UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D. C.  20549





FORM
10-Q


(Mark
One)


S
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the
quarterly period ended November 29, 2008


OR





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





For the
transition period from _____________ to ______________





Commission
File No. 0-5815





AMERICAN
CONSUMERS, INC.


(Exact
name of registrant as specified in its charter)





GEORGIA
                      58-1033765(State
      or other jurisdiction of Incorporation
      or organization)
                      (I.R.S.
      Employer Identification Number)





55 Hannah Way, Rossville,
GA
                      30741(Address
      of principal executive offices)
                      (Zip
      Code)








Registrant’s
      Telephone Number, including Area Code: (706) 861-3347(Former
      name, former address and former fiscal year, if changed since last
      report)





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 S NO £





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large
      accelerated filer  £
              Accelerated
      filer £Non-accelerated
      filer £ (Do not
      check if a smaller reporting company)
              Smaller
      reporting company S





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). £
YES   SNO





APPLICABLE
ONLY TO CORPORATE ISSUERS:


Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.





Class
              Outstanding
      at January 9, 2009COMMON
      STOCK - $ .10 PAR VALUE
              781,339NON
      VOTING COMMON STOCK - $ .10 PAR VALUE
              ----










ITEM
1.   FINANCIAL STATEMENTS





FINANCIAL
INFORMATION


AMERICAN
CONSUMERS, INC.


CONDENSED
STATEMENTS OF INCOME AND RETAINED EARNINGS


(UNAUDITED)






THIRTEEN WEEKS ENDED
                
                
                TWENTY-SIX WEEKS ENDEDNovember 29,
                
                
                December 1,
                
                
                November 29,
                
                
                December 1,2008
                
                
                2007
                
                
                2008
                
                
                2007NET
      SALES
                
                $
                8,700,897
                
                
                $
                8,487,207
                
                
                $
                17,486,177
                
                
                $
                17,228,089COST
      OF GOODS SOLD
                
                
                6,549,700
                
                
                
                6,513,801
                
                
                
                13,248,836
                
                
                
                13,211,145Gross
      Margin
                
                
                2,151,197
                
                
                
                1,973,406
                
                
                
                4,237,341
                
                
                
                4,016,944OPERATING,
      GENERAL AND ADMINISTRATIVE EXPENSES
                
                
                2,132,687
                
                
                
                1,987,573
                
                
                
                4,241,817
                
                
                
                4,004,679Operating
      Income (Loss)
                
                
                18,510
                
                
                
                (14,167
                )
                
                
                (4,476
                )
                
                
                12,265OTHER
      INCOME (EXPENSE)Interest
      income
                
                
                2,567
                
                
                
                4,166
                
                
                
                5,218
                
                
                
                7,804Other
      income
                
                
                22,079
                
                
                
                30,485
                
                
                
                48,171
                
                
                
                67,521Loss
      on disposal of equipment
                
                
                (1,574
                )
                
                
                ---
                
                
                
                (2,143
                )
                
                
                ---Interest
      expense
                
                
                (11,467
                )
                
                
                (16,790
                )
                
                
                (19,314
                )
                
                
                (35,068
                )Income
      Before Income Taxes
                
                
                30,115
                
                
                
                3,694
                
                
                
                27,456
                
                
                
                52,522INCOME
      TAXES
                
                
                —
                
                
                
                —
                
                
                
                —
                
                
                
                —NET
      INCOME
                
                
                30,115
                
                
                
                3,694
                
                
                
                27,456
                
                
                
                52,522RETAINED
      EARNINGS:Beginning
                
                
                1,002,200
                
                
                
                921,165
                
                
                
                1,004,859
                
                
                
                872,388Redemption
      of common stock
                
                
                (29
                )
                
                
                (122
                )
                
                
                (29
                )
                
                
                (173
                )Ending
                
                $
                1,032,286
                
                
                $
                924,737
                
                
                $
                1,032,286
                
                
                $
                924,737PER
      SHARE:Net
      Income
                
                $
                0.039
                
                
                $
                0.005
                
                
                $
                0.035
                
                
                $
                0.067Cash
      dividends
                
                $
                —
                
                
                $
                —
                
                
                $
                —
                
                
                $
                —WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING
                
                
                781,696
                
                
                
                783,836
                
                
                
                781,717
                
                
                
                784,758








See Notes
to Financial Statements


2




FINANCIAL
INFORMATION


AMERICAN
CONSUMERS, INC.


CONDENSED
BALANCE SHEETS








November 29,
                
                
                May 31,2008
                
                
                2008(Unaudited)--A
      S S E T S--CURRENT
      ASSETSCash
      and cash equivalents
                
                $
                647,449
                
                
                $
                741,440Certificate
      of deposit
                
                
                302,465
                
                
                
                311,884Accounts
      receivable
                
                
                145,686
                
                
                
                118,334Inventories
                
                
                2,354,477
                
                
                
                2,241,670Prepaid
      expenses
                
                
                42,472
                
                
                
                70,494Total
      current assets
                
                
                3,492,549
                
                
                
                3,483,822PROPERTY
      AND EQUIPMENT - at costLeasehold
      improvements
                
                
                303,766
                
                
                
                303,766Furniture,
      fixtures and equipment
                
                
                3,254,409
                
                
                
                3,323,7133,558,175
                
                
                
                3,627,479Less
      accumulated depreciation
                
                
                (3,061,285
                )
                
                
                (3,304,201
                )496,890
                
                
                
                323,278TOTAL
      ASSETS
                
                $
                3,989,439
                
                
                $
                3,807,100--LIABILITIES
      AND STOCKHOLDERS' EQUITY--CURRENT
      LIABILITIESAccounts
      payable
                
                $
                667,838
                
                
                $
                817,890Book
      overdraft
                
                
                515,781
                
                
                
                238,932Short-term
      borrowings
                
                
                381,487
                
                
                
                422,820Current
      maturities of long-term debt
                
                
                85,718
                
                
                
                53,922Accrued
      sales tax
                
                
                103,341
                
                
                
                150,205Other
                
                
                239,330
                
                
                
                258,087Total
      current liabilities
                
                
                1,993,495
                
                
                
                1,941,856LONG-TERM
      DEBT
                
                
                233,949
                
                
                
                130,265STOCKHOLDERS'
      EQUITYNonvoting
      preferred stock – authorized 5,000,000 shares of no par value; no shares
      issued
                
                
                —
                
                
                
                —Nonvoting
      common stock – authorized 5,000,000 shares-$.10 par value; no shares
      issued
                
                
                —
                
                
                
                —Common
      stock - $.10 par value; authorized 5,000,000 shares; shares issued of
      781,339 and 781,779 respectively
                
                
                78,134
                
                
                
                78,178Additional
      paid-in capital
                
                
                651,575
                
                
                
                651,942Retained
      earnings
                
                
                1,032,286
                
                
                
                1,004,859Total
      Stockholders’ Equity
                
                
                1,761,995
                
                
                
                1,734,979TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
                
                $
                3,989,439
                
                
                $
                3,807,100








See Notes
to Financial Statements


3




FINANCIAL
INFORMATION


AMERICAN
CONSUMERS, INC.


CONDENSED
STATEMENTS OF CASH FLOWS


(UNAUDITED)





TWENTY-SIX WEEKS ENDEDNovember 29,
                
                
                December 1,2008
                
                
                2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Income
                
                $
                27,456
                
                
                $
                52,522Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                
                
                60,410
                
                
                
                62,291Change
      in operating assets and liabilities:Accounts
      receivable
                
                
                (27,352
                )
                
                
                76,803Inventories
                
                
                (112,807
                )
                
                
                (82,943
                )Prepaid
      expenses
                
                
                28,022
                
                
                
                93,962Accounts
      payable
                
                
                (150,052
                )
                
                
                (79,029
                )Book
      overdraft
                
                
                276,849
                
                
                
                ---Accrued
      sales tax
                
                
                (46,864
                )
                
                
                (21,854
                )Other
      accrued liabilities
                
                
                (18,757
                )
                
                
                15,244Net
      cash provided by operating activities
                
                
                36,905
                
                
                
                116,996CASH
      FLOWS FROM INVESTING ACTIVITIESDecrease
      in certificate of deposit
                
                
                9,419
                
                
                
                8,237Purchase
      of property and equipment
                
                
                (234,022
                )
                
                
                (64,976
                )Net
      cash used in investing activities
                
                
                (224,603
                )
                
                
                (56,739
                )CASH
      FLOWS FROM FINANCING ACTIVITIESNet
      decrease in short-term borrowings
                
                
                (41,333
                )
                
                
                (9,073
                )Proceeds
      from long-term borrowings
                
                
                168,000
                
                
                
                35,435Principal
      payments on long-term debt
                
                
                (32,520
                )
                
                
                (38,277
                )Redemption
      of common stock
                
                
                (440
                )
                
                
                (2,614
                )Net
      cash provided by (used in) financing activities
                
                
                93,707
                
                
                
                (14,529
                )Net
      increase (decrease) in cash
                
                
                (93,991
                )
                
                
                45,728Cash
      and cash equivalents at beginning of period
                
                
                741,440
                
                
                
                582,472Cash
      and cash equivalents at end of period
                
                $
                647,449
                
                
                $
                628,200SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATION:Cash
      paid during the six months for:Interest
                
                $
                19,314
                
                
                $
                35,068








See Notes
to Financial Statements


4




AMERICAN
CONSUMERS, INC.


