ALIF Artificial Life Inc (CE)

Artificial Life, Inc. (OTCPK:ALIF), an innovative investment company, announced today that it and its subsidiaries, Artificial Life Asia Ltd. and Artificial Life Europe GmbH (collectively, "Company") have filed a malpractice lawsuit with the High Court of Hong Kong against KPMG Hong Kong and two of its senior partners. The legal action of the Company was unanimously supported by its board and independent audit committee.

The Company claims that KPMG Hong Kong and two of its senior partners breached their contractual audit obligations under a signed engagement letter during their assignment as Company auditors during 2010 and 2011 until  the termination of their engagement. The Company claims that they are guilty of serious malpractice during their assignment in breach of their contractual duties to the Company and are guilty of a breach of their general duty of care.

The Company also claims that KPMG Hong Kong incorrectly overcharged and overstated invoices for services rendered to the Company during the audit assignment. Despite several written requests, KPMG Hong Kong has – until today - refused even to provide substantiating detailed narratives of the work which it claims to have carried out during the assignment, leaving the Company with no alternative but to question the overall correctness and legitimacy of the audit charges which KPMG has billed to the Company.  

The Company currently estimates and assesses the damage and potential damage caused to the Company by KPMG Hong Kong to exceed US$ 100 million due to – amongst other factors – the loss of substantial market value of its equity, the forced delisting of its shares from the US OTC market and the German Entry Standard Segment, its loss of major cash funding options, its loss of investment opportunities, its loss of revenues and profits and its general loss of business opportunities and general reputation damage caused directly and/or indirectly by KPMG Hong Kong's malpractice, breach of contract and breach of duty of care.

The Company also announced that it has made a formal complaint about KPMG Hong Kong and certain of its senior managers to the HKICPA (Hong Kong Institute of Certified Public Accountants), the oversight board of accounting firms in Hong Kong which is currently conducting an investigation of the case.

The Company has also reported KPMG Hong Kong and certain of its senior managers to the responsible law enforcement agency in Hong Kong.

The Company also announced that several of its major shareholders are preparing an additional class-action lawsuit against KPMG in the USA. These shareholders are currently preparing such a class-action and have asked the Company to assist them in the preparation of this class-action.

The Company therefore asks all of its shareholders who have suffered losses since the termination of KPMG Hong Kong  after 7 April 2011 and who want to join the class-action against KPMG in the US to contact the Company at: ir@artificial-life.com. The Company will keep shareholders regularly updated about the status of the intended  class-action and about the progress of the legal proceedings against KPMG Hong Kong.

"In over 25 years  of  acting as Chairman, CEO and CFO of several companies on three continents, I have never had to deal with such unprofessional auditors as those at KPMG Hong Kong. In my own personal opinion, their audit team and management engaged in our audit are not only incompetent, but also – and this is the worst part insofar as I am concerned - very arrogant and ignorant towards smaller clients like us.  We have proposed amicable out of court settlements several times, but KPMG Hong Kong has ignored us and our concerns for months, just as it repeatedly did during the audit assignment. Therefore, we have had no other choice but to sue KPMG Hong Kong and its senior managers to finally enforce our legal rights. The Writ we have filed today claims that KPMG Hong Kong's conduct has caused substantial harm to our company and our shareholders, has cut us off from several funding options and has triggered the collapse of our stock price since the termination of the audit engagement. We will now seek to enforce our rights and interests against KPMG Hong Kong to their fullest extent by claiming substantial damages, costs and interest so as to repair the damage done to us by our former auditors," said Eberhard Schoneburg, CEO of Artificial Life, Inc.

About Artificial Life, Inc.

Artificial Life, Inc. is a new kind of investor. We act as a global incubator and business network provider and facilitator for our investment companies, assisting them in their funding efforts, sales, production, and general business development activities. When needed, we also inject our valuable intellectual property into our investment companies for their use. 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. We have won many industry awards for outstanding technology and products in prior years.

Artificial Life, Inc. is a Delaware registered corporation founded in 1994 in Boston. We are a public US entity (OTCPK:ALIF). Our global headquarters is in Hong Kong.

For more information on Artificial Life, Inc., please visit: www.artificial-life.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: 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:
         Tel: (+852) 3102 2800
         ir@artificial-life.com