TO OUR STOCKHOLDERS


     Sales for the 52-week fiscal year ended June 2, 2001, were $25,634,552. The
Company  opened its seventh  store April 28, 2001.  Six stores were operated for
the fiscal year ended June 3, 2000. The Company operated at a net profit for the
fiscal  year of $7,694 as  compared  to a net loss of $50,537  for the  previous
year. Net income per share was 1 cent for the current fiscal year as compared to
a net loss of 6 cents per share for the  previous  fiscal  year.  Book value per
share at June 2, 2001, and June 3, 2000, was $2.99 and $2.96, respectively.

     The Board of Directors  elected not to pay dividends  during the year.  The
Company repurchased 8,385 shares of common stock from unaffiliated  shareholders
in response to several unsolicited requests during the year.

     It has been  difficult  for the Company to operate at a profit for the past
three fiscal years due to increased  pressure from competition.  The addition of
our  seventh  store in April of 2001 and the change in our  principal  inventory
supplier  in March of 2000 has  allowed  the  Company  to better  compete in the
marketplace.  However,  it is anticipated that competition in the retail grocery
business  will  continue to  increase,  with new stores in two of the  Company's
trade areas already announced or under construction.

     Management  continues  to  believe  there is a place for small  independent
retailers in the grocery business.  While the current trend seems to negate that
belief,  management  believes that the Company can remain a viable competitor in
the  markets  that it serves  despite  its small size  relative to others in the
industry.

     It is difficult to  anticipate  the effect of current and future events and
actions in the marketplace,  but management  intends for the Company to continue
to be a source of employment and to serve the communities in its trade area.


                                            Sincerely,

                                            AMERICAN CONSUMERS, INC.



                                            Michael A. Richardson
                                            Chairman and Chief Executive Officer

<PAGE>

<TABLE>
<CAPTION>
BOARD OF DIRECTORS                 CORPORATE OFFICERS               CORPORATE INFORMATION
<S>                                <C>                              <C>
VIRGIL BISHOP (1)                  MICHAEL A. RICHARDSON            EXECUTIVE OFFICES
Vice President                     Chairman of the Board,           P.O. Box 2328
American Consumers, Inc.              Chief Executive Officer       Fort Oglethorpe, GA  30742
                                      and President

PAUL R. COOK (1)                   PAUL R. COOK                     AUDITORS
Executive Vice-President           Executive Vice-President         Hazlett, Lewis & Bieter, PLLC
    and Treasurer                     and Treasurer                 Market Court, Suite 300
American Consumers, Inc.                                            537 Market Street
                                                                    Chattanooga, TN  37402

MICHAEL A. RICHARDSON (1)          JAMES E. FLOYD (1)               COUNSEL
Chairman of the Board,             Vice-President                   Witt, Gaither & Whitaker, P.C.
     Chief Executive Officer                                        1100 SunTrust Bank Building
     and President                                                  Chattanooga, TN  37402
American Consumers, Inc.

THOMAS L. RICHARDSON (2)(3)        VIRGIL BISHOP                    10-K REPORT
Chairman of the Board              Vice-President                   American Consumers, Inc.'s
Learning Labs, Inc.                                                   annual report on Form 10-K
                                                                      as filed with The Securities
JEROME P. SIMS, SR. (2)(3)         REBA S. SOUTHERN (1)               and Exchange Commission is
Physician                          Secretary                          available to stockholders free
                                                                      of charge upon written request
ANDREW V. DOUGLAS (2)(3)                                              to Corporate Secretary
Retail Counselor (Retired)                                            American Consumers, Inc.,
Fleming Companies, Inc.                                               P.O. Box 2328,
                                                                      Ft. Oglethorpe, GA 30742
</TABLE>


(1)  Executive  Committee (Mr. Floyd and Mrs. Southern are ex officio members of
     the committee.)

(2)  Audit Committee

(3)  Compensation Committee


                                      -2-
<PAGE>

                            AMERICAN CONSUMERS, INC.

                         FIVE-YEAR SUMMARY OF OPERATIONS

                    (In thousands, except per share amounts)

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

<TABLE>
<CAPTION>
                                                                     FISCAL YEAR ENDED
                                             -------------------------------------------------------------------
                                              JUNE 2         JUNE 3         MAY 29         MAY 30         MAY 31
                                               2001           2000           1999           1998           1997
                                             -------        -------        -------        -------        -------

<S>                                          <C>            <C>            <C>            <C>            <C>
NET SALES                                    $25,635        $25,619        $25,482        $26,920        $28,005
                                             -------        -------        -------        -------        -------

