UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2003


     [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ___________________  to  _____________

                        Commission file number 000-17053

                              ARTIFICIAL LIFE, INC.
                              ---------------------
             (Exact name of registrant as specified in its charter)

            DELAWARE                                            04-3253298
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

                              Artificial Life, Inc.
                   Lippo Center, Tower 2, Floor 22, Suite 2207
                                    Admiralty
                                    Hong Kong
                    (Address of principal executive offices)

                                (+852) 2530 8803
                            Issuer's telephone number

                                 NOT APPLICABLE.
              (Former name, former address and former fiscal year,
                          if changed since last report)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [_]

State the number of shares of each of the Issuer's classes of common equity, as
of the latest practicable date: As of August 8, 2003, there were 13,550,502
shares of Common Stock, $.01 par value per share, outstanding.

Transitional Small Business Disclosure Format (Check one):  Yes [_] No [X]

<PAGE>

                              ARTIFICIAL LIFE, INC.
              INDEX OF INFORMATION CONTAINED IN FORM 10-QSB FOR THE
                           QUARTER ENDED JUNE 30, 2003
<TABLE>
<CAPTION>
                                                                                                                   PAGE
                          PART I-FINANCIAL INFORMATION                                                             ----

Item 1 - Financial Statements (Unaudited)
<S>                                                                                                                  <C>
         Condensed Consolidated Balance Sheet at June 30, 2003.......................................................3
         Condensed Consolidated Statements of Operations for the
                 Three Months and Six Months Ended June 30, 2003 and June 30, 2002...................................4
         Condensed Consolidated Statements of Cash Flows for the Six Months Ended..
                 June 30, 2003 and June 30, 2002.....................................................................5
         Notes to Condensed Consolidated Financial Statements........................................................6

Item 2 - Management's Discussion and Analysis of Financial Condition
                 and Results of Operations...........................................................................8
Item 3 - Controls and Procedures.....................................................................................10

                           PART II - OTHER INFORMATION


Item 1 - Legal Proceedings...........................................................................................11

Item 2 - Changes in Securities.......................................................................................11

Item 3 - Defaults Upon Senior Securities.............................................................................11

Item 4 - Submission of Matters to a Vote of Security Holders.........................................................11

Item 5 - Other Information...........................................................................................11

Item 6 - Exhibits and Reports on Form 8-K............................................................................12

Signatures...........................................................................................................13

Certification........................................................................................................14
</TABLE>


<PAGE>

                          PART I FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                              ARTIFICIAL LIFE, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2003
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                         Six-month Period Ended
                                                                                                 June 30,
                                                                                                 -------

                                     ASSETS
<S>                                                                                           <C>
Current assets:
Stock subscription receivable                                                                 $   105,000
                                                                                              -----------
        Total current assets                                                                      105,000
                                                                                              -----------

Other assets:
Deposits and other assets                                                                           9,825
                                                                                              -----------

TOTAL ASSETS                                                                                   $  114,825
                                                                                              ===========

                       LIABILITIES & STOCKHOLDERS' DEFICIT

Current liabilities:
Accounts payable                                                                              $ 1,740,968
Note payable - officer/stockholder                                                              1,635,488
Accrued expenses                                                                                  327,816
                                                                                              -----------
        Total current liabilities                                                               3,704,272
                                                                                              -----------

Stockholders' equity (deficit):
Preferred stock, $.01 par value; 5,000,000 shares authorized,
         no shares issued and outstanding
Common stock, $.01 par value; 30,000,000 shares authorized,
         13,550,502 shares issued and outstanding                                                 135,505
Additional paid-in capital                                                                     26,964,896
Stock subscription receivable                                                                    (80,000)
Notes receivable from stockholders                                                               (19,577)
Accumulated deficit                                                                          (30,590,271)
                                                                                             ------------
        Total stockholders' equity (deficit)                                                  (3,589,447)
                                                                                             ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                         $    114,825
                                                                                             ============
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.