NOTES TO
FINANCIAL STATEMENTS







(1)
            Basis
      of Presentation.





The
financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America.





The
interim financial statements have not been audited and should be read in
conjunction with the notes to the financial statements presented in the
Corporation’s 2008 Annual Report to Shareholders.  The quarterly
financial statements reflect all adjustments that are, in the opinion of
management, necessary for a fair presentation of the results for interim
periods.  All such adjustments are of a normal recurring
nature.  The results for the interim periods are not necessarily
indicative of the results to be expected for the complete fiscal
year.





(2)
            Commitments
      and Contingencies.





Ordinary
course capital expenditures replacements of store equipment during fiscal 2009
are estimated to be $50,000 or less, which we expect to be funded from operating
cash flows.  In addition to these expected equipment replacements, up
to three vehicles may have to be replaced during 2009 at a cost of approximately
$25,000 each and we may also have to replace the Company’s maintenance vehicle
during fiscal 2009 at an estimated cost of $30,000 to $35,000.  We
expect to fund these vehicle replacements through either bank or manufacturer
financing, whichever will provide the Company with the most favorable
terms.  Finally, while management has attempted to postpone upgrades
of our existing cash registers and scanning equipment, the pending change to add
an additional digit to UPC bar codes on inventory items and the deterioration of
the current equipment required us to begin the upgrades just prior to our year
end in May 2008.  These upgrades were installed in one location prior
to year end and in one additional location prior to the quarter ended on August
30, 2008.  Three additional stores were upgraded during our quarter
ended November 29, 2008.  The cost of the upgrades is approximately
$56,000 plus tax per store and financing for the completion of the installations
has been obtained through our local bank.  As of November 29, 2008,
capital expenditures for the fiscal year to date totaled $234,022, including the
register and scanning equipment upgrades at four of the Company’s locations and
three scales purchased for the meat or produce departments. The equipment
upgrades for one store cost only $49,818 because we were able to use some
equipment that had been replaced earlier at that location.  Other
stores will need to be updated with meat scales and printers, probably during
the current fiscal year, as part of the ordinary course replacements mentioned
above.





The
Company has a 401(k) plan that is administered by Ascensus. Participation
in the plan is available to all full-time employees after one year of service
and age 19. The Company’s annual contributions to the plan are
discretionary. The Company’s contribution to the plan was $7,500 in each of
fiscal years 2008 and 2007.





(3)
            Cost
      of Goods Sold.





Cost of
goods sold is comprised of the cost of purchasing the Company’s products (such
as groceries and other vendor-supplied products) sold during the
period.  Cost of goods sold is equal to the beginning inventory, plus
the cost of goods purchased during the period, less the amount comprising ending
inventory.  The cost of goods sold shown on the Company’s Statement of
Income and Retained Earnings is presented net of rebates from
suppliers.  These rebates represent cash consideration received from
suppliers based primarily on the Company’s volume of purchases from such
suppliers.  These rebates do not include reimbursement of costs
incurred to sell the supplier’s products.  In accordance with EITF
02-16, the Company applies rebates from suppliers (excluding rebates for
advertising costs) as a reduction in cost of goods sold.


5


ITEM
2


MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL


CONDITION
AND RESULTS OF OPERATIONS




RESULTS
OF OPERATIONS





THIRTEEN WEEKS ENDED
                  
                  
                  TWENTY-SIX WEEKS ENDEDNovember 29,
                    2008
                  
                  
                  December 1,
                    2007
                  
                  
                  November 29,
                    2008
                  
                  
                  December 1,
                    2007Sales
                  
                  $
                  8,700,897
                  
                  
                  $
                  8,487,207
                  
                  
                  $
                  17,486,177
                  
                  
                  $
                  17,228,089%
      Sales Increase
                  
                  
                  2.52
                  %
                  
                  
                  1.13
                  %
                  
                  
                  1.50
                  %
                  
                  
                  2.65
                  %Gross
      Margin %
                  
                  
                  24.72
                  %
                  
                  
                  23.25
                  %
                  
                  
                  24.23
                  %
                  
                  
                  23.32
                  %Operating,
      General and Administrative Expenses:Amount
                  
                  $
                  2,132,687
                  
                  
                  $
                  1,987,573
                  
                  
                  $
                  4,241,817
                  
                  
                  $
                  4,004,679%
      of Sales
                  
                  
                  24.51
                  %
                  
                  
                  23.42
                  %
                  
                  
                  24.26
                  %
                  
                  
                  23.25
                  %Net
      Income
                  
                  $
                  30,115
                  
                  
                  $
                  3,694
                  
                  
                  $
                  27,456
                  
                  
                  $
                  52,522





Overview:





American
Consumers, Inc., (the “Company”), operates eight (8) self-service supermarkets
within a compact geographical area that comprises Northwest Georgia, Northeast
Alabama and Southeast Tennessee.  All of our supermarkets are operated
under the name “Shop-Rite,” and are engaged in the retail sale of groceries
including meats, fresh produce, dairy products, frozen foods, bakery products,
tobacco products and miscellaneous other non-food items.





After
operating at a loss of $2,659 for the first quarter of fiscal 2009, the Company
operated at a net income of $30,115 for the thirteen weeks (quarter) ended
November 29, 2008, which allowed us to report a net income of $27,456 for the
first half of fiscal 2009.  Sales increased by $213,690 (or 2.52%) as
compared to the same quarter of the prior year, as the economy continued to
force consumers to alter their spending habits.  While this quarterly
sales increase was partially offset by the minimal increase of only 0.51%
experienced during our first fiscal quarter, sales for the first half of fiscal
2009 still increased by $258,088 (or 1.50%) over the comparable twenty-six weeks
ended December 1, 2007.  Unfortunately, the impact of this sales
increase, coupled with significant increases in the gross margin (to 24.72% from
23.25% for the quarter and to 24.23% from 23.32% for the first six months of
last year) was offset by increases in operating, general and administrative
expenses ($145,114, or 1.09% as a percentage of sales for the quarter, and
$237,138, or 1.01% as a percentage of sales for the twenty-six week period),
resulting in a small ($4,476) operating loss for the twenty-six weeks ended
November 29, 2008, though we achieved operating income of $18,510 for the
current quarter.  The increase in expenses was due primarily to
increases in payroll costs, increases in group insurance premiums, utility costs
and professional services.  Still, favorable net changes in other
income/expense items allowed us to remain profitable for both the current
quarter and year-to-date periods.  The most significant component of
these changes was the reduction in interest expense for both the thirteen and
twenty-six week periods, due primarily to a decrease in the average balance
carried on our line of credit resulting from the implementation of a cash
management system during fiscal 2008.  Interest expense did increase
by $3,620 in the second quarter as compared to the first quarter of fiscal 2009,
however, due to the new debt incurred to finance equipment purchases of new cash
registers and scanning equipment during the period.  Partially
offsetting the decreases in interest expense were simultaneous decreases in
interest income (due principally to lower prevailing interest rates on our bank
deposits) and other income (due principally to variations in the level of
certain activities as discussed below under “Interest and Other Income” for each
period presented).


6





The
thirteen weeks (quarter) ended December 1, 2007 resulted in a net income in the
amount of $3,694.  Sales increased by only 1.13% during the quarter as
compared to a 4.28% increase during the previous year.  The small
sales increase, while tempered by a decrease in the gross margin of 0.28% for
the quarter, also coincided with a decrease of $8,192 (or 0.41%) in the
operating, general and administrative expenses for the
quarter.  Interest expense for the quarter also increased by $2,154 as
compared to the previous year, due to additional borrowing on the Company’s line
of credit to support traditionally higher November inventory levels for the
Thanksgiving holiday and to maintain two accounts as the Company changed bank
accounts during the quarter.  Other income for the quarter also
declined by $4,547 versus the prior year period, due principally to variations
in the level of certain activities as discussed below under “Interest and Other
Income.”  Cumulatively, these changes resulted in a small increase
($463) in net income for the quarter as compared to the same quarter of fiscal
2007.  For the first six months of fiscal 2008, sales increased by
2.65%, offset somewhat by a 0.44% decrease in the gross
margin.  Interest expense increased by $5,579 as compared to the first
six months of the prior year, largely due to the same factors discussed above
for the quarter, and operating, general and administrative expenses actually
increased slightly (by $1,119, or 0.03%) for the first six months of fiscal
2008.  However, the sales increase, coupled with an increase of $6,139
in other income detailed below, helped to more than offset this slight increase
in expenses and a 0.44% decline in the gross margin, leading a $28,944 increase
in net income as compared to the first six months of fiscal 2007.





