Artificial Life, Inc. (Pink Sheets:ALIF)
(http://www.artificial-life.com) today announced its third quarter
2011 results.
In the third quarter of 2011 the Company has continued to
implement its new business model and actively pursued new
investment targets.
Status of new business model and investment
portfolio
Artificial Life Investments, Ltd.
In December 2010, the Company has launched a new 100% owned
subsidiary and investment entity, Artificial Life Investments, Ltd.
based in the Cayman Islands. The new entity is the key investment
vehicle for the Artificial Life group and is intended to become the
investment holding for all its future acquisitions.
Currently Artificial Life Investments has invested in and holds
four investment companies:
ALife Studios, Inc. (68% ownership)
In the third quarter of 2011, Artificial Life Investments
launched a new operational entity, ALife Studios, Inc. ("ALife
Studios"). ALife Studios, Inc. is a content development studio
based in Hong Kong which implements custom solutions for
smartphones and tablet devices. ALife Studios has a strong focus on
mobile and cross-platform applications and games. ALife Studios
will take over the former operational business lines of Artificial
Life, Inc and some of Artificial Life's contractual obligations
with partners and shareholders. The Company is currently in talks
with several investors about a Series A financing to fund its
growth and expansion. In November 2011 Artificial Life Investments
sold 32% of the equity of ALife Studios as an incentive to its new
management. The ALife Studios is working already on several new
contract assignments and on sub-contracts of Artificial Life and
has started developing its own new products. ALife Studios is
working on an outsourcing business model and works with outsourcing
partners around the globe. For further details see:
www.alife-studios.com
Green Cortex, Inc. (100% ownership)
In May 2010, Artificial Life founded Green Cortex Inc. to
penetrate the booming green IT and green mobile apps market for
smart-phones. Hong Kong based Green Cortex combines many years of
research and experience in the artificial intelligence field with
unique know-how in mobile technology, green technology, and
sustainability practices to create smart mobile apps that work to
protect our environment, to improve the safety of hazardous
production facilities, and to help minimize carbon footprints. The
Company focuses on modern, biology oriented smart software
technologies (such as genetic algorithms) to innovate green
technology and applications. The Company also is in the process of
hiring a new CEO and to start operational activities still in Q4,
2011. The Company is currently also in its Series A funding round.
For further details please see: www.green-cortex.com
Augmented Reality Europe (19.9% ownership)
In December 2010, Artificial Life Investments acquired a 19.9%
stake in a Berlin based start up called ARE Augmented Reality
Europe. The Company specializes in augmented reality related
intellectual property and patents acquisitions and trading. The
Company is currently in the process to acquire its first
intellectual property assets from several companies. For further
details, please see: www.arereality.com
M-Health Middle East, Ltd. (19.9%
ownership)
In December 2010, Artificial Life Investments acquired a 19.9%
equity stake in M-Health Middle East. The business focus of
M-Health is to deploy mobile health services in the Middle East and
Africa. The Company invested approximately 12 mio USD in form of
accounts receivables to acquire the equity stake. At this point
Artificial Life Investments is in negotiation with some partners to
sell its stake in M-Health.
Further Activities
Further to the active pursuit of investments the Company is in
the process to sell some of its valuable intellectual property
developed over the past years as it has ceased licensing these
assets under the former business model. The proceeds from these
sales are intended to be used for further acquisitions.
Asset Sales Status and Activities
Since the second quarter of 2011 Artificial Life, Inc is in
negotiations with several potential buyers around the globe to sell
some of its product assets and/or use these assets in exchange for
equity in further investment targets according to its new business
strategy. Further announcements will follow.
Artificial Life is also in talks with some major Chinese game
and non gaming companies to launch Joint Ventures based on the
Company's valuable assets for the Greater China territory.
Financial Results — Quarter Ended September 30, 2011
compared to Quarter Ended September 30, 2010
Current financial results of Artificial Life, Inc. are
considered not to be directly comparable with past and future
expected results of the Company due to its recent shift in business
focus and business model. The Company has ceased to actively sell
its former products under the historic licensing business model and
started implementing instead its new business model by evaluating
and actively pursuing various investments and joint venture
opportunities. Therefore, in the short term the Company does not
expect substantial revenues as its old income stream is fading out
while its new income will mostly come from future investments. The
Company will engage in investment activities over the coming months
and will only be able to generate income when selling equity stakes
or assets. The first substantial asset sales and trades or sales of
equity in its new investment companies are currently expected in
early 2012.
