<TABLE>
<CAPTION>
                                AMERICAN  CONSUMERS,  INC.

                            FIVE-YEAR  SUMMARY  OF  OPERATIONS

                         (In thousands, except per share amounts)
-----------------------------------------------------------------------------------------

                                                      FISCAL YEAR ENDED
                                    -----------------------------------------------------
                                     MAY 28     MAY 29     MAY 31     JUNE 1     JUNE 2
                                      2005       2004       2003       2002       2001
                                    ---------  ---------  ---------  ---------  ---------
<S>                                 <C>        <C>        <C>        <C>        <C>

NET SALES                           $ 32,101   $ 30,011   $ 29,625   $ 28,900   $ 25,635
                                    ---------  ---------  ---------  ---------  ---------

COST AND EXPENSES:
  Cost of goods sold                  24,431     22,819     22,524     22,313     19,561
  Operating, general and
    administrative expenses            8,031      7,473      7,098      6,881      6,137
  Interest expense                        59         45         56         73         26
  Other income, net                      (89)       (90)       (93)       (96)       (94)
                                    ---------  ---------  ---------  ---------  ---------

      Total                           32,432     30,247     29,585     29,171     25,630
                                    ---------  ---------  ---------  ---------  ---------

Income (loss) before income taxes       (331)      (236)        40       (271)         5
                                    ---------  ---------  ---------  ---------  ---------

INCOME TAXES:
  Federal                                  -          -          -        (42)        (3)
  State                                    -          -          -         (2)         -
                                    ---------  ---------  ---------  ---------  ---------

      Total                                -          -          -        (44)        (3)
                                    ---------  ---------  ---------  ---------  ---------

NET INCOME (LOSS)                   $   (331)  $   (236)  $     40   $   (227)  $      8
                                    =========  =========  =========  =========  =========

PER SHARE AMOUNTS:
  Net income (loss)                 $   (.41)  $   (.29)  $    .05   $   (.27)  $    .01
                                    =========  =========  =========  =========  =========

  Cash dividends                    $      -   $      -   $      -   $      -   $      -
                                    =========  =========  =========  =========  =========

WEIGHTED AVERAGE NUMBER
  OF SHARES OUTSTANDING                  807        814        818        825        832
                                    =========  =========  =========  =========  =========

TOTAL ASSETS                        $  3,607   $  4,090   $  4,046   $  4,469   $  4,566
                                    =========  =========  =========  =========  =========

LONG-TERM DEBT                      $426,244   $662,078   $514,236   $681,154   $169,421
                                    =========  =========  =========  =========  =========

OBLIGATIONS UNDER CAPITAL
  LEASE AGREEMENTS                  $      -   $      -   $      -   $      -   $      3
                                    =========  =========  =========  =========  =========
</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 May 28,
2005,  was  823.  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.

<TABLE>
<CAPTION>
                         Bid Prices            Asked Prices       Dividends
---------------------------------------------------------------------------
                     High        Low         High        Low      Per Share
                  ----------  ----------  ----------  ----------  ---------
<S>               <C>         <C>         <C>         <C>         <C>
2005
---------------------------------------------------------------------------
  First Quarter   $     0.87  $     0.87  $     1.50  $     1.50       None
---------------------------------------------------------------------------
  Second Quarter  $     0.90  $     0.90  $     4.00  $     4.00       None
---------------------------------------------------------------------------
  Third Quarter   $     0.90  $     0.90  $     4.00  $     4.00       None
---------------------------------------------------------------------------
  Fourth Quarter  $     1.01  $     1.01        None        None       None
---------------------------------------------------------------------------

2004
---------------------------------------------------------------------------
  First Quarter   $     0.80  $     0.80  $     4.00  $     4.00       None
---------------------------------------------------------------------------
  Second Quarter  $     0.80  $     0.80  $     4.00  $     4.00       None
---------------------------------------------------------------------------
  Third Quarter   $     0.80  $     0.80  $     4.00  $     4.00       None
---------------------------------------------------------------------------
  Fourth Quarter  $     0.87  $     0.87  $     1.50  $     1.50       None
---------------------------------------------------------------------------
</TABLE>

     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  of  which  do  not  necessarily  represent  actual  trades.  The
market-makers  as  of  May  28,  2005,  are:

<TABLE>
<CAPTION>
<S>                                         <C>
     Carr Securities Corporation            (516) 944-8300

     David A. Noyes & Co.                   (312) 606-4694

     Domestic Securities, Inc.              (201) 782-0009

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

     Hudson Securities, Inc.                (201) 216-9100

     Knight Equity Markets, LP              (212) 336-8790

     Monroe Securities, Inc.                (800) 766-5560

     UBS Capital Markets L.P.               (212) 514-5140
</TABLE>


                                      - 4 -
<PAGE>
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                  RESULTS OF OPERATIONS
                                  ---------------------

                                                            FISCAL YEAR ENDED
                                                 ----------------------------------------
                                                    May 28,       May 29,       May 31,
                                                     2005          2004          2003
                                                 ------------  ------------  ------------
<S>                                              <C>           <C>           <C>
Sales                                            $32,101,191   $30,011,255   $29,624,631
% Sales Increase                                        6.96%         1.31%         2.51%
Gross Margin %                                         23.89%        23.97%        23.97%
Operating, General and Administrative Expense:
  Amount                                         $ 8,031,341   $ 7,473,239   $ 7,097,762
  % of Sales                                           25.02%        24.90%        23.96%
Net Income (Loss)                                $  (331,360)  $  (236,050)  $    40,134
</TABLE>

Overview:
--------

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

The  Company  continues  to  struggle with operating losses as we are faced with
competition from larger grocery retailers operating in the markets served by our
stores.  The  Company realized a net loss for the fiscal year ended May 28, 2005
of $331,360, as compared to a net loss of $236,050 for the fiscal year ended May
29,  2004  and  net  income  of  $40,134 for the fiscal year ended May 31, 2003.

One factor which contributed to the increased loss for fiscal 2005 was the 0.08%
reduction  that  we experienced in our gross margin as compared to the prior two
fiscal  years.  The  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 we have not yet
been  able  to  fully recover this increase through adjustments to the Company's
retail  prices.  If we are not able to fully offset this increase through retail
pricing  adjustments  and/or locating a lower cost source for at least a portion
of  our  inventory  during  fiscal  2006,  our  gross margin will continue to be
negatively  impacted.  Major factors contributing to the net loss experienced in
fiscal 2004 as compared to the net income realized in 2003 included expenditures
associated with the establishment of our eighth grocery store location in Tunnel
Hill,  Georgia,  payroll  increases  at  all  store  locations and a significant
increase  in  our  worker's  compensation  insurance  premium.

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,  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


                                      - 5 -
<PAGE>
experienced  at the wholesale level.  Accordingly, while management will attempt
to  offset  the recent increase in its wholesale markup from 3.0% to 3.5% by our
principal  supplier  through  strategic  adjustments  to  our pricing mix during
future  quarters, 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 recent periods, will continue to increase
over  time as a result of the increased presence of larger competitors operating
in the Company's trade area.  These competitors have greater financial resources
than those of the Company, and may be able to obtain preferential treatment from
suppliers  in  the  form  of  advertising  allowances,  lower  prices  and other
concessions  not  available to the Company.  These factors allow our competitors
to  engage  in  aggressive  pricing  and promotional activities that the Company
cannot  match,  putting  us  at  a  competitive  disadvantage.

