----

----

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

| o | 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 x |
| (Do not check if a smaller reporting reporting company) |

----

----

----

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

NDE

| PART I - FINANCIAL INFORMATION |
|--------------------------------|
|                           |
|                           |   | Page |
|                           |   |   |
| Item 1                         | Financial statements | 3 |
|                           |   |   |
|                           | Consolidated balance sheets as of April 30, 2010 (unaudited) and July 31, 2009 | 3 |
|                           |   |   |
|                           | Consolidated statements of income (unaudited) for the three and nine months ended April 30, 2010 and 2009 | 5 |
|                           |   |   |
|                           | Consolidated statements of cash flows (unaudited) for the nine months ended April 30, 2010 and 2009 | 6 |
|                           |   |   |
|                           | Notes to unaudited consolidated financial statements | 7 |
|                           |   |   |
| Item 2                         | Management's discussion and analysis of financial condition and results of operations | 20 |
|                           |   |   |
| 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                         | Reserved | 31 |
|                           |   |   |
| Item 5                         | Other information | 31 |
|                           |   |   |
| Item 6                         | Exhibits | 31 |
|                           |   |   |
| Signatures                     | 32 |

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

ANC

| ARI Network Services, Inc.                                                                                   |   |
|--------------------------------------------------------------------------------------------------------------|--------|
| Consolidated Balance Sheet                                                                                   |   |
| (Dollars in Thousands, Except per Share Data)                                                                |   |
|                                                                                                         |   |
|                                                                                                         |   | (Unaudited) |   |   | (Audited) |   |
| ASSETS                                                                                                       |   | April 30 |   |   | July 31 |   |
|                                                                                                         |   | 2010 |   |   | 2009 |   |
| Current assets:                                                                                              |   |   |   |   |   |   |
| Cash                                                                                                         |   | $ | 904 |   |   | $ | 650 |   |
| Trade receivables, less allowance for doubtful accounts of $402 and $410 at April 30, 2010 and July 31, 2009 |   |   | 1,794 |   |   |   | 1,352 |   |
| Work in process                                                                                              |   |   | 173 |   |   |   | 156 |   |
| Prepaid expenses and other                                                                                   |   |   | 327 |   |   |   | 321 |   |
| Deferred income taxes                                                                                        |   |   | 513 |   |   |   | 513 |   |
| Total Current Assets                                                                                         |   |   | 3,711 |   |   |   | 2,992 |   |
| Equipment and leasehold improvements:                                                                        |   |   |   |   |   |   |   |   |
| Computer equipment                                                                                           |   |   | 2,192 |   |   |   | 1,827 |   |
| Leasehold improvements                                                                                       |   |   | 548 |   |   |   | 463 |   |
| Furniture and equipment                                                                                      |   |   | 2,648 |   |   |   | 2,479 |   |
|                                                                                                         |   |   | 5,388 |   |   |   | 4,769 |   |
| Less accumulated depreciation and amortization                                                               |   |   | 3,430 |   |   |   | 2,827 |   |
| Net equipment and leasehold improvements                                                                     |   |   | 1,958 |   |   |   | 1,942 |   |
| Capitalized software product costs:                                                                          |   |   |   |   |   |   |   |   |
| Amounts capitalized for software product costs                                                               |   |   | 15,822 |   |   |   | 14,886 |   |
| Less accumulated amortization                                                                                |   |   | 13,273 |   |   |   | 12,489 |   |
| Net capitalized software product costs                                                                       |   |   | 2,549 |   |   |   | 2,397 |   |
| Deferred income taxes                                                                                        |   |   | 2,141 |   |   |   | 2,141 |   |
| Other long term assets                                                                                       |   |   | 62 |   |   |   | 59 |   |
| Other intangible assets                                                                                      |   |   | 3,030 |   |   |   | 3,637 |   |
| Goodwill                                                                                                     |   |   | 5,439 |   |   |   | 5,439 |   |
| Total Assets                                                                                                 |   | $ | 18,890 |   |   | $ | 18,607 |   |

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

| ARI Network Services, Inc.                                                                                                                                                                |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| Consolidated Balance Sheet                                                                                                                                                                |   |
| (Dollars in Thousands, Except per Share Data)                                                                                                                                             |   |
|                                                                                                                                                                                      |   |   |   |   |   |   |
|                                                                                                                                                                                      |   | (Unaudited) |   |   | (Audited) |   |
| LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                      |   | April 30 |   |   | July 31 |   |
|                                                                                                                                                                                      |   | 2010 |   |   | 2009 |   |
| Current liabilities:                                                                                                                                                                      |   |   |   |   |   |   |
| Current borrowings on line of credit                                                                                                                                                      |   | $ | 1,025 |   |   | $ | 500 |   |
| Current portion of notes payable                                                                                                                                                          |   |   | - |   |   |   | 117 |   |
| Accounts payable                                                                                                                                                                          |   |   | 462 |   |   |   | 788 |   |
| Deferred revenue                                                                                                                                                                          |   |   | 5,380 |   |   |   | 5,523 |   |
| Accrued payroll and related liabilities                                                                                                                                                   |   |   | 984 |   |   |   | 1,421 |   |
| Accrued sales, use and income taxes                                                                                                                                                       |   |   | 3 |   |   |   | 82 |   |
| Other accrued liabilities                                                                                                                                                                 |   |   | 782 |   |   |   | 729 |   |
| Current portion of capital lease obligations                                                                                                                                              |   |   | 218 |   |   |   | 109 |   |
| Total current liabilities                                                                                                                                                                 |   |   | 8,854 |   |   |   | 9,269 |   |
| Non-current liabilities:                                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Notes payable                                                                                                                                                                             |   |   | 5,000 |   |   |   | 5,000 |   |
| Long-term portion of accrued compensation                                                                                                                                                 |   |   | 17 |   |   |   | 36 |   |
| Capital lease obligations                                                                                                                                                                 |   |   | 260 |   |   |   | 115 |   |
| Other long term liabilities                                                                                                                                                               |   |   | - |   |   |   | - |   |
| Total non-current liabilities                                                                                                                                                             |   |   | 5,277 |   |   |   | 5,151 |   |
| Total liabilities                                                                                                                                                                         |   |   | 14,131 |   |   |   | 14,420 |   |
|                                                                                                                                                                                      |   |   |   |   |   |   |   |   |
| Shareholders' equity:                                                                                                                                                                     |   |   |   |   |   |   |   |   |
| Cumulative preferred stock, par value $.001 per share, 1,000,000 shares authorized; 0 shares issued and outstanding at April 30, 2010 and July 31, 2009, respectively                     |   |   | - |   |   |   | - |   |
| Junior preferred stock, par value $.001 per share, 100,000shares authorized; 0 shares issued and outstanding at April 30, 2010 and July 31, 2009, respectively                            |   |   | - |   |   |   | - |   |
| Common stock, par value $.001 per share, 25,000,000 shares authorized; 7,768,921 and  7,693,510 shares issued and outstanding at April 30, 2010 and July 31, 2009, respectively |   |   | 8 |   |   |   | 8 |   |
| Common stock warrants and options                                                                                                                                                         |   |   | 948 |   |   |   | 816 |   |
| Additional paid-in-capital                                                                                                                                                                |   |   | 95,748 |   |   |   | 95,681 |   |
| Accumulated deficit                                                                                                                                                                       |   |   | (91,920 | ) |   |   | (92,284 | ) |
| Other accumulated comprehensive income (loss)                                                                                                                                             |   |   | (25 | ) |   |   | (34 | ) |
| Total Shareholders' Equity                                                                                                                                                                |   |   | 4,759 |   |   |   | 4,187 |   |
| Total Liabilities and Shareholders' Equity                                                                                                                                                |   | $ | 18,890 |   |   | $ | 18,607 |   |

