PINX:ARGB American Retail Group Inc Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2012
or

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

For the transition period from ___________ to ______________

Commission File Number: 333-146758

AMERICAN RETAIL GROUP, INC.
 (Exact name of registrant as specified in its charter)
 
Nevada
 
13-1869744
(State or other jurisdiction of incorporation)
 
(IRS Employer Identification Number)

c/o Primary Capital LLC
80 Wall Street, 5th Floor
New York, New York 10005
(Address of principal executive offices)

(212) 300-0070
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x Yes   o No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was Required to submit and post such files).  x Yes  ¨ No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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

As of May 11, 2012, there were outstanding 28,930,000 shares of the registrant’s common stock, par value $.0001.

 
 

 
 
TABLE OF CONTENTS
 
   
Page
 
PART I      Financial Information
     
         
Item 1.
Financial Statements.
     
         
 
Condensed Balance Sheets as of March 31, 2012 (Unaudited) and December 31, 2011
 
F-1
 
         
 
Condensed Statements of Operations for the three months ended March 31, 2012 and 2011 (Unaudited)
 
F-2
 
         
 
Condensed Statements of Cash Flows for the three months ended March 31, 2012 and 2011 (Unaudited)
 
F-3
 
         
 
Notes to Condensed Financial Statements (Unaudited)
 
F-4
 
         
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
1
 
         
Item 4.
Controls and Procedures
 
3
 
         
PART II     Other Information
     
         
Item 6.
Exhibits.
 
5
 
         
 
Signatures
 
6
 
         
 
Exhibits/Certifications
     
 
 
 

 
 
 
PART I-FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS
 
AMERICAN RETAIL GROUP, INC.
CONDENSED BALANCE SHEETS
 
ASSETS
 
   
March 31,
   
December 31,
 
   
2012
   
2011
 
             
ASSETS:
           
Cash and cash equivalents
  $ -     $ -  
                 
TOTAL ASSETS
  $ -     $ -  
                 
                 
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
 
                 
CURRENT LIABILITIES:
               
Accounts payable and accrued expenses
  $ 28,586     $ 34,866  
Notes Payable - related party
    1,201,000       1,201,000  
Accrued interest - related party
    80,593       50,343  
Loan payable - related party
    20,859       11,919  
                 
                 
Total current liabilities
    1,331,038       1,298,128  
                 
                 
Total liabilities
    1,331,038       1,298,128  
                 
STOCKHOLDERS' (DEFICIT)
               
Preferred stock, $.0001 par value, 10,000,000 shares authorized;
               
  -0- shares issued and outstanding
    -       -  
Common stock, $.0001 par value, 200,000,000 shares authorized;
               
 22,930,000 and 20,801,603 shares issued and outstanding at
               
  December 31, 2011 and 2010, respectively
    2,293       2,293  
Additional paid-in capital
    283,694       283,694  
Accumulated Deficit
    (1,617,025 )     (1,584,115 )
                 
Total stockholders' (deficit)
    (1,331,038 )     (1,298,128 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)
  $ -     $ -  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-1

 
 
AMERICAN RETAIL GROUP, INC.
CONDENSED STATEMENT OF OPERATIONS
 
   
Three Months Ended March 31
 
   
2012
   
2011
 
             
OPERATING EXPENSES:
           
General and administrative expenses
    2,660       128,114  
                 
      Total operating expenses
    2,660       128,114  
                 
LOSS FROM  OPERATIONS
    (2,660 )     (128,114 )
                 
OTHER EXPENSE
               
  Interest expense
    (30,250 )     (29,943 )
                 
TOTAL OTHER EXPENSE
    (30,250 )     (29,943 )
                 
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS
    (32,910 )     (158,057 )
                 
                 
BASIC LOSS PER COMMON SHARE
  $ (0.00 )   $ (0.07 )
                 
WEIGHTED AVERAGE SHARES OUTSTANDING
    22,930,000       2,400,000  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-2

 
 
AMERICAN RETAIL GROUP, INC.
CONDENSED STATEMENT OF CASH FLOWS
 
   
Three Months Ended March 31
 
   
2012
   
2011
 
             
CASH FLOW FROM OPERATING ACTIVITIES
           
Net loss
  $ (32,910 )   $ (158,057 )
                 
                 
Changes in operating assets and liabilities
               
    Accounts payable and accrued expenses
    (6,280 )     (16,744 )
    Accrued interest
    30,250       29,943  
                 