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

The  trend  of  operating,  general  and administrative expenses increasing as a
percent  of sales appears to have moderated, as such expenses rose by only 0.12%
of  total  sales in fiscal 2005 as compared to fiscal 2004, versus increasing by
0.94%  of  total  sales in fiscal 2004 as compared to fiscal 2003.  Still, these
expenses  have  continued to increase in absolute terms with the addition of the
Company's  seventh  and  eighth  grocery  stores  since  April  28,  2001.

Operating, general and administrative expenses increased overall by $558,102 (or
7.5%) in fiscal 2005 as compared to 2004, and increased by $375,477 (or 5.3%) in
fiscal  2004  as compared to 2003.  As illustrated by the detailed breakdown set
forth  below,  a  majority  of  these  increases  (amounting to 65% of the total
increase  for fiscal 2005 and 83% of the total increase for fiscal 2004) related
to  increases  in  payroll,  insurance  premiums (including increases of 10%, or
$35,970,  for  group  medical  insurance  and  35%,  or  $54,837,  for  worker's
compensation  insurance),  utilities  and  rent, all of which were significantly
impacted  by  the  addition  of our eighth grocery store during fiscal 2004.  In
light  of  the  ongoing  challenges  to  the Company's gross margin as discussed
above,  we  are  working to reduce payroll expense through better scheduling and
the  use  of  part-time  employees.  Additionally,  we  have  installed  a check
verification  system  in an attempt to reduce bad debt expense, and we have been
quoted  a  worker's  compensation  insurance  premium  for  fiscal  2006 that is
approximately $40,000 lower than the 2005 premium.  Further, we will continue to
evaluate  the  performance  of  each of our grocery store locations to determine
their  long  term  value  to  the  Company.

An  additional factor which contributed to the increased loss experienced by the
Company  in  fiscal 2005 versus 2004 is the fact that interest expense increased
by  $14,501  over the prior year, due to increases in our credit line borrowings
during  the  year  as  well  as  to  increases  in  the  effective


                                      - 6 -
<PAGE>
interest  rate  on  a  portion  of  our  variable  rate debt.  At the same time,
interest  income  decreased by $9,695 due to the repricing of the Company's bank
certificate  of  deposit  during  fiscal  2005.

Sales:
-----

Sales for the fiscal year ended May 28, 2005 include an entire year of sales for
our Tunnel Hill store, opened on January 5, 2004.  Sales without Tunnel Hill for
the  current  year  increased 1.32%, while the addition of the Tunnel Hill store
accounted  for  5.64%  of the 6.96% increase in sales over the 2004 fiscal year.
The  remaining  1.32%  increase  is  attributable  to  the closing of one of the
Company's  main  competitors  in Dayton, Tennessee in April 2004.  Sales for the
Dayton location increased 9.88% in fiscal 2005 as compared to fiscal 2004, while
other  Company  store locations saw either negligible growth in sales or minimal
declines.

Excluding  the  impact  of  the Tunnel Hill store addition, sales for the fiscal
year  ended May 29, 2004 actually decreased 2.50% as compared to the fiscal year
ended  May 31, 2003.  Sales for the year ended May 31, 2003 increased 2.51% over
fiscal  2002,  primarily  due  to  the addition of the Jasper store on April 30,
2001.  Sales  without  the  Jasper  store  increased  1.67%  for  fiscal 2003 as
compared  to  2002.

Management  believes  that  the  difficulties  experienced  by  the  Company  in
increasing  its  volume,  apart  from  the  addition of new store locations, are
indicative  of  the effects of ongoing price competition from larger competitors
with  greater  financial  resources  than  the  Company.

The following table sets forth information for the last three fiscal years as to
the  amount  of  total  sales  contributed  by  each  class  of  products  which
contributed  a  significant percentage of the total retail sales and revenues of
the  Company  during  such  periods:

<TABLE>
<CAPTION>
                                  Fiscal 2005    Fiscal 2004    Fiscal 2003
     Product Class                (52 Weeks)     (52 Weeks)     (52 Weeks)
     -------------               -------------  -------------  -------------
<S>                              <C>            <C>            <C>
     Meat and Deli               $   9,230,478  $   8,327,742  $   7,945,764

     Produce                         2,344,420      2,206,198      2,269,945

     Grocery and Non-Food Items     20,526,293     19,477,315     19,408,922
</TABLE>

Gross Margin:
------------

As discussed above, the Company's gross margin percentage for the year ended May
28,  2005  decreased  by  .08%  to  23.89% of sales, as compared to the past two
fiscal  years  when  the  gross  margin was 23.97% of sales.  Nearly all of this
decrease  from  fiscal  2004  and  2003  levels  is  attributable to our primary
supplier  increasing  its  wholesale  markup  from 3% to 3.5% during the quarter
ended  February  26,  2005.  While  the  Company  is  attempting to recover this
increase  in  our  cost  through  adjustments  to  the  Company's retail prices,
competitive  conditions  may  limit  the  extent  to which we are able to do so.

Operating, General and Administrative Expenses:
----------------------------------------------

The  Company's  operating,  general  and  administrative  expenses are comprised
mainly  of  personnel  salary  costs  and  related  payroll costs, rent expense,
depreciation  expense,  professional  fees,  bank


                                      - 7 -
<PAGE>
service  charges  and  credit  card  fees,  costs for office supplies, operating
supplies,  insurance  expense,  advertising and promotion expense, telephone and
utilities  expense,  repairs  and  maintenance  and  other  minor  miscellaneous
expenses.  In  accordance  with  EITF  02-16,  advertising rebates received from
suppliers  are  deducted  from  advertising  expense  within  this  category.

Overall,  operating,  general  and administrative expenses increased by $558,102
(or  7.5%)  in  fiscal  2005  as compared to 2004, and increased by $375,477 (or
5.3%)  in  fiscal  2004 as compared to 2003.  The following table sets forth the
increases and decreases in individual components of operating and administrative
expenses  which  comprised the overall increases for each of these fiscal years:

<TABLE>
<CAPTION>
                                                    Fiscal 2005           Fiscal 2004
                                                Increase/(Decrease)   Increase/(Decrease)
     Expense Item                                   versus 2004           versus 2003
     ------------                               --------------------  --------------------
<S>                                             <C>                   <C>
     Payroll                                    $            184,852  $           197,743

     Insurance                                                90,807               49,438

     Advertising and promotion                                56,464              (30,253)

     Utilities                                                58,463               14,915

     Bank service charges and credit card fees                40,349               10,691

     General supplies                                         28,303                9,258

     Rent                                                     27,968               47,912

     Bad checks                                               20,996                1,400

     Repairs and services                                     16,103               33,538

     Professional fees                                        11,373                1,735

     Depreciation                                              3,608               31,842

     All other                                                18,816                7,258
                                                --------------------  --------------------

     TOTAL                                      $            558,102  $           375,477
                                                ====================  ====================
</TABLE>


As  discussed  above,  the  majority  of the overall increases in these expenses
involved  payroll,  insurance  premiums,  utilities  and rent, all of which were
significantly impacted by the addition of our eighth grocery store during fiscal
2004.  Additionally,  repairs  and  services  expense  and  depreciation expense
increased  by  significantly greater amounts in fiscal 2004 than in fiscal 2005,
reflecting  the  initial  refurbishment  and  capital  equipment  expenditures
associated  with  the  opening of the Tunnel Hill store.  Finally, a significant
contributor  to  increased  professional  fees  during fiscal 2005 was increased
regulatory  costs  related  to  compliance  with the Sarbanes-Oxley Act of 2002.

