ALIF Artificial Life Inc (CE)

Artificial Life, Inc., (Pink Sheets:ALIF) (http://www.artificial-life.com) today announced solid growth in revenues and profits for fiscal year 2010. Revenues grew 29% to $35,505,273, income from operations was $6,180,981, and net income was $5,495,028, representing a net profit margin of 15%.

Business Highlights

2010 was again a strong year for our gaming business. We achieved a total number of iPhone/iPod Touch/iPad downloads of approximately 15.8 million in the year of 2010, a significant increase of 88%, as compared to approximately 8.4 million in 2009. The total cumulative number of our mobile games and apps downloaded through June 2011 exceeded 60 million worldwide.

We have released 37 iPhone/iPod Touch/iPad games so far. Below is a summary of our iPhone/iPod Touch/iPad key ranking statistics through June 2011:

Titles Released since 2008:	37
Number of Countries Selling:	90
Rankings on App Store Top charts:
Top 100:	92% (34 titles)
Top 50:	86% (32 titles)
Top 10:	65% (24 titles)
Top 5:	49% (18 titles)
Rank 1:	38% (14 titles)
Number of Countries Reached (Top 10):	74 countries
	(82% of all countries in which the games are offered)
Duration Staying on App Store Top Charts since 2009:
Top 100 for more than 30 days:	16 titles
Top 100 for more than 90 days:	10 titles
Top 100 for more than 180 days:	7 titles
Longest Continuous Top 100:	More than 2 years
Licensed Games : Own Branded Games:	26:11
Free Games : Paid Games	19:18
Best Performing Game Categories:	Adventure and Racing

In early 2010, we launched our OPUS-M™ product and were successful with our efforts as approximately 54% of our new revenues were related to or derived from this product since its commercial launch, while approximately 27% and 15% of our revenues were derived from the sales of mobile games and Mobile Diab®, respectively.

Revenue mix by product type for 2010 and 2009 was as follows:

	Year Ended December 31,
	2010	2009
OPUS-M™	54%	0%
Mobile Booster™	-- %	21%
Mobile Games	27%	51%
Mobile Diab®	15%	22%
NeuroDerMo	1%	-- %
Others	3%	6%
Total	100%	100%

OPUS-MTM 2.0 was recently released. With its cloud computing base and its broad appeal, flexible module selection concept, competitive pricing, hosting support and comprehensive feature set it is our current key product.

Financial Results

Results of Operations —Year Ended December 31, 2010 compared to Year Ended December 31, 2009

Revenues. Revenues for the year ended December 31, 2010 were $35,505,273 as compared to $27,454,474 for the year ended December 31, 2009. The increase of $8,050,799, or 29%, was primarily due to revenue recognized from global license deals for our m-commerce platform, OPUS-M™, as well as license income from the sales of our mobile health products and our smart phone games and applications.

Cost of Revenues. Cost of revenues mainly consisted of amortization of intangible assets (license rights). Cost of revenues for the year ended December 31, 2010 was $10,330,890 as compared to $5,309,072 for the year ended December 31, 2009. The increase of $5,021,818, or 95%, was primarily due to the increased amortization of additional license rights acquired, write-off of certain license rights.

Gross Margin. Gross margin for the year ended December 31, 2010 was $25,174,383 as compared to $22,145,402 for the year ended December 31, 2009. The increase of $3,028,981, or 14%, was mainly due to increase in revenue recognized from global license deals for our m-commerce platform, OPUS-M™, and our mobile health products, offset by amortization of license rights acquired.

General and Administrative Expenses. General and administrative expenses consisted of salary and payroll tax expenses of administrative personnel, rent, professional fees and costs associated with employee benefits, supplies, communications, and travel. Total general and administrative expenses for the year ended December 31, 2010 were $11,584,552 as compared to $5,745,538 for the year ended December 31, 2009. The increase of $5,839,014, or 102%, was primarily due to significant increase in bad debt expense primarily for certain clients in the Euro zone of approximately $5.2 million, increase in bonus expenses of approximately $0.8 million and professional fees of approximately $0.4 million, offset by decrease in stock-based compensation expense of approximately $0.6 million.

