Form 10-Q ~~2nd~~
3rd Quarter

INDEX ------- PAGE ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements: -------------------------------------------- Condensed consolidated balance sheets at March 31,

PAGE

Item 1. Financial Statements:

Condensed consolidated balance sheets
at June 30, 2009 (unaudited) and September 30, 2008 3 Condensed consolidated unaudited statements of operations for the three and six months ended March 31, 2009 and 2008 4 Condensed consolidated unaudited statements of cash flows for the six months ended March 31, 2009 and 2008 5 Notes to condensed consolidated unaudited financial statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 23 Item 3. Quantitative and Qualitative Disclosures About Market Risk 36 Item 4T. Controls and Procedures 36 PART II - OTHER INFORMATION Item 1. Legal Proceedings 37 Item 1A. Risk Factors 37 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 38 Item 3. Defaults Upon Senior Securities 38 Item 4. Submission of Matters to a Vote of Security Holders 38 Item 5. Other Information 39 Item 6. Exhibits 40 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements

~~AMCON Distributing Company and Subsidiaries Condensed Consolidated Balance Sheets March 31, 2009~~ and September 30, 2008 - ---------------------------------------------------------------------------------------------------- March 2009 September (Unaudited) 2008 ------------ ------------ ASSETS Current assets: Cash $ 411,760 $ 457,681 Accounts receivable, less allowance for doubtful accounts of $1.1 million and $0.8 million, respectively 20,993,044 27,198,414 Inventories, net 30,523,160 37,330,969 Deferred income taxes 1,582,880 1,260,609 Current assets of discontinued operations 8,589 18,947 Prepaid and other current assets 4,255,140 3,519,650 ------------ ------------ Total current assets 57,774,573 69,786,270 Property and equipment, net 10,764,915 10,907,541 Goodwill 5,848,808 5,848,808 Other intangible assets, net 3,373,269 3,373,269 Deferred income taxes 134,312 234,171 Non-current assets of discontinued operations 2,032,047 2,032,047 Other assets 1,015,606 1,123,252 ------------ ------------ $ 80,943,530 $ 93,305,358 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 11,886,193 $ 14,738,214 Accrued expenses 8,181,597 5,275,697 Accrued wages, salaries and bonuses 2,372,790 2,636,699 Income taxes payable 2,374,671 313,021 Current liabilities of discontinued operations 4,253,096 4,041,837 Current maturities of credit facility 3,046,000 3,046,000 Current maturities of long-term debt 1,509,263 787,128 ------------ ------------ Total current liabilities 33,623,610 30,838,596 Credit facility, less current maturities 16,774,215 32,155,005 Long-term debt, less current maturities 5,406,336 6,525,881 Noncurrent liabilities of discontinued operations 6,562,860 6,542,310 Series A cumulative, convertible preferred stock, $.01 par value 100,000 shares authorized and issued, liquidation preference $25.00 per share 2,500,000 2,438,355 Series B cumulative, convertible preferred stock, $.01 par value 80,000 shares authorized and issued, liquidation preference $25.00 per share 2,000,000 1,857,645 Series C cumulative, convertible preferred stock, $.01 par value 80,000 shares authorized and issued at September 30, 2008, liquidation preference $25.00 per share - 1,982,372 Commitments and contingencies (Note 11) Shareholders' equity: Preferred stock, $0.01 par, 1,000,000 shares authorized, 180,000 shares outstanding and issued in Series A and B at March 31, 2009 and 260,000 shares outstanding and issued in Series A, B and C at September 30, 2008 referred to above - - Common stock, $0.01 par value, 3,000,000 shares authorized, 570,397 shares outstanding at March 2009 and September 2008 5,704 5,704 Additional paid-in capital 7,245,156 6,995,948 Retained earnings 6,825,649 3,963,542 ------------ ------------ Total shareholders' equity 14,076,509 10,965,194 ------------ ------------ $ 80,943,530 $ 93,305,358 ============ ============ The accompanying notes are an integral part of these condensed
		3

Condensed consolidated unaudited ~~financial statements.~~

~~AMCON Distributing Company and Subsidiaries Condensed Consolidated Unaudited Statements~~statements of ~~Operations~~ operations
for the three and ~~six~~nine months ended ~~March 31,~~June 30, 2009 and 2008 ~~- --------------------------------------------------------------------------------------------------------- For~~
	4

Condensed consolidated unaudited statements of cash flows for the ~~three months For the six~~nine months ended ~~March ended March ----------------------------- -----------------------------~~June 30, 2009 ~~2008 2009 2008 ------------- ------------- ------------- -------------~~ ~~Sales (including excise taxes of $43.3 million~~ and $46.3 million, and $93.6 million and $97.9 million, respectively) $ 195,442,246 $ 190,411,670 $ 412,819,608 $ 401,074,907 Cost of sales 178,195,212 174,669,957 379,727,926 370,137,346 ------------- ------------- ------------- ------------- Gross profit 17,247,034 15,741,713 33,091,682 30,937,561 ------------- ------------- ------------- ------------- Selling, general and administrative expenses 13,027,140 12,696,507 25,824,722 24,907,082 Depreciation and amortization 300,988 339,809 611,322 702,283 ------------- ------------- ------------- ------------- 13,328,128 13,036,316 26,436,044 25,609,365 ------------- ------------- ------------- ------------- Operating income 3,918,906 2,705,397 6,655,638 5,328,196 ------------- ------------- ------------- ------------- Other expense (income): Interest expense 408,587 749,558 897,786 1,719,360 Other (income), net (26,476) (39,265) (40,543) (72,476) ------------- ------------- ------------- ------------- 382,111 710,293 857,243 1,646,884 ------------- ------------- ------------- ------------- Income from continuing operations before income tax expense 3,536,795 1,995,104 5,798,395 3,681,312 Income tax expense 1,343,000 728,000 2,203,000 1,369,000 ------------- ------------- ------------- ------------- Income from continuing operations 2,193,795 1,267,104 3,595,395 2,312,312 Discontinued operations (Note 2) Loss from discontinued operations, net of income tax benefit of $0.1 million in each fiscal period (97,437) (97,445) (199,475) (193,440) ------------- ------------- ------------- ------------- Net income 2,096,358 1,169,659 3,395,920 2,118,872 Dividends on convertible preferred stock (314,201) (104,386) (419,734) (209,919) ------------- ------------- ------------- ------------- Net income available2008		5

Notes to common shareholders $ 1,782,157 $ 1,065,273 $ 2,976,186 $ 1,908,953 ============= ============= ============= ============= Basic earnings (loss) per share available to common shareholders: Continuing operations $ 3.43 $ 2.16 $ 5.80 $ 3.92 Discontinued operations (0.18) (0.18) (0.36) (0.36) ------------- ------------- ------------- ------------- Net basic earnings per share available to common shareholders $ 3.25 $ 1.98 $ 5.44 $ 3.56 ============= ============= ============= ============= Diluted earnings (loss) per share available to common shareholders: Continuing operations $ 2.72 $ 1.48 $ 4.33 $ 2.72 Discontinued operations (0.12) (0.11) (0.24) (0.23) ------------- ------------- ------------- ------------- Net diluted earnings per share available to common shareholders $ 2.60 $ 1.37 $ 4.09 $ 2.49 ============= ============= ============= ============= Weighted average shares outstanding: Basic 548,619 537,064 547,089 535,473 Diluted 805,236 851,370 830,923 850,314 The accompanying notes are an integral part of these condensed consolidated unaudited financial statements

~~AMCON Distributing Company~~
	6

Item 2. Management’s Discussion and ~~Subsidiaries Condensed Consolidated Unaudited Statements~~Analysis of ~~Cash Flows for the six months ended March 31, 2009~~Financial Condition and 2008 - --------------------------------------------------------------------------------------------------- 2009 2008 ------------ ------------ ~~CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,395,920 $ 2,118,872 Deduct: Loss from discontinued operations, net~~Results of tax (199,475) (193,440) ------------ ------------ Income from continuing operations 3,595,395 2,312,312 AdjustmentsOperations		20

Item 3. Quantitative and Qualitative Disclosures About Market Risk		31

Item 4T. Controls and Procedures		31

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		32

Item 1A. Risk Factors		32

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		33

Item 3. Defaults Upon Senior Securities		33

Item 4. Submission of Matters to reconcile net income from continuing operations to net cash flows from operating activities: Depreciation 611,322 682,417 Amortization - 19,866 Gain on salea Vote of property and equipment (47,700) (17,635) Stock based compensation 265,800 169,449 Excess tax deficiency on equity-based awards 16,592 - Deferred income taxes (222,412) 1,246,631 Provision for losses on doubtful accounts 346,000 182,909 Provision for losses on inventory obsolescence 327,673 13,993 Changes in assets and liabilities: Accounts receivable 5,859,370 5,924,315 Inventories 6,480,136 (3,394,581) Prepaid and other current assets (735,490) 1,665,605Security Holders		33

Item 5. Other assets 107,646 (367,540) Accounts payable (2,852,021) (1,571,109) Accrued expenses and accrued wages, salaries and bonuses 2,641,991 (631,969) Income tax payable 2,045,058 (132,090) ------------ ------------ Net cash flows from operating activities - continuing operations 18,439,360 6,102,573 Net cash flows from operating activities - discontinued operations 42,692 (128,421) ------------ ------------ Net cash flows from operating activities 18,482,052 5,974,152 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (497,401) (543,156) Proceeds from sales of property and equipment 76,405 43,821 ------------ ------------ Net cash flows from investing activities (420,996) (499,335) CASH FLOWS FROM FINANCING ACTIVITIES: Net payments on bank credit agreements (15,380,790) (5,324,674) Principal payments on long-term debt (397,410) (274,409) Proceeds from exercise of stock options - 119,637 Excess tax deficiency on vesting equity-based awards (16,592) - Redemption of Series C convertible preferred stock (2,000,000) - Dividends paid on convertible preferred stock (198,106) (209,919) Dividends on common stock (114,079) - ------------ ------------ Net cash flows from financing activities (18,106,977) (5,689,365) ------------ ------------ Net change in cash (45,921) (214,548) Cash, beginning of period 457,681 717,554 ------------ ------------ Cash, end of period $ 411,760 $ 503,006 ============ ============ 5 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 968,296 $ 1,832,447 Cash paid during the period for income taxes 264,355 136,458 Supplemental disclosure of non-cash information: Constructive dividends on Series A, B, and C Convertible Preferred Stock 221,628 - Acquisition of equipment through capital leases - 277,624 The accompanying notes are an integral part of these condensed consolidated unaudited financial statements. Information		33

Item 6. Exhibits		34

Signatures		35

Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

AMCON Distributing Company and Subsidiaries

Condensed Consolidated Balance Sheets

June 30, 2009 and September 30, 2008


	June		September
	2009		2008
	(Unaudited)

ASSETS
Current assets:
Cash	$	410,404	$	457,681
Accounts receivable, less allowance for doubtful accounts of $1.2 million and $0.8 million, respectively		28,506,716		27,198,414
Inventories, net		35,285,633		37,330,969
Deferred income taxes		1,705,820		1,260,609
Current assets of discontinued operations		—		18,947
Prepaid and other current assets		3,206,891		3,519,650

Total current assets		69,115,464		69,786,270

Property and equipment, net		10,798,795		10,907,541
Goodwill		5,848,808		5,848,808
Other intangible assets, net		3,373,269		3,373,269
Deferred income taxes		—		234,171
Non-current assets of discontinued operations		—		2,032,047
Other assets		1,063,975		1,123,252

	$	90,200,311	$	93,305,358


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	15,034,390	$	14,738,214
Accrued expenses		7,940,022		5,275,697
Accrued wages, salaries and bonuses		2,599,148		2,636,699
Income taxes payable		5,043,290		313,021
Current liabilities of discontinued operations		—		4,041,837
Current maturities of credit facility		3,046,000		3,046,000
Current maturities of long-term debt		1,480,307		787,128

Total current liabilities		35,143,157		30,838,596

Credit facility, less current maturities		23,199,769		32,155,005
Deferred income taxes		1,104,891		—
Long-term debt, less current maturities		5,240,060		6,525,881
Noncurrent liabilities of discontinued operations		—		6,542,310

Series A cumulative, convertible preferred stock, $.01 par value, 100,000 shares authorized and issued, liquidation preference $25.00 per share		2,500,000		2,438,355
Series B cumulative, convertible preferred stock, $.01 par value, 80,000 shares authorized and issued, liquidation preference $25.00 per share		2,000,000		1,857,645
Series C cumulative, convertible preferred stock, $.01 par value, 80,000 shares authorized and issued at September 30, 2008, liquidation preference $25.00 per share		—		1,982,372

Shareholders’ equity:
Preferred stock, $0.01 par, 1,000,000 shares authorized, 180,000 shares outstanding and issued in Series A and B at June 30, 2009 and 260,000 shares outstanding and issued in Series A, B and C at September 30, 2008 referred to above		—		—
Common stock, $0.01 par value, 3,000,000 shares authorized, 570,397 shares outstanding at June 2009 and September 2008		5,704		5,704
Additional paid-in capital		7,378,056		6,995,948
Retained earnings		13,628,674		3,963,542

Total shareholders’ equity		21,012,434		10,965,194

	$	90,200,311	$	93,305,358

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

AMCON Distributing Company and Subsidiaries

Condensed Consolidated Unaudited Statements of Operations

for the three and nine months ended June 30, 2009 and 2008


	For the three months						For the nine months
	ended June						ended June
	2009			2008			2009			2008
Sales (including excise taxes of $77.4 million and $53.6 million, and $171.0 million and $151.5 million, respectively)	$	242,817,927		$	223,397,392		$	655,637,536		$	624,472,299
Cost of sales		225,753,469			207,135,083			605,481,395			577,272,429

Gross profit		17,064,458			16,262,309			50,156,141			47,199,870

Selling, general and administrative expenses		12,800,612			12,959,518			38,625,335			37,866,602
Depreciation and amortization		273,650			340,983			884,972			1,043,266

