Artificial Life (ALIF) Red Flags Accounting

Today's news is not good for the company.

Transition report cannot be filed within the prescribed time period

KPMG resigns

On March 18, 2011, the audit committee of Artificial Life, Inc. (the “Company”) approved the dismissal of KPMG as the Company’s principal accountant effective March 30, 2011.

KPMG has not issued a report on the financial statements of the Company in either of the two most recent fiscal years.

KPMG was engaged by the Company on April 13, 2010. During the Company’s fiscal year ended December 31, 2010, and the subsequent interim period through the date of KPMG’s dismissal, there were no disagreements between the Company and KPMG on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of KPMG, would have caused KPMG to make reference to the subject matter of the disagreement in its report on the Company’s consolidated financial statements, and there were no reportable events as that term is described in Item 304(a)(1)(v) of Regulation S-K, except as set out below.

During the course of the audit of the Company’s financial statements for the fiscal year ended December 31, 2010, KPMG identified a number of accounting matters that would have prevented KPMG from rendering an unqualified opinion if the issues were not resolved. After KPMG notified the Company of such matters, the Company provided KPMG with various detailed assessments. In late March 2011, there were discussions between the Company, its audit committee and KPMG in connection with these matters, which principally related to: accounting for a Joint Venture agreement, reserves for accounts receivables, revenue recognition and impairment of license rights related to its 2010 fiscal year. These issues remained unresolved at the end of KPMG’s engagement.

The Company has provided KPMG with a copy of the foregoing statements and has requested that KPMG promptly furnish it with a letter addressed to the Securities and Exchange Commission stating that KPMG agrees with the Company’s statements in this Item 401(a). A copy of KPMG’s letter stating its agreement with such statements is attached as Exhibit 16.1. The Company has authorized KPMG to respond to inquiries of the successor accountant concerning the matters set forth above.

Artificial Life (ALIF) is securitizing their receivables. Selling receivables enables the firm to collect cash sooner, but the firm collects less cash because they are sold at a discount. Clearly a RED FLAG. The Next Fraud?