Other Income:
------------

The  components of net other income for the fiscal years ended May 28, 2005, May
29,  2004  and  May  31,  2003  were  as  follows:


                                      - 8 -
<PAGE>
<TABLE>
<CAPTION>
     Description                                2005 Amount   2004 Amount    2003 Amount
     -----------                                ------------  ------------  -------------
<S>                                             <C>           <C>           <C>
     Check cashing fees                         $     52,133  $     31,139  $     38,737
     Funds received for handling money orders          5,940        15,870        10,204
     Vendor's compensation from the States of
       Alabama and Georgia for collecting and
       remitting sales taxes on a timely basis        14,153        13,664        13,227
     Returned check fees                               6,003        10,264         9,634
     Loss on sale of property and equipment                -             -        (1,127)
     Interest income                                   4,033        13,728        17,480
     Revenue related to Fed-Ex shipments/other         6,756         5,421         5,131
                                                ------------  ------------  -------------
     TOTAL                                      $     89,018  $     90,086  $     93,286
                                                ============  ============  =============
</TABLE>

As  noted  above,  the $9,695 decrease in interest income for fiscal 2005 versus
2004  was  due  to  the  repricing  of the Company's bank certificate of deposit
during  the  year.  Changes  in  the  remaining  components  of  other income as
presented  above  relate primarily to variations in the volume of the associated
activity  or  service  provided  by  the Company during each of the fiscal years
presented.

Income Taxes:
------------

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

No  amounts  have  been  provided for current and deferred federal and state tax
expense  in  the  statements  of income for any of the three years ended May 28,
2005,  as  a  result  of  continued  net  operating  losses and the related full
valuation  of  the  Company's  net  deferred  tax  assets.

At  May  28,  2005, the Company has net operating loss carryforwards for federal
and  state  income  tax  purposes  of  $692,304 and $654,628, respectively.  The
Company  has  established  a full valuation allowance, which effectively reduces
the carrying value of its net deferred taxes to zero at May 28, 2005 and May 29,
2004.  Unless  the  Company realizes sufficient taxable income in future periods
to demonstrate that the likelihood of realization of the net deferred tax assets
is  reasonably  assured  under  the  accounting guidelines of SFAS No. 109, this
valuation  allowance  will be continued in future periods.  If not utilized, the
carryforwards  will  expire  at  various  dates  through  2024.

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.  As
discussed above, however, competitive conditions often delay our ability to pass
through  price  increases  experienced  at  the  wholesale  level.  When


                                      - 9 -
<PAGE>
the Company is forced to raise overall prices of its goods, the Company attempts
to  preserve  its  market share by competitive pricing strategies that emphasize
weekly-advertised  specials.


                               FINANCIAL CONDITION
                               -------------------

Liquidity and Capital Resources:
-------------------------------

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

During  the  fiscal  year  ended May 28, 2005, the Company generated $150,760 in
cash  flow  from  operating  activities,  increased  its draws under its line of
credit  with  Northwest  Georgia  Bank  by  $100,000  and reduced its cash, cash
equivalents  and  certificates of deposit by $57,016.  These funds were utilized
to purchase $56,588 in property and equipment, to redeem $9,423 in common stock,
and  to  reduce the Company's long-term debt by $235,834 and its borrowings from
affiliated  parties  by  $5,931  during  the  fiscal  year.

While  the  Company  incurred  a  loss in fiscal year 2005 of $331,360, its full
impact  on  the  Company's liquidity has been softened, as much of this loss was
comprised  of  $303,820  in depreciation and amortization which has no impact of
the  Company's  cash  flow.  Following  the  substantial increase in inventories
which  occurred  in  fiscal  2004  in connection with the addition of our eighth
grocery  store,  management  concentrated  during  fiscal  2005  on reducing the
Company's  overall  inventories,  resulting in a net reduction of $156,884 which
also  had  a  positive  impact  on our liquidity.  We also significantly reduced
capital  spending  during  fiscal 2005, with purchases of property and equipment
amounting  to $56,588 for the 2005 year as compared to $341,752 for fiscal 2004,
which  included significant capital expenditures related to the establishment of
our  eighth grocery store location.  Capital expenditures during fiscal 2006 are
projected  to  be  $150,000  or  less,  and  to include required replacements of
existing  equipment  in  the  ordinary course, which we expect to be funded from
operating  cash flows, and purchases of replacement vehicles, which we expect to
fund  through  either  bank  or  manufacturer  financing,  whichever option will
provide  the  Company  with  the  most  favorable  terms.

During  fiscal  year  2004,  the company experienced a decrease in cash and cash
equivalents  of $410,524.  This decrease is primarily attributable to opening of
the  Company's eighth grocery store during the third quarter of the fiscal year.
In  conjunction  with  this  opening,  the  Company  was  required  to  purchase
approximately  $300,000  in  inventories and $300,000 in property and equipment.
Purchases  of  inventory and property and equipment at the other store locations
were  approximately  $66,000  and  $42,000,  respectively.  In  addition  to the
decrease in cash and cash equivalents, the Company increased its net outstanding
long-term debt at May 29, 2004 by $147,842 and borrowed an additional $85,303 in
short-term  borrowings, as compared to May 31, 2003, to help fund the opening of
the eighth store and other store operations.  Finally, the Company experienced a
net  loss of $236,050 for fiscal year 2004.  However, the impact of the net loss
on the Company's cash flow was slightly more than offset by non-cash charges for
depreciation  and  amortization  of  $300,212.

During  fiscal  year 2003, the company experienced a slight increase in cash and
cash  equivalents  of  $2,289.  However,  the  certificate  of deposit decreased
$140,179  during  this  time  period.  This  was


                                     - 10 -
<PAGE>
attributable  primarily  to  the  following.  During  fiscal  2003,  the company
realized net income of $40,134.  This impact on cash flows was further helped by
depreciation  and amortization expense taken of $268,370.  However, decreases in
accounts  payable  and  accrued  liabilities  of $111,606 partially offset these
factors.  For  fiscal  year 2003, the Company purchased only $41,026 in property
and  equipment.  However,  we  also  decreased  the  outstanding balances on the
Company's  short-term  borrowings  and  long-term debt by $155,576 and $166,918,
respectively.  We did not incur any additional long-term debt during fiscal year
2003.  Other  smaller  items  created  the  remaining  net  change  of  $28,732.