Research and Development Expenses. Research and development expenses consisted of salary, training, consulting, subcontracting, and other expenses incurred to develop and fulfill the design specifications and production of the products and services from which we derive our revenues. Total research and development expenses for the year ended December 31, 2010 were $3,272,722 as compared to $4,523,847 in the year ended December 31, 2009. The decrease of $1,251,125, or 28%, was primarily due to a decrease in consulting expenses of approximately $0.6 million, stock-based compensation of approximately $0.5 million, staff costs, data hosting and web service expenses.

Sales and Marketing Expenses. Sales and marketing expenses consisted of salary and payroll tax expenses of marketing personnel and costs relating to marketing materials, promotional videos, advertising, tradeshow-related expense and public relation activities. Total marketing expenses for the year ended December 31, 2010 were $2,595,828, as compared to $4,086,282 for the year ended December 31, 2009. The decrease of $1,490,454, or 36%, was primarily due to increase in staff costs of approximately $0.6 million, offset by decrease in stock-based compensation of approximately $1.2 million and consulting expenses of $1 million.

Depreciation and Write-off of Fixed Assets. Depreciation and write-off of fixed assets for the year-ended December 31, 2010 was $1,540,300 as compared to $1,664,685 in the year ended December 31, 2009. The decrease of $124,385, or 7%, was primarily due to decrease in write-off of certain fixed assets, offset by an increase in depreciation.

Other (Expenses)Income. Other (expenses) income for the year ended December 31, 2010 totaled $(780,953) as compared to $383,669 for the year ended December 31, 2009. The decrease of $1,164,622, or 304%, was primarily due to the decrease in interest income and a substantial increase in foreign currency transaction loss. The decrease in interest income was due to net late payment charge income of approximately $189,000 in 2009. The increase in foreign currency transaction loss was mostly due to the overall adverse effect of the weakening of the Euro relative to the United States Dollar on the trade receivables denominated in Euro during the year of 2010.

Income from Operation and Net Incomes. Income from operations for the year ended December 31, 2010 was $6,180,981, an increase of 1%, as compared to income from operations of $6,125,050 for the year ended December 31, 2009. The income from operations was primarily due to revenue of $35,505,273 mainly generated from global license deals for our m-commerce platform, OPUS-M™, our mobile health products and games, offset by the cost of revenue of $10,330,890 and the operating cost of $18,993,402. Net income for the year ended December 31, 2010 was $5,495,028, a decrease of 27%, as compared to $7,568,719 for the year ended December 31, 2009. The decrease was primarily due to the increased amortization of additional license rights acquired, write-off of certain license rights and increase in bad debt expense, offset by the increase in license income and decrease in research and development, and sales and marketing expenses.

The basic and diluted net income per share for the year ended December 31, 2010 was $0.09 and $0.09, respectively, as compared to the basic and diluted net income per share for the year ended December 31, 2009 of $0.15.

Liquidity and Capital Resources

Net cash provided by operating activities was $5,678,449 for year ended December 31, 2010, which was an increase of $7,891,778 compared to the year ended December 31, 2009. This increase in cash provided was due primarily to the increase in net income and collections from customers.

Net cash used in investing activities was $11,746,179 for the year ended December 31, 2010, which was an increase of $6,722,023 compared to the year ended December 31, 2009. This increase was primarily due to increased cash expenditures for the purchase of license rights and fixed assets and capital contribution in new investment.

Net cash provided by financing activities was $5,684,169 for the year ended December 31, 2010, which was an decrease of $2,611,203 compared to the year ended December 31, 2009. This decrease was primarily due to the private placements completed during the year, raising cash proceeds of $6,057,080, as compared to $8,600,590 during the year ended December 31, 2009, repayment of note payable of $666,667, offset by net advances of $293,756 from our chief executive officer. 

As of December 31, 2010, we had a working capital surplus of $9,112,600 and stockholders' equity of $60,326,967.

During the year ended December 31, 2010, we completed private placements raising total cash proceeds of $6,057,080 through the issuance of 5,276,079 shares of common stock and warrants to purchase 2,094,565 shares to a number of investors. As part of this placement, one party received 40,000 shares and warrants to purchase 20,000 shares in satisfaction of $50,000 of accounts payable and 80,000 shares for prepaid consulting expenses of $77,600.

