Artificial Life Announces Strong Growth and Earnings for Q3 2009

LOS ANGELES and HONG KONG, Nov. 10 /PRNewswire-Asia-FirstCall/ –
Artificial Life, Inc. (OTC BB: ALIF) (http://www.artificial-life.com ) today
announced its third quarter 2009 results with the highest quarterly revenues
in the Company’s history and revenue growth of over 32% compared to Q3 2008
and income from operations of $3.75 million.

“The third quarter was again a very strong quarter for us. Until end of
October 2009, we sold over 12 million mobile 3G and Java games globally and
generated over 4.6 million downloads for the iPhone/iPod Touch. Despite the
large amount of games available on the Apple App Store, 20 (or 95%) of our
games have climbed up to the Top 100 most downloaded rank or higher; 17 games
have been ranked in the Top 50; 15 in the Top 10 downloads; and 11 games have
achieved Top 5 or higher. The best games have reached Top 10 download rankings
in 56 countries, i.e. 73% of all countries in which the iPhone is officially
sold. 8 of our games have even hit rank 1 in 23 countries. The longest
continuous Top 100 ranked game has been in the ranks for over 300 days. Hence,
the third quarter and the first nine months of 2009 were strong despite the
global financial crisis. We were able to keep our expansion and profitability.
In October 2009 the 3M Company has chosen us for a strategic investment and as
a new cooperation partner in the mobile space. The investment and the alliance
agreement with 3M provide a strong, global business opportunity for us. The
cooperation will allow us to create innovative business and lifestyle
applications for one of the leading innovators in the business world. We are
looking forward to working with 3M on many projects in the coming years. For
the remainder of the year we expect to continue to grow and release several
new branded game titles and soon also our first iPhone business applications,”
said Eberhard Schoneburg, CEO of Artificial Life, Inc.

As for the financial results:

REVENUES:

Revenues for the quarter ended September 30, 2009 were $8,723,481 as
compared to $6,628,597 for the quarter ended September 30, 2008 and compared
to $7,577,969 for the second quarter of 2009. The increase in revenues of
$2,094,884, or 32% compared to 2008 was mainly due to increased (a) product
license revenue from mobile games, one-time downloads, (b) monthly
subscription revenues for 3G games derived from mobile operators, bulk
resellers and hand set distributors and (c) license revenues from the sale of
our mobile diabetes and mobile property solutions.

COST OF REVENUES:

Cost of revenues mainly consisted of amortization of intangible assets
(license rights). Cost of revenues for the quarter ended September 30, 2009
was $1,732,798 as compared to $923,350 for the quarter ended September 30,
2008. The increase of $809,448, or 88%, was primarily due to the increased
amortization of certain license rights of approximately $560,000.

GROSS MARGIN:

Gross margin for the quarter ended September 30, 2009 was $6,990,683 as
compared to $5,705,247 for the quarter ended September 30, 2008. The increase
of $1,285,436, or 23%, was mainly due to increased product license income from
mobile games, one-time downloads and monthly subscription revenues for 3G
games derived from mobile operators, bulk resellers and hand set distributors
and a global license deal for the sale of our mobile diabetes and mobile
property solutions offset by amortization of license rights acquired in
earlier periods.

GENERAL AND ADMINISTRATIVE:

General and administrative expenses consisted of salaries of
administrative personnel, rent, professional fees and costs associated with
employee benefits, supplies, communications and travel. General and
administrative expenses for the quarter ended September 30, 2009 were
$1,750,366 as compared to $451,518 for the quarter ended September 30, 2008.
The increase of $1,298,848, or 288%, was mainly due to increased depreciation
of fixed assets approximately of $1,235,000.

RESEARCH & DEVELOPMENT:

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. Research and development expenses for the
quarter ended September 30, 2009 were $1,015,483 as compared to $928,487 for
the quarter ended September 30, 2008. The increase of $86,996, or 9%, was
mainly due to increased internet expenses.

SALES AND MARKETING:

Sales and marketing expenses consisted of salaries of sales and marketing
personnel and costs relating to marketing materials, advertising, trade shows,
traveling and public relations activities. Sales and marketing expenses for
the quarter ended September 30, 2009 were $474,066 as compared to $740,696 for
the quarter ended September 30, 2008. The decrease of $266,630, or 36%, was
primarily due to reductions in expenses related to marketing,
telecommunications and sub-contracting expenses.

OTHER EXPENSE/INCOME:

Other income for the quarter ended September 30, 2009 totaled $124,656, as
compared to other expenses of $99,496 for the quarter ended September 30,
2008. The other income of $124,656 was mainly due to late payment charge
income of $219,761, offset by interest expense of $39,356 and foreign currency
transaction losses of approximately $55,749 in this quarter compared to income
of approximately $533 in the third quarter of 2008.

INCOME FROM OPERATIONS AND NET INCOME:

Income from operations for the quarter ended September 30, 2009 was
$3,750,768 as compared to income from operations of $3,584,546 for the quarter
ended September 30, 2008 and compared to $3,124,103 for the second quarter of
2009. Income from operations was mainly due to revenue of $8,723,481 from the
sale of product licenses for our mobile games and technology licenses, which
was offset by costs of revenue of $1,732,798 and operational costs of
$3,239,915. Net income for the quarter ended September 30, 2009 was
$3,875,424, compared to net income of $3,485,050 for the quarter ended
September 30, 2008. Basic and diluted net income per share for the quarter
ended September 30, 2009 and 2008 was $0.08 and $0.07, respectively.

CASH AND LIQUIDITY:

Due to the global financial crisis and tight cash liquidity for most
companies, the Company also has experienced a slow down of payments from
certain clients since the third quarter of 2008. As a cautionary step the
company has hence increased its allowance for potential doubtful accounts by
approximately $2.1 million through 2009. Management does not expect any
further significant additional allowances for doubtful accounts for the
remainder of the year 2009.

Through September 30, 2009, the Company completed a private placement
raising total cash proceeds of $2,072,950 through the issuance of 2,697,941
shares of common stock to a number of investors.

In October 2009, the Company sold 6,447,491 shares of its common stock at
a price of $1 per share, for aggregate consideration of $6,447,491, to 3M
Company. The proceeds represent a 10% equity interest in Artificial Life by
the 3M Company, calculated on a fully diluted basis at the time of the
transaction.

(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, Inc. (OTCBB: ALIF) is a public US corporation
headquartered in Los Angeles, with its production center in Hong Kong and
additional offices in Berlin (EMEA headquarters) and Tokyo. As a leading,
full-service provider of mobile broadband 3G technology, mobile participation
TV, mobile gaming, content and business applications, Artificial Life provides
2D and 3D multi- and single player rich-media applications for 3G, 3.5G and 4G
network-enabled mobile phones. Recognized internationally for outstanding
content quality and technology, Artificial Life transcends traditional modes
of mobile communications and interactive gaming. For more information, please
visit http://www.artificial-life.com or the company’s m-commerce portal at
http://www.botme.com .

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,
our ability to obtain additional funding to operate and grow our business; the
unproven potential of our mobile gaming business model; changing consumer
preferences and uncertainty of market acceptance of our products; timely
adoption and availability of 3G mobile technology; market acceptance for use
of mobile handheld devices to play the interactive games; unpredictable mobile
game development schedules; our reliance on a relatively small number of
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 February 10,
2009. We assume no obligation to update any forward-looking statements, which
apply only as of the date of this press release.

    Artificial Life PR & IR Contact:

     Annie Lau
     Tel:   +852-3102-2800
     Email: ir@artificial-life.com

SOURCE Artificial Life, Inc.