LOS ANGELES, BERLIN, HONG KONG, March 16, 2010 (GLOBE NEWSWIRE) -- Artificial Life, Inc., (OTCBB:ALIF) (http://www.artificial-life.com) today announced solid growth in revenues and profits for fiscal year 2009. Revenues grew 22% to $27,454,474 and net income was $7,568,719, representing a net profit margin after taxes of 28%.
Business Highlights
During the course of 2009, Artificial Life Inc. strengthened its global position as a leading, full-service mobile software provider by offering a wide variety of mobile products, including mobile games, mobile TV, mobile business applications, and mobile productivity tools and technology.
For the year 2009, Artificial Life sold over 12 million licenses for its mobile Java games worldwide. 2009 also saw significant growth in the market for iPhone games and applications, and though a relative newcomer to the iPhone market, Artificial Life became one of the leading iPhone publishers. The Company had over 10 million game downloads globally and 70% of its games achieved a top-10 ranking, 46% a top-5 ranking, and 33% of the games even reached a #1 ranking on Apple's download charts in many countries around the globe.
In 2009, the Company had 73 corporate clients, 22 of which were new customers, generating approximately 45% of the Company's total revenue.
Approximately 51% of Artificial Life's revenues were derived from mobile games, while approximately 22% were derived from sales of non-game-related mobile products such as Mobil Diab™, a mobile healthcare application for business; 21% from sales of MobileBooster®, a productivity tool that has now become an integrated part of the newly released m-commerce platform, OPUS-M™; and 6% from sales of Mobile Property, a mobile application for the real estate industry.
Financial Results
Results of Operations —Year Ended December 31, 2009 compared to Year Ended December 31, 2008
Revenues. Revenues for the year ended December 31, 2009 were $27,454,474 as compared to $22,454,414 for the year ended December 31, 2008. The increase of $5,000,060, or 22%, was primarily due to increased licensing revenue generated from the sales of our 3G mobile Java and iPhone/iPod touch products and our m-commerce platform as well as license income from the sales of our Mobil Diab™ and Mobile Property 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, 2009 was $5,309,072 as compared to $3,204,590 for the year ended December 31, 2008. The increase of $2,104,482, or 66%, was primarily due to the increased amortization of license rights.
Gross Margin. Gross margin for the year ended December 31, 2009 was $22,145,402 as compared to $19,249,824 for the year ended December 31, 2008. The increase of $2,895,578, or 15%, 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 handset distributors and a number of license deals for the sale of our Mobil Diab™ and Mobile Property applications 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, 2009 were $6,426,674 as compared to $3,268,260 for the year ended December 31, 2008. The increase of $3,158,414, or 97%, was primarily due to the stock-based compensation expense of approximately $0.6 million, depreciation of computer software of approximately $1.4 million, and bad debt expense of approximately $2 million partially offset by reduced legal and professional fees.
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, 2009 were $4,930,495 as compared to $3,250,289 in the year ended December 31, 2008. The increase of $1,680,206, or 52%, was primarily due to the stock-based compensation expense of approximately $0.5 million and an increase of approximately $0.8 million in staff bonus and approximately $0.5 million in Internet expenses partially offset by reduced consulting fees.
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, 2009 were $4,663,183 as compared to $2,272,516 for the year ended December 31, 2008. The increase of $2,390,667, or 105%, was primarily due to the stock-based compensation expense of approximately $1.2 million and an increase of approximately $0.3 million in staff bonus and salaries and approximately of $0.9 million in consulting expenses.
Other Income/Expenses. Other income for the year ended December 31, 2009 totaled $383,669 as compared to $9,656 for the year ended December 31, 2008. The other income of $383,669 was mainly due to net late payment charge income of approximately $189,000 and foreign currency transaction gains of $332,251 in this year compared to gains of $161,574 in 2008.
Net Income. Net income for the year ended December 31, 2009 was $7,568,719 as compared to $10,575,285 for the year ended December 31, 2008. The decrease of $3,006,566 was primarily due to stock-based compensation expense of $2,385,500, bad debt expense of $2,636,979, and income tax benefit of $1,060,000 in this year compared to income tax benefit of $106,870 in 2008. The basic and diluted net income per share for the year ended December 31, 2009 was $0.15 compared to the basic and diluted net income per share for the year ended December 31, 2008 of $0.23 and $0.22, respectively.
Income from Operations and Net Income Excluding Stock-Based Compensation Expense and Debt Discounts on DetachedWarrants Issued with Convertible Promissory Note. For the years ended December 31, 2009 and 2008, our income from operations was $6,125,050 and $10,458,759 respectively, and our net income was $7,568,719 and $10,575,285, respectively, which includes the effects of stock-based compensation expense for stock options, and the effects of interest expense arising from the accretion of discount on convertible notes. Excluding the income statement effects of stock-based compensation expense and interest expense arising from the accretion of discount on convertible notes, our non-GAAP income from operations would have been $8,510,550 in 2009 and $10,458,759 in 2008 and our non-GAAP net income would have been $9,954,219 in 2009 and $10,626,158 in 2008.