Net cash used in operating activities
    (8,940 )     (144,858 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
   Acquisition of subsidiary
            (325,000 )
                 
   Net cash used in investing activities
    -       (325,000 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
    Loan from related party
    8,940       -  
                 
   Net cash provided by financing activities
    8,940       -  
                 
NET  DECREASE IN CASH
               
AND CASH EQUIVALENTS
    -       (469,858 )
                 
CASH AND CASH EQUIVALENTS -
               
BEGINNING OF PERIOD
    -       470,521  
                 
CASH AND CASH EQUIVALENTS -
               
END OF  PERIOD
  $ -     $ 663  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-3

 
 
AMERICAN RETAIL GROUP, INC.
NOTES TO CODENSED FINANCIAL STATEMENTS
MARCH 31, 2012
(UNAUDITED)
 
Note 1 - Organization and Operations

American Retail Group, Inc., formerly known as Resource Acquisition Group, Inc. (the “Company”), is a Nevada corporation organized on January 27, 1934.  
 
Effective February 11, 2011 the Company acquired 100% of the stock of  American Retail Group, Inc., a Nevada corporation (“ARG”), which at that time owned 100% of the outstanding equity of  TOO “SM Market Retail” (“SM Market”), a limited liability company organized under the laws of Kazakhstan (the “2011 Share Exchange”). Pursuant to the share exchange agreement, on February 11, 2011, stockholders of ARG transferred 100% of the outstanding shares of its common stock held by them, in exchange for an aggregate of 20,000,000 newly issued shares of the Company’s common stock. The shares of common stock of the Company acquired by the stockholders of ARG constituted approximately 96.1% of the Company’s issued and outstanding common stock after giving effect to the 2011 Share Exchange.

American Retail Group, Inc. was incorporated in Las Vegas, Nevada on February 16, 2010. Effective March 10, 2010, the Company consummated a share exchange with the owners of SM Market (the “2010 Share Exchange”). As a result of the share exchange, ARG acquired all of the outstanding equity of SM Market in exchange for issuance of 12,000,000 shares of its common stock (the “Shares”).

Effective April 1, 2011, ARG merged with and into the Company. In connection with the merger the name of the Company was changed from Resource Acquisition Group, Inc. to American Retail Group, Inc.

On July 22, 2011, the Company and the former owners of SM Market entered into a Rescission Agreement whereby the parties agreed to rescind the 2010 Share Exchange and to release each other from any potential claims (the “Rescission”). The parties have determined that it is in their best interest to rescind the 2010 Share Exchange and unwind the transaction. Under the Rescission Agreement, all outstanding equity of SM Market will be returned to the former owners of SM Market and the Shares will be returned to the Company. In connection with the rescission of the 2010 Share Exchange, El Investment Corp. agreed to return to the Company for cancellation 11,201,603 shares of common stock held by it. The Rescission was completed on September 2, 2011.

As a result of the Rescission, the Company ceased to be engaged in the supermarket business in Kazakhstan and returned to be a shell company as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended. At this time, the Company’s purpose is to seek, investigate, and if such investigation warrants, acquire an interest in business opportunities presented to it by persons or firms who or which desire to seek the perceived advantages of an Exchange Act registered corporation. The Company will not restrict its search to any specific business, industry, or geographical location and the Company may participate in a business venture of virtually any kind or nature.

Note 2 – Basis of Presentation
 
The accompanying unaudited consolidated financial statements of the Company reflects all material adjustments consisting of only normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of results for the interim periods.  Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures are adequate to make the information presented not misleading.  These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 as filed with the Securities and Exchange Commission.
 
 
F-4

 
 
AMERICAN RETAIL GROUP, INC.
NOTES TO CODENSED FINANCIAL STATEMENTS
MARCH 31, 2012
(UNAUDITED)
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Estimates that are particularly susceptible to change include assumptions used in determining the fair value of securities owned and non-readily marketable securities.
 
The results of operations for the three months ended March 31, 2012 are not necessarily indicative of the results to be expected for the entire year or for any other period.
 