		13,074,262			13,300,501			39,510,307			38,909,868

Operating income		3,990,196			2,961,808			10,645,834			8,290,002


Other expense (income):
Interest expense		368,048			635,523			1,265,834			2,354,883
Other (income), net		(43,600	)		(17,958	)		(84,143	)		(90,437	)

		324,448			617,565			1,181,691			2,264,446

Income from continuing operations before income tax expense		3,665,748			2,344,243			9,464,143			6,025,556
Income tax expense		1,411,000			857,000			3,614,000			2,226,000

Income from continuing operations		2,254,748			1,487,243			5,850,143			3,799,556
Discontinued operations (Note 2)
Gain on asset disposal and debt settlement, net of income tax expense of $2.7 million		4,666,264			—			4,666,264			—
Income (loss) from discontinued operations, net of income tax expense (benefit) of $0.01 million and ($0.1) million, & ($0.1) million & ($0.2) million, respectively		13,105			(98,441	)		(186,370	)		(291,881	)

Income (loss) on discontinued operations		4,679,369			(98,441	)		4,479,894			(291,881	)

Net income		6,934,117			1,388,802			10,330,037			3,507,675

Dividends on convertible preferred stock		(74,052	)		(104,386	)		(493,786	)		(314,306	)


Net income available to common shareholders	$	6,860,065		$	1,284,416		$	9,836,251		$	3,193,369


Basic earnings (loss) per share available to common shareholders:
Continuing operations	$	3.97		$	2.57		$	9.78		$	6.50
Discontinued operations		8.52			(0.18	)		8.17			(0.54	)

Net basic earnings per share available to common shareholders	$	12.49		$	2.39		$	17.95		$	5.96


Diluted earnings (loss) per share available to common shareholders:
Continuing operations	$	3.11		$	1.75		$	7.37		$	4.46
Discontinued operations		6.46			(0.12	)		5.65			(0.34	)

Net diluted earnings per share available to common shareholders	$	9.57		$	1.63		$	13.02		$	4.12


Weighted average shares outstanding:
Basic		549,397			537,064			547,859			536,002
Diluted		724,833			851,911			793,610			850,898

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

AMCON Distributing Company and Subsidiaries

Condensed Consolidated Unaudited Statements of Cash Flows

for the nine months ended June 30, 2009 and 2008


	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	10,330,037		$	3,507,675
Deduct: Income (loss) from discontinued operations, net of tax		4,479,894			(291,881	)

Income from continuing operations		5,850,143			3,799,556

Adjustments to reconcile net income from continuing operations to net cash flows from operating activities:
Depreciation		884,972			1,016,465
Amortization		—			26,801
Loss (gain) on sale of property and equipment		26,468			(36,417	)
Stock based compensation		398,700			302,350
Excess tax deficiency on equity-based awards		16,592			—
Deferred income taxes		893,851			2,000,291
Provision for losses on doubtful accounts		489,038			238,000
Provision for losses on inventory obsolescence		331,319			118,976

Changes in assets and liabilities:
Accounts receivable		(1,797,340	)		2,072,959
Inventories		1,714,017			(8,110,310	)
Prepaid and other current assets		312,759			1,674,160
Other assets		59,277			(253,247	)
Accounts payable		(365,711	)		(236,455	)
Accrued expenses and accrued wages, salaries and bonuses		2,625,568			(666,365	)
Income tax payable		4,713,677			(170,366	)

Net cash flows from operating activities — continuing operations		16,153,330			1,776,398
Net cash flows from operating activities — discontinued operations		(2,673,712	)		(112,866	)

Net cash flows from operating activities		13,479,618			1,663,532

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(784,221	)		(667,268	)
Proceeds from sales of property and equipment		102,406			74,821


Net cash flows from investing activities		(681,815	)		(592,447	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on bank credit agreements		(8,955,236	)		(453,482	)
Principal payments on long-term debt		(604,975	)		(448,306	)
Proceeds from exercise of stock options		—			119,636
Excess tax deficiency on vesting equity-based awards		(16,592	)		—
Redemption of Series C convertible preferred stock		(2,000,000	)		—
Dividends paid on convertible preferred stock		(272,158	)		(314,306	)
Dividends on common stock		(171,119	)		(45,485	)

Net cash flows from financing activities — continuing operations		(12,020,080	)		(1,141,943	)
Net cash flows from financing activities — discontinued operations		(825,000	)		—

Net cash flows from financing activities		(12,845,080	)		(1,141,943	)

Net change in cash		(47,277	)		(70,858	)
Cash, beginning of period		457,681			717,554

Cash, end of period	$	410,404		$	646,696


Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	1,347,690		$	2,488,101
Cash paid during the period for income taxes		612,473			221,076

Supplemental disclosure of non-cash information:
Constructive dividends on Series A, B, and C Convertible Preferred Stock		221,628			—
Acquisition of equipment through capital leases		12,333			277,624
Equipment acquisitions classified as accounts payable		108,546			—

TSI disposition — discontinued operations
Property and equipment, net		(2,032,047	)		—
Accrued expenses		(925,452	)		—
Long-term debt		(6,945,548	)		—
Deferred gain on CPH Settlement		(1,542,312	)		—

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

AMCON Distributing Company and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements ~~- ----------------------------------------------------------------------------~~

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

AMCON Distributing Company and Subsidiaries ~~("AMCON" and "the Company"~~(“AMCON” or “the Company”) is primarily engaged in the wholesale distribution of consumer products in the Great Plains and Rocky Mountain regions. In addition, the Company operates thirteen retail health food stores in Florida and the Midwest. ~~AMCON's~~

AMCON’s wholesale distribution business ~~("ADC"~~(“ADC”) includes five distribution centers that sell approximately 14,000 different consumer products, including cigarettes and tobacco products, candy and other confectionery, beverages, groceries, paper products, health and beauty care products, frozen and chilled products and institutional food service products. The Company distributes products primarily to retailers such as convenience stores, discount and general merchandise stores, grocery stores and supermarkets, drug stores and gas stations. In addition, the Company services institutional customers, including restaurants and bars, schools, sports complexes and vendors, as well as other wholesalers.

AMCON also operates six retail health food stores in Florida under the name ~~Chamberlin's~~Chamberlin’s Market & Cafe ~~(Chamberlin's)~~(Chamberlin’s) and seven in the Midwest under the name ~~Akin's~~Akin’s Natural Foods Market ~~(Akin's)~~(Akin’s). These stores carry natural supplements, groceries, health and beauty care products and other food items.

Results for the interim period are not necessarily indicative of results to be expected for the entire year.

All significant intercompany transactions and balances have been eliminated in consolidation. Certain information and footnote disclosures normally included in our annual financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) have been condensed or omitted. In the opinion of management, the accompanying condensed consolidated unaudited financial statements (“financial statements”) contain all adjustments necessary to fairly present the financial information included ~~therein,~~herein, such as adjustments consisting of normal recurring items. In preparing the accompanying financial statements, management has evaluated subsequent events through July 17, 2009 (the financial statement issue date). The Company believes that although the disclosures contained herein are adequate to prevent the information presented from being misleading, these ~~condensed consolidated unaudited~~ financial statements should be read in conjunction with the ~~Company's~~Company’s annual audited consolidated financial statements for the fiscal year ended September 30, 2008, as filed with the Securities and Exchange Commission on Form 10-K.

For purposes of this report, unless the context indicates otherwise, all references to ~~"we"~~“we”, ~~"us"~~“us”, ~~"our"~~“our”, ~~"Company"~~“Company”, and ~~"AMCON"~~“AMCON” shall mean AMCON Distributing Company and its subsidiaries. The wholesale distribution segment of our Company will be separately referred to as ~~"ADC"~~“ADC”. Additionally, the three month fiscal periods ended ~~March 31,~~June 30, 2009 and ~~March 31,~~June 30, 2008 have been referred to throughout this quarterly report as Q2Q3 2009 and Q2Q3 2008, respectively. The fiscal balance sheet dates of ~~March 31,~~June 30, 2009, ~~March 31,~~June 30, 2008, and September 30, 2008 have been referred to as ~~March~~June 2009, ~~March~~June 2008, and September 2008, respectively. 7

Adoption of New Accounting ~~Changes - ------------------~~ Standards

The Company adopted the following accounting standards ~~effective October 1, 2008 (beginning~~during Q3 2009, none of ~~fiscal 2009):~~which had a material impact on our consolidated results of operations or financial condition.

In May 2009, the Financial Accounting Standards Board ~~("FASB"~~(“FASB”) issued FASB No. ~~157, "Fair Value Measurements" ("~~165, “Subsequent Events” (“SFAS ~~157"~~165”):. SFAS ~~157 defines fair value,~~165 establishes ~~a framework~~general standards of accounting for ~~measuring fair value,~~disclosing events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and ~~expands disclosures about fair value measurements. The provisions of~~the basis for selecting that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. SFAS ~~157 apply to all~~165 is effective for interim or annual financial ~~instruments which are measured and reported at fair value on a recurring basis.~~ periods ending after June 15, 2009.

In ~~February 2008,~~April 2009, the FASB issued FASB Staff Position ~~("FSP"~~(“FSP”) ~~FAS 157-2, which delayed~~FSP SFAS 107-1 and Accounting Principles Board Opinion (“APB”) APB 28-1, “Interim Disclosure about Fair Value of Financial Instruments” (“FSP 107-1/APB 28-1”). FSP 107-1/APB 28-1 requires interim disclosures regarding the fair values of financial instruments that are within the scope of FASB No. 107, “Disclosures about the Fair Value of Financial Instruments”. Additionally, FSP 107-1/APB 28-1 requires disclosure of the methods and significant assumptions used to estimate the fair value of financial instruments on an interim basis as well as changes of the methods and significant assumptions from prior periods. FSP 107-1/APB 28-1 does not change the accounting treatment for these financial instruments and is effective ~~date~~for interim reporting periods ending after June 15, 2009.

In April 2009, the FASB issued FSP SFAS 157-4, “Determining Fair Value When the Volume and Level of ~~SFAS 157 to fiscal years beginning after November 15, 2008 (fiscal 2010~~Activity for the ~~Company)~~Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP 157-4”). FSP 157-4 provides additional guidance for ~~all nonfinancial assets and liabilities, except those that are recognized or disclosed at~~estimating fair value inunder FASB No. 157 “Fair value Measurements” (“SFAS 157”) when the ~~financial statements on a recurring basis (at least annually). Assets~~volume and ~~liabilities subject to this deferral include goodwill, intangible assets,~~level of activity for the asset or liability have significantly decreased. FSP 157-4 is effective for interim and ~~long-lived assets measured at fair value for impairment assessments, and nonfinancial assets and liabilities initially measured at fair value in a business combination. As~~annual reporting periods ending after June 15, 2009. Because the Company does not have any financial assets or liabilities measured at fair value on a recurring basis, nor ~~does it~~do we have any nonfinancial assets and liabilities not subject to the FSP 157-2 delay discussed below, the adoption ofFSP 157-4 and SFAS 157 which was adopted in the first fiscal quarter of 2009, did not have any impact on our consolidated financial position, or results of operations. FASB No. 159 "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"): This standard provides an option for companies to report selected financial assets and liabilities at fair value. Although the Company adopted the provisions of SFAS 159, it did not elect the fair value option for any financial instrumentsoperations, or ~~other items held by the Company. Therefore, the adoption of SFAS 159 did not have any impact on the Company's consolidated financial position or results of operations.~~ cash flows.

Recently Issued Accounting Pronouncements ~~- -----------------------------------------~~

The Company is currently evaluating the impact of implementing the following new accounting standards:

In June 2009, the FASB issued FASB No. 168 “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162” (“SFAS 168”). SFAS 168 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP in the United States. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009.

In June 2009, the FASB issued FASB No. 166, “Accounting for Transfers of Financial Assets — an amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166 requires additional disclosures about the transfer and derecognition of financial assets and eliminates the concept of qualifying special-purpose entities under SFAS 140. SFAS 166 is effective for fiscal years beginning after November 15, 2009 (fiscal 2011 for the Company).

In June 2008, the FASB issued FSP-EITF No. 03-6-1, ~~"Determining~~“Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating ~~Securities"~~Securities”. FSP EITF 03-6-1 provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008 (fiscal 2010 for the Company). Upon adoption, a company is required to retrospectively adjust its earnings per share data (including any amounts related to interim periods, summaries of earnings, and selected financial data) to conform to the provisions of FSP EITF 03-6-1. 8

In April 2008, the FASB issued FSP ~~No. FAS~~SFAS 142-3, ~~"Determination~~“Determination of the Useful Life of Intangible ~~Assets" ("~~Assets” (“FSP ~~No. FAS 142-3"~~142-3”). FSP ~~No. FAS~~ 142-3 requires companies estimating the useful life of a recognized intangible asset to consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, to consider assumptions that market participants would use about renewal or extension as adjusted for SFAS No. ~~142's,~~142’s, Goodwill and Other Intangible Assets, entity-specific factors. FSP ~~No. FAS~~ 142-3 is effective for fiscal years beginning after December 15, 2008 (fiscal 2010 for the Company).

In February 2008, the FASB issued FSP SFAS 157-2, which delayed the effective date of SFAS 157 to fiscal years beginning after November 15, 2008 (fiscal 2010 for the Company) for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Assets and liabilities subject to this deferral include goodwill, intangible assets, and long-lived assets measured at fair value for impairment assessments, and nonfinancial assets and liabilities initially measured at fair value in a business combination.