Eberhard Schoneburg, CEO of Artificial Life, Inc., said:
"2009 was again a very positive year for Artificial Life despite the global financial crisis that has hit many of our clients and affected most of our key competitors negatively. We managed to remain profitable with a solid 28% net profit margin and grew 22% in terms of revenues even though we deferred an additional $4.8 million in revenues and respective potential profits to 2010. We improved our accounts receivables situation by collecting substantial amount of cash in Q4 2009 and Q1 2010, and by utilizing working capital strategies to offset receivables and payables with certain customers and licensors and to acquire licenses while minimizing cash outflow and cash usage. We have benefited from a liquidity perspective and reduced our credit risk and exposure.
We also invested heavily in new products and technologies in 2009 to further strengthen our technological advantage and leading position in the mobile content space for the years to come. We more than doubled our investments in new technologies and products with over $22 million in 2009, as compared to $10 million invested in 2008. Most of these investments were dedicated to our new OPUS-M™ platform, our tele-medicine platform and mobile diabetes application Mobil Diab®, and our new and very powerful augmented reality technology. We expect to see substantial growth and new business in all these areas in the coming months and years."
(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. has been a pioneer in artificial intelligence and mobile technology since its inception in Boston in 1994. We are a public US corporation (OTCBB:ALIF) with headquarters in Los Angeles. Our production center is in Hong Kong and we have additional offices in Berlin, Germany (EMEA headquarters) and Tokyo, Japan. As a leading provider of broadband mobile content and technology solutions in the world, we develop and sell a wide range of mobile applications for 3G, 3.5G and 4G network-enabled mobile (smart) phones. Currently our main business areas are: high quality 3D interactive multi- and single- player mobile games, mobile participation television (MoPA-TV™), mobile business applications (Mobil Diab® and Mobile Property) and our mobile commerce technology platform (OPUS-M™). We are supporting all major mobile phone operating systems and platforms such as J2ME, iPhone and iPod touch OS, Android, Brew and DoJa. Recognized internationally for outstanding content quality and technology we have received many international awards and have been ranked one of the fastest growing companies in Asia Pacific by Deloitte. For more information about Artificial Life, Inc., please visit our websites www.artificial-life.com or www.botme.com
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| Artificial Life, Inc. | ||||||
| Consolidated Statements of Income and Comprehensive Income (Audited) | ||||||
| For the Years Ended December 31, 2009 and 2008 | ||||||
| 2009 | 2008 | |||||
| Revenues: | ||||||
| Software license agreements | $ 27,427,016 | $ 21,659,786 | ||||
| Reseller license agreement | -- | 778,800 | ||||
| Application services and other | 27,458 | 15,828 | ||||
| 27,454,474 | 22,454,414 | |||||
| Cost of revenues: | ||||||
| Cost of software license agreements | 5,177,417 | 3,076,181 | ||||
| Cost of application services and other | 131,655 | 128,409 | ||||
| 5,309,072 | 3,204,590 | |||||
| Gross profit | 22,145,402 | 19,249,824 | ||||
| Operating expenses: | ||||||
| General and administrative | 6,426,674 | 3,268,260 | ||||
| Research and development | 4,930,495 | 3,250,289 | ||||
| Sales and marketing | 4,663,183 | 2,272,516 | ||||
| Total operating expenses | 16,020,352 | 8,791,065 | ||||
| Income from operations | 6,125,050 | 10,458,759 | ||||
| Other income (expenses): | ||||||
| Interest income and other | 189,832 | 25,152 | ||||
| Interest expense | (138,414) | (225,197) | ||||
| Gain on extinguishment of liabilities | -- | 48,127 | ||||
| Foreign currency transaction gains | 332,251 | 161,574 | ||||
| 383,669 | 9,656 | |||||
| Income before income tax | 6,508,719 | 10,468,415 | ||||
| Income tax benefit | 1,060,000 | 106,870 | ||||
| Net income | 7,568,719 | 10,575,285 | ||||
| Foreign currency translation adjustment | 194,832 | (95,974) | ||||
| Comprehensive income | $ 7,763,551 | $ 10,479,311 | ||||
| Net income per share: | ||||||
| Basic | $ 0.15 | $ 0.23 | ||||
| Diluted | $ 0.15 | $ 0.22 | ||||
| Weighted average shares outstanding: | ||||||
| Basic | 50,554,592 | 46,420,825 | ||||
| Diluted | 50,745,210 | 47,879,856 | ||||
| Artificial Life, Inc. | ||||||