Management
actively monitors both the gross margin and the Company’s retail pricing
structure in an attempt to maximize profitability.  Management began
working on the Company’s gross margin during the quarter ended August 31, 2002,
at which time the gross margin stood at 22.79% for the fiscal year ended June 1,
2002.  While occasional improvements in gross profit have been seen in
recent periods, such as the 24.23% gross margin we achieved for the first half
of fiscal 2009 as compared to the gross margins of 23.85% for fiscal 2008 and
23.73% for fiscal 2007, it is difficult to maintain a trend of consistent
improvement in the gross margin due to competitive conditions which often delay
the Company’s ability to pass through price increases experienced at the
wholesale level.  Accordingly, while management attempts to offset
increases in its cost through pricing adjustments as competition allows, further
improvements in the gross margin may not be achievable at this time, and further
deterioration in the Company’s gross margin is possible.  While the
increases in sales mostly offset the impact of reduced gross margins on
profitability during fiscal years 2007 and 2008, the gross margin reductions
experienced as a result of pricing adjustments made to increase sales during
those periods provides further evidence of this trend.





Management
believes that competitive pressures on the Company, which have led to the losses
experienced in years prior to fiscal 2007, will continue to increase over time
as a result of competitors opening more new stores in the Company’s trade
area.  These competitors have greater financial resources than those
of the Company, and may be able to obtain preferential treatment from suppliers
in the form of advertising allowances, lower prices and other concessions not
available to the Company.  These factors allow our competitors to
engage in aggressive pricing and promotional activities that the Company cannot
match, putting us at a competitive disadvantage. In response to these
developments, management will continue seeking to manage the Company’s pricing
structure to produce the most favorable balance between increases in sales,
which help to offset our fixed operating expenses, and the gross margin, which
determines the profitability of the additional sales.  We will attempt
to improve the gross margin and increase profitability by working to obtain the
lowest cost for the Company’s inventory, and as competition permits, by
periodically implementing adjustments in the Company’s overall mix of retail
prices.


7





Our gross
margins may not be directly comparable to those of our larger competitors, since
some of those companies may include the costs of their internal distribution
networks in cost of goods sold – thus impacting the gross margin – while others
reflect such costs elsewhere (such as in operating, general and administrative
expenses).  Unlike many of the larger grocery store chains with which
we compete, the Company does not have an internal distribution
network.  Inventory is delivered directly to our individual store
locations by our wholesale supplier, which recovers its distribution costs
through the markup that it charges to the Company.  Accordingly, our
cost of goods sold as reflected in the Company’s financial statements is
comprised principally of our direct wholesale cost for the acquisition of such
inventory, net of applicable rebates and allowances as discussed under
“Inventories” in Note 1 of the financial statements presented in the Company’s
2008 Annual Report to Shareholders.





Management
has been working to contain operating, general and administrative expenses as
much as possible.  As indicated above, however, these expenses
increased by $145,114, or 1.09% as a percentage of sales, for the current
quarter as compared to the same period last year, and by $237,138, or 1.01% as a
percentage of sales, for the twenty-six week period, resulting in a small
operating loss for the first half of fiscal 2009.  Management
continues to monitor these expenses and continues to evaluate the performance of
each of our grocery store locations to determine their long-term value to the
Company.  Cost increases, combined with the relatively fixed nature of
certain of our expenses mean that any future decrease in sales due to the
effects of ongoing competition will likely erode the improvement experienced in
these expenses as a percentage of sales, which could affect the Company’s
operating profits.  A more detailed discussion of these expenses and
related changes is set forth below under the caption “Operating, General and
Administrative Expenses” for each of the periods presented.








Three Months Ended November
29, 2008 Compared to Three Months Ended December 1, 2007:





Sales:





Sales
increased $213,690 or 2.52% during the quarter ended November 29, 2008 compared
to the quarter ended December 1, 2007.  While sales have continued to
be affected at two of our grocery stores by the opening of a locally owned
supermarket between these two store locations, sales at one of these stores
increased by 1.21% this quarter as compared to the prior year period, while the
other experienced an increase of 6.13% as customers are, or at least seem to be,
now shopping closer to home.  Still, three of the Company’s stores
experienced sales decreases ranging from 1.25% to 5.56%, while the other five
stores showed increases in sales ranging from the 1.21% mentioned above to
7.57%.  The stores with sales decreases generally suffered from
increased competition in their local market areas as compared to the prior year
period, and one also continues to be adversely impacted by another tenant having
moved out of the shopping center where it is located during fiscal 2006 and been
replaced by a tenant which does not generate as much traffic, and by generally
unfavorable traffic pattern conditions at that location.  Management
will attempt to maintain the overall increase in sales by continuing to offer
lower-priced generic goods to our customers and continuing with weekly
advertised specials (including certain targeted promotions) throughout the
year.  We believe that each of these factors, as well as the
continuing effect of high gas prices on consumers’ spending choices and the
availability of our check cashing program for customers, contributed to the
sales increases experienced thus far in fiscal 2009.  Of course,
pricing adjustments made to stimulate sales also contributed to some erosion of
the gross margin during fiscal years 2007 and 2008, so maintaining profitable
increases in sales over time may not be achievable.


8


Sales for
the three months ended December 1, 2007 increased $94,940 or 1.13% compared to
the same quarter the previous year.  Four of our eight grocery stores
experienced sales increases for the quarter (ranging from 1.47% to
6.93%).  The remaining four locations, including both the locations
mentioned above where a competitor opened between two of the Company’s stores
and the third location impacted by the loss of traffic at its shopping center,
experienced sales declines ranging from 0.03% to 8.18%.  Although the
increase was only 1.13% of sales for the three months ended December 1, 2007,
the sales increase was 2.65% for the first six months of the 2008 fiscal
year.




Gross
Margin:





Our gross
margin percentage for the three months ended November 29, 2008 increased by
1.47% from the same quarter last year.  However, the 24.72% gross
margin for the current quarter is down slightly from the gross margin of 24.83%
for the fourth quarter ended May 31, 2008.  Management is working to
make adjustments to retail prices of merchandise to recover increases in our
wholesale costs, to the extent permitted by competition in order to keep the
gross margin at a rate favorable to the Company in its efforts to generate net
income.





The gross
margin percentage for the Company for the three months ended December 1, 2007
decreased by 0.28%, from 23.53% to 23.25% as compared to the same quarter of the
previous fiscal year.  This decrease represented a drop of 0.48% from
the gross margin percentage of 23.73% obtained during the fiscal year ended June
1, 2007.  This decrease versus the prior year period was attributable
to the delays in recovering increases in the costs of certain goods through
adjustments to our retail prices and to promotional programs run by the Company
during the period.




Operating, General and
Administrative Expenses:





The
Company’s operating, general and administrative expenses are comprised mainly of
personnel salary and related payroll costs, utilities and telephone expenses,
rental payments for leased locations, insurance expense, advertising and
promotion expense, general and office supplies expense, repairs and maintenance,
depreciation expense, bank service charges and credit card fees, bad checks
expense, professional fees, vehicle expenses and other minor miscellaneous
expenses.  In accordance with EITF 02-16, advertising rebates received
from suppliers are deducted from advertising expense within this
category.





The
following table details the components of operating, general and administrative
expenses, both in absolute terms and as a percentage of the total of all such
expenses, for the quarters ended November 29, 2008 and December 1,
2007:


9





Expense Item
                  
                  Second
                    Quarter
                    2009 Amount
                  
                  
                  %
      of Second
                    Qtr. 2009 Total
                  
                  
                  Second
      Quarter
                    2008 Amount
                  
                  
                  %
      of Second
                    Qtr. 2008 TotalPayroll
                  
                  $
                  1,069,866
                  
                  
                  
                  50.2
                  
                  
                  $
                  989,207
                  
                  
                  
                  49.8Utilities
      & telephone expense
                  
                  
                  214,338
                  
                  
                  
                  10.0
                  
                  
                  
                  185,760
                  
                  
                  
                  9.2Rent
                  
                  
                  166,212
                  
                  
                  
                  7.8
                  
                  
                  
                  166,806
                  
                  
                  
                  8.4Insurance
                  
                  
                  150,362
                  
                  
                  
                  7.1
                  
                  
                  
                  127,035
                  
                  
                  
                  6.4Advertising
      & promotion
                  
                  
                  125,281
                  
                  
                  
                  5.9
                  
                  
                  
                  113,854
                  
                  
                  
                  5.9General
      & office supplies
                  
                  
                  105,273
                  
                  
                  
                  4.9
                  
                  
                  
                  102,169
                  
                  
                  
                  5.0Repairs
      & maintenance
                  
                  
                  76,258
                  
                  
                  
                  3.6
                  
                  
                  
                  87,811
                  
                  
                  
                  4.4Depreciation
                  
                  
                  32,484
                  
                  
                  
                  1.5
                  
                  
                  
                  31,457
                  
                  
                  
                  1.6Bank
      service charges and credit card fees
                  
                  
                  35,006
                  
                  
                  
                  1.6
                  
                  
                  
                  37,775
                  
                  
                  
                  1.9Bad
      checks
                  
                  
                  27,613
                  
                  
                  
                  1.3
                  
                  
                  
                  43,077
                  
                  
                  
                  2.2Professional
      fees
                  
                  
                  53,010
                  
                  
                  
                  2.5
                  
                  
                  
                  45,000
                  
                  
                  
                  2.3Vehicle
      expenses
                  
                  
                  13,604
                  
                  
                  
                  0.6
                  
                  
                  
                  7,417
                  
                  
                  
                  0.4All
      other miscellaneous
                  
                  
                  63,380
                  
                  
                  
                  3.0
                  
                  
                  
                  50,205
                  
                  
                  
                  2.5TOTAL
                  
                  $
                  2,132,687
                  
                  
                  