COST AND EXPENSES:
    Cost of goods sold                        19,561         19,682         19,831         21,015         22,047
    Operating, general and
      administrative expenses                  6,137          6,020          5,759          5,788          5,802
    Interest expense                              26             56             52             58             72
    Other income, net                            (94)           (66)           (71)           (64)           (45)
                                             -------        -------        -------        -------        -------

      Total                                   25,630         25,692         25,571         26,797         27,876
                                             -------        -------        -------        -------        -------

Income (loss) before income taxes                  5            (73)           (89)           123            129
                                             -------        -------        -------        -------        -------

INCOME TAXES:
    Federal                                       (3)           (18)           (26)            29             14
    State                                       --               (4)            (6)             8              6
                                             -------        -------        -------        -------        -------

      Total                                       (3)           (22)           (32)            37             20
                                             -------        -------        -------        -------        -------

NET INCOME (LOSS)                            $     8        $   (51)       $   (57)       $    86        $   109
                                             =======        =======        =======        =======        =======

PER SHARE AMOUNTS:
    Net income (loss)                        $   .01        $  (.06)       $  (.06)       $   .09        $   .12
                                             =======        =======        =======        =======        =======

    Cash dividends                           $  --          $  --          $  --          $  --          $   .06
                                             =======        =======        =======        =======        =======
WEIGHTED AVERAGE NUMBER
    OF SHARES OUTSTANDING                        832            838            883            907            923
                                             =======        =======        =======        =======        =======

TOTAL ASSETS                                 $ 4,566        $ 3,674        $ 4,033        $ 4,257          4,301
                                             =======        =======        =======        =======        =======
OBLIGATIONS UNDER CAPITAL
    LEASE AGREEMENTS                         $     3        $    67        $   185        $   328        $   471
                                             =======        =======        =======        =======        =======
</TABLE>


                                      -3-
<PAGE>

                         MARKET AND DIVIDEND INFORMATION

     The Company's common stock is traded in the  over-the-counter  market.  The
approximate  number of record  holders of the Company's  common stock at June 2,
2001,  was  868.  The  following  table  gives  the  range  of high  and low bid
quotations  and  dividends  for each  quarterly  period for the two most  recent
fiscal years.

                           Bid Prices           Asked Prices           Dividends
--------------------------------------------------------------------------------
                         High       Low        High        Low         Per Share
                         -----     -----       -----      -----        ---------
2001
--------------------------------------------------------------------------------
  First Quarter          $0.30     $0.30       $4.00      $4.00          None
--------------------------------------------------------------------------------
  Second Quarter         $0.30     $0.30       $4.00      $4.00          None
--------------------------------------------------------------------------------
  Third Quarter          $0.30     $0.30       $2.00      $2.00          None
--------------------------------------------------------------------------------
  Fourth Quarter         $0.30     $0.30       $2.00      $2.00          None
--------------------------------------------------------------------------------

2000
--------------------------------------------------------------------------------
  First Quarter          $0.50     $0.50       None       None           None
--------------------------------------------------------------------------------
  Second Quarter         $0.50     $0.50       $1.25      $1.25          None
--------------------------------------------------------------------------------
  Third Quarter          $0.50     $0.50       $1.25      $1.25          None
--------------------------------------------------------------------------------
  Fourth Quarter         $0.50     $0.30       $1.25      $1.05          None
--------------------------------------------------------------------------------

     The  information  set forth in the above  table is  supplied  through  Pink
Sheets LLC where available.

     There is no established  public trading market for the Company's stock, and
the  information  set  forth  above  is  based  on a small  number  of  isolated
quotations which do not necessarily  represent actual trades.  The market-makers
as of June 2, 2001, are:

     Carr Securities Corporation         New York           (800) 221-2243

     Hill Thompson Magid & Co.           New Jersey         (800) 631-3083

     Knight Securities                   New Jersey         (800) 232-3684

     Howe Barnes Investment, Inc.        Chicago            (800) 621-2364


                                      -4-
<PAGE>

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

                              RESULTS OF OPERATIONS

     The Company  realized an after-tax  profit in its fiscal year ended June 2,
2001, of $7,694 as compared to a loss of $50,537 for the prior fiscal year.  Net
sales for the current  fiscal year increased less than 1% from net sales for the
previous  fiscal  year.  Management  believes  that the  smaller  than  expected
increase in sales is due primarily to direct competition.

     Increased  pressure from competition on the Company's  market share,  sales
and profits during fiscal year 2001 continues to threaten the  profitability  of
the Company.  Management believes that competitive pressures on the Company will
continue to increase over time as a result of its  competitors  opening more new
stores in the Company's trade area. Management continuously seeks to improve the
gross margin and  increase  profitability  by obtaining  the lowest cost for the
Company's inventory.

