UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-K





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





For
the fiscal year ended May 31, 2008





OR





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





For
the transition period
from                            to





Commission
File Number 0-5815


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 No.)





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





Registrant’s
telephone number, including area code:  (706) 861-3347





Securities
registered pursuant to Section 12(g) of the Act:





Common
Stock, $0.10 par value


(Title of
Class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.   Yes o    No x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.   Yes o    No x





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 periods that the
registrant was required to file such report(s)) and (2) has been subject to
such filing requirements for the past 90 days.


Yes x    No o





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





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. (Check one):





Large
      accelerated filer o
            Accelerated
      filer oNon-accelerated
      filer o  (Do
      not check if a smaller reporting company)
            Smaller
      reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o    No x













State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter:





As of
December 1, 2007 (the last business day of the registrant’s most recently
completed second fiscal quarter), the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately
$466,531.  (Calculated for these purposes by multiplying the total
number of outstanding shares held by non-affiliates by the average of available
bid and asked price information for such date.)





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





781,779
shares of Common Stock, $0.10 par value, as of July 18, 2007.





DOCUMENTS
INCORPORATED BY REFERENCE





List
hereunder the following documents if incorporated by reference and the Part of
the Form 10-K into which the document is incorporated:  (1) Any annual
report to security holders; (2) Any proxy or information statement; and
(3) Any prospectus filed pursuant to Rule 424(b) or (c) under the
Securities Act of 1933.  The listed documents should be clearly
described for identification purposes:





(1)
            specified
      portions of the Registrant’s Annual Report to Shareholders for the fiscal
      year ended May 31, 2008, incorporated by reference into Part II of this
      Annual Report on Form 10-K.





(2)
            specified
      portions of the Registrant’s Definitive Proxy Statement filed with the
      Securities and Exchange Commission for the Registrant’s 2007 Annual
      Meeting of Shareholders, incorporated by reference into Part III of this
      Annual Report on Form 10-K.





Part I





ITEM
      1.
            BUSINESS





Incorporated
in Georgia in 1968, American Consumers, Inc. (which we refer to herein as the
“Company,” “we” or “us,” and “ACI”), operates eight (8)
supermarkets within a compact geographical area that comprises Northwest
Georgia, Northeast Alabama, and Southeast Tennessee.





All of
the Company’s supermarkets are operated under the name
“Shop-Rite.”  All of the Company’s supermarkets are self-service and
are engaged in the retail selling of groceries including meats, fresh produce,
dairy products, frozen foods, bakery products, tobacco products, and
miscellaneous other non-food items.  The Company’s supermarkets
feature national brand merchandise with only a minor part of sales from
controlled-label, private-label or generic
merchandise.  “Controlled-label” or “private-label” merchandise is
merchandise purchased from national or local suppliers under a trade name chosen
by the wholesaler supplying the merchandise.  The Company’s
supermarkets offer milk and certain dairy products, as well as frozen vegetables
and jellies, under the controlled-labels “Foodland,” “Food Club,” “Ultimate
Choice,” “Freshland,” “Price Saver,” “Top Crest,” “Top Care,” “Select” and “Valu
Time.”  Bread and related bakery items are also offered as
controlled-label groceries.





During
the fiscal year ended May 31, 2008, the Company’s major supplier of staple
groceries was Mitchell Grocery Corporation (“Mitchell”), with its
principal corporate offices in Albertville, Alabama.  For the fiscal
year ended May 31, 2008, approximately 82% of the Company’s total inventory
purchases of $26,265,102 were made from Mitchell.





Various
local suppliers within the geographical area served by the Company’s
supermarkets provide the Company with certain perishable items, including
produce, and accounted for approximately 18% of the Company’s total inventory
purchases during fiscal 2008.  The Company believes that there are
other adequate and convenient sources of groceries, including several area and
local suppliers, which could meet its needs.  Accordingly, while the
Company has elected to purchase the majority of its inventory from Mitchell for
reasons of cost, the Company is not dependent upon any particular supplier for
its requirements of groceries.





The
supermarket industry is highly competitive and the principal method of
competition historically has been the pricing of groceries.  The
Company’s current major competitors now include various local and four regional
chains, as well as one major national retailer (Wal-Mart).  The nature
of price competition which the Company encounters from these major competitors
includes the sale of selected items at below cost prices as “loss-leaders” or
“advertised specials,” the practice of “double couponing” or matching coupon
discounts with additional cash discounts, loyalty card programs, as well as the
sale of certain main line items at prices below the Company’s wholesale
cost.  The Company believes that its major competitors have been and
are 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 the
aggressive pricing and promotional activities described above at a level that
the Company cannot match, putting us at a competitive
disadvantage.  As a result of these competitive conditions, it has
been difficult to achieve meaningful sales increases apart from the addition of
two new store locations in recent years. As discussed in more detail below,
these factors also have made it difficult for the Company to sustain consistent
improvements in gross profit.


1




Management
believes that, in recent periods, entry into the Company’s trade area by
Save-A-Lot and United Grocery Outlets, and further expansion in the area by Food
Lion and Wal-Mart in addition to the presence of Ingle’s and Bi-Lo, have created
a situation of ongoing price competition and increasingly expensive advertising
and promotional activities which place an operation the size of the Company at a
significant competitive disadvantage.  These developments, combined
with increased overhead expenses and rising inventory costs, have resulted in
constant pressure on the Company’s market share, sales and profits over the past
several years, which has made it difficult for the Company to operate at a
consistent profit.





The
addition of two stores since 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.  The Company recorded a net profit for the fiscal
year ended May 31, 2008 of $132,741.  This represented our second
consecutive profitable year after struggling with operating losses for the three
prior fiscal years.  We recorded a net profit of $97,502 for the
fiscal year ended June 2, 2007, as compared to net losses sustained for the
fiscal years ended June 3, 2006, May 28, 2005 and May 29, 2004 of $167,379,
$331,360 and $236,050, respectively.  We recorded a net profit of
$40,134 for the fiscal year ended May 31, 2003.





While
operating, general and administrative expenses increased in absolute terms
during fiscal 2008, management’s ongoing efforts to control these expenses
succeeded in holding them relatively steady as a percentage of
sales.  Coupled with a slight increase in the gross margin for fiscal
2008, this helped us translate the increased sales into the Company’s second
consecutive year of net profit despite a slight reduction in our gross margin
from the level achieved in fiscal 2006.





Sales
increased by $709,579 (or 2.10%) during fiscal 2008 as compared to fiscal 2007.
Sales increased by $503,124 (or 1.51%) for fiscal 2007, even though fiscal 2006
was a fifty three week year while fiscal 2007 was only a fifty two week
year.  While this increase was significantly less than those
experienced during the prior two fiscal years of 2006 (3.67%) and 2005 (6.96%),
adjusting to eliminate the effects of the extra week of operations during fiscal
2006 would have yielded an annual sales increase of 3.46% for fiscal
2007.  Still, we were pleased to be able to grow the Company’s sales
for a ninth consecutive year despite the continuous challenges posed by the
competition that we face from larger grocery retailers operating in the markets
served by our stores.  The factors contributing to our sales increases
include the economy, with customers buying more groceries and eating at home and
price increases which have been passed on to the consumer through retail price
adjustments.