                                       3
<PAGE>


                              ARTIFICIAL LIFE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                    Three-month Period Ended                 Six-month Period Ended
                                                           June 30,                                 June 30,
                                                          ----------                               ----------
                                                      2003           2002                         2003        2002
<S>                                            <C>              <C>                         <C>          <C>
Revenues:
Software license agreements                     $         --    $   800,000                 $        --  $1,550,000
Application services and other                            --         72,500                       3,400     127,500
                                                ------------    -----------                 -----------  ----------
                                                          --        872,500                       3,400   1,677,500
                                                ------------    -----------                 -----------  ----------
Operating expenses:
General and administrative                            29,971        162,350                     108,645     339,017
Engineering and cost of sales                             --        185,543                          --     387,448
Research and development                              48,313         23,194                      73,057      48,433
Sales and marketing                                      500         92,771                       1,400     193,723
                                                ------------    -----------                 -----------  ----------
Total operating expenses                              78,784        463,858                     183,102     968,621
                                                ------------    -----------                 -----------  ----------
(Loss) income from operations                       (78,784)        408,642                   (179,702)     708,879

Other income (expenses):
Interest income                                           --          4,828                          --       7,627
Interest expense                                    (20,204)       (26,053)                    (40,460)     (51,820)
Other                                                  2,112             --                       2,112          --
                                                ------------    -----------                 -----------  ----------

Net (loss) income                               $   (96,876)  $     387,417               $   (218,052)  $  664,686
                                                ============  =============               =============  ===========

Net (loss) income per share
       Basic                                    $     (0.01)   $       0.04               $      (0.02)  $     0.06
                                                ============  =============               =============  ===========
       Diluted                                  $     (0.01)   $       0.03               $      (0.02)  $     0.05
                                                ============  =============               =============  ===========

Weighted average shares outstanding:
       Basic                                      12,372,890     10,950,451                  12,231,112  10,940,705
                                                ============  =============               =============  ===========
       Diluted                                    12,372,890     12,891,646                  12,231,112  12,871,140
                                                ============  =============               =============  ===========
</TABLE>

See accompanying notes to unaudited condensed consolidated financial statements.


                                       4
<PAGE>


                              ARTIFICIAL LIFE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                     Six-month Period Ended
                                                                                            June 30,
                                                                                            ---------
                                                                                   2003                2002
<S>                                                                             <C>                 <C>
Cash flows from operating activities:
Net (loss) income                                                               $   (218,052)       $    664,686
Adjustments to reconcile net (loss) income to net cash used by
        operating activities:
Depreciation and amortization                                                             --             211,656
Interest income accrued on notes receivable from stockholders                             --             (3,264)
Interest expense accrued on advances from officer/stockholder                         40,460              51,820
Decrease in accounts receivable, other                                                22,000                  --
(Increase) in accounts receivable, trade                                                  --         (1,374,363)
(Increase) decrease in prepaid expenses and other assets                               2,038              63,604
Increase in accounts payable and accrued expenses                                     10,278             231,480
Increase in due to/from officer/stockholder                                           25,000                  --
                                                                                ------------        ------------
Net cash used by operating activities                                              (118,006)           (154,381)
                                                                                ------------        ------------
Cash flows from financing activities:
Proceeds from issurance of common stock, net                                          65,000                  --
Advances from officer/stockholder                                                     75,378             139,615
Payments on advance from officer/stockholder                                        (22,400)           (121,318)
Proceeds from notes receivable stockholders                                               --             126,000
                                                                                ------------        ------------
Net cash provided by financing activities                                            117,978             144,297
                                                                                ------------        ------------

Effect of exchange rate changes on cash                                                   --                  --
                                                                                ------------        ------------

Net decrease in cash and cash equivalents                                               (28)            (10,084)
Cash and cash equivalents and beginning of period                                        28              10,112
                                                                                ------------        ------------
Cash and cash equivalents at end of period                                      $        --         $         28
                                                                                ============        ============