     The Company's gross margin  increased from 23.17% to 23.69% during the past
year.  The gross margin was 22.18% for the year ended May 29, 1999.  The Company
began an effort in the third  quarter  of  fiscal  year 1998 to  increase  gross
margin by increasing  retail prices on certain items, to the extent permitted by
competition.  The  success of this  effort  and a switch of our major  inventory
supplier  in the last  quarter of fiscal 2000 have  resulted in the  increase in
gross margin.

     The Company's Operating, General and Administrative Expenses for the fiscal
year ended June 2, 2001,  increased by approximately  $118,000 from the previous
fiscal year.  Expenses as a percentage of sales  increased from 23.50% to 23.94%
over the past  fiscal  year.  Operating,  General  and  Administrative  Expenses
amounted  to 22.60% of net sales for fiscal  year 1999.  Repairs  and  services,
utilities and group  insurance  expenses  account for the increase.  Repairs and
services have  increased  due to aging  equipment.  Management  will continue to
monitor these costs and replace older equipment and make other  adjustments when
deemed to be beneficial to business.

     Interest expense varied throughout the fiscal years presented, from $51,643
in 1999 to $55,206 in 2000 to $26,071  in 2001.  The change is  attributable  to
interest on capitalized leases decreasing over the three-year  period.  Interest
expense on the Company's short-term  borrowings also decreased due to a decrease
in the average balance outstanding during the latest fiscal year. This effect is
not  expected to be  permanent.  As  discussed  below,  the  Company  expects to
complete its current program of purchasing  updated  replacements for previously
leased cash registers and scanning  equipment during the first quarter of fiscal
year  2002.  With the  related  bank  financing  for these  purchases  in place,
interest expense for 2002 is expected to be more comparable to that reported for
fiscal years 1999 and 2000.


                                      -5-
<PAGE>

     Other income for the past three fiscal years consists of the following:

                                            2001         2000         1999
                                          -------      -------      -------
     Vendors' compensation                $12,988      $10,019      $14,049
     Gain on sale of assets                 7,971        2,009         --
     Interest income                       26,732       21,219       22,949
     Other income                          46,618       32,639       33,768
                                          -------      -------      -------
         Totals                           $94,309      $65,886      $70,766
                                          =======      =======      =======

     Other income  increased as a result of an increase in the  collection  of a
check-cashing  charge for individuals wishing to cash their check but not making
a purchase.

     The Company seeks to improve its profitability by obtaining the lowest cost
for its goods. In an effort to lower its cost of goods, the Company ceased using
Fleming Co.,  Inc. as its major  supplier of staple  groceries in March 2000 and
began purchasing its inventory from Mitchell Grocery Corporation in Albertville,
Alabama in March 2000.

Income Taxes

     The provision for income taxes does not vary significantly from the Federal
statutory  rate of 34% and State rates of 5% to 6%. The components of income tax
are detailed in Note 6 of the Company's financial statements.

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.
When the  Company is forced to raise  overall  prices of its goods,  the Company
attempts to preserve its market share by competitive  pricing  strategies  which
emphasize weekly advertised specials.

                               FINANCIAL CONDITION

Liquidity and Capital Resources

     The Company finances its working capital  requirements  principally through
its cash flow from operations and short-term borrowings. Short-term borrowing to
finance inventory purchases is provided by the Company's $800,000 line of credit
from its two banks. Short-term borrowings at the end of the 2001 and 2000 fiscal
year ends are as follows:

                                                         2001        2000
                                                       --------    --------
     Line of credit at Wachovia Bank                   $   --      $  9,956
     Line of credit at Northwest Georgia Bank           456,500        --
     Note payable to Northwest Georgia Bank             254,952        --
     Note to Michael and Diana Richardson                37,412      62,239
     Note to Matthew Richardson                          48,330      56,480
                                                       --------    --------
                       Totals                          $797,194    $128,675
                                                       ========    ========


                                      -6-
<PAGE>

     During the third quarter of fiscal 2001, the Company commenced a program of
purchasing new  replacements  for cash registers and other  equipment  which the
Company  previously leased as the existing leases expire. The Company negotiated
financing  for  this  program  with  Northwest  Georgia  Bank  in the  form of a
short-term note,  which had an outstanding  balance of $254,952 at June 2, 2001.
The Company  intends to convert this note to long-term  debt once the  equipment
replacements are completed  during the first quarter of fiscal 2002.  Management
believes that the terms of this bank  financing are more favorable than any that
the  Company  could  have  obtained  under  renewal  or  replacement  leases for
comparably updated  equipment.  Thus, the purchase of this equipment is expected
to lower the Company's  financing  costs without having a significant  effect on
the Company's  overall  working  capital  requirements.  For additional  details
concerning  the  Company's  short-term  borrowings  see Note 3 to the  Company's
financial statements.