2. DISPOSITIONS ~~Discontinued operations include the residual assets, liabilities, and results of operations of~~

On May 4, 2009, Trinity Springs, Inc. ~~("TSI"~~(“TSI”), a wholly owned subsidiary and former component of the Company’s water bottling and marketing segment, and Crystal Paradise Holdings, Inc. (“CPH”) closed a previously disclosed transaction whereby CPH exchanged a $5.0 million note receivable (plus $0.1 million of accrued interest) which it held and was due from TSI, for the ~~three~~operating assets of TSI. The Company will have no continuing involvement in the related operating assets and ~~six month fiscal periods ended March 2009 and March 2008. TSI operated~~has recorded a ~~water bottling facility~~$4.7 million pre-tax gain ($3.0 million after tax) in ~~Idaho prior~~conjunction with the transaction, which includes the recognition of a $1.5 million deferred gain attributable to ~~its closure. In September 2007, the Company signed~~ a previously executed Mutual Release and Settlement Agreement ~~(the "Settlement Agreement") to resolve litigation among and~~ between AMCON, TSI, and Crystal Paradise Holdings, Inc. ("CPH") related to a 2004 Asset Purchase Agreement ("Asset Purchase Agreement"), under which TSI acquired certain assets from CPH. In conjunction with the Settlement Agreement, AMCON entered into a $5.0 million note payable to CPH. The note is due in September 2012 and accrues interest at 5.0%. The Settlement Agreement also provided CPH with an option to purchase TSI's remaining assets for a price equivalent to the amount due CPH under the $5.0$4.7 million ~~note payable, plus accrued interest. In conjunction with the Settlement Agreement, the Company recorded a $1.5 million pre-tax deferred gain. This deferred~~ gain has been ~~classified~~reflected in the Statement of Operations as a component of ~~noncurrent liabilities~~discontinued operations.

Simultaneous with the closing of ~~discontinued operations in~~ the ~~Company's Consolidated Balance Sheets. In March 2009,~~ CPH ~~notified~~transaction discussed above, the Company ~~that it was exercising its option under the Settlement Agreement to acquire the assets of~~fully settled and satisfied $2.7 million in related party notes payable and accrued interest totaling $0.8 million due from TSI, in exchange for cash payments of approximately $0.8 million. The Company has recorded a $2.7 million pre-tax gain ($1.7 million after tax) related to this transaction, which has been reflected in the ~~$5.0 million note payable, plus accrued interest. Upon completion~~Statements of the transaction, the Company will recognize the aforementioned $1.5 million deferred gain, in addition to any other settlement gains and losses. The transaction is scheduled to close in April 2009 and is subject to the satisfactionOperations as a component of ~~various closing conditions. 9~~ discontinued operations.

A summary of discontinued operations for the three and nine month periods is as follows:


	Three months ended					Nine months ended
	June					June
	2009		2008			2009			2008
Operating income (loss)	$	20,105	$	(40,791	)	$	(65,458	)	$	(122,731	)
Interest expense		—		(114,750	)		(230,012	)		(344,250	)
Gain on asset disposal and debt settlement		7,381,264		—			7,381,264			—
Income tax expense (benefit)		2,722,000		(57,000	)		2,606,000			(175,000	)
Gain (loss) from discontinued operations		4,679,369		(98,441	)		4,479,894			(291,881	)

The carrying amounts of the major classes of assets and liabilities included in discontinued operations at June 2009 and September 2008 are as follows (in millions):


	June		September
	2009		2008

Fixed assets — total noncurrent assets of discontinued operations	$	—	$	2.0


Accounts payable	$	—	$	0.5
Accrued expenses		—		0.7
Current portion of long-term debt due related party		—		2.8

Liabilities of discontinued operations	$	—	$	4.0


Deferred gain on CPH settlement	$	—	$	1.5
Long-term debt, less current portion		—		5.0

Noncurrent liabilities of discontinued operations	$	—	$	6.5

3. CONVERTIBLE PREFERRED STOCK

The Company had two convertible preferred stock series outstanding at ~~March~~June 2009 as identified in the following table:


	Series A			Series B
Date of issuance:	June 17, 2004			October 8, 2004
Optionally redeemable beginning	June 18, 2006			October 9, 2006
Par value (gross proceeds):	$	2,500,000		$	2,000,000
Number of shares:		100,000			80,000
Liquidation preference per share:	$	25.00		$	25.00
Conversion price per share:	$	30.31		$	24.65
Number of common shares in which to be converted:		82,481			81,136
Dividend rate:		6.785	%		6.37	%

The Series A Convertible Preferred Stock ("(“Series A"A”) and Series B Convertible Preferred Stock ("(“Series B"B”), collectively (the Preferred Stock), are convertible at any time by the holders into a number of shares of AMCON common stock equal to the number of preferred shares being converted times a fraction equal to $25.00 divided by the conversion price. The conversion prices for the Preferred Stock are subject to customary adjustments in the event of stock splits, stock dividends and certain other distributions on the Common Stock. Cumulative dividends for the Preferred Stock are payable in arrears, when, as and if declared by the Board of Directors, on March 31, June 30, September 30 and December 31 of each year.

In the event of a liquidation of the Company, the holders of the Preferred Stock are entitled to receive the liquidation preference plus any accrued and unpaid dividends prior to the distribution of any amount to the holders of the Common Stock. The Preferred Stock also contain redemption features which trigger based on certain circumstances such as a change of control, bankruptcy, or minimum ownership thresholds in AMCON by Mr. William Wright ("Mr. Wright") and his family. Mr. Wright is AMCON's founder, largest common shareholder, and a Company director.

The shares of Preferred Stock are optionally redeemable by the Company beginning on various dates, as listed in the above table, at redemption prices equal to 112% of the liquidation preference. The redemption prices decrease 1% annually thereafter until the redemption price equals the liquidation preference, after which date it remains the liquidation preference. The ~~Company's~~Preferred Stock is redeemable at the liquidation value at the option of the holder, however, prior to June 30, 2009 the Company’s revolving credit ~~facility prohibits~~agreement prohibited the redemption of the ~~Series A and Series B. The Series A is owned by Mr. Wright and a private equity firm (Draupnir, LLC) of which Mr. Jeremy Hobbs, a Company director, is a member. The Series B~~ Preferred ~~Stock is owned by an institutional investor which has elected Mr. Chris Atayan~~Stock. As discussed in Note 11, the Company’s revolving credit agreement was amended in July 2009 to ~~serve on~~remove this redemption restriction.

During the ~~Company's board of directors. Mr. Atayan is AMCON's Chief Executive Officer and Chairman of the Company's Board of Directors. 11 In February 2009,~~Company’s second fiscal quarter (February 2009), the holder of the ~~Company's~~Company’s Series C Convertible Preferred Stock ("(“Series C"C”) ~~redeemed~~exercised its redemption right for all 80,000 issued and outstanding shares of ~~the issuance.~~Series C. The Series C issuance had been outstanding since 2006, paid a dividend of 6.00% percent per annum, and was convertible into 146,842 shares of common stock. The Company paid the liquidation value, or $2.0 million, plus accumulated and unpaid dividends to fully redeem all of the outstanding shares. The redemption was funded bythrough borrowings on our credit facility and satisfied all of the ~~Company's~~Company’s obligations under the Series C Convertible Preferred Stock Agreement. In conjunction with the Series C redemption, the Company also adjusted the carrying value of the Series A and Series B issuances to their respective redemption values, as they are currently redeemable by the holders. The adjustment to redemption value had no impact on our Income from Continuing Operations or Net Income.

4. INVENTORIES

Inventories consisted of the following at ~~March~~June 2009 and September 2008:


	June		September
	2009		2008
Finished Goods	$	35,285,633	$	37,330,969

The wholesale distribution and retail health food segment inventories consist of finished products purchased in bulk quantities to be redistributed to the ~~Company's~~Company’s customers or sold at retail. The wholesale distribution inventories are stated at the lower of cost (first-in, first-out or ~~"FIFO"~~“FIFO” method) or market and consist of the cost of finished goods. The retail health food operation utilizes the retail inventory method of accounting stated at the lower of cost (FIFO) or market and consists of the costs of finished goods.

Inventory also included total reserves of approximately ~~$0.8~~$0.9 million and $0.6 million at ~~March~~June 2009 and September 2008, respectively. These reserves include the ~~Company's~~Company’s obsolescence allowance, which reflects estimated unsaleable or non-refundable inventory based upon an evaluation of slow moving and discontinued products.

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill by reporting segment of the Company consisted of the following:


	June		September
	2009		2008
Wholesale	$	3,935,931	$	3,935,931
Retail		1,912,877		1,912,877

	$	5,848,808	$	5,848,808

Other intangible assets of the Company consisted of the following:


	June		September
	2009		2008
Trademarks and tradenames	$	3,373,269	$	3,373,269

Goodwill, trademarks and tradenames are considered to have indefinite useful lives and therefore no amortization has been taken on these assets. The Company tests goodwill and other intangibles for impairment on an annual basis, or between annual tests if an event occurs or circumstances change that may reduce their respective fair values below carrying value.

6. ~~DIVIDENDS:~~ DIVIDENDS

In ~~January~~April 2009, the Company declared cash dividends of $0.10 per common share to shareholders of record as of ~~February 9,~~May 4, 2009. Cash dividends paid to common shareholders for the three and ~~six~~nine months ended ~~March~~June 2009 totaled $57,040 and ~~$114,079,~~$171,119, respectively.

7. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share available to common shareholders is calculated by dividing income (loss) from continuing operations less preferred stock dividend requirements and income (loss) from discontinued operations by the weighted average common shares outstanding for each period. Diluted earnings (loss) per share available to common shareholders is calculated by dividing income (loss) from continuing operations less preferred stock dividend requirements (when anti-dilutive) and income (loss) from discontinued operations by the sum of the weighted average common shares outstanding and the weighted average dilutive options, using the treasury stock method.

Stock options and potential common stock outstanding at ~~March~~June 2009 and ~~March~~June 2008 that were anti-dilutive were not included in the computations of diluted earnings per share. Such potential common shares totaled ~~15,286~~917 and 8,878 for the three and nine months ended June 2009, respectively, and 12,279 for both the three and ~~six~~nine months ended ~~March 2009 and 12,279 for the three and six month periods ended March 2008, respectively.~~June 2008. The average exercise price of anti-dilutive options and potential common stock was ~~$39.94~~$45.68 and $32.32 for the three and nine months ended June 2009, respectively, and $44.09 for both the three and ~~six~~nine months ended ~~March 2009 and $44.09 for the three and six month periods ended March 2008, respectively. 13~~ June 2008.


	For the three months ended June
	2009					2008
	Basic			Diluted		Basic			Diluted
Weighted average common shares outstanding		549,397			549,397		537,064			537,064

Weighted average of net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock and conversion of preferred stock /1/		—			175,436		—			314,847

Weighted average number of shares outstanding		549,397			724,833		537,064			851,911


Income from continuing operations	$	2,254,748		$	2,254,748	$	1,487,243		$	1,487,243
Deduct: convertible preferred stock dividends /2/		(74,052	)		—		(104,386	)		—

		2,180,696			2,254,748		1,382,857			1,487,243

Income (loss) from discontinued operations	$	4,679,369		$	4,679,369	$	(98,441	)	$	(98,441	)

Net income available to common shareholders	$	6,860,065		$	6,934,117	$	1,284,416		$	1,388,802

Income per share from continuing operations	$	3.97		$	3.11	$	2.57		$	1.75

Income (loss) per share from discontinued operations	$	8.52		$	6.46	$	(0.18	)	$	(0.12	)

Net earnings per share available to common shareholders	$	12.49		$	9.57	$	2.39		$	1.63


	For the nine months ended June
	2009					2008
	Basic			Diluted		Basic			Diluted
Weighted average common shares outstanding		547,859			547,859		536,002			536,002

Weighted average of net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock and conversion of preferred stock /1/		—			245,751		—			314,896

Weighted average number of shares outstanding		547,859			793,610		536,002			850,898


Income from continuing operations	$	5,850,143		$	5,850,143	$	3,799,556		$	3,799,556
Deduct: convertible preferred stock dividends /2/		(493,786	)		—		(314,306	)		—

		5,356,357			5,850,143		3,485,250			3,799,556

Income (loss) from discontinued operations	$	4,479,894		$	4,479,894	$	(291,881	)	$	(291,881	)

Net income available to common shareholders	$	9,836,251		$	10,330,037	$	3,193,369		$	3,507,675

Income per share from continuing operations	$	9.78		$	7.37	$	6.50		$	4.46

Income (loss) per share from discontinued operations	$	8.17		$	5.65	$	(0.54	)	$	(0.34	)

Net earnings per share available to common shareholders	$	17.95		$	13.02	$	5.96		$	4.12

For the three months ended March ------------------------------------------------------ 2009 2008 ------------------------- ------------------------ Basic Diluted Basic Diluted ----------- ----------- ----------- ----------- Weighted average common shares outstanding 548,619 548,619 537,064 537,064 Weighted average of net additional shares outstanding assuming dilutive options exercised and proceeds used to purchase treasury stock and conversion of preferred stock /1/ - 256,617 - 314,306 ----------- ----------- ----------- ----------- Weighted average number of shares outstanding 548,619 805,236 537,064 851,370 =========== =========== =========== =========== Income from continuing operations $ 2,193,795 $ 2,193,795 $ 1,267,104 $ 1,267,104 Deduct: convertible preferred stock dividends /2/ (314,201) - (104,386) - ----------- ----------- ----------- ----------- 1,879,594 2,193,795 1,162,718 1,267,104 =========== =========== =========== =========== Loss from discontinued operations $ (97,437) $ (97,437) $ (97,445) $ (97,445) =========== =========== =========== =========== Net income available to common shareholders $ 1,782,157 $ 2,096,358 $ 1,065,273 $ 1,169,659 =========== =========== =========== =========== Income per share from continuing operations $ 3.43 $ 2.72 $ 2.16 $ 1.48 =========== =========== =========== =========== Loss per share from discontinued operations $ (0.18) $ (0.12) $ (0.18) $ (0.11) =========== =========== =========== =========== Net earnings per share available to common shareholders $ 3.25 $ 2.60 $ 1.98 $ 1.37 =========== =========== =========== =========== /1/

/1/		Diluted earnings per share calculation includes all stock options, convertible preferred stock, and restricted stock deemed to be dilutive. ~~/2/~~

/2/		Diluted earnings per share calculation excludes dividends for convertible preferred stock deemed to be dilutive, as those amounts are assumed to have been converted to common stock of the Company.