"We are satisfied with the careful step-by-step implementation
of our new business model and the evaluation of several promising
investment opportunities. Everything is starting to take shape. Our
first investments are taking off and are becoming active
operational entities. Especially our ALife Studios are doing very
well already, just weeks after their launch. Hence we are confident
in our new strategy and our new business approach and expect to
show strong growth and more promising and substantial results to
our shareholders already in the near future," said Eberhard
Schoneburg, CEO of Artificial Life, Inc.
Revenues:
Revenues for the quarter ended September 30, 2011 were $146,155
as compared to $10,560,747 for the quarter ended September 30,
2010. The decrease of revenues of $10,414,592 was mainly due to the
discontinuation of sales and licensing of our historic products and
the related decrease in revenue recognized from global license
deals for our m-commerce platform, OPUS-M™. The Company's new
investment oriented business model does not generate ongoing
license income.
Other Income / Expenses:
Other income (expenses) for the quarter ended September 30, 2011
was $(1,620,658) as compared to $1,612,389 for the quarter ended
September 30, 2010. Net other expenses of $1,620,658 was primarily
due to foreign currency transaction losses of approximately
$1,610,000 in this quarter compared to gains of approximately
$1,624,000 in the third quarter of 2010. The increase in foreign
currency transaction losses was mostly due to the significant
adverse effect of the weakening of the Euro relative to the United
States Dollar on the trade receivables denominated in Euro.
Income / Loss from Operations and Net Income /
Loss:
Loss from operations for the quarter ended September 30, 2011
was $(3,789,975), as compared to income from operations of
$4,280,746 for the quarter ended September 30, 2010. Net loss for
the quarter ended September 30, 2011 was $(2,646,503), as compared
to net income of $5,055,651 for the quarter ended September 30,
2010. The decrease in both (loss) income from operations and net
(loss) income is primarily due to the decrease in license revenues
related to the shift in business model. The basic and diluted net
(loss) income per share for the third quarter of 2011 was $(0.04),
as compared to $0.08 for the quarter ended September 30, 2010.
|
ARTIFICIAL LIFE, INC.
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME |
AND COMPREHENSIVE
INCOME |
(UNAUDITED) |
|
|
Three-Month Periods Ended
September 30, |
Nine-Month Periods Ended
September 30, |
|
2011 |
2010 |
2011 |
2010 |
|
|
|
|
|
Revenues: |
|
|
|
|
Software license
agreements |
$ 146,155 |
$ 10,560,747 |
$ 10,717,459 |
$ 27,772,531 |
Application services and
other |
-- |
-- |
-- |
15,854 |
|
146,155 |
10,560,747 |
10,717,459 |
27,788,385 |
|
|
|
|
|
Cost of revenues: |
|
|
|
|
Cost of software license
agreements |
2,063,791 |
3,456,832 |
5,659,996 |
6,718,185 |
Others |
14,632 |
6,358 |
125,943 |
158,325 |
|
2,078,423 |
3,463,190 |
5,785,939 |
6,876,510 |
Gross (loss) profit |
(1,932,268) |
7,097,557 |
4,931,520 |
20,911,875 |
|
|
|
|
|
Operating expenses: |
|
|
|
|
General and administrative |
956,811 |
623,260 |
2,775,052 |
1,944,816 |
Research and development |
579,363 |
651,886 |
1,858,021 |
1,894,147 |
Sales and marketing |
304,323 |
442,475 |
1,181,933 |
1,337,812 |
Depreciation |
13,390 |
1,095,313 |
46,268 |
1,522,814 |
Bad and doubtful debt |
3,820 |
3,877 |
3,855,001 |
7,588 |
Total operating expenses |
1,857,707 |
2,816,811 |
9,716,275 |
6,707,177 |
|
|
|
|
|
(Loss) income from operations |
(3,789,975) |
4,280,746 |
(4,784,755) |
14,204,698 |
|
|
|
|
|
Other (expenses) income: |
|
|
|
|