Supplemental disclosure of non-cash financing activities:
      Stock subscriptions receivable (payment received on July 22, 2003)        $    105,000
                                                                                ============
      Stock subscriptions receivable                                            $     80,000
                                                                                ============

See accompanying notes to unaudited condensed consolidated financial statements.
</TABLE>


                                       5
<PAGE>

                              ARTIFICIAL LIFE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   BASIS OF PRESENTATION

The accompanying un-audited condensed consolidated financial statements of
Artificial Life, Inc. (the "Company") have been prepared in accordance with
generally accepted accounting principles in the United States of America for
interim financial information and in accordance with the instructions to Form
10-QSB and Regulations S-B. Accordingly, they do not include all information and
footnotes required by generally accepted accounting principles for complete
financial statement presentation. The consolidated financial statements include
the accounts of the Company, and it's wholly owned subsidiaries: Artificial Life
Ventures, Inc. ("Artificial Life Ventures"), Artificial Life USA, Inc.
("Artificial Life USA"), Artificial Life Mobile Computing, Inc. ("Artificial
Life Mobile Computing") and Artificial Life Asia Limited ("Artificial Life
Asia"). All significant inter-company balances and transactions have been
eliminated in consolidation.

The financial information included in this report has been prepared in
conformity with the accounting policies reflected in the financial statements
included in the Company's Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission.

2.   NET INCOME (LOSS)

The Company incurred a net loss of $2,034,682 in 2002. As of June 30, 2003, the
Company had a working capital deficiency of $3,599,272 and a stockholders'
deficit of $3,589,447. During the six months ended June 30, 2003, the Company
generated a net loss of $218,052 and used $118,006 of cash in operating
activities. Without continuing to improve profitability, generating cash from
operations and/or obtaining additional financing or capital, the Company may not
have sufficient resources to fund its operations. Management is pursuing
financing opportunities to meet anticipated liquidity needs; however there is no
assurance that these activities will be successful.

These factors raise a substantial doubt about the Company's ability to continue
as a going concern. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

3.   NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is calculated based on the weighted average
number of common shares outstanding for the three month period ended June 30,
2003. Diluted earnings per share reflects additional common shares that would
have been outstanding if dilutive potential common shares had been issued, as
well as any adjustment to income that would result from the assumed issuance.
Potential common shares that may be issued by the Company relate to outstanding
stock options and warrants, and are determined using the treasury stock method.
Basic and diluted net loss per share are the same for the three months ended
June 30, 2003 since the effect of inclusion of all outstanding options and
warrants would be anti-dilutive. Diluted earnings per share for the three and
six months ended June 30, 2002 includes outstanding options and warrants.

4.   INCOME TAXES

There is no provision for income taxes for the three months ended June 30, 2003
and June 30, 2002, as the Company incurred a loss during the three months ended
June 30, 2003 and income for the three months ended June 30, 2002 was offset by
net operating loss carry forwards. At December 31, 2002, the Company had
approximately $24,000,000 of federal and state net operating loss carry forwards
expiring through 2021 and 2006, respectively. The net operating loss carry
forwards may be subject to annual limitations based on ownership changes in the
Company's common stock as provided by in Section 382 of the Internal Revenue
Code.

5.   ADVANCES FROM SHAREHOLDER

At June 30, 2003 the Company owed its Chief Executive Officer $1,635,488, which
increased by $34,306 for the three months ended June 30, 2003 (including accrued
interest of $20,203 and accrued salary of $12,500). The advances bear interest
at a rate of 5% per year, are unsecured and are due on demand. The loan from the
CEO to the Company has been converted into an obligation with a 6-month
cancellation notice period.

6.   SEGMENT INFORMATION

The Company markets and supports "intelligent software robots," software
programs, and related intellectual property, that the Company has designed to
automate and simplify time-consuming and complex business-related Internet
functions. The Company believes that it currently operates in one business
segment: intelligent agents/smart bots.