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

| ARI Network Services, Inc.                                                                                 |   |
|------------------------------------------------------------------------------------------------------------|--------|
| Consolidated Statements of Income                                                                          |   |
| (Dollars in Thousands, Except per Share Data)                                                              |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                       |   | (Unaudited) |   |   | (Unaudited) |   |
|                                                                                                       |   | Three months ended April 30 |   |   | Nine months ended April 30 |   |
|                                                                                                       |   | 2010 |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Net revenue                                                                                                |   | $ | 5,378 |   |   | $ | 4,166 |   |   | $ | 16,203 |   |   | $ | 12,290 |   |
| Cost of revenue *                                                                                          |   |   | 1,123 |   |   |   | 768 |   |   |   | 3,053 |   |   |   | 2,229 |   |
| Gross profit                                                                                               |   |   | 4,255 |   |   |   | 3,398 |   |   |   | 13,150 |   |   |   | 10,061 |   |
| Operating expenses:                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales and marketing                                                                                        |   |   | 1,385 |   |   |   | 866 |   |   |   | 3,871 |   |   |   | 2,599 |   |
| Customer operations and support                                                                            |   |   | 873 |   |   |   | 695 |   |   |   | 2,596 |   |   |   | 1,952 |   |
| Software development and technical support (net of capitalized product costs)                              |   |   | 245 |   |   |   | 294 |   |   |   | 1,074 |   |   |   | 1,081 |   |
| General and administrative                                                                                 |   |   | 1,173 |   |   |   | 1,032 |   |   |   | 3,465 |   |   |   | 2,866 |   |
| Restructuring                                                                                              |   |   | - |   |   |   | - |   |   |   | 76 |   |   |   | - |   |
| Depreciation and amortization (exclusive of amortization of software products included in cost of revenue) |   |   | 411 |   |   |   | 233 |   |   |   | 1,232 |   |   |   | 691 |   |
| Net operating expenses                                                                                     |   |   | 4,087 |   |   |   | 3,120 |   |   |   | 12,314 |   |   |   | 9,189 |   |
| Operating income                                                                                           |   |   | 168 |   |   |   | 278 |   |   |   | 836 |   |   |   | 872 |   |
| Other income (expense):                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                                                           |   |   | (153 | ) |   |   | (25 | ) |   |   | (442 | ) |   |   | (76 | ) |
| Other, net                                                                                                 |   |   | 11 |   |   |   | 2 |   |   |   | (25 | ) |   |   | (12 | ) |
| Total other income (expense)                                                                               |   |   | (142 | ) |   |   | (23 | ) |   |   | (467 | ) |   |   | (88 | ) |
| Income before provision for income taxes                                                                   |   |   | 26 |   |   |   | 255 |   |   |   | 369 |   |   |   | 784 |   |
| Income tax benefit (expense)                                                                               |   |   | - |   |   |   | (29 | ) |   |   | (5 | ) |   |   | (246 | ) |
| Net income                                                                                                 |   | $ | 26 |   |   | $ | 226 |   |   | $ | 364 |   |   | $ | 538 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted net income per common share:                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                      |   | $ | 0.00 |   |   | $ | 0.03 |   |   | $ | 0.05 |   |   | $ | 0.08 |   |
| Diluted                                                                                                    |   | $ | 0.00 |   |   | $ | 0.03 |   |   | $ | 0.05 |   |   | $ | 0.08 |   |

