----

----

| T | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|-----------------------------------------------------------------------------------|

| £ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
|--------|-----------------------------------------------------------------|

| WISCONSIN                                                      |   | 39-1388360                        |
|----------------------------------------------------------------|--------|-----------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (IRS Employer Identification No.) |

| 10850 West Park Place, Suite 1200, Milwaukee, Wisconsin  53224 |   |
|--------------------------------------------------------------------------|--------|
| (Address of principal executive offices)                                 |   |

| (414) 973-4300                                       |   |
|------------------------------------------------------|--------|
| (Registrant's telephone number, including area code) |   |

| Large accelerated filer                       | £ | Accelerated filer         | £ |
|-----------------------------------------------|--------|---------------------------|--------|
| Non-accelerated filer                         | £ | Smaller reporting company | R      |
| (Do not check if a smaller reporting company) |

----

----

----

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

IN

| PART I - FINANCIAL INFORMATION |
|--------------------------------|
|                           |   |   | Page |
| Item 1                    |   | Financial statements |   |
|                           |   |   |   |
|                           |   | Consolidated balance sheets as of January 31, 2010 (unaudited) and July 31, 2009 | 3-4 |
|                           |   |   |   |
|                           |   | Consolidated statements of income (unaudited) for the three and six months ended January 31, 2010 and 2009 | 5 |
|                           |   |   |   |
|                           |   | Consolidated statements of cash flows (unaudited) for the six months ended January 31, 2010 and 2009 | 6 |
|                           |   |   |   |
|                           |   | Notes to unaudited consolidated financial statements | 7-19 |
|                           |   |   |   |
| Item 2                    |   | Management's discussion and analysis of financial condition and results of operations | 20-30 |
|                           |   |   |   |
| Item 3                    |   | Quantitative and qualitative disclosures about market risk | 30 |
|                           |   |   |   |
| Item 4                    |   | Controls and procedures | 30 |
|                           |   |   |   |
| PART II - OTHER INFORMATION    |   |
|                           |   |
| Item 1                    |   | Legal proceedings | 31 |
|                           |   |   |   |
| Item 2                    |   | Unregistered sales of equity securities and use of proceeds | 31 |
|                           |   |   |   |
| Item 3                    |   | Defaults upon senior securities | 31 |
|                           |   |   |   |
| Item 4                    |   | Submission of matters to a vote of security holders | 31 |
|                           |   |   |   |
| Item 5                    |   | Other information | 31 |
|                           |   |   |   |
| Item 6                    |   | Exhibits | 31 |
|                           |   |   |   |
| Signatures                     | 32 |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

IT

| ARI Network Services, Inc.                                                                                     |   |
|----------------------------------------------------------------------------------------------------------------|--------|
| Consolidated Balance Sheet                                                                                     |   |
| (Dollars in Thousands, Except per Share Data)                                                                  |   |
|                                                                                                           |   |
|                                                                                                           |   | (Unaudited) |   |   | (Audited) |   |
| ASSETS                                                                                                         |   | January 31 |   |   | July 31 |   |
|                                                                                                           |   | 2010 |   |   | 2009 |   |
| Current assets:                                                                                                |   |   |   |   |   |   |
| Cash                                                                                                           |   | $ | 577 |   |   | $ | 650 |   |
| Trade receivables, less allowance for doubtful accounts of $397 and $410 at January 31, 2010 and July 31, 2009 |   |   | 1,412 |   |   |   | 1,352 |   |
| Work in process                                                                                                |   |   | 179 |   |   |   | 156 |   |
| Prepaid expenses and other                                                                                     |   |   | 304 |   |   |   | 321 |   |
| Deferred income taxes                                                                                          |   |   | 513 |   |   |   | 513 |   |
| Total Current Assets                                                                                           |   |   | 2,985 |   |   |   | 2,992 |   |
| Equipment and leasehold improvements:                                                                          |   |   |   |   |   |   |   |   |
| Computer equipment                                                                                             |   |   | 2,083 |   |   |   | 1,827 |   |
| Leasehold improvements                                                                                         |   |   | 548 |   |   |   | 463 |   |
| Furniture and equipment                                                                                        |   |   | 2,497 |   |   |   | 2,479 |   |
|                                                                                                           |   |   | 5,128 |   |   |   | 4,769 |   |
| Less accumulated depreciation and amortization                                                                 |   |   | 3,239 |   |   |   | 2,827 |   |
| Net equipment and leasehold improvements                                                                       |   |   | 1,889 |   |   |   | 1,942 |   |
| Capitalized software product costs:                                                                            |   |   |   |   |   |   |   |   |
| Amounts capitalized for software product costs                                                                 |   |   | 15,444 |   |   |   | 14,886 |   |
| Less accumulated amortization                                                                                  |   |   | 13,008 |   |   |   | 12,489 |   |
| Net capitalized software product costs                                                                         |   |   | 2,436 |   |   |   | 2,397 |   |
| Deferred income taxes                                                                                          |   |   | 2,141 |   |   |   | 2,141 |   |
| Other long term assets                                                                                         |   |   | 60 |   |   |   | 59 |   |
| Other intangible assets                                                                                        |   |   | 3,232 |   |   |   | 3,637 |   |
| Goodwill                                                                                                       |   |   | 5,439 |   |   |   | 5,439 |   |
| Total Assets                                                                                                   |   | $ | 18,182 |   |   | $ | 18,607 |   |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