The
Company’s 23.85% gross margin for fiscal 2008 represents an increase of 0.12%
from fiscal 2007, but remains a decrease of 0.33% as compared to the 24.18%
gross margin achieved for fiscal 2006.  The slight increase over
fiscal 2007 is attributable to management’s ongoing efforts to increase gross
margin when possible, and due to the Company having refrained from certain sales
promotions conducted during fiscal 2007 which had a negative impact on gross
margin.  However, this slight increase was only achieved during the
fourth quarter, as the Company struggled with slight decreases in the gross
margin as compared to the comparable period of fiscal 2007 throughout the
remainder of the year, due to ongoing increases in the wholesale costs of
certain grocery items as well as gradual increases in suppliers’ fuel surcharges
due to increased gasoline prices, that we have not been able to immediately
recover through adjustments to the Company’s retail prices due to the impacts of
competition.  Although operating, general and administrative expenses
increased by $170,774 (or 2.13%) in fiscal 2008, they remained essentially flat
as a percentage of sales.  Increases in wages, supplies, rent,
utilities, professional services and bad checks were offset somewhat by
decreases in advertising, depreciation, and bank and credit card
fees.  Management will continue to monitor these expenses and attempt
to control costs as much as possible given the ongoing regulatory and
market-driven increases in several of these costs.


2




Our
23.73% gross margin for fiscal 2007 represented a decrease of 0.45% from fiscal
2006 and a decrease of 0.16% as compared to fiscal 2005.  This
reduction reflected the fact that competition prevented us from succeeding until
the third quarter of fiscal 2007 in adjusting our retail prices to recover
increases in our wholesale costs for certain items (principally certain private
label merchandise) which occurred earlier in the year.  The gross
margin also was impacted by our introduction of certain lower-priced,
lower-margin generic merchandise during the year, as well as certain targeted
merchandise sales and other weekly advertised specials run to stimulate
sales.  Management’s ongoing efforts to control the Company’s
operating, general and administrative expenses helped translate the relatively
small sales increase into the Company’s first net profit in four years, despite
the slight reduction in our gross margin.  We achieved a measure of
success in reducing these expenses both in absolute terms (by $260,829) and as a
percentage of sales (by 1.15%) during fiscal 2007 as compared to the prior
year.  The two principal components of the 2007 decrease, however,
were the absence of a $98,750 charge for a loss due to employee theft that
impacted the fourth quarter of fiscal 2006 and a decrease of $126,091 in
depreciation expense for fiscal 2007 versus 2006.  The 2006 theft loss
was an unusual item.  As discussed in prior periods, management
expects depreciation charges to return to more historically consistent levels as
the Company continues the process, which began during the fourth quarter of
fiscal 2008, of moving through anticipated replacement cycles for its cash
register and scanning hardware and software, and related back door systems, at
all of the Company’s retail locations.  Accordingly, we expect future
periods to continue to reflect the overall increase in these expenses that has
occurred with the addition of the Company’s seventh and eighth grocery stores
since April 28, 2001, as well as with ongoing increases in service charges
related to our support for customer debit and credit card transactions and check
cashing activities undertaken as a means of maintaining sales.





Two
primary factors contributed to the reduction in the Company’s net loss for
fiscal 2006. The first of these was an increase in sales of $1,178,737 (or
approximately 3.67%) as compared to fiscal 2005.  Approximately 55% of
this sales increase was due to the fact that our 2006 fiscal year contained 53
weeks, while fiscal 2005 was a 52-week year, with a significant portion of the
remaining increase attributable to two successful sales promotions that the
Company conducted during the third and fourth quarters of fiscal
2006.  The second major factor contributing the Company’s reduced net
loss for the year was our fiscal 2006 gross margin of 24.18%, which represented
an improvement of 0.29% over fiscal 2005 and an improvement of 0.21% as compared
to fiscal 2004.  This reversed the 0.08% reduction in gross margin
that we experienced for fiscal 2005 as compared to fiscal 2004.  The
gross margin improved because, whereas gross margin was negatively impacted
during the second half of fiscal 2005 by the fact that our primary inventory
supplier increased its wholesale markup from 3.0% to 3.5% during the third
quarter and competition prevented us from immediately passing the increase
through to the retail level, management succeeded during fiscal 2006 in
strategically adjusting the Company’s retail pricing mix to recapture the
remainder of this increase.  Similarly, while we were not able to
immediately adjust our prices to recover a fuel surcharge that the supplier
implemented during the second quarter of fiscal 2006, ongoing adjustments to our
pricing mix also offset this increase in our wholesale inventory costs by fiscal
year end.Unfortunately, increases
in several items of operating, general and administrative expenses, including a
significant non-recurring theft loss experienced during the fourth quarter of
fiscal 2006, more than offset the improved gross margin, resulting in the net
loss for the year.


3




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 increase we achieved during fiscal 2006, 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 (such as our successes in recovering a significant wholesale price
increase by our principal supplier during 2005 and a fuel surcharge added by the
supplier during the second quarter of fiscal 2006), the Company still struggled
to maintain or improve its gross margin throughout most of fiscal 2008, due to
the continuing increase in wholesale costs as noted
above.  Accordingly, further improvements in the gross margin may not
be achievable at this time, and further deterioration in the Company’s gross
margin is possible.





Management
believes that competitive pressures on the Company, which have led to the losses
experienced in four out of the last eight fiscal years, will continue to
increase over time as a result of larger competitors, which are in a better
position than the Company to withstand prolonged price competition, opening more
new stores in the Company’s trade area.





Backlog
is not a significant factor in the Company’s business.





The
Company employs approximately 91 full-time employees and approximately 126
part-time and seasonal employees.





The
Company believes it is in compliance with all federal, state and local laws
relating to environmental protection.  No capital expenditures for
equipment relating to environmental protection are presently
anticipated.





The
Company is engaged in a single line of business; namely, the retail,
self-service grocery business which is not divisible into separate
segments.  The following table sets forth information for the last
three (3) fiscal years as to the total sales and revenue of the Company
contributed by each class of products which contributed a significant percentage
of the total retail sales and revenues of the Company in the last three (3)
fiscal years.








Product
      Class
            
            Fiscal
      2008
              (52 Weeks)
            
            
            Fiscal
      2007
              (52 Weeks)
            
            
            Fiscal
      2006
              (53 Weeks)Grocery
      and Non-Food Items
            
            $
            22,327,217
            
            
            $
            21,627,218
            
            
            $
            21,183,034Meat
      and Deli
            
            
            9,452,010
            
            
            
            9,419,858
            
            
            
            9,533,808Produce
            
            
            2,713,404
            
            
            
            2,735,976
            
            
            
            2,563,086





4


ITEM
      1A.
            RISK
      FACTORS




The
following are certain risk factors that could affect the Company’s business,
results of operations and financial condition.  These risk factors
could cause the Company’s actual results to differ materially from those
projected in the forward-looking statements contained in our Annual Report on
Form 10-K. Before investing in the Company, investors should know that making
such an investment involves some risks.  The risks that are described
below are not the only ones the Company faces; there may be other risks and
uncertainties not presently known to us, or that we presently deem immaterial,
that could affect our business.  If any of the following risks occur,
the Company’s business, results of operations or financial condition could be
negatively affected.  The Company does not undertake any obligation to
update forward-looking statements.




For
four out of the past eight fiscal years we have been unable to operate
profitably due to a high level of competition in the retail grocery store
business.  This intense competition may be expected to have a negative
impact on both the prices we may charge for our products and certain elements of
our overhead and, accordingly, on the Company’s revenues, margins and
profitability.





