Artificial Life Announces Fiscal Year 2010 Results

2010 was again a strong year for our gaming business. We achieved a total number of iPhone/iPod Touch/iPad downloads of in broad outline 15.8 million in the year of 2010, a significant increase of 88%, as compared to in broad outline 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:

In early 2010, we launched our OPUS-M(TM) product and were successful with our efforts as in broad outline 54% of our new earnings were related to or derived from this product since its commercial launch, during approximately 27% and 15% of our earnings were derived from the sales of mobile games and Mobile Diab(R), respectively.

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.

Revenues. Earnings 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(TM), as then as license income from the sales of our mobile health products and our smart phone games and applications.

Cost of Earnings. Cost of earnings mainly consisted of amortization of intangible assets. Cost of earnings 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(TM), 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 customers in the Euro zone of in broad outline $5.2 million, increase in bonus expenses of roughly $0.8 million and professional fees of in broad outline $0.4 million, offset by decrease in stock-based compensation expense of approximately $0.6 million.

Research and Development Expenses. Innovation 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 earnings. Total innovation 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 in broad outline $0.6 million, stock-based compensation of in broad outline $0.5 million, staff costs, data hosting and web service expenses.

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(TM), 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 technology and development, and sales and marketing expenses.

The liquidity crisis in the Euro zone while 2010

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

"2010 was again a strong year for us in spite of 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 in a class by itself 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."

Trademark of Apple Inc

(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.)

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 markets with a focus on smartphone content and wireless technology just as: nearly 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 with a secondary listing on the Frankfurt Stock Exchange. Our global headquarters is in Hong Kong and our EMEA headquarters is in Berlin, Germany. We have won many industry awards for outstanding research and products in prior years.

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 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. Partly, you can identify forward-looking statements by terminology just as "may", "will", "should", "expect", "intend", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue" or the negative of these terms or other comparable terminology. Though 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, nevertheless 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 research; market acceptance for use of mobile handheld devices;; our reliance on a relatively small number of customers 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 place to place 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.

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