The  ratio  of current assets to current liabilities was 1.74 to 1 at the end of
the  latest  fiscal  year, May 28, 2005, compared to 1.97 to 1 at the end of the
fiscal  year  ended on May 29, 2004.  Cash, cash equivalents and the certificate
of  deposit  constituted  20.13% of the total current assets at May 28, 2005, as
compared  to  20.42% at May 29, 2004.  These ratios reflect the trends discussed
above,  in  that the Company increased its reliance on bank financing during the
last  two  fiscal  years, due to increased losses which coincided with increased
inventory  and  capital  spending  requirements  in  fiscal  2004 related to the
establishment  of  our  eighth  grocery  store  location.  During  fiscal  2005,
management  has  limited  additional  capital  spending  and has been working to
gradually  reduce the Company's inventory level in order to moderate the effects
of  these  developments  on  the  Company's  overall  liquidity.

Historically,  we  have  financed  our  working capital requirements principally
through  cash  flow from operations.  Short-term borrowings to finance inventory
purchases is provided by the Company's $500,000 line of credit from its bank and
through  borrowings  from related parties, as discussed below.  The bank line of
credit  is  secured  by  our  certificate  of  deposit, as well as by a security
interest  in  substantially  all of our accounts receivable, inventory, machines
and  equipment,  furniture and fixtures and by personal guarantees of Michael A.
Richardson  and Paul R. Cook, the Company's President and CEO and Executive Vice
President  and  CFO,  respectively.  While  we  believe  that these sources will
continue  to  provide  us  with adequate liquidity to supply our working capital
needs,  if  the  Company's  operating  losses  were  to  increase  relative  to
depreciation  and  other  non-cash  charges,  our  operating cash flows could be
adversely  affected.  If  this  happens, we could be required to seek additional
financing  through  bank  loans,  or other sources, in order to meet our working
capital  needs.  If  we were required to seek such additional financing and were
not able to obtain it, or were unable to do so on commercially reasonably terms,
we  could  be  required  to  reduce the Company's current level of operations in
order  to  lower  our  working  capital requirements to a level that our present
financing  arrangements  would  support.

Short-term  borrowings  as of the end of the past two fiscal years are presented
below:

<TABLE>
<CAPTION>
                                        May 28,             May 29,
                                          2005                2004
                                        --------            --------
<S>                                     <C>                 <C>
     Michael and Diana Richardson       $ 12,776            $ 13,166
     Matthew Richardson                   21,343              26,884
     Line of Credit                      400,000             300,000
                                        --------            --------
     Total                              $434,119            $340,050
                                        ========            ========
</TABLE>

The  Company's  line  of credit with Northwest Georgia Bank bore interest at May
28,  2005  at  prime  plus 0.50%, subject to a 6.0% floor.  Notes to Michael and
Diana  Richardson and to Matthew Richardson are unsecured, payable on demand and
bear  interest  at .25% below the base rate charged by Northwest Georgia Bank on
the  line  of  credit.  Michael  Richardson  is  Chairman  of  the


                                     - 11 -
<PAGE>
Board  and Chief Executive Officer of the Company.  Diana Richardson is the wife
of  Michael  Richardson,  and  Matthew  Richardson  is  their  son.

On  June 27, 2005, we renewed our $500,000 line of credit with Northwest Georgia
Bank  for  an  additional  one  year  term.  Under  the  terms  of  the renewal,
outstanding  borrowings bear interest at an annual rate equal to the Wall Street
Journal  prime  rate, subject to a minimum annual interest rate of 6.0%.  We are
required  to  make  quarterly interest only payments on the outstanding balance,
and  to  repay outstanding principal and accrued interest on June 27, 2006.  The
outstanding  balance  on  the  renewal  date  was  $400,000.

Long-Term Debt:
--------------

At May 28, 2005, long-term debt consisted of a note payable to Northwest Georgia
Bank  of  $137,287  to finance cash registers and peripheral equipment and notes
payable  to  Northwest Georgia bank of $27,648 incurred in April 2001 to finance
the  addition  of  the  Company's seventh grocery store and $261,309 incurred in
December 2003 to finance the addition of the Company's eighth grocery store.  In
addition,  two vehicles which were purchased and financed through GMAC were paid
off  on  schedule  in December 2004, with a balance due at May 28, 2005 of zero.

The  components  of  the  Company's  long term debt as of the end of each of the
fiscal years ended May 28, 2005 and May 29, 2004 are set forth in detail in Note
3  to  the  accompanying  financial  statements.

The  following  is  a  schedule  by  years  of  the  amount of maturities of all
long-term  debt  subsequent  to  May  28,  2005:

<TABLE>
<CAPTION>
<S>                                       <C>
                         Year              Amount
                         ----             --------
                         2006             $227,309
                         2007               76,863
                         2008               76,124
                         2009               45,948
</TABLE>


Material Commitments and Contingencies
--------------------------------------

As  noted  above,  capital  expenditures  during fiscal 2006 are projected to be
$150,000  or less, and to include required replacements of existing equipment in
the ordinary course, which we expect to be funded from operating cash flows, and
purchases  of  replacement vehicles, which we expect to fund through either bank
or  manufacturer  financing,  whichever option will provide the Company with the
most  favorable  terms.

The  Company  has 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 each
of  fiscal  years  2005,  2004  and  2003.

The  Sarbanes-Oxley Act of 2002 includes provisions addressing audits, financial
reporting  and  disclosure,  conflicts  of  interest and corporate governance at
public  companies.  As  discussed


                                     - 12 -
<PAGE>
above,  the  Company  already  has  incurred  increased professional fees during
fiscal  2005 related to compliance with these provisions.  Additionally, Section
404  of  this  Act deals with management's report on internal controls, and will
require  much  in  the way of resources to plan, implement and document internal
controls.  Some  of  the  resources  will  be  in  the form of management effort
devoted  to  complying with the new rules, but a significant cost will likely be
in increased accounting and consulting fees.  On March 2, 2005, the SEC formally
extended the Section 404 compliance dates for non-accelerated filers such as the
Company.  Non-accelerated filers now will be required to comply with Section 404
of  the  Act  for  the  first  fiscal  year  ending  on  or after July 15, 2006.
Accordingly,  the Company may begin to incur Section 404 compliance costs during
fiscal  year 2006, and expects to incur significant Section 404 compliance costs
during  fiscal year 2007.  Due to pending regulatory developments concerning the
application  of  these  rules  to smaller issuers such as the Company, the exact
amount  of  such  costs  cannot  be  reliably  estimated  at  this  time.

Critical Accounting Policies:
----------------------------

Critical  accounting  policies  are  those policies that management believes are
important  to  the portrayal of the Company's financial condition and results of
operations  and  require  management's  most  difficult,  subjective  or complex
judgments,  often  as a result of the need to make estimates about the effect of
matters  that  are  inherently  uncertain.

Management  has determined valuation of its inventories as a critical accounting
policy.  Inventories  are  stated  at  the  lower  of  average  cost  or market.