                                       6
<PAGE>


7.   SIGNIFICANT CONCENTRATION OF CREDIT RISK

The Company grants credit, generally without collateral, to its customers.

8.   CONTINGENCY


In June 2001, Artificial Life Deutschland AG, a former subsidiary of the
Company, entered into bankruptcy and dissolution proceedings. The Company
believes that no further liabilities will be incurred by it in connection with
its German subsidiary bankruptcy. However the ultimate outcome of these filings
cannot be determined at this time. No provision has been made for any additional
liabilities, which may be incurred.

9.   SALES OF COMMON STOCK

On May 14, 2003 the Company sold 433,333 shares of common stock to a private
investor for the amount of $65,000, at $0.15 per share.

On June 26, 2003 the company sold 1,029,411 shares of common stock for $185,000,
to two institutional and one individual investor. In connection with the sales
of the shares, the Company granted options to purchase an additional 2,000,000
shares of common stock for a strike price of $0.05 a share with a six months
vesting period and options to purchase 235,294 shares of common stock for a
strike price of $0.17 a share with immediate vesting. $105,000 was received in
July 2003 and has been recorded as a current asset. The remaining $80,000 has
been recorded as a contra-equity, pending receipt of the cash.

10.  STOCK BASED COMPENSATION AND EARNINGS PER SHARE

The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for its stock-based
employee compensation plans. Accordingly, no compensation expense has been
recognized for options granted to employees at fair market value. The following
table illustrates the effect on net income (loss) and income (loss) per share if
the Company had applied the fair value recognition provisions of FASB Statement
No. 123, Accounting for Stock-Based Compensation to its stock-based employee
plans.
<TABLE>
<CAPTION>
                                            Three Months             Six Months
                                           Ended June 30,          Ended June 30,
                                      ----------------------  ------------------------
                                         2003        2002        2003          2002
                                      ----------  ----------  ----------   -----------
<S>                                   <C>          <C>        <C>          <C>
Net (loss) income, as reported        $ (96,876)   $387,417   $(218,052)   $   664,686
Deduct:  Total stock-based employee
compensation expense determined
under fair value based method           (17,500)    (10,000)    (17,500)       (10,000)
                                      ----------  ----------  ----------   -----------

Pro forma net income (loss)           $(114,376)   $377,417   $(235,552)   $   654,686
                                      ==========   =========  ==========   ============
Earnings (loss) per share:

          Basic - as reported         $   (0.01)   $   0.04   $   (0.02)   $      0.06
                                      =========    ========   =========    ===========
          Diluted - as reported       $   (0.01)   $   0.03   $   (0.02)   $      0.05
                                      =========    ========   =========    ===========

          Basic - pro forma           $   (0.01)   $   0.03   $   (0.02)   $      0.06
                                      =========    ========   =========    ===========
          Diluted - pro forma         $   (0.01)   $   0.03   $   (0.02)   $      0.05
                                      =========    ========   =========    ===========
</TABLE>

300,000 options granted in the three-month period ended June 30, 2002 were
forfeited in the same period. 100,000 options granted in the three-month period
ended June 30, 2002 were forfeited in January 2003.


                                       7
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

GENERAL

The following Management's Discussion and Analysis of our Financial Condition
and Results of Operations should be read in conjunction with our financial
statements and the related notes included elsewhere in this Quarterly Report on
Form 10-QSB. This discussion contains, in addition to historical statements,
forward-looking statements that involve risks and uncertainties. Our actual
results could differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include the factors discussed in the section titled "Risk Factors"
as well as other factors described in our Annual Report on Form 10-KSB for the
year ended December 31, 2002. We do not intend to update any such
forward-looking statements.