     At June 2, 2001,  long-term  debt  consists of a note  payable to a bank of
$169,421  that was  incurred  in  April  2001 to  finance  the  addition  of the
Company's seventh grocery store in Jasper, Tennessee.

     The ratio of current assets to current liabilities was 1.98 to 1 at the end
of fiscal 2001, as compared to 2.80 to 1 at the end of fiscal 2000,  and 2.64 to
1 at the end of fiscal 1999. Cash constituted  44.91% of total current assets at
June 2, 2001, as compared to 40.99% of total current assets at June 3, 2000, and
39.38% at May 29, 1999.

     Accounts  receivable  decreased  due  to  a  decrease  in  receivables  for
advertising and merchandise as of June 2, 2001.

     During the fiscal year ended June 2, 2001, retained earnings decreased as a
result of the operating income for the fiscal year.

Material Commitments

     Capital  expenditures  are not  expected to exceed  $400,000  for the year,
including  all  expenditures  needed to complete  the  purchase of new,  updated
replacements  for cash  registers  and other  equipment  which  previously  were
leased.

     The Company  adopted a 401(k) plan that is administered by Capital Bank and
Trust  Company.  Participation  in  the  plan  is  available  to  all  full-time
employees.  Any  contribution  by the Company will be at the  discretion  of the
Board of Directors.  The Company's  contribution  to the plan was $7,500 in 2001
and 2000.

     None of the Company's employees are represented by a union.

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
by or on behalf of the


                                      -7-
<PAGE>

Company,  including filings with the Securities and Exchange Commission of 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:  changes in the general  economy or in the
Company's primary markets,  changes in consumer spending,  competitive  factors,
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 detailed from time-to-time in the Company's
filings with the Securities and Exchange Commission.


                                      -8-
<PAGE>

               Report of Independent Certified Public Accountants



To the Board of Directors and Stockholders
American Consumers, Inc.
Fort Oglethorpe, Georgia

     We have audited the accompanying balance sheets of American Consumers, Inc.
as of June 2, 2001,  and June 3, 2000,  and the  related  statements  of income,
changes in stockholders'  equity,  and cash flows for each of the three years in
the period ended June 2, 2001. These financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

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

     In our opinion, the financial statements mentioned above present fairly, in
all material respects, the financial position of American Consumers,  Inc. as of
June 2, 2001,  and June 3, 2000,  and the results of its operations and its cash
flows  for  each of the  three  years  in the  period  ended  June 2,  2001,  in
conformity with accounting principles generally accepted in the United States of
America.

/s/  Hazlett, Lewis & Bieter, PLLC


Chattanooga, Tennessee
July 3, 2001


                                      -9-
<PAGE>

                            AMERICAN CONSUMERS, INC.

                              STATEMENTS OF INCOME

     For the Fiscal Years Ended June 2, 2001, June 3, 2000, and May 29, 1999

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

<TABLE>
<CAPTION>
                                                       2001              2000              1999
                                                    (52 Weeks)        (53 Weeks)        (52 Weeks)
                                                   -----------       -----------       -----------
<S>                                                <C>               <C>               <C>
NET SALES                                          $25,634,552       $25,618,564       $25,482,561

COST OF GOODS SOLD                                  19,560,530        19,682,468        19,831,422
                                                   -----------       -----------       -----------

      Gross profit                                   6,074,022         5,936,096         5,651,139

OPERATING, GENERAL AND
    ADMINISTRATIVE EXPENSES                          6,137,240         6,019,545         5,759,329
                                                   -----------       -----------       -----------

      Operating income (loss)                          (63,218)          (83,449)         (108,190)
                                                   -----------       -----------       -----------

OTHER INCOME (EXPENSE)
    Interest expense                                   (26,071)          (55,206)          (51,643)
    Other income                                        94,309            65,886            70,766
                                                   -----------       -----------       -----------

                                                        68,238            10,680            19,123
                                                   -----------       -----------       -----------

      Income (loss) before income taxes                  5,020           (72,769)          (89,067)

FEDERAL AND STATE INCOME
    TAXES                                               (2,674)          (22,232)          (32,104)
                                                   -----------       -----------       -----------

NET INCOME (LOSS)                                  $     7,694       $   (50,537)      $   (56,963)
                                                   ===========       ===========       ===========

EARNINGS (LOSS) PER SHARE                          $       .01       $      (.06)      $      (.06)
                                                   ===========       ===========       ===========
WEIGHTED AVERAGE NUMBER
    OF SHARES OUTSTANDING                              831,955           838,443           883,203
                                                   ===========       ===========       ===========
</TABLE>

The Notes to Financial Statements are an integral part of these statements.


                                      -10-
<PAGE>

                            AMERICAN CONSUMERS, INC.