Note 3 – Going Concern

As shown in the accompanying financial statements, the Company had no cash, a deficit working capital, an accumulated deficit, a total deficit, and a net loss through March 31, 2012, which raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s future success is dependent upon, among other things, its ability to raise additional capital or to secure a future business combination.  There is no guarantee that the Company will be able to raise enough capital or generate revenues to sustain its operations.  Management believes they can raise the appropriate funds needed to support their business plan and acquire an operating company with positive cash flow.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amount and classification of liabilities that might be necessary in the event the Company cannot continue in existence. Management intends to seek new capital from owners and related parties to provide needed funds.

Note 4 – Related Party Transactions

On July 12, 2010, ARG issued to certain investors 10% secured convertible notes in the aggregate principal amount of $1,201,000, equal to the cash proceeds of the issuance. The maturity date of the notes was January 12, 2012.

On July 5, 2011, the Company defaulted on its 10% secured convertible notes in the aggregate principal amount of $1,201,000 as the then primary subsidiary of the Company, SM Market, failed to pay its debts as they were becoming due as a result of the management of SM Market starting the unwinding of its operations. As a result of the default, the notes became due and payable at 150% of the principal amount.

In August 2011, Ms. Soledad Bayazit, the Company’s Chief Executive Officer and sole director, purchased all the outstanding notes from the noteholders for the aggregate amount of $1,201,000.

Interest expense on the Note payable – related party aggregated $30,250 for the three months ended March 31, 2012.

During the three month period ended March 31, 2012, to finance our operations our chief executive officer has extended loans to us in the total amount of $8,940. The balance of $20,859 remains outstanding and payable on demand without interest.

Note 5 – Income Taxes

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax assets for every period because it is more likely than not that all of the deferred tax assets will not be realized.

Note 6 – Subsequent Events

The Company has evaluated all subsequent events that occurred up to the time of the Company's issuance of its financial statements.
 
 
F-5

 
 
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
 
FORWARD-LOOKING STATEMENTS
 
CERTAIN STATEMENTS IN THIS REPORT, INCLUDING STATEMENTS IN THE FOLLOWING DISCUSSION, ARE WHAT ARE KNOWN AS "FORWARD-LOOKING STATEMENTS", WHICH ARE BASICALLY STATEMENTS ABOUT THE FUTURE. FOR THAT REASON, THESE STATEMENTS INVOLVE RISK AND UNCERTAINTY SINCE NO ONE CAN ACCURATELY PREDICT THE FUTURE. WORDS SUCH AS "PLANS", "INTENDS", "WILL", "HOPES", "SEEKS", "ANTICIPATES", "EXPECTS "AND THE LIKE OFTEN IDENTIFY SUCH FORWARD-LOOKING STATEMENTS, BUT ARE NOT THE ONLY INDICATION THAT A STATEMENT IS A FORWARD-LOOKING STATEMENT. SUCH FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS CONCERNING OUR PLANS AND OBJECTIVES WITH RESPECT TO THE PRESENT AND FUTURE OPERATIONS OF THE COMPANY, AND STATEMENTS WHICH EXPRESS OR IMPLY THAT SUCH PRESENT AND FUTURE OPERATIONS WILL OR MAY PRODUCE REVENUES, INCOME OR PROFITS. NUMEROUS FACTORS AND FUTURE EVENTS COULD CAUSE THE COMPANY TO CHANGE SUCH PLANS AND OBJECTIVES OR FAIL TO SUCCESSFULLY IMPLEMENT SUCH PLANS OR ACHIEVE SUCH OBJECTIVES, OR CAUSE SUCH PRESENT AND FUTURE OPERATIONS TO FAIL TO PRODUCE REVENUES, INCOME OR PROFITS. THEREFORE, THE READER IS ADVISED THAT THE FOLLOWING DISCUSSION SHOULD BE CONSIDERED IN LIGHT OF THE DISCUSSION OF RISKS AND OTHER FACTORS CONTAINED IN THIS REPORT AND IN THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.
  
Overview

American Retail Group, Inc., formerly known as Resource Acquisition Group, Inc. (the “Company”), is a Nevada corporation organized on January 27, 1934.  
 
Effective February 11, 2011 the Company acquired 100% of the stock of  American Retail Group, Inc., a Nevada corporation (“ARG”), which at that time owned 100% of the outstanding equity of  TOO “SM Market Retail” (“SM Market”), a limited liability company organized under the laws of Kazakhstan (the “2011 Share Exchange”). Pursuant to the share exchange agreement, on February 11, 2011, stockholders of ARG transferred 100% of the outstanding shares of its common stock held by them, in exchange for an aggregate of 20,000,000 newly issued shares of the Company’s common stock. The shares of common stock of the Company acquired by the stockholders of ARG constituted approximately 96.1% of the Company’s issued and outstanding common stock after giving effect to the 2011 Share Exchange.