INTRODUCTION

OVERVIEW

In May 2002 the Company moved its executive offices to Asia (Hong Kong). The
purpose of this move was the Company's plan to focus on the Asian markets. The
Company expects to do business in Asia especially in Hong Kong, Greater China,
Singapore, Japan, and Korea, seeking to leverage the unique features of its core
Smart Engine (TM) language processing technology that allows applications in all
major Asian languages. The business focus is expected to be on financial service
applications, e-learning, bio computing and mobile computing as the Asian
markets for these applications are expected to grow.

The Company plans an expansion to Singapore and to establish a new subsidiary in
2004 that will focus on bio computing applications in Singapore. However, the
nature and extent of this planned expansion is contingent on the availability of
new funds to finance the expansion.

In the first quarter of 2003 the Company launched a new life science and
distributed computing web-service at www.epidemic-alerts.com to help to
understand and fight the SARS (severe acute respiratory syndrome) disease. The
Company intends to develop further life science and bio computing applications
in the future. However, there can be no assurance that the Company will be able
to raise sufficient funds on acceptable terms to finance these activities and
the planned re-expansion.

In the quarter ended June 30, 2003, the company generated no revenues. The sole
focus of efforts in this quarter was the production and preparation for release
in the third and fourth quarter of 2003 of a series of new products and
applications especially for the mobile computing markets in Asia.

We incurred aggregate losses of $30,590,271 through the end of the second
quarter of 2003.

Our accumulated losses have severely impacted our liquidity and cash position
which, in turn, have significantly impeded our ability to fund our operations.
Consequently, in connection with our Annual Reports on Form 10-K and 10-KSB for
the fiscal years ended December 31, 2000, 2001 and 2002 the opinion of our
independent certified public accountants stated that there was substantial doubt
about our ability to continue as a going concern. As of June 30, 2003, we had
total assets of $114,825 and total liabilities of $3,704,272. As of June 30,
2003, current assets were $105,000, and current liabilities were $3,704,272.

In the third quarter of 2002 the Company resumed some of its R&D efforts to
enhance its existing product line and to develop new mobile applications and
modules. The Company currently develops new products for Asian language based
e-learning and entertainment applications and mobile games. As the Company has
only limited human resources at the current time the Company expects that the
resumed R&D efforts will have a negative impact on current and expected sales as
human resources from sales and business development have been re-assigned to
work on product enhancement and product design and development. The Company also
expects a certain un-specifiable time delay between the production of the new
products and services and the generation of revenues based on these new
products. There can also be no guarantee that the new products and services will
contribute substantially to future revenues of the Company.

In light of our restructuring and the resumption of R&D efforts, results of
operations to date are not indicative of our future results of operation.
Moreover, we expect to experience significant fluctuations in our future
operating results due to a variety of factors. Factors that may affect our
operating results include the recovery of the global internet markets, the
general market acceptance of our products, our ability to sell and license our
intellectual property, the amount of software consulting we undertake in the
future, success in creating and entering into strategic alliances, our mix of
product and service sales, our response to competitive pressure, our ability to
attract and retain qualified personnel, our ability to execute business in the
Asian markets and the relocation of our headquarters to Hong Kong. Gross profit
margins will vary from product to product and between products and services. Our
sales mix may vary from period to period and our gross margins will fluctuate
accordingly.


                                       8
<PAGE>

In addition to our restructuring efforts, we are seeking additional financing to
increase liquidity and capital resources. If we are unable to obtain additional
financing, this will have a material adverse effect on our business.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2003 COMPARED TO THREE MONTHS ENDED JUNE 30, 2002

REVENUES: Revenues for the quarter ended June 30, 2003 were $0 as compared to
$872,500 for the quarter ended June 30, 2002. The decrease of revenues of
$872,500 was primarily due to the shift to new products and applications in
2003, the allocation of human resources to R&D and the corresponding necessary
reduction of sales efforts.