Interest income and other
income (expenses) |
11,071 |
(118) |
20,564 |
5,302 |
Interest expense |
(21,594) |
(11,412) |
(68,098) |
(53,171) |
Foreign currency transaction
(losses) gains |
(1,610,135) |
1,623,919 |
36,075 |
101,561 |
|
(1,620,658) |
1,612,389 |
(11,459) |
53,692 |
|
|
|
|
|
(Loss) income before income taxes |
(5,410,633) |
5,893,135 |
(4,796,214) |
14,258,390 |
Income tax benefit (expense) |
2,764,130 |
(837,484) |
2,661,130 |
(1,964,729) |
|
|
|
|
|
Net (loss) income |
(2,646,503) |
5,055,651 |
(2,135,084) |
12,293,661 |
Foreign currency translation adjustment |
(222,439) |
2,016 |
22,587 |
(150,970) |
|
|
|
|
|
Comprehensive (loss) income |
$ (2,868,942) |
$ 5,057,667 |
$ (2,112,497) |
$ 12,142,691 |
|
|
|
|
|
Net (loss) income per share: |
|
|
|
|
Basic |
$ (0.04) |
$ 0.08 |
$ (0.03) |
$ 0.21 |
Diluted |
$ (0.04) |
$ 0.08 |
$ (0.03) |
$ 0.20 |
|
|
|
|
|
Weighted average shares
outstanding: |
|
|
|
|
Basic (Note 8) |
70,945,478 |
61,575,272 |
67,852,571 |
59,869,484 |
Diluted (Note 8) |
71,019,949 |
61,927,535 |
68,972,851 |
61,363,512 |
|
|
ARTIFICIAL LIFE, INC.
AND SUBSIDIARIES |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(UNAUDITED) |
|
|
September 30, 2011 |
December 31, 2010 |
ASSETS |
Current assets: |
|
|
Cash |
$ 96,166 |
$ 2,240,509 |
Pledged deposit (Note 3) |
25,641 |
25,641 |
Trade accounts receivables, net
of allowance for discount interest and doubtful accounts of
$7,780,960 and $8,298,470, respectively |
19,710,304 |
14,599,571 |
Prepaid expenses and other |
700,413 |
872,208 |
Deferred income taxes, net |
4,261,804 |
1,497,000 |
Total current
assets |
24,794,328 |
19,234,929 |
|
|
|
Fixed assets, net of accumulated depreciation
of $455,491 and $579,016, respectively |
44,339 |
90,247 |
|
|
|
Investments (Note 7) |
11,998,753 |
11,989,243 |
License rights, net of accumulated
amortization of $17,286,666 and $12,339,664, respectively |
25,830,664 |
35,599,878 |
Prepaid expenses, deposits and other
assets |
1,541,064 |
2,027,999 |
Deferred income taxes |
1,507,000 |
1,507,000 |
|
40,877,481 |
51,124,120 |
|
|
|
TOTAL
ASSETS |
$ 65,716,148 |
$ 70,449,296 |
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
Current liabilities: |
|
|
Accounts payable |
$ 1,234,296 |
$ 707,324 |
Accrued expenses and other |
1,396,329 |
6,077,897 |
Income taxes payable |
1,282,745 |
1,192,941 |
Note payable –
officer/stockholder |
631,742 |
2,144,167 |
Total liabilities (all
current) |
4,545,112 |
10,122,329 |
|
|
|
Stockholders' Equity |
|
|
Preferred stock, $0.01 par
value; 5,000,000 shares authorized, no shares issued and
outstanding |
-- |
-- |
Common stock, $0.01 par value;
130,000,000 shares authorized, 74,915,174 shares issued and
outstanding as of September 30, 2011 and 65,457,282 shares issued
and outstanding as of December 31, 2010 |
749,151 |
654,572 |
Additional paid-in capital |
74,299,053 |
71,437,066 |
Notes receivable from
stockholders |
(19,577) |
(19,577) |
Accumulated deficit |
(13,757,481) |
(11,622,397) |
Accumulated other comprehensive
loss |
(100,110) |
(122,697) |
Total stockholders'
equity |
61,171,036 |
60,326,967 |
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY |
$ 65,716,148 |
$ 70,449,296 |
|
|
|
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 past and future results and future quarters as
the Company has changed its business model and strategy in the
second quarter of 2011.
This press release shall be considered as a forward-looking
statement.
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) .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
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:
Frank Namyslik, CFO
Tel: (+852) 3102 2800
ir@artificial-life.com
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