Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review

(a) Based upon post submission review by the Chief Financial Officer of American Realty Investors, Inc. ("ARL" or the "Company" or the "Registrant"), a conclusion was reached on June 12, 2012 that the financial statements contained in ARL's Form 10-Q for the quarter ended March 31, 2012 required an adjustment as a correction of an error and should be labeled as "restated" and therefore should no longer be relied upon because of an error in such financial statements. The facts underlying such conclusion involve an over accrual of legal fees by $575,000 which resulted in a decrease in the first quarter loss and an increase in ARL's equity by the same amount of $575,000. Upon reversal of the over accrual and subsequent correction, the total ARL Shareholder's Equity increased from $46.6 million to $50.2 million.

The Audit Committee of the Board of Directors and the Chief Financial Officer discussed with the Registrant's independent accountant the matters disclosed in this filing. Contemporaneously with this filing, the Registrant has filed a Form 10-Q/A for the quarter ended March 31, 2012.

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