8. DEBT

The Company has a credit agreement (the “Facility”) with Bank of America, ~~(the "Facility"),~~ which includes the following significant terms: -

A June 2011 maturity date. -

A $55.0 million revolving credit limit, plus the outstanding balance on Term Note A. Term Note A had an outstanding balance of ~~$0.3~~$0.2 million at ~~March~~June 2009. -

The Facility bears interest at either the ~~bank's~~bank’s prime rate or at a LIBOR ~~based rate~~plus 250 basis points, at the election of the Company. -

8. DEBT (continued)

The Facility provides for an additional $5.0 million of credit available for certain inventory purchases. These advances bear interest at the ~~bank's~~bank’s prime rate plus one-quarter of one-percent (1/4%) per annum and are payable within 45 days of each advance. -

Lending limits subject to accounts receivable and inventory limitations, and an unused commitment fee equal to one-quarter of one percent (1/4%) per annum on the difference between the maximum loan limit and average monthly borrowings. -

Collateral including all of the ~~Company's~~Company’s equipment, intangibles, inventories, and accounts receivable. -

Provides that the Company may not pay dividends on its common stock in excess of $0.72 per share on an annual basis. -

The Facility includes a prepayment penalty equal to ~~a predetermined percentage~~one-half of one percent (1/2%) of the original maximum loan limit ~~of $60.4 million~~($60.4 million) if the Company prepays the entire Facility ~~and~~or terminates the credit agreement ~~before specified dates. The prepayment penalty percentages are as follows: (1) one percent (1%) if prepayment occurs~~ on or before June 30, ~~2009, and (2) one-half of one percent (1/2%) if prepayment occurs subsequent to June 30, 2009 but on or before June 30,~~ 2010.

The Facility ~~also~~ includes ~~quarterly debt service and cumulative earnings before interest, taxes, depreciation and amortization ("EBITDA")~~a financial ~~covenants. A~~covenant which requires the Company to maintain a minimum debt service ratio of 1.0 to 1.0 ~~must be maintained,~~ as measured by the previous twelve month period then ~~ended and the cumulative minimum EBITDA requirement is $2,000,000 for the six months ending March 31, 2009.~~ended. The Company was in compliance with ~~the required debt service and minimum EBITDA covenants~~this covenant at ~~March~~June 2009.

The ~~Company's~~Company’s maximum available credit limit for the revolving portion of the Facility was ~~$41.2~~$51.9 million at ~~March~~June 2009, however, the amount available for use at any given time is subject to ~~many~~a number of factors including eligible accounts receivable and inventory balances. 16

At ~~March~~June 2009, the outstanding balance on the revolving portion of the Facility was ~~$19.5~~$26.0 million. ~~The Facility bears interest at a variable rate equal to the bank's prime rate, which was 3.25% at March 2009.~~ Based on our collateral and loan limits as defined byin the Facility agreement, the ~~Company's~~Company’s availability under the Facility at ~~March~~June 2009 was approximately ~~$21.7~~$25.9 million.

Approximately $6.0 million of the Company’s Facility balance bore interest based on the bank’s prime rate of 3.25% at June 2009 and approximately $20.0 million bore interest based on various short-term LIBOR rate elections made by the Company. These LIBOR interest rate elections had an average rate of 2.97% at June 2009.

At June 2009, the Company had long-term debt outstanding of approximately $6.7 million. Based on the borrowing rates currently available to the Company for bank loans with similar terms and average maturities, the fair value of this long-term debt approximated its carrying value at June 2009.

Cross Default and Co-Terminus Provisions ~~- -----------------------------------------~~

OTHER ~~- -----~~

AMCON has issued a letter of credit for $0.8 million to its ~~workers'~~workers’ compensation insurance carrier as part of its self-insured loss control program.

Off-Balance Sheet Arrangements ~~- ------------------------------~~

The Company does not have any off-balance sheet arrangements.

9. EQUITY-BASED INCENTIVE AWARDS

Stock Options ~~- -------------~~

At ~~March~~June 2009, the Company had two groups of stock option awards issued and outstanding. The first award group includes incentive and non-qualified stock options issued to management employees and outside directors pursuant to the ~~Company's~~Company’s stock-based compensation plan ("(“the Stock Option ~~Plan"~~Plan”). The Stock Option Plan expired in fiscal 2004 and all compensation expense related to the plan was amortized in prior fiscal periods.

The second award group includes 25,000 non-qualified stock options issued to the ~~Company's~~Company’s Chief Executive Officer in fiscal 2007. These stock options vest in equal installments over a three year period and have an exercise price of $18.00 per share. At ~~March~~June 2009, 16,666 of these stock options had vested. 17

Stock options issued and outstanding to management employees at ~~March~~June 2009 are summarized as follows:


			Number of
			Options		Number
Date	Exercise Price		Outstanding		Exercisable
Fiscal 1999	$	45.68		917		917
Fiscal 2000	$	34.50		3,123		3,123
Fiscal 2003	$	28.80		3,170		3,170
Fiscal 2007	$	18.00		25,000		16,666

				32,210		23,876

Stock options issued and outstanding to the ~~Company's~~Company’s outside directors at ~~March~~June 2009 are summarized as follows:


			Number of
			Options		Number
Date	Exercise Price		Outstanding		Exercisable
Fiscal 2002	$	26.94		834		834
Fiscal 2003	$	28.26		834		834

				1,668		1,668

The following summarizes all stock options outstanding at ~~March~~June 2009:


				Remaining			Exercisable
	Exercise	Number		Weighted-Average	Weighted-Average		Number		Weighted-Average
	Price	Outstanding		Contractual Life	Exercise Price		Exercisable		Exercise Price
1999 Options	$45.68		917	0.21 years	$	45.68		917	$	45.68
2000 Options	$34.50		3,123	0.95 years	$	34.50		3,123	$	34.50
2002 Options	$26.94		834	3.12 years	$	26.94		834	$	26.94
2003 Options	$28.26-$28.80		4,004	3.49 years	$	28.69		4,004	$	28.69
2007 Options	$18.00		25,000	7.45 years	$	18.00		16,666	$	18.00

			33,878		$	21.75		25,544	$	22.98

The following is a summary of the activity of the stock plans for the ~~six~~nine months ended ~~March~~June 2009:


				Weighted
	Number			Average
	of			Exercise
	Shares			Price
Outstanding at September 2008		42,120		$	26.80
Granted		—			—
Exercised		—			—
Expired		(8,242	)	$	47.54

Outstanding at June 2009		33,878		$	21.75


Options exercisable at end of period		25,544

The ~~Company's~~Company’s stock options have varying vesting schedules, ranging up to five years and expiring ten years subsequent to the grant date. Net income before income taxes included compensation expense related to stock options of approximately $0.03 million for three months ended June 2009 and June 2008, and $0.1 million for ~~both~~ the ~~three and six month fiscal periods~~nine months ended ~~March~~June 2009 and ~~March~~June 2008. Total unamortized compensation expense related to stock options at ~~March~~June 2009 totaled approximately $0.1 million. This unamortized stock expense is expected to be amortized over approximately the next ~~twelve~~nine months (the expected weighted-average period).

Omnibus Plan ~~- ------------~~

The Company has an Omnibus Incentive Plan ("(“the Omnibus ~~Plan"~~Plan”) which provides for equity incentives to employees. The Omnibus Plan was designed with the intent of encouraging employees to acquire a vested interest in the growth and performance of the Company. The Omnibus Plan permits the issuance of up to 150,000 shares of the ~~Company's~~Company’s common stock in the form of stock options, restricted stock awards, restricted stock units, performance share awards as well as awards such as stock appreciation rights, performance units, performance shares, bonus shares, and dividend share awards payable in the form of common stock or cash. 19

Pursuant to the Omnibus Plan, the Compensation Committee of the Board of Directors has authorized and approved the restricted stock awards as summarized below:


	Restricted Stock /1/		Restricted Stock /2/
Date of award:	December 6, 2007		January 29, 2008
Number of shares:		24,000		7,500
Service period:	34 months		36 months
Estimated fair value of award at grant date/3/:	$	963,000	$	229,000
Intrinsic value of awards outstanding at June 2009:	$	656,000	$	205,000

Restricted Stock /1/ Restricted Stock /2/ -------------------- -------------------- Date of award: December 6, 2007 January 29, 2008 Number of shares: 24,000 7,500 Service period: 34 months 36 months Estimated fair value of award at grant date/3/: $963,000 $229,000 Intrinsic value of awards outstanding at March 2009: $400,000 $125,000 /1/

/1/		8,000 shares were vested at ~~March~~June 2009. The remaining 16,000 shares will vest in equal amounts (8,000 per year) on October 16, 2009 and October 16, 2010. ~~/2/~~

/2/		2,500 shares were vested at ~~March~~June 2009. The remaining 5,000 shares will vest in equal amounts (2,500 per year) on January 29, 2010 and January 29, 2011. ~~/3/~~

/3/		Amount is net of estimated forfeitures.

There is no direct cost to the recipients of the restricted stock awards, except for any applicable taxes. The restricted stock held by recipients are entitled to full voting rights and the customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the ~~Company's~~Company’s common stock. All cash dividends and/or distributions payable to restricted stock recipients will be held in escrow until all the conditions of vesting have been met.

The Company recognizes compensation expense related to restricted stock awards on a straight-line basis over the requisite service period. Accordingly, net income before income taxes included compensation expense of $0.1 million and $0.3 million for the three and nine months ended June 2009, respectively, and $0.1 million and $0.2 million for the three and ~~six~~nine months ended ~~March 2009, and approximately $0.1 million for both the three and six months ended March 2008.~~June 2008, respectively. Total unamortized compensation expense related to restricted stock awards at ~~March~~June 2009 was approximately ~~$0.7~~$0.6 million. This unamortized compensation expense is expected to be amortized over approximately the next ~~two fiscal years~~seventeen months (the expected weighted-average period).

The following summarizes restricted stock activity under the Omnibus Plan for the ~~six~~nine months ended ~~March~~June 2009:


	Number			Weighted Average
	of			Grant Date
	Shares			Fair Value
Nonvested restricted stock at September 2008		31,500		$	40.16
Granted		—			—
Vested/Issued		(10,500	)	$	40.16
Expired		—			—

Nonvested restricted stock at June 2009		21,000		$	40.16

10. BUSINESS SEGMENTS

AMCON has two reportable business segments: the wholesale distribution of consumer products and the retail sale of health and natural food products. The retail health food ~~stores'~~stores’ operations are aggregated to comprise the retail segment because such operations have similar economic characteristics, as well as similar characteristics with respect to the nature of products sold, the type and class of customers for the health food products and the methods used to sell the products. Included in the ~~"Other"~~“Other” column is intercompany eliminations, charges incurred by the holding company, and assets of discontinued operations. The segments are evaluated on revenues, gross margins, operating income (loss), and income before taxes.


	Wholesale
	Distribution		Retail		Other /1/			Consolidated
THREE MONTHS ENDED JUNE 2009:
External revenue:
Cigarettes	$	175,859,941	$	—	$	—		$	175,859,941
Confectionery		17,248,948		—		—			17,248,948
Health food		—		9,059,300		—			9,059,300
Tobacco, food service & other		40,649,738		—		—			40,649,738

Total external revenue		233,758,627		9,059,300		—			242,817,927
Depreciation		223,275		49,228		1,147			273,650
Operating income (loss)		4,661,114		888,437		(1,559,355	)		3,990,196
Interest expense		132,192		133,692		102,164			368,048
Income (loss) from continuing operations before taxes		4,536,746		765,176		(1,636,174	)		3,665,748
Total assets		77,693,924		11,517,275		989,112			90,200,311
Capital expenditures		223,251		63,569		—			286,820

THREE MONTHS ENDED JUNE 2008:
External revenue:
Cigarettes	$	156,409,915	$	—	$	—		$	156,409,915
Confectionery		16,778,331		—		—			16,778,331
Health food		—		9,810,444		—			9,810,444
Tobacco, food service & other		40,398,702		—		—			40,398,702

Total external revenue		213,586,948		9,810,444		—			223,397,392
Depreciation		256,941		76,400		707			334,048
Amortization		—		6,935		—			6,935
Operating income (loss)		3,253,230		775,679		(1,067,101	)		2,961,808
Interest expense		157,599		211,524		266,400			635,523
Income (loss) from continuing operations before taxes		3,102,724		575,021		(1,333,502	)		2,344,243
Total assets		76,941,902		11,756,379		5,401,427			94,099,708
Capital expenditures		101,977		22,135		—			124,112


	Wholesale
	Distribution		Retail		Other /1/			Consolidated
NINE MONTHS ENDED JUNE 2009:
External revenue:
Cigarettes	$	464,141,853	$	—	$	—		$	464,141,853
Confectionery		47,377,945		—		—			47,377,945
Health food		—		27,604,903		—			27,604,903
Tobacco, food service & other		116,512,835		—		—			116,512,835

Total external revenue		628,032,633		27,604,903		—			655,637,536
Depreciation		716,427		165,105		3,440			884,972
Operating income (loss)		12,130,097		2,552,606		(4,036,869	)		10,645,834
Interest expense		391,236		443,550		431,048			1,265,834
Income (loss) from continuing
operations before taxes		11,766,639		2,140,075		(4,442,571	)		9,464,143
Total assets		77,693,924		11,517,275		989,112			90,200,311
Capital expenditures		526,281		257,940		—			784,221

NINE MONTHS ENDED JUNE 2008:
External revenue:
Cigarettes	$	438,088,121	$	—	$	—		$	438,088,121
Confectionery		44,399,849		—		—			44,399,849
Health food		—		29,861,462		—			29,861,462
Tobacco, food service & other		112,122,867		—		—			112,122,867