American Retail Group, Inc. was incorporated in Las Vegas, Nevada on February 16, 2010. Effective March 10, 2010, the Company consummated a share exchange with the owners of SM Market (the “2010 Share Exchange”). As a result of the share exchange, ARG acquired all of the outstanding equity of SM Market in exchange for issuance of 12,000,000 shares of its common stock (the “Shares”).

Effective April 1, 2011, ARG merged with and into the Company. In connection with the merger the name of the Company was changed from Resource Acquisition Group, Inc. to American Retail Group, Inc.

On July 22, 2011, the Company and the former owners of SM Market entered into a Rescission Agreement whereby the parties agreed to rescind the 2010 Share Exchange and to release each other from any potential claims (the “Rescission”). The parties have determined that it is in their best interest to rescind the 2010 Share Exchange and unwind the transaction. Under the Rescission Agreement, all outstanding equity of SM Market was to be returned to the former owners of SM Market and the Shares were to be returned to the Company. In connection with the rescission of the 2010 Share Exchange, El Investment Corp. agreed to return to the Company for cancellation 11,201,603 shares of common stock held by it. The Rescission was completed on September 2, 2011.
 
 
1

 
 
As a result of the Rescission, the Company ceased to be engaged in the supermarket business in Kazakhstan and returned to be a shell company as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended.
 
Plan of Operations

At this time, the Company’s purpose is to seek, investigate, and if such investigation warrants, acquire an interest in business opportunities presented to it by persons or firms who or which desire to seek the perceived advantages of an Exchange Act registered corporation. The Company will not restrict its search to any specific business, industry, or geographical location and the Company may participate in a business venture of virtually any kind or nature.  This discussion of the proposed business is purposefully general and is not meant to be restrictive of the Company’s virtually unlimited discretion to search for and enter into potential business opportunities. Management anticipates that it may be able to participate in only one potential business venture because the Company has nominal assets and limited financial resources. This lack of diversification should be considered a substantial risk to shareholders of the Company because it will not permit the Company to offset potential losses from one venture against gains from another.

The Company may seek a business opportunity with entities which have recently commenced operations, or which wish to utilize the public marketplace in order to raise additional capital in order to expand into new products or markets, to develop a new product or service, or for other corporate purposes. The Company may acquire assets and establish wholly-owned subsidiaries in various businesses or acquire existing businesses as subsidiaries

Results of Operations
 
We did not have any revenues during the three month periods ended March 31, 2012 and 2011.

We incurred operating expenses of $2,660 for the three month period ended March 31, 2012. This compares to $128,114 in expenses during the three month period, which ended March 31, 2011. The operating expenses incurred in 2011 was primarily due to professional fees in connection with the 2011 Share Exchange.

The Company incurred interest expense in the amount of $30,250 for the three month period ended March 31, 2012 on the notes to a related party. This compares to $29,943 in interest expense for the three month period ended March 31, 2011 on the convertible notes.

The Company realized a net loss of $32,910 for the three month period ended March 31, 2012, respectively. This compares to $158,057 in net loss during the three month period, which ended March 31, 2011.
 
Liquidity and Capital Resources
 
As of March 31, 2012 we had $0 in cash. We have financed our operations primarily with the proceeds from the issuance to investors of bridge convertible notes in the aggregate principal amount of $1,201,000 in 2010. In connection with the Rescission, our chief executive officer has purchased from the investors all the outstanding notes. During the three month period ended March 31, 2012 and up to the date of this report, to finance our operations our chief executive officer has extended loans to us in the total amount of $8,940. The balance of $20,859 remains outstanding and payable on demand without interest.

We believe we cannot satisfy our cash requirements for the next twelve months with our current cash and need to obtain additional financing. We cannot assure investors that adequate financing will be available. In the absence of such financing, we may be unable to proceed with our plan of operations.
 
 
2

 
 
Contractual Obligations

At March 31, 2012, our significant contractual obligations were the 10% bridge convertible notes in the aggregate principal amount of $1,201,000 due on January 12, 2012. All the notes are in default. In August 2011, all the notes were purchased from the investors by the Company’s Chief Executive Officer and sole director.
 