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

etwo

|                                                                                                                                          |   | (Unaudited)                |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|--------|
|                                                                                                                                          |   | Nine months ended April 30 |   |
|                                                                                                                                          |   | 2010                       |   |   | 2009 |   |
| Operating activities                                                                                                                          |   |                       |   |   |   |   |
| Net income                                                                                                                                    |   | $                          | 364    |   |   | $ | 538 |   |
| Adjustments to reconcile net income to net cash provided by operating activities:                                                             |   |                       |   |   |   |   |   |   |
| Amortization of software products                                                                                                             |   |                       | 784    |   |   |   | 619 |   |
| Amortization of deferred financing costs, debt discount and excess carrying value over face amount of notes payable                           |   |                       | -      |   |   |   | 8 |   |
| Depreciation and other amortization                                                                                                           |   |                       | 1,222  |   |   |   | 681 |   |
| Deferred income taxes                                                                                                                         |   |                       | -      |   |   |   | 233 |   |
| Stock based compensation related to stock options                                                                                             |   |                       | 142    |   |   |   | 247 |   |
| Stock issued as contribution to 401(k) plan                                                                                                   |   |                       | 52     |   |   |   | 45 |   |
| Net change in assets and liabilities:                                                                                                         |   |                       |   |   |   |   |   |   |
| Trade receivables, net                                                                                                                        |   |                       | (445   | ) |   |   | 110 |   |
| Work in process                                                                                                                               |   |                       | (17    | ) |   |   | 122 |   |
| Prepaid expenses and other                                                                                                                    |   |                       | (6     | ) |   |   | (36 | ) |
| Other long term assets                                                                                                                        |   |                       | (3     | ) |   |   | (3 | ) |
| Accounts payable                                                                                                                              |   |                       | (324   | ) |   |   | (94 | ) |
| Deferred revenue                                                                                                                              |   |                       | (143   | ) |   |   | (285 | ) |
| Accrued payroll related liabilities                                                                                                           |   |                       | (454   | ) |   |   | 165 |   |
| Accrued sales, use and income tax                                                                                                             |   |                       | (79    | ) |   |   | (36 | ) |
| Other accrued liabilities                                                                                                                     |   |                       | 52     |   |   |   | (88 | ) |
| Net cash provided by operating activities                                                                                                     |   |                       | 1,145  |   |   |   | 2,226 |   |
| Investing activities                                                                                                                          |   |                       |   |   |   |   |   |   |
| Purchase of equipment, software and leasehold improvements                                                                                    |   |                       | (496   | ) |   |   | (413 | ) |
| Cash paid for goodwill and intangible assets related to acquisitions                                                                          |   |                       | -      |   |   |   | (410 | ) |
| Cash paid for other net assets related to acquisitions                                                                                        |   |                       | -      |   |   |   | (215 | ) |
| Software development costs capitalized                                                                                                        |   |                       | (1,003 | ) |   |   | (508 | ) |
| Net cash used in investing activities                                                                                                         |   |                       | (1,499 | ) |   |   | (1,546 | ) |
| Financing activities                                                                                                                          |   |                       |   |   |   |   |   |   |
| Borrowings (repayments) under line of credit                                                                                                  |   |                       | 525    |   |   |   | (200 | ) |
| Payments under notes payable                                                                                                                  |   |                       | (117   | ) |   |   | (425 | ) |
| Proceeds from capital lease obligations incurred                                                                                              |   |                       | 300    |   |   |   | - |   |
| Payments of capital lease obligations                                                                                                         |   |                       | (102   | ) |   |   | (66 | ) |
| Proceeds from issuance of common stock                                                                                                        |   |                       | 5      |   |   |   | 18 |   |
| Net cash provided by (used in) financing activities                                                                                           |   |                       | 611    |   |   |   | (673 | ) |
| Effect of foreign currency exchange rate changes on cash                                                                                      |   |                       | (3     | ) |   |   | (10 | ) |
| Net change in cash                                                                                                                            |   |                       | 254    |   |   |   | (3 | ) |
| Cash at beginning of period                                                                                                                   |   |                       | 650    |   |   |   | 1,086 |   |
| Cash at end of period                                                                                                                         |   | $                          | 904    |   |   | $ | 1,083 |   |
| Cash paid for interest                                                                                                                        |   | $                          | 290    |   |   | $ | 70 |   |
| Cash paid for income taxes                                                                                                                    |   | $                          | 54     |   |   | $ | 28 |   |
|                                                                                                                                          |   |                       |   |   |   |   |   |   |
| Noncash investing and financing activities                                                                                                    |   |                       |   |   |   |   |   |   |
| Increase in amount due from leasing company (recorded as a component of prepaid expenses and other) and increase in capital lease obligations |   | $                          | -      |   |   | $ | - |   |
| Accrued liabilities related to purchase of computer equipment                                                                                 |   |                       | -      |   |   |   | - |   |
| Issuance of common stock in connection with acquisitions                                                                                      |   |                       | -      |   |   |   | 462 |   |
| Debt issued in connection with acquisitions                                                                                                   |   |                       | -      |   |   |   | 5,000 |   |
| Capital leases acquired in connection with acquisitions                                                                                       |   |                       | -      |   |   |   | - |   |
| Accrued liabilities assumed in connection with acquisitions                                                                                   |   |                       | -      |   |   |   | 275 |   |
| Tax benefit of stock options exercised                                                                                                        |   |                       | -      |   |   |   | - |   |
| Issuance of common stock related to payment of executive compensation                                                                         |   | $                          | 10     |   |   | $ | 8 |   |

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

nsolida

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

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

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

|                                                                                                                                                                                             |   | (Unaudited)                 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|
|                                                                                                                                                                                             |   | Three months ended April 30 |   |   | Nine months ended April 30 |   |
|                                                                                                                                                                                             |   | 2010                        |   |   | 2009 |   |   | 2010 |   |   | 2009 |   |
| Net income                                                                                                                                                                                       |   |                        | 26     |   |   | $ | 226 |   |   | $ | 364 |   |   | $ | 538 |   |
| Weighted-average common shares outstanding                                                                                                                                                       |   |                        | 7,769  |   |   |   | 7,099 |   |   |   | 7,746 |   |   |   | 7,040 |   |
| Effect of dilutive stock options and warrants                                                                                                                                                    |   |                        | 20     |   |   |   | 16 |   |   |   | 20 |   |   |   | 16 |   |
| Diluted weighted-average common shares outstanding                                                                                                                                               |   |                        | 7,789  |   |   |   | 7,115 |   |   |   | 7,766 |   |   |   | 7,056 |   |
| Net income per share:                                                                                                                                                                            |   |                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                                                                                            |   | $                           | 0.00   |   |   | $ | 0.03 |   |   | $ | 0.05 |   |   | $ | 0.08 |   |
| Diluted                                                                                                                                                                                          |   | $                           | 0.00   |   |   | $ | 0.03 |   |   | $ | 0.05 |   |   | $ | 0.08 |   |
| 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 |   |                        | 1,453  |   |   |   | 1,449 |   |   |   | 1,453 |   |   |   | 1,449 |   |