                                 BALANCE SHEETS

                          June 2, 2001 and June 3, 2000

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


                                                       2001             2000
                                                   -----------      -----------
       ASSETS

CURRENT ASSETS
    Cash and short-term investments                $ 1,245,135      $   852,652
    Certificate of deposit                             450,000          434,887
    Accounts receivable                                104,917          140,593
    Inventories                                      1,894,146        1,659,588
    Prepaid expenses                                    80,003           53,473
                                                   -----------      -----------

         Total current assets                        3,774,201        3,141,193
                                                   -----------      -----------





PROPERTY AND EQUIPMENT - at cost
    Leasehold improvements                             218,332          201,253
    Furniture, fixtures and equipment                2,843,230        2,755,604
                                                   -----------      -----------

                                                     3,061,562        2,956,857
    Less accumulated depreciation                   (2,270,177)      (2,424,512)
                                                   -----------      -----------

                                                       791,385          532,345
                                                   -----------      -----------

                                                   $ 4,565,586      $ 3,673,538
                                                   ===========      ===========


The Notes to Financial Statements are an integral part of these statements.


                                      -11-
<PAGE>

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

<TABLE>
<CAPTION>
                                                                         2001              2000
                                                                      ----------        ----------
<S>                                                                   <C>               <C>
       LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                  $  788,639        $  696,560
    Short-term borrowings                                                797,194           128,675
    Current maturities of long-term debt                                  28,688              --
    Current obligations under capital leases                               3,195            63,321
    Accrued sales tax                                                    132,536           117,954
    Federal and state income taxes                                         9,422             3,706
    Other                                                                146,026           112,647
                                                                      ----------        ----------

         Total current liabilities                                     1,905,700         1,122,863
                                                                      ----------        ----------

DEFERRED INCOME TAXES                                                      3,827            12,587
                                                                      ----------        ----------
LONG-TERM DEBT                                                           140,733              --
                                                                      ----------        ----------

OBLIGATIONS UNDER CAPITAL LEASE AGREEMENTS                                  --               3,904
                                                                      ----------        ----------

DEFERRED INCOME                                                           43,651            61,818
                                                                      ----------        ----------

STOCKHOLDERS' EQUITY
    Nonvoting preferred stock - authorized 5,000,000
      shares of no par value; no shares issued                              --                --
    Nonvoting common stock - $.10 par value; authorized
      5,000,000 shares; no shares issued                                    --                --
    Common stock - $.10 par value; authorized 5,000,000
      shares; shares issued of 827,233 in 2001 and 835,618
      in 2000                                                             82,723            83,562
    Additional paid-in capital                                           689,847           696,839
    Retained earnings                                                  1,699,105         1,691,965
                                                                      ----------        ----------

                                                                       2,471,675         2,472,366
                                                                      ----------        ----------

                                                                      $4,565,586        $3,673,538
                                                                      ==========        ==========
</TABLE>


                                      -12-
<PAGE>

                            AMERICAN CONSUMERS, INC.

                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

     For the Fiscal Years Ended June 2, 2001, June 3, 2000, and May 29, 1999

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

<TABLE>
<CAPTION>
                                                          Additional
                                           Common           Paid-in           Retained
                                           Stock            Capital           Earnings           Total
                                        -----------       -----------       -----------       -----------
<S>                                     <C>               <C>               <C>               <C>
Balance, May 30, 1998                   $    89,060       $   742,688       $ 1,803,098       $ 2,634,846

    Net loss for year                          --                --             (56,963)          (56,963)

    Redemption of common stock               (2,024)          (16,881)           (1,337)          (20,242)

Balance, May 29, 1999                        87,036           725,807         1,744,798         2,557,641

    Net loss for year                          --                --             (50,537)          (50,537)

    Redemption of common stock               (3,474)          (28,968)           (2,296)          (34,738)
                                        -----------       -----------       -----------       -----------

Balance, June 3, 2000                        83,562           696,839         1,691,965         2,472,366

    Net income for year                        --                --               7,694             7,694

    Redemption of common stock                 (839)           (6,992)             (554)           (8,385)
                                        -----------       -----------       -----------       -----------

Balance, June 2, 2001                   $    82,723       $   689,847       $ 1,699,105       $ 2,471,675
                                        ===========       ===========       ===========       ===========
</TABLE>

The Notes to Financial Statements are an integral part of these statements.


                                      -13-
<PAGE>

                            AMERICAN CONSUMERS, INC.