Total external revenue		594,610,837		29,861,462		—			624,472,299
Depreciation		731,261		283,543		1,661			1,016,465
Amortization		—		26,801		—			26,801
Operating income (loss)		8,387,321		2,964,701		(3,062,020	)		8,290,002
Interest expense		569,564		794,050		991,269			2,354,883
Income (loss) from continuing
operations before taxes		7,845,094		2,205,078		(4,024,616	)		6,025,556
Total assets		76,941,902		11,756,379		5,401,427			94,099,708
Capital expenditures		509,447		157,821		—			667,268

~~Wholesale Distribution Retail Other /1/ Consolidated ------------- ----------- ---------- -------------~~ THREE MONTHS ENDED MARCH 2009: External revenue: Cigarettes $ 136,018,967 $ - $ - $ 136,018,967 Confectionery 14,667,301 - - 14,667,301 Health food - 9,564,810 - 9,564,810 Tobacco, food service & other 35,191,168 - - 35,191,168 ------------- ----------- ---------- ------------- Total external revenue 185,877,436 9,564,810 - 195,442,246 Depreciation 244,988 54,854 1,146 300,988 Amortization - - - - Operating income (loss) 4,180,906 1,076,330 (1,338,330) 3,918,906 Interest expense 126,365 140,313 141,909 408,587 Income (loss) from continuing operations before taxes 4,070,742 946,290 (1,480,237) 3,536,795 Total assets 65,160,730 11,416,692 4,366,108 80,943,530 Capital expenditures 174,540 56,890 - 231,430 THREE MONTHS ENDED MARCH 2008: External revenue: Cigarettes $ 132,066,675 $ - $ - $ 132,066,675 Confectionery 13,513,561 - - 13,513,561 Health food - 10,529,463 - 10,529,463 Tobacco, food service & other 34,301,971 - - 34,301,971 ------------- ----------- ---------- ------------- Total external revenue 179,882,207 10,529,463 - 190,411,670 Depreciation 242,555 86,824 497 329,876 Amortization - 9,933 - 9,933 Operating income (loss) 2,321,460 1,377,648 (993,711) 2,705,397 Interest expense 181,730 258,320 309,508 749,558 Income (loss) from continuing operations before taxes 2,152,385 1,131,587 (1,288,868) 1,995,104 Total assets 68,732,684 11,680,923 6,246,151 86,659,758 Capital expenditures 138,238 124,299 - 262,537 /1/
/1/		Includes intercompany eliminations, charges incurred by the holding company, and the assets of discontinued operations.

11. ~~CONTINGENCIES~~ SUBSEQUENT EVENT:

Credit Facility Amendment

In ~~September 2007,~~July 2009, the Company ~~signed a Mutual Release~~amended its revolving credit facility to remove the lender’s restriction on the redemption of Series A and ~~Settlement Agreement (the "Settlement Agreement")~~B Preferred Stock among other things. The amendment allows the Company to resolve litigation among and between AMCON, TSI, and Crystal Paradise Holdings, Inc. ("CPH") related to a 2004 Asset Purchase Agreement ("Asset Purchase Agreement"), under which TSI acquired certain assets from CPH. In conjunction withredeem Series A and/or B Preferred Stock provided that the ~~Settlement Agreement, AMCON entered into a~~Company has average excess availability of $5.0 million note payable to CPH. The note is due in September 2012 and accrues interest at 5.0%. The Settlement Agreement also provided CPH with an option to purchase TSI's remaining assets for a price equivalent to the amount due CPH under the $5.0 million note payable, plus accrued interest. In conjunction with the Settlement Agreement, the Company recorded a $1.5 million pre-tax deferred gain. This deferred gain has been classified as a component of noncurrent liabilities of discontinued operations in the Company's Consolidated Balance Sheets. In March 2009, CPH notified the Company that it was exercising its option under the Settlement Agreement to acquire the assets of TSI in exchange for the ~~$5.0 million note payable, plus accrued interest. Upon completion of the transaction, the Company will recognize the aforementioned $1.5 million deferred gain, in addition~~thirty day period immediately prior to such purchase and after giving effect to any ~~other settlement gains and losses. The transaction is scheduled to close in April 2009 and is subject to the satisfaction of various closing conditions. 22~~ such purchase.

Item 2. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including ~~the Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections, contains forward-looking statements that are subject to risks and uncertainties and which reflect ~~management's~~management’s current beliefs and estimates of future economic circumstances, industry conditions, company performance and financial results. Forward-looking statements include information concerning the possible or assumed future results of operations of the Company and those statements preceded by, followed by or that include the words ~~"future," "position," "anticipate(s)~~“future,” “position,” “anticipate(s),~~" "expect," "believe(s)~~” “expect,” “believe(s),~~" "see," "plan," "further~~” “see,” “plan,” “further improve,~~" "outlook," "should"~~” “outlook,” “should” or similar expressions. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. You should understand that the following important factors, in addition to those discussed elsewhere in this document, could affect the future results of the Company and could cause those results to differ materially from those expressed in our forward-looking statements: -

increases in state and federal excise taxes on cigarette and tobacco products, including recent increases in federal excise taxes imposed ~~as part of~~in connection with the State ~~Children's~~Children’s Health Insurance Program ~~("SCHIP"~~(“SCHIP”) ~~legislation, - possible~~ law,

regulation of cigarette and tobacco products by the U.S. Food and Drug Administration ~~("FDA"~~(“FDA”), in addition to existing state and federal regulations by other agencies, -

increases in manufacturer prices, -

increases in inventory carrying costs and customer credit risk, -

changes in promotional and incentive programs offered by manufacturers, -

decreased availability of capital resources ~~due to recent events in the credit markets, -~~

demand for the ~~Company's~~Company’s products, particularly cigarette and tobacco products, -

new business ventures, -

domestic regulatory and legislative risks, -

competition, -

poor weather conditions, -

increases in fuel prices, -

consolidation trends within the convenience store industry, -

other risks over which the Company has little or no control, and - any other factors not identified herein.

Changes in these factors could result in significantly different results. Consequently, future results may differ from ~~management's~~management’s expectations. Moreover, past financial performance should not be considered a reliable indicator of future performance. Any forward-looking statement contained herein is made as of the date of this document. Except as required by law, the Company undertakes no obligation to publicly update or correct any of these forward-looking statements in the future to reflect changed assumptions, the occurrence of material events or changes in future operating results, financial conditions or business over time. 23

CRITICAL ACCOUNTING ESTIMATES

Certain accounting estimates used in the preparation of the ~~Company's~~Company’s financial statements require us to make judgments and estimates and the financial results we report may vary depending on how we make these judgments and estimates. Our critical accounting estimates are set forth in our Form 10-K for the fiscal year ended September 30, 2008, as filed with the Securities and Exchange Commission. There have been no significant changes with respect to these policies during the ~~six~~nine months ended ~~March~~June 2009. ~~COMPANY OVERVIEW - SECOND~~

THIRD FISCAL QUARTER 2009 ~~(Q2~~OVERVIEW (Q3 2009)

The following discussion and analysis includes the ~~Company's~~Company’s results of operations from continuing operations for the three and ~~six~~nine months ended ~~March~~June 2009 and ~~March~~June 2008. Continuing operations are comprised of our wholesale distribution and retail health food segments. A separate discussion of our discontinued operations has been presented following our analysis of continuing operations. Accordingly, the sales, gross profit (loss), selling, general and administrative, depreciation and amortization, direct interest, other expenses and income tax benefit from our discontinued operations have been aggregated and reported as loss from discontinued operations and are not a component of the aforementioned continuing operations discussion. During Q2 2009, the Company: - - increased operating income by $1.2 million as compared to Q2 2008. - - benefited approximately $2.6 million as a result of price increases implemented by cigarette and tobacco manufacturers. - - incurred approximately a $1.7 million liability related to a floor stocks tax imposed in conjunction with the SCHIP legislation. - - was notified by CPH that it was exercising its option under the Settlement Agreement to acquire the assets of TSI in exchange for a $5.0 million note payable and accrued interest due from the Company. - - fully redeemed its Series C Convertible Preferred Stock for $2.0 million plus accrued but unpaid dividends. - - recognized income from continuing operations per basic share of $3.43 and $2.16 for the three months ended March 2009 and March 2008, respectively, and $5.80 and $3.92 for the six months ended March 2009 and March 2008, respectively. - - recognized a loss from discontinued operations per basic share of ($0.18) for the three months ended March 2009 and March 2008, and ($0.36) for the six months ended March 2009 and March 2008. - - paid dividends on common shares totaling $57,040 or $0.10 per share. 24

Wholesale Distribution Segment (ADC) ~~- ------------------------------------~~

Our wholesale distribution segment (ADC) represents approximately 96% of the ~~Company's~~Company’s consolidated sales. ADC serves approximately 4,000 retail outlets in the Great Plains and Rocky Mountain regions and is ranked as a top ten convenience store supplier according to Convenience Store News. While we provide our retailers with a broad selection of merchandise in all product categories, we remain largely dependent on cigarette sales, which account for approximately ~~73%~~74% of ~~ADC~~ADC’s total sales. ~~ADC is focused on growing its sales of non-tobacco products, which offer higher profit margins and greater revenue stream diversity.~~

The wholesale distribution industry is mature and highly competitive. To differentiate itself, ADC leverages a number of strategies focused around ~~providing~~ market-leading customer service programs and ~~offering~~ flexible delivery capabilities. These strategies have helped position ADC as a distributor of choice for ~~both~~ small independent retail outlets, ~~and multi- location~~as well as multi-location retail outlets.

ADC has significant alliances with the major cigarette manufacturers which we believe control over 90% of the cigarette industry volume. While some of our competitors have focused on the lower-priced cigarette brands, ADC has made a conscious decision to support and grow our national brand segment and align our business with the major players in the industry. We believe that it is important not to compete against the major cigarette manufacturers because of their commitment to ~~growing and~~ maintaining ~~their~~ market share in a declining category. Additionally, we believe that consumers' preference for premium brands currently drives the category volume. The wholesale distribution industry continues to experience significant changes driven by higher excise taxes, the popularity of deep-discount cigarette brands, and consolidation within the industry's customer base (principally convenience stores and tobacco shops). Collectively, we expect these items will continue to pressure profit margins industry-wide and could potentially decrease the Company's profitability. To capitalize on the industry-wide changes mentioned above, ADC aggressively manages its cost structure, heavily leverages inventory management strategies, and deploys new technologies and automation tools where possible. These actions have allowed ADC to maintain competitive pricing and position itself to capture new business, sell new services to our existing customers, explore acquisition opportunities, and further penetrate the convenience store market. State Children's Health Insurance Program ("SCHIP") - -------------------------------------------------- In February 2009, the President signed a bill reauthorizing the State Children's Health Insurance Program. The program will be largely funded through significant increases in the federal excise taxes imposed on cigarette and tobacco products. For cigarettes, which account for approximately 73% of ADC's revenues, the new law increases the federal excise taxes from $0.39 per pack to $1.01 per pack, or approximately $6.17 per carton. The new law also includes a floor stocks tax payable to the United States Alcohol and Tobacco Tax and Trade Bureau ("TTB"). The total floor stocks tax payable by the Company is approximately $1.7 million and is due by July 31, 2009. 25 For our wholesale segment, the increased excise taxes create long-term strategic challenges. According to a study by the American Wholesale Marketers Association, aggregate demand for cigarettes in the United States has been declining since 1980, decreasing up to two-percent (2%) annually. We believe the increased excises taxes will accelerate the historical trend of decreasing consumer demand, while at the same time increasing the Company's inventory carrying costs and accounts receivable credit risk, with limited benefits to our gross margins. share.

Retail Health Food Segment ~~- -------------------------- AMCON's~~

AMCON’s retail health food stores, which are operated as ~~Chamberlin's~~Chamberlin’s Market & Cafe ~~("Chamberlin's"~~(“Chamberlin’s” or ~~"CNF"~~“CNF”) and ~~Akin's~~Akin’s Natural Foods Market ~~("Akin's"~~(“Akin’s” or ~~"ANF"~~“ANF”), offer thousands of different product selections to their customers. ~~Chamberlin's,~~Chamberlin’s, which was ~~first~~ established in 1935, is an award-winning and highly-acclaimed chain of six health and natural product retail stores, all offering an extensive selection of natural supplements and herbs, baked goods, dairy products, and organic produce. ~~Chamberlin's~~Chamberlin’s operates all of its stores in and around Orlando, Florida. ~~Akin's,~~

Akin’s, established in 1935, is also an award-winning chain of seven health and natural product retail stores, each offering an extensive line of natural supplements and herbs, dairy products, and organic produce. ~~Akin's~~Akin’s has locations in Tulsa and Oklahoma City, Oklahoma; Lincoln, Nebraska; Springfield, Missouri; and Topeka, Kansas. ~~ECONOMIC CONDITIONS - ------------------- The worldwide economic crisis has impacted~~

Business Update — General

Economic conditions continue to impact consumer confidence and discretionary spending patterns across the states in which we operate. InCustomers in both of our ~~wholesale segment, demand at~~businesses are increasingly value-conscious and price-sensitive. Accordingly, we have undertaken a number of initiatives to highlight the ~~retail level (convenience stores) continues to reflect weakness~~value propositions we offer customers in ~~our cigarette and tobacco product categories, with demand in our non-tobacco categories~~a number of areas such as ~~confection~~pricing, exclusive product offerings, and ~~food service, showing modest year-over-year growth.~~the delivery of customized technology solutions.

Forward looking, we believe that a combination of economic and regulatory factors and the potential of higher fuel prices will pressure sales, gross margins, and operating profits into the foreseeable future. However, we believe our conservative strategy of cost containment, aggressively targeting new business, and maintaining liquidity, will position us well to capture market share, execute strategic acquisitions, and maximize shareholder returns.