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

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

|                     |   | Three months ended April 30 |   |   | Nine months ended April 30 |   |
|--------------------------|--------|-----------------------------|--------|--------|----------------------------|--------|
|                     |   | 2010                        |   |   | 2009                       |   |   | 2010 |   |   | 2009 |   |
| Expected life (years)    |   | 10 years                    |   |   | 10 years                   |   |   | 10 years |   |   | 10 years |   |
| Risk-free interest rate  |   |                        | 3.6    | %      |                       |   | 2.9 | % |   |   | 3.9 | % |   |   | 3.4 | % |
| Expected volatility      |   |                        | 95.4   | %      |                       |   | 68.0 | % |   |   | 86.3 | % |   |   | 75.7 | % |
| Expected forfeiture rate |   |                        | 17.0   | %      |                       |   | 12.0 | % |   |   | 9.2 | % |   |   | 12.0 | % |
| Expected dividend yield  |   |                        | 0.0    | %      |                       |   | 0.0 | % |   |   | 0.0 | % |   |   | 0.0 | % |

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

|                                   |   | Number of Options |   |   | Wtd. Avg. Exercise Price |   |   | Wtd. Avg. Remaining Contractual Period (Years) |   |   | Aggregate Instrinsic Value |   |
|----------------------------------------|--------|------------------------|--------|--------|-------------------------------|--------|--------|------------------------------------------------|--------|--------|----------------------------|--------|
| Outstanding and exercisable at 1/31/09 |   |                   | 37,000 |   |                          | $      | 2.45   |                                           |   |   | 1.57                       |   |   | $ | - |   |
| 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 4/30/09 |   |                   | 37,000 |   |                          | $      | 2.45   |                                           |   |   | 1.33                       |   |   | $ | - |   |
|                                   |   |                   |   |   |                          |   |   |                                           |   |   |                       |   |   |   |   |   |
| Outstanding and exercisable at 1/31/10 |   |                   | 35,000 |   |                          | $      | 2.33   |                                           |   |   | 0.60                       |   |   | $ | - |   |
| 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 4/30/10 |   |                   | 35,000 |   |                          | $      | 2.33   |                                           |   |   | 0.35                       |   |   | $ | - |   |

|                                                                                                                                |   | 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 4/30/09                                                                                              |   |                   | 37,000  |   |                          | $      | 2.45   |                                           |   | $      | 1.33                       |   |   | $ | - |   |
|                                                                                                                                |   |                   |    |   |                          |   |   |                                           |   |   |                       |   |   |   |   |   |
| 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 4/30/10                                                                                              |   |                   | 35,000  |   |                          | $      | 2.33   |                                           |   |   | 0.35                       |   |   | $ | - |   |
|                                                                                                                                |   |                   |    |   |                          |   |   |                                           |   |   |                       |   |   |   |   |   |
| The range of exercise prices for options outstanding at April 30, 2010 was $2.06 to $2.44 and at April 30, 2009 was $2.06 to $9.06. |   |

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

|                                   |   | Number of Options |   |   | Wtd. Avg. Exercise Price |   |   | Wtd. Avg. Remaining Contractual Period (Years) |   |   | Aggregate Instrinsic Value |   |
|----------------------------------------|--------|------------------------|--------|--------|-------------------------------|--------|--------|------------------------------------------------|--------|--------|----------------------------|--------|
| Outstanding and exercisable at 1/31/09 |   |                   | 1,313  |   |                          | $      | 2.65   |                                           |   |   | 1.47                       |   |   | $ | - |   |
| 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 4/30/09 |   |                   | 1,313  |   |                          | $      | 2.65   |                                           |   |   | 1.22                       |   |   | $ | - |   |
|                                   |   |                   |   |   |                          |   |   |                                           |   |   |                       |   |   |   |   |   |
| Outstanding and exercisable at 1/31/10 |   |                   | 1,313  |   |                          | $      | 2.65   |                                           |   |   | 0.47                       |   |   | $ | - |   |
| 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 4/30/10 |   |                   | 1,313  |   |                          | $      | 2.65   |                                           |   |   | 0.22                       |   |   | $ | - |   |

|                                                                                                |   | 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 4/30/09                                                              |   |                   | 1,313  |   |                          | $      | 2.65   |                                           |   |   | 1.22                       |   |   | $ | - |   |
|                                                                                                |   |                   |   |   |                          |   |   |                                           |   |   |                       |   |   |   |   |   |
| 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 4/30/10                                                              |   |                   | 1,313  |   |                          | $      | 2.65   |                                           |   |   | 0.22                       |   |   | $ | - |   |
|                                                                                                |   |                   |   |   |                          |   |   |                                           |   |   |                       |   |   |   |   |   |
| The range of exercise prices for options outstanding at April 30, 2010 and 2009 was $2.00 to $3.56. |   |

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

|                   |   | Number of Options |      |   | Wtd. Avg. Exercise Price |   |   | Wtd. Avg. Remaining Contractual Period (Years) |   |   | Aggregate Instrinsic Value |   |
|------------------------|--------|------------------------|-----------|--------|-------------------------------|--------|--------|------------------------------------------------|--------|--------|----------------------------|--------|
| Outstanding at 1/31/09 |   |                   | 1,207,463 |   |                          | $      | 1.54   |                                           |   |   | 7.51                       |   |   | $ | 27,807 |   |
| Granted                |   |                   | 15,000    |   |                          |   | 0.82   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised              |   |                   | -         |   |                          |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited              |   |                   | (1,125    | )      |                          |   | 2.15   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding at 4/30/09 |   |                   | 1,221,338 |   |                          | $      | 1.53   |                                           |   |   | 7.30                       |   |   | $ | 38,458 |   |
| Exercisable at 4/30/09 |   |                   | 682,877   |   |                          | $      | 1.58   |                                           |   |   | 5.92                       |   |   | $ | 30,933 |   |
|                   |   |                   |      |   |                          |   |   |                                           |   |   |                       |   |   |   |   |   |
| Outstanding at 1/31/10 |   |                   | 1,291,777 |   |                          | $      | 1.46   |                                           |   |   | 6.80                       |   |   | $ | 34,698 |   |
| Granted                |   |                   | 70,250    |   |                          |   | 0.84   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised              |   |                   | -         |   |                          |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited              |   |                   | (24,750   | )      |                          |   | 1.12   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding at 4/30/10 |   |                   | 1,337,277 |   |                          | $      | 1.43   |                                           |   |   | 6.69                       |   |   | $ | 29,740 |   |
| Exercisable at 4/30/10 |   |                   | 850,826   |   |                          | $      | 1.56   |                                           |   |   | 5.56                       |   |   | $ | 24,164 |   |