                            STATEMENTS OF CASH FLOWS

     For the Fiscal Years Ended June 2, 2001, June 3, 2000, and May 29, 1999

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

<TABLE>
<CAPTION>
                                                                         2001             2000              1999
                                                                      (52 Weeks)       (53 Weeks)        (52 Weeks)
                                                                     -----------      -----------       -----------
<S>                                                                  <C>              <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income (loss)                                                $     7,694      $   (50,537)      $   (56,963)
    Adjustments to reconcile net income (loss) to net cash
      provided by operating activities:
        Depreciation and amortization                                    191,910          232,684           250,105
        Deferred income taxes                                             (8,760)         (27,748)          (22,169)
        (Gain) loss on sale of property and equipment                     (7,713)          (1,971)               10
        Change in operating assets and liabilities:
          Accounts receivable                                             35,676            8,928            25,614
          Inventories                                                   (234,558)         200,449           (30,034)
          Prepaid expenses and other assets                              (26,530)         (40,395)            5,535
          Refundable income taxes                                           --             28,119           (28,119)
          Accounts payable and accrued liabilities                       140,040           70,973           (34,640)
          Federal and state income taxes                                   5,716            3,706           (24,634)
                                                                     -----------      -----------       -----------
            Net cash provided by operating activities                    103,475          424,208            84,705
                                                                     -----------      -----------       -----------
CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of certificate of deposit                                  (450,000)        (434,887)         (414,520)
    Proceeds from maturity of certificate of deposit                     434,887          414,520           394,792
    Purchase of property and equipment                                  (469,784)        (145,822)          (27,922)
    Proceeds from disposal of property and equipment                       8,380            8,300              --
                                                                     -----------      -----------       -----------
            Net cash used in investing activities                       (476,517)        (157,889)          (47,650)
                                                                     -----------      -----------       -----------
CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase (decrease) in short-term borrowings                     668,519         (178,280)           98,010
    Proceeds from long-term borrowing                                    169,421             --                --
    Principal payments on obligations under capital leases               (64,030)        (118,087)         (142,607)
    Redemption of common stock                                            (8,385)         (34,738)          (20,242)
                                                                     -----------      -----------       -----------
      Net cash provided by (used in) financing activities                765,525         (331,105)          (64,839)
                                                                     -----------      -----------       -----------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                                   392,483          (64,786)          (27,784)

CASH AND CASH EQUIVALENTS, beginning of year                             852,652          917,438           945,222
                                                                     -----------      -----------       -----------
CASH AND CASH EQUIVALENTS, end of year                               $ 1,245,135      $   852,652       $   917,438
                                                                     ===========      ===========       ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
    INFORMATION
      Cash paid (received) during the year for:
        Income taxes                                                 $     4,369      $   (22,308)      $    46,818
        Interest                                                          25,342           55,206            50,310
                                                                     ===========      ===========       ===========
</TABLE>

The Notes to Financial Statements are an integral part of these statements.


                                      -14-
<PAGE>

                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 1.   Nature of Business and Summary of Significant Accounting Policies

          Nature of business:

          The Company is engaged in a single line of business,  the operation of
          a chain of retail grocery  stores.  The stores are located in Georgia,
          Tennessee,  and  Alabama  and  operate  under  the  name of  Shop-Rite
          Supermarket.

          Use of estimates:

          The  preparation of financial  statements in conformity with generally
          accepted  accounting  principles requires management to make estimates
          and assumptions  that affect certain reported amounts and disclosures.
          Accordingly, actual results could differ from those estimates.

          Cash and cash equivalents:

          For  purposes of  reporting  cash flows,  the  Company  considers  all
          highly-liquid  debt  instruments  with an  original  maturity of three
          months or less to be cash equivalents.

          Inventories:

          Inventories are stated at the lower of average cost or market.

          Depreciation of property and equipment:

          Depreciation is provided on the  straight-line  and  declining-balance
          methods at rates based upon the estimated  useful lives of the various
          classes of depreciable property.

          Advertising costs:

          Advertising costs are charged to operations when incurred. Advertising
          costs charged to operations were $451,712,  $495,680,  and $431,188 in
          2001, 2000, and 1999, respectively.

          Deferred income taxes:

          Deferred tax assets and liabilities are reflected at currently enacted
          income tax rates  applicable  to the period in which the  deferred tax
          assets or  liabilities  are  expected to be  realized  or settled.  As
          changes  in tax laws or rates are  enacted,  deferred  tax  assets and
          liabilities are adjusted through the provision for income taxes.


                                      -15-
<PAGE>

                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 2.   Securities Purchased Under Agreement to Resell

          Included in cash and short-term  investments are securities  purchased
          under  agreement to resell.  The Company  invests excess funds in U.S.
          Government or U.S.  Government  Agency  securities which are purchased
          under an  agreement  to resell  (reverse  repurchase  agreement).  The
          securities are purchased from a bank but do not constitute deposits at
          the  bank  and  are  not  insured  by the  Federal  Deposit  Insurance
          Corporation.  The bank  maintains  possession of the  securities,  but
          title of ownership passes to the Company according to the terms of the
          agreement.  The bank  repurchases  the  securities  the  business  day
          immediately following the Company's purchase date. The carrying amount
          of securities  purchased under agreement to resell  approximates  fair
          value.  Risk  of  market  value  deterioration  is  mitigated  by  the
          short-term  nature  of the  transaction  and the  type  of  securities
          purchased.  There were no amounts  outstanding  under the agreement at
          June 2, 2001 and June 3, 2000.