                  100.0
                  
                  
                  $
                  1,987,573
                  
                  
                  
                  100.0





Operating,
general and administrative expenses increased by $145,114 (or 7.30%), for the
second quarter of fiscal 2009 as compared to the comparable period of fiscal
2008.  Payroll expenses increased by $80,659 (or 8.15%) versus last
year due to the federally mandated increase in the minimum wage that took effect
on July 24, 2008, as well as an increase in bonuses accrued during the current
quarter of $9,459 as compared to the same quarter last year, due to the improved
net income for the quarter.  This increase was also affected by an
increase in administrative payroll of approximately $26,000 during the quarter,
due to hiring an additional office employee and employees receiving additional
training for management and supervisory positions.  Utilities and
telephone expense increased by $28,578 (or 15.38%) as energy costs continue to
escalate.  Insurance increased by $23,327 (or 18.36%) due to the
receipt in the second quarter of fiscal 2008 of a premium refund that resulted
from an audit of the Company’s workman’s compensation package, with no
comparable refund received during the current quarter.  Advertising
and promotion expense, which remained constant as a percentage of sales,
increased by $11,427 (or 10.04%), as costs to purchase comparable advertising
increased.  General and office expense increased by $3,104 (or 3.04%)
due to increases in the cost of supplies.  Depreciation expense
increased by $1,027 (or 3.26%), as the Company moved forward with replacing its
cash register and scanning systems during the quarter.  This expense
will continue to increase as replacements continue throughout the fiscal
year.  Professional fees increased by $8,010 (or 17.80%) as compared
to the same quarter last year, as costs to comply with the Sarbanes-Oxley Act
continued to rise, including increases in utilization of legal services related
to compliance with the internal controls provisions of Section 404 of such
Act.  We are also incurring additional expense for the use of an
outside agent to collect bad checks, which resulted in a decrease in bad check
expense as discussed below.  Vehicle expenses increased $6,187 (or
83.42%) due to additional repairs and maintenance required for the Company’s
aging fleet of vehicles.  All other expenses increased $13,175 (or
26.20%), due to increases in other miscellaneous expenses during the
quarter.


10





The
Company also experienced decreases in the following expenses during the
quarter.  Rent expense remained fairly consistent decreasing by $594
(or 0.36%) during the quarter due to a decrease in overages at one of the
Company’s locations that has experienced a decrease in sales during the past
year.  Repairs and maintenance expenses were down $11,553 (or 13.16%)
due to a reduction in repairs to equipment during the quarter as compared to the
prior year period.  Bank service charges and credit card fees
decreased by $2,769 (or 7.33%), as the Company has changed to a new provider to
handle its credit and debit card processing services in conjunction with the
ongoing replacement of our registers.  Bad checks decreased by $15,464
(or 35.90%), reflecting improved recoveries due to a change in the provider of
bad check collection services coupled with improved procedures for processing
checks at the store level that have caused more questionable checks to be
refused at the register.  As noted above, this decrease was partially
offset by additional professional fees attributable to the new provider of
collection services.  Management continues to monitor these expenses
in an effort to reduce or limit increases to the extent possible, given the
costs passed on to the Company by its suppliers of goods and
services.





Overall,
operating, general and administrative expenses decreased slightly, by $8,192 (or
0.41%), for the second quarter of fiscal 2008 as compared to the comparable
period of fiscal 2007.  Payroll expense increased by $4,188 (or 0.4%)
versus fiscal 2007 due to the federally mandated increase in the minimum wage
that took effect at the first of the 2008 quarter.  Store management
worked to reduce these expenses prior to the wage increase through more
efficient management of employee scheduling and will continue to do
so.  Utilities and telephone expense increased by $7,916 (or 4.45%) as
energy costs continue to rise.  Rent increased by $6,027 due to
increases in rent at two locations.  General and office supplies
increased by $15,906 (or 18.44%) due to increases in costs as well as additional
supplies needed to accommodate increased sales.  Bad checks expense
increased $7,649 (or 21.59%), reflecting a trend in the presentation and
subsequent cashing of counterfeit checks.  Management believes that
the practice of cashing customers’ checks, while posing risks for the Company
(such as the theft loss that was experienced during the fourth quarter of fiscal
2006 and recent increases in bad checks expense), is also vital to our
competitive strategy for maintaining customer traffic and growing sales in the
face of increased competition from grocery retailers that we have experienced in
recent years. Professional fees increased by $4,307 (or 10.58%) as costs
continue to increase due to compliance with Sarbanes-Oxley Act.





Insurance
expense decreased by $30,814 (or 19.52%) as a result of a reduction in workman’s
compensation premiums for our policy period that began on July 1,
2007.  Advertising and promotion expense decreased by $7,597, (or
6.26%) due to management’s efforts to reduce these costs during the
quarter.  Repairs and maintenance expense decreased by $2,016 (or
2.24%) due to a reduction in the need for repairs during the
quarter.  Depreciation decreased by $6,159 (or 16.37%) due to the age
and fully depreciated status of much of our equipment.  These charges
are returning to more historically consistent levels as the Company moves
through the equipment replacement cycle discussed above.  Bank service
charges and credit card fees decreased by $4,584 (or 10.82%) due to improved
cash flow resulting in reduced bank service charges during the
quarter.  All other expenses remained generally consistent with the
preceding year’s figures.





Interest and Other
Income:





Other
income (not including interest income) decreased from $30,485 for the quarter
ended December 1, 2007 to $22,079 for the quarter ended November 29,
2008.  The decrease in check cashing fees for the second quarter of
fiscal 2009 reflects a reduction in the activity of check cashing, as management
attempts to more closely monitor the acceptance of bad checks.  An
improved system is now in place at the five stores that had received the cash
register and scanning equipment updates as of November 29, 2008, which scans
checks when presented and rejects any checks deemed not good by the system’s
enhanced database.  The negative figure of $467 for the quarter ended
December 1, 2007 in funds received for handling money orders and money transfers
in the stores was due to a one-time adjustment of $3,033 made to reverse an
over-accrual error in these amounts that occurred during the first quarter of
fiscal 2007, as well as to a reduction in the volume of these transactions as
compared to the prior year period.  Excluding the one-time adjustment,
funds received for handling money orders would have been $2,566 for the quarter
ended December 1, 2007.  Changes in the other components of other
income presented below relate primarily to variations in the volume of the
associated activity or service provided by the Company during each of the fiscal
periods presented.  The components of other income for the quarters
ended November 29, 2008 and December 1, 2007 were as follows:


11




THIRTEEN WEEKS ENDEDDescription
                    
                    November 29, 2008
                    
                    
                    December 1, 2007Check
      cashing fees
                    
                    $
                    15,065
                    
                    
                    $
                    23,877Funds
      received for handling money orders
                    
                    
                    539
                    
                    
                    
                    (467
                    )Vendor’s
      compensation from the States of Alabama and Georgia for collecting and
      remitting sales taxes on a timely basis
                    
                    
                    3,739
                    
                    
                    
                    3,629Returned
      check fees
                    
                    
                    1,243
                    
                    
                    
                    1,460Revenue
      related to Fed-Ex shipments/other
                    
                    
                    1,493
                    
                    
                    
                    1,986TOTAL
                    
                    $
                    22,079
                    
                    
                    $
                    30,485





Interest
income decreased by $1,599 as compared to the second quarter of fiscal 2008, due
to the re-pricing of the interest rate on the Company’s certificate of deposit
at the latest renewal date.





Six Months Ended November
29, 2008 Compared to Six Months Ended December 1, 2007:





Sales:





Sales for
the six months ended November 29, 2008 increased $258,088 or 1.50% compared to
the same six-month period last year.  While the sales increase of
2.52% realized in the second quarter of fiscal 2009 as compared to the same
quarter last year was roughly in line with the 2.65% sales increase experienced
for the first six months of fiscal 2008, as noted above this increase was
tempered by nearly flat sales for the first quarter of fiscal 2009 as compared
to the prior year.  Sales increased at four of the Company’s eight
stores for the twenty-six weeks ended November 29, 2008 (ranging from 1.90% to
6.21%).  The other four stores experienced sales decreases ranging
from 0.46% to 7.37%.  Factors believed by management to have
influenced these increases and decreases are discussed above in relation to the
second quarter numbers.  While it is difficult to consistently
increase sales due to the effects of competition, we are trying to service our
customers, both new and old, to encourage them to shop with us.





Sales for
the six months ended December 1, 2007 increased $445,111 or 2.65% compared to
the same six months of fiscal 2007.  This increase was down from the
4.61% increase obtained for the six months ended December 2, 2006 over the six
months ended November 26, 2005.  Six of our eight grocery stores
experienced sales increases for the first six months of fiscal 2008 (ranging
from 1.07% to 8.78%).  Competition opened in the market area of the
Company’s other two stores that experienced decreases of 3.99% and 0.74% during
the period.