|                   |   | Number of Options |      |   | Wtd. Avg. Exercise Price |   |   | Wtd. Avg. Remaining Contractual Period (Years) |   |   | Aggregate Instrinsic Value |   |
|------------------------|--------|------------------------|-----------|--------|-------------------------------|--------|--------|------------------------------------------------|--------|--------|----------------------------|--------|
| Outstanding at 7/31/08 |   |                   | 1,380,538 |   |                          | $      | 1.51   |                                           |   |   | 7.36                       |   |   | $ | 150,967 |   |
| Granted                |   |                   | 104,000   |   |                          |   | 1.07   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised              |   |                   | (60,242   | )      |                          |   | 0.26   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited              |   |                   | (202,958  | )      |                          |   | 1.51   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding at 4/30/09 |   |                   | 1,221,338 |   |                          | $      | 1.53   |                                           |   |   | 7.30                       |   |   | $ | 38,458 |   |
| Exercisable at 4/30/09 |   |                   | 682,877   |   |                          | $      | 1.58   |                                           |   |   | 5.92                       |   |   | $ | 30,933 |   |
|                   |   |                   |      |   |                          |   |   |                                           |   |   |                       |   |   |   |   |   |
| Outstanding at 7/31/09 |   |                   | 1,213,402 |   |                          | $      | 1.51   |                                           |   |   | 7.08                       |   |   | $ | 21,337 |   |
| Granted                |   |                   | 171,000   |   |                          |   | 0.82   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Exercised              |   |                   | -         |   |                          |   | n/a    |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Forfeited              |   |                   | (47,125   | )      |                          |   | 1.28   |                                           |   |   | n/a                        |   |   |   | n/a |   |
| Outstanding at 4/30/10 |   |                   | 1,337,277 |   |                          | $      | 1.43   |                                           |   |   | 6.69                       |   |   | $ | 29,740 |   |
| Exercisable at 4/30/10 |   |                   | 850,826   |   |                          | $      | 1.56   |                                           |   |   | 5.56                       |   |   | $ | 24,164 |   |

| The range of exercise prices for options outstanding at April 30, 2010 and 2009 was $0.15 to $2.74 |
|----------------------------------------------------------------------------------------------------|

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

|                  |   | Number of Options |    |   | Wtd. Avg. Exercise Price |   |
|-----------------------|--------|------------------------|---------|--------|--------------------------|--------|
| Non-vested at 1/31/09 |   |                   | 523,711 |   |                     | $      | 1.49 |   |
| Granted               |   |                   | 15,000  |   |                     |   | 0.82 |   |
| Vested                |   |                   | -       |   |                     |   | n/a |   |
| Forfeited             |   |                   | -       |   |                     |   | n/a |   |
| Non-vested at 4/30/09 |   |                   | 538,711 |   |                     | $      | 1.47 |   |
|                  |   |                   |    |   |                     |   |   |   |
| Non-vested at 1/31/10 |   |                   | 437,526 |   |                     | $      | 1.26 |   |
| Granted               |   |                   | 70,250  |   |                     |   | 0.84 |   |
| Vested                |   |                   | -       |   |                     |   | n/a |   |
| Forfeited             |   |                   | (21,125 | )      |                     |   | 1.28 |   |
| Non-vested at 4/30/10 |   |                   | 486,651 |   |                     | $      | 1.21 |   |

|                  |   | Number of Options |    |   | Wtd. Avg. Exercise Price |   |
|-----------------------|--------|------------------------|---------|--------|--------------------------|--------|
| Non-vested at 7/31/08 |   |                   | 443,335 |   |                     | $      | 1.76 |   |
| Granted               |   |                   | 104,000 |   |                     |   | 1.07 |   |
| Vested                |   |                   | -       |   |                     |   | n/a |   |
| Forfeited             |   |                   | (8,624  | )      |                     |   | 1.63 |   |
| Non-vested at 4/30/09 |   |                   | 538,711 |   |                     | $      | 1.47 |   |
|                  |   |                   |    |   |                     |   |   |   |
| Non-vested at 7/31/09 |   |                   | 341,776 |   |                     | $      | 1.40 |   |
| Granted               |   |                   | 171,000 |   |                     |   | 0.82 |   |
| Vested                |   |                   | -       |   |                     |   | n/a |   |
| Forfeited             |   |                   | (26,125 | )      |                     |   | 1.28 |   |
| Non-vested at 4/30/10 |   |                   | 486,651 |   |                     | $      | 1.21 |   |

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

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

|                                            |   | (Unaudited)                 |   |   | (Unaudited)                |   |
|-------------------------------------------------|--------|-----------------------------|--------|--------|----------------------------|--------|
|                                            |   | Three months ended April 30 |   |   | Nine months ended April 30 |   |
|                                            |   | 2010                        |   |   | 2009                       |   |   | 2010 |   |   | 2009 |   |
|                                            |   | (Actual)                    |   |   | (Pro Forma)                |   |   | (Actual) |   |   | (Pro Forma) |   |
| Net Revenue                                     |   | $                           | 5,378  |   |                       | $      | 5,312 |   |   | $ | 16,203 |   |   | $ | 15,728 |   |
| Cost of revenue                                 |   |                        | 1,123  |   |                       |   | 996 |   |   |   | 3,053 |   |   |   | 2,913 |   |
| Gross profit                                    |   |                        | 4,255  |   |                       |   | 4,316 |   |   |   | 13,150 |   |   |   | 12,815 |   |
| Net operating expenses                          |   |                        | 4,087  |   |                       |   | 4,382 |   |   |   | 12,314 |   |   |   | 12,976 |   |
| Operating income (loss)                         |   |                        | 168    |   |                       |   | (66 | ) |   |   | 836 |   |   |   | (161 | ) |
| Interest income (expense)                       |   |                        | (153   | )      |                       |   | (200 | ) |   |   | (442 | ) |   |   | (601 | ) |
| Other, net                                      |   |                        | 11     |   |                       |   | 2 |   |   |   | (25 | ) |   |   | (12 | ) |
| Income (loss) before provision for income taxes |   |                        | 26     |   |                       |   | (264 | ) |   |   | 369 |   |   |   | (774 | ) |
| Income tax expense                              |   |                        | -      |   |                       |   | (29 | ) |   |   | (5 | ) |   |   | (246 | ) |
| Net income (loss)                               |   | $                           | 26     |   |                       | $      | (293 | ) |   | $ | 364 |   |   | $ | (1,020 | ) |
|                                            |   |                        |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Average common shares outstanding:              |   |                        |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                           |   |                        | 7,769  |   |                       |   | 7,676 |   |   |   | 7,746 |   |   |   | 7,642 |   |
| Diluted                                         |   |                        | 7,789  |   |                       |   | 7,676 |   |   |   | 7,766 |   |   |   | 7,642 |   |
| Basic and diluted net income(loss) per share:   |   |                        |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                           |   | $                           | 0.00   |   |                       | $      | (0.04 | ) |   | $ | 0.05 |   |   | $ | (0.13 | ) |
| Diluted                                         |   | $                           | 0.00   |   |                       | $      | (0.04 | ) |   | $ | 0.05 |   |   | $ | (0.13 | ) |