Note 3.   Short-Term Borrowings

          The Company had line-of-credit agreements with banks totaling $800,000
          and $600,000 at June 2, 2001 and 2000, respectively. The interest rate
          on amounts outstanding under the line-of-credit  agreements fluctuates
          with the prime interest rate. The Company's  certificate of deposit is
          pledged as collateral under these agreements.

          At June 2, 2001 the Company had a short-term note payable to a bank in
          the  amount of  $254,952  that bears  interest  at the prime rate plus
          1.5%.  Short-term  borrowings also include  unsecured notes payable to
          Michael and Diana Richardson,  principal  shareholders of the Company,
          and to their son, Matthew Richardson. These notes provide for interest
          at .25% below the bank's base rate and are payable on demand.

          A summary of  short-term  borrowing for the fiscal years ended June 2,
          2001 and June 3, 2000, is a follows:

                                                         2001        2000
                                                       --------    --------

          Line-of-credit agreements                    $456,500    $  9,956
          Loans payable to shareholders                  85,742     118,719
          Short-term note payable to bank               254,952        --
                                                       --------    --------

                 Total outstanding                     $797,194    $128,675
                                                       ========    ========

          Weighted average interest rate at year end       9.27%       8.27%
                                                       --------    --------

          Weighted average interest rate during year       8.93%       8.60%
                                                       --------    --------

          Maximum amount outstanding during year       $810,469    $834,107
                                                       ========    ========

          Average amount outstanding during year       $244,707    $461,771
                                                       ========    ========

          The carrying amount of short-term borrowings approximates fair value.


                                      -16-
<PAGE>

                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 4.   Long-Term Debt

          At June 2, 2001,  long-term  debt consists of a note payable to a bank
          of $169,421 that bears  interest at the prime rate plus 1.5%. The note
          is due in monthly  installments  of  principal  and interest of $3,564
          with all  outstanding  principal and interest due April 2006. The note
          is collateralized by equipment,  inventory and personal  guarantees of
          the Company's President and Executive Vice President.

          The aggregate  maturities or principal  payments required on long-term
          debt for each of the five years  subsequent  to June 2,  2001,  are as
          follows:

                                Year             Amount
                                ----             ------
                                2002            $28,688
                                2003             31,379
                                2004             34,323
                                2005             37,542
                                2006             37,489

Note 5.   Lease Commitments

          Capital leases:

          The  Company  leases  cash  registers  and  scanning  equipment  under
          agreements that are classified as capital  leases.  The leased capital
          assets  included in property and equipment  totaled $1,198 and $54,309
          net of  accumulated  depreciation  of $310,501 and $592,904 at June 2,
          2001, and June 3, 2000, respectively.  Depreciation expense for leased
          capital assets is included in total depreciation  expense as a part of
          operating,  general and  administrative  expenses in the statements of
          income.  All of  these  leases  expire  in  fiscal  year  2002 and the
          remaining obligation under such leases is $3,195.

          Operating leases:

          The  Company  leases  the  facilities  in  which  its  retail  grocery
          operations  are  located  under  noncancelable  operating  leases that
          expire at various dates through April 2006.  Substantially  all of the
          leases include renewal  options.  The following is a schedule by years
          of future minimum rental payments required under operating leases that
          have initial or remaining  noncancelable  lease terms in excess of one
          year as of June 2, 2001:

                               Fiscal            Minimum
                             Year Ending         Rentals
                             -----------       ----------
                                2002           $  487,902
                                2003              330,521
                                2004              199,360
                                2005               86,620
                                2006               62,400
                                               ----------

                                   Total       $1,166,803
                                               ==========


                                      -17-
<PAGE>

                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 5.   Lease Commitments (continued)

          Rental expense for the fiscal years ended June 2, 2001,  June 3, 2000,
          and May 29, 1999, is as follows:

<TABLE>
<CAPTION>
                                                              2001             2000             1999
                                                           ---------        ---------        ---------
<S>                                                        <C>              <C>              <C>
               Minimum rentals                             $ 451,549        $ 446,002        $ 445,426
               Contingent rentals based on sales              13,360           15,389            4,963
                                                           ---------        ---------        ---------

                   Total                                   $ 464,909        $ 461,391        $ 450,389
                                                           =========        =========        =========
</TABLE>