| ARI Network Services, Inc.                                                                                                                                       |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Consolidated Balance Sheet                                                                                                                                       |   |
| (Dollars in Thousands, Except per Share Data)                                                                                                                    |   |
|                                                                                                                                                             |   |
|                                                                                                                                                             |   | (Unaudited) |   |   | (Audited) |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                             |   | January 31 |   |   | July 31 |   |
|                                                                                                                                                             |   | 2010 |   |   | 2009 |   |
| Current liabilities:                                                                                                                                             |   |   |   |   |   |   |
| Current borrowings on line of credit                                                                                                                             |   | $ | 1,025 |   |   | $ | 500 |   |
| Current portion of notes payable                                                                                                                                 |   |   | - |   |   |   | 117 |   |
| Accounts payable                                                                                                                                                 |   |   | 317 |   |   |   | 788 |   |
| Deferred revenue                                                                                                                                                 |   |   | 4,804 |   |   |   | 5,523 |   |
| Accrued payroll and related liabilities                                                                                                                          |   |   | 1,205 |   |   |   | 1,421 |   |
| Accrued sales, use and income taxes                                                                                                                              |   |   | 34 |   |   |   | 82 |   |
| Other accrued liabilities                                                                                                                                        |   |   | 633 |   |   |   | 729 |   |
| Current portion of capital lease obligations                                                                                                                     |   |   | 200 |   |   |   | 109 |   |
| Total current liabilities                                                                                                                                        |   |   | 8,218 |   |   |   | 9,269 |   |
| Non-current liabilities:                                                                                                                                         |   |   |   |   |   |   |   |   |
| Notes payable                                                                                                                                                    |   |   | 5,000 |   |   |   | 5,000 |   |
| Long-term portion of accrued compensation                                                                                                                        |   |   | 17 |   |   |   | 36 |   |
| Capital lease obligations                                                                                                                                        |   |   | 265 |   |   |   | 115 |   |
| Other long term liabilities                                                                                                                                      |   |   | 17 |   |   |   | - |   |
| Total non-current liabilities                                                                                                                                    |   |   | 5,299 |   |   |   | 5,151 |   |
| Total liabilities                                                                                                                                                |   |   | 13,517 |   |   |   | 14,420 |   |
|                                                                                                                                                             |   |   |   |   |   |   |   |   |
| Shareholders' equity:                                                                                                                                            |   |   |   |   |   |   |   |   |
| Cumulative preferred stock, par value $.001 per share, 1,000,000 shares authorized; 0 shares issued and outstanding at January 31, 2010 and July 31, 2009        |   |   | - |   |   |   | - |   |
| Junior preferred stock, par value $.001 per share,100,000 shares authorized; 0 shares issued and outstanding at January 31, 2010 and July 31, 2009               |   |   | - |   |   |   | - |   |
| Common stock, par value $.001 per share,25,000,000 shares authorized; 7,762,337 and 7,693,510shares issues and outstanding at January 31, 2010 and July 31, 2009 |   |   | 8 |   |   |   | 8 |   |
| Common stock warrants and options                                                                                                                                |   |   | 899 |   |   |   | 816 |   |
| Additional paid-in-capital                                                                                                                                       |   |   | 95,743 |   |   |   | 95,681 |   |
| Accumulated deficit                                                                                                                                              |   |   | (91,946 | ) |   |   | (92,284 | ) |
| Other accumulated comprehensive income (loss)                                                                                                                    |   |   | (39 | ) |   |   | (34 | ) |
| Total Shareholders' Equity                                                                                                                                       |   |   | 4,665 |   |   |   | 4,187 |   |
| Total Liabilities and Shareholders' Equity                                                                                                                       |   | $ | 18,182 |   |   | $ | 18,607 |   |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

| ARI Network Services, Inc.                                                                                 |   |
|------------------------------------------------------------------------------------------------------------|--------|
| Consolidated Statements of Income                                                                          |   |
| (Dollars in Thousands, Except per Share Data)                                                              |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                       |   | (Unaudited) |   |   | (Unaudited) |   |
|                                                                                                       |   | Three months ended January 31 |   |   | Six months ended January 31 |   |
|                                                                                                       |   | 2010 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Net revenue                                                                                                |   | $ | 5,355 |   |   | $ | 3,955 |   |   | $ | 10,825 |   |   | $ | 8,124 |   |
| Cost of revenue *                                                                                          |   |   | 975 |   |   |   | 732 |   |   |   | 1,930 |   |   |   | 1,461 |   |
| Gross profit                                                                                               |   |   | 4,380 |   |   |   | 3,223 |   |   |   | 8,895 |   |   |   | 6,663 |   |
| Operating expenses:                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales and marketing                                                                                        |   |   | 1,297 |   |   |   | 820 |   |   |   | 2,486 |   |   |   | 1,734 |   |
| Customer operations and support                                                                            |   |   | 899 |   |   |   | 533 |   |   |   | 1,723 |   |   |   | 1,257 |   |
| Software development and technical support (net of capitalized product costs)                              |   |   | 283 |   |   |   | 344 |   |   |   | 829 |   |   |   | 786 |   |
| General and administrative                                                                                 |   |   | 1,155 |   |   |   | 994 |   |   |   | 2,292 |   |   |   | 1,834 |   |
| Restructuring                                                                                              |   |   | - |   |   |   | - |   |   |   | 76 |   |   |   | - |   |
| Depreciation and amortization (exclusive of amortization of software products included in cost of revenue) |   |   | 417 |   |   |   | 229 |   |   |   | 821 |   |   |   | 458 |   |
| Net operating expenses                                                                                     |   |   | 4,051 |   |   |   | 2,920 |   |   |   | 8,227 |   |   |   | 6,069 |   |
| Operating income                                                                                           |   |   | 329 |   |   |   | 303 |   |   |   | 668 |   |   |   | 594 |   |
| Other income (expense):                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                                                           |   |   | (150 | ) |   |   | (23 | ) |   |   | (289 | ) |   |   | (51 | ) |
| Other, net                                                                                                 |   |   | (3 | ) |   |   | (7 | ) |   |   | (36 | ) |   |   | (14 | ) |
| Total other income (expense)                                                                               |   |   | (153 | ) |   |   | (30 | ) |   |   | (325 | ) |   |   | (65 | ) |
| Income before provision for income taxes                                                                   |   |   | 176 |   |   |   | 273 |   |   |   | 343 |   |   |   | 529 |   |
| Income tax benefit (expense)                                                                               |   |   | - |   |   |   | (217 | ) |   |   | (5 | ) |   |   | (217 | ) |
| Net income                                                                                                 |   | $ | 176 |   |   | $ | 56 |   |   | $ | 338 |   |   | $ | 312 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted net income per common share:                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                      |   | $ | 0.02 |   |   | $ | 0.01 |   |   | $ | 0.04 |   |   | $ | 0.04 |   |
| Diluted                                                                                                    |   | $ | 0.02 |   |   | $ | 0.01 |   |   | $ | 0.04 |   |   | $ | 0.04 |   |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