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

|                        |   | (Unaudited) |   |   | (Audited) |   |
|-----------------------------|--------|-------------|--------|--------|-----------|--------|
|                        |   | April 30    |   |   | July 31   |   |
|                        |   | 2010        |   |   | 2009      |   |
| Notes payable               |   | $           | 5,000  |   |      | $      | 5,117 |   |
| Less current maturities     |   |        | -      |   |      |   | 117 |   |
| Notes payable - non-current |   | $           | 5,000  |   |      | $      | 5,000 |   |

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

|       |   | Year EndingJuly 31: |   |
|------------|--------|---------------------|--------|
| 2010       |   | $                   | -      |   |
| 2011       |   |                | 177    |   |
| 2012       |   |                | 771    |   |
| 2013       |   |                | 885    |   |
| 2014       |   |                | 1,016  |   |
| Thereafter |   |                | 2,151  |   |
|       |   | $                   | 5,000  |   |

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

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

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

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

|                                             |   | (Unaudited)                 |   |   | (Unaudited)                |   |
|--------------------------------------------------|--------|-----------------------------|--------|--------|----------------------------|--------|
|                                             |   | Three months ended April 30 |   |   | Nine months ended April 30 |   |
|                                             |   | 2010                        |   |   | 2009                       |   |   |   | 2010 |   |   |   | 2009 |   |
| Current:                                         |   |                        |   |   |                       |   |   |   |   |   |   |   |   |   |
| Federal                                          |   | $                           | (175   | )      |                       | $      | 187 |   |   | $ | (55 | ) |   | $ | 198 |   |
| State                                            |   |                        | (23    | )      |                       |   | 21 |   |   |   | (1 | ) |   |   | 23 |   |
| Utilization of net operating loss carry forwards |   |                        | 198    |   |                       |   | (199 | ) |   |   | 56 |   |   |   | (212 | ) |
| AMT and other                                    |   |                        | -      |   |                       |   | 4 |   |   |   | 5 |   |   |   | 4 |   |
| Deferred, net                                    |   |                        | -      |   |                       |   | 16 |   |   |   | - |   |   |   | 233 |   |
| Income tax provision                             |   | $                           | -      |   |                       | $      | 29 |   |   | $ | 5 |   |   | $ | 246 |   |

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

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

|              |   | (Unaudited)                 |   |   | (Unaudited)                |   |
|-------------------|--------|-----------------------------|--------|--------|----------------------------|--------|
|              |   | Three months ended April 30 |   |   | Nine months ended April 30 |   |
|              |   | 2010                        |   |   | 2009                       |   |   | 2010 |   |   | 2009 |   |
| Revenue :         |   |                        |   |   |                       |   |   |   |   |   |   |   |
| Netherlands       |   | $                           | 168    |   |                       | $      | 153 |   |   | $ | 525 |   |   | $ | 486 |   |
| United States     |   |                        | 5,210  |   |                       |   | 4,013 |   |   |   | 15,678 |   |   |   | 11,804 |   |
| Consolidated      |   | $                           | 5,378  |   |                       | $      | 4,166 |   |   | $ | 16,203 |   |   | $ | 12,290 |   |
|              |   |                        |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) |   |                        |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Netherlands       |   | $                           | (42    | )      |                       | $      | (15 | ) |   | $ | (113 | ) |   | $ | (70 | ) |
| United States     |   |                        | 68     |   |                       |   | 241 |   |   |   | 477 |   |   |   | 608 |   |
| Consolidated      |   | $                           | 26     |   |                       | $      | 226 |   |   | $ | 364 |   |   | $ | 538 |   |

|          |   | (Unaudited) |   |   | (Unaudited) |   |
|---------------|--------|-------------|--------|--------|-------------|--------|
|          |   | April 30    |   |   | July 31     |   |
|          |   | 2010        |   |   | 2010        |   |
| Total Assets  |   |        |   |   |        |   |
| Netherlands   |   | $           | 185    |   |        | $      | 227 |   |
| United States |   |        | 18,705 |   |        |   | 18,380 |   |
| Consolidated  |   | $           | 18,890 |   |        | $      | 18,607 |   |

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

| Three months ended April 30, 2010: |   |   |   |
|------------------------------------|--------|--------|--------|
| Balance at 1/31/10                 |   | $      | 112    |   |
| Payments                           |   |   | (30    | ) |
| Adjustments                        |   |   | -      |   |
| Balance at 4/30/10                 |   | $      | 82     |   |
|                               |   |   |   |   |
| Nine months ended April 30, 2010:  |   |   |   |   |
| Balance at 7/31/09                 |   | $      | 93     |   |
| Payments                           |   |   | (87    | ) |
| Adjustments                        |   |   | 76     |   |
| Balance at 4/30/10                 |   | $      | 82     |   |

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

AGE

|   | · | 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 fiscal 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. |
|--------|--------|-------------------------------------------------------------|

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 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, distributors and manufacturers grow their business and enhance revenue; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | · | Other services, including F&I 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. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 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. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

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Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

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Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