The
retail food industry in which the Company operates is extremely competitive and
is generally characterized by narrow profit margins and high inventory
turnover.  We are competing against national, regional and local
supermarket chains, independent and specialty grocers, and nontraditional food
stores, such as super-centers and club stores, as well as convenience stores and
prepared food retailers.  Aggressive super-center expansion,
increasing fragmentation of retail formats, entry of non-traditional competitors
and market consolidation have further contributed to an increasingly competitive
marketplace.  We also face increasing competition from restaurants and
fast food chains due to the increasing portion of household food expenditures
for food prepared outside the home.  Many of our competitors have
financial, distribution, purchasing, and marketing resources that are greater
than ours.  Thus our profitability may be impacted by the pricing,
purchasing, financing, advertising or promotional decisions made by
competitors.  Our principal competitors compete primarily on the basis
of price, quality of products, product assortment, service, and store location
and condition.  A historical lack of inflation in food prices and
increasingly competitive markets have made it difficult generally for grocery
store operators to achieve comparable store sales gains and maintain
profitability.  Because sales growth has been difficult to attain,
competitors have attempted to maintain market share through increased levels of
promotional activities and discount pricing, creating a more difficult
environment in which to consistently increase
year-over-year-sales.  Our responses to these competitive pressures,
such as additional promotions and increased advertising, have in the past
adversely affected our operating margins and our overall profitability, and may
continue to do so in the future.  Further, these competitive pressures
often delay our ability to adjust our prices to reflect increases in our costs,
such as increases in wholesale inventory prices or in other elements of our
overhead.  Accordingly, we may not be able to fully absorb any future
cost increases through our efforts to adjust retail prices or increase
efficiencies in other areas of operations, which could result in increased
losses in future periods.  Additionally, we sometimes face the opening
of a new or remodeled competitor’s store in our trade
area.  Competition also requires us to periodically remodel our
existing stores, at ever increasing costs, in order to maintain their
appeal.


5


Our
level of outstanding indebtedness, coupled with the losses we have experienced
in four of the last eight years and increasing interest expense and other bank
charges, could impair our financial flexibility and negatively impact our
business.





As of May
31, 2008, our aggregate outstanding indebtedness stood at $2,072,121 as compared
to total assets for the Company of $3,807,100 at such date.  Our level
of indebtedness could:





·
            make
      it difficult for us to satisfy our obligations, including making interest
      payments;


·
            limit
      our ability to obtain additional financing to fund both working capital
      and capital spending requirements;


·
            limit
      our financial flexibility in planning for, and reacting to, industry
      changes;


·
            place
      us at a competitive disadvantage as compared to less leveraged
      companies;


·
            increase
      our vulnerability to general adverse economic and industry conditions,
      including changes in interest rates;
and


·
            require
      us to dedicate a substantial portion of our cash flow to payments on our
      debt, reducing the availability of our cash flow for other
      purposes.





Additionally,
the terms of our debt agreements with our senior lender contain negative
covenants which prohibit us, without the lender’s written consent, from taking
any of the following actions which we might otherwise deem to be in the interest
of the Company and its shareholders: (i) subject to certain exceptions, incur
additional indebtedness or guaranty obligations; (ii) subject to certain
exceptions, sell Company assets; (iii) purchase or acquire any interest in, or
loan money to, any other enterprise or entity; (iv) engage in any merger or sale
of the Company’s assets, or in any business activity substantially different
from our current business; or (v) pay any dividends on our stock.





Historically,
we have financed our working capital requirements principally through cash flow
from operations.  During the past five years, however, we have
increased our reliance on both bank and vendor financing due to periodic losses
which coincided with increased inventory and capital spending requirements
beginning in fiscal 2004 related to the establishment of our eighth grocery
store location.  While we believe that our cash flows and existing
financing arrangements will continue to supply our working capital needs, if our
operating losses should increase relative to depreciation and other non-cash
charges, we could be required to seek additional financing through bank loans,
or other sources, in order to meet our working capital needs.  If we
could not obtain such additional financing, or could not do so on commercially
reasonable terms, we could be required to reduce our current level of
operations.  We also could be forced to delay or cancel future planned
equipment upgrades and other capital spending if we are not able to obtain
appropriate financing for such projects on commercially reasonable
terms.  Further, increased interest expense resulting from higher debt
levels and rising interest rates, as well as increased bank service charges
related to both temporary overdrafts in our accounts and fees for processing
larger numbers of credit and debit card transactions required to maintain sales,
have contributed significantly to our losses in recent periods and may continue
to adversely impact our future performance.


6




We
are subject to the requirements of Section 404 of the Sarbanes-Oxley
Act.  If we are unable to timely comply with Section 404 or if the
costs related to compliance are significant, our profitability, stock price and
results of operations and financial condition could be materially adversely
affected.





We are
required to comply with the provisions of Section 404 of the Sarbanes-Oxley Act
of 2002, which require us to maintain an ongoing evaluation and documentation of
the internal controls over financial reporting related to our
business.  We were required to document and test our internal controls
and certify that we are responsible for maintaining an adequate system of
internal control procedures for the year ended May 31,
2008.  Beginning with our 2010 fiscal year and in subsequent years,
our independent registered public accounting firm will be required to opine on
those internal controls.  In the process, we may identify areas
requiring improvement, and we may have to design enhanced processes and controls
to address issues identified through such reviews.





We
evaluated our existing controls for the year ended May 31, 2008.  Our
Chief Executive Officer and Chief Financial Officer identified material
weaknesses in our internal control over financial reporting and determined that
ACI did not maintain effective internal control over financial reporting as of
May 31, 2008.  The identified material weaknesses did not result
in material audit adjustments to our fiscal 2008 financial statements; however,
uncured material weaknesses could negatively impact our financial statements for
subsequent years.





We cannot
be certain that we will be able to successfully remediate all of the material
weaknesses identified by our management as of May 31, 2008 and described in Item
9A(T) of this report, or that we or our auditors will not subsequently identify
additional deficiencies in our internal controls which constitute material
weaknesses.  If we fail to comply with the requirements of Section 404
or if we are unable to remediate such material weakness, the accuracy and
timeliness of the filing of our annual report could be materially adversely
affected.  Such events also could cause investors to lose confidence
in our reported financial information, which could have a negative affect on the
trading price of our Common Stock.  In addition, a material weakness
in the effectiveness of our internal controls over financial reporting could
result in an increased chance of fraud and the loss of customers, reduce our
ability to obtain financing and require additional expenditures to comply with
these requirements, each of which could have a material adverse effect on our
business, results of operations and financial condition.





While
neither we nor our auditors have identified any material misstatements in our
fiscal 2008 financial statements, any failure to successfully remediate material
weaknesses in our internal controls could result in a material misstatement that
would require a restatement of our financial statements, which could harm our
business and operating results.  The restatement of previously issued
financial statements could also expose us to legal risk.  The defense
of any such actions could cause the diversion of management’s attention and
resources, and we could be required to pay damages to settle such actions if any
such actions are not resolved in our favor.  Even if resolved in our
favor, such actions could cause us to incur significant legal and other
expenses.  Moreover, we may be the subject of negative publicity
focusing on the financial statement inaccuracies and resulting restatement and
negative reactions from our shareholders, creditors or others with which we do
business.  The occurrence of any of the foregoing could harm our
business and reputation and cause the price of our common stock to
decline.





Further,
we believe that the out-of-pocket costs, the diversion of management’s attention
from running the day-to-day operations and operational changes caused by the
need to comply with the requirements of Section 404 of the Sarbanes-Oxley Act
have been, and will continue to be, significant.  If the time and
costs associated with such compliance exceed our current expectations, our
results of operations could be adversely affected.


7


There
are inherent limitations in all control systems, and misstatements due to error
or fraud may occur and not be detected, which may adversely impact our business
and operating results.