| ARI Network Services, Inc.                                                                                          |   |
|---------------------------------------------------------------------------------------------------------------------|--------|
| Consolidated Statements of Cash Flows                                                                               |   |
| (Dollars in Thousands)                                                                                              |   |
|                                                                                                                |   |   |   |   |   |   |
|                                                                                                                |   | (Unaudited) |   |
|                                                                                                                |   | Six months ended January 31 |   |
|                                                                                                                |   | 2010 |   |   | 2009 |   |
| Operating activities                                                                                                |   |   |   |   |   |   |
| Net income                                                                                                          |   | $ | 338 |   |   | $ | 312 |   |
| Adjustments to reconcile net income to net cash provided by operating activities:                                   |   |   |   |   |   |   |   |   |
| Amortization of software products                                                                                   |   |   | 519 |   |   |   | 419 |   |
| Amortization of deferred financing costs, debt discount and excess carrying value over face amount of notes payable |   |   | - |   |   |   | 8 |   |
| Depreciation and other amortization                                                                                 |   |   | 814 |   |   |   | 424 |   |
| Deferred income taxes                                                                                               |   |   | - |   |   |   | 217 |   |
| Stock based compensation related to stock options                                                                   |   |   | 93 |   |   |   | 161 |   |
| Stock issued as contribution to 401(k) plan                                                                         |   |   | 52 |   |   |   | 45 |   |
| Net change in assets and liabilities:                                                                               |   |   |   |   |   |   |   |   |
| Trade receivables, net                                                                                              |   |   | (60 | ) |   |   | 327 |   |
| Work in process                                                                                                     |   |   | (23 | ) |   |   | 133 |   |
| Prepaid expenses and other                                                                                          |   |   | 17 |   |   |   | 142 |   |
| Other long term assets                                                                                              |   |   | (1 | ) |   |   | (4 | ) |
| Accounts payable                                                                                                    |   |   | (473 | ) |   |   | (282 | ) |
| Deferred revenue                                                                                                    |   |   | (719 | ) |   |   | (462 | ) |
| Accrued payroll related liabilities                                                                                 |   |   | (236 | ) |   |   | 11 |   |
| Accrued sales, use and income taxes                                                                                 |   |   | (48 | ) |   |   | (36 | ) |
| Other accrued liabilities                                                                                           |   |   | (78 | ) |   |   | (174 | ) |
| Net cash provided by operating activities                                                                           |   |   | 195 |   |   |   | 1,241 |   |
| Investing activities                                                                                                |   |   |   |   |   |   |   |   |
| Purchase of equipment, software and leasehold improvements                                                          |   |   | (292 | ) |   |   | (244 | ) |
| Software development costs capitalized                                                                              |   |   | (625 | ) |   |   | (345 | ) |
| Net cash used in investing activities                                                                               |   |   | (917 | ) |   |   | (589 | ) |
| Financing activities                                                                                                |   |   |   |   |   |   |   |   |
| Borrowings (repayments) under line of credit                                                                        |   |   | 525 |   |   |   | (200 | ) |
| Payments under notes payable                                                                                        |   |   | (117 | ) |   |   | (366 | ) |
| Proceeds from capital lease obligations incurred                                                                    |   |   | 300 |   |   |   | - |   |
| Payments of capital lease obligations                                                                               |   |   | (59 | ) |   |   | (42 | ) |
| Proceeds from issuance of common stock                                                                              |   |   | - |   |   |   | 19 |   |
| Net cash provided by (used in) financing activities                                                                 |   |   | 649 |   |   |   | (589 | ) |
| Effect of foreign currency exchange rate changes on cash                                                            |   |   | - |   |   |   | (11 | ) |
| Net change in cash                                                                                                  |   |   | (73 | ) |   |   | 52 |   |
| Cash at beginning of period                                                                                         |   |   | 650 |   |   |   | 1,086 |   |
| Cash at end of period                                                                                               |   | $ | 577 |   |   | $ | 1,138 |   |
| Cash paid for interest                                                                                              |   | $ | 290 |   |   | $ | 47 |   |
| Cash paid for income taxes                                                                                          |   | $ | 54 |   |   | $ | 28 |   |
|                                                                                                                |   |   |   |   |   |   |   |   |
| Noncash investing and financing activities                                                                          |   |   |   |   |   |   |   |   |
| Issuance of common stock related to payment of executive bonus                                                      |   | $ | 10 |   |   | $ | 8 |   |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

No

|   | 1. | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
|--------|----|-----------------------------------------------------------|

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|   | 2. | BASIC AND DILUTED NET INCOME PER SHARE |
|--------|----|----------------------------------------|

|                                                                                                                                                                                             |   | (Unaudited)                        |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                                                                                                                                             |   | Three months ended January 31 |   |   | Six months ended January 31 |   |
|                                                                                                                                                                                             |   | 2010                               |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Net income                                                                                                                                                                                       |   | $                                  | 176    |   |   | $ | 56 |   |   | $ | 338 |   |   | $ | 312 |   |
| Weighted-average common shares outstanding                                                                                                                                                       |   |                               | 7,757  |   |   |   | 7,049 |   |   |   | 7,734 |   |   |   | 7,011 |   |
| Effect of dilutive stock options and warrants                                                                                                                                                    |   |                               | 23     |   |   |   | 16 |   |   |   | 23 |   |   |   | 16 |   |
| Diluted weighted-average common shares outstanding                                                                                                                                               |   |                               | 7,780  |   |   |   | 7,065 |   |   |   | 7,757 |   |   |   | 7,027 |   |
| Net income per share:                                                                                                                                                                            |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                                                            |   | $                                  | 0.02   |   |   | $ | 0.01 |   |   | $ | 0.04 |   |   | $ | 0.04 |   |
| Diluted                                                                                                                                                                                          |   | $                                  | 0.02   |   |   | $ | 0.01 |   |   | $ | 0.04 |   |   | $ | 0.04 |   |
| Options and warrants that could potentially dilute net income per share in the future that are not included in the computation of diluted net income per share, as their impact is anti-dilutive |   |                               | 1,382  |   |   |   | 1,425 |   |   |   | 1,382 |   |   |   | 1,425 |   |