Note 6.   Federal and State Income Taxes

          The  components  of income tax expense for the fiscal years ended June
          2, 2001, June 3, 2000, and May 29, 1999, are as follows:

<TABLE>
<CAPTION>
                                                              2001             2000             1999
                                                           ---------        ---------        ---------
<S>                                                        <C>              <C>              <C>
               Current tax expense (benefit):
                  Federal                                  $   4,649        $   4,583        $  (7,704)
                  State                                        1,437              933           (2,231)
                                                           ---------        ---------        ---------

                                                               6,086            5,516           (9,935)
                                                           ---------        ---------        ---------
               Deferred tax expense (benefit):
                  Federal                                     (7,438)         (22,431)         (18,369)
                  State                                       (1,322)          (5,317)          (3,800)
                                                           ---------        ---------        ---------

                                                              (8,760)         (27,748)         (22,169)
                                                           ---------        ---------        ---------

                    Total income tax expense (benefit)     $  (2,674)       $ (22,232)       $ (32,104)
                                                           =========        =========        =========
</TABLE>

               A  reconciliation  of income tax expense computed by applying the
               U.S.  Federal  statutory  rate to income  before income taxes and
               actual income tax expense is as follows:

<TABLE>
<CAPTION>
                                                              2001             2000             1999
                                                           ---------        ---------        ---------
<S>                                                        <C>              <C>              <C>
               Federal income tax expense (benefit)
                  computed at the statutory rate           $     800        $ (11,000)       $ (18,500)
               State income tax, net of federal
                  income tax benefit                             300           (3,700)          (4,500)
               Other                                          (3,774)          (7,532)          (9,104)
                                                           ---------        ---------        ---------

                  Total income tax expense (benefit)       $  (2,674)       $ (22,232)       $ (32,104)
                                                           =========        =========        =========
</TABLE>


                                      -18-
<PAGE>

                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 6.   Federal and State Income Taxes (continued)

          The tax effects of  significant  temporary  differences  that comprise
          deferred tax assets and liabilities at June 2, 2001, and June 3, 2000,
          are as follows:

<TABLE>
<CAPTION>
                                                                     2001          2000
                                                                   --------      --------
<S>                                                                <C>           <C>
               Assets:
                  Deferred income                                  $(11,602)     $(17,655)
                  Other                                             (19,815)      (17,603)

               Liabilities:
                  Depreciable basis of property and equipment        33,939        46,926
                  Other                                               1,305           919
                                                                   --------      --------

                                                                   $  3,827      $ 12,587
                                                                   ========      ========
</TABLE>

Note 7.   Sale of Assets and Deferred Income

          On April 29, 1988, the Company sold its strip shopping  center located
          in Chatsworth,  Georgia.  The strip shopping  center  consisted of two
          separate  buildings with a total of 42,900 square feet.  Approximately
          18,540  square feet of the  shopping  center were leased to others and
          approximately  24,360  square  feet were used by the  Company  for its
          retail grocery store.

          Effective  as of the date of sale,  the Company  leased back its store
          location in the center for a period of 15 years.  The  minimum  annual
          rental  payments of $91,350 are included in the minimum  annual rental
          payments of operating  leases  described in Note 5. The gain resulting
          from  the  sale of  these  assets  has  been  deferred  for  financial
          reporting purposes and is being amortized over the 15-year lease term.

Note 8.   Employee Benefit Plan

          The  Company  has  adopted a 401(k)  employee  benefit  plan  covering
          substantially  all  employees  who have met  minimum  service  and age
          requirements.  The  service and age  requirements  were waived for the
          initial plan  participants to encourage  participation.  The Company's
          annual  contribution is discretionary.  The Company's  contribution to
          the plan was $7,500 in 2001 and 2000.

Note 9.   Concentration of Credit Risk

          The Company  maintains  a  certificate  of deposit  and other  deposit
          accounts at financial  institutions in amounts that exceed the Federal
          Deposit  Insurance  Corporation  (FDIC)  insurance limit. The total of
          deposits that exceeded the FDIC  insurance  limit was $955,700 at June
          2, 2001.  The  Company  believes  that  maintaining  deposits in these
          financial  institutions  does not represent a significant  credit risk
          and that the Company benefits from favorable banking  relationships as
          a result of maintaining deposits with these institutions.


                                      -19-
<PAGE>

                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 10.  Related Party Transactions

          As described in greater detail in Note 3 above, the Company finances a
          portion  of  its  working  capital   requirements  through  borrowings
          consisting  of two  unsecured  notes,  payable  to  Michael  and Diana
          Richardson,  principal  shareholders of the Company, and to their son,
          Matthew Richardson. These notes bear interest at a rate per annum .25%
          below the base rate of interest  charged on the  Company's  borrowings
          from its lead bank and are payable on demand.




                                      -20-