Effective
internal control over financial reporting is necessary for us to provide
reasonable assurance with respect to our financial reports and to effectively
prevent fraud.  If we cannot provide reasonable assurance with respect
to our financial reports and effectively prevent fraud, our business and
operating results could be harmed.  Internal control over financial
reporting may not prevent or detect misstatements because of its inherent
limitations, including the possibility of human error, the circumvention or
overriding of controls, or fraud.  Therefore, even effective internal
controls can provide only reasonable assurance with respect to the preparation
and fair presentation of financial statements.  In addition,
projections of any evaluation of effectiveness of internal control over
financial reporting to future periods are subject to the risk that the control
may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.  As noted
above, if we fail to maintain the adequacy of our internal controls, including
any failure to implement required new or improved controls, or if we experience
difficulties in their implementation, our business and operating results could
be harmed and we could fail to meet our reporting obligations.




Our
common stock is not actively traded and is not traded on an established
exchange, and a majority of our stock is held by insiders, which may be expected
to result in limited liquidity and stock price volatility for
investors.





Our
common stock is quoted on the Pink Sheets under the symbol
“ANCS”.  The Pink Sheets is not an established exchange, and we do not
have enough shareholders or outstanding shares to support an active trading
market.  Accordingly, the market for our common stock is not liquid
and the historical prices at which our stock has traded may not provide a
reliable indication of future market prices.  For those reasons, the
trading price of our common stock could fluctuate
significantly.  Volatility in our stock price could also result from
the following factors, among others:





·
            the
      fact that we are presently unable to pay dividends to our stockholders due
      to the losses experienced in most of our recent fiscal
    years;


·
            the
      fact that a majority of our outstanding common stock (approximately 63.5%)
      is controlled by the Company’s officers and directors, principally by
      Michael A. Richardson, our Chief Executive Officer, and his wife, Diana K.
      Richardson;


·
            quarterly
      variations in the Company’s operating
results;


·
            changes
      in governmental regulations;


·
            the
      operating and stock price performance of other companies in our industry;
      and


·
            general
      stock market and economic
conditions.


8




Unfavorable
changes in governmental regulation may impose additional costs and
administrative burdens on the Company that could have an adverse effect on our
results of operations and financial condition.





Our
stores are subject to various federal, state and local laws, and regulations
affecting our business.  We must comply with numerous provisions
regulating, among other things, health and sanitation standards, food
labeling, land use and zoning, community right-to-know laws, equal employment
opportunity, workplace safety, minimum wages and other employment practices,
licensing for the sale of food, age requirements for the sale of tobacco
products, and fire safety regulations.  We cannot predict the nature
of future laws, regulations, interpretations or their application, or determine
what effect additional government regulations or administrative orders, when and
if promulgated, or disparate federal, state or local schemes would have on our
future business.  They could, however, require the reformulation of
certain products to meet new standards, the recall or discontinuance of certain
products not able to be reformulated, additional record keeping, expanded
documentation of the properties of certain products, expanded or different
labeling and/or substantiation.  Any or all of such requirements, to
the extent they either raise the wholesale prices for our inventory or impose
direct costs on the Company, could have an adverse effect on our results of
operations and financial condition.





Further,
the Sarbanes-Oxley Act of 2002 includes provisions addressing audits, financial
reporting and disclosure, conflicts of interest and corporate governance at
public companies.  We have already incurred increased professional
fees during fiscal years 2005 through 2008 related to compliance with these
provisions.  As discussed above, our efforts to achieve initial
compliance with the provisions of Section 404 of this Act, which deals with
management’s report on internal controls and an auditor’s examination of
internal controls, already has imposed, and may continue to impose, significant
additional costs on the Company over the next fiscal year.  We expect
these costs to include additional significant increases in accounting and
consulting fees, as well as additional internal personnel costs and the indirect
costs imposed by the diversion of scarce management resources to deal with
regulatory compliance matters as opposed to operational issues.  These
increased costs are likely to adversely affect our financial condition and
results of operations because, as discussed above, the intensely competitive
nature of our business makes it difficult for the Company to recover cost
increases through adjustments to our retail prices.





The
majority of our operating, general and administrative expenses is composed of
personnel costs, so that increases in prevailing wages, benefits and other
associated costs, such as recent legislation mandating increases in the federal
minimum wage, could have a material adverse effect on our results of operations
and financial condition.





The
majority of our operating, general and administrative expenses is composed of
employee payroll and related insurance and benefits
expense.  Accordingly, our financial performance may be greatly
influenced by increases in wage and benefit costs.  We compete with
other businesses in our markets in attracting and retaining
employees.  Tight labor markets, increased overtime, government
mandated increases in the minimum wage and a higher proportion of full−time
employees could all result in an increase in our labor costs.  We have
a substantial number of employees who are paid wage rates at or slightly above
the minimum wage.  As federal and state minimum wage rates increase,
we may be required to increase not only the wages of our minimum wage employees
but also the wages paid to employees whose wage rates are above minimum
wage.  A shortage of qualified employees also could require us to
increase our wage and benefit offerings in order to compete effectively in the
hiring and retention of qualified employees or to retain more expensive
temporary employees.  Additionally, various proposals that would
require employers to provide health insurance for all of their employees are
being considered from time-to-time in Congress and various
states.  The imposition of any requirement that we provide health
insurance to all employees on terms materially different from our existing
programs could also significantly increase our costs.  Due to
competitive conditions in our business, any such increases in labor and benefits
costs would be difficult for us to recover through contemporaneous price
increases, and there can be no assurance that we would be able to absorb such
cost increases through efforts to increase efficiencies in other areas of our
operations.  Accordingly, increased labor and benefits costs could
have a material adverse effect on our financial condition and results of
operations.


9




If
competitive conditions prevent us from being able to recover increases in our
costs through adjustments to our retail prices, our results of operations and
financial condition will be adversely affected.





During
the current fiscal year, we have experienced increases in transportation cost
and in the cost of products we sell in our stores.  The increases in
our costs are attributed to increases in fuel, plastic, grain and other
commodity costs.  As inflation has increased expenses, we have
recovered, to the extent permitted by competition, the increase in expenses by
increasing prices over time.  However, the economic and competitive
environment in our trade area continues to challenge us to become more cost
efficient as our ability to recover increases in expenses through price
increases is often limited, or at least delayed, by the effects of
competition.  Our future results of operations will depend upon our
ability to adapt to the current economic environment as well as current and
future competitive conditions.





We
are vulnerable to adverse changes in economic conditions in the concentrated
geographic region in which we operate, as well as changes affecting the national
economy, and negative economic developments either locally or nationally could
have a material adverse impact on our business.





Our
operations are concentrated within a compact geographical area that comprises
Northwest Georgia, Northeast Alabama, and Southeast Tennessee.  We are
therefore vulnerable to regional economic downturns as well as to natural and
other catastrophic events that may impact our local region, in addition to being
vulnerable to any such events that may affect the national economy as a
whole.  Economic conditions such as inflation, interest rates, energy
costs and unemployment rates may adversely affect both our sales and our cost
structure, which could lead to losses, and may also adversely affect our future
growth and expansion.  Further, since our operations are concentrated
in a single, relatively compact geographical area, opportunities for future
store expansion may be limited, which may adversely affect our business and
results of operations.





The
loss of any of our key employees could have a material adverse effect on our
business.





We are
heavily dependent upon the services of Michael A. Richardson, our President and
Chief Executive Officer, and Paul R. Cook, our Executive Vice President and
Chief Financial Officer, as well as certain other key personnel.  If
Mr. Richardson, Mr. Cook or any of our other key personnel were to unexpectedly
leave our Company, our business, financial condition and results of operations
could be materially and adversely affected.  In addition, we must
continue to attract, retain and motivate a significant number of qualified
management and operating personnel, including replacement of senior management
upon retirement.  Individuals of this caliber are historically in
short supply and this shortage may limit our ability to hire and retain
qualified personnel, and thus, may hinder our ability to operative
effectively.