|   | 3. | STOCK-BASED COMPENSATION PLANS |
|--------|----|--------------------------------|

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|                     |   | Three months ended January 31 |   |   | Six months ended January 31 |   |
|--------------------------|--------|------------------------------------|--------|--------|----------------------------------|--------|
|                     |   | 2010                               |   |   | 2009                             |   |   | 2010 |   |   | 2009 |   |
| Expected life (years)    |   | 10 years                           |   |   | 10 years                         |   |   | 10 years |   |   | 10 years |   |
| Risk-free interest rate  |   |                               | 4.0    | %      |                             |   | 2.6 | % |   |   | 4.0 | % |   |   | 2.8 | % |
| Expected volatility      |   |                               | 84.8   | %      |                             |   | 85.0 | % |   |   | 84.8 | % |   |   | 83.0 | % |
| Expected forfeiture rate |   |                               | 15.9   | %      |                             |   | 23.6 | % |   |   | 8.4 | % |   |   | 22.2 | % |
| Expected dividend yield  |   |                               | 0.0    | %      |                             |   | 0.0 | % |   |   | 0.0 | % |   |   | 0.0 | % |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|                                                                                                                                    |   | Number of Options |    |   | Wtd. Avg. Exercise Price |   |   | Wtd. Avg. Remaining Contractual Period (Years) |   |   | Aggregate Instrinsic Value |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|--------------------------|--------|--------|------------------------------------------------|--------|--------|----------------------------|--------|
| Outstanding and exercisable at 10/31/08                                                                                                 |   |              | 63,250  |   |                     | $      | 2.31   |                                           |   |   | 1.12                       |   |   | $ | - |   |
| Granted                                                                                                                                 |   |              | -       |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised                                                                                                                               |   |              | -       |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited                                                                                                                               |   |              | (26,250 | )      |                     |   | 2.12   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding and exercisable at 1/31/09                                                                                                  |   |              | 37,000  |   |                     | $      | 2.56   |                                           |   |   | 1.57                       |   |   | $ | - |   |
|                                                                                                                                    |   |              |    |   |                     |   |   |                                           |   |   |                       |   |   |   |   |   |
| Outstanding and exercisable at 10/31/09                                                                                                 |   |              | 35,500  |   |                     | $      | 2.43   |                                           |   |   | 0.84                       |   |   | $ | - |   |
| Granted                                                                                                                                 |   |              | -       |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised                                                                                                                               |   |              | -       |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited                                                                                                                               |   |              | (500    | )      |                     |   | 9.06   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding and exercisable at 1/31/10                                                                                                  |   |              | 35,000  |   |                     | $      | 2.33   |                                           |   |   | 0.60                       |   |   | $ | - |   |
|                                                                                                                                    |   |              |    |   |                     |   |   |                                           |   |   |                       |   |   |   |   |   |
|                                                                                                                                    |   | Number of Options |    |   | Wtd. Avg. Exercise Price |   |   | Wtd. Avg. Remaining Contractual Period (Years) |   |   | Aggregate Instrinsic Value |   |
| Outstanding and exercisable at 7/31/08                                                                                                  |   |              | 93,186  |   |                     | $      | 2.27   |                                           |   |   | 1.23                       |   |   | $ | - |   |
| Granted                                                                                                                                 |   |              | -       |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised                                                                                                                               |   |              | -       |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited                                                                                                                               |   |              | (56,186 | )      |                     |   | 2.15   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding and exercisable at 1/31/09                                                                                                  |   |              | 37,000  |   |                     | $      | 2.56   |                                           |   | $      | 1.57                       |   |   | $ | - |   |
|                                                                                                                                    |   |              |    |   |                     |   |   |                                           |   |   |                       |   |   |   |   |   |
| Outstanding and exercisable at 7/31/09                                                                                                  |   |              | 35,500  |   |                     | $      | 2.43   |                                           |   |   | 1.09                       |   |   | $ | - |   |
| Granted                                                                                                                                 |   |              | -       |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised                                                                                                                               |   |              | -       |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited                                                                                                                               |   |              | (500    | )      |                     |   | 9.06   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding and exercisable at 1/31/10                                                                                                  |   |              | 35,000  |   |                     | $      | 2.33   |                                           |   |   | 0.60                       |   |   | $ | - |   |
|                                                                                                                                    |   |              |    |   |                     |   |   |                                           |   |   |                       |   |   |   |   |   |
| The range of exercise prices for options outstanding at January 31, 2010 was $2.06 to $2.44 and at January 31, 2009 was $2.06 to $9.06. |   |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|                                                                                                  |   | Number of Options |   |   | Wtd. Avg. Exercise Price |   |   | Wtd. Avg. Remaining Contractual Period (Years) |   |   | Aggregate Instrinsic Value |   |
|-------------------------------------------------------------------------------------------------------|--------|-------------------|--------|--------|--------------------------|--------|--------|------------------------------------------------|--------|--------|----------------------------|--------|
| Outstanding and exercisable at 10/31/08                                                               |   |              | 1,313  |   |                     | $      | 2.65   |                                           |   |   | 1.72                       |   |   | $ | - |   |
| Granted                                                                                               |   |              | -      |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised                                                                                             |   |              | -      |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited                                                                                             |   |              | -      |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding and exercisable at 1/31/09                                                                |   |              | 1,313  |   |                     | $      | 2.65   |                                           |   |   | 1.47                       |   |   | $ | - |   |
|                                                                                                  |   |              |   |   |                     |   |   |                                           |   |   |                       |   |   |   |   |   |
| Outstanding and exercisable at 10/31/09                                                               |   |              | 1,313  |   |                     | $      | 2.65   |                                           |   |   | 0.72                       |   |   | $ | - |   |
| Granted                                                                                               |   |              | -      |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised                                                                                             |   |              | -      |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited                                                                                             |   |              | -      |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding and exercisable at 1/31/10                                                                |   |              | 1,313  |   |                     | $      | 2.65   |                                           |   |   | 0.47                       |   |   | $ | - |   |
|                                                                                                  |   |              |   |   |                     |   |   |                                           |   |   |                       |   |   |   |   |   |
|                                                                                                  |   | Number of Options |   |   | Wtd. Avg. Exercise Price |   |   | Wtd. Avg. Remaining Contractual Period (Years) |   |   | Aggregate Instrinsic Value |   |
| Outstanding and exercisable at 7/31/08                                                                |   |              | 1,313  |   |                     | $      | 2.65   |                                           |   |   | 1.97                       |   |   | $ | - |   |
| Granted                                                                                               |   |              | -      |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised                                                                                             |   |              | -      |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited                                                                                             |   |              | -      |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding and exercisable at 1/31/09                                                                |   |              | 1,313  |   |                     | $      | 2.65   |                                           |   |   | 1.47                       |   |   | $ | - |   |
|                                                                                                  |   |              |   |   |                     |   |   |                                           |   |   |                       |   |   |   |   |   |
| Outstanding and exercisable at 7/31/09                                                                |   |              | 1,313  |   |                     | $      | 2.65   |                                           |   |   | 0.97                       |   |   | $ | - |   |
| Granted                                                                                               |   |              | -      |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised                                                                                             |   |              | -      |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited                                                                                             |   |              | -      |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding and exercisable at 1/31/10                                                                |   |              | 1,313  |   |                     | $      | 2.65   |                                           |   |   | 0.47                       |   |   | $ | - |   |
|                                                                                                  |   |              |   |   |                     |   |   |                                           |   |   |                       |   |   |   |   |   |