Off-Balance sheet Arrangements:
------------------------------

The  Company  has  no  significant  off-balance sheet arrangements as of May 28,
2005.

Related Party Transactions:
--------------------------

Except  as  discussed  under  "Liquidity  and  Capital Resources" with regard to
short-term borrowings from related parties, there were no material related party
transactions  during  the  fiscal  year  ended  May  28,  2005.

Contractual Obligations:
-----------------------

The following table represents the Company's outstanding contractual obligations
at  May  28,  2005:

<TABLE>
<CAPTION>
                                                 LESS THAN 1                           AFTER 5
CONTRACTUAL OBLIGATIONS                  TOTAL       YEAR      1-3 YEARS   4-5 YEARS    YEARS
-----------------------                  ------------------------------------------------------
<S>                                      <C>     <C>           <C>         <C>         <C>
Debt Obligations Excluding Interest (1)  $  860  $        661  $      153  $       46  $      0
Operating Lease Obligations (2)           1,616           604         845         167         0
Other Obligations                            33            33           0           0         0
                                         ------  ------------  ----------  ----------  --------
TOTAL CONTRACTUAL CASH OBLIGATIONS       $2,509  $      1,298  $      998  $      213  $      0
                                         ======  ============  ==========  ==========  ========
<FN>
(1)  Amount  includes  short-term  borrowings of $434 at May 28, 2005, which are
     included  in  the  "Less  than  1  year"  column.

(2)  These obligations relate primarily to leases of the Company's various store
     locations.
</TABLE>


                                     - 13 -
<PAGE>
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  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, the effects of ongoing
price  competition  from  competitors  (some  of  which  have  greater financial
resources  than  those of the Company), changes in consumer spending, the nature
and  extent of continued consolidation in the grocery store industry, changes in
the  rate  of  inflation, changes in state or federal legislation or regulation,
adverse determinations with respect to any litigation or other claims, inability
to  develop  new stores or complete remodels as rapidly as planned, stability of
product  costs,  supply  or quality control problems with the Company's vendors,
and  other  issues  detailed from time-to-time in the Company's filings with the
Securities  and  Exchange  Commission.

Quantitative And Qualitative Disclosures About Market Risk:
----------------------------------------------------------

The  Company  does  not  engage  in derivative transactions, nor does it hold or
issue  financial  instruments  for  trading  or other speculative purposes.  The
Company is exposed to market risk related to changes in interest rates primarily
as  a  result  of  its borrowing activities.  The effective interest rate on the
Company's  borrowings  under  its  Line  of  Credit  Agreements  and  under  its
outstanding notes varies with the prime rate.  The Company does not maintain any
interest  rate  hedging  arrangements.  Based  on  the  Company's  outstanding
indebtedness at May 28, 2005 a one percent (1.0%) increase in the prime interest
rate  would  increase interest expense applicable to our variable rate debt (and
our  net  loss)  by  approximately  $8,000  annually.  Due  to the effect of the
interest  rate  floor  provisions  in  the  Company's  variable rate debt, a one
percent (1.0%) decrease in the prime interest rate would not be expected to have
a  material  impact  on  the  Company's annualized interest expense.  All of the
Company's  business  is  transacted  in  U. S. dollars and, accordingly, foreign
exchange  rate  fluctuations  have never had a significant impact on the Company
and  they  are  not  expected  to  in  the  foreseeable  future.


                                     - 14 -
<PAGE>
                  [LETTERHEAD OF HAZLETT, LEWIS & BIETER, PLLC]




             Report of Independent Registered Public Accounting Firm
             -------------------------------------------------------


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  May  28,  2005  and  May 29, 2004, and the related statements of income,
changes  in  stockholders' equity, and cash flows for each of the three years in
the  period  ended  May  28,  2005.  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 the standards of the Public
Company  Accounting  Oversight  Board  (United States).  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 referred to above present fairly,
in  all material respects, the financial position of American Consumers, Inc. as
of May 28, 2005 and May 29, 2004, and the results of its operations and its cash
flows  for  each  of  the  three  years  in  the  period  ended May 28, 2005, in
conformity  with  U.S.  generally  accepted  accounting  principles.


/S/ HAZLETT, LEWIS & BIETER, PLLC


Chattanooga, Tennessee
July 5, 2005


                                     - 15 -
<PAGE>
<TABLE>
<CAPTION>
                            AMERICAN CONSUMERS, INC.

                              STATEMENTS OF INCOME

     For the Fiscal Years Ended May 28, 2005, May 29, 2004, and May 31, 2003

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

                                            2005          2004          2003
                                         (52 Weeks)    (52 Weeks)    (52 Weeks)
                                        ------------  ------------  ------------
<S>                                     <C>           <C>           <C>
NET SALES                               $32,101,191   $30,011,255   $29,624,631

COST OF GOODS SOLD                       24,430,627    22,819,052    22,524,276
                                        ------------  ------------  ------------

    Gross profit                          7,670,564     7,192,203     7,100,355

OPERATING, GENERAL AND
  ADMINISTRATIVE EXPENSES                 8,031,341     7,473,239     7,097,762
                                        ------------  ------------  ------------

    Operating income (loss)                (360,777)     (281,036)        2,593
                                        ------------  ------------  ------------

OTHER INCOME (EXPENSE)
  Interest expense                          (59,601)      (45,100)      (55,745)
  Other income                               89,018        90,086        93,286
                                        ------------  ------------  ------------

                                             29,417        44,986        37,541
                                        ------------  ------------  ------------

    Income (loss) before income taxes      (331,360)     (236,050)       40,134

FEDERAL AND STATE INCOME
    TAXES                                         -             -             -
                                        ------------  ------------  ------------

NET INCOME (LOSS)                       $  (331,360)  $  (236,050)  $    40,134
                                        ============  ============  ============

EARNINGS (LOSS) PER SHARE               $      (.41)  $      (.29)  $       .05
                                        ============  ============  ============

WEIGHTED AVERAGE NUMBER
  OF SHARES OUTSTANDING                     806,586       814,382       817,802
                                        ============  ============  ============
</TABLE>

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


                                     - 16 -
<PAGE>
<TABLE>
<CAPTION>
                            AMERICAN CONSUMERS, INC.