GENERAL AND ADMINISTRATIVE: General and administrative expenses consist of
salary and payroll tax expenses of administrative personnel, rent, professional
fees and costs associated with employee benefits, supplies, communications and
travel. General and administrative expenses for the quarter ended June 30, 2003
were $29,971 as compared to $162,350 for the quarter ended June 30, 2002. The
decrease of $132,379 was due primarily to reduction of administrative overhead
and lower cost basis.

ENGINEERING AND COST OF SALES: These costs generally consist of salary and
payroll tax expenses, training, consulting, subcontracting and other expenses
incurred to develop and fulfill the engineering (design specifications) of the
products and services from which we derive our revenues. Engineering expenses
for the quarter ended June 30, 2003 were $0 as compared to $185,543 for the
quarter ended June 30, 2002. The decrease of $185,543 was primarily due to
shifting of the human resources towards research and development.

RESEARCH & DEVELOPMENT: Research and development expenses are similar in nature
to engineering expenses, but they relate to products in their initial stage and
are anticipated to generate revenue at a later date. Research and development
expenses for the quarter ended June 30, 2003 were $48,313 as compared to $23,194
for the quarter ended June 30, 2002. The increase of $25,119 is due to
additional human resources for R&D.

SALES AND MARKETING: Sales and marketing expenses consist of salary and payroll
tax expenses of sales and marketing personnel, costs relating to marketing
materials, advertising, trade show related expense and public relations
activities. Sales and marketing expenses for the quarter ended June 30, 2003
were $500 as compared to $92,771 for the quarter ended June 30, 2002. The
decrease of $92,271 was primarily due to no sales and very limited marketing
activities during the quarter.

NET INCOME (LOSS): As a result of the foregoing, the net loss for the quarter
ended June 30, 2003 was $96,876 as compared to a profit of $387,417 for the
quarter ended June 30, 2002. The generation of losses is mainly due to the
resumption of R&D efforts, new developments for life science and mobile
computing and reduced sales due to a re-allocation of human resources to R&D.
The basic net income (loss) per share for the first quarter of 2003 was ($0.01)
as compared to $0.04 for the quarter ended June 30, 2002.

SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002

REVENUES: Revenues for the six months period ended June 30, 2003 were $3,400 as
compared to $1,677,500 for the six months period ended June 30, 2002. The
decrease of $1,674,100 was primarily due to reduced sales force, the effects of
the SARS diseases in the first quarter of 2003 and the re-allocation of human
resources to new product development.

GENERAL AND ADMINISTRATIVE: General and administrative expenses consist of
salary and payroll tax expenses of administrative personnel, rent, professional
fees and costs associated with employee benefits, supplies, communications and
travel. General and administrative expenses for the six months period ended June
30, 2003 were $108,645 as compared to $339,017 for the six months period ended
June 30, 2002. The decrease of $230,372 was due primarily to a reduction of
administrative overhead and reduced cost basis.

ENGINEERING AND COST OF SALES: These costs generally consist of salary and
payroll tax expenses, training, consulting, subcontracting and other expenses
incurred to develop and fulfill the engineering (design specifications) of the
products and services from which we derive our revenues. Engineering expenses
for the six months period ended June 30, 2003 were $0 as compared to $387,448
for the six months period ended June 30, 2002. The decrease of $387,448 was
primarily due to shifting of human resources towards research and development.

RESEARCH & DEVELOPMENT: Research and development expenses are similar in nature
to engineering expenses, but they relate to products in their initial stage and
are anticipated to generate revenue at a later date. Research and development
expenses for the six months period ended June 30, 2003 were $73,057 as compared
to $48,433 for the six months period ended June 30, 2002. The increase of
$24,624 was primarily due to additional human resources for R&D.


                                       9
<PAGE>

SALES AND MARKETING: Sales and marketing expenses consist of salary and payroll
tax expenses of sales and marketing personnel, costs relating to marketing
materials, advertising, trade show related expense and public relations
activities. Sales and marketing expenses for the six months period ended June
30, 2003 were $1,400 compared to $193,723 for the six months period ended June
30, 2002. The decrease of $192,323 was primarily due to low sales and very
limited marketing activities.

