                                                 <C>           <C>         <C>       <C>   
Decrease in reserve for estimated costs and
 interest during period of liquidation              $    38       $   521     $  549    $  566
Provision for estimated costs and interest
 during period of liquidation                        (2,355)
Increase in net liabilities                          (2,945)          (75)         0         0


                                                                  Fiscal quarters ended
                                                    --------------------------------------------
                                                    October 28,   July 29,    April 29,  January 28,
                                                       1995         1995        1995        1995
                                                    -----------   ---------   --------   ----------

Loss from operations                               $   (513)     $   (556)  $   (862)   $   (626)
Provision for estimated costs and interest
 during period of liquidation                        (1,674)
Increase in net liabilities                          (2,187)
Net loss                                                             (556)      (862)       (626)
</TABLE>


                                       20

<PAGE>




ITEM 9 -  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
--------------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------

None.

                                    PART III
                                    --------

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------------

DIRECTORS OF THE COMPANY

The  following  table  sets forth  certain  information  concerning  each of the
directors and executive officers of the Company.  All directors will serve until
the next Annual Meeting of  Shareholders  and until his respective  successor is
elected or appointed. Each director of the Company is also a director of PNS.

                                                          Present Principal
                                                        Occupation or Employment
Name and Position                                           and Five Year
with the Company              Age                         Employment History
----------------              ---                         ------------------

Mark Todes                    41             President  and   Director   of  the
President and Director                       Company  since May 1996.  President
                                             of City Realty, Inc. since May 1996
                                             and  Vice  President  of  200  West
                                             Holdings,   Ltd.   (a  real  estate
                                             holding company and a subsidiary of
                                             City  Realty) for more than 5 years
                                             prior  thereto.  Vice  President of
                                             Seacorp since July 1996.



Gerald P. Nathanson           51             Director  of  the   Company   since
Director                                     October  1986.   During  1996,  Mr.
                                             Nathanson  left   the   employ   of
                                             L.Luria (a retail company).   Chief
                                             Executive Officer,  US Holographics
                                             (marketing  company for holographic
                                             products)   from   April   1992  to
                                             December 1995.  Managing  Director,
                                             C4  Marketing  (an import  company)
                                             until January 1992.                




                                       21
<PAGE>


Pursuant to the terms of the Subscription and Stockholders' Agreement, dated May
7, 1986 (the "Stockholders' Agreement"), as amended as of November 25, 1987 (the
"November  1987   Agreement"  and,  as  amended,   the  "Amended   Stockholders'
Agreement"),  between the Company's two major  stockholders,  Zimco and Seacorp,
Seacorp was,  subject to certain  conditions,  entitled to nominate as directors
one-half the  Company's  Nonindependent  Directors  (as defined in the Company's
Restated  Certificate  of  Incorporation)  plus one,  and Zimco was  entitled to
nominate   one-half  the   Nonindependent   Directors  minus  one.  The  Amended
Stockholders'  Agreement  terminated in accordance with its terms on October 31,
1995.  See the  discussion  under Item 13 - Certain  Relationships  and  Related
Transactions.

ITEM 11 - EXECUTIVE COMPENSATION
--------------------------------

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

The Company has no employees.  There are currently no  arrangements  under which
any officer or director of the Company will receive  compensation for serving as
such; however, other arrangements may be made in the future.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
-------------------------------------------------------------
MANAGEMENT
----------

The following table sets forth, as of December 31, 1996,  information concerning
the beneficial ownership of the common stock of the Company by (i) persons known
by the Company to own beneficially more than 5% of its outstanding common stock,
(ii) each of the  directors of the Company and (iii) all directors and executive
officers of the Company as a group.  Except as set forth in the footnotes to the
table, the stockholders  have sole voting and investment power over such shares.
Unless otherwise specified, the

                                       22

<PAGE>



address for all directors is the address of the Company's executive offices. The
address  for  Messrs.  Julius and Eddie Trump is the address set forth below for
Seacorp.  The address for Mr.  Christopher Podoll is the address set forth below
for Zimmerman Retailing Group Limited.