| The range of exercise prices for options outstanding at January 31, 2010 and 2009 was $2.00 to $3.56. |   |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|                                                                                                                                                                          |   | Number of Options |      |   | Wtd. Avg. Exercise Price |   |   | Wtd. Avg. Remaining Contractual Period (Years) |   |   | Aggregate Instrinsic Value |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|--------------------------|--------|--------|------------------------------------------------|--------|--------|----------------------------|--------|
| Outstanding at 10/31/08                                                                                                                                                       |   |              | 1,310,600 |   |                     | $      | 1.52   |                                           |   |   | 7.44                       |   |   | $ | 70,344 |   |
| Granted                                                                                                                                                                       |   |              | 30,500    |   |                     |   | 0.85   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised                                                                                                                                                                     |   |              | (60,242   | )      |                     |   | 0.26   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited                                                                                                                                                                     |   |              | (73,395   | )      |                     |   | 1.99   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding at 1/31/09                                                                                                                                                        |   |              | 1,207,463 |   |                     | $      | 1.58   |                                           |   |   | 7.51                       |   |   | $ | 27,807 |   |
| Exercisable at 1/31/09                                                                                                                                                        |   |              | 684,002   |   |                     | $      | 1.46   |                                           |   |   | 3.49                       |   |   | $ | 25,957 |   |
|                                                                                                                                                                          |   |              |      |   |                     |   |   |                                           |   |   |                       |   |   |   |   |   |
| Outstanding at10/31/09                                                                                                                                                        |   |              | 1,221,527 |   |                     | $      | 1.50   |                                           |   |   | 6.86                       |   |   | $ | 37,456 |   |
| Granted                                                                                                                                                                       |   |              | 78,750    |   |                     |   | 0.80   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised                                                                                                                                                                     |   |              | -         |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited                                                                                                                                                                     |   |              | (8,500    | )      |                     |   | 1.45   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding at 1/31/10                                                                                                                                                        |   |              | 1,291,777 |   |                     | $      | 1.46   |                                           |   |   | 6.80                       |   |   | $ | 34,698 |   |
| Exercisable at 1/31/10                                                                                                                                                        |   |              | 854,251   |   |                     | $      | 1.56   |                                           |   |   | 5.80                       |   |   | $ | 26,120 |   |
|                                                                                                                                                                          |   |              |      |   |                     |   |   |                                           |   |   |                       |   |   |   |   |   |
|                                                                                                                                                                          |   | Number of Options |      |   | Wtd. Avg. Exercise Price |   |   | Wtd. Avg. Remaining Contractual Period (Years) |   |   | Aggregate Instrinsic Value |   |
| Outstanding at 7/31/08                                                                                                                                                        |   |              | 1,380,538 |   |                     | $      | 1.45   |                                           |   |   | 6.61                       |   |   | $ | 320,062 |   |
| Granted                                                                                                                                                                       |   |              | 89,000    |   |                     |   | 1.12   |                                           |   |   | -                          |   |   |   | - |   |
| Exercised                                                                                                                                                                     |   |              | (60,242   | )      |                     |   | 0.26   |                                           |   |   | -                          |   |   |   | - |   |
| Forfeited                                                                                                                                                                     |   |              | (201,833  | )      |                     |   | 1.51   |                                           |   |   | -                          |   |   |   | - |   |
| Outstanding at 1/31/09                                                                                                                                                        |   |              | 1,207,463 |   |                     | $      | 1.58   |                                           |   |   | 7.51                       |   |   | $ | 27,807 |   |
| Exercisable at 1/31/09                                                                                                                                                        |   |              | 684,002   |   |                     | $      | 1.46   |                                           |   |   | 3.49                       |   |   | $ | 25,957 |   |
|                                                                                                                                                                          |   |              |      |   |                     |   |   |                                           |   |   |                       |   |   |   |   |   |
| Outstanding at 7/31/09                                                                                                                                                        |   |              | 1,213,402 |   |                     | $      | 1.51   |                                           |   |   | 7.08                       |   |   | $ | 21,337 |   |
| Granted                                                                                                                                                                       |   |              | 100,750   |   |                     |   | 0.81   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised                                                                                                                                                                     |   |              | -         |   |                     |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited                                                                                                                                                                     |   |              | (22,375   | )      |                     |   | 1.46   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding at 1/31/10                                                                                                                                                        |   |              | 1,291,777 |   |                     | $      | 1.46   |                                           |   |   | 6.80                       |   |   | $ | 34,698 |   |
| Exercisable at 1/31/10                                                                                                                                                        |   |              | 854,251   |   |                     | $      | 1.56   |                                           |   |   | 5.80                       |   |   | $ | 26,120 |   |
|                                                                                                                                                                          |   |              |      |   |                     |   |   |                                           |   |   |                       |   |   |   |   |   |
| Changes in the 2000 Plan's non-vested option shares included in the outstanding shares above during three and six months ended January 31, 2010 and 2009 are as follows: |   |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|                                                                                                 |   | Number of Options |    |   | Wtd. Avg. Exercise Price |   |
|------------------------------------------------------------------------------------------------------|--------|-------------------|---------|--------|--------------------------|--------|
| Non-vested at 10/31/08                                                                               |   |              | 493,867 |   |                     | $      | 1.53 |   |
| Granted                                                                                              |   |              | 30,500  |   |                     |   | 0.85 |   |
| Vested                                                                                               |   |              | -       |   |                     |   | n/a |   |
| Forfeited                                                                                            |   |              | (906    | )      |                     |   | 1.74 |   |
| Non-vested at 1/31/09                                                                                |   |              | 523,461 |   |                     | $      | 1.49 |   |
|                                                                                                 |   |              |    |   |                     |   |   |   |
| Non-vested at 10/31/09                                                                               |   |              | 363,776 |   |                     | $      | 1.36 |   |
| Granted                                                                                              |   |              | 78,750  |   |                     |   | 0.80 |   |
| Vested                                                                                               |   |              | -       |   |                     |   | n/a |   |
| Forfeited                                                                                            |   |              | (5,000  | )      |                     |   | 1.45 |   |
| Non-vested at 1/31/10                                                                                |   |              | 437,526 |   |                     | $      | 1.26 |   |
|                                                                                                 |   |              |    |   |                     |   |   |   |
|                                                                                                 |   | Number ofOptions  |    |   | Wtd. Avg.Exercise Price  |   |
| Non-vested at 7/31/08                                                                                |   |              | 443,335 |   |                     | $      | 1.76 |   |
| Granted                                                                                              |   |              | 89,000  |   |                     |   | 1.12 |   |
| Vested                                                                                               |   |              | -       |   |                     |   | n/a |   |
| Forfeited                                                                                            |   |              | (8,874  | )      |                     |   | 1.63 |   |
| Non-vested at 1/31/09                                                                                |   |              | 523,461 |   |                     | $      | 1.49 |   |
|                                                                                                 |   |              |    |   |                     |   |   |   |
| Non-vested at 7/31/09                                                                                |   |              | 341,776 |   |                     | $      | 1.40 |   |
| Granted                                                                                              |   |              | 100,750 |   |                     |   | 0.81 |   |
| Vested                                                                                               |   |              | -       |   |                     |   | n/a |   |
| Forfeited                                                                                            |   |              | (5,000  | )      |                     |   | 1.45 |   |
| Non-vested at 1/31/10                                                                                |   |              | 437,526 |   |                     | $      | 1.26 |   |
|                                                                                                 |   |              |    |   |                     |   |   |   |
| The range of exercise prices for options outstanding at January 31, 2010 and 2009 was $0.15 to $2.74 |   |