12




Gross
Margin:





The
Company’s gross margin percentage for the six months ended November 29, 2008
increased by 0.91% as compared to the six months ended December 1, 2007, from
23.32% to 24.23%.  The gross margin percentage for fiscal 2008 was
23.85%, with the gross margin for the fourth quarter of fiscal 2008 being
24.83%.  The gross margin for the first quarter of fiscal 2009 was
23.75%.  The gross margin achieved in the four individual quarters
making up fiscal 2008 ranged from 23.25% to 24.83%.  The gross margin
percentage is dependent on our ability to keep pace with increases in wholesale
prices and our ability to pass those increases on to the customer based on
competition.  Management is constantly working to strategically adjust
the retail prices of our merchandise to recover increases in our wholesale
costs, to the extent permitted by competition.





The
Company’s gross margin percentage for the six months ended December 1, 2007
decreased by 0.44% as compared to the six months ended December 2, 2006, from
23.76% to 23.32%. However, the gross margin for the first six months of fiscal
2008 reflected relative stability as compared to the 23.28% gross margin
experienced for the fourth quarter of the fiscal year ended June 2,
2007.  This decrease versus the comparable period of fiscal 2007 is
attributable to the impact of delays in recovering increases in the costs of
certain merchandise through adjustments to our retail prices, as well as to the
other promotional activities described above.





Operating, General and
Administrative Expenses:





The
following table details the components of operating, general and administrative
expenses, both in absolute terms and as a percentage of the total of all such
expenses, for the six month periods ended November 29, 2008 and December 1,
2007:





Expense Item
                  
                  2009
      Six
                    Month Amount
                  
                  
                  %
      of 2009 Six
                    Month Total
                  
                  
                  2008
      Six
                    Month Amount
                  
                  
                  %
      of 2008 Six
                    Month TotalPayroll
                  
                  $
                  2,113,952
                  
                  
                  
                  49.8
                  
                  
                  $
                  1,985,363
                  
                  
                  
                  49.6Utilities
      & telephone expense
                  
                  
                  410,199
                  
                  
                  
                  9.7
                  
                  
                  
                  361,329
                  
                  
                  
                  9.0Rent
                  
                  
                  332,508
                  
                  
                  
                  7.8
                  
                  
                  
                  329,506
                  
                  
                  
                  8.2Insurance
                  
                  
                  297,337
                  
                  
                  
                  7.0
                  
                  
                  
                  268,468
                  
                  
                  
                  6.7Advertising
      & promotion
                  
                  
                  256,110
                  
                  
                  
                  6.0
                  
                  
                  
                  250,936
                  
                  
                  
                  6.3General
      & office supplies
                  
                  
                  208,679
                  
                  
                  
                  4.9
                  
                  
                  
                  203,514
                  
                  
                  
                  5.0Repairs
      & maintenance
                  
                  
                  160,320
                  
                  
                  
                  3.8
                  
                  
                  
                  177,470
                  
                  
                  
                  4.4Depreciation
                  
                  
                  60,410
                  
                  
                  
                  1.4
                  
                  
                  
                  62,291
                  
                  
                  
                  1.6Bank
      service charges and credit card fees
                  
                  
                  72,108
                  
                  
                  
                  1.7
                  
                  
                  
                  75,467
                  
                  
                  
                  1.9Bad
      checks
                  
                  
                  70,674
                  
                  
                  
                  1.7
                  
                  
                  
                  88,061
                  
                  
                  
                  2.2Professional
      fees
                  
                  
                  123,459
                  
                  
                  
                  2.9
                  
                  
                  
                  87,665
                  
                  
                  
                  2.2Vehicle
      expenses
                  
                  
                  24,197
                  
                  
                  
                  0.6
                  
                  
                  
                  14,137
                  
                  
                  
                  0.4All
      other miscellaneous
                  
                  
                  111,864
                  
                  
                  
                  2.7
                  
                  
                  
                  100,472
                  
                  
                  
                  2.5TOTAL
                  
                  $
                  4,241,817
                  
                  
                  
                  100.0
                  
                  
                  $
                  4,004,679
                  
                  
                  
                  100.0




13




The
Company’s operating, general and administrative expense for the six months ended
November 29, 2008 increased overall by $237,138 (or 5.92%) over the same
six-month period last year.  Payroll costs increased by $128,589 (or
6.48%).  As discussed above, this increase is due to an increase in
the minimum wage effective on July 24, 2008 and to the hiring of additional
personnel during the first six months of fiscal 2009.  Officer’s and
supervisors accrued bonuses actually decreased by $5,880 for the six month
period because of the reduction in net income for the six months ended November
29, 2008 in the amount of $25,066 as compared to the prior year
period.  Utilities and telephone expenses increased by $48,870 (or
13.53%) as energy costs continue to rise.  Rent expense remained
fairly consistent, increasing by $3,002 (or 0.91%) for the twenty-six week
period and actually decreased during the quarter ended November 29, 2008, as
discussed above.  Insurance increased by 28,869 (or 10.75%) due to
increased premiums under the Company’s health insurance package maintained for
employees, partially offset by a decrease in the premiums for the Company’s
workmen’s compensation package and commercial liability coverage.  The
Company also received a return premium of approximately $18,000 last year from a
workmen’s compensation audit that has not been completed this
year.  Advertising and promotion expense increased by only $5,174 (or
2.06%) as management continually works to control these costs by reducing the
amount of certain of these activities during the year.  General and
office supplies increased by $5,165 (or 2.54%) reflecting increases in costs of
paper, operating supplies and other office supplies.  Professional
fees increased by $35,794 (or 40.83%) as compared to the same quarter last year,
as costs to comply with the Sarbanes-Oxley Act continued to rise, including
significant increases in utilization of legal services and other outside
consulting fees related to compliance with the internal controls provisions of
Section 404 of such Act.  The Company also incurred approximately
$7,500 in professional fees paid to a check collection agency in an effort to
reduce bad checks expense.  Vehicle expenses increased $10,060 (or
71.16%) due to additional repairs and maintenance required for the Company’s
aging fleet of vehicles.  All other expenses increased $11,392 (or
11.34%), due to increases in other miscellaneous expenses during the
quarter.





Repairs
and maintenance decreased by $17,150 (or 9.66%) due to the reduction in repairs
to equipment during the twenty-six week period this year as compared to last
year.  These repairs are expensed as incurred and may not continue to
decrease during the remainder of the year. Depreciation decreased by $1,881 (or
3.02%) for the periods reported but will increase during the remainder of fiscal
2009 due to the ongoing replacements of cash registers and other
equipment.  Bank service charges and credit card fees decreased by
$3,359 (or 4.45%) as management is switching service providers for card
processing as cash registers are replaced. Bad check expense decreased by
$17,387 (or 19.71%) as management also is switching to a new provider of
handling bad check collections and striving to improve store procedures, as
discussed above.





The
Company’s operating, general and administrative expenses for the six months
ended December 1, 2007 increased overall by only $1,119, or 0.03% over the same
six month period of fiscal 2007.  While payroll expenses decreased by
$2,037 (or 0.10%) versus last year, these expenses increased during the second
quarter of fiscal 2008 because of the federally mandated increase in the minimum
wage that took effect early in the quarter.  Utilities and telephone
expense increased by $9,968 (or 2.84%) for the six month period due to increases
in energy costs.  Rent expense increased by $9,272 (or 2.90%) due to
increases in rent at two of the Company’s locations as leases were
renewed.  General and office supplies increased by $21,555, or
(11.85%) due to increases in costs as well as additional supplies needed to
accommodate increased sales.  Repairs and maintenance only increased
by $1,347, (or 0.76%) due to a reduction of needed repairs in the second quarter
of this year.  Bad checks increased by $8,760, (or 11.05%) reflecting
a trend in the presentation and subsequent cashing of counterfeit
checks.  Management is continually making efforts to improve training
and employee education on this topic.  Professional fees increased by
$28,375 (or 47.86%) as a result of increased regulatory compliance expense under
the Sarbanes-Oxley Act, coupled with increased utilization of legal services as
compared to the same six month period of the preceding year.


14





Insurance
expense decreased by $55,391 (or 17.10%) as a result of a reduction in workman’s
compensation premiums for our policy period that began on July 1,
2007.  Advertising and promotion expense decreased by $3,262 (or
1.28%) due to management’s efforts to reduce this expense
item.  Depreciation expense was reduced by $13,452 (or 17.76%) due to
the age and fully depreciated status of much of our equipment.  As
noted above, however, these charges are returning to more historically
consistent levels as the Company moves through current equipment replacement
cycles.  Bank service charges and credit card fees decreased by $7,421
(or 8.95%) due to the improvements in the Company’s cash balances and cash
management procedures as a result of the change in our principal banking
relationship during the fourth quarter of fiscal 2007.  All other
expenses remained generally consistent with last year’s figures.