                                        Amount and Nature
                                          of Beneficial     Percent
Name                                        Ownership      of Class
----                                        ---------      --------
Christopher Podoll (a)                      4,603,962        23.64%
Zimmerman Retailing Group Limited (a)       4,603,962        23.64%
 P.O. Box 948
 Route 2, Pleasant Plain Road
 Fairfield, IA 52556
Seacorp, Inc. (b)                           8,014,705        41.1%
 P.O. Box 21186
 Seattle, WA 98111-3186
Eddie Trump (b)                             8,014,705        41.1%
Julius Trump (b)                            8,014,705        41.1%
All Directors and Executive Officers as
 a Group (2 persons)                                0           0%

(a)  According to the Schedule 13D, as amended (the "Zimco Amended 13D"),  filed
     with the Securities and Exchange Commission (the "Commission"), Zimco is an
     Iowa limited partnership, the sole general partner of which is Soma 2 L.P.,
     a  Delaware  limited  partnership  ("Soma  2").  Soma 2 has as its  general
     partner ZRG Co., Inc., a Delaware corporation ("ZRG"), for which Mr. Podoll
     serves as the sole executive officer and director.  Mr. Podoll is a manager
     of  investments  of the William  Zimmerman  family.  Amounts  include 8,079
     shares issuable upon conversion of Debentures  beneficially owned by Zimco.
     Amounts do not  include  the  ownership  of 6,000  shares and 3,810  shares
     issuable upon  conversion of Debentures  owned by the Surya  Financial Inc.
     Retirement Plan, a retirement plan for the benefit of various  employees of
     Surya Financial Inc., an affiliate of Zimco.

(b)  According to the Schedule  13D, as amended,  filed with the  Commission  by
     Julius Trump, Eddie Trump and Seacorp,  Seacorp is, and Messrs.  Julius and
     Eddie  Trump may be deemed to be,  the  beneficial  owner(s)  of  8,014,705
     shares of common stock.  Such amount  includes  8,079 shares  issuable upon
     conversion of Debentures  beneficially owned by an affiliate of Seacorp. As
     set forth in the Schedule 13D,  Seacorp is a Delaware  corporation and does
     not  presently  have any  business  other than the  ownership  of shares of
     common stock of the Company.  Seacorp is  indirectly  controlled by Messrs.
     Julius and Eddie Trump.




                                       23

<PAGE>



ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------

Stockholders' Agreement
-----------------------

GENERAL.  On May 7,  1986,  Zimco,  Seacorp  and the  Company  entered  into the
Stockholders' Agreement.  Under the Stockholders'  Agreement,  Zimco and Seacorp
exchanged  all of their  common  stock in Pay'n  Save for all of the  issued and
outstanding  Common  Stock of the Company.  Subsequently,  in  consideration  of
Seacorp causing to be made available short-term borrowing facilities aggregating
$20 million to the Company,  Seacorp,  Zimco and certain related parties entered
into an agreement  amending the  Stockholders'  Agreement  (the  "November  1987
Amendment") in certain  respects.  In connection with the Amended  Stockholders'
Agreement,  the parent of Seacorp  guaranteed  Company  borrowings by Pay'n Save
under such  short-term  borrowing  facilities  (which have since  expired) in an
amount up to $15 million.

The Stockholders' Agreement and the November 1987 Amendment were entered into by
Seacorp and Zimco and certain of its related  parties on their own behalf and on
behalf of their respective permitted  transferees,  for the exclusive benefit of
Seacorp and its permitted  transferees (the "Seacorp Group"),  and Zimco and its
permitted  transferees  and certain of its related  parties (the "Zimco Group").
The Amended Stockholders'  Agreement also contained certain indemnities in favor
of (and for the benefit of) the  Company.  The Amended  Stockholders'  Agreement
terminated in accordance with its terms on October 31, 1995.

