Artificial Life Wins New Contract/Finishes Consolidation

Artificial Life Inc, a leading provider of intelligent software bots for Internet and desktop applications announced that it has won a new contract and sold several product licenses to develop a bot-based interface for an upcoming US healthcare portal. The Company has also announced that it has successfully finished its restructuring and consolidation program. Global expenses have been reduced by over 90%.

The Company announced that it will begin to re-hire personnel for its New York headquarters to fulfill the new and additional pending contractual obligations. The Company has agreed in principle to several new major contracts and license transactions.

"We are excited about the fact that our customers have remained confident in our Company and products during the recent difficult period and are now developing even stronger commitments to us. We are able to win new clients again! The last twelve months and especially the first half of this year were very tough for the whole Internet industry and us. We where forced to finance operations exclusively out of our own limited cash flow. The downturn of the Internet market and the global stock markets forced the re-structuring of our operations and the focus on the profitable operational entities and the cut back of unnecessary expenses. We have learned our lesson and completed the necessary turn-around towards profitability. It is good to see that the global markets for bot products are slowly recovering. Major clients are coming back with project offers and requests for license transactions. Our award winning products are becoming an enabling technology for a wide variety of new Internet and desktop applications," said Eberhard Schoeneburg, CEO and Chairman of Artificial Life.

"The restructuring of Artificial Life is now complete and has been very successful. We were able to reduce operational expenses on a global scale without jeopardizing our client support. Costs of operations are down now by over 90%. The new focus on the American and Asian markets was the right move. The shut down of the European non- profitable operations was a tough decision but the right one. We will take all necessary write-offs in Q2 of this year reflecting the closing or bankruptcy of the European subsidiaries. However, the goal for Artificial Life has always been to be profitable in the second half of 2001. Considering the current favorable and strongly reduced cost structure and the new pending contracts and license sales we believe we will be able to achieve this goal in Q3, 2001" said P. Chin Lim, CFO of Artificial Life.

About Artificial Life

Founded in 1994, Artificial Life Inc develops, markets, licenses and supports intelligent software programs for Internet and desktop applications based on artificial intelligence and artificial life research, methods and algorithms. The company offers unique software robots ("bots")-based products for customer service, e-finance, consultative selling, Web-based learning, Web site navigation, automated e-mail response, and financial portfolio management. Major customers of Artificial Life include, among others, PricewaterhouseCoopers, Credit Suisse First Boston, UBS, Advance Bank, Eagle Star, Pioneer Investments, ZDF, GZS, LGT, and MobilCom.

Artificial Life Inc is headquartered in New York City, NY, U.S.A, and maintains a subsidiary in Hong Kong. Detailed information about Artificial Life Inc and its products is available at www.artificial-life.com.

Contact Eberhard Schoeneburg, CEO and Chairman of Artificial Life Inc, 617- 266-5542.