                                 BALANCE SHEETS

                          May 28, 2005 and May 29, 2004

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

                                                          2005          2004
                                                      ------------  ------------
<S>                                                   <C>           <C>
        ASSETS

CURRENT ASSETS
  Cash and short-term investments                     $   298,759   $   335,135
  Certificate of deposit                                  302,848       323,488
  Accounts receivable                                     112,698       137,463
  Inventories                                           2,207,089     2,363,973
  Prepaid expenses                                         67,655        65,369
                                                      ------------  ------------

        Total current assets                            2,989,049     3,225,428
                                                      ------------  ------------






PROPERTY AND EQUIPMENT - at cost
  Leasehold improvements                                  290,586       273,615
  Furniture, fixtures and equipment                     3,258,304     3,236,063
                                                      ------------  ------------

                                                        3,548,890     3,509,678
  Less accumulated depreciation                        (2,931,312)   (2,644,738)
                                                      ------------  ------------

                                                          617,578       864,940
                                                      ------------  ------------

                                                      $ 3,606,627   $ 4,090,368
                                                      ============  ============
</TABLE>

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


                                     - 17 -
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------

                                                             2005        2004
                                                          ----------  ----------
<S>                                                       <C>         <C>
        LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                                        $  752,028  $  788,330
  Short-term borrowings                                      434,119     340,050
  Current maturities of long-term debt                       227,309     241,510
  Accrued sales tax                                          111,996      96,259
  Other                                                      187,917     168,545
                                                          ----------  ----------

        Total current liabilities                          1,713,369   1,634,694
                                                          ----------  ----------


LONG-TERM DEBT                                               198,935     420,568
                                                          ----------  ----------


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 803,988 in 2005 and 813,410
    in 2004                                                   80,399      81,341
  Additional paid-in capital                                 670,462     678,320
  Retained earnings                                          943,462   1,275,445
                                                          ----------  ----------

                                                           1,694,323   2,035,106
                                                          ----------  ----------

                                                          $3,606,627  $4,090,368
                                                          ==========  ==========
</TABLE>


                                     - 18 -
<PAGE>
<TABLE>
<CAPTION>
                                  AMERICAN CONSUMERS, INC.

                        STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

           For the Fiscal Years Ended May 28, 2005, May 29, 2004, and May 31, 2003

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

                                Shares of              Additional
                                  Common     Common     Paid-in      Retained
                                  Stock      Stock      Capital      Earnings       Total
                                ----------  --------  ------------  -----------  -----------
<S>                             <C>         <C>       <C>           <C>          <C>
Balance, June 1, 2002             823,047   $82,305   $   686,357   $1,471,997   $2,240,659

  Net income for year                   -         -             -       40,134       40,134

  Redemption of common stock       (7,051)     (705)       (5,880)        (466)      (7,051)
                                ----------  --------  ------------  -----------  -----------

Balance, May 31, 2003             815,996    81,600       680,477    1,511,665    2,273,742

  Net loss for year                     -         -             -     (236,050)    (236,050)

  Redemption of common stock       (2,586)     (259)       (2,157)        (170)      (2,586)
                                ----------  --------  ------------  -----------  -----------

Balance, May 29, 2004             813,410    81,341       678,320    1,275,445    2,035,106

  Net loss for year                     -         -             -     (331,360)    (331,360)

  Redemption of common stock       (9,422)     (942)       (7,858)        (623)      (9,423)
                                ----------  --------  ------------  -----------  -----------

Balance, May 28, 2005             803,988   $80,399   $   670,462   $  943,462   $1,694,323
                                ==========  ========  ============  ===========  ===========
</TABLE>

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


                                     - 19 -
<PAGE>
<TABLE>
<CAPTION>
                                           AMERICAN CONSUMERS, INC.

                                           STATEMENTS OF CASH FLOWS

                For the Fiscal Years Ended May 28, 2005, May 29, 2004, and May 31, 2003

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

                                                                     2005         2004         2003
                                                                  (52 Weeks)   (52 Weeks)   (52 Weeks)
                                                                  -----------  -----------  -----------
<S>                                                               <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                               $ (331,360)  $ (236,050)  $   40,134
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
      Depreciation and amortization                                  303,820      300,212      268,370
      Loss on sale of property and equipment                             130            -        1,127
      Change in operating assets and liabilities:
        Accounts receivable                                           24,765      (24,196)      (4,511)
        Inventories                                                  156,884     (366,044)       3,410
        Prepaid expenses                                              (2,286)      (9,228)     (15,484)
        Refundable income taxes                                            -            -       43,891
        Accounts payable and accrued liabilities                      (1,193)      49,642     (110,606)
                                                                  -----------  -----------  -----------

          Net cash provided by (used in) operating activities        150,760     (285,664)     226,331
                                                                  -----------  -----------  -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of certificate of deposit                                (302,848)    (323,488)    (309,821)
  Proceeds from maturity of certificate of deposit                   323,488      309,821      450,000
  Purchase of property and equipment                                 (56,588)    (341,752)     (41,026)
  Proceeds from disposal of property and equipment                         -            -        6,350
                                                                  -----------  -----------  -----------

          Net cash provided by (used in) investing activities        (35,948)    (355,419)     105,503
                                                                  -----------  -----------  -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Net increase (decrease) in short-term borrowings                    94,069       85,303     (155,576)
  Proceeds from long-term debt                                             -      350,020            -
  Principal payments on long-term debt                              (235,834)    (202,178)    (166,918)
  Redemption of common stock                                          (9,423)      (2,586)      (7,051)
                                                                  -----------  -----------  -----------

          Net cash provided by (used in) financing activities       (151,188)     230,559     (329,545)
                                                                  -----------  -----------  -----------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                               (36,376)    (410,524)       2,289

CASH AND CASH EQUIVALENTS, beginning of year                         335,135      745,659      743,370
                                                                  -----------  -----------  -----------

CASH AND CASH EQUIVALENTS, end of year                            $  298,759   $  335,135   $  745,659
                                                                  ===========  ===========  ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
  Cash paid (received) during the year for:
    Income taxes                                                  $    6,354   $    6,356   $  (31,888)
    Interest                                                          53,037       44,673       55,060
                                                                  ===========  ===========  ===========
</TABLE>

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


                                     - 20 -
<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.

          Accounts receivable:

          The  Company  extends  unsecured  credit  for 30-day terms to selected
          customers  in  the  ordinary  course  of  business,  but mitigates the
          associated  credit risk by carefully screening applicants and actively
          pursuing past due accounts. An allowance for doubtful accounts has not
          been  established since management is of the opinion that all accounts
          receivable  at  year-end  are  fully  collectible.

          Inventories:

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

          The  Company  receives funds for a variety of merchandising activities
          from  vendors whose products the Company buys for resale in its store.
          These  incentives  and  allowances  include  volume  or purchase based
          incentives,  advertising  allowances,  and  promotional discounts. The
          purpose  of these incentives and allowances is generally to aid in the
          reduction  of  the  costs  incurred  by  the  Company  for  stocking,
          advertising,  promoting  and  selling  the  vendor's  products. Due to
          system  constraints  and  the  nature  of  certain  allowances,  these
          allowances  are  applied  as  a  reduction  of inventory costs using a
          rational  and systematic methodology, which results in the recognition
          of these incentives when the inventory related to the initial purchase
          is  sold.  Amounts  that  represent  a  reimbursement  of  specific
          identifiable incremental costs, such as advertising, are recorded as a
          reduction  to  the  related  expense  in  the  period that the related
          expense  is  incurred.


                                     - 21 -
<PAGE>
                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 1.   Nature  of  Business  and  Summary  of Significant Accounting Policies
          (continued)

          Property and equipment:

          Expenditures  for property and equipment are charged to asset accounts
          at  cost.  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. Repairs and
          maintenance are expensed as incurred. Depreciation expense included in
          the statements of income was $303,820, $300,212, and $268,370 in 2005,
          2004  and  2003,  respectively.