NET INCOME (LOSS): The net loss for the six months period ended June 30, 2003
was $218,052 as compared to a profit of $664,686 for the six months period ended
June 30, 2002. The generation of losses is mainly due to the resumption of R&D
efforts, new developments for life science and mobile computing and reduced
sales due to a re-allocation of human resources to R&D. The basic net loss per
share for the period ended June 30, 2003 was ($0.02) as compared to a basic net
income of $0.06 per share for the six months ended June 30, 2002.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2003, we had a working capital deficit of $3,599,272 and a
stockholders' deficit of $3,589,477.

In order to fund our cash needs we have borrowed funds from time to time from
our chief executive officer, Eberhard Schoeneburg. As of June 30, 2003 we owed
our CEO an aggregate of $1,635,448. The advanced funds bear interest at a rate
of 5% per year, are unsecured and are due with 6 months notice. In addition, as
a result of our current liquidity shortfall and current economic conditions,
effective January 1, 2003 Mr. Schoeneburg has voluntarily reduced his salary to
$50,000 per year and deferred the payments to him.

 On May 14, 2003 the Company sold 433,333 shares of common stock to a private
investor for the amount of $65,000, at $0.15 per share.

On May 14, 2003 the Company reduced the annual salary of its CEO and Chairman
Eberhard Schoeneburg to $50,000 (fifty thousand) per year effective as of
January 1 , 2003.

On May 14, 2003 the Company reduced the interest rate on the loan granted from
its CEO and Chairman Eberhard Schoeneburg to the Company from 10% per year to 5%
per year effective as of January 1, 2003.

On June 26, 2003 the company sold 1,029,411 shares of common stock for $185,000,
to two institutional and one individual investor. In connection with the sales
of the shares, the Company granted options to purchase an additional 2,000,000
shares of common stock for a strike price of $0.05 a share with a six months
vesting period and options to purchase 235,294 shares of common stock for a
strike price of $0.17 a share with immediate vesting. $105,000 was received in
July 2003 and has been recorded as a current asset. The remaining $80,000 has
been recorded as a contra-equity, pending receipt of the cash.

Accounts payable and accrued expenses as of June 30, 2003 were $2,068,784.

Without operating on a profitable basis, generating cash from operations and/or
obtaining additional financing or capital, we will not have sufficient resources
to fund our operations. We are continuing to pursue financing opportunities to
meet our anticipated liquidity needs. We cannot be sure that we will be able to
obtain the necessary financing on acceptable terms, or at all, or that any
financing will be adequate to meet our working capital needs.

These factors create a substantial doubt about our ability to continue as a
going concern. The accompanying financial statements do not include any
adjustments that might come from the outcome of this uncertainty.

ITEM 3. CONTROLS AND PROCEDURES

On August 1, 2003 ("Evaluation Date"), the Company's management concluded its
evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. As of the Evaluation Date, the Company's
Chief Executive Officer and Principal Financial Officer concluded that the
Company maintains disclosure controls and procedures that are effective in
providing reasonable assurance that information required to be disclosed in the
Company's reports under the Securities Act of 1934 (Exchange Act) is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated and communicated
to the Company's management, including its Chief Executive Officer and Principal
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. The Company's management necessarily applied its judgment in
assessing the costs and benefits of such controls and procedures, which, by
their nature, can provide only reasonable assurance regarding management's
control objectives. There have been no significant changes in the Company's
internal controls or in other factors that could significantly affect these
controls subsequent to the Evaluation Date.


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<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

On June 8, 2001, we filed for bankruptcy protection for Artificial Life
Deutschland in the Insolvenzgericht Frankfurt. As of the date of the bankruptcy
filing, Artificial Life Deutschland owed $543,010 including funds owed to
Dresdner Bank pursuant to a bank overdraft line and funds owed to other
creditors. These proceedings are currently still pending.