|   | 4. | ACQUISITIONS |
|--------|----|--------------|

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|                                            |   | (Unaudited)                        |   |   | (Unaudited)                      |   |
|-------------------------------------------------|--------|------------------------------------|--------|--------|----------------------------------|--------|
|                                            |   | Three months ended January 31 |   |   | Six months ended January 31 |   |
|                                            |   | 2010                               |   |   | 2009                             |   |   | 2010 |   |   | 2009 |   |
|                                            |   | (Actual)                           |   |   | (Pro Forma)                      |   |   | (Actual) |   |   | (Pro Forma) |   |
| Net Revenue                                     |   | $                                  | 5,355  |   |                             | $      | 5,101 |   |   | $ | 10,825 |   |   | $ | 10,416 |   |
| Cost of revenue                                 |   |                               | 975    |   |                             | $      | 960 |   |   |   | 1,930 |   |   |   | 1,917 |   |
| Gross profit                                    |   |                               | 4,380  |   |                             | $      | 4,141 |   |   |   | 8,895 |   |   |   | 8,499 |   |
| Net operating expenses                          |   |                               | 4,051  |   |                             | $      | 4,182 |   |   |   | 8,227 |   |   |   | 8,594 |   |
| Operating income (loss)                         |   |                               | 329    |   |                             | $      | (41 | ) |   |   | 668 |   |   |   | (95 | ) |
| Interest income (expense)                       |   |                               | (150   | )      |                             | $      | (198 | ) |   |   | (289 | ) |   |   | (401 | ) |
| Other, net                                      |   |                               | (3     | )      |                             | $      | (7 | ) |   |   | (36 | ) |   |   | (14 | ) |
| Income (loss) before provision for income taxes |   |                               | 176    |   |                             | $      | (246 | ) |   |   | 343 |   |   |   | (510 | ) |
| Income tax expense                              |   |                               | -      |   |                             | $      | (217 | ) |   |   | (5 | ) |   |   | (217 | ) |
| Net income (loss)                               |   | $                                  | 176    |   |                             | $      | (463 | ) |   | $ | 338 |   |   | $ | (727 | ) |
|                                            |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Average common shares outstanding:              |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                           |   |                               | 7,757  |   |                             |   | 7,664 |   |   |   | 7,734 |   |   |   | 7,626 |   |
| Diluted                                         |   |                               | 7,780  |   |                             |   | 7,664 |   |   |   | 7,757 |   |   |   | 7,626 |   |
| Basic and diluted net income(loss) per share:   |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                           |   | $                                  | 0.02   |   |                             | $      | (0.06 | ) |   | $ | 0.04 |   |   | $ | (0.10 | ) |
| Diluted                                         |   | $                                  | 0.02   |   |                             | $      | (0.06 | ) |   | $ | 0.04 |   |   | $ | (0.10 | ) |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|   | 5. | NOTES PAYABLE |
|--------|----|---------------|

|                        |   | (Unaudited)     |   |   | (Audited)    |   |
|-----------------------------|--------|-----------------|--------|--------|--------------|--------|
|                        |   | January 31 |   |   | July 31 |   |
|                        |   | 2010            |   |   | 2009         |   |
| Notes payable               |   | $               | 5,000  |   |         | $      | 5,117 |   |
| Less current maturities     |   |            | -      |   |         |   | 117 |   |
| Notes payable - non-current |   | $               | 5,000  |   |         | $      | 5,000 |   |

|   | 6. | LINE OF CREDIT |
|--------|----|----------------|

|   | 7. | SHAREHOLDER RIGHTS PLAN |
|--------|----|-------------------------|

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|   | 8. | INCOME TAXES |
|--------|----|--------------|

|                                            |   | (Unaudited)                        |   |   | (Unaudited)                      |   |
|-------------------------------------------------|--------|------------------------------------|--------|--------|----------------------------------|--------|
|                                            |   | Three months ended January 31 |   |   | Six months ended January 31 |   |
|                                            |   | 2010                               |   |   | 2009                             |   |   | 2010 |   |   | 2009 |   |
| Current:                                        |   |                               |   |   |                             |   |   |   |   |   |   |   |
| Federal                                         |   | $                                  | 49     |   |                             | $      | 11 |   |   | $ | 120 |   |   | $ | 11 |   |
| State                                           |   |                               | 9      |   |                             |   | 2 |   |   |   | 22 |   |   |   | 2 |   |
| Utilization of net operating loss carryforwards |   |                               | (58    | )      |                             |   | (133 | ) |   |   | (142 | ) |   |   | (13 | ) |
| AMT and other                                   |   |                               | -      |   |                             |   | - |   |   |   | 5 |   |   |   | - |   |
| Deferred, net                                   |   |                               | -      |   |                             |   | 337 |   |   |   | - |   |   |   | 217 |   |
| Income tax provision                            |   | $                                  | -      |   |                             | $      | 217 |   |   | $ | 5 |   |   | $ | 217 |   |

|   | 9. | BUSINESS SEGMENTS |
|--------|----|-------------------|

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|              |   | (Unaudited)                        |   |   | (Unaudited)                      |   |
|-------------------|--------|------------------------------------|--------|--------|----------------------------------|--------|
|              |   | Three months ended January 31 |   |   | Six months ended January 31 |   |
|              |   | 2010                               |   |   | 2009                             |   |   | 2010 |   |   | 2009 |   |
| Revenue :         |   |                               |   |   |                             |   |   |   |   |   |   |   |
| Netherlands       |   | $                                  | 181    |   |                             | $      | 161 |   |   | $ | 357 |   |   | $ | 333 |   |
| United States     |   |                               | 5,174  |   |                             |   | 3,794 |   |   |   | 10,468 |   |   |   | 7,791 |   |
| Consolidated      |   | $                                  | 5,355  |   |                             | $      | 3,955 |   |   | $ | 10,825 |   |   | $ | 8,124 |   |
|              |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Netherlands       |   | $                                  | (56    | )      |                             | $      | (19 | ) |   | $ | (71 | ) |   | $ | (55 | ) |
| United States     |   |                               | 232    |   |                             |   | 75 |   |   |   | 409 |   |   |   | 367 |   |
| Consolidated      |   | $                                  | 176    |   |                             | $      | 56 |   |   | $ | 338 |   |   | $ | 312 |   |
|              |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |
|              |   | (Unaudited)                        |   |   | (Audited)                        |   |   |   |   |   |   |   |   |   |
|              |   | January 31                    |   |   | July 31                     |   |   |   |   |   |   |   |   |   |
|              |   | 2010                               |   |   | 2009                             |   |   |   |   |   |   |   |   |   |
| Total Assets      |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Netherlands       |   | $                                  | 192    |   |                             | $      | 228 |   |   |   |   |   |   |   |   |   |
| United States     |   |                               | 17,990 |   |                             |   | 18,379 |   |   |   |   |   |   |   |   |   |
| Consolidated      |   | $                                  | 18,182 |   |                             | $      | 18,607 |   |   |   |   |   |   |   |   |   |

|   | 10. | RESTRUCTURING |
|--------|-----|---------------|

| Three months ended January 31, 2010: |   |   |   |
|-------------------------------------------|--------|--------|--------|
| Balance at 10/31/09                       |   | $      | 142    |   |
| Payments                                  |   |   | (30    | ) |
| Adjustments                               |   |   | -      |   |
| Balance at 1/31/10                        |   | $      | 112    |   |
|                                      |   |   |   |   |
| Six months ended January 31, 2010:   |   |   |   |   |
| Balance at 7/31/09                        |   | $      | 93     |   |
| Payments                                  |   |   | (57    | ) |
| Adjustments                               |   |   | 76     |   |
| Balance at 1/31/10                        |   | $      | 112    |   |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

IT

|   | · | Focusing on organic growth, which includes expanding our services within our existing customer base, strengthening our existing applications and developing new functionality for our customers; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Integrating FY 2009 acquisitions and leveraging cross-selling opportunities; |
|--------|--------|------------------------------------------------------------------------------|

|   | · | Refining our organization and processes to drive innovation and efficiency; and |
|--------|--------|---------------------------------------------------------------------------------|

|   | · | Exploring strategic acquisitions and potential new markets. |
|--------|--------|-------------------------------------------------------------|