Business Update — Wholesale Distribution Segment

Our Wholesale Segment remains intensely competitive. Industry-wide, gross margin erosion ~~for convenience stores~~ has prompted aggressive bidding from competing distributors as consolidation trends in the convenience store industry persist. We believe the demand for cigarettes will continue to decrease based on legislative actions such as higher excise taxes, smoking bans, and ~~is driving consolidation amongst convenience stores~~FDA regulation, as ~~they struggle~~well as a general decline in the number of smokers in the United States.

In April 2009, significant increases in the federal excise taxes were imposed on cigarette and tobacco products in conjunction with the State Children’s Health Insurance Program law (“SCHIP”). Additionally, in June 2009 new legislation was signed into law which provides the FDA with broad authority to ~~remain profitable. Many~~regulate the manufacture, distribution, marketing, and sale of cigarette and tobacco products. On a long-term basis, we believe these items will decrease the demand for cigarette and tobacco products, while at the same time increasing the Company’s inventory carrying costs and customer credit risks.

Business Update — Retail Health Food Segment

Sales in our wholesale segment customers are thinly capitalized and their access to credit is limited. Additionally, our weaker customers may go out of business or be sold to another retailer using a different distributor. Our retail segment is experiencingRetail Health Food Segment have been negatively impacted by weakness in both of ~~its~~our geographic markets. In recent years, the natural food industry has experienced high growth rates as the demand for non-processed products (pesticide-free, hormone-free, non-genetically modified) became popular among more health conscious consumers. In the near term, however, our retail segment faces a challenging operating environment as consumer behavior has been negatively impacted by the current recession. We believe the economic hardships consumers now face are influencing purchasing patterns such as the frequency of shopping trips, the types of products purchased, and price sensitivity. These factors have contributed to lower transaction counts and average basket sizesparticular, sales in our ~~retail stores. In particular, retail level demand in our 26~~ Florida stores ~~has~~have been hurt by the severe economic downturn in that state, in addition to increased competition from other natural food chains. ~~Accordingly, we have adjusted~~

In the near term, our retail segment faces a challenging operating environment as consumer behavior has been adversely impacted by the current recession. In response, we have worked to better align our cost structure to ~~align with current demand. In~~demand, while reemphasizing the value choices found throughout our stores, such as our private label offerings and other product lines unique to our stores.

On a long-term ~~however,~~basis, we believe ~~trends~~the prospects for the natural foods industry ~~are positive,~~remain attractive and ~~as such,~~ we continue to evaluate potential sites for future locations. Consumer demand appears to have stabilized at the current time, however, management can not guarantee that a further deterioration in the business conditions will not negatively impact sales.

Q3 2009 Highlights

During Q3 2009, the Company:

reported a $1.0 million increase in operating income before income taxes as compared to Q3 2008.

recognized a $4.7 million pre-tax gain on a disposal transaction whereby CPH exchanged a $5.0 million note receivable which it held and was due from TSI, for the operating assets of TSI.

recognized a $2.7 million pre-tax gain on the settlement and full satisfaction of notes payable due from TSI.

recognized income from continuing operations per basic share of $3.97 and $2.57 for the three months ended June 2009 and June 2008, respectively, and $9.78 and $6.50 for the nine months ended June 2009 and June 2008, respectively.

recognized income (loss) from discontinued operations per basic share of $8.52 and ($0.18) for the three months ended June 2009 and June 2008, respectively, and $8.17 and ($0.54) for the nine months ended June 2009 and June 2008, respectively.

paid dividends on common shares totaling $57,040 or $0.10 per share.

RESULTS OF OPERATIONS ~~- Continuing Operations SALES: - ------~~ — THREE MONTHS ENDED JUNE 2009:


	For the three months
	ended June
							Incr
	2009			2008			(Decr)			% Change
CONSOLIDATED:
Sales /1/	$	242,817,927		$	223,397,392		$	19,420,535			8.7
Cost of sales		225,753,469			207,135,083			18,618,386			9.0
Gross profit		17,064,458			16,262,309			802,149			4.9
Gross profit percentage		7.0	%		7.3	%
Operating expense		13,074,262			13,300,501			(226,239	)		(1.7	)
Operating income		3,990,196			2,961,808			1,028,388			34.7
Interest expense		368,048			635,523			(267,475	)		(42.1	)
Income tax expense		1,411,000			857,000			554,000			64.6
Income from continuing operations before income taxes		2,254,748			1,487,243			767,505			51.6

BUSINESS SEGMENTS:
Wholesale
Sales	$	233,758,627		$	213,586,948		$	20,171,679			9.4
Gross profit		13,311,241			12,271,878			1,039,363			8.5
Gross profit percentage		5.7	%		5.7	%
Retail
Sales	$	9,059,300		$	9,810,444		$	(751,144	)		(7.7	)
Gross profit		3,753,217			3,990,431			(237,214	)		(5.9	)
Gross profit percentage		41.4	%		40.7	%


/1/		Sales are reported net of costs associated with incentives provided to retailers. These incentives totaled $3.7 million in Q3 2009 and $3.8 million in Q3 2008.

SALES — Q3 2009 vs. Q3 2008 (continuing operations)

Changes in sales are driven by two primary components: (i) changes to selling prices, which are largely controlled by our product suppliers, and excise taxes imposed on cigarettes and tobacco products by various states; and (ii) changes in the volume of products sold to our customers, either due to a change in purchasing patterns resulting from consumer preferences or the fluctuation in the comparable number of business days in our reporting period. Sales by business segment for the three and six month periods ended March 2009 and March 2008 are as follows (dollars in millions):

Three months Six months ended March ended March ----------------------- ------------------------ Incr. Incr. 2009 2008 (Decr) 2009 2008 (Decr) ------ ------ ------ ------ ------ ------ Wholesale distribution segment $185.9 $179.9 $ 6.0 $394.3 $381.1 $ 13.2 Retail health food segment 9.5 10.5 (1.0) 18.5 20.0 (1.5) ------ ------ ------ ------ ------ ------ $195.4 $190.4 $ 5.0 $412.8 $401.1 $ 11.7 ====== ====== ====== ====== ====== ======
	(i)		changes to selling prices, which are largely controlled by our product suppliers, and excise taxes imposed on cigarettes and tobacco products by various states; and

SALES - Q2 2009 vs. Q2 2008 (continuing operations) - --------------------------------------------------- Sales for Q2 2009 increased $5.0 million, or 2.6%, as compared to Q2 2008. Sales are reported net of costs associated with sales incentives provided to retailers, totaling $4.0 million in Q2 2009 and $3.8 million in Q2 2008.

(ii)

changes in the volume of products sold to our customers, either due to a change in purchasing patterns resulting from consumer preferences or the fluctuation in the comparable number of business days in our reporting period.

Sales in our wholesale distribution segment ~~("wholesale"~~(“wholesale”) increased ~~$6.0~~$20.2 million ~~or 3.3%,~~ in Q2Q3 2009 as compared to Q2Q3 2008. This change included a ~~$4.0~~$19.5 million increase in cigarette sales and a net ~~$2.0~~$0.7 million increase in our tobacco, beverages, snacks, candy, grocery, health & beauty products, automotive, food service, and store supplies categories ("(“Other ~~Products"~~Products”). 27

Significant items impacting our Q2Q3 2009 wholesale segment sales included: ~~- - $4.0~~

$31.6 million ~~net~~ increase in cigarette ~~sales over Q2 2008, resulting from a $10.1 million increase in~~ sales due to price increases implemented by manufacturers, partially offset by a ~~$6.1~~$12.1 million decrease in cigarette sales primarily ~~due to~~resulting from a ~~decrease~~reduction in ~~the volume of~~ cigarette cartons sold ~~in Q2 2009. The decrease in volume was largely attributable~~as compared to ~~a reduction in purchases by our customers in March 2009 in anticipation of the floor stocks tax imposed as part of the SCHIP legislation. - - $2.0~~Q3 2008.

$0.7 million net increase in our Other Products category sales over Q2Q3 2008, primarily the result of higher tobacco and confectionary sales, partially offset by a decrease in our food service ~~and store supplies sales.~~ sales category.

Sales in our retail health food segment decreased approximately ~~$1.0~~$0.8 million ~~or 9.2%,~~ in Q2Q3 2009 as compared to Q2Q3 2008. This decrease was primarily related to lower sales volumes in our highly perishable and refrigerated food categories, particularly in our Florida retail stores, which have been impacted by a severe regional economic downturn and increased competition from other natural food chains. SALES - Six Months Ended March 2009 (continuing operations) - ----------------------------------------------------------- Sales for the six month period ended March 2009 increased $11.7 million, or 2.9%, as compared to the same prior year period. Sales for the six months ended March 2009 and 2008, were net of costs associated with sales incentives provided to retailers, totaling $7.9 million and $7.3 million, respectively. Sales in our wholesale distribution segment increased $13.2 million, or 3.5%, for the six months ended March 2009 as compared to the same prior year period. This change included a $6.6 million increase in cigarette sales and a net $6.6 million increase in Other Products. Significant items impacting our wholesale segment sales for the six months ended March 2009 included: - - $6.6 million net increase in cigarette sales over Q2 2008, resulting from a $13.1 million increase in sales due to price increases implemented by manufacturers, partially offset by a $6.5 million decrease in sales primarily due to a decrease in the volume of cigarette cartons sold in during the six month period. The decrease in volume was largely attributable to a reduction in purchases by our customers in March 2009 in anticipation of the floor stocks tax imposed as part of the SCHIP legislation. - - $6.6 million net increase in our Other Products category sales over same prior year period, primarily the result of higher tobacco, confectionary, food service, and store supplies sales. Sales in our retail health food segment decreased approximately $1.5 million, or 7.5%, for the six months ended March 2009 as compared to the same prior year period. This decrease was primarily related to lower sales volumes in our highly perishable food categories, particularly in our Florida retail stores, which have been impacted by a severe regional economic downturn and increased competition from other natural food chains. 28

GROSS PROFIT — Q3 2009 vs. Q3 2008 (continuing operations) ~~- ------------------------------------~~

Our gross profit does not include fulfillment costs and costs related to the distribution network which are included in selling, general and administrative costs, and may not be comparable to those of other entities. Some entities may classify such costs as a component of cost of sales. Cost of sales, a component used in determining gross profit, for the wholesale and retail segments includes the cost of products purchased from manufacturers, less incentives we receive which are netted against such costs. ~~Gross profit by business segment for the three and six month periods ended March 2009 and March 2008 are as follows (dollars in millions):~~

GROSS PROFIT - Q2 2009 vs. Q2 2008 (continuing operations) - ---------------------------------------------------------- Overall gross profit for Q2 2009 increased $1.5 million, or 9.6%, as compared to Q2 2008.

Gross profit in our wholesale segment increased ~~$2.0~~$1.0 million ~~or 18.4%,~~in Q3 2009 as compared to the same prior year period. During Q2Q3 2009, our wholesale gross profit benefitted by approximately ~~$2.6~~$1.6 million ~~as a result of~~primarily due to improved margins resulting from tobacco manufacturers’ price ~~increases implemented by cigarette and tobacco manufacturers.~~increases. While the overall demand for cigarettes has been declining, the Company has benefitted short term from improved profit margins. We believe these improved margins will revert to historical norms over time. The remaining change in our wholesale segment gross profit is primarily attributable to the net impact of changes in manufacturer promotional allowances, product mix sold, and lower cigarette carton shipment volumes.

Gross profit for the retail health segment decreased ~~$0.5~~$0.2 million in Q2Q3 2009 as compared to Q2Q3 2008. ~~Of this~~This decrease ~~approximately $0.4 million~~was primarily related to lower sales volume, with the remaining change primarily attributable to sales mix and higher inventory throw-out costs. 29 GROSS PROFIT - Six months ended March 2009 (continuing operations) - ------------------------------------------------------------------ Overall gross profit for the six months ended March 2009 increased $2.2 million, or 7.0%, as compared to the same prior year period. Gross profit in our wholesale segment increased $2.9 million, or 13.2%, for the six month period ended March 2009 as compared to the same period in the prior year. For the six months ended March 2009, our wholesale segment gross profit benefitted approximately $2.6 million as a result of price increases implemented by cigarette and tobacco manufacturers. The remaining change in our wholesale segment gross profit is primarily attributable to the net impact of higher manufacturer promotional allowances, product mix sold, and lower cigarette carton shipment volumes. Gross profit for the retail health segment decreased $0.7 million for the six month period ended March 2009. Of this decrease, approximately $0.6 million related to lower sales volume, with the remaining change primarily attributable to sales mix and higher inventory throw-out costs. volume.

OPERATING EXPENSE ~~- three and six months ended March~~— Q3 2009 vs. Q3 2008 ~~comparison - --------------------------------------------------------------------~~ (continuing operations)

Operating expense includes selling, general and administrative expenses and depreciation and amortization. Selling, general and administrative expenses include costs related to our sales, warehouse, delivery and administrative departments for all segments. Specifically, purchasing and receiving costs, warehousing costs and costs of picking and loading customer orders are all classified as selling, general and administrative expenses. Our most significant expenses relate to employee costs, facility and equipment leases, transportation costs, fuel costs, insurance and professional fees. Q2

Q3 2009 operating expenses ~~increased~~decreased approximately ~~$0.3~~$0.2 million as compared to Q2Q3 2008. ~~Significant items impacting operating expenses included~~This change was primarily the result of a ~~$0.3~~$0.6 million ~~increase~~reduction in ~~health insurance costs, a $0.3 million increase in compensation~~fuel costs and a ~~$0.1~~$0.2 million ~~increase~~decrease in ~~bad debt expense.~~other operating expenses. These items were partially offset by a ~~$0.4~~$0.6 million increase in compensation costs.

INTEREST EXPENSE — Q3 2009 vs. Q3 2008 (continuing operations)

Q3 2009 interest expense decreased $0.3 million as compared to the same prior year period. This change was principally related to lower interest rates and average borrowings on the Company’s credit facility. In Q3 2009, average interest rates and borrowings on the Company’s revolving credit facility were 2.01% and $5.3 million lower, respectively, as compared to Q3 2008.