10




Changes
in the terms on which suppliers require the Company to pay for store merchandise
could have an adverse effect on the Company’s business, financial condition and
results of operations.





Similar
to many retailers, the Company has payment terms with most of its suppliers that
extend payment for up to 30 days beyond the date the product is
purchased.  Those payment terms are subject to change at any
time.  If the Company’s suppliers change their payment terms for
whatever reason and require faster payment by the Company, it could have a
material adverse effect on the Company’s business, financial condition and
results of operations.





A
change in supplier rebates could adversely affect our results.





We
receive allowances, credits and income from suppliers primarily for volume
incentives, new product introductions, in-store promotions and co-operative
advertising.  Certain of these funds are based on volume of net sales
or purchases, growth rate of net sales or purchases and marketing
programs.  If we do not grow our net sales over prior periods or if we
are not in compliance with the terms of these programs, there could be a
material negative effect on the amount of incentives offered or paid to us by
our suppliers.





Additionally,
suppliers routinely change the requirements for, and the amount of, funds
available.  No assurance can be given that we will continue to receive
such incentives or that we will be able to collect outstanding amounts relating
to these incentives in a timely manner, or at all.  A reduction in,
the discontinuance of, or a significant delay in receiving such incentives, as
well as the inability to collect such incentives, could have a material adverse
effect on our business, results of operations and financial
condition.





We
depend on one principal supplier for a substantial portion of our merchandise
inventory. A disruption in supply or a change in our relationship could have a
material adverse effect on our business.





We
purchase approximately 82% of our merchandise including grocery, meat and
produce items, from a single wholesale grocer, Mitchell Grocery
Corporation.  Mitchell has been a supplier of ours since
2000.  We do not have a written contract with Mitchell but a change of
merchandise suppliers, a disruption in supply or a significant change in our
relationship with Mitchell could have a material adverse effect on our business
and results of operations and ability to service our outstanding
indebtedness.





As
a result of selling food products, we may be exposed to product liability claims
and adverse publicity that could have a material adverse effect on our
profitability and business operations.





The
packaging, marketing, distribution and sale of food products purchased from
others entail an inherent risk of product liability, product recall and adverse
publicity resulting from such events.  Any such products may contain
contaminants that we may inadvertently redistribute.  These
contaminants may, in certain cases, result in illness, injury or death if
processing at the foodservice or consumer level does not eliminate the
contaminants.  Even an inadvertent shipment of adulterated products
may violate the law and may lead to an increased risk of exposure to product
liability claims.  There can be no assurance that such claims will not
be asserted against us or that we will not be obligated to perform such a recall
in the future.  If a product liability claim is successful, our
insurance may not be adequate to cover all liabilities that we may incur, and we
may not be able to continue to maintain such insurance, or obtain comparable
insurance at a reasonable cost, if at all.  If we do not have adequate
insurance or contractual indemnification available from the producer of the
product or others in the supply chain, product liability claims relating to
defective products could have a material adverse effect on our business,
financial condition and results of operations.  In addition, adverse
publicity about these types of claims and concerns, whether or not valid, may
discourage consumers from buying our products or cause production and delivery
disruptions, which also could have a material adverse effect on our business,
financial condition and results of operations.


11




If
we were held liable for any future environmental damages or cleanup costs, our
business and financial condition could be adversely impacted.





Our
operations subject us to various laws and regulations relating to the protection
of the environment, including those governing the management and disposal of
hazardous materials and the cleanup of contaminated sites.  Under some
environmental laws, such as the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, also known as CERCLA or the Superfund
law, and similar state statues, responsibility for the entire cost of cleanup of
a contaminated site can be imposed upon any current or former site owners or
operators, or upon any party who sent waste to the site, regardless of the
lawfulness of the original activities that lead to the
contamination.  We believe we are currently in substantial compliance
with all applicable environmental requirements.  However, future
developments such as more aggressive enforcement policies, new laws or
discoveries of unknown conditions may require expenditures that could have a
material adverse effect on our business and financial condition.





Adverse
outcomes in any future legal proceedings could have a material adverse effect on
our financial condition and results of operations.





From time
to time, we may be made a party to legal proceedings, including matters
involving personnel and employment issues, personal injury, intellectual
property and other proceedings arising in the ordinary course of
business.  We are not presently a party to any material legal
proceedings, and we estimate our exposure to any such claims and litigation
arising in the normal course of business and currently believe we have made
adequate provisions for such exposure.  Unexpected future outcomes in
any such matters, however, could result in a material adverse effect on our
financial condition and results of operations.





Any
disruptions to the operation of, or breaches in the security of data maintained
in, the information technology systems on which our business increasingly
depends could adversely affect the Company.





Our
business is increasingly dependent on information technology systems that are
complex and vital to continuing operations.  If we were to experience
difficulties maintaining existing systems or implementing new systems, we could
incur significant losses due to disruptions in our operations. Additionally,
these systems contain valuable proprietary data that, if breached, would have an
adverse effect on the Company.


12


ITEM
      1B.
            UNRESOLVED
      STAFF COMMENTS.





None.








ITEM
      2.
            PROPERTIES





The
executive offices of the Company are located in a 4,000 square-foot office
building on Hannah Way, just off Battlefield Parkway in Rossville, Georgia,
which the Company holds under a lease for a term of three years, expiring in
September 2009 with one two-year renewal option.





The
Company’s supermarkets are located in Ringgold, LaFayette, Chatsworth,
Chickamauga and Tunnel Hill, Georgia; Stevenson, Alabama; and Dayton and Jasper,
Tennessee.  All of the eight locations are leased from unaffiliated
landlords.  Summary information concerning these leases is presented
below:





Square
            
            
            Current
      Lease
            
            
            RenewalLocation
            
            Footage
            
            
            Term
            
            
            OptionsRinggold,
      GA
            
            
            14,400
            
            
            12/01/07
      - 11/30/08
            
            
            4-1
      yr. termsLaFayette,
      GA
            
            
            20,500
            
            
            02/01/07
      - 01/31/12
            
            
            1-5
      yr. termsChatsworth,
      GA
            
            
            24,360
            
            
            05/01/08
      - 04/30/13
            
            
            —Chickamauga,
      GA
            
            
            13,840
            
            
            01/01/05
      - 12/31/09
            
            
            1-5
      yr. termTunnel
      Hill, GA
            
            
            18,900
            
            
            09/01/07
      - 08/31/12
            
            
            2-5
      yr. termsStevenson,
      AL
            
            
            23,860
            
            
            06/01/04
      - 05/31/09
            
            
            1-5
      yr. termDayton,
      TN
            
            
            23,004
            
            
            08/01/07
      - 07/31/12
            
            
            —Jasper,
      TN
            
            
            25,000
            
            
            05/01/06
      – 04/30/14
            
            
            2-5
      yr. terms163,864





The
supermarkets in Ringgold, LaFayette, Chatsworth and Tunnel Hill, Georgia;
Stevenson, Alabama; and Dayton, Tennessee, are located in strip shopping
centers.  The stores in Chickamauga, Georgia and Jasper, Tennessee are
free-standing.








ITEM
      3.
            LEGAL
      PROCEEDINGS





There are
no material pending legal proceedings to which the Company is a party, or to
which any of its property is subject, nor have any material legal proceedings
been terminated during the fourth quarter of the Company’s fiscal
year.








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





None.