Pursuant to separate  agreements,  the Company has granted certain  registration
rights to each group and certain of each group's  transferees,  including Zimco,
with  respect  to  the  shares  of  common  stock   acquired   pursuant  to  the
Stockholders' Agreement.

NOMINATION  OF  DIRECTORS.  The  Stockholders'  Agreement had provided that each
group would  nominate and vote for an equal number of nominees on the  Company's
Board of Directors and vote as stockholders  in favor of each matter  previously
approved by a majority of the directors  nominated by Zimco and Seacorp and vote
against  each matter not so  approved.  However,  if at any time one group owned
less than one-third the number of shares of common stock owned by the other, the
group with the  greater  number of shares of common  stock  would be entitled to
nominate  one  additional  director  and the other  group  would be  entitled to
nominate  one  less   director.   The  November  1987   Amendment   amended  the
Stockholders'  Agreement  to  provide  that so long as Julius or Eddie  Trump or
their affiliates or certain related parties and certain other designated parties
(collectively,  the "Trump  Group") remain the  beneficial  owners,  directly or
indirectly,  of at least a  majority  of the  shares  of common  stock  owned by
Seacorp as of  November  25,  1987,  Seacorp  would be  entitled  to nominate as
directors  one-half the number of  Nonindependent  Directors  plus one and Zimco
would be

                                       24

<PAGE>



entitled to nominate one-half the number of Nonindependent  Directors minus one,
and that at all times at least four seats on the  Company's  Board of  Directors
would be reserved for Nonindependent  Directors. At such time as the Trump Group
was no longer the beneficial owner of a majority of shares of common stock owned
by Seacorp on November 25, 1987,  the provision in the  Stockholders'  Agreement
prior to the November 1987 Agreement relating to the election of directors would
be applicable  so that each of Seacorp and Zimco would  nominate and vote for an
equal number of nominees on the Company's Board of Directors.

The  Company's  Certificate  of  Incorporation  provides  that  actions  by  the
Company's  Board of Directors  generally  require the  affirmative  vote of that
number of directors equal to the sum of (i) the number of Independent  Directors
(as defined) plus (ii) a majority of the Nonindependent Directors.

CERTAIN VOTING ARRANGEMENTS.  The Amended Stockholders'  Agreement provided that
Seacorp and the Zimco  Group  would use their best  efforts to cause the Seacorp
Directors and the Zimco  Directors to vote against any issuance of capital stock
of the Company or its  subsidiaries  (i) to any affiliate of Seacorp  unless the
Zimco  Group was first  offered  the  opportunity  to purchase a portion of such
shares pro rata in  accordance  with their  then  ownership  of shares of common
stock, for the same consideration that was to be paid by such affiliate, or (ii)
to any entity not affiliated with Seacorp without the consent or approval of the
holders of a majority of the outstanding shares of common stock, subject in each
case to waiver by the Zimco Directors.

Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------

The Company does not have a compensation or similar committee.



                                       25

<PAGE>



                           PART IV. OTHER INFORMATION
                           --------------------------

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
----------------------------------------------------------------
FORM 8-K
--------

(a)  See the section  entitled "Index to Financial  Statements"  appearing under
     Item 8 of this Annual Report on Form 10-K.

(b)  Not applicable

(c)  Exhibits:

     3.1       Restated Certificate of              Incorporated by
               Incorporation of Pay'n Save Inc.     reference from Exhibit
                                                    3.1 to the Registration 
                                                    Statement on Form S-1 (File
                                                    No. 33-5560) of the
                                                    Company (the "Registration
                                                    Statement").

     3.2       Certificate of Amendment of          Incorporated by
               Certificate of Incorporation         reference from
               of Pay'n Save Inc.                   Exhibit 3.2 to the
                                                    Registration
                                                    Statement.