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Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

| Worldwide Revenue     |   | Three months ended April 30 |   |   | Nine months ended April 30 |   |
|-----------------------|--------|-----------------------------|--------|--------|----------------------------|--------|
|                  |   | 2010                        |   |   | 2009                       |   |   | Percent Change |   |   | 2010 |   |   | 2009 |   |   | Percent Change |   |
| Catalog subscriptions |   |                        | 3,029  |   |                       |   | 2,870 |   |   |   | 5.5 |   |   |   | 8,858 |   |   |   | 8,337 |   |   |   | 6.2 |   |
| Marketing services    |   |                        | 1,797  |   |                       |   | 783 |   |   |   | 129.5 |   |   |   | 5,665 |   |   |   | 2,061 |   |   |   | 174.9 |   |
| Professional services |   |                        | 376    |   |                       |   | 339 |   |   |   | 10.9 |   |   |   | 1,142 |   |   |   | 1,396 |   |   |   | (18.2 | ) |
| Other revenues        |   |                        | 176    |   |                       |   | 174 |   |   |   | 1.1 |   |   |   | 538 |   |   |   | 496 |   |   |   | 8.5 |   |
| Total Revenue         |   | $                           | 5,378  |   |                       | $      | 4,166 |   |   |   | 29.1 |   |   | $ | 16,203 |   |   | $ | 12,290 |   |   |   | 31.8 |   |

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Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

|                    |   | (Unaudited)                 |   |   | (Unaudited)                |   |
|-------------------------|--------|-----------------------------|--------|--------|----------------------------|--------|
| Cost of Goods Sold      |   | Three months ended April 30 |   |   | Nine months ended April 30 |   |
|                    |   | 2010                        |   |   | 2009                       |   |   | Percent Change |   |   | 2010 |   |   | 2009 |   |   | Percent Change |   |
| Catalog subscriptions   |   |                        |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                 |   | $                           | 3,029  |   |                       | $      | 2,870 |   |   |   | 5.5 |   |   | $ | 8,858 |   |   | $ | 8,337 |   |   |   | 6.2 |   |
| Cost of revenue         |   |                        | 343    |   |                       |   | 415 |   |   |   | (17.3 | ) |   |   | 982 |   |   |   | 1,118 |   |   |   | (12.2 | ) |
| Gross profit            |   |                        | 2,686  |   |                       |   | 2,455 |   |   |   | 9.4 |   |   |   | 7,876 |   |   |   | 7,219 |   |   |   | 9.1 |   |
| Gross margin percentage |   |                        | 88.7   | %      |                       |   | 85.5 | % |   |   |   |   |   |   | 88.9 | % |   |   | 86.6 | % |   |   |   |   |
| Marketing services      |   |                        |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                 |   |                        | 1,797  |   |                       |   | 783 |   |   |   | 129.5 |   |   |   | 5,665 |   |   |   | 2,061 |   |   |   | 174.9 |   |
| Cost of revenue         |   |                        | 547    |   |                       |   | 166 |   |   |   | 229.5 |   |   |   | 1,412 |   |   |   | 581 |   |   |   | 143.0 |   |
| Gross profit            |   |                        | 1,250  |   |                       |   | 617 |   |   |   | 102.6 |   |   |   | 4,253 |   |   |   | 1,480 |   |   |   | 187.4 |   |
| Gross margin percentage |   |                        | 69.6   | %      |                       |   | 78.8 | % |   |   |   |   |   |   | 75.1 | % |   |   | 71.8 | % |   |   |   |   |
| Professional Services   |   |                        |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                 |   |                        | 376    |   |                       |   | 339 |   |   |   | 10.9 |   |   |   | 1,142 |   |   |   | 1,396 |   |   |   | (18.2 | ) |
| Cost of revenue         |   |                        | 229    |   |                       |   | 182 |   |   |   | 25.8 |   |   |   | 647 |   |   |   | 515 |   |   |   | 25.6 |   |
| Gross profit            |   |                        | 147    |   |                       |   | 157 |   |   |   | (6.4 | ) |   |   | 495 |   |   |   | 881 |   |   |   | (43.8 | ) |
| Gross margin percentage |   |                        | 39.1   | %      |                       |   | 46.3 | % |   |   |   |   |   |   | 43.3 | % |   |   | 63.1 | % |   |   |   |   |
| Other                   |   |                        |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                 |   |                        | 176    |   |                       |   | 174 |   |   |   | 1.1 |   |   |   | 538 |   |   |   | 496 |   |   |   | 8.5 |   |
| Cost of revenue         |   |                        | 4      |   |                       |   | 5 |   |   |   | (20.0 | ) |   |   | 12 |   |   |   | 15 |   |   |   | (20.0 | ) |
| Gross profit            |   |                        | 172    |   |                       |   | 169 |   |   |   | 1.8 |   |   |   | 526 |   |   |   | 481 |   |   |   | 9.4 |   |
| Gross margin percentage |   |                        | 97.7   | %      |                       |   | 97.1 | % |   |   |   |   |   |   | 97.8 | % |   |   | 97.0 | % |   |   |   |   |
| Total                   |   |                        |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                 |   |                        | 5,378  |   |                       |   | 4,166 |   |   |   | 29.1 |   |   |   | 16,203 |   |   |   | 12,290 |   |   |   | 31.8 |   |
| Cost of revenue         |   |                        | 1,123  |   |                       |   | 768 |   |   |   | 46.2 |   |   |   | 3,053 |   |   |   | 2,229 |   |   |   | 37.0 |   |
| Gross profit            |   | $                           | 4,255  |   |                       | $      | 3,398 |   |   |   | 25.2 |   |   | $ | 13,150 |   |   | $ | 10,061 |   |   |   | 30.7 |   |
| Gross margin percentage |   |                        | 79.1   | %      |                       |   | 81.6 | % |   |   |   |   |   |   | 81.2 | % |   |   | 81.9 | % |   |   |   |   |