| Consolidated Balance Sheets (Audited) | ||||||
| December 31, 2009 and 2008 | ||||||
| December 31, 2009 | December 31, 2008 | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash | $ 2,356,336 | $ 1,430,578 | ||||
| Trade accounts receivable, net | 9,498,896 | 13,859,315 | ||||
| Trade installment receivable, net | 8,473,270 | -- | ||||
| Prepaid expenses and other | 473,166 | 914,372 | ||||
| Deferred tax asset | 1,000,000 | 500,000 | ||||
| Total current assets | 21,801,668 | 16,704,265 | ||||
| Fixed assets, net | 1,575,531 | 3,140,067 | ||||
| License rights, net | 26,421,105 | 9,617,198 | ||||
| Prepaid expenses, deposits and other assets | 1,325,702 | 828,943 | ||||
| Deferred tax asset | 710,000 | -- | ||||
| 28,456,807 | 10,446,141 | |||||
| TOTAL ASSETS | $ 51,834,006 | $ 30,290,473 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ 2,297,854 | $ 669,745 | ||||
| Accrued expenses and other | 737,128 | 472,813 | ||||
| Income tax payable | 17,394 | 60,000 | ||||
| Note payable – officer/stockholder | 1,606,328 | 737,771 | ||||
| Notes payable – stockholders | 666,667 | 1,000,000 | ||||
| Total liabilities (all current) | 5,325,371 | 2,940,329 | ||||
| Stockholders' equity: | ||||||
| Preferred stock, $.01 par value; 5,000,000 shares authorized, no shares issued and outstanding | -- | -- | ||||
| Common stock, $.01 par value; 130,000,000 shares authorized, 57,411,203 (2009) and 47,724,132 (2008) shares issued and outstanding | 574,111 | 477,241 | ||||
| Additional paid-in capital | 63,006,782 | 51,708,712 | ||||
| Notes receivable from stockholders | (19,577) | (19,577) | ||||
| Accumulated deficit | (17,117,425) | (24,686,144) | ||||
| Accumulated other comprehensive income (loss) | 64,744 | (130,088) | ||||
| Total stockholders' equity | 46,508,635 | 27,350,144 | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 51,834,006 | $ 30,290,473 | ||||
| Artificial Life, Inc. | ||||||
| Consolidated Statements of Cash Flows (Audited) | ||||||
| For the Years Ended December 31, 2009 and 2008 | ||||||
| 2009 | 2008 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ 7,568,719 | $ 10,575,285 | ||||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||
| Depreciation and amortization | 6,016,049 | 2,182,652 | ||||
| Write down of fixed assets and license rights | 826,053 | 263,566 | ||||
| Amortization of discount on notes payable | -- | 99,000 | ||||
| Bad and doubtful debt expenses | 2,636,979 | 731,500 | ||||
| Foreign currency exchange gains | (332,251) | (161,574) | ||||
| Deferred income tax expense (benefit) | (1,210,000) | (166,870) | ||||
| Interest expense accrued on advances from officer / stockholder | 3,185 | 7,727 | ||||
| Stock-based compensation expense | 2,385,500 | -- | ||||
| Gain on extinguishment of liabilities | -- | (48,127) | ||||
| Salary / bonus accrued to officer / stockholder | 837,257 | 320,361 | ||||
| Discount on trade receivable | 347,961 | -- | ||||
| Changes in operating assets and liabilities: | ||||||
| Increase in trade accounts and installment receivables | (21,834,921) | (9,245,652) | ||||
| Increase in prepaid expenses, deposits and other assets | (53,228) | (649,420) | ||||
| Increase (decrease) in accounts payable | 375,470 | (57,245) | ||||
| Increase (decrease) in accrued expenses and other | 262,504 | (639,604) | ||||
| (Decrease) increase in income tax payable | (42,606) | 60,000 | ||||
| Net cash (used in) provided by operating activities | (2,213,329) | 3,271,599 | ||||
| Cash flows from investing activities: | ||||||
| Purchase of fixed assets | (30,127) | (3,060,783) | ||||
| Purchase of license rights | (4,994,029) | (10,012,608) | ||||
| Net cash used in investing activities | (5,024,156) | (13,073,391) | ||||
| Cash flows from financing activities: | ||||||
| Net proceeds from issuance of common stock and warrants | 8,600,590 | 5,278,502 | ||||
| Advances under note payable to officer/stockholder | 202,257 | -- | ||||
| Repayment of note payable to officer/stockholder | (174,142) | (342,176) | ||||
| Repayment of note payable to stockholders | (333,333) | -- | ||||
| Net cash provided by financing activities | 8,295,372 | 4,936,326 | ||||
| Net increase (decrease) in cash | 1,057,887 | (4,865,466) | ||||
| Cash at beginning of period | 1,430,578 | 6,210,435 | ||||
| Effect of exchange rate changes on cash | (132,129) | 85,609 | ||||
| Cash at end of period | $ 2,356,336 | $ 1,430,578 | ||||
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 March 16, 2010. We assume no obligation to update any forward-looking statements, which apply only as of the date of this press release.