     3.3       Certificate of Amendment of          Incorporated by
               Certificate of Incorporation         reference from
               of Pay'n Save Inc.                   Exhibit 3.1 to Quarterly
                                                    Report on Form 10-Q for the
                                                    quarter ended July 30, 1988.

     3.4       Certificate of Amendment of          Incorporated by
               Certificate of Incorporation         reference from
               of PSS, Inc.                         Exhibit 3.4 to the Annual
                                                    Report on Form 10-K for the
                                                    year ended October 31, 1992.

     3.5       By-Laws of Pay'n Save Inc.           Incorporated by reference
                                                    from Exhibit 3.3 to the
                                                    Registration Statement.

     4.1       Indenture between Pay'n Save         Incorporated by reference 
               Inc. and United States Trust         from 

                                       26

<PAGE>



               Company of New York, as Trustee,     Exhibit 4.1 to the
               relating to the 7-1/8% Con-          Registration Statement.
               vertible Debentures due July 15,     
               2006 (including the form of
               Convertible Debenture).

     4.2       First Supplemental Indenture be-     Incorporated by
               tween Pay'n Save Inc., and           reference from
               United States Trust Company of       Exhibit 4.1 to the
               New York as Trustee, relating        Quarterly Report on
               to the 7-1/8% Convertible De-        Form 10-Q for the
               bentures due July 15, 2006.          quarter ended April
                                                    30, 1988.

     4.3       Indenture between PNS Inc. and       Incorporated by
               Norwest Bank Minneapolis, Nat-       reference from
               ional Association as Trustee,        Exhibit 4.1 to the
               relating to the 12-1/8% Senior       Registration State-
               Subordinated Notes due July 15,      ment on Form S-1
               1996 (including the form of          (File No. 33-5591)
               Senior Subordinated Note).           of PNS Inc.

     4.4       First Supplemental Indenture be-     Incorporated by
               tween PNS Inc., and Norwest Bank     reference from
               Minnesota, National Association      Exhibit 4.2 to the
               as Trustee, relating to the          Quarterly Report on
               12-1/8% Senior Subordinated          Form 10-Q for the
               Notes due July 15, 1996.             quarter ended April
                                                    30, 1988.

    10.4       Agreement for purchase and sale      Incorporated by
               of assets by and among Pay'n         reference from
               Save Stores, Inc., The Bi-Mart       Exhibit 2.1 to
               Company, Pay'n Save Drugs Inc.       Form 8-K dated
               and Thrifty Corporation, dated       May 13, 1988.
               as of May 12, 1988.

    10.5       Letter Agreement dated               Incorporated by
               February 9, 1990 by and among        reference from
               PSSC Inc. and Bear Stearns &         Exhibit (i) to
               Co., Inc. for the purchase and       the Quarterly
               financing of adjustable-rate         Report on Form
               mortgages.                           10-Q for the quarter
                                                    ended February 3, 1990.

    10.6       Agreements dated as of               Incorporated by
               January 14, 1993 with respect        reference from
               to the acquisition by PSS, Inc.      Exhibit 10.7 to the
               and PNS Inc. of up to $64.475        Annual Report on
               million of Senior Notes and          Form 10-K for

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<PAGE>



               $14 million of Debentures.           the year ended October
                                                    31, 1992.

    22.1       Subsidiaries of the Registrant.      Incorporated by
                                                    reference from Exhibit
                                                    22.1 to the Annual
                                                    Report on Form 10-K
                                                    for the year ended
                                                    October 31, 1992.


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<PAGE>



                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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.


                                            PSS, INC.
                                            (Registrant)




Date:  January 31, 1997                     By: /s/  Mark Todes
      -------------------                      ---------------------------
                                                 Mark Todes, President



                                       29

<PAGE>


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.

           Date        Title               Signature
           ----        -----               ---------



January 31, 1997       Director            By:
                                              ------------------------------
                                                Gerald Nathanson



January 31, 1997       Director            By:  /s/  Mark Todes
                                              ------------------------------
                                                Mark Todes


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