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Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

|                                           |   | (Unaudited)                 |   |   | (Unaudited)                |   |
|------------------------------------------------|--------|-----------------------------|--------|--------|----------------------------|--------|
|                                           |   | Three months ended April 30 |   |   | Nine months ended April 30 |   |
|                                           |   | 2010                        |   |   | % of Revenue               |   |   | 2009 |   |   | % of Revenue |   |   | % Change |   |   | 2010 |   |   | % of Revenue |   |   | 2009 |   |   | % of Revenue |   |   | % Change |   |
| Sales and marketing                            |   | $                           | 1,385  |   |                       |   | 25.8 |   |   | $ | 866 |   |   |   | 20.8 |   |   |   | 60.0 |   |   | $ | 3,871 |   |   |   | 23.9 |   |   | $ | 2,599 |   |   |   | 21.2 |   |   |   | 48.9 |   |
| Customer operations and support                |   |                        | 873    |   |                       |   | 16.2 |   |   |   | 695 |   |   |   | 16.7 |   |   |   | 25.6 |   |   |   | 2,596 |   |   |   | 16.0 |   |   |   | 1,952 |   |   |   | 15.9 |   |   |   | 33.0 |   |
| Software development and technical support (1) |   |                        | 245    |   |                       |   | 4.6 |   |   |   | 294 |   |   |   | 7.1 |   |   |   | -16.7 |   |   |   | 1,074 |   |   |   | 6.6 |   |   |   | 1,081 |   |   |   | 8.8 |   |   |   | -0.6 |   |
| General and administrative                     |   |                        | 1,173  |   |                       |   | 21.8 |   |   |   | 1,032 |   |   |   | 24.8 |   |   |   | 13.7 |   |   |   | 3,465 |   |   |   | 21.4 |   |   |   | 2,866 |   |   |   | 23.3 |   |   |   | 20.9 |   |
| Restructuring                                  |   |                        | -      |   |                       |   | 0.0 |   |   |   | - |   |   |   | 0.0 |   |   |   | n/a |   |   |   | 76 |   |   |   | 0.5 |   |   |   | - |   |   |   | 0.0 |   |   |   | n/a |   |
| Depreciation and amortization (2)              |   |                        | 411    |   |                       |   | 7.6 |   |   |   | 233 |   |   |   | 5.6 |   |   |   | 76.4 |   |   |   | 1,232 |   |   |   | 7.6 |   |   |   | 691 |   |   |   | 5.6 |   |   |   | 78.3 |   |
| Net operating expenses                         |   | $                           | 4,087  |   |                       |   | 76.0 |   |   | $ | 3,120 |   |   |   | 74.9 |   |   |   | 31.0 |   |   | $ | 12,314 |   |   |   | 76.0 |   |   | $ | 9,189 |   |   |   | 74.8 |   |   |   | 34.0 |   |

| (1) | Net of capitalized software product costs of $390 and $199 for the three months ended April 30, 2010 and 2009, respectively, and $1,015 and $544 for the nine months ended April, 2010 and 2009, respectively. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Exclusive of amortization of software products of $265 and $200 for the three months ended April 30, 2010 and 2009, respectively, and $784 and $619 for the nine months ended April 30, 2010 and 2009, respectively, which are included in cost of revenue. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

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Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

|                                                                              |   | (Unaudited)                 |   |   | (Unaudited)                |   |
|-----------------------------------------------------------------------------------|--------|-----------------------------|--------|--------|----------------------------|--------|
|                                                                              |   | Three months ended April 30 |   |   | Nine months ended April 30 |   |
|                                                                              |   | 2010                        |   |   | 2009                       |   |   | 2010 |   |   | 2009 |   |
| Net income                                                                        |   | $                           | 26     |   |                       | $      | 226 |   |   | $ | 364 |   |   | $ | 538 |   |
| Adjustments to reconcile net income to net cash provided by operating activities: |   |                        |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Amortization of software products                                                 |   |                        | 265    |   |                       |   | 200 |   |   |   | 784 |   |   |   | 619 |   |
| Amortization of debt discount and other                                           |   |                        | -      |   |                       |   | - |   |   |   | - |   |   |   | 8 |   |
| Depreciation and other amortization                                               |   |                        | 408    |   |                       |   | 257 |   |   |   | 1,222 |   |   |   | 681 |   |
| Stock based compensation                                                          |   |                        | 49     |   |                       |   | 86 |   |   |   | 142 |   |   |   | 247 |   |
| Deferred income taxes                                                             |   |                        | -      |   |                       |   | 16 |   |   |   | - |   |   |   | 233 |   |
| Stock issued to 401(k) plan                                                       |   |                        | -      |   |                       |   | - |   |   |   | 52 |   |   |   | 45 |   |
| Net change in working capital                                                     |   |                        | 202    |   |                       |   | 200 |   |   |   | (1,419 | ) |   |   | (145 | ) |
| Net cash provided by operating activities                                         |   |                        | 950    |   |                       |   | 985 |   |   |   | 1,145 |   |   |   | 2,226 |   |
| Net cash used in investing activities                                             |   |                        | (582   | )      |                       |   | (957 | ) |   |   | (1,499 | ) |   |   | (1,546 | ) |
| Net cash provided by (used in) financing activities                               |   |                        | (38    | )      |                       |   | (84 | ) |   |   | 611 |   |   |   | (673 | ) |
| Effect of foreign currency exchange ratechanges on cash                           |   |                        | (3     | )      |                       |   | 1 |   |   |   | (3 | ) |   |   | (10 | ) |
|                                                                              |   |                        |   |   |                       |   |   |   |   |   |   |   |   |   |   |   |
| Net change in cash                                                                |   | $                           | 327    |   |                       | $      | (55 | ) |   | $ | 254 |   |   | $ | (3 | ) |

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Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

TITATIV

TROL

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Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
|--|---------------------------------------------------------------------------------------|

HE

CEED

REGISTE

FAUL

ESERVE

THE

HIB

| 10.1 | Amendment to Employment Agreement between Brian E. Dearing and ARI Network Services, Inc. dated May 5, 2010. |
|------|--------------------------------------------------------------------------------------------------------------|
| 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.                                                       |

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Index

|  | ARI NETWORK SERVICES, INC.Form 10-QFor the Three and Nine Months Ended April 30, 2010 |
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AT

| ARI NETWORK SERVICES, INC. |                                                      |
|----------------------------|-----------------------------------------------------------|
| (Registrant)               |                                                      |
|                       |                                                      |   |
|                       |                                                      |   |
|                       |                                                      |   |
| 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 |   |

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