13


EXECUTIVE
OFFICERS OF THE COMPANY





The
Company’s Board of Directors appoints the Company’s Executive Officers for a
term of one year.  The names, ages, offices held with the Company,
business experience during the past five years, and certain directorships held
by each of the Company’s Executive Officers are set forth in the following
table:





Name
      and Year
            
            Office(s)
      PresentlyFirst
      Elected as
            
            Held,
      Business ExperienceExecutive Officer
            
            and Certain Directorships
            
            AgeMichael
      A. Richardson
            
            Chairman
      of the Board of
            
            621977
            
            Directors,
      President, ChiefExecutive
      Officer, member ofthe
      Executive Committee ofthe
      Board of Directors.Paul
      R. Cook
            
            Executive
      Vice-President,
            
            581987
            
            Treasurer,
      Chief FinancialOfficer,
      Director, member ofthe
      Executive Committee ofthe
      Board of Directors.Director
      of Capital Bank,Fort
      Oglethorpe, Georgiasince
      May 1993.James
      E. Floyd
            
            Vice-President,
      member of
            
            641991
            
            the
      Executive Committee(ex-officio).Reba
      S. Southern
            
            Secretary,
      member of the
            
            551991
            
            Executive
      Committee (ex-officio).


14




PART II





ITEM
      5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES





(a)           The
approximate number of record holders of the Company’s common stock at May 31,
2008, was 757.  The Company does not have any equity compensation
plans.  The remaining information required by paragraph (a) of this
Item 5 is incorporated herein by reference to page 4 of the Company’s Annual
Report to security holders for the fiscal year ended May 31, 2008.





(b)           Not
applicable.





(c)           Issuer
Repurchases:





There
were no repurchases of common stock made by the Company during the fourth
quarter of the fiscal year covered by this report.








ITEM
      6.
            SELECTED
      FINANCIAL DATA





The
information required by this Item is incorporated herein by reference to page 3
of the Company’s Annual Report to security holders for the fiscal year ended May
31, 2008.








ITEM
      7.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





The
information required by this Item is incorporated herein by reference to pages 5
through 21 of the Company’s Annual Report to security holders for the fiscal
year ended May 31, 2008.








ITEM
      7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
required.







ITEM
      8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA





The
information required by this Item is incorporated herein by reference to pages
22 through 38 of the Company’s Annual Report to security holders for the fiscal
year ended May 31, 2008.








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





None.


15


ITEM
      9A(T).
            CONTROLS
      AND PROCEDURES





Evaluation of Disclosure
Controls and Procedures




The
Company maintains disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-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 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 May 31, 2008. Based on that evaluation,
the Company’s Chief Executive Officer and Chief Financial Officer concluded
that, as of that date, the Company’s disclosure controls and procedures, were
not effective at a reasonable assurance level, due to the identification of
material weaknesses in internal control over financial reporting, as discussed
further below under Management’s Report on Internal Control over Financial
Reporting.





Based
upon management’s conclusion that there were material weaknesses in the
Company’s internal control over financial reporting, the Company has taken
measures it deemed necessary to conclude its financial statements as of and for
the year-ended May 31, 2008 do not contain a material
misstatement.




Management’s Report on
Internal Control over Financial Reporting




Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Section 13a-15(f) of the
Securities Exchange Act of 1934, as amended).  Internal control over
financial reporting is a process designed by, or under the supervision of, the
Company’s CEO and CFO to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of the Company’s financial statements
for external reporting purposes in conformity with U.S. generally accepted
accounting principles and include those policies and procedures that
(i) pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and disposition of the assets of
the Company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company’s assets that
could have a material effect on the financial statements.





As of May
31, 2008, management, with the participation of the Company’s Chief Executive
Officer and Chief Financial Officer, conducted an assessment of the
effectiveness of the Company’s internal control over financial reporting based
on the framework established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).  Based on the criteria established by COSO, management
concluded that the Company’s internal control over financial reporting was not
effective as of May 31, 2008, as a result of the identification of the material
weaknesses described below.


16


A
material weakness is a deficiency or combination of deficiencies in internal
control over financial reporting, such that there is a reasonable possibility
that a material misstatement of the annual or interim financial statements will
not be prevented or detected on a timely basis.





Our
management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures or our internal
control over financial reporting will prevent or detect all errors and all
fraud.  A control system, no matter how well designed and operated,
can provide only reasonable, not absolute, assurance that the control system’s
objectives will be met.  Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs.  Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected.  These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or
mistake.  Controls can also be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of
the controls.  Over time, controls may become inadequate because of
changes in conditions or deterioration in the degree of compliance with
associated policies or procedures.  Because of the inherent
limitations in a cost-effective control system, misstatements due to error or
fraud may occur and not be detected.





In
connection with the preparation of our financial statements for the year ended
May 31, 2008, certain significant deficiencies in the internal control became
evident to management that, individually and in the aggregate, represent
material weaknesses, including, insufficient segregation of duties in our
finance and accounting functions due to limited personnel.  During the
year ended May 31, 2008, the Chief Financial Officer internally maintained all
aspects of our financial reporting process, including, but not limited to,
access to the underlying accounting records and systems, the ability to post and
record journal entries and responsibility for the preparation of the financial
statements. Oftentimes spreadsheets are created, modified and maintained by the
Chief Financial Officer without any independent review or verification of the
calculations, formulas or assumptions used to aggregate the amounts used to
compile the financial statements and related
disclosures.  Additionally, meaningful review of the Company’s bank
statements used by the Chief Financial Officer to perform reconciliations are
not being performed and 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 may have a pervasive impact on our internal
control over financial reporting.





This
annual report does not include an attestation report of the Company’s
independent registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by the
Company’s independent registered public accounting firm pursuant to temporary
rules of the Securities Exchange Commission that permit the Company to provide
only management’s report in this annual report.


17


Management’s Remediation
Plan





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.  Management has hired additional staff that will have
the 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.  Additionally, the Chief Executive Officer will
be performing a detailed review of the bank statements, including examination of
individual items, used by the Chief Financial Officer in the preparation of
reconciliations.





Changes in Internal Control
over Financial Reporting





Except as
noted above, there were no 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 year that have materially affected, or
are reasonably likely to materially affect, our internal control over financial
reporting.








ITEM
      9B.
            OTHER
      INFORMATION





None.


18


PART III





ITEM
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE





Executive
Officers





Information
concerning the Company’s Executive Officers is set forth in Part I of this
report on Form 10-K under the caption “Executive Officers of the
Company.”





Audit Committee Financial
Expert





All three
of the Company’s independent directors currently serve on the Audit Committee,
and each is an experienced business professional.  Thomas L.
Richardson is the retired chief executive officer of Learning Labs, Inc., a
position he held for 27 years.  He has had over 32 years of experience
in reviewing the Company’s financial reporting process through service as an
independent director.  Danny R. Skates has 13 years of senior
management experience as Vice President and General Manager of Jackson Chevrolet
Pontiac Buick GMC, Inc., and Andrew V. Douglas has had extensive experience with
the business of independent grocery retailers such as the Company through his
service as a retail counselor for Fleming Companies, Inc., our former principal
supplier.  Accordingly, in light of their backgrounds and their
understanding of the Company’s business, the Board of Directors believes that
the members of the Audit Committee will be able to provide effective oversight
for the Company’s financial reporting process and its relationship with its
independent accountants.  Nevertheless, the Company’s Board of
Directors has not determined that any member of the Company’s Audit Committee
qualifies as an “audit committee financial expert” under the SEC’s detailed,
technical definition of that term.





Code of
Ethics





The
Company has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”)
which applies to its principal executive officer, principal financial officer
and principal accounting officer or controller, and any persons performing
similar functions.  A copy of the Code of Ethics is filed as Exhibit
14 to this Report.