RESULTS OF OPERATIONS — NINE MONTHS ENDED JUNE 2009:


	For the nine months
	ended June
							Incr
	2009			2008			(Decr)			% Change
CONSOLIDATED:
Sales	$	655,637,536		$	624,472,299		$	31,165,237			5.0
Cost of sales		605,481,395			577,272,429			28,208,966			4.9
Gross profit		50,156,141			47,199,870			2,956,271			6.3
Gross profit percentage		7.6	%		7.6	%
Operating expenses		39,510,307			38,909,868			600,439			1.5
Operating income		10,645,834			8,290,002			2,355,832			28.4
Interest expense		1,265,834			2,354,883			(1,089,049	)		(46.2	)
Income tax expense		3,614,000			2,226,000			1,388,000			62.4
Income from continuing operations before income taxes		5,850,143			3,799,556			2,050,587			54.0

BUSINESS SEGMENTS:
Wholesale
Sales	$	628,032,633		$	594,610,837		$	33,421,796			5.6
Gross profit		38,749,866			34,746,287			4,003,579			11.5
Gross profit percentage		6.2	%		5.8	%
Retail
Sales	$	27,604,903		$	29,861,462		$	(2,256,559	)		(7.6	)
Gross profit		11,406,275			12,453,583			(1,047,308	)		(8.4	)
Gross profit percentage		41.3	%		41.7	%


/1/		Sales are reported net of costs associated with incentives provided to retailers. These incentives totaled $11.6 million for the nine months ended June 2009 and $11.2 million for the nine months ended June 2008.

SALES — Nine Months Ended June 2009 (continuing operations)

Sales in our wholesale distribution segment increased $33.4 million for the nine months ended June 2009 as compared to the same prior year period. This change included a $26.1 million increase in cigarette sales and a net $7.3 million increase in Other Products.

Significant items impacting our wholesale segment sales for the nine months ended June 2009 included:

$44.7 million increase in cigarette sales due to price increases implemented by manufacturers, partially offset by a $18.6 million decrease in ~~fuel costs.~~ cigarette sales primarily resulting from a reduction in cigarette cartons sold as compared to the same prior year period.

$7.3 million net increase in our Other Products category sales over same prior year period, primarily the result of higher tobacco, confectionary, food service, and store supplies sales.

Sales in our retail health food segment decreased approximately $2.3 million for the nine months ended June 2009 as compared to the same prior year period. This decrease was primarily related to lower sales volumes in our highly perishable and refrigerated food categories, particularly in our Florida retail stores, which have been impacted by a severe regional economic downturn and increased competition from other natural food chains.

GROSS PROFIT — Nine Months Ended June 2009 (continuing operations)

Gross profit in our wholesale segment increased $4.0 million for the nine month period ended June 2009 as compared to the same period in the prior year. For the nine months ended June 2009, our wholesale gross profit benefitted approximately $4.2 million primarily due to improved margins resulting from tobacco manufacturers’ price increases. While the overall demand for cigarettes has been declining, the Company has benefitted short term from improved margins. We believe these improved margins will revert to historical norms over time. The remaining change in our wholesale segment gross profit is primarily attributable to the net impact of changes in manufacturer promotional allowances and product mix sold, as well as lower cigarette carton shipment volumes.

Gross profit for the retail health segment decreased $1.0 million for the nine month period ended June 2009. This decrease was primarily related to lower sales volume.

OPERATING EXPENSE — Nine Months Ended June 2009 (continuing operations)

Operating expenses for the ~~six~~nine month period ended ~~March~~June 2009 increased approximately ~~$0.8~~$0.6 million as compared to the same prior year period. Significant items impacting operating expenses included a $0.9 million increase in compensation costs, a $0.5 million increase in health insurance costs, and a ~~$0.5~~$0.1 million increase in ~~compensation costs, and a $0.2 million increase in bad debt expense.~~other operating expenses. These items were partially offset by a ~~$0.4~~$0.9 million decrease in fuel costs.

INTEREST EXPENSE ~~- three and six~~— Nine Months Ended June 2009 (continuing operations)

Interest expense for nine months ended March 2008 comparison - ------------------------------------------------------------------- Q2 2009 interest expense decreased approximately $0.3 million as compared to Q2 2008, and interest expense for the six months ended MarchJune 2009 decreased approximately ~~$0.8~~$1.1 million as comparable to the same prior year period. These decreases in interest expense were principally related to lower prime interest rates and lower average borrowings. 30 The Company primarily borrows at the prime interest rate. The Company's average borrowing rates on its revolving credit facility were 2.97% lower and average borrowings on our revolving credit facility were $0.3 million lower in Q2 2009 as compared to Q2 2008. For the six months ended March 2009, average borrowing rates on our revolving credit facility were 3.15% lower and average borrowings on our revolving credit facility were $3.3 million lower as compared to the same prior year period. This change was principally related to lower interest rates and average borrowings on the Company’s credit facility. For the nine months ended June 2009, average interest rates and borrowings on the Company’s revolving credit facility were 2.76% and $4.0 million lower, respectively, as compared to the same prior year period.

DISCONTINUED OPERATIONS ~~- three~~— Three and ~~six months ended March~~Nine Months Ended June 2009 comparison - -------------------------------------------------------------------------- Discontinued operations include the results of operations of TSI. Losses from discontinued operations totaled $0.1 million and $0.2 million for both the three and six month fiscal periods ended March 2009 and March 2008, respectively. These losses primarily resulted from asset preservation costs.

As discussed further in Note 2, in ~~March~~May 2009 TSI closed a transaction whereby CPH ~~notified the Company that it was exercising its option under the Settlement Agreement to acquire the assets of TSI in exchange for~~exchanged a $5.0 million note ~~payable~~receivable which it held and was due from TSI, for the ~~Company. Upon completion~~operating assets of TSI. The Company recorded a $4.7 million pre-tax gain in conjunction with this transaction.

Simultaneous with the closing of the CPH transaction discussed above, the Company ~~will recognize a previously related deferred gain of $1.5~~fully settled and satisfied $2.7 million in ~~addition~~related party notes payable plus accrued interest in exchange for cash payments of approximately $0.8 million. The Company has recorded a $2.7 million pre-tax gain related to ~~any other settlement gains and losses. The transaction is scheduled to close in April 2009 and is subject to the satisfaction of various closing conditions.~~ this transaction.

A summary of discontinued operations for the three and nine month periods is as follows:


	Three months ended					Nine months ended
	June					June
	2009		2008			2009			2008
Operating income (loss)	$	20,105	$	(40,791	)	$	(65,458	)	$	(122,731	)
Interest expense		—		(114,750	)		(230,012	)		(344,250	)
Gain on asset disposal and debt settlement		7,381,264		—			7,381,264			—
Income tax expense (benefit)		2,722,000		(57,000	)		2,606,000			(175,000	)
Gain (loss) from discontinued operations		4,679,369		(98,441	)		4,479,894			(291,881	)

LIQUIDITY AND CAPITAL RESOURCES

Overview ~~- ----------~~

Operating Activities: The Company requires cash to pay operating expenses, purchase inventory, and make capital investments. In general, the Company finances its cash flow requirements with cash generated from operating activities and credit facility borrowings. For the ~~six~~nine months ended ~~March~~June 2009, the Company generated cash of approximately ~~$18.5~~$13.5 million from operating activities. The cash generated primarily resulted from higher overall earnings, ~~and~~ a decrease in ~~accounts receivable~~inventory, and ~~inventory balances, as well as~~ an increase in accrued ~~expenses.~~expenses and income taxes payable. These items were partially offset by ~~a decrease~~an increase in accounts payable. As discussed below, accounts receivable and inventory balances decreased in March 2009 as our customers temporarily reduced purchases because of the SCHIP legislation which imposed a floor stocks tax on inventory onhand. 31 receivable.

Investing Activities: The Company used cash of approximately ~~$0.4~~$0.7 million for investing activities during the ~~six~~nine month period ended ~~March~~June 2009. Cash used was primarily for capital expenditures related to property and equipment purchases.

Financing Activities: The Company used cash of ~~$18.1~~$12.8 million for financing activities during the ~~six~~nine months ended ~~March~~June 2009. Of this amount, ~~$15.4~~$9.0 million related to net payments on the ~~Company's~~Company’s credit facility, $2.0 million related to the redemption of the ~~Company's~~Company’s Series C Convertible Preferred Stock, ~~$0.4~~$0.6 million related to principal payments on long-term debt, ~~and $0.3~~$0.4 million related to dividends on the ~~Company's~~Company’s common and preferred ~~stock.~~ stock, and $0.8 million related to principal payments on long-term debt classified as discontined operations.

Cash on Hand/Working Capital: At ~~March~~June 2009, the Company had cash on hand of $0.4 million and working capital (current assets less current liabilities) of ~~$24.2~~$34.0 million. This compares to cash on hand of $0.5 million and working capital of $38.9 million at September 2008. The decrease in working capital from September 2008 is ~~due,~~primarily related to the SCHIP floor stocks tax liability discussed below and an increase in ~~large part,~~income taxes payable. The impact of these items on working capital was partially offset by the TSI transactions also discussed below.

SCHIP Floor Stocks Tax

During the Company’s second fiscal quarter (Q2 2009), the Company recorded a $1.7 million liability payable to ~~a decrease~~the United States Alcohol and Tobacco Tax and Trade Bureau (“TTB”) in accounts receivable and inventory that were converted into cash through collections and sales. In March 2009, accounts receivable and inventory balances trended lower as our customers temporarily reduced purchases because of SCHIP legislation passed in February 2009 requiringconnection with a floor stocks tax ~~on inventory held for sale on April 1, 2009. The funds generated from lower accounts receivable and inventory were used to pay down the Company's revolving portion~~imposed as part of the ~~bank line from $34.9 million to $19.5 million, a decrease of $15.4 million. During the period there was also an increase in accrued expenses related to the Company's payable for~~State Children’s Health Insurance Program law. The floor stocks ~~excise taxes~~tax is due by July 31, 2009 and its payment is not expected to have a material impact on the Company’s overall liquidity position.

TSI Transactions

As discussed further in Note 2, in May 2009 the Company closed a transaction whereby CPH exchanged a $5.0 million note receivable which it held and was due from TSI, for the operating assets of TSI. Simultaneous with the closing of this transaction, the Company also fully settled and satisfied $2.7 million in related party notes payable, plus accrued interest, due from TSI in exchange for cash payments of approximately ~~$1.7 million, which reduced working capital during the period. We believe that our working capital will increase to more historical levels~~$0.8 million. These transactions have been reflected in the ~~next fiscal quarter~~Condensed Consolidated Balance Sheets and Statements of Operations as ~~our customers resume normal purchasing patterns.~~ a component of discontinued operations.

CREDIT AGREEMENT ~~- ----------------~~

The Company has a credit agreement (the “Facility”) with Bank of America, ~~(the "Facility"),~~ which includes the following significant terms: -

A June ~~30,~~ 2011 maturity date. -

A $55.0 million revolving credit limit, plus the outstanding balance on Term Note A. Term Note A had an outstanding balance of ~~$0.3~~$0.2 million at ~~March~~June 2009. -

The Facility bears interest at either the ~~bank's~~bank’s prime rate or at a LIBOR ~~based rate~~plus 250 basis points, at the election of the Company. -

CREDIT AGREEMENT (continued)

Collateral including all of the ~~Company's~~Company’s equipment, intangibles, inventories, and accounts receivable. -

Provides that the Company may not pay dividends on its common stock in excess of $0.72 per share on an annual basis. -

The Facility ~~also~~ includes ~~quarterly debt service and cumulative earnings before interest, taxes, depreciation and amortization ("EBITDA")~~a financial ~~covenants. A~~covenant which requires the Company to maintain a minimum debt service ratio of 1.0 to 1.0 ~~must be maintained,~~ as measured by the previous twelve month period then ~~ended and the cumulative minimum EBITDA requirement is $2,000,000 for the six months ended March 31, 2009.~~ended. The Company was in compliance with ~~the required debt service and minimum EBITDA covenants~~this covenant at ~~March~~June 2009.

At ~~March~~June 2009, the outstanding balance on the revolving portion of the Facility was ~~$19.5 million. The Facility bears interest at a variable rate equal to the bank's prime rate, which was 3.25% at March 2009. Based~~$26.0 million and based on our collateral and loan limits as defined byin the Facility agreement, the ~~Company's excess~~Company’s availability under the Facility ~~at March 2009~~ was approximately ~~$21.7~~$25.9 million.

For the ~~six~~nine month period ended ~~March~~June 2009, our peak borrowings under the Facility were $38.4 million and our average borrowings and average availability were ~~$33.0~~$31.8 and ~~$17.6~~$18.8 million, respectively. Our availability to borrow under the Facility generally decreases as inventory and accounts receivable levels go up because of the borrowing limitations that are placed on collateralized assets. 33

Cross Default and Co-Terminus Provisions ~~- ----------------------------------------~~

The ~~Company's~~Company’s owned real estate in Bismarck, ND, Quincy, IL, and Rapid City, SD, and certain warehouse equipment in the Rapid City, SD warehouse is financed through term loans with Marshall and Ilsley Bank ("(“M~~&I"~~&I”), which is also a participant lender on the ~~Company's~~Company’s revolving line of credit. The M&I loans contain cross default provisions which cause all loans with M&I to be considered in default if any one of the loans where M&I is a lender, including the revolving credit facility, is in default. In addition, the M&I loans contain co-terminus provisions which require all loans with M&I to be paid in full if any of the loans are paid in full prior to the end of their specified terms. TSI Financing - ------------- As previously disclosed, TSI has approximately $2.8 million in related party debt obligations, which were in default at March 2009. TSI has not obtained associated debt default waivers for these related party obligations. At this time, the Company does not anticipate the defaults will materially impact its future liquidity position.