Interest and Other
Income:





Other
income (not including interest income) decreased from $67,521 for the six months
ended December 1, 2007 to $48,171 for the six months ended November 29, 2008,
due primarily to variations in the volume of the associated activity or service
provided by the Company during each of the fiscal quarters
presented.  As discussed above, the Company has tightened its controls
over the process for accepting checks, resulting in some reduction in the volume
of check cashing activity, and has switched to a different provider for the
handling of bad check collections.  This has resulted in more income
from returned check fees, partially offset by the increased cost of the provider
reflected under professional fees above.  The components of other
income for the six months ended November 29, 2008 and December 1, 2007 were as
follows:





TWENTY-SIX WEEKS ENDEDDescription
                    
                    November 29, 2008
                    
                    
                    December 1, 2007Check
      cashing fees
                    
                    $
                    34,689
                    
                    
                    $
                    46,821Funds
      received for handling money orders
                    
                    
                    1,110
                    
                    
                    
                    4,457Vendor’s
      compensation from the States of Alabama and Georgia for collecting and
      remitting sales taxes on a timely basis
                    
                    
                    7,604
                    
                    
                    
                    7,354Returned
      check fees
                    
                    
                    2,708
                    
                    
                    
                    1,837Revenue
      related to Fed-Ex shipments/other
                    
                    
                    2,060
                    
                    
                    
                    7,052TOTAL
                    
                    $
                    48,171
                    
                    
                    $
                    67,521





Interest
income decreased by $2,586 as compared to the first six months of fiscal 2008,
due to the repricing of the interest rate on the Company’s certificate of
deposit at the latest renewal date.





Income
Taxes:





The
Company accounts for income taxes in accordance with the provisions of SFAS No.
109, “Accounting for Income Taxes,” which requires that deferred income taxes be
determined based on the estimated future tax effects of differences between the
financial statement and tax bases of assets and liabilities given the provisions
of the enacted tax laws.  Valuation allowances are used to reduce
deferred tax assets to the amount considered likely to be
realized.


15




No
amounts have been provided for current and deferred federal and state tax
expense in the statements of income for the six months ended November 29, 2008
or December 1, 2007, as a result of a continued net operating loss carry-forward
and the related full valuation of the Company’s net deferred tax
assets.




Inflation:





The
Company continues to seek ways to cope with the threat of
inflation.  To the extent permitted by competition, increased costs of
goods and services to the Company are reflected in increased selling prices for
the Company’s goods.  However, competitive conditions often delay our
ability to pass through price increases experienced at the wholesale
level.  When the Company is forced to raise overall prices of its
goods, we attempt to preserve the Company’s market share through competitive
pricing strategies that emphasize weekly-advertised
specials.


16


FINANCIAL
CONDITION








Liquidity and Capital
Resources:





Changes
in the Company’s liquidity and capital resources during the periods presented
resulted primarily from the following:





Cash
Flows from Operating Activities





During
the twenty-six weeks ended November 29, 2008, the Company generated a net amount
of $36,905 in cash flows from operating activities.  In addition to
the Company’s net income of $27,456 for the period, other sources of operating
cash flow included the impact of non-cash depreciation charges in the amount of
$60,410 and an increase in the book overdraft in the amount of $276,849
(resulting from the timing impacts of draws and repayments under our revolving
line of credit in conjunction with the cash management program instituted during
fiscal 2008 with the bank that provides the line of credit), partially offset by
a decrease in accounts payable of $150,052.  Operating cash flow was
also generated by a $28,022 decrease in prepaid expenses.  This was
due to a combination of (i) a decrease in prepaid maintenance expense, since the
new registers being installed come with the first year maintenance free and only
a nominal fee for software maintenance and (ii) the fact that there were no
deposits on registers at November 29, 2008 as compared to a $24,216 deposit that
was being carried at May 31, 2008, partially offset by an increase in the
prepaid insurance balance between May 31, 2008 and November 29, 2008 due to the
payment of premiums.  Additional uses of operating cash flows during
the first half of fiscal 2009 included (i) a $112,807 increase in inventories
(due to seasonal requirements for increased inventory to meet customer demand
during the holiday periods in November and December); (ii) a $27,352 increase in
accounts receivable (due to an increase in advertising and volume-based rebates
from vendors and a decrease in coupons receivable due to timing of mailing
coupons for redemption); and (iii) reductions of $46,864 in sales tax payable
(due mainly to timing of payments) and $18,757 in other accrued
liabilities.





This
compares to cash generated from operating activities of $116,996 for the
twenty-six weeks ending December 1, 2007.  These funds resulted from a
net income of $52,522, coupled with the impact of non-cash depreciation charges
in the amount of $62,291 as well as reductions in accounts receivable of $76,803
(due to a slight increase in advertising and volume-based rebates from vendors
which was more than offset by collection of a short-term promissory note from a
former employee that was repaid during the period) and prepaid expenses of
$93,962 (largely due to timing differences in payments for insurance premiums)
and an increase of $15,244 in other liabilities.  These sources of
operating cash flows were partially offset by decreases of $79,029 in accounts
payable and $21,854 in sales tax payable (due largely to the timing of state
sales tax payments in relation to quarterly sales levels), and increases of
$82,943 in inventories (due to seasonal requirements to meet seasonal holiday
demand) and $93,962 in prepaid expense (largely due to timing differences in
payments for insurance premiums and prepaid maintenance contracts on our cash
registers and scanning equipment).





Cash
Flows from Investing Activities





Investing
activities used $224,603 of cash flow during the twenty-six weeks ended
November 29, 2008, due to $234,022 of expenditures for the equipment
purchases ($221,022 for the upgraded cash register and scanning equipment
systems for four stores plus approximately $13,000 for the purchase of three
scales for produce and meat departments), partially offset by a decrease in the
Company’s certificate of deposit in the amount of $9,419.


17




Investing
activities used $56,739 of cash flow during the twenty-six weeks ended
December 1, 2007, consisting of $64,976 used to fund purchases of property
and equipment during the period, including the purchase of two vehicles,
partially offset by a decrease of $8,237 in the balance of our certificate of
deposit.





Cash
Flows from Financing Activities





Financing
activities provided $93,707 of additional cash flow during the twenty-six weeks
ended November 29, 2008.  The impact of $168,000 of additional
long-term debt incurred in connection with the ongoing cash register and
scanning equipment purchases was partially offset by principal payments on
long-term debt in the amount of $32,520, a net decrease of $41,333 in short-term
debt (primarily outstanding borrowings under our line of credit, which fluctuate
throughout each quarter as amounts are continuously drawn and repaid, based on
the timing of expenditures and revenues, under the terms of the cash management
facility with our lender) and the redemption of common stock in the amount of
$440.





During
the twenty-six weeks ended December 1, 2007, the Company used $14,529 in cash
flow from financing activities, consisting of a $9,073 reduction in the
Company’s short term borrowings and payments of $38,277 on the Company’s long
term debt, offset by $35,435 of new debt incurred in connection with the
purchase of the two new vehicles during the six month period and the expenditure
of $2,614 to redeem common stock.





Overall,
the Company’s cash and cash equivalents decreased by $93,991 during the
twenty-six weeks ended November 29, 2008, versus an increase in cash and cash
equivalents of $45,728 during the twenty-six weeks ended December 1,
2007.





The ratio
of current assets to current liabilities was 1.75 to 1 at the end of the latest
quarter, November 29, 2008 compared to 1.80 to 1 on December 1, 2007 and 1.79 to
1 at the end of the fiscal year ended May 31, 2008.  Cash, cash
equivalents and the certificate of deposit constituted 27.20% of the total
current assets at November 29, 2008, as compared to 27.83% of total current
assets at December 1, 2007 and 30.23% of total current assets at May 31,
2008.  As previously reported, the Company has increased its reliance
on bank financing and working capital management to maintain adequate liquidity
to fund operations in connection with the operating losses experienced in recent
years.  During the last three years, management also has limited
additional capital spending and has been attempting to control costs in other
areas to moderate the effects of these developments on the Company’s overall
liquidity by reducing the Company’s working capital
requirements.  While these efforts resulted in a net reduction of
approximately $14,000 in the Company’s monthly debt service requirements through
the end of fiscal 2008 due to the retirement of long term debt over the three
year period, these savings will be partially offset by debt service requirements
on the new financing obtained in connection with the ongoing replacement of the
Company’s cash registers and scanning equipment at each of its stores, as well
as with vehicles purchased in recent periods.  As employment and
inventory costs increase, management will continue to attempt to compensate for
the increases through operational efficiencies (including both efficient working
capital management, which has been aided by the addition of a cash management
program during the second half of fiscal 2008, and seeking to reduce other
expenses where possible), and through seeking to continue the favorable cash
management arrangement with our primary lender.


18


In
general, management also has been working to reduce the Company’s inventory
levels when possible as an additional means of providing working
capital.  However, inventories at November 29, 2008 increased by
$112,807 over the inventory at year-end May 31, 2008, due to normal seasonal
requirements for increased inventory to meet customer demand during the
holidays, as discussed above.  The overall level of inventory balances
in recent periods also has been affected by ongoing increases in the Company’s
cost for certain staple grocery items.





Historically,
the Company has financed its working capital requirements principally through
its cash flow from operations.  Short-term borrowing to finance
inventory purchases is provided by the Company’s $800,000 line of credit from
its bank and through borrowings from related parties, as discussed
below.  Effective May 3, 2007, we entered into a new credit facility
with Gateway Bank & Trust, which includes an $800,000 line of credit with a
12 month term which was renewed for an additional year in May
2008.  The line of credit contains a borrowing base provision that
limits the maximum outstanding indebtedness to forty percent (40%) of the value
of the Company’s inventory, as measured on a quarterly basis.  As of
November 29, 2008, we had $429,060 available to be borrowed under the line of
credit.  The bank line of credit is secured by the Company’s
certificate of deposit, as well as by a security interest in substantially all
of our accounts receivable, inventory, machines and equipment, furniture and
fixtures and by personal guarantees of Michael A. Richardson and Paul R. Cook,
the Company’s President and CEO and Executive Vice President and CFO,
respectively.  While we believe that these sources will continue to
provide us with adequate liquidity to supply the Company’s working capital
needs, if the Company’s operating losses were to increase relative to
depreciation and other non-cash charges, our operating cash flows could be
adversely affected.  If this happens, we could be required to seek
additional financing through bank loans, or other sources, in order to meet our
working capital needs.  If we were required to seek such additional
financing and were not able to obtain it, or were unable to do so on
commercially reasonable terms, we could be required to reduce the Company’s
current level of operations in order to lower our working capital requirements
to a level that our present financing arrangements would support.