The
remaining information required by this Item is incorporated herein by reference
to the Company’s definitive proxy statement filed with the Securities and
Exchange Commission pursuant to Regulation 14A for the Company’s 2008 Annual
Meeting of Shareholders, under the headings “INFORMATION ABOUT NOMINEES FOR
DIRECTOR” and “SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE.”


19


ITEM
      11.
            EXECUTIVE
      COMPENSATION





The
information required by this Item is incorporated herein by reference to the
Company’s definitive proxy statement filed with the Securities and Exchange
Commission pursuant to Regulation 14A for the Company’s 2008 Annual Meeting of
Shareholders, under the headings “DIRECTOR COMPENSATION” and “EXECUTIVE
COMPENSATION.”








ITEM
      12.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS





Securities Authorized for
Issuance Under Equity Compensation Plans





The
Company has not adopted any equity compensation plans.




The
remaining information required by this Item is incorporated herein by reference
to the Company’s definitive proxy statement filed with the Securities and
Exchange Commission pursuant to Regulation 14A for the Company’s 2008 Annual
Meeting of Shareholders, under the headings “PRINCIPAL SHAREHOLDERS” and
“INFORMATION ABOUT NOMINEES FOR DIRECTOR.”








ITEM
      13.
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE





The
information required by this Item is incorporated herein by reference to the
Company’s definitive proxy statement filed with the Securities and Exchange
Commission pursuant to Regulation 14A for the Company’s 2008 Annual Meeting of
Shareholders, under the headings “CERTAIN TRANSACTIONS” and “DIRECTOR NOMINATION
PROCESS AND INDEPENDENCE DETERMINATIONS.”








ITEM
      14.
            PRINCIPAL
      ACCOUNTING FEES AND SERVICES





The
information required by this Item is incorporated herein by reference to the
Company’s definitive proxy statement filed with the Securities and Exchange
Commission pursuant to Regulation 14A for the Company’s 2008 Annual Meeting of
Shareholders, under the heading “AUDIT FEES.”


20




PART IV





ITEM
      15.
            EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES





1.
            The
      following Financial Statements included in the Company’s 2008 Annual
      Report to the security holders for the fiscal year ended May 31, 2008, are
      incorporated by reference in Item 8
hereof:





-
            Report
      of Independent Registered Public Accounting
Firm





-
            Balance
      Sheets – May 31, 2008 and June 2,
2007





-
            Statements
      of Income and Changes in Stockholders’ Equity - Fiscal Years Ended May 31,
      2008 and June 2, 2007





-
            Statements
      of Cash Flows - Fiscal Years Ended May 31, 2008 and June 2,
      2007





-
            Notes
      to Financial Statements





2.
            None
      of the schedules for which provision is made in the applicable accounting
      regulations of the Securities and Exchange Commission are required under
      the related instructions, or else are inapplicable to the Company, and
      therefore no such schedules have been
filed.





3.
            The
      Exhibit Index attached to this report is incorporated by reference into
      this Item 15(a)(3).


21


SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





AMERICAN
      CONSUMERS, INC.Date:
      August 27, 2008
            By:
            /s/ Michael A. RichardsonMichael
      A. RichardsonChairman
      of the Board,President
      and ChiefExecutive
      Officer





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








Signature
            
            Title
            Date/s/ Michael A. Richardson
            
            Chairman
      of the Board,
            August
      27, 2008Michael
      A. Richardson
            
            President
      and ChiefExecutive
      Officer/s/ Paul R. Cook
            
            Executive
      Vice-
            August
      27, 2008Paul
      R. Cook
            
            President,
      ChiefFinancial
      Officer,Treasurer
      (ChiefAccounting
      Officer) andDirector/s/ Virgil E. Bishop
            
            Director
            August
      27, 2008Virgil
      E. Bishop/s/ Danny R. Skates
            
            Director
            August
      27, 2008Danny
      R. Skates/s/ Thomas L. Richardson
            
            Director
            August
      27, 2008Thomas
      L. RichardsonDirectorAndrew
      V. Douglas







EXHIBIT
INDEX





Exhibit
      3
            
            Articles
      of Incorporation and By-Laws.  Incorporated by reference to
      Exhibit 3 to Form 10-K for the year ended May 29, 1993.Exhibit
      10.1
            
            Lease
      for the Company’s Ringgold, Georgia location, as amended through the Fifth
      Amendment thereto dated February 18, 2008.  Incorporated by
      reference to Exhibit 10.1 to Form 10-Q for quarterly period ended March 1,
      2008.Exhibit
      10.2
            
            Lease
      Agreement for the Company’s LaFayette, Georgia
      location.  Incorporated by reference to Exhibit 10(f) to Form
      10-K for the year ended May 29, 1993.Exhibit
      10.3
            
            Lease
      Agreement for the Company’s Chatsworth, Georgia location. Incorporated by
      reference to Exhibit 10(g) to Form 10-K for the year ended May 29,
      1993.Exhibit
      10.4
            
            First
      Lease Amendment Agreement for the Company’s Chatsworth, Georgia location,
      dated March 19, 2003.  Incorporated by reference to Exhibit
      10.15 to Form 10-K for the year ended May 31, 2003.Exhibit
      10.5
            
            Second
      Lease Amendment Agreement for the Company’s Chatsworth, Georgia location,
      dated November 30, 2007.  Incorporated by reference to Exhibit
      10.28 to Current Report on Form 8-K dated November 30,
    2007.Exhibit
      10.6
            
            Lease
      Agreement for the Company’s Chickamauga, Georgia location. Incorporated by
      reference to Exhibit 10(h) to Form 10-K for the year ended May 29,
      1993.Exhibit
      10.7
            
            Letter
      Agreement, dated August 3, 1994, concerning three 5-year extension options
      for the Company’s Chickamauga, Georgia location.  Incorporated
      by reference to Exhibit 10 to Form 10-Q for quarterly period ended August
      27, 1994.Exhibit
      10.8
            
            Renewal
      Lease Agreement for the Company’s Stevenson, Alabama location.
      Incorporated by reference to Exhibit 10(h) to Form 10-K for the year ended
      May 28, 1994.Exhibit
      10.9
            
            Lease
      Agreement for the Company’s Dayton, Tennessee
      location.  Incorporated by reference to Exhibit 10(j) to Form
      10-K for the year ended May 29,
1993.






All references
incorporating exhibits from documents
previously
filed by the Companywith the
SEC are to SEC File No. 0-5815









Exhibit
      10.10
            
            Lease
      Agreement for the Company’s Executive Offices.  Incorporated by
      reference to Exhibit 10.3 to Form 10-Q for the quarterly period ended
      September 1, 2001.Exhibit
      10.11
            
            Lease
      Agreement for the Company’s Jasper, Tennessee
      location.  Incorporated by reference to Exhibit 10.19 to Form
      10-K for the year ended June 2, 2001.Exhibit
      10.12
            
            Lease
      Agreement for the Company’s Tunnel Hill, Georgia location, dated December
      20, 2003 between the Company and Tunnel Properties,
      LLC.  Incorporated by reference to Exhibit 10.2 to Form 10-Q for
      the quarterly period ended February 28, 2004.Exhibit
      10.13
            
            Demand
      Note with Variable Interest Rate between the Company and Michael A. and
      Diana K. Richardson.  Incorporated by reference to Exhibit 10.21
      to Form 10-K for the year ended May 29, 2004.Exhibit
      10.14
            
            Demand
      Note with Variable Interest Rate between the Company and Matthew A.
      Richardson.  Incorporated by reference to Exhibit 10.22 to Form
      10-K for the year ended May 29, 2004.Exhibit
      10.15
            
            Commitment
      Letter between the Company and Gateway Bank and Trust Company, dated as of
      March 16, 2007.  Incorporated by reference to Exhibit 10.17 to
      Form 10-K for the year ended June 2, 2007.Exhibit
      10.16
            
            Business
      Loan Agreement and Promissory Note between the Company and Gateway Bank
      and Trust Company, dated as of May 3, 2007, for $180,000 Term
      Loan.  Incorporated by reference to Exhibit 10.18 to Form 10-K
      for the year ended June 2, 2007.Exhibit
      10.17
            
            Commercial
      Security Agreement between the Company and Gateway Bank and Trust Company
      for $180,000 Term Loan, dated as of May 3, 2007.  Incorporated
      by reference to Exhibit 10.19 to Form 10-K for the year ended June 2,
      2007.Exhibit
      10.18
            
            Assignment
      of Deposit Account between the Company and Gateway Bank and Trust Company
      for $180,000 Term Loan, dated as of May 3, 2007.  Incorporated
      by reference to Exhibit 10.20 to Form 10-K for the year ended June 2,
      2007.