On September 5, 2001 Copley Place Associates filed suit against the Company
alleging that the Company breached its commercial lease by vacating its former
Boston, Massachusetts corporate headquarters prior to the expiration of the
lease term. Copley Place Associates has alleged damages of approximately
$585,000 and the court granted their motion for summary judgment on March 4,
2002. Damages assessed by the court in July 2002 have confirmed the summary
judgment. The Company has offered Copley Place Associates a complete settlement
of the matter for $50,000. No final settlement has been achieved. The Company
has accrued $100,000 in connection with this matter.

In connection with claims for certain unpaid wages and vacation pay made by
former employees of its former U.S. operations, the Company has originally
accrued $150,000 representing the maximum amount of damages claimed by former
employees. Although certain of these employees of the Company's U.S. operations
have filed claims for unpaid wages and vacation pay with the Office of the
Attorney General of the Commonwealth of Massachusetts, to the Company's
knowledge, as of August 1, 2002, no suits had been filed. On July 23, 2002, a
hearing on these claims was held before an Administrative Law Magistrate. The
potential liability for these asserted claims has been reduced by the Magistrate
to approximately $108,000 and the accrual in our books has been reduced
accordingly. After conducting the hearing the Administrative Law Magistrate
confirmed the claims. On September 10, 2002, the Attorney General has filed a
tax lien for the amount of $108,015. The Company has tried to negotiate
individual settlement agreements during 2002 und the first quarter of 2003 with
its former employees but does not assume that such negotiations will eventually
be successful.

It is possible that we may become a party to legal proceedings arising from the
settlement of our outstanding liabilities.

ITEM 2 - CHANGES IN SECURITIES

On May 14, 2003 the Company sold 433,333 shares of common stock to a private
investor for the amount of $65,000, at $0.15 per share.

On May 14, 2003 the Company granted its board members Dr. Gert Hensel and
Claudia Alsdorf options according to the Company's stock option incentive plan
to purchase each 50,000 common stock of the company for a strike price of $0.15
a share. The options are immediately exercisable and vest over 2 years.

On May 14, 2003 the Company granted its consultant and advisor Tim Bardwell
options according to the Company's stock option incentive plan to purchase
50,000 common stock of the Company for a strike price of $0.15 a share. The
option is immediately exercisable and vests over 2 years.

On June 26, 2003 the company sold 1,029,411 shares of common stock for $185,000
to two institutional and one individual investor. In connection with the sales
of the shares the Company granted options to purchase an additional 2,000,000
shares of common stock for a strike price of $0.05 a share with a six months
vesting period, and options to purchase 235,294 shares of common stock for a
strike price of $0.17 a share with immediate vesting.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

On June 8, 2001, our subsidiary Artificial Life Deutschland AG filed for
bankruptcy protection in the Insolvenzgericht Frankfurt, Germany. As of the date
of the bankruptcy filing, Artificial Life Deutschland AG owed $543,010 including
funds owed to Dresdner Bank pursuant to a bank overdraft line and funds owed to
other creditors. These proceedings are currently still pending.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5 - OTHER INFORMATION


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<PAGE>

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits:


         31.1  Certification by Chief Executive Officer and Principal Financial
               Officer pursuant to Rule 13A-15E or 15D-15E of the Securities
               exchange Act of 1934
         32.1  Certification by Chief Executive Officer and Principal Financial
               Officer pursuant to 18 U.S.C 1350

         (b)   Reports on Form 8-K:


         There were no reports on Form 8-K filed in the three months ended
June 30, 2003.


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<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                              ARTIFICIAL LIFE, INC.


Date: August 19, 2003        By: /s/ Eberhard Schoeneburg
                                -------------------------
                             Name: Eberhard Schoeneburg
                             Title:  Chief Executive Officer and
                             Principal Financial Officer


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