Short-term
borrowings as of specific dates are presented below:








November 29,
                    2008
                  
                  
                  May 31,
                    2008
                  
                  
                  December 1,
                    2007Michael
      and Diana Richardson
                  
                  $
                  10,051
                  
                  
                  $
                  9,764
                  
                  
                  $
                  13,350Matthew
      Richardson
                  
                  
                  496
                  
                  
                  
                  1,566
                  
                  
                  
                  1,517Line
      of Credit
                  
                  
                  370,940
                  
                  
                  
                  411,490
                  
                  
                  
                  600,000TOTAL
                  
                  $
                  381,487
                  
                  
                  $
                  422,820
                  
                  
                  $
                  614,867





During
the first six months of fiscal 2009, we increased the Company’s borrowings from
related parties by $317 (reflecting additional accrued interest) and reduced the
outstanding principal by $1,100 for a net reduction of $783.  We
reduced the outstanding balance under the line of credit by a net amount of
$40,550.





The
Company’s line of credit with Gateway Bank & Trust bears interest at prime,
subject to a 6.0% floor.  Notes to Michael and Diana Richardson and to
Matthew Richardson are unsecured, payable on demand and bear interest at .25%
below the base rate charged by Gateway Bank & Trust on the line of
credit.  Michael Richardson is Chairman of the Board and Chief
Executive Officer of the Company.  Diana Richardson is the wife of
Michael Richardson, and Matthew Richardson is their son.


19





Long-Term
Debt:





At
November 29, 2008, long-term debt included a note payable to Gateway Bank &
Trust of $130,704 incurred in May 2007 to refinance the addition of the
Company’s eighth grocery store. The Company also borrowed $168,000 (current
balance of $161,954) in three related loans, with the proceeds used to purchase
registers and related equipment in three stores.  In addition, three
vehicles have been purchased and financed through Tennessee Valley Federal
Credit Union, with balances due at November 29, 2008 of $10,638, $9,269 and
$7,102.  Long-term debt as of specific dates is presented
below:








November 29,
                      2008
                    
                    
                    May 31,
                      2008
                    
                    
                    December 1,
                      2007Three
      notes payable, Bank, secured by all inventory, machinery and equipment,
      due $1,087 monthly, with interest at prime with a 6% floor through
      September 2013.
                    
                    $
                    161,954
                    
                    
                    $
                    —
                    
                    
                    $
                    —Note
      payable, Bank, secured by all inventory, machinery and equipment, due
      $3,684 monthly, with interest at prime with a 6% floor through April
      2012.
                    
                    
                    130,704
                    
                    
                    
                    148,486
                    
                    
                    
                    165,228Vehicle
      loans; collateralized by automobiles due monthly through July
      2010.
                    
                    
                    27,009
                    
                    
                    
                    35,701
                    
                    
                    
                    44,180$
                    319,667
                    
                    
                    $
                    184,187
                    
                    
                    $
                    209,408Less
      current maturities
                    
                    
                    85,718
                    
                    
                    
                    53,922
                    
                    
                    
                    50,112$
                    233,949
                    
                    
                    $
                    130,265
                    
                    
                    $
                    159,296





The
following is a schedule by years of the amount of maturities of all long-term
debt subsequent to November 29, 2008:





Twelve
      Months
                    Ending November
                  
                  Amount2009
                  
                  $
                  85,7182010
                  
                  
                  80,7002011
                  
                  
                  76,2182012
                  
                  
                  47,6602013
                  
                  
                  29,371





During
the quarter ended November 29, 2008 retained earnings increased as a result of
the Company’s net income for the quarter.








Critical Accounting
Policies:





Critical
accounting policies are those policies that management believes are important to
the portrayal of the Company’s financial condition and results of operations and
require management’s most difficult, subjective or complex judgments, often as a
result of the need to make estimates about the effect of matters that are
inherently uncertain.  Management believes it has chosen accounting
policies that are appropriate to report accurately and fairly our operating
results and financial position, and we apply those accounting policies in a
consistent manner.  Our significant accounting policies are summarized
in Note 1 to the Financial Statements included in the Company’s Annual Report on
Form 10-K for the year ended May 31, 2008.


20




We
believe that the following accounting policies are the most critical in the
preparation of our financial statements because they involve the most difficult,
subjective or complex judgments about the effect of matters that are inherently
uncertain.





Use of
Estimates:





The
preparation of financial statements is conformity with generally accepted
accounting principals requires management to make estimates and assumptions that
affect the reported amount of assets, liabilities, revenues, and expenses, and
related disclosures of contingent assets and liabilities.  Management
determines its estimates based on historical experience and other factors
believed to be reasonable under the circumstances.  Actual results
could differ from those estimates.





Inventories:





All
inventories are valued at the lower of average cost or market, following the
Average Cost-to-Retail Method.  Under this method, inventory is stated
at average cost, which is determined by applying an average cost-to-retail ratio
to each similar merchandise category’s ending retail value.  If
average cost is determined to exceed market value, the impacted merchandise’s
carrying value is reduced to market value, with the reduction flowing through
current period earnings.  Management recognizes inventory shortages
throughout the year based on actual physical counts, which are performed on a
quarterly basis at each store location.





Vendor
Allowances:





The
Company receives funds for a variety of merchandising activities from vendors
whose products the Company buys for resale in its stores.  These
incentives and allowances include volume or purchase based incentives,
advertising allowances, and promotional discounts.  The purpose of
these incentives and allowances is generally to aid in the reduction of the
costs incurred by the Company for stocking, advertising, promoting and selling
the vendor’s products.  The allowances generally relate to short-term
arrangements with vendors, often relating to a period of one month or less, and
are typically negotiated on a purchase-by-purchase basis.  Due to
system constraints and the nature of certain allowances, these allowances are
applied as a reduction of inventory costs using a rational and systematic
methodology, which results in the recognition of these incentives when the
inventory related to the initial purchase is sold.  Management
recognized vendor allowances of $115,085 and $205,035, respectively, as a
reduction in inventory costs for the thirteen and twenty-six week periods ended
November 29, 2008, and recognized vendor allowances of $124,049 and $213,565,
respectively, as a reduction in inventory costs for the thirteen and twenty-six
week periods ended December 1, 2007.  Amounts that represent a
reimbursement of specific identifiable incremental costs, such as advertising,
are recorded as a reduction to the related expense in the period that the
related expense is incurred.  Management recognized approximately
$14,350 and $30,682, respectively, in advertising allowances recorded as a
reduction of advertising expense for the thirteen and twenty-six week periods
ended November 29, 2008, and recognized approximately $22,578 and $31,328,
respectively, in advertising allowances recorded as a reduction of advertising
expense for the thirteen and twenty-six week periods ended December 1,
2007.


21





Asset
Impairments:





Management
accounts for any impairment of its long-lived assets in accordance with
Statement of Financial Accounting Standards No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets.”  Management monitors the
carrying value of its long-lived assets for potential impairment each quarter
based on whether any indicators of impairment have occurred.  As of
November 29, 2008 and December 1, 2007, no long-lived assets have been
identified by management as impaired.




Off-Balance Sheet
Arrangements:





The
Company had no significant off-balance sheet arrangements as of November 29,
2008.




Related Party
Transactions:





Except as
discussed above under “Liquidity and Capital Resources,” there were no material
related party transactions during the twenty-six week period ended November 29,
2008.




Forward – Looking
Statements:





Information
provided by the Company, including written or oral statements made by its
representatives, may contain “forward looking information” as defined in Section
21E of the Securities Exchange Act of 1934, as amended.  All
statements which address activities, events or developments that the Company
expects or anticipates will or may occur in the future, including such things as
expansion and growth of the Company’s business, the effects of future
competition, future capital expenditures and the Company’s business strategy,
are forward-looking statements.  In reviewing such information it
should be kept in mind that actual results may differ materially from those
projected or suggested in such forward-looking statements.  This
forward-looking information is based on various factors and was derived
utilizing numerous assumptions.  Many of these factors previously have
been identified in filings or statements made on behalf of the Company,
including filings with the Securities and Exchange Commission on Forms 10-Q,
10-K and 8-K.  Important assumptions and other important factors that
could cause actual results to differ materially from those set forth in the
forward-looking statements, include the following (in addition to those matters
discussed in the Risk Factors included in Part I, Item 1A of our Annual
Report on Form 10-K for the fiscal year ended May 31, 2008): changes in the
general economy or in the Company’s primary markets, the effects of ongoing
price competition from competitors with greater financial resources than those
of the Company, changes in consumer spending, the nature and extent of continued
consolidation in the grocery store industry, changes in the rate of inflation,
changes in state or federal legislation or regulation, adverse determinations
with respect to any litigation or other claims, inability to develop new stores
or complete remodels as rapidly as planned, stability of product costs, supply
or quality control problems with the Company’s vendors, and other issues and
uncertainties detailed from time-to-time in the Company’s filings with the
Securities and Exchange Commission.