During the year ended December 31, 2010, receivables of approximately $12.5 million were collected in cash from our customers in settlement of the trade accounts and installment receivables. Between December 31, 2010 and April 30, 2011, an additional approximately $1.4 million of the 2010 receivables have been collected. In total, the Company has reduced its total receivables stemming from fiscal years 2007 through 2010 by approximately $65 million, which includes cash, non-cash offsetting and other settlement of approximately $33 million, $20 million and $12 million, respectively.

Management Comments

Frank Namyslik, Chief Financial Officer of Artificial Life, Inc. said:

"Considering the liquidity crisis in the Euro zone during 2010, our core market, which required us to account for over $7 million in bad debt allowance for some Greek and European clients and the decline of the Euro during 2010 which cost us nearly an additional of $1 million in currency losses, we still performed quite well. Not only did we maintain a solid profit margin of 15%, we also increased revenues by 29% and therefore grew at an even stronger rate than in the already good year 2009".

Eberhard Schoneburg, CEO of Artificial Life, Inc. added:

"2010 was again a strong year for us despite the difficult global economy and the liquidity issues in the Euro zone. We are now looking forward to implementing our new business model. In the coming months and years we are planning several key investments and joint ventures and are aiming to build up a unique and cooperative network of leading edge wireless companies around the globe. We will be very active in analyzing targets within the BRICS nations and in extending our portfolio of investment companies."

(iPod is a trademark of Apple Inc., registered in the US and other countries. iPhone is a trademark of Apple Inc. App Store is a service mark of Apple Inc.)

About Artificial Life, Inc.

Artificial Life is a new kind of investor. We act as a global incubator and business network provider and facilitator for our holding companies, assisting them in their sales, production, and general business development activities. We invest mainly in the BRICS (Brazil, Russia, India, China and South Africa) markets with a focus on smartphone content and wireless technology such as: near field communication, mobile business apps and games, mobile health services, social networking apps and games, and mobile commerce.

Artificial Life, Inc. is a Delaware registered corporation founded in 1994 in Boston. We are a public US entity (Pink Sheets:ALIF) with a secondary listing on the Frankfurt Stock Exchange (Frankfurt:AIF) (Xetra:AIF). Our global headquarters is in Hong Kong and our EMEA headquarters is in Berlin, Germany. We have won many industry awards for outstanding technology and products in prior years.

The Artificial Life logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=1669  Non Solicitation Disclaimer:

This press release is for information purposes only.  No information in this press release is intended to constitute, and should not be constituted as an offer to sell, or a solicitation of an offer to buy, any securities of Artificial Life, Inc. When making any investment decisions, investors should review securities reports, filed or submitted by the Company with the relevant regulatory authorities, and should exercise their own judgment in making their investment decisions.

The published financial results in this press release may differ substantially from future results and 2011 results of the Company as it has changed its business model and strategy. 

This press release shall be considered as a forward-looking statement.

Forward-Looking Statements:

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, without limitation, statements regarding our future results of operations, financial condition and business prospects. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "intend", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue" or the negative of these terms or other comparable terminology. Although such statements are based on our own information and information from other sources we believe to be reliable, you should not place undue reliance on them. These statements involve risks and uncertainties, and actual market trends or our actual results of operations, financial condition or business prospects may differ materially from those expressed or implied in these forward looking statements for a variety of reasons. Potential risks and uncertainties include, but are not limited to: the general economic conditions in the markets in which we operate; the success of our newly adopted business model and strategy; our ability to find investment targets for reasonable conditions; the economic conditions in the BRICS nations; our ability to sell equity or assets and intellectual property; our ability to obtain additional funding to operate and grow our business and to do investments; changing consumer preferences and uncertainty of market acceptance of our products; timely adoption and availability of broadband mobile technology; market acceptance for use of mobile handheld devices;; our reliance on a relatively small number of clients and brands; our ability to license brands from others; our dependence upon resellers and telecommunication carriers and operators to distribute our products; our ability to successfully develop, introduce, and sell new or enhanced products in a timely manner; and the timing of new product announcements or introductions by us or by our competitors. For additional discussion of these risks and uncertainties and other factors, please see the documents we file from time to time with the Securities and Exchange Commission, including our Annual Report on Form 10-KSB filed on August 2nd, 2011. We assume no obligation to update any forward-looking statements, which apply only as of the date of this press release.

CONTACT: Artificial Life IR and PR Contact:
         Adeline Law
         Tel: (+852) 3102 2800
         ir@artificial-life.com