          Revenue recognition:

          The financial statements of the Company are prepared under the accrual
          method of accounting. The Company recognizes income on the sale of all
          grocery  and  non-food  merchandise  at  the  point-of-sale.

          Advertising costs:

          Advertising costs are charged to operations when incurred. Advertising
          costs  charged  to operations were $628,455, $571,991, and $602,244 in
          2005,  2004,  and  2003,  respectively.

          Deferred income taxes:

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

          Recent accounting pronouncements:

          Emerging  Issues  Task  Force  (EITF) Issue No. 03-10, "Application of
          Issue  No. 02-16 by Resellers to Sales Incentives Offered to Consumers
          by  Manufacturers"  was  effective for the Company's fiscal year ended
          May  28,  2004. This EITF guidance promotes the appropriate accounting
          treatment  for general vendor funded incentives that are redeemable by
          the Company and at other retailers by including them in their reported
          sales. The adoption of this guidance did not have a material effect on
          the  Company's  financial  statements.


                                     - 22 -
<PAGE>
                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 1.   Nature  of  Business  and  Summary  of Significant Accounting Policies
          (continued)

          Recent accounting pronouncements: (continued)

          In  November  2004, the FASB issued SFAS No. 151, "Inventory Costs, an
          amendment  of  ARB  No.  43, Chapter 4" which clarifies that inventory
          costs  that  are  "abnormal"  are required to be charged to expense as
          incurred  as  opposed to being capitalized into inventory as a product
          cost.  SFAS  No.  151 provides examples of "abnormal" costs to include
          costs  of  idle  facilities,  excess  freight  and  handling costs and
          spoilage.  SFAS  No.  151  will  become  effective  for  fiscal  years
          beginning  after  June  15,  2005. The adoption of SFAS No. 151 is not
          expected  to  have  a  material  effect  on  the  Company's  financial
          statements.

Note 2.   Short-Term Borrowings

          The  Company  had  a  line-of-credit  agreement  with  a bank totaling
          $500,000  at  May  28,  2005  and  May  29, 2004. The interest rate on
          amounts  outstanding  under the line-of-credit was based on prime plus
          .50%  at  May  28,  2005, subject to a 6.0% floor. This line-of-credit
          agreement  was  renewed  on  June  27, 2005, and the new interest rate
          floats  at  prime,  subject to a 6.0% floor. This agreement matures on
          June  27,  2006.  The  line-of-credit  is  secured  by  the  Company's
          certificate  of  deposit,  as  well  as  by  a  security  interest  in
          substantially  all of its accounts receivable, inventory, machines and
          equipment,  furniture  and  fixtures  and  by  personal  guarantees of
          Michael  A.  Richardson  and Paul R. Cook, the Company's President and
          CEO  and  Executive  Vice  President  and  CFO,  respectively.

          At  May  28,  2005  and  May  29,  2004,  the  Company  had short-term
          borrowings  consisting of 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 borrowings for the fiscal years ended May 28,
          2005  and  May  29,  2004,  is  as  follows:

<TABLE>
<CAPTION>
                                                        2005       2004
                                                      ---------  ---------
<S>                                                   <C>        <C>
          Line-of-credit agreements                   $400,000   $300,000
          Loans payable to shareholders                 34,119     40,050
                                                      ---------  ---------

             Total outstanding                        $434,119   $340,050
                                                      =========  =========

          Weighted average interest rate at year end      6.13%      5.76%
                                                      ---------  ---------

          Weighted average interest rate during year      5.99%      5.87%
                                                      ---------  ---------

          Maximum amount outstanding during year      $440,610   $354,847
                                                      =========  =========

          Average amount outstanding during year      $399,438   $229,743
                                                      =========  =========
</TABLE>


                                     - 23 -
<PAGE>
                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 3.   Long-Term Debt

          Long-term  debt  consists  of  the  following notes payable at May 28,
          2005 and May 29, 2004:

<TABLE>
<CAPTION>
                                                                     2005      2004
                                                                   --------  --------
<S>                                                                <C>       <C>
          Note payable to Northwest Georgia Bank;
            principal and interest due in monthly installments
            of $11,381, through September 2006; interest
            at prime rate; collateralized by equipment,
            accounts receivable, inventory, and personal
            guarantees of the Company's President and
            Executive Vice President                               $137,287  $264,000

          Note payable to Northwest Georgia Bank;
            principal and interest due in monthly installments
            of $3,576, through April 2006; interest at prime rate
            plus 1.5%; collateralized by equipment, inventory,
            and personal guarantees of the Company's President
            and Executive Vice President                             27,648    64,212

          Note payable to Northwest Georgia Bank;
            principal and interest due in monthly installments
            of $6,781, through December 2008; interest at prime
            rate with 6.00% floor; collateralized by equipment,
            inventory, and personal guarantees of the Company's
            President and Executive Vice President                  261,309   324,725

          Vehicle installment loans; due in monthly installments
            of $1,305, through December 2004; collateralized
            by automobiles                                                -     9,141
                                                                   --------  --------
                                                                    426,244   662,078

          Less current maturities                                   227,309   241,510
                                                                   --------  --------

          Total long-term debt                                     $198,935  $420,568
                                                                   ========  ========
</TABLE>


                                     - 24 -
<PAGE>
                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 3.   Long-Term Debt (continued)

          The  aggregate  maturities  or  principal  payments  required  on
          long-term  debt  for years subsequent to May 28, 2005, are as follows:

<TABLE>
<CAPTION>
                         Year              Amount
                         ----             --------
<S>                                       <C>
                         2006             $227,309
                         2007               76,863
                         2008               76,124
                         2009               45,948
</TABLE>


Note 4.   Lease Commitments

          The  Company  leases  the  facilities  in  which  its  retail  grocery
          operations  are  located  under  noncancelable  operating  leases that
          expire  at  various  dates through December 2009. 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  May  28,  2005:

<TABLE>
<CAPTION>
                           Fiscal                  Minimum
                         Year Ending               Rentals
                         -----------              ----------
                         <S>                      <C>
                           2006                   $  603,956
                           2007                      529,855
                           2008                      314,048
                           2009                      140,419
                           2010                       26,238
                                                  ----------

                           Total                  $1,614,516
                                                  ==========
</TABLE>

          Rental  expense for the fiscal years ended May 28, 2005, May 29, 2004,
          and  May  31,  2003,  is  as  follows:

<TABLE>
<CAPTION>
                                               2005      2004      2003
                                             --------  --------  --------
<S>                                          <C>       <C>       <C>
          Minimum rentals                    $609,105  $577,213  $535,645
          Contingent rentals based on sales    12,703    16,628    10,509
                                             --------  --------  --------

              Total                          $621,808  $593,841  $546,154
                                             ========  ========  ========
</TABLE>


                                     - 25 -
<PAGE>
                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 5.   Federal and State Income Taxes

          No  amounts  have  been  provided for current and deferred federal and
          state  tax  expense  in  the statements of income for any of the three
          years  ended  May  28,  2005,  as  a result of continued net operating
          losses  and  the  related full valuation of the Company's net deferred
          tax  assets.