22




ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
applicable.





ITEM
      4T.
            CONTROLS
      AND PROCEDURES





Evaluation of Disclosure
Controls and Procedures





The
Company maintains disclosure control and procedures (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e)) designed to ensure that
information required to be disclosed in reports filed or submitted under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and
forms.  Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that the information
required to be disclosed by the Company in its reports that it files or submits
under the Exchange Act is accumulated and communicated to the Company’s
management, including its principal executive and principal financial officers,
or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.





The
Company’s management, with the participation of its Chief Executive Officer and
its Chief Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures (as defined in the Securities Exchange Act of 1934
Rules 13a-15(e) or 15d-15(e)) as of November 29,
2008.  Based on that evaluation, the Company’s Chief Executive Officer
and Chief Financial Officer concluded that the Company’s disclosure controls and
procedures were not effective at a reasonable assurance level as of such date,
because they are not yet able to conclude that we have remediated the material
weaknesses in internal control over financial reporting identified in
Item 9A(T) of our Annual Report on Form 10-K for the fiscal year ended
May 31, 2008.





Based
upon management’s conclusion that there were material weaknesses in the
Company’s internal control over financial reporting, management of the Company
has taken measures it deemed necessary to conclude that, notwithstanding such
material weaknesses, its unaudited condensed financial statements included in
this report are fairly stated, in all material respects, in accordance with
accounting principles generally accepted in the United States of
America.





Changes in Internal Control
over Financial Reporting





The
changes in our internal control over financial reporting, as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently
completed fiscal quarter that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting are
discussed below:





Management’s Plan for
Remediation of Material Weaknesses





In
connection with the preparation of our financial statements for the year ended
May 31, 2008, management identified certain significant deficiencies in the
internal control that, individually and in the aggregate, represent material
weaknesses, including, insufficient segregation of duties in our finance and
accounting functions due to limited personnel.  Specifically,
management determined that a material weakness existed due to a lack of any
independent review of the spreadsheets used to aggregate, summate and calculate
the amounts used in the preparation of the financial statements and related
disclosures and a lack of segregation of duties due to the concentration of many
responsibilities with the Chief Financial Officer without any independent review
or verification.  Additionally, meaningful reviews of the Company’s
bank statements used by the Chief Financial Officer to perform reconciliations
were not being performed, and it was determined that these control deficiencies
could result in material misstatement to our interim or annual financial
statements that would not be prevented or detected in a timely
manner.  Management believes that each of these material weaknesses
could have a pervasive impact on our internal control over financial
reporting.


23




During
the first two quarters of fiscal 2009, management has begun implementing the
following steps to address and remediate the material weaknesses described
above:


·
              Management
      has hired additional staff to
      segregate and provide additional backup for certain of the Chief Financial
      Officer’s duties.  Such staff, along with designated members of
      the existing staff, have been giventhe
      responsibility of independently reviewing the spreadsheets maintained by
      the Chief Financial Officer to verify the amounts, calculations, and
      formulas used to compile the amounts used in the preparation of the
      financial statements and related disclosures. As
      of the end of the second quarter, the Company has completed the initial
      testing and verification of all of the major calculational spreadsheets
      used by the Chief Financial Officer in preparation of the financial
      statements.


·
            Additionally,
      the Chief Executive Officer has been performing a detailed review of the
      bank statements, including examination of individual items, used by the
      Chief Financial Officer in the preparation of
    reconciliations.




While we
are still in the process of developing certain new procedures, and will continue
to test the independent verification of the Chief Financial Officer’s
spreadsheets and related calculations used in the preparation of the Company’s
financial statements, we believe the successful completion of these remediation
steps will correct the material weakness discussed above.  We will
assess the effectiveness of our remediation efforts in connection with our
management’s tests of internal control over financial reporting in conjunction
with our 2009 year-end financial statements.  Except as discussed
above, we have not identified any changes in our internal control over financial
reporting during the first quarter of fiscal 2009 that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.


24


AMERICAN
CONSUMERS, INC.





PART
II     OTHER INFORMATION





ITEM
      1A.
            RISK
      FACTORS





Information
regarding risk factors appears under the caption “Forward-Looking Statements” in
Part I, Item 2 of this Form 10-Q and in Part I, Item 1A for our Annual Report on
Form 10-K for the fiscal year ended May 31, 2008.  There have been no
material changes from the risk factors previously disclosed in our Annual Report
on Form 10-K.








ITEM
      2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





(c)
            Issuer
      Repurchases:





The
following table presents information with respect to repurchases of common stock
made by the Company during the fiscal quarter covered by this
report:


Period
                  
                  Total
      Numberof
      SharesPurchased (1)
                  
                  
                  AveragePricePaid
      perShare
                  
                  
                  Total
      Number ofShares
      Purchased asPart
      of a PubliclyAnnounced Plan
                  
                  
                  Maximum
      Number ofShares
      that May YetBe
      PurchasedUnder the PlanAugust
      30 –  Sept. 27, 2008
                  
                  
                  ----
                  
                  
                  $
                  0.00
                  
                  
                  
                  —
                  
                  
                  
                  —September
      28,  – Nov. 1, 2008
                  
                  
                  220
                  
                  
                  
                  1.00
                  
                  
                  
                  —
                  
                  
                  
                  —November
      2,  – Nov. 29 2008
                  
                  
                  220
                  
                  
                  
                  1.00
                  
                  
                  
                  —
                  
                  
                  
                  —Total
                  
                  
                  440
                  
                  
                  $
                  1.00
                  
                  
                  
                  —
                  
                  
                  
                  —





(1)
            Represents
      shares repurchased at $1.00 per share in response to unsolicited requests
      from unaffiliated shareholders during the
  quarter.








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





The
Company held its Annual Meeting of Shareholders on October 23, 2008, at which
shareholders were asked to vote on the election of directors for the fiscal year
ending in 2009.  Proxies were solicited by management in favor of six
nominees, with no solicitation in opposition to management’s
nominees.  All of such nominees were elected, with the number of votes
cast for, against, or withheld as well as the number of broker non-votes as to
each nominee having been as follows:


25





NOMINEE
                  
                  TOTALSHARESVOTED
                  
                  
                  VOTESCASTFOR
                  
                  
                  VOTESCASTAGAINST
                  
                  
                  VOTESWITHHELD
                  
                  
                  BROKERNON-VOTESMichael
      A. Richardson
                  
                  
                  541,828
                  
                  
                  
                  541,603
                  
                  
                  
                  225
                  
                  
                  
                  0
                  
                  
                  
                  0Paul
      R. Cook
                  
                  
                  541,828
                  
                  
                  
                  541,603
                  
                  
                  
                  225
                  
                  
                  
                  0
                  
                  
                  
                  0Virgil
      E. Bishop
                  
                  
                  541,828
                  
                  
                  
                  541,603
                  
                  
                  
                  225
                  
                  
                  
                  0
                  
                  
                  
                  0Thomas
      L. Richardson
                  
                  
                  541,828
                  
                  
                  
                  541,603
                  
                  
                  
                  225
                  
                  
                  
                  0
                  
                  
                  
                  0Andrew
      V. Douglas
                  
                  
                  541,828
                  
                  
                  
                  541,559
                  
                  
                  
                  269
                  
                  
                  
                  0
                  
                  
                  
                  0Danny
      R. Skates
                  
                  
                  541,828
                  
                  
                  
                  541,559
                  
                  
                  
                  269
                  
                  
                  
                  0
                  
                  
                  
                  0








ITEM
      6
            EXHIBITS





The
Exhibit Index attached to this report is incorporated by reference into this
Item 6.





26


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.








AMERICAN
      CONSUMERS, INC.(Registrant)January
      13, 2009
                    
                    /s/
      Michael A. RichardsonDate:Michael
      A. RichardsonCHAIRMAN
      OF THE BOARD ANDCHIEF
      EXECUTIVE OFFICER(Principal
      Executive Officer)January
      13, 2009
                    
                    /s/
      Paul R. CookDate:Paul
      R. CookEXECUTIVE
      VICE PRESIDENT,CHIEF
      FINANCIAL OFFICER AND TREASURER(Principal
      Financial Officer & ChiefAccounting
      Officer)


27




AMERICAN
CONSUMERS, INC.





EXHIBIT
INDEX








The
following exhibits are filed with this report, as noted below:





Exhibit No.
                  
                  Description11
                  
                  Statement
      re: computation of per share earnings.*31.1
                  
                  CEO
      Certification pursuant to Exchange Act Rules 13a-14(a) and
      15d-14(a).*31.2
                  
                  CFO
      Certification pursuant to Exchange Act Rules 13a-14(a) and
      15d-14(a).*32.1
                  
                  CEO
      Certification pursuant to Exchange Act Rules 13a-14(b) and
      15d-14(b).*32.2
                  
                  CFO
      Certification pursuant to Exchange Act Rules 13a-14(b) and
      15d-14(b).*





* Filed
herewith.






28