All references
incorporating exhibits from documents
previously filed by the Companywith the
SEC are to SEC File No.
0-5815









Exhibit
      10.19
            
            Business
      Loan Agreement and Promissory Note between the Company and Gateway Bank
      and Trust Company, dated as of May 3, 2007, for $800,000 Revolving Line of
      Credit.  Incorporated by reference to Exhibit 10.21 to Form 10-K
      for the year ended June 2, 2007.Exhibit
      10.20
            
            Commercial
      Security Agreement between the Company and Gateway Bank and Trust Company
      for $800,000 Revolving Line of Credit, dated as of May 3,
      2007.  Incorporated by reference to Exhibit 10.22 to Form 10-K
      for the year ended June 2, 2007.Exhibit
      10.21
            
            Assignment
      of Deposit Account between the Company and Gateway Bank and Trust Company
      for $800,000 Revolving Line of Credit, dated as of May 3,
      2007.  Incorporated by reference to Exhibit 10.23 to Form 10-K
      for the year ended June 2, 2007.Exhibit
      10.22
            
            Letter
      Agreement, dated as of May 3, 2007, between the Company and Gateway Bank
      and Trust Company.  Incorporated by reference to Exhibit 10.24
      to Form 10-K for the year ended June 2, 2007.Exhibit 10.23*
            
            Narrative
      Summary of the Company’s Named Executive Officer Base Salaries for Fiscal
      2009.  Filed herewith.Exhibit 10.24*
            
            Narrative
      Summary of the Company’s Cash Bonus Plan for Fiscal 2009.  Filed
      herewith.Exhibit 10.25*
            
            Narrative
      Summary of Director Compensation Arrangements for the Company (no material
      changes from fiscal 2007 and 2008 descriptions).  Filed
      herewith.Exhibit
      10.26
            
            Cash
      Register Purchase Agreement for the Company’s LaFayette, Georgia location,
      dated February 5, 2008.  Incorporated by reference to Exhibit
      10.29 to Current Report on Form 8-K dated February 5,
  2008.Exhibit
      10.27
            
            Business
      Loan Agreement and Promissory Note between the Company and Gateway Bank
      and Trust Company, dated as of April 25, 2008, for $800,000 Revolving Line
      of Credit.  Incorporated by reference to Exhibit 10.30 to
      Current Report on Form 8-K dated May 5,
2008.






All references
incorporating exhibits from documents
previously filed by the Companywith the
SEC are to SEC File No. 0-5815









Exhibit
      10.28
            
            Commercial
      Security Agreement between the Company and Gateway Bank and Trust Company
      for $800,000 Revolving Line of Credit, dated as of April 25,
      2008.  Incorporated by reference to Exhibit 10.31 to Current
      Report on Form 8-K dated May 5, 2008.Exhibit
      10.29
            
            Assignment
      of Deposit Account between the Company and Gateway Bank and Trust Company
      for $800,000 Revolving Line of Credit, dated as of April 25,
      2008.  Incorporated by reference to Exhibit 10.32 to Current
      Report on Form 8-K dated May 5, 2008.Exhibit
      10.30
            
            Letter
      Agreement, dated as of May 8, 2008, between the Company and Gateway Bank
      and Trust Company.  Incorporated by reference to Exhibit 10.33
      to Current Report on Form 8-K dated May 5, 2008.Exhibit
      10.31
            
            Cash
      Register Purchase Agreement for the Company’s Tunnel Hill, Georgia
      location, dated May 22, 2008.  Incorporated by reference to
      Exhibit 10.34 to Current Report on Form 8-K dated May 22,
      2008.Exhibit
      10.32
            
            Cash
      Register Purchase Agreement for the Company’s Chickamauga, Georgia
      location, dated July 18, 2008.  Incorporated by reference to
      Exhibit 10.35 to Current Report on Form 8-K dated July 18,
      2008.Exhibit
      10.33
            
            Cash
      Register Purchase Agreement for the Company’s Stevenson, Alabama location,
      dated July 18, 2008.  Incorporated by reference to Exhibit 10.36
      to Current Report on Form 8-K dated July 18, 2008.Exhibit
      10.34
            
            Terms
      Sheet Letter between the Company and Gateway Bank & Trust Company,
      dated as of February 7, 2008, regarding commitment under which first
      borrowing was initiated July 25, 2008.  Incorporated by
      reference to Exhibit 10.37 to Current Report on Form 8-K dated July 25,
      2008.Exhibit
      10.35
            
            Two
      Promissory Notes for $56,000 each between the Company and Gateway Bank
      & Trust Company, dated as of July 25, 2008.  Incorporated by
      reference to Exhibit 10.38 to Current Report on Form 8-K dated July 25,
      2008.






All references
incorporating exhibits from documents
previously filed by the Companywith the
SEC are to SEC File No. 0-5815









Exhibit
      10.36
            
            Commercial
      Security Agreements between the Company and Gateway Bank & Trust
      Company related to Two $56,000 Promissory Notes dated as of July 25,
      2008.  Incorporated by reference to Exhibit 10.39 to Current
      Report on Form 8-K dated July 25, 2008.Exhibit
      10.37
            
            Assignments
      of Deposit Account between the Company and Gateway Bank & Trust
      Company related to Two $56,000 Promissory Notes dated as of July 25,
      2008.  Incorporated by reference to Exhibit 10.40 to Current
      Report on Form 8-K dated July 25, 2008.Exhibit 13
            
            Information
      Incorporated by Reference from Annual Report to Shareholders for the
      Fiscal Year ended May 31, 2008.  Filed
  herewith.Exhibit
      14
            
            Code
      of Business Conduct and Ethics.  Incorporated by reference to
      Exhibit 14 to Form 10-K for the year ended May 29,
2004.Exhibit 23
            
            Consent
      of Hazlett, Lewis & Bieter, PLLC.  Filed
      herewith.Exhibit 31.1
            
            C.E.O.
      Certification pursuant to Exchange Act Rules 13a-14(a) and
      15d-14(a).  Filed herewith.Exhibit 31.2
            
            C.F.O.
      Certification pursuant to Exchange Act Rules 13a-14(a) and
      15d-14(a).  Filed herewith.Exhibit 32.1
            
            C.E.O.
      Certification pursuant to Exchange Act Rules 13a-14(b) and
      15d-14(b).  Filed herewith.Exhibit 32.2
            
            C.F.O.
      Certification pursuant to Exchange Act Rules 13a-14(b) and
      15d-14(b).  Filed
herewith.








*
Indicates a management contract or compensatory plan or arrangement




All
references incorporating exhibits fromdocuments
previously filed by the Companywith the
SEC are to SEC File No. 0-5815