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Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|   | · | Catalog subscriptions for publishing and viewing technical parts and service reference information pertaining to equipment; |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|

|   | · | Marketing services including lead management, lead generation and eCommerce Website services that help dealers grow their business and enhance revenue; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Professional services focused on software customization, large-scale data conversion and general project management; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------|

|   | · | F&I and other services, including finance and insurance services that enable dealers to help their customers obtain financing for purchases, as well as to provide additional services such as extended service agreements; and other technology solutions unique to the manufactured equipment and agriculture industries. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|   | · | Software amortization, which represents the periodic amortization of costs for internally developed or purchased software sold to our customers; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Direct labor used in the provision of catalog and marketing professional services; and |
|--------|--------|----------------------------------------------------------------------------------------|

|   | · | Other direct costs, which represent amounts paid to third party vendors directly attributable to the services we provide our customers. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|                  |   | (Unaudited)                        |   |   | (Unaudited)                      |   |
|-----------------------|--------|------------------------------------|--------|--------|----------------------------------|--------|
| Worldwide Revenue     |   | Three months ended January 31 |   |   | Six months ended January 31 |   |
|                  |   | 2010                               |   |   | 2009                             |   |   | Percent Change |   |   | 2010 |   |   | 2009 |   |   | Percent Change |   |
| Catalog subscriptions |   |                               | 2,954  |   |                             |   | 2,705 |   |   |   | 9.2 |   |   |   | 5,829 |   |   |   | 5,467 |   |   |   | 6.6 |   |
| Marketing services    |   |                               | 1,886  |   |                             |   | 628 |   |   |   | 200.3 |   |   |   | 3,868 |   |   |   | 1,278 |   |   |   | 202.7 |   |
| Professional services |   |                               | 346    |   |                             |   | 465 |   |   |   | (25.6 | ) |   |   | 766 |   |   |   | 1,057 |   |   |   | (27.5 | ) |
| Other revenues        |   |                               | 169    |   |                             |   | 157 |   |   |   | 7.6 |   |   |   | 362 |   |   |   | 322 |   |   |   | 12.4 |   |
| Total Revenue         |   | $                                  | 5,355  |   |                             | $      | 3,955 |   |   |   | 35.4 |   |   | $ | 10,825 |   |   | $ | 8,124 |   |   |   | 33.2 |   |

----

Index

|                    |   | (Unaudited)                        |   |   | (Unaudited)                      |   |
|-------------------------|--------|------------------------------------|--------|--------|----------------------------------|--------|
| Cost of Goods Sold      |   | Three months ended January 31 |   |   | Six months ended January 31 |   |
|                    |   | 2010                               |   |   | 2009                             |   |   | Percent Change |   |   | 2010 |   |   | 2009 |   |   | Percent Change |   |
| Catalog subscriptions   |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                 |   | $                                  | 2,954  |   |                             | $      | 2,705 |   |   |   | 9.2 |   |   | $ | 5,829 |   |   | $ | 5,467 |   |   |   | 6.6 |   |
| Cost of revenue         |   |                               | 335    |   |                             |   | 288 |   |   |   | 16.3 |   |   |   | 639 |   |   |   | 585 |   |   |   | 9.2 |   |
| Gross profit            |   |                               | 2,619  |   |                             |   | 2,417 |   |   |   | 8.4 |   |   |   | 5,190 |   |   |   | 4,882 |   |   |   | 6.3 |   |
| Gross margin percentage |   |                               | 88.7   | %      |                             |   | 89.4 | % |   |   |   |   |   |   | 89.0 | % |   |   | 89.3 | % |   |   |   |   |
| Marketing services      |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                 |   |                               | 1,886  |   |                             |   | 628 |   |   |   | 200.3 |   |   |   | 3,868 |   |   |   | 1,278 |   |   |   | 202.7 |   |
| Cost of revenue         |   |                               | 455    |   |                             |   | 300 |   |   |   | 51.7 |   |   |   | 865 |   |   |   | 533 |   |   |   | 62.3 |   |
| Gross profit            |   |                               | 1,431  |   |                             |   | 328 |   |   |   | 336.3 |   |   |   | 3,003 |   |   |   | 745 |   |   |   | 303.1 |   |
| Gross margin percentage |   |                               | 75.9   | %      |                             |   | 52.2 | % |   |   |   |   |   |   | 77.6 | % |   |   | 58.3 | % |   |   |   |   |
| Professional Services   |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                 |   |                               | 346    |   |                             |   | 465 |   |   |   | (25.6 | ) |   |   | 766 |   |   |   | 1,057 |   |   |   | (27.5 | ) |
| Cost of revenue         |   |                               | 183    |   |                             |   | 139 |   |   |   | 31.7 |   |   |   | 418 |   |   |   | 333 |   |   |   | 25.5 |   |
| Gross profit            |   |                               | 163    |   |                             |   | 326 |   |   |   | (50.0 | ) |   |   | 348 |   |   |   | 724 |   |   |   | (51.9 | ) |
| Gross margin percentage |   |                               | 47.1   | %      |                             |   | 70.1 | % |   |   |   |   |   |   | 45.4 | % |   |   | 68.5 | % |   |   |   |   |
| Other                   |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                 |   |                               | 169    |   |                             |   | 157 |   |   |   | 7.6 |   |   |   | 362 |   |   |   | 322 |   |   |   | 12.4 |   |
| Cost of revenue         |   |                               | 2      |   |                             |   | 5 |   |   |   | (60.0 | ) |   |   | 8 |   |   |   | 10 |   |   |   | (20.0 | ) |
| Gross profit            |   |                               | 167    |   |                             |   | 152 |   |   |   | 9.9 |   |   |   | 354 |   |   |   | 312 |   |   |   | 13.5 |   |
| Gross margin percentage |   |                               | 98.8   | %      |                             |   | 96.8 | % |   |   |   |   |   |   | 97.8 | % |   |   | 96.9 | % |   |   |   |   |
| Total                   |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                 |   |                               | 5,355  |   |                             |   | 3,955 |   |   |   | 35.4 |   |   |   | 10,825 |   |   |   | 8,124 |   |   |   | 33.2 |   |
| Cost of revenue         |   |                               | 975    |   |                             |   | 732 |   |   |   | 33.2 |   |   |   | 1,930 |   |   |   | 1,461 |   |   |   | 32.1 |   |
| Gross profit            |   | $                                  | 4,380  |   |                             | $      | 3,223 |   |   |   | 35.9 |   |   | $ | 8,895 |   |   | $ | 6,663 |   |   |   | 33.5 |   |
| Gross margin percentage |   |                               | 81.8   | %      |                             |   | 81.5 | % |   |   |   |   |   |   | 82.2 | % |   |   | 82.0 | % |   |   |   |   |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|                                           |   | (Unaudited)                        |   |   | (Unaudited)                      |   |
|------------------------------------------------|--------|------------------------------------|--------|--------|----------------------------------|--------|
|                                           |   | Three months ended January 31 |   |   | Six months ended January 31 |   |
|                                           |   | 2010                               |   |   | % of Revenue                     |   |   | 2009 |   |   | % of Revenue |   |   | % Change |   |   | 2010 |   |   | % of Revenue |   |   | 2009 |   |   | % of Revenue |   |   | % Change |   |
| Sales and marketing                            |   | $                                  | 1,297  |   |                             |   | 24.2 |   |   | $ | 820 |   |   |   | 20.7 |   |   |   | 58.2 |   |   | $ | 2,486 |   |   |   | 23.0 |   |   | $ | 1,734 |   |   |   | 21.3 |   |   |   | 43.4 |   |
| Customer operations and support                |   |                               | 899    |   |                             |   | 16.8 |   |   |   | 533 |   |   |   | 13.5 |   |   |   | 68.7 |   |   |   | 1,723 |   |   |   | 15.9 |   |   |   | 1,257 |   |   |   | 15.5 |   |   |   | 37.1 |   |
| Software development and technical support (1) |   |                               | 283    |   |                             |   | 5.3 |   |   |   | 344 |   |   |   | 8.7 |   |   |   | -17.8 |   |   |   | 829 |   |   |   | 7.7 |   |   |   | 786 |   |   |   | 9.7 |   |   |   | 5.4 |   |
| General and administrative                     |   |                               | 1,155  |   |                             |   | 21.6 |   |   |   | 994 |   |   |   | 25.1 |   |   |   | 16.2 |   |   |   | 2,292 |   |   |   | 21.2 |   |   |   | 1,834 |   |   |   | 22.6 |   |   |   | 25.0 |   |
| Restructuring                                  |   |                               | -      |   |                             |   | 0.0 |   |   |   | - |   |   |   | 0.0 |   |   |   | n/a |   |   |   | 76 |   |   |   | 0.7 |   |   |   | - |   |   |   | 0.0 |   |   |   | n/a |   |
| Depreciation and amortization (2)              |   |                               | 417    |   |                             |   | 7.8 |   |   |   | 229 |   |   |   | 5.8 |   |   |   | 82.1 |   |   |   | 821 |   |   |   | 7.6 |   |   |   | 458 |   |   |   | 5.6 |   |   |   | 79.3 |   |
| Net operating expenses                         |   | $                                  | 4,051  |   |                             |   | 75.6 |   |   | $ | 2,920 |   |   |   | 73.8 |   |   |   | 38.7 |   |   | $ | 8,227 |   |   |   | 76.0 |   |   | $ | 6,069 |   |   |   | 74.7 |   |   |   | 35.6 |   |