Off-Balance Sheet Arrangements

We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.
 
Critical Accounting Policies and Estimates
 
Going concern

As shown in the accompanying financial statements, the Company had limited cash, a deficit working capital, an accumulated deficit, a total deficit, and a net loss through March 31, 2012, which raise substantial doubt about the Company’s ability to continue as a going concern.

The Company’s future success is dependent upon, among other things, its ability to raise additional capital or to secure a future business combination. There is no guarantee that the Company will be able to raise enough capital or generate revenues to sustain its operations.  Management believes they can raise the appropriate funds needed to support their business plan and acquire an operating company with positive cash flow.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amount and classification of liabilities that might be necessary in the event the Company cannot continue in existence. Management intends to seek new capital from owners and related parties to provide needed funds.
 
ITEM 4T.   CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.
 
 
3

 
 
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report because of a material weakness in our internal control over financial reporting described below.
  
Changes in Internal Controls over Financial Reporting

On July 22, 2011, the Company and the former owners of SM Market entered into a Rescission Agreement whereby the parties agreed to rescind the 2010 Share Exchange. The Rescission was consummated on September 1, 2011. As a result of the Rescission, the Company ceased to be engaged in the supermarket business in Kazakhstan and returned to be a shell company as such term is defined in Rule 12b-2 under the Exchange Act of 1934, as amended.

Prior to the Rescission and as a result of the 2010 Shares Exchange, the Company was operating supermarkets in Kazakhstan through its wholly-owned subsidiary SM Market. Although SM Market was 100% owned by the Company, it had its own management controlled directly by the majority shareholder of the Company, El Investment Corp. In September 2011, it came to our attention that the SM Market’s management’s view on the Company’s business direction differs substantially from the position of the Company’s management. Instead of continuing to expand its operations, SM Market started a restructuring which first led to a reduction of the number of its stores and ultimately resulted in closure of most of the stores by late July 2011. Because of the position of El Investment Corp. as the Company’s majority shareholder, the Company’s management had no redress other than to negotiate the Rescission of the 2010 Share Exchange.

Until his resignation on September 24, 2011, our former director, Mr. Vassili Oxenuk, controlled our U.S. bank accounts. This was mostly due to the fact that Mr. Oxenuk was the Company’s major shareholder and promoter who was instrumental in the Company’s obtaining its bridge financing with gross proceeds of $1,201,000 in July 2010. Mr. Oxenuk, however, failed to provide to the Company full information about use of proceeds from the bridge financing and his use of the Company’s bank accounts. As of the date of this report, $100,000 of the proceeds from the bridge financing that was wired by an investor directly to one of Mr. Oxenuk’s personal accounts have not been accounted for. The Company has recently closed its banking accounts that were under Mr. Oxenuk’s prior control to limit its potential exposure to liability from third parties. An examination of the bank statements for one of these accounts showed a deposit and immediate transfer out of the Company’s account to an offshore account controlled by Mr. Oxenuk of $300,000. We were not able to obtain from Mr. Oxenuk a plausible explanation of the origin of this money and why the Company’s account was used for these transfers as Mr. Oxenuk refused to honor any of our requests after his resignation.

The foregoing shows that the Company has a material weakness in its internal controls over financial reporting.
 
Remediation Initiative

The Company took the following actions to remediate the foregoing weaknesses: (i) negotiated and closed the Rescission, and (ii) closed its banking accounts that had been under previous control of Mr. Oxenuk.
 
 
4

 
 
PART II-OTHER INFORMATION

ITEM 6.   EXHIBITS.

(a) The following exhibits are filed herewith:
 
31.1
Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1
Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
101
Interactive Data Files.
 
 
5

 
 
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.

 
AMERICAN RETAIL GROUP, INC.
 
       
Date:  May 11, 2012
By:
/s/ Soledad Bayazit
 
   
Chief Executive Officer, Chief Financial Officer and Director
(Principal Executive Officer, Principal Financial Officer and
Principal Accounting Officer)
 
 
 
 
 
 
 
6

PINX:ARGB American Retail Group Inc Quarterly Report 10-Q Filling

American Retail Group Inc PINX:ARGB Stock - Get Quarterly Report SEC Filing of American Retail Group Inc PINX:ARGB stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

PINX:ARGB American Retail Group Inc Quarterly Report 10-Q Filing - 3/31/2012
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