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

<TABLE>
<CAPTION>
                                                     2005       2004       2003
                                                   ---------  ---------  --------
<S>                                                <C>        <C>        <C>
          Federal income tax expense (benefit)
            computed at the statutory rates        $(49,700)  $(35,400)  $ 6,600
          State income tax, net of federal
            income tax benefit                      (18,000)   (13,000)    2,200
          Change in deferred tax asset valuation     67,700     48,400    (8,200)
            allowance                              ---------  ---------  --------

              Total income tax expense (benefit)   $      -   $      -   $     -
                                                   =========  =========  ========
</TABLE>

          The  tax  effects  of  significant temporary differences that comprise
          deferred  tax assets and liabilities at May 28, 2005 and May 29, 2004,
          are  as  follows:

<TABLE>
<CAPTION>
                                                            2005        2004
                                                         ----------  ----------
<S>                                                      <C>         <C>
          Deferred tax assets:
            Net operating loss carryforward              $(140,000)  $(105,100)
            Other                                          (16,300)     (2,600)

          Deferred tax liabilities:
            Depreciable basis of property and equipment     38,200      57,300

          Deferred tax asset valuation allowance           118,100      50,400
                                                         ----------  ----------

                                                         $       -   $       -
                                                         ==========  ==========
</TABLE>

          At  May 28, 2005, the Company has net operating loss carryforwards for
          federal  and  state  income  tax  purposes  of  $692,304 and $654,628,
          respectively.  The Company has established a full valuation allowance,
          which effectively reduces the carrying value of its net deferred taxes
          to  zero at May 28, 2005 and May 29, 2004. Unless the Company realizes
          sufficient  taxable  income  in future periods to demonstrate that the
          likelihood of realization of the net deferred tax assets is reasonably
          assured  under  the  accounting  guidelines  of  SFAS  No.  109,  this
          valuation  allowance  will  be  continued  in  future  periods. If not
          utilized, the carryforwards will expire at various dates through 2024.

                                     - 26 -
<PAGE>
                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 6.   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  2005,  2004  and  2003.

Note 7.   Concentration of Credit Risk and Major Supplier

          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 $251,467 at May
          28,  2005.  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.

          Approximately  82  percent  of the Company's purchased merchandise for
          the  year  ended  May  28,  2005, was procured from the Company's main
          supplier.

Note 8.   Related Party Transactions

          As described in greater detail in Note 2 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.

Note 9.   Segment Reporting

          SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
          Information" provides for the identification of reportable segments on
          the  basis  of discreet business units and their financial information
          to  the  extent  such units are reviewed by an entity's chief decision
          maker (which can be an individual or group of management persons). The
          Statement  permits  aggregation  or  combination of segments that have
          similar  characteristics.  In  the Company's operations, each store is
          viewed  by  management  as being a separately identifiable business or
          segment  from the perspective of monitoring performance and allocation
          of  financial resources. Although the stores operate independently and
          are managed and monitored separately, each is substantially similar in
          terms  of  business  focus,  type of customers, products and services.
          Accordingly,  the  Company's  financial  statements  reflect  the
          presentation  of  segment  information  on  an aggregated basis in one
          reportable  segment.


                                     - 27 -
<PAGE>
                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 10.  Fair Value of Financial Instruments

          The  carrying  values  of  cash  and  short-term  investments,  the
          certificate  of  deposit,  accounts receivable, short-term borrowings,
          accounts  payable  and accrued liabilities are reasonable estimates of
          their  fair  values  because  of the short maturity of these financial
          instruments. Based on the borrowing rates available to the Company for
          long-term debt with similar terms and average maturities, the carrying
          amounts  approximate  the  fair  value  of such financial instruments.


                                     - 28 -
<PAGE>
                            AMERICAN CONSUMERS, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

Note 11.  Quarterly Data (unaudited)

<TABLE>
<CAPTION>
                                                                         Years Ended
                                    ---------------------------------------------------------------------------------------
                                                           May 28, 2005                                May 29, 2004
                                    ---------------------------------------------------------  ----------------------------
                                      Thirteen       Thirteen       Thirteen      Thirteen       Thirteen       Thirteen
                                     Weeks Ended    Weeks Ended   Weeks Ended    Weeks Ended    Weeks Ended    Weeks Ended
                                      5/28/2005      2/26/2005     11/27/2004     8/28/2004      5/29/2004      2/28/2004
                                    -------------  -------------  ------------  -------------  -------------  -------------
<S>                                 <C>            <C>            <C>           <C>            <C>            <C>
Net sales                           $  7,989,118   $  7,903,607   $  8,182,495  $  8,025,971   $  7,872,486   $  7,604,053
Cost of goods sold                     6,087,839      6,039,155      6,206,884     6,096,749      6,036,816      5,704,260
                                    -------------  -------------  ------------  -------------  -------------  -------------

  Gross profit                         1,901,279      1,864,452      1,975,611     1,929,222      1,835,670      1,899,793

Operating, general and
  administrative expenses              1,987,972      2,010,879      1,969,071     2,063,419      1,994,369      1,950,405
                                    -------------  -------------  ------------  -------------  -------------  -------------

  Operating income (loss)                (86,693)      (146,427)         6,540      (134,197)      (158,699)       (50,612)

Other income                              22,376         11,609         31,039        23,994         20,234         22,395
Interest expense                          14,751         15,288         14,881        14,681         12,847         13,521
                                    -------------  -------------  ------------  -------------  -------------  -------------

Income (loss) before income taxes        (79,068)      (150,106)        22,698      (124,884)      (151,312)       (41,738)
Income taxes                                   -              -              -             -              -              -
                                    -------------  -------------  ------------  -------------  -------------  -------------

Net income (loss)                   $    (79,068)  $   (150,106)  $     22,698  $   (124,884)  $   (151,312)  $    (41,738)
                                    =============  =============  ============  =============  =============  =============


Earnings (loss) per common share:   $      (0.10)  $      (0.19)  $       0.03  $      (0.15)  $      (0.18)  $      (0.05)
                                    =============  =============  ============  =============  =============  =============


                                             Years Ended
                                    ----------------------------
                                             May 29, 2004
                                    ----------------------------
                                      Thirteen       Thirteen
                                     Weeks Ended    Weeks Ended
                                     11/29/2003      8/30/2003
                                    -------------  -------------
<S>                                 <C>            <C>
Net sales                           $  7,201,004   $  7,333,712
Cost of goods sold                     5,491,030      5,586,946
                                    -------------  -------------

  Gross profit                         1,709,974      1,746,766

Operating, general and
  administrative expenses              1,754,769      1,773,696
                                    -------------  -------------

  Operating income (loss)                (44,795)       (26,930)

Other income                              24,944         22,513
Interest expense                           8,864          9,868
                                    -------------  -------------

Income (loss) before income taxes        (28,715)       (14,285)
Income taxes                                   -              -
                                    -------------  -------------

Net income (loss)                   $    (28,715)  $    (14,285)
                                    =============  =============


Earnings (loss) per common share:   $      (0.04)  $      (0.02)
                                    =============  =============
</TABLE>


                                       29