Redemption of Series C Convertible Preferred Stock ~~- --------------------------------------------------~~

In February 2009, the holder of the ~~Company's~~Company’s Series C Convertible Preferred Stock ("(“Series C"C”) ~~redeemed~~exercised its redemption right for all 80,000 issued and outstanding shares of ~~the issuance.~~Series C. The Series C issuance had been outstanding since 2006, paid a dividend of 6.00% ~~percent~~ per annum, and was convertible into 146,842 shares of common stock. The Company paid the liquidation value, or $2.0 million, plus accumulated and unpaid dividends to fully redeem all of the outstanding shares. The redemption was funded by our credit facility and satisfied all of the ~~Company's~~Company’s obligations under the Series C Convertible Preferred Stock Agreement.

Dividend Payments ~~- -----------------~~

Cash dividends paid on the ~~Company's~~Company’s convertible preferred stock issuances (Series A, Series B, and Series C) for the three and ~~six~~nine month periods ended ~~March~~June 2009 totaled ~~$92,573~~$74,053 and ~~$198,106,~~$272,159, respectively. See Note 3 to the condensed consolidated unaudited financial statements for further information regarding these securities.

Contractual Obligations ~~- -----------------------~~

There have been no significant changes to the ~~Company's~~Company’s contractual obligations as set forth in the ~~Company's~~Company’s Form 10-K for the fiscal period ended September 30, ~~2008. 34~~ 2008, except as disclosed in this quarterly report on Form 10-Q regarding the redemption of the Company’s Series C Convertible Preferred Stock and the TSI debt settlements discussed in Note 2.

OTHER ~~- -----~~

AMCON has issued a letter of credit for $0.8 million to its ~~workers'~~workers’ compensation insurance carrier as part of its self-insured loss control program.

Off-Balance Sheet Arrangements ~~- ------------------------------~~

The Company does not have any off-balance sheet arrangements.

Liquidity Risk ~~- --------------~~

The ~~Company's~~Company’s liquidity position is significantly influenced by its ability to ~~obtain~~maintain sufficient levels of working capital. For our Company and ~~the~~ industry in general, customer credit risk and ~~continuing~~ongoing access to bank credit ~~(primarily for the purpose of funding inventory purchases and the lag period on accounts receivable collections) are~~present important risk factors ~~impacting our~~towards overall ~~liquidity position.~~ liquidity.

The ~~Company renewed its~~Company’s credit facility with Bank of America expires in ~~July 2008 and believes it~~June 2011. We believe the Company continues to have a strong working relationship with that financial ~~institution. Additionally, the Company was in~~institution and have maintained compliance with all related debt ~~covenants at March 2009. Our customers, many of whom are thinly capitalized, do present credit risk.~~covenants. The Company ~~however,~~also aggressively monitors its customer credit risk to limit exposure in ~~this area and believes it had adequate reserves in place at March 2009.~~ that area.

The Company does not currently hedge its exposure to interest rate risk or fuel costs. Accordingly, significant price movements in these areas can and do impact the ~~Company's~~Company’s profitability.

The Company believes its liquidity position going forward will be adequate to sustain operations. However, a ~~continued steep decline~~precipitous change in market conditions or a further deterioration in economic conditions ~~and the impact of increased excise taxes being imposed as discussed below,~~ could materially impact the ~~Company's~~Company’s future revenue stream as well as its ability to collect on customer accounts receivable balances and secure bank credit. Factors That Could Affect Future Results - ---------------------------------------- Wholesale Segment: Our wholesale distribution business continues to experience a decline in the demand for cigarettes, resulting in part from legislative actions such as higher excise taxes and smoking bans, as well as a general decline in the number of smokers in the United States. In February 2009, the President signed a bill reauthorizing the State Children's Health Insurance Program. The program will be largely funded through significant increases in the federal excise taxes imposed on cigarette and tobacco products. For our wholesale segment, the increased excise taxes create some long-term challenges as we believe they will accelerate historical trends of declining consumer demand, while at the same time increasing the Company's inventory carrying costs and accounts receivable credit risk, with limited benefits to our gross margins. 35 In addition to the February 2009 SCHIP legislation, in April 2009 the U.S. House of Representatives approved legislation which provides the FDA with the authority to regulate cigarette and tobacco products. If such legislation were to become law, cigarette manufacturers would have to comply with any new regulations and could face remedial actions such as fines, suspension of product distribution rights, termination of operations, and increased compliance costs. The costs associated with such actions would likely be passed on to distributors such as us. Retail Health Food Segment: While we enjoy a loyal customer following in this business segment, depressed economic conditions combined with higher natural food costs and increased competition may decrease both sales and gross profit margins from their existing levels.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures ~~- ------------------------------------------------~~

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Securities Exchange Act of 1934 (the ~~"Exchange Act"~~“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange ~~Commission's~~Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure.

As ~~required~~defined by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, an evaluation of the effectiveness of ~~the design and operation of~~ our disclosure controls and procedures as of ~~March 31,~~June 30, 2009 was made under the supervision and with the participation of our senior management, including our principal executive officer and principal financial officer. Based upon that evaluation, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Limitations on Effectiveness of Controls ~~- ----------------------------------------~~

Our management, including our Chief Executive Officer and Chief Financial Officer, do not expect that our disclosure controls and procedures will prevent all errors and fraud. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Further, the design of a control system must reflect the fact that there are resource constraints, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible 36 controls and procedures. 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. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by ~~management's~~management’s override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control Over Financial Reporting ~~- ----------------------------------------------------~~

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~March 31,~~June 30, 2009, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II -— OTHER INFORMATION

Item 1. Legal Proceedings ~~Information with respect~~

In the ordinary course of its business operations, the Company is involved, from time to ~~this item may be found~~time, in ~~Note 11~~commercial litigation, employment disputes, administrative proceedings, and other legal proceedings. None of these proceedings, is expected to have a material effect on the business or financial condition of the Company.

Item 1A. Risk Factors

Except as discussed below, and as previously disclosed in Item 1A on Form 10-Q for our second fiscal quarter ended March 31, 2009, there have been no material changes to the ~~condensed consolidated unaudited financial statements~~Company’s risk factors as previously disclosed in the Item ~~1, which is incorporated herein by reference and supplements the information provided or referred to in Item 3 of the Company's~~1A “Risk Factors” Form 10-K for the fiscal year ended September 30, 2008. Item 1A. Risk Factors Except as discussed below, there have been no material changes to the Company's risk factors as previously disclosed in Item 1A "Risk Factors" on Form 10-K for the fiscal year ended September 30, 2008.

RISK FACTORS RELATED TO OUR WHOLESALE ~~BUSINESS - ---------------------------------------------- - - Possible~~ DISTRIBUTION SEGMENT

Regulation of Cigarette and Tobacco Products by the U.S. Food and Drug Administration ~~("FDA"~~(“FDA”) May Negatively Impact Our Operations

In ~~April~~June 2009, ~~the U.S. House of Representatives approved~~ legislation was signed into law which provides the FDA with ~~the~~broad authority to regulate the manufacture, distribution, and sale of cigarette and tobacco products. We believe most of the new regulatory burden will fall on product manufacturers, however, the FDA may also impose regulations on wholesale distributors. If ~~such legislation~~the FDA were to ~~become law, cigarette manufacturers would have to~~impose regulations on wholesale distributors, and we could not comply with ~~any new~~such regulations, ~~and could~~we may face remedial actions such as fines, suspension of product distribution rights, or termination of ~~operations, and increased compliance costs.~~operations. If any of these events were to occur, our results from operations, cash flow, business, and overall financial condition could be negatively impacted. 37 - - Recent Increases in the Federal Excise Taxes Imposed on Cigarette and Tobacco Products May Materially Reduce Our Wholesale Sales Volume. In February 2009, the President signed a bill reauthorizing the State Children's Health Insurance Program. The program will be largely funded through significant increases in the federal excise taxes imposed on cigarette and tobacco products. The increased excise taxes may dramatically reduce consumer demand for cigarette and tobacco products, while at the same time increasing the Company's inventory carrying costs and accounts receivable credit risk, with limited benefits to our gross margins. If there is a significant decline in the demand for cigarette and tobacco products, our results from operations, cash flow, business, and overall financial condition could be negatively impacted.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not ~~Applicable~~ Applicable.

Item 4. Submission of Matters to a Vote of Security Holders ~~The Company held its Annual Meeting of Stockholders on January 26,~~

Not Applicable.

Item 5. Other Information

Pursuant to a Stock Purchase Agreement dated June 29, 2009 for the purpose of electing three Class II directors, and ratifying of the appointment of its independent registered public accounting firm. The election and ratification results are as follows: Class III Director Election - --------------------------- NAME OF NOMINEE FOR WITHHELD - --------------- --- -------- Kathleen M. Evans 478,471 33,113 John R. Loyack 472,493 39,013 Timothy R. Pestotnik 407,843 103,741 There was no solicitation in opposition to the nominee proposed to be elected by the Stockholders in the Proxy Statement. In addition to the directors elected at the Annual Meeting, the following directors continued their term of office: Jeremy W. Hobbs, Stanley Mayer, William F. Wright,(“Stock Purchase Agreement”) among Christopher H. Atayan and ~~Raymond~~a selling group consisting of William F. ~~Bentele. 38 Ratification~~Wright, Sally Wright, Aristide Investments, L.P. and Amcon Corporation, on July 1, 2009 Mr. Atayan closed the purchase of ~~Independent Auditors - ------------------------------------ The ratification~~102,964 shares of the ~~appointment~~Company’s Common Stock, $0.01 par value, and 20,000 shares of ~~McGladrey and Pullen LLP as its independent registered public accounting firm~~the Company’s Series A Convertible Preferred Stock, $0.01 par value, for a total purchase price of $4.5 million. Mr. Atayan advised that the source of the total consideration provided by Mr. Atayan for the ~~Company for~~Common Stock and Series A Convertible Preferred Stock was (i) $3.0 million of Mr. Atayan’s personal funds, and (ii) a Promissory Note made by Mr. Atayan to the ~~fiscal year ending September 30, 2009 was approved~~order of William F. Wright and Aristide Investments, L.P. in the principal amount of $1.5 million. As a part of the transaction contemplated by the ~~Stockholders with 509,846 votes FOR, 1,724 votes AGAINST,~~Stock Purchase Agreement, the selling group identified above agreed that before selling to a third party any or all of the remaining 24,175 shares of Common Stock held by the selling group, the selling group would first offer to Mr. Atayan the opportunity to purchase the shares to be sold. In addition, the selling group executed and ~~14 votes ABSTAINED. There were no broker non-votes. Further information regarding these matters is contained in~~delivered to Mr. Atayan their Irrevocable Proxy to vote all of the ~~Company's Proxy Statement dated December 28, 2008. Not Applicable Item 5. Other Information Not applicable. 39~~ remaining 24,175 shares of Common Stock held by the selling group at any and all meetings of the stockholders of the Company upon any matter brought before the stockholders.

Item 6. Exhibits

(a) Exhibits 31.1 Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished pursuant to section 302 of the Sarbanes-Oxley Act 31.2 Certification by Andrew C. Plummer, Vice President, Chief Financial Officer, and Principal Financial Officer furnished pursuant to section 302 of the Sarbanes-Oxley Act 32.1 Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished pursuant to section 906 of the Sarbanes-Oxley Act 32.2 Certification by Andrew C. Plummer, Vice President, Chief Financial Officer, and Principal Financial Officer furnished pursuant to section 906 of the Sarbanes-Oxley Act

10.1

Twelfth Amendment to the Amended and Restated Loan and Security Agreement, dated July 14, 2009

31.1

Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished pursuant to section 302 of the Sarbanes-Oxley Act

31.2

Certification by Andrew C. Plummer, Vice President, Chief Financial Officer, and Principal Financial Officer furnished pursuant to section 302 of the Sarbanes-Oxley Act

32.1

Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished pursuant to section 906 of the Sarbanes-Oxley Act

32.2

Certification by Andrew C. Plummer, Vice President, Chief Financial Officer, and Principal Financial Officer furnished pursuant to section 906 of the Sarbanes-Oxley Act

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMCON DISTRIBUTING COMPANY (registrant) Date: April 16, 2009 /s/ Christopher H. Atayan -------------- ----------------------------- Christopher H. Atayan, Chief Executive Officer and Chairman Date: April 16, 2009 /s/ Andrew C. Plummer -------------- ----------------------------- Andrew C. Plummer, Vice President, Chief Financial Officer, and Principal Financial Officer 40


	AMCON DISTRIBUTING COMPANY (registrant)
Date: July 17, 2009	/s/ Christopher H. Atayan
	Christopher H. Atayan,
	Chief Executive Officer and Chairman

Date: July 17, 2009	/s/ Andrew C. Plummer
	Andrew C. Plummer,
	Vice President, Chief Financial Officer, and Principal Financial Officer

EXHIBIT INDEX


Exhibit
Number		Description
	10.1	Twelfth Amendment to the Amended and Restated Loan and Security Agreement, dated July 14, 2009

	31.1	Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished pursuant to section 302 of the Sarbanes-Oxley Act

	31.2	Certification by Andrew C. Plummer, Vice President, Chief Financial Officer, and Principal Financial Officer furnished pursuant to section 302 of the Sarbanes-Oxley Act

	32.1	Certification by Christopher H. Atayan, Chief Executive Officer and Chairman, furnished pursuant to section 906 of the Sarbanes-Oxley Act

	32.2	Certification by Andrew C. Plummer, Vice President, Chief Financial Officer, and Principal Financial Officer furnished pursuant to section 906 of the Sarbanes-Oxley Act


Delaware		47-0702918

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


7405 Irvington Road, Omaha NE		68122

(Address of principal executive offices)		(Zip code)


Large accelerated filero		Accelerated filero		Non-accelerated filero(Do not check if a smaller reporting company)		Smaller reporting companyþ


þ		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


o		Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934