| (1) | Net of capitalized software product costs of $365 and $119 for the three months ended January 31, 2010 and 2009, respectively, and $625 and $345 for the six months ended January 31, 2010 and 2009. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Exclusive of amortization of software products of $266 and $204 for the three months ended January 31, 2010 and 2009, respectively, and $519 and $419 for the six months ended January 31, 2010 and 2009, which are included in cost of revenue. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

|                                                                              |   | (Unaudited)                        |   |   | (Unaudited)                      |   |
|-----------------------------------------------------------------------------------|--------|------------------------------------|--------|--------|----------------------------------|--------|
|                                                                              |   | Three months ended January 31 |   |   | Six months ended January 31 |   |
|                                                                              |   | 2010                               |   |   | 2009                             |   |   | 2010 |   |   | 2009 |   |
| Net income                                                                        |   | $                                  | 176    |   |                             | $      | 56 |   |   | $ | 338 |   |   | $ | 312 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Amortization of software products                                                 |   |                               | 266    |   |                             |   | 204 |   |   |   | 519 |   |   |   | 419 |   |
| Amortization of debt discount and other                                           |   |                               | -      |   |                             |   | 4 |   |   |   | - |   |   |   | 8 |   |
| Depreciation and other amortization                                               |   |                               | 410    |   |                             |   | 195 |   |   |   | 814 |   |   |   | 424 |   |
| Stock based compensation                                                          |   |                               | 53     |   |                             |   | 85 |   |   |   | 93 |   |   |   | 161 |   |
| Deferred income taxes                                                             |   |                               | -      |   |                             |   | 217 |   |   |   | - |   |   |   | 217 |   |
| Stock issued to 401(k) plan                                                       |   |                               | -      |   |                             |   | 45 |   |   |   | 52 |   |   |   | 45 |   |
| Net change in working capital                                                     |   |                               | (396   | )      |                             |   | (15 | ) |   |   | (1,621 | ) |   |   | (345 | ) |
| Net cash provided by (used in) operating activities                               |   |                               | 509    |   |                             |   | 791 |   |   |   | 195 |   |   |   | 1,241 |   |
| Net cash used in investing activities                                             |   |                               | (537   | )      |                             |   | (104 | ) |   |   | (917 | ) |   |   | (589 | ) |
| Net cash provided by (used in) financing activities                               |   |                               | 306    |   |                             |   | (409 | ) |   |   | 649 |   |   |   | (589 | ) |
| Effect of foreign currency exchange rate                                          |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| changes on cash                                                                   |   |                               | 8      |   |                             |   | - |   |   |   | - |   |   |   | (11 | ) |
|                                                                              |   |                               |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |
| Net change in cash                                                                |   | $                                  | 286    |   |                             | $      | 278 |   |   | $ | (73 | ) |   | $ | 52 |   |

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

IT

IT

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

IT

IT

IT

IT

| (a) | The Company held its 2009 Annual Meeting of Shareholders on December 17, 2009. |
|-----|--------------------------------------------------------------------------------|

| (b) | Votes cast for the election of Gordon J. Bridge to serve as director until the 2012 Annual Shareholder’s Meeting were as follows: |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------|

| For                            | 5,480,065 |   |
|--------------------------------|-----------|--------|
| Withheld authority to vote for | 194,121   |   |

| For                            | 4,810,522 |   |
|--------------------------------|-----------|--------|
| Withheld authority to vote for | 863,664   |   |

| (c) | Votes cast to ratify the appointment of Wipfli LLP as ARI’s auditors for the fiscal year ending July 31, 2010 were as follows: |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|

| For       | 5,508,119 |   |
|-----------|-----------|--------|
| Against   | 110,086   |   |
| Abstained | 55,980    |   |

IT

IT

| 31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer. |
|------|--------------------------------------------------------------------|

| 31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer. |
|------|--------------------------------------------------------------------|

| 32.1 | Section 1350 Certification of Chief Executive Officer. |
|------|--------------------------------------------------------|

| 32.2 | Section 1350 Certification of Chief Financial Officer. |
|------|--------------------------------------------------------|

----

Index

|                                                     | ARI NETWORK SERVICES, INC. |
|-----------------------------------------------------|----------------------------|
| Form 10-Q                                           |
| For the Three and Six Months Ended January 31, 2010 |

SI

| By:    | /s/ Roy W. Olivier                                        |
|--------|-----------------------------------------------------------|
|   | Roy W. Olivier                                            |
|   | President and Chief Executive Officer                     |
|   |                                                      |
|   |                                                      |
| By:    | /s/ Brian E. Dearing                                      |
|   | Brian E. Dearing                                          |
|   | Chairman of the Board and